UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-K


x
            
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the fiscal year ended September 30, 2008




OR


o
            
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the transition period from
  
  to




Commission
file number: 000-27147





CELLYNX
GROUP, INC.


(Exact
name of registrant as specified in its charter)


Nevada
            
            95-4705831(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)25910
      Acero, Suite 370
              Mission
      Viejo, California
            
            92691(Address
      of principal executive offices)
            
            (Zip
      Code)




Registrant’s
telephone number: (949) 305-5290





Securities
registered pursuant to Section 12(b) of the Act: None


Securities
registered pursuant to Section 12(g) of the Act: Common Stock, no par
value




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes o No þ





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes o No þ




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes þ No o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained herein, to the best of registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. þ




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.





Large
accelerated filer o
        Accelerated filer o




Non-accelerated
filer o  
        Smaller reporting company þ





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No þ





At March
31, 2008, the end of our second fiscal quarter, the aggregate market value of
common stock held by non-affiliates of the registrant was approximately
$9,687,409 based on the closing price of $0.28 as reported on the
Over-the-Counter Bulletin Board.





Number of
shares of common stock outstanding as of December 19,
2008:  126,068,846.






















TABLE
OF CONTENTS


TO
ANNUAL REPORT ON FORM 10-K


FOR
YEAR ENDED SEPTEMBER 30, 2008





PagePART
      IItem
      1.
            
            Business
            
            1Item
      1A.
            
            Risk
      Factors
            
            11Item
      1B.
            
            Unresolved
      Staff Comments
            
            11Item
      2.
            
            Properties
            
            11Item
      3.
            
            Legal
      Proceedings
            
            11Item
      4.
            
            Submission
      of Matters to a Vote of Security Holders
            
            11PART
      IIItem
      5.
            
            Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            
            12Item
      6.
            
            Selected
      Financial Data
            
            13Item
      7.
            
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            13Item
      7A.
            
            Quantitative
      and Qualitative Disclosures About Market Risk
            
            18Item
      8.
            
            Financial
      Statements and Supplementary Data
            
            18Item
      9.
            
            Disagreements
      With Accountants on Accounting and Financial Disclosure
            
            18Item
      9A.
            
            Controls
      and Procedures
            
            18Item
      9B.
            
            Other
      Information
            
            19PART
      IIIItem
      10.
            
            Directors,
      Executive Officers and Corporate Governance
            
            20Item
      11.
            
            Executive
      Compensation
            
            24Item
      12.
            
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            
            27Item
      13.
            
            Certain
      Relationships and Related Transactions, and Director
      Independence
            
            28Item
      14.
            
            Principal
      Accounting Fees and Services
            
            29PART
      IVItem
      15.
            
            Exhibits,
      Financial Statement Schedules
            
            30Signatures






i







FORWARD
LOOKING STATEMENTS AND CERTAIN TERMINOLOGY





Some of
the statements made by us in this Annual Report on Form 10-K are
forward-looking in nature, including but not limited to, statements relating to
our future revenue, product development, demand, acceptance and market share,
gross margins, levels of research and development, our management's plans and
objectives for our current and future operations, and other statements that are
not historical facts. Forward-looking statements include, but are not limited
to, statements that are not historical facts, and statements including forms of
the words "intend", "believe", "will", "may", "could", "expect", "anticipate",
"plan", "possible", and similar terms. Actual results could differ materially
from the results implied by the forward looking statements due to a variety of
factors.  Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. We undertake
no obligation to publicly release any revisions to these forward-looking
statements that may reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. Factors that could cause actual
results to differ materially from those expressed in any forward-looking
statement made by us include, but are not limited to:





●
            our
      limited operational history;


●
            our
      ability to finance our activities and maintain our financial
      liquidity;


●
            our
      ability to attract and retain qualified, knowledgeable
      employees;


●
            the
      impact of general economic conditions on our
  business;


●
            the
      ability to bring our technology to
  commercialization;


●
            market
      acceptance of our products;


● dependence
on suppliers, third party manufacturers and other key vendors;


●
            our
      ability to design and market new products
  successfully;


●
            our
      failure to acquire new customers in the
future;


●
            continued
      enforceability of patent and trademark
rights;


●
            deterioration
      of business and economic conditions in our
  markets;


●
            intensely
      competitive industry conditions with increasing price competition;
      and


●
            the
      rate of growth in the cellular amplifier
market.






In this
document, the words "we," "our," "ours," "us,"  “CelLynx” and
“Company” refer to CelLynx Group, Inc. and our subsidiary.




ii










PART
I





ITEM
1. BUSINESS




Corporate
Background





CelLynx
Group, Inc. (“CelLynx” or the “Company”) was originally incorporated under the
laws of the State of Minnesota on April 1, 1998, under the name “Cool Can
Technologies, Inc.” Effective July 12, 2004, the Company merged (the “Merger”)
with NorPac Technologies, Inc., its wholly owned subsidiary (“Nevada Sub”), for
the purpose of reincorporating the Company in Nevada. The Merger was completed
effective July 12, 2004, with Nevada Sub as the surviving corporation. Upon
completion of the Merger, the Company’s name was changed to NorPac Technologies,
Inc. (“NorPac”).





The
Company had originally been in the business of developing and marketing a
proprietary technology for self-chilling beverage containers (the “Cool Can
Technology”). However, the Company’s patents for the Cool Can Technology
expired, and, as a result, the Company’s management decided to abandon the
development of the Cool Can Technology and seek alternative business
opportunities. To that end, as more fully explained below, on July 24, 2008, the
Company closed a transaction with shareholders of CelLynx, Inc., a California
corporation ("CelLynx-California"), by which it newly issued shares to the
CelLynx-California shareholders in exchange for all outstanding shares of
CelLynx-California. Through this transaction, the Company acquired a
cellular amplifier business as its wholly owned subsidiary. This
transaction has been considered a "reverse take-over" for accounting
purposes.




Effective
August 5, 2008, the Company changed its name to CelLynx Group, Inc. by merging
another wholly owned subsidiary, CelLynx Group, Inc., a Nevada corporation, into
the Company and assuming the subsidiary’s name.





The
Reverse Take-Over





On July
24, 2008, the Company closed a reverse take-over transaction by which it
acquired a cellular amplifier business pursuant to a Share Exchange Agreement,
as amended  (the “Exchange Agreement”), by and among the Company,
CelLynx, Inc., a California corporation (“CelLynx-California”),
and twenty-three (23) CelLynx-California shareholders who, immediately prior to
the closing of the transactions contemplated by the Exchange Agreement,
collectively held 100% of CelLynx-California’s issued and outstanding shares of
capital stock (the “CelLynx Owners”).





Prior to
the closing, on July 23, 2008, the Company entered into a Regulation S
Subscription Agreement (the “Subscription Agreement”) pursuant to which the
Company agreed to issue and sell 10,500,000 shares of its common stock and
warrants to purchase 10,500,000 shares of common stock at an exercise price of
$0.20 per share to non-U.S. persons (the “Investors”) for an aggregate purchase
price of $1,575,000 (the “Financing”).





Prior to
the closing, on July 22, 2008, CelLynx-California entered into a Master Global
Marketing and Distribution Agreement (the “Distribution Agreement”) with
Dollardex Group Corp., a company organized under the laws of
Panama (“Dollardex”), whereby Dollardex shall act as CelLynx-California’s
exclusive distributor of CelLynx-California’s products and related accessories
in the following regions: Canada, South America, Europe, Middle East, China,
India, Australia, Africa and South East Asia.





Immediately
following the closing, on July 24, 2008, two of the new officers and directors,
one of the new employees and one of the new non-officer directors of the Company
entered into a Lock-Up Agreement (the “Lock-Up Agreement”) whereby they agreed
not to transfer their Company shares for a period of 24 months following the
closing of the reverse take-over transaction.








As a
result of the closing of the reverse take-over transaction, the CelLynx Owners
became our controlling shareholders, CelLynx-California became our wholly-owned
subsidiary, and CelLynx-California’s business became our business.





The
following is a brief description of the terms and conditions of the Exchange
Agreement, Subscription Agreement and Distribution Agreement, and the
transactions contemplated thereunder that are material to the
Company.





Share
Exchange




Under the
Exchange Agreement, the Company was to acquire all of the equity interests of
CelLynx-California in exchange for issuing restricted common stock to the
CelLynx Owners in an aggregate amount equal to approximately 70% of the total
issued and outstanding shares of common stock immediately after the closing of
the reverse take-over, taking into account certain derivative shares held by
certain CelLynx Owners and a CelLynx-California noteholder, but exclusive of the
shares issued in the Financing and to certain CelLynx-California
investors.   As a result, the CelLynx Owners were to receive
77,970,956 shares of the Company’s common stock in exchange for 100% of
CelLynx’s common stock.   However, the Company had only
41,402,110 authorized, unissued and unreserved shares of common stock available,
after taking into account the shares of common stock issued and reserved in the
Financing described below.  Pursuant to the Exchange Agreement, in the
event that there were an insufficient number of authorized but unissued and
unreserved common stock to complete the transaction, the Company was to issue
all of the available authorized but unissued and unreserved common stock to the
CelLynx Owners in a pro rata manner and then establish a class of Series A
Convertible Preferred Stock (“Series A Preferred Stock”) and issue that number
of shares of Series A Preferred Stock such that the common stock underlying the
Series A Preferred Stock plus the common stock actually issued to the CelLynx
Owners would equal the total number of shares of common stock due to the CelLynx
Owners under the Exchange Agreement.  As a result, the Company issued
to the CelLynx Owners an aggregate of 32,454,922 shares of common stock and
45,516,034 shares of Series A Preferred Stock.  The Series A Preferred
Stock automatically converts into common stock on a one-to-one ratio upon the
authorized capital stock of the Company being increased to include not less than
150,000,000 shares of common stock.





On
September 22, 2008, shareholders owning in the aggregate 26,441,554 shares of
the Company’s common stock and 40,411,544 shares of the Company’s Series A
Preferred Stock, outstanding as of September 10, 2008 (the “Record Date”),
consented in writing to amend the Company’s articles of incorporation to
increase the number of shares of the Company’s authorized common stock from
100,000,000 to 400,000,000.  On October 8, 2008, the Company filed and
mailed a Definitive Information Statement notifying its shareholders of this
action and on November 7, 2008, the Company filed a Certificate of Amendment to
its Articles of Incorporation (the “Amendment”) with the Secretary of State of
the State of Nevada to increase the number of authorized shares common stock of
the Company from 100,000,000 to 400,000,000.  As a result of filing
the Amendment, the 45,516,034 shares of Series A Preferred Stock were
automatically converted into 45,516,034 shares of common stock.





The
Exchange Agreement also provided that all options, warrants and convertible
notes to purchase or acquire shares of CelLynx-California be converted into
options, warrants or convertible notes to purchase or acquire shares of the
Company in the same proportion at which the CelLynx-California shares were
converted into Company shares (the “Conversion Ratio”) under the Exchange
Agreement.  The exercise or conversion price for such options,
warrants or convertible notes shall be the exercise price or conversion price of
the CelLynx-California options, warrants or convertible notes divided by the
Conversion Ratio.  As a result, 750,000 CelLynx-California options
with an exercise price of $0.018 per share were converted into 943,447 Company
options with an exercise price of $0.014 per share; 375,000 CelLynx-California
options with an exercise price of $0.02 per share were converted into 471,723
Company options with an exercise price of $0.016 per share; 23,394,133
CelLynx-California options with an exercise price of $0.09 per share were
converted into 29,428,166 Company options at an exercise price of approximately
$0.0715 per share; 18,330,544 CelLynx-California options with an exercise price
of $0.099 per share were converted into 23,058,527 Company options with an
exercise price of approximately $0.0787 per share, and, with the exception of
the Palomar Note described below, $40,000 of CelLynx-California convertible
notes with a conversion price of $0.01 per share were converted into $40,000 of
Company convertible notes with a conversion price of approximately $0.0079 per
share, and $20,000 of CelLynx-California convertible notes with a conversion
price of $0.10 per share were converted into $20,000 of Company convertible
notes with a conversion price of approximately $0.0795 per
share.  There were no CelLynx-California warrants issued and
outstanding at the time of the closing of the Exchange Agreement.




2


In
connection with the reverse take-over transaction, Palomar Ventures III, L.P.
(“Palomar”), holder of a certain amended and restated convertible promissory
note dated November 10, 2007 (the “Palomar Note”) executed by CelLynx-California
in the principal amount of $262,356.16, is entitled to convert the Palomar Note
into that number of shares of common stock of CelLynx-California such that
immediately following the closing of the reverse take-over transaction, the
Palomar Note would be convertible into 4.8% of the issued and outstanding common
stock of the Company, exclusive of unvested options.  As a result, the
Palomar Note is convertible into 6,340,029 shares of the Company's common
stock.




As a
condition to closing the Exchange Agreement, John P. Thornton resigned as the
Company’s President, Chief Executive Officer, Chief Financial Officer, Secretary
and Treasurer, and the following officers were appointed:




§
            Daniel
      R. Ash, President, Chief Executive Officer, Chief Operating Officer and
      Secretary;§
            Kevin
      Pickard, Chief Financial Officer and Treasurer, and§
            Tareq
      Risheq, Chief Strategy Officer.




In
addition, Mr. Thornton agreed to resign as a director of the Company and Mr.
Ash, Mr. Risheq, Norman W. Collins, and Robert J. Legendre were appointed
directors of the Company.  Mr. Ash’s appointment was effective
immediately.  The appointment of the other directors became effective
on August 14, 2008, upon the Company’s compliance with the provisions of Section
14(f) of the Securities Act of 1933, as amended, and Rule 14(f)-1
thereunder.





On
November 17, 2008, the Board of Directors of the Company appointed Mr. Legendre
Executive Chairman of the Board to assist the Company’s Chief Executive Officer
with strategy and execution of the Company’s manufacturing and supply chain
operations, corporate development, capital markets and investor
relations.





On
December 12, 2008, Mr. Risheq resigned as the Company’s Chief Strategy Officer
but remains a director.




$1,575,000 Financing




Under the
Subscription Agreement, the Company issued 10,500,000 shares of its common stock
and warrants (the “Warrants”) to purchase 10,500,000 shares of common stock at
an exercise price of $0.20 per share to the Investors for an aggregate purchase
price of $1,575,000, or $0.15 per share, payable in cash and through the
cancellation of debt.  The proceeds from the Financing were allocated
as follows: $100,000 to pay current obligations of NorPac, $225,000 as
cancellation of current debt of NorPac and the remaining $1,250,000 for working
capital.  The Warrants expire on July 22, 2010 except in the event
that at any time CelLynx has manufactured 25 or more of its mobile or home
repeater units, then the Company may, at its option, accelerate the expiry of
the Warrants by giving notice (“Notice of Acceleration”) to the holder
thereof.  If the holder does not exercise the Warrant within 30 days
of the giving of the Notice of Acceleration, the Warrants will expire and the
holder will have no further rights to acquire any shares of the Company under
the Warrants.




Dollardex
Distribution Agreement




Under the Distribution Agreement, Dollardex shall act
as CelLynx’s exclusive distributor of the CelLynx’s 5BARzTM products and related
accessories (the “Products”) in the following nine regions: Canada, South
America, Europe, Middle East, China, India, Australia, Africa, and South East
Asia (the “Territory”).  The Distribution Agreement supersedes a prior
Joint Venture Agreement, as amended, dated January 3, 2008 entered into between
the parties.


3





In
accordance with the terms of the Distribution Agreement, Dollardex will sell and
distribute the Products directly to resellers (whether wholesales or retailers)
or end users of the Products in the Territory as well as sell and distribute the
Products to its agents in the Territory (the “Dealers”).  The Dealers
will be located and appointed by Dollardex but their appointment will be subject
to CelLynx’s approval.





In
accordance with the terms of the Distribution Agreement, CelLynx also granted
Dollardex an exclusive non-transferrable license to use the tradenames,
trademark, logos, and designations in or associated with the Products during the
term of the Distribution Agreement in connection with the promotion and
distribution of the Products in the Territory. The Distribution Agreement is
otherwise subject to customary intellectual property protections, including,
without limitation, all of the processes, know-how, and related material
proprietary of CelLynx to manufacture the Products.





The term
of the Distribution Agreement is perpetual though the Distribution Agreement may
be terminated, in the event of, among other events, a material breach,
upon a change of control of Dollardex, or by mutual agreement of the
parties.  The Distribution Agreement further provides that CelLynx
shall have the exclusive right of first refusal to acquire Dollardex in the
event that Dollardex considers such transaction. In addition, effective December
31, 2011, CelLynx shall have the option to acquire Dollardex in accordance with
a certain appraisal method as further described in the Distribution
Agreement.





In
accordance with the terms of the Distribution Agreement, CelLynx and Dollardex,
prior to Dollardex entering into a contractual relationship with a Dealer or
commencing distribution of the Product in a given Territory, will develop a
business plan for deployment of the distribution and marketing of the Products
in the specific Territory.  CelLynx will have approval rights over the
business plan and Dollardex is obligated to conduct business and ensure that
Dealers conduct their business substantially in accordance with the terms of the
business plan.





As
consideration for the rights granted under the Distribution Agreement, Dollardex
will provide funding to the Company as follows: (i) $1,000,000 due and payable
after the pilot production run for the first commercial Product is completed
(the “Initial Roll Out”); (ii) $4,000,000 due and payable 90 days from the
commencement of the Initial Roll Out; and (iii) $5,000,000 due and payable 180
days from the commencement of the Initial Roll Out.  In addition, the
parties agreed that the Company will sell products to Dollardex at 10% over cost
of goods sold and Dollardex will pay the Company 50.1% of its Net Earning (as
defined in the Distribution Agreement) on a quarterly basis with payments to be
made within 45 days following the end of each quarter.




Lock-Up
Agreement




Under the
Lock-Up Agreement, Robert J. Legendre, Executive Chairman of the Board of
Directors of the Company,  Daniel R. Ash, Chief Executive Officer
and a director of the Company, Tareq Risheq, Chief Strategy Officer and a
director of the Company, and Anthony DeMarco, a senior employee of the Company,
agreed not to transfer, sell, assign, pledge, hypothecate, give, create a
security interest in or lien on, place in trust (voting trust or otherwise), or
in any other way encumber or dispose of, directly or indirectly and whether or
not voluntarily, without express prior written consent of the Company, any
common stock or options to purchase common stock of the Company for a period of
24 months.




The
descriptions of the Exchange Agreement, Subscription Agreement, Warrants,
Distribution Agreement, Palomar Note, and Lock-Up Agreement are qualified in
their entirety by the contents of such agreements, which are attached to this
report as Exhibits 2.1, 2.2, 2.3, 10.1, 10.2, 10.3, 10.4 and 10.8, respectively,
and are incorporated herein by reference.





Recent
Events





On
October 27, 2008, the CelLynx’s Board of Directors approved a change of the
Company’s fiscal year.  CelLynx’s new fiscal year will begin on
October 1 and end on September 30 of each year, and the change shall be
applicable with the year ending September 30, 2008.  The Company
previously had a June 30 fiscal year end.  The September 30 fiscal
year end is also the fiscal year end of
CelLynx-California.


4





On
November 7, 2008, CelLynx filed a Certificate of Amendment to its Articles of
Incorporation (the “Amendment”) with the Secretary of State of the State of
Nevada after shareholders approved a proposal to increase the number of
authorized shares of common stock of the Company from 100,000,000 to 400,000,000
by written consent in lieu of a special meeting of shareholders.  As a
result of filing the Amendment, 45,516,034 shares of the Company’s Series A
Preferred Stock automatically converted into 45,516,034 shares of the Company’s
common stock.  The Company now has 126,068,846 shares of common stock
and no shares of Series A Preferred Stock issued and outstanding.





On
November 17, 2008, CelLynx’s Board of Directors appointed Robert J. Legendre
Executive Chairman of the Board to assist the Company’s Chief Executive Officer
with strategy and execution of the Company’s manufacturing and supply chain
operations, corporate development, capital markets and investor
relations.





On
November 24, 2008, CelLynx announced that it had successfully reached a key
commercialization milestone with its manufacturing of the newly enhanced 5BARzTM
Universal Unit.  Initially envisioned as a plug-and-play mobile unit
to be used in vehicles, this product has also proven highly effective for
single-room coverage in a home or office.  Accordingly, CelLynx plans
to introduce the Universal Unit with a 110 volt power cord for indoor use, as
well as with an accessory portable battery pack that can be used virtually
anywhere a weak cellular signal exists.  The Universal Unit contrasts
with CelLynx’s 5BARzTM SOHO stationary table top unit which is designed to cover
a 2,000 square foot home or office space.





On
December 12, 2008, Tareq Risheq resigned as CelLynx’s Chief Strategy
Officer.  There were no disagreements
between Mr. Risheq and CelLynx regarding any matter relating to CelLynx’s
operations, policies, practices or otherwise.  Mr. Risheq remains a
director of CelLynx.





Overview
of CelLynx





CelLynx
is developing and plans to produce and market a next generation of cell phone
boosters (also known as repeaters or amplifiers) for the small office, home
office (“SOHO”) and vehicle.  This next generation product, CelLynx
5BARzTM, is the first consumer-friendly, single-piece unit that strengthens weak
cellular signals to deliver higher quality signals for voice, data and video
reception on cell phones being used indoors or in
vehicles.   CelLynx plans to develop its products for use in
North America, Europe and Asia.  The CelLynx product line is intended
to be manufactured by contract manufacturers located in South East
Asia.   These manufacturers will allow CelLynx to capitalize on
the full advantages of multiple manufacturing locations with a trained and
experienced technical work force, state of the art facilities and knowledge
of all aspects of supply chain management, operational execution, global
logistics and reverse logistics. The marketing and sales functions will be
handled in-house incorporating a multi-channel strategy that includes
distribution partners, wireless service providers, retail outlets and
international joint ventures.





The CelLynx
Solution




Most SOHO
cellular amplifiers currently on the market require a receiving tower or
antenna, usually placed in an attic or on a rooftop, and a transmitting tower or
antenna to be placed at least 35 feet from the other antenna with each connected
to the amplifier by cable.  CelLynx’s patent pending technology
eliminates the need to distance the receiving and transmitting towers, allowing
the two towers to be placed directly inside the booster, resulting in a more
affordable, one piece unit sometimes referred to as ‘plug ‘n play’, i.e.
requiring no installation other than plugging the unit into a power
source.




CelLynx has
      recently completed a prototype of the 5BARz SOHO Unit which delivers 45
      decibel (dB) of gain in a Single Band PCS environment providing up to
      1,500 square feet of indoor coverage.  This unit measures 6.5 X
      7.5 X 2.5 inches, weighs approximately one pound and does not require the
      installation of antennas or cables in order to function.  In
      order to optimize marketability, CelLynx is developing an improved model
      which it expects to operate in a dual band, PCS and Cellular, environment
      delivering 65 dB of gain thereby allowing for coverage of 2,000 to 3,000
      square feet.  This dual band unit would work with all current
      wireless carriers in the U.S. and Canada except Nextel, which
      operates on its own frequency. The PCS network is generally used by the
      older carriers such as AT&T at 850MHz while the newer carriers such as
      T-Mobile operate on the Cellular network at 1900 MHz.  Management is
      confident that all of the critical functions required for this dual band
      unit have been identified and that their engineering team has the
      capability to accomplish development leading to
      commercialization.
            
            image




5


We
believe the CelLynx 5BARz product line, when commercialized, will also offer an
advantage over other amplifiers such as the Femtocell architecture being
developed by wireless service providers such as AT&T and
Verizon.  This Femtocell technology requires a small cellular base
station which connects to the service provider’s network via a broadband such as
DSL or cable.  As such, Femtocell will be carrier specific and subject
to a monthly subscription fee.  CelLynx products, on the other hand,
will be compatible with all wireless carriers in the U.S. and
Canada (except Nextel), and will not require a broadband internet
connection and will not entail a monthly service fee.




CelLynx
has also developed a mobile 5BARz Universal Unit designed primarily for use in
vehicles, or for single-room coverage in the home or office.  In
November, 2008, the Company announced it had manufactured 25 5BARz Universal
Unit production samples, reaching a key commercialization milestone. The 5BARz
Universal Unit is an adaptation of the 5BARz SOHO Unit described
above.  The unit will produce up to 45 dB of gain offering higher
performance than the competition within the interior of a vehicle cabin or
single room, while minimizing the signal degrading effects of
cabling.





Initially
envisioned as a plug ‘n play mobile unit to be used in vehicles with a 12 volt
cigarette lighter power adapter, the 5BARz Universal Unit has also proven highly
effective for single-room coverage in a home or office. Accordingly, the Company
plans to introduce the 5BARz Universal Unit with a 110 volt power cord for
indoor single-room use, as well as with an accessory portable battery pack that
can be used virtually anywhere a weak signal exists. Using the 5BARz Universal
Unit with Bluetooth® extends the effective coverage range to that of the
Bluetooth® signal.





History
and Development of CelLynx





CelLynx
assembled a veteran engineering team with extensive cellular radio
frequency (RF) experience headquartered in Sacramento,
California.  Within eight months, this team, with more than 80 years
of combined experience in building RF products, developed working prototypes of
an affordable consumer friendly single piece plug ‘n play booster with a minimum
of 45dB of gain in both up and down paths. By late 2007, a pre-production
prototype had been developed. At that time, CelLynx entered into a merger
agreement with NorPac Technologies, Inc., a Nevada corporation trading on the
Over The Counter Bulletin Board (OTC BB).





Since the
closing of the reverse take-over July 24, 2008, CelLynx has continued the
development of the 5BARz product line with both the 5BARz Universal Unit and
5BARz SOHO Unit on similar but separate development tracks. Concurrently,
management is focusing on the manufacturing process and implementation of a
sales and marketing plan to ensure the delivery of a quality low-cost product
into the market place. In 2008, the Company has raised $2 million in equity
capital, added executives to its board of directors and management team, and
opened a new corporate headquarters in Mission Viejo, California while
maintaining its R&D facility in El Dorado Hills, California.





6


The
CelLynx 5BARzTM  Product Line





5BARz
SOHO Unit





The 5BARz
SOHO Unit  (small office, home office) is designed to eliminate
cell phone weak spots in an area similar to the size of a single family home
(2,000 to 3,000 square feet).  Expected to retail at a competitive
price of about $299, the 5BARz SOHO Unit is lightweight, aesthetically pleasing
and designed to sit on a table near a window in the direction of the nearest
cell tower.  There is an indicator light to determine the best
placement.  This product requires no assembly: simply place the unit
on a table and plug in the power chord.  Product introduction is
expected to occur in the first half of 2009 for the North American
model.  The European and Asian models are expected to be introduced in
mid 2009.





5BARz
Universal Unit





The 5BARz
Universal Unit is designed to eliminate cell phone weak spots primarily while in
a vehicle --moving or stationary -- as well as for single-room coverage in home,
office or hotel.





For
vehicles, simply place the unit on the dashboard and plug in the cigarette
lighter power adapter/cradle for handheld cell phone use, or place the cell
phone into the cradle for hands-free or Bluetooth® operation. This unit includes
a Bluetooth® speaker phone with caller ID.  CelLynx technology is
designed to be superior to current vehicle solutions that require complex
installation including roof top mounting of the antenna and, in some cases, a
direct connection between the cell phone and the roof top antenna.





For
single-room home, office, or hotel room coverage, simply place the unit near a
window in the building, plug in the powerline and extend the antenna line for
handheld cell phone operation. Place the cell phone in the cradle for best
hands-free or Bluetooth® performance; use of a Bluetooth® device extends the
effective coverage to that of the Bluetooth® range.





The
Bluetooth® speaker phone with caller ID will offer the user the convenience of
hands free phone conversation while driving, which is mandated by law in many
areas including California, the nation’s largest automobile
market.  This product is also expected to retail at a competitive
price of about $299 and to be introduced in North American in the first half of
2009.  The European and Asian models are expected to be introduced
mid-year 2009.





5BARz
Product Launch





The 5BARz
product launch schedule is coordinated with the marketing plan to first
introduce the 5BARz SOHO Unit and 5BARz Universal Unit in the United States and
Canada, operating at the Cellular and PCS frequencies
(800/1900MHz).  To allow for the marketing of the 5BARz products in
Europe and Asia, new models will be subsequently launched that are designed to
operate at the ETSI defined frequencies for GSM (900/1800MHz).  The
development requirement for the new models is primarily limited to the tuning of
the U.S. based units for the change of frequency assignments, including
replacement of frequency sensitive components such as band pass filters and
antennas.





Industry
Overview





Given the
nature of the CelLynx product line, CelLynx is within the overall cellular
telephone market as well as two sub-segments of that market, i.e. the
in-building wireless systems marketplace and the vehicle amplifier
marketplace.





The
overall cellular telephone marketplace





Statistics
from the 3GSM World Congress in Barcelona, Spain this year indicate that the
number of worldwide mobile subscribers has surpassed the two billion mark and is
predicted to reach three billion by the end of this year and four billion by
2011.  Demand for cellular applications beyond voice, such as video,
SMS, email and internet access have created a multi-billion dollar market for
accessorial cellular network products such as CelLynx amplifiers. “Certain user
segments have an almost insatiable appetite for connectivity and enhanced access
to critical productivity applications while at work, at home and on the move,”
according to Cliff Raskind, Strategy Analytics’ director of Wireless
Strategies.  These early adopters are already driving the market for
products that will improve connectivity. Business users are twice as likely to
carry a mobile phone as a notebook when away from their desk and are keenly
interested in expanding email and internet access to the phone.  This
increase in bandwidth demand on the cellular network decreases signal strength
and increases the need for CelLynx’s 5BARzÔ
products.


7





In spite
of the overall proliferation of cell phones, the carriers themselves are
suffering from a high rate of customer defections sometimes referred to as
churn.  According to CITA, The Wireless Association, 40% of those
customers switching networks are searching for a better signal. Considering that
it costs the average carrier almost $400 to acquire a new subscriber, this
global churn rate is the most serious problem affecting the cellular industry
and CelLynx is directly addressing this problem through improving indoor and
vehicle coverage while diminishing interference. It is also noteworthy that
according to First Research, a D & B Company providing Industry
Intelligence, 85% of the U.S. Wireless industry revenues are generated by the
four major wireless companies, AT&T, Verizon, Sprint and T-Mobile. In the
U.S. market, CelLynx will concentrate on adapting its products to the
frequencies being used by those carriers, in particular the Dual Band
850/1900MHz.  In the International market, CelLynx will focus on the
Dual Band 900/1800MHz being used in Europe, Africa, Asia, Australia, New Zealand
and most of South America.





CelLynx
believes that all of the above market conditions indicate the potential for the
success of the CelLynx 5BARz product line within the general cell phone
market.  The CelLynx products will seek to attract virtually all cell
phone users including those who will come by the product through their cellular
and Wi-MAX carriers, enterprise employers, government agencies or military
service organizations.





The
‘In Building’ wireless systems marketplace





According
to ABI Research, ‘In-building wireless systems, forecasted to exceed $15 billion
in revenues in 2013, are a key enabler for delivering on the potential of
cellular mobile services.’ Total Telecom, a
leading communications periodical, reports that the role of the traditional
office is no longer essential for day-to-day productivity as people increasingly
work wherever the technology is available, generally at home if not in the
office.  The U.S. Department of Labor reports that over 20 million
workers work at home and this does not include those who work out of a home
office to conduct personal business or those who work at home to finish
uncompleted tasks from their regular employment or use their home office for
outside or after hours employment.  More and more workers are adopting
the trend toward work-life balance that results in them spending more time at
home. These factors reinforce the need for improved signal in the Small Office
Home Office.  That need is expected to be met by the CelLynx 5BARz
SOHO Unit.




The
‘In-Vehicle’ wireless systems marketplace





Three
trends are noteworthy when discussing this sub sector:  the growth of
the number of motor vehicles on the road, the trend indicating the increased
number of mobile workers and the trend toward legislation requiring hands free
cell phone operation while driving.





According
to Plunkett Research, Ltd. there were 806 million automobiles and light trucks
on the roads of the world in 2007.  That number is expected to
increase to one billion by the year 2020. Not so surprisingly, predictions by
Analyst House IDC indicate that the number of mobile workers is set to reach
one billion by 2011. It is reasonable to assume that as the number of
vehicles increase and the number of cell phones increase that the number of
drivers using cell phones will also increase.





The
National Council of Legislators estimate that 73 % of drivers use their cell
phones in the car. That being the case, twenty states and dozens of
municipalities have passed legislation requiring hands free cell phone
usage while driving. Anticipating the continuation of this legislative trend,
the CelLynx vehicular 5BARz Universal Unit is equipped with Bluetooth® for hands
free, safe driving.





8


All of
the above trends suggest the need for quality voice, data and media solutions in
the mobile environment, and that the market for user friendly boosters such as
the CelLynx 5BARz Universal Unit will follow these trends in both growth and
application.




Sales
and Marketing Strategy





In the
US, CelLynx will  deploy a multi-channel sales strategy seeking to
include: Distribution Partners such as Celluphone, QDI or Advantage; Stocking
Partners such as Tesco, Hutton & Brightstar;   Cellular
Carriers such as AT&T & Verizon; Corporate Accounts such as Accenture,
IBM, Remax, Roadway & Hertz;  Retail Outlets such as Radio Shack,
Comp USA & Best Buy and Web based direct sales.





CelLynx
will address the international market place through a Master Global Marketing,
Distribution and Service Agreement between CelLynx and Dollardex Group Corp.
(“DGC”).  DGC intends to build an international marketing and
distribution dealer network through its existing relationships in its licensed
territories.





Operating
and Manufacturing Strategy





CelLynx’s management
and engineering teams have extensive experience working with top-tier off shore
manufacturers.  In fact, this collective team has successfully
launched over 150 complex RF products in the past seven years using off shore
manufacturers.





Given
their expertise in this area they have become acutely aware of the advantages of
partnering with a reputable contract manufacturer (CM).  In this case,
CelLynx will immediately leverage manufacturing practices at minimal cost. In
fact, the team has identified several CM candidates in Southeast Asia. Once a CM
is selected, CelLynx will immediately benefit from multiple manufacturing
locations with a trained and experienced technical work force, state of the art
facilities and knowledge of all aspects of supply chain management, operational
execution, global logistics and reverse logistics.





An
additional benefit to CelLynx is that the CM to be selected will have facilities
in California which will produce the first 200 units in coordination with the
Company’s engineering team.  Once the team has approved these initial
mass production  units, the manufacturing plan will be developed for
one of the CM’s Southeast Asia facilities.  The 200 units scheduled
for availability in the second quarter of 2009 will then be used for UL testing
and product demonstrations.




Competition
by Market Segment





The SOHO or residential wireless
amplifier competitors; Most of the companies in this industry do not
offer plug ‘n play single-unit solutions such as CelLynx.  In fact,
companies such as Wilson, Wi-Ex and CellAntenna, offer two-piece, ‘cable
connected amplifier-to-antenna’ solutions requiring complex installation enabled
only by tech savvy users or professional installers and at considerably higher
prices than CelLynx.





The mobile vehicle market
competitors; A few companies such as Digital Antenna and Richardson (Call
Capture) are focused on the vehicle market and others such as Wilson are
entering that market.  Again, however, these vehicle solutions require
complex installation including roof top mounting of antenna and, in some cases,
a direct connection between the cell phone and the roof top
antenna.





The Wireless enterprise solution
providers as competitors; While the equipment manufacturers in the
enterprise market such as Wilson, EMS Wireless and Radioframe Networks are
attempting to enter the SOHO/residential market, their products are engineered
for commercial enterprises requiring complex installation and as a result
are expensive as compared to the CelLynx solution.





While
each of the above competitors has solutions for certain market segments such as
large buildings and warehouses, there is no dominant market leader in the SOHO
and Vehicle segments of the Market. CelLynx believes that the total indoor and
vehicle cell signal amplification market, now exceeding $300 million annually,
could experience continued growth through the commercialization of products such
as those being offered by CelLynx. As compared to the current products in the
marketplace, CelLynx’s key sustainable competitive advantage is in its patent
pending technology providing for compact, plug ‘n play, consumer friendly and
affordable product lines. An overview of the competition is shown
below.









9


Intellectual
Property





CelLynx
has trademark protection for the brand name “5BARz” and has applied for
trademark protection for its sales slogan, “Turning Weak Spots into Sweet
Spots.”  CelLynx has the following patent applications
pending:









The
CelLynx Technology





The plug
‘n play aspects of the CelLynx cellular booster demanded complex algorithms and
intuitive interfaces. Further complicating the challenge, the booster required a
full duplex linear amplifier providing up to 45db of gain in both RX and TX
paths and directional antennae with one inch of separation and 70db of isolation
between them. It further required an active feed-forward cancellation in both
the RX and TX links with real time correction and an active Automatic Gain
Control for both links running in sync with the active feed-forward
cancellation.  Typically, a repeater simply boosts off the air cell
phone signals so operating performance of a repeater can be related to the
amount of boost reliability delivered by the repeater.





System
gain is the measure of boost in decibels or dB.  The major obstacles
to reliable gain in a repeater are isolation and linearity.  Linearity
is a function of the amplification in the active portion of the repeater.
Generally, the amplifiers in a repeater are designed to operate class A and the
usable output power is de-rated from the maximum output power by 10dB or 90%
below the saturated output of the amplifier. Isolation is the measure of
separation of the input from the output of the repeater.  If the
separation is less than the system gain, the result will be similar to the
feedback screech heard when a microphone is placed too close to a loud
speaker.  In practice, isolation has proven to be the Achilles heel of
repeaters because unlike linearity, improvements in isolation have proven to be
costly and unmanageable.




Traditionally
the low tech approaches to achieving the isolation necessary for adequate
repeater performance includes vertical and horizontal spacing of the two
antennae, as with a speaker and microphone.  In most cases this
horizontal spacing requires approximately ten times the distance of vertical
spacing.   CelLynx has used a high tech approach to deal with the
real world environment resulting in a superior product delivering high
performance. Not only did the team meet the challenge, but in the process they
developed a user friendly, affordable unit that is protected by five
pending patents.





Government
Regulation and Probability of Affecting Business





Our
products are subject to Federal Communications Commission (FCC) and Underwriter
Laboratories (UL) certifications.  We will submit samples of our
products to both agencies according to our product development
process.  We do not anticipate any difficulty in obtaining these
certifications for our products.





In
addition, because we plan to market and sell our products in other countries,
importation and exportation regulations may impact our activities. A breach of
these laws or regulations may result in the imposition of penalties or fines,
suspension or revocation of licenses. We are not currently involved in any such
judicial or administrative proceedings and believe that we are in compliance
with all applicable regulations.  Although it is impossible to predict
with certainty the effect that additional importation and exportation
requirements and other regulations may have on future earnings and operations,
we are presently unaware of any future regulations that may have a material
effect on our financial position, but cannot rule out the
possibility.




Compliance
with Environmental Laws





CelLynx
is not required to comply with any environmental laws that are particular to the
cellular amplifier industry.  However, it is company policy to be as
environmentally conscience in every aspect of our operations.


10





Employees





CelLynx
has approximately seven (7) full-time employees.  In addition, we have
hired several consultants to assist with development of our cellular amplifier
units.   CelLynx is not affiliated with any union or collective
bargaining agreement.  There have been
no adverse labor incidents or work stoppages in the history of CelLynx.
Management believes that its relationship with our employees is
good.





Corporate
Information





CelLynx’s
principal executive offices are located at 25910 Acero, Suite 370, Mission
Viejo, California 92691.CelLynx’s main
telephone number is (949) 305-5290, and our website address is www.CelLynx.com.  Information
provided on our website, however, is not part of this report and is not
incorporated herein.





ITEM
1A. RISK FACTORS





CelLynx
is a “smaller reporting company” as that term is defined in Rule 12b-2 of the
Securities Exchange Act, and, accordingly, is not required to provide the
information required by this item.





ITEM
1B. UNRESOLVED STAFF COMMENTS





CelLynx
is a “smaller reporting company” as that term is defined in Rule 12b-2 of the
Securities Exchange Act, and, accordingly, is not required to provide the
information required by this item.





ITEM
2. PROPERTIES





We lease office space in Mission Viejo, California at 25910 Acero,
Suite 370, Mission Viejo, California 92691.  The facility is our
primary operating offices and headquarters.  The facility is
approximately 2,120 square feet.  The lease has a one-and-half year
term that expires March 31, 2010 and the monthly base rent is
$4,664.





We also
lease office space in El Dorado Hills, California at 5047 Robert J Mathews
Parkway, Suite 400, El Dorado Hills, California 95762. This facility is used for
research, development and engineering.  The facility is approximately
1,570 square feet. The lease has a one-year term that expires February 21, 2009
and the monthly base rent is $2,198.





We
believe that the foregoing facilities are sufficient for our operational
needs.





We do not anticipate investing in real estate or interests in
real estate, real estate mortgages, or securities of or interests in persons
primarily engaged in real estate activities. We currently have no formal
investment policy, and we do not intend to undertake investments in real estate
as a part of our normal operations.





ITEM 3. LEGAL PROCEEDINGS




We are
not currently involved in any material legal proceedings, nor have we been
involved in any such proceedings that have had or may have a significant effect
on the Company. We are not aware of any other material legal proceedings pending
against us.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




On
September 22, 2008, shareholders owning in the aggregate 26,441,554 shares of
the Company’s common stock and 40,411,544 shares of the Company’s Series A
Preferred Stock, outstanding as of September 10, 2008 (the “Record Date”),
consented in writing to amend the Company’s articles of incorporation to
increase the number of shares of the Company’s authorized common stock from
100,000,000 to 400,000,000.  On October 8, 2008, the Company filed and
mailed a Definitive Information Statement notifying its shareholders of this
action and on November 7, 2008, the Company filed a Certificate of Amendment to
its Articles of Incorporation (the “Amendment”) with the Secretary of State of
the State of Nevada to increase the number of authorized shares common stock of
the Company from 100,000,000 to 400,000,000.  As a result of filing
the Amendment, 45,516,034 shares of Series A Preferred Stock were automatically
converted into 45,516,034 shares of common stock.




11





PART
II




ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES




Market
Information





The
Company’s common stock, par value $0.001 per share, is traded on the
Over-The-Counter Bulletin Board ("OTCBB") under the symbol "CYNX." The following
table sets forth, for each quarter within the last two fiscal years, the
reported high and low bid quotations for the Company’s common stock as reported
on the OTCBB. The bid prices reflect inter-dealer quotations, do not include
retail markups, markdowns or commissions and do not necessarily reflect actual
transactions.





QUARTER
            HIGH
      ($)
            LOW
      ($)1st
      Quarter 2007
            $0.62
            $0.252nd
      Quarter 2007
            $0.65
            $0.283rd
      Quarter 2007
            $0.31
            $0.114th
      Quarter 2007
            $0.19
            $0.121st
      Quarter 2008
            $0.23
            $0.122nd
      Quarter 2008
            $0.35
            $0.183rd
      Quarter 2008
            $0.28
            $0.184th
      Quarter 2008
            $0.26
            $0.12




Holders




As of
December 19, 2008, there were approximately 192 shareholders of record of our
common stock based upon the shareholder list provided by our transfer agent. Our
transfer agent is Signature Stock Transfer located at 2632 Coachlight Court,
Plano, Texas 75093, and their telephone number is (972) 612-4120.




Dividends




We have
not declared any dividends on our common stock since our inception. Our current
policy is to retain any earnings in order to finance the expansion of our
operations. Our board of directors will determine future declaration and payment
of dividends, if any, in light of the then-current conditions they deem relevant
and in accordance with applicable corporate law. There are no dividend
restrictions that limit our ability to pay dividends on our common stock in our
Articles of Incorporation or Bylaws. Chapter 78 of the Nevada Revised Statutes
(the “NRS”), does provide certain limitations on our ability to declare
dividends. Section 78.288 of Chapter 78 of the NRS prohibits us from declaring
dividends where, after giving effect to the distribution of the
dividend:




(a)
            we
      would not be able to pay our debts as they become due in the usual course
      of business; or(b)
            except
      as may be allowed by our Articles of Incorporation, our total assets would
      be less than the sum of our total liabilities plus the amount that would
      be needed, if we were to be dissolved at the time of the distribution, to
      satisfy the preferential rights upon dissolution of stockholders who may
      have preferential rights and whose preferential rights are superior to
      those receiving the distribution.




We have
not declared any dividends and we do not plan to declare any dividends in the
foreseeable future.





Sales
of Unregistered Securities





There
were no unregistered sales of securities during the period covered by this
report that were not previously reported in a Quarterly Report on Form 10-Q or a
Current Report on Form 8-K.




12


ITEM 6. SELECTED FINANCIAL
DATA





Not
applicable.





ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION




Management’s
      Discussion and Analysis or Plan of
Operation.





FORWARD
LOOKING STATEMENTS





The
following discussion and analysis of our results of operations and financial
condition for the years ended September 30, 2008 and 2007 should be read in
conjunction with our financial statements and the notes to those financial
statements that are included elsewhere in this Annual Report on Form 10-K. Our
discussion includes forward-looking statements based upon current expectations
that involve risks and uncertainties, such as our plans, objectives,
expectations and intentions. Actual results and the timing of events could
differ materially from those anticipated in these forward-looking statements as
a result of a number of factors. We use words such as “anticipate,” “estimate,”
“plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,”
“may,” “will,” “should,” “could,” and similar expressions to identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. Except
as required by law, we do not undertake any obligation to update or keep current
either (i) any forward-looking statement to reflect events or circumstances
arising after the date of such statement, or (ii) the important factors that
could cause our future results to differ materially from historical results or
trends, results anticipated or planned by us, or which are reflected from time
to time in any forward-looking statement.





Overview




On July
24, 2008, we acquired all of the outstanding shares of CelLynx-California in
exchange for the issuance by us of 32,454,922 restricted shares of our common
stock to the CelLynx Owners, which represented approximately 40.3% of our-issued
and outstanding common stock (including the shares issued in the Financing), and
45,516,034 restricted shares of our Preferred Stock, which automatically convert
into 45,516,034 shares of our common stock upon the filing of a Certificate of
Amendment to the our Articles of Incorporation increasing the number of
authorized common stock to at least 150,000,000 shares. As a result of this
reverse merger transaction, CelLynx-California became our wholly owned
subsidiary, and then we acquired the business and operations of
CelLynx-California.




Just
prior to the closing of the share exchange transaction, on July 23, 2008, we
raised $1,575,000 in a private placement by issuing 10,500,000 shares of our
common stock and warrants to purchase 10,500,000 shares of our common stock at
an exercise price of $0.20 per share to investors.   See Item
1.01 of our Form 8-K filed on July 30, 2008 for additional details regarding
this equity financing.




We have
not generated any revenue since the commencement of our operations on October
11, 2005.  We have financed our operations primarily through proceeds
from the issuance of common stock.  At this time, we believe that our
current cash position will not be sufficient to meet our anticipated cash needs
beyond January 2009.  We will need to raise additional capital in
order to remain operational beyond this point.





If
we are unable to raise additional capital in January 2009, we will be required
to severely reduce, or even cease, our operations.




Critical
Accounting Policies and Estimates





Our
management’s discussion and analysis of our financial condition and results of
operations are based on our combined financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States.  The preparation of these financial statements requires
us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements as well as the reported net sales and expenses
during the reporting periods. On an ongoing basis, we evaluate our estimates and
assumptions. We base our estimates on historical experience and on various other
factors that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.





13


While our
significant accounting policies are more fully described in Note 3 to our
financial statements attached hereto as Exhibit 99.1, we believe that the
following accounting policies are the most critical to aid you in fully
understanding and evaluating this management discussion and
analysis:





Fair Value of Financial
Instruments





On
January 1, 2008, CelLynx adopted SFAS No. 157, Fair Value Measurements. SFAS No.
157 defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosures requirements for
fair value measures. The carrying amounts reported in the balance sheets for
receivables and current liabilities each qualify as financial instruments and
are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest. The three levels are defined as
follows:




·
            Level
      1 inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets.




·
            Level
      2 inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the asset or liability, either directly or indirectly, for
      substantially the full term of the financial
  instrument.




·
            Level
      3 inputs to the valuation methodology are unobservable and significant to
      the fair value measurement.








We
analyze all financial instruments with features of both liabilities and equity
under SFAS 150, “Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity,” SFAS No 133, “Accounting for
Derivative Instruments and Hedging Activities” and EITF 00-19, “Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company’s Own Stock.”




Our
share-based compensation liability is carried at fair value totaling $2,714,724,
as of September 30, 2008. We used Level 2 inputs for its valuation methodology
for the share-based compensation liability, and the fair values is determined by
using the Black Scholes option pricing model based on various assumptions. We
recognized compensation expense of $2,625,106 for the year ended September 30,
2008.





Our
accrued beneficial conversion liability is carried at fair value totaling
$2,358,439, as of September 30, 2008. We used Level 2 inputs for its valuation
methodology for the accrued beneficial conversion liability, and the fair values
is determined by using the Black Scholes option pricing model based on various
assumptions.  We recognized a $1,151,992 loss on the change in the
accrued beneficial conversion liability for the year ended September 30,
2008.





The
Company’s accrued warrant liability is carried at fair value totaling $603,993,
as of September 30, 2008. The Company used Level 2 inputs for its valuation
methodology for the accrued warrant liability, and the fair values is determined
by using the Black Scholes option pricing model based on various
assumptions.  The Company recognized a $127,688 gain on the change in
the accrued warrant liability for the year ended September 30,
2008.





We did
not identify any other assets and liabilities that are required to be presented
on the balance sheet at fair value in accordance with SFAS No. 157.





Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.





14


Income
Taxes





Income
taxes are provided based upon the liability method of accounting in accordance
with SFAS No. 109, “Accounting for Income Taxes.”  Deferred income
taxes are recognized for the tax effect of temporary differences between the
basis of assets and liabilities for financial statement and income tax
purposes.  Pursuant to SFAS No. 109, we are required to compute
deferred income tax assets for net operating losses carried forward. The
potential benefits of net operating losses have not been recognized in these
financial statements because the Company cannot be assured it is more likely
than not it will utilize the net operating losses carried forward in future
years.





We
adopted FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes”,
during 2007. A tax position is recognized as a benefit only if it is “more
likely than not” that the tax position would be sustained in a tax examination,
with a tax examination being presumed to occur. The amount recognized is the
largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test,
no tax benefit is recorded. The adoption had no affect on our financial
statements.





Stock-Based
Compensation





We
account for our stock-based compensation for employees in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 123R, "Share-Based
Payment, an Amendment of Financial Accounting Standards Board (“FASB”) Statement
No. 123." We recognize in the statement of operations the grant-date fair value
of stock options and other equity-based compensation issued to employees and
non-employees.  We use the Black-Scholes option pricing model to value
the options issued.





Shares Issued for
Services





From time
to time, we issued stock for services.  Since we were a private
company, we used the most recent stock issuance price to determine the value of
the services performed.





Patents and
Trademarks





Acquired
patents and trademarks are capitalized at their acquisition cost or fair value.
The legal costs, patent registration fees and models and drawings required for
filing patent applications are capitalized if they relate to commercially viable
technologies. Commercially viable technologies are those technologies that are
projected to generate future positive cash flows in the near term. Legal costs
associated with applications that are not determined to be commercially viable
are expensed as incurred. All research and development costs incurred in
developing the patentable idea are expensed as incurred. Legal fees from the
costs incurred in successful defense to the extent of an evident increase in the
value of the patents are capitalized.





Capitalized
cost for pending patents are amortized on a straight-line basis over the
remaining twenty year legal life of each patent after the costs have been
incurred. Once each patent or trademark is issued, capitalized costs are
amortized on a straight-line basis over a period not to exceed 20 years and 10
years, respectively.





Plan
of Operations





Overview





We are an
early stage developer of patent pending technology that allows for the
production of the next generation of cell phone boosters (also known as
repeaters or amplifiers) for the small office, home office (SOHO) and
vehicle.  This next generation product, CelLynx 5BARz, is a single
piece unit that strengthens weak cellular signals to deliver higher quality
signals for voice, data and video reception on cell phones being used indoors or
in vehicles.  We have recently completed a prototype SOHO unit which
delivers 45 decibel (dB) of gain in a Single Band PCS environment providing up
to 1,500 square feet of indoor coverage.  This unit measures 6.5 X 7.5
X 2.5 inches, weighs approximately one pound and does not require the
installation of antennas or cables in order to function.  Most SOHO
cellular amplifiers currently on the market require a receiving tower or
antenna, usually placed in an attic or on a rooftop, and a transmitting tower or
antenna to be placed at least 35 feet from the other antenna with each connected
to the amplifier by cable.  Our patent pending technology eliminates
the need to distance the receiving and transmitting towers, allowing the two
towers to be placed directly inside the amplifier, resulting in a more
affordable, one piece unit sometimes referred to as ‘plug ‘n play’, i.e.
requiring no installation other than plugging the unit into a power source. In
order to optimize marketability, we are developing an improved model which it
expects to operate in a dual band, PCS and Cellular, environment delivering 65
dB of gain thereby allowing for coverage of 2,500 to 3,000 square feet.
 This dual band unit would work with all current wireless carriers except
Nextel which operates on its own frequency. The PCS network is generally used by
the older carriers such as AT&T at 850MHz while the newer carriers such as
T-Mobile operate on the Cellular network at 1900 MHz.  Management is
confident that all of the critical functions required for this dual band unit
have been identified and that their engineering team has the capability to
accomplish development leading to commercialization.


15





We have
also developed a mobile unit designed primarily for use in vehicles, or for
single-room coverage in the home or office.   The mobile is an
adaptation of the SOHO Unit described above.  The unit will produce up to
45 dB of gain offering higher performance than the competition within the
interior of a vehicle cabin or single room, while minimizing the signal
degrading effects of cabling.  Initially envisioned as a plug ‘n play
mobile unit to be used in vehicles with a 12 volt cigarette lighter power
adapter, the 5BARz Universal Unit has also proven highly effective for
single-room coverage in a home or office. Accordingly, we plan to introduce the
5BARz Universal Unit with a 110 volt power cord for indoor single-room use, as
well as with an accessory portable battery pack that can be used virtually
anywhere a weak signal exists. Using the 5BARz Universal Unit with Bluetooth®
extends the effective coverage range to that of the Bluetooth®
signal.





Our
product line is expected to be manufactured by contract manufacturers located in
South East Asia.   These manufacturers allow us to capitalize on
the full advantages of multiple manufacturing locations with a trained and
experienced technical work force,  state of the art facilities and
knowledge of all aspects of supply chain management, operational execution,
global logistics and reverse logistics. The marketing and sales functions will
be handled in house incorporating a multi-channel strategy that includes
distribution partners, wireless service providers, retail outlets and
international joint ventures.





Material
Impact of Known Events on Liquidity





There are
no known events that are expected to have a material impact on our short-term or
long-term liquidity.





Results
of Operations





During
the year ended September 30, 2008, we incurred $308,906 of research and
development expenses compared to $81,218 incurred during the year ended
September 30, 2007.  Research and development expenses relate to our
ongoing development and testing of our cell phone boosters.  Our
research and development costs were higher in 2008 compared to 2007 due to
increase in personnel costs, consultant costs and materials.  We
expect our research and development costs to increase as we continue to grow and
develop our products.





During the year ended September 30,
2008, we incurred $4,397,131 of general and administrative expenses, compared to
$254,650 incurred during the year ended September 30, 2007.  The
increase is due to an increase in compensation expense related to options of
$2,625,106, an increase in professional fees of approximately $750,000, and an
increase in salaries of approximately $600,000





During the year ended September 30,
2008, we incurred $1,952,499 of non-operating expense, compared to $10,375
incurred during the year ended September 30, 2007.  The increase is
due to an increase in the fair value of the accrued beneficial conversion
feature of $1,151,992, an increase in interest and financing costs of $921,845
and a gain on the change in the fair value of the accrued warrant liability of
$127,688.  The increase in interest and financing costs of $921,845 is
related to the recording the fair value of the conversion feature for the
convertible promissory notes.


16





Financial
Condition





As of September 30, 2008, we had a
working capital deficit of $5,301,132, which includes a share-based compensation
liability of $2,714,724, an accrued beneficial conversion liability of
$2,358,439 and an accrued warrant liability of $603,993.  These
liabilities will be reclassified to equity in the first quarter ending December
31, 2008 because as of November 7, 2008, we increased our authorized shares to
400,000,000 which will provide sufficient shares to cover the potential
conversion of the options and the convertible promissory notes.





For the
year ended September 30, 2008 and 2007 and for the period from October 11, 2005
(Date of Inception) to September 30, 2008, we incurred net losses of $6,658,536,
$346,243 and $7,695,448, respectively. As of September 30, 2008 and 2007, we
have a deficit accumulated during the development stage of $7,695,448 and
$1,036,912, respectively.





The
report of our independent registered public accounting firm for the fiscal year
ended September 30, 2008 states that due to our net operating cash flow deficits
and the deficit accumulated during the development stage,  there is a
substantial doubt about our ability to continue as a going concern.





Capital
Resources




We have
financed our operations primarily through proceeds from the issuance of common
stock.  From January to June 2008, we received approximately $750,000
in equity financing. In July 2008, we also received proceeds of $1,575,000 from
a private placement financing transaction.  We believe that our
current cash, anticipated cash flow from operations, and net proceeds from the
private placement financing will be sufficient to meet our anticipated cash
needs, including our cash needs for working capital and capital expenditures for
only the next month.  We will need to raise additional capital in
order to remain operational beyond this point.  We believe we will
raise an additional $2,100,000 by the Investors exercising the warrants they
were issued in the private placement financing transaction referenced above;
however, the Investors are under no obligation to exercise their warrants and
there can be no assurances that they will exercise their warrants.  We
also believe we will receive an additional $10,000,000 from the Distribution
Agreement we entered into with Dollardex, however, this funding is contingent on
our meeting certain milestones and there can be no assurances that we will meet
those milestones.  If we receive these funds, we believe we will have
sufficient capital to meet our needs for the foreseeable future.  If
these funds do not materialize, we will need to seek additional financing
elsewhere.  In addition, we may require additional cash due to changes
in business conditions or other future developments, including any investments
or acquisitions we may decide to pursue. To the extent it becomes necessary to
raise additional cash in the future, we may seek to raise it through the sale of
debt or equity securities, funding from joint-venture or strategic partners,
debt financing or loans, issuance of common stock or a combination of the
foregoing. We currently do not have any binding commitments for, or readily
available sources of, additional financing. We cannot provide any assurances
that we will be able to secure the additional cash or working capital we may
require to continue our operations, either now or in the future.





Contractual Obligations and
Off-Balance Sheet Arrangements





Contractual
Obligations





We have
certain fixed contractual obligations and commitments that include future
estimated payments. Changes in our business needs, cancellation provisions,
changing interest rates, and other factors may result in actual payments
differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our financial position, results of operations, and cash flows.





The
following table summarizes our contractual obligations as of September 30, 2008,
and the effect these obligations are expected to have on our liquidity and cash
flows in future periods.


17





Less
      thanContractual
      Obligation
              
              Total
              
              
              1
      year
              
              
              1-3
      yearsNote
      payable
              
              $
              262,356
              
              
              $
              -
              
              
              $
              262,356Stockholder
      notes
              
              
              60,000
              
              
              
              40,000
              
              
              
              20,000Operating
      lease
              
              
              97,140
              
              
              
              69,156
              
              
              
              27,984Total
      Contractual Obligations
              
              $
              419,496
              
              
              $
              109,156
              
              
              $
              310,340





Off-Balance
Sheet Arrangements





We have
not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
stockholder’s equity or that are not reflected in our financial
statements.  Furthermore, we do not have any retained or contingent
interest in assets transferred to an unconsolidated entity that serves as
credit, liquidity or market risk support to such entity. We do not have any
variable interest in any unconsolidated entity that provides financing,
liquidity, market risk or credit support to us or engages in leasing, hedging or
research and development services with us.







ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





Not
applicable.




ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA





The
financial statements are listed in the Index to Financial Statements on page
F-1.





ITEM
9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES





None.





ITEM 9A(T). CONTROLS AND
PROCEDURES





Evaluation
of Disclosure Controls and Procedures





Regulations
under the Securities Exchange Act of 1934 (the "Exchange Act") require
public companies to maintain "disclosure controls and procedures," which are
defined to mean a company's controls and other procedures that are designed to
ensure that information required to be disclosed in the reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the Commission's
rules and forms. Our Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO") carried out an evaluation of the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this report.
Based on those evaluations, as of the Evaluation Date, our CEO and CFO believe
that:





(i) our
disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in the reports we file under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms and that such information is
accumulated and communicated to our management, including the CEO and CFO, as
appropriate, to allow timely decisions regarding required disclosure;
and





(ii) our
disclosure controls and procedures are not effective.





18


Management’s
Annual Report on Internal Control over Financial Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such terms are defined in Rules 13(a) – 15(f)
promulgated under the Securities Exchange Act of 1934, as amended. The purpose
of an internal control system is to provide reasonable assurance to the
Company’s management and board of directors regarding the preparation and fair
presentation of published financial statements.





An
internal control material weakness is a significant deficiency, or aggregation
of deficiencies, that does not reduce to a relatively low level the risk that
material misstatements in financial statements will be prevented or detected on
a timely basis by employees in the normal course of their work. An internal
control significant deficiency, or aggregation of deficiencies, is one that
could result in a misstatement of the financial statements that is more than
consequential.





Management
assessed the effectiveness of the Company’s internal control over financial
reporting as of September 30, 2008 and this assessment identified the following
material weaknesses in the company’s internal control over financial
reporting:





o
            A
      system of internal controls (including policies and procedures) has
      neither been designed nor implemented.o
            A
      formal, internal accounting system has not been
    implemented.





o
            Appropriate
      technology systems to ensure reliability of information and record-keeping
      have not been acquired.





o
            Segregation
      of duties in the handling of cash, cash receipts, and cash disbursements
      is not formalized.





It is
Management’s opinion that the above weaknesses exist due to the small size of
operating staff and the current R&D phase of operations (e.g., no current
sales activity).





In making
this assessment, Management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated
Framework. Because of the material weaknesses described in the preceding
paragraph, Management believes that, as of June 30, 2008, the Company’s internal
control over financial reporting was not effective based on those
criteria.





This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management's report
in this annual report.





Changes
in Internal Controls





There
were no changes in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
amended) during the year ended September 30, 2008 that have materially affected,
or are reasonably likely to materially affect, our international control over
financial reporting.





ITEM 9B. OTHER INFORMATION





None.


19


PART III




ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE




Previous
Executive Officers and Directors





Prior to
the reverse take-over transaction that closed on July 24, 2008, John P. Thornton
was the Chief Executive Officer, President, Chief Financial Officer, Secretary,
Treasurer and sole Director of the Company.





Name of Director
            Age
            PositionJohn
      P. Thornton
            74
            Chief
      Executive Officer, Chief Financial Officer,
              President,
      Secretary, Treasurer and Director




John
P. Thornton – Chief  Executive Officer, Chief Financial Officer,
President, Secretary, Treasurer and Director




Effective
April 18, 2006, John P. Thornton was appointed as a member of our board of
directors. Mr. Thornton was appointed as our Chief Executive Officer, Chief
Financial Officer, President, Secretary and Treasurer as of June 7, 2006. Mr.
Thornton has been a self-employed businessman and consultant in the securities
industry in the Vancouver, British Columbia area since 1986. During the past
five years, Mr. Thornton served as a director of several U.S. and Canadian
public companies listed on TSX Venture Exchange, Canadian Venture Exchange, and
Over-the-Counter Bulletin Board (“OTCBB”) including:




·
            Bonaventure
      Enterprises Inc., TSX Venture
Exchange;




·
            Consolidated
      Odyssey Exploration Inc., TSX Venture
Exchange;




·
            Caesar’s
      Explorations Inc., Canadian Venture
Exchange;




·
            Goldnev
      Resources Inc., TSX Venture
Exchange;




·
            Knightsbridge
      Resources Inc., OTCBB;




·
            Fairchild
      International Corp., OTCBB; and




·
            Patch
      International Inc., OTCBB.




In
connection with the reverse take-over, Mr. Thornton resigned as our Chief
Executive Officer, President, Chief Financial Officer, Secretary and Treasurer
effective July 24, 2008, and as a director effective August 21,
2008.




Current
Executive Officers and Directors





Our
current directors and executive officers, their ages, their respective offices
and positions, and their respective dates of election or appointment are as
follows:




Name
            
            Age
            
            Position
            
            Date of AppointmentDaniel
      R. Ash
            
            47
            
            President,
      Chief Executive Officer, Chief Operating Officer, Secretary and
      Director
            
            July
      24, 2008Tareq
      Risheq
            
            44
            
            Chief
      Strategy Officer and Director (1)
            
            July
      24, 2008Kevin
      Pickard
            
            44
            
            Chief
      Financial Officer and Treasurer
            
            July
      24, 2008Robert
      J. Legendre
            
            51
            
            Executive
      Chairman of the Board
            
            July
      24, 2008Norman
      W. Collins
            
            69
            
            Director
            
            July
      24, 2008





(1)
            Tareq
      Risheq resigned as Chief Strategy Officer on December 12,
      2008.  Mr. Risheq remains a director of the
    Company.





20





Daniel
R. Ash – President, Chief Executive Officer, Chief Operating Officer, Secretary
and Director




Daniel R.
Ash currently serves as a Director, President and Chief Executive
Officer.  Since July of 2006 he has devoted his full time efforts to
the development of CelLynx and its products. Mr. Ash has more than 20 years
experience in the wireless industry with senior management roles in new product
development, engineering, off-shore manufacturing and global
operations.





From 1999
to 2006 Mr. Ash held senior positions at Powerwave Technologies, a manufacturer
of RF amplifiers and antennae, and was instrumental in its growth from $200M to
more than $800M annual revenues. From 1991 to 1999, Mr. Ash held senior
positions with Hewlett Packard and was responsible for the transfer of RF cell
phone amplifier modules to high volume production in Malaysia ramping production
to over one million amplifiers per month.





Early in
his career, Mr. Ash worked in the electronic defense industry for Teledyne
Microwave and Narda Microwave. He worked on several missile projects and was
considered by many to be one of the industry experts in millimeter wave
electronics.





Tareq
Risheq – Chief Strategy Officer and Director




Tareq
Risheq currently serves as Director and Chief Strategy Officer.  He
has over 20 years experience in the Consumer Electronics and Information
Technology industries.  Mr. Risheq founded Simpliciti Corporation,
where, from 2002 to 2004, he took a PDA product from concept to volume
manufacturing and nationwide distribution to major
retailers.  Simpliciti was featured in the Wall Street Journal as well
as most of the other national media outlets. Mr. Risheq also established a
direct sales organization in Saudi Arabia and grew that firm to $30M in revenues
within three years.  He holds a Bachelor of Science degree in
Business/Management from Bradley University.  Mr. Risheq resigned as
Chief Strategy Officer on December 12, 2008.  Mr. Risheq remains a
director.




Kevin
Pickard – Chief Financial Officer and Treasurer




Since 1998,
Mr. Pickard has been a principal officer and owner of Pickard & Green
CPAs (formerly Pickard & Company, CPA’s, P.C.), an accounting firm formed by
Mr. Pickard that specializes in providing SEC accounting and other
management consulting services for small to medium sized companies, including
preparing required SEC filings for public companies, due diligence on potential
acquisitions, preparing projections and business plans, assisting with
restructuring of companies, and positioning companies for initial public
offerings. Mr. Pickard also currently serves as the interim President for
Universal Guardian Holding, Inc., a company that trades on the Pink Sheets, and
as interim CFO for Signalife, Inc., a company that trades on the American Stock
Exchange.  Mr. Pickard was a Partner with Singer Lewak Greenbaum
& Goldstein, LLP, from 1996 to 1998, where he co-managed the
firm’s securities practice group. Mr. Pickard also spent over nine years
with Coopers & Lybrand, L.L.P. (currently PricewaterhouseCoopers, LLP),
where he focused on the auditing companies in the insurance, high-tech and
manufacturing industries.  Mr. Pickard holds Bachelors of Science
and Masters degrees in Accounting from Brigham Young University.




Robert
J. Legendre – Executive Chairman of the Board




Robert J.
Legendre brings 25 years of global experience in all aspects of operations
management including supply chain management, global operations, captive and
contracted offshore manufacturing, NPI management, research & development,
engineering development, and sales & marketing. Mr. Legendre held several
senior level positions including Sr. Vice President of Global Operations and
President of Asia & America’s Strategic Business Unit for Powerwave
Technologies. He has also held senior management positions in operations and
supply chain with Infocus Corporation, Pemstar Corporation and Western Digital,
where he managed operations and supply chain in many global locations including
Puerto Rico, Singapore and Malaysia. Mr. Legendre has a Bachelor of Science
degree in Business from LaSalle University.




21


Norman
W. Collins – Director




Norman W.
Collins, Sr. is an independent Director who was appointed upon the completion of
the merger between CelLynx, Inc. and NorPac.  Since June of 2003, Mr.
Collins has been Director and President of Collins & Associates, a Delaware
corporation providing consulting services to corporations as well as legal
services in the form of Mediation and Arbitration of corporate
disputes.  He is admitted to the Tennessee Bar and is a Certified
Mediator and Arbitrator in Georgia and a Certified Mediator in North Carolina
and the District of Columbia.  Between 2003 and 2007 Mr. Collins also
served as the Executive Director of the Living Memorial Tree Foundation, a New
York non-profit organization dedicated to the creation of a memorial to the
victims of 9/11. Since May of 2006, Mr. Collins has also served as Director and
CEO of Upgrade International, a Washington technology
corporation.  Prior positions include Director and CEO of several
non-reporting companies either in the development stage or with revenues
exceeding $30 Million.




Mr.
Collins holds a Bachelor of Science degree in Business Administration from Trine
University and a Juris Doctor degree from Michigan State University, College of
Law.





Family
Relationships





There are
no family relationships among our directors and executive officers.





Involvement
in Certain Legal Proceedings




Except as
provided below, none of our directors or executive officers has, during the past
five years:





(a)
            Has
      had a petition under the federal bankruptcy laws or any state insolvency
      law filed by or against, or a receiver, fiscal agent or similar officer
      was appointed by a court for the business or property of such person, or
      any partnership in which he was a general partner at or within two years
      before the time of such filing, or any corporation or business association
      of which he was an executive officer at or within two years before the
      time of such filing;





(b)
            Been
      convicted in a criminal proceeding or is a named subject of a pending
      criminal proceeding (excluding traffic violations and other minor
      offenses);





(c)
            Been the subject of any order, judgment, or
      decree, not subsequently reversed, suspended or vacated, of any court of
      competent jurisdiction, permanently or temporarily enjoining him from, or
      otherwise limiting, the following activities:
              
              ·     
      Acting as a futures commission
      merchant, introducing broker, commodity trading advisor, commodity pool
      operator, floor broker, leverage transaction merchant, any other person
      regulated by the Commodity Futures Trading Commission, or an associated
      person of any of the foregoing, or as an investment adviser, underwriter,
      broker or dealer in securities, or as an affiliated person, director or
      employee of any investment company, bank, savings and loan association or
      insurance company, or engaging in or continuing any conduct or practice in
      connection with such activity;
              
              ·Engaging in any type
      of business practice; or
              
              ·   Engaging in any activity in connection
      with the purchase or sale of any security or commodity or in connection
      with any violation of federal or state securities laws or federal
      commodities laws;(d)
            Been
      the subject of any order, judgment or decree, not subsequently reversed,
      suspended or vacated, of any federal or state authority barring,
      suspending or otherwise limiting for more than 60 days the right of such
      person to engage in any activity described in paragraph I(i) above, or to
      be associated with persons engaged in any such
  activity;


22





(e)
            Been
      found by a court of competent jurisdiction in a civil action or by the
      Commission to have violated any federal or state securities law, and the
      judgment in such civil action or finding by the Commission has not been
      subsequently reversed, suspended, or vacated; and(f)
            Been
      found by a court of competent jurisdiction in a civil action or by the
      Commodity Futures Trading Commission to have violated any federal
      commodities law, and the judgment in such civil action or finding by the
      Commodity Futures Trading Commission has not been subsequently reversed,
      suspended or vacated.




In
January 2008, Mr. Pickard became interim President of Universal Guardian
Holding, Inc. (“UGH”) to assist the Board of Directors in disposing of UGH’s
assets to repay UGH’s bondholders.  UGH was not successful in selling
its assets and on June 23, 2008, the Board of Directors elected to voluntarily
file for Chapter 7 bankruptcy protection.





Compliance
with Section 16(a) of the Exchange Act





Based
solely upon a review of the copies of such forms furnished to the Company, or
written representations that no reports were required, we believe that for the
fiscal year ended September 30, 2008, beneficial owners complied with
Section 16(a) filing requirements applicable to them.




Code
of Ethics





We have
not adopted a code of ethics, but we plan on adopting a code of ethics that
applies to all directors, officers, and employees, including our Chief Executive
Officer and Chief Financial Officer, and members of the board of directors in
the near future.




Material
Changes to the Procedures by which Security Holders May Recommend Nominees to
the Board of Directors




There
have been no material changes to the procedures by which security holders may
recommend nominees to the Board of Directors.







Board
Committees; Director Independence




In
November 2008, our board of directors appointed Robert J. Legendre and Norman W.
Collins to serve as members of our audit committee, although neither qualifies
as an “audit committee financial expert.”  Our board of directors has
yet to appoint a compensation committee.  The functions ordinarily
handled by a compensation committee are currently handled by our entire board of
directors. Our board of directors intends, however, to review our governance
structure and institute board committees as necessary and advisable in the
future to facilitate the management of our business.




Our board
of directors consists of one independent director, Mr. Norman W. Collins, and
three non-independent directors. We have determined independence in accordance
with definitions and criteria applicable under the NASDAQ rules.




Compensation
Committee Interlocks and Insider Participation




No
interlocking relationship exists between our board of directors and the board of
directors or compensation committee of any other company, nor has any
interlocking relationship existed in the past.




23


ITEM 11. EXECUTIVE COMPENSATION





Summary
of Compensation





Executive
Compensation




The
following summary compensation table reflects all compensation for fiscal years
2007 and 2008 received by our predecessor’s principal executive officer and two
most highly compensated executive officers whose salary exceeded
$100,000.




Summary
Compensation Table – Predecessor




Name
      and
              Principal
      Position
            
            
            Year
            
            Salary
              ($)
            
            
            Bonus
              ($)
            
            
            Stock
              Awards
              ($)
            
            
            Option
              Awards
              ($)
            
            
            Non-Equity
              Incentive
      Plan
              Compensation
              ($)
            
            
            Nonqualified
              Deferred
              Compensation
              Earnings
              ($)
            
            
            All
      Other
              Compensation
              ($)
            
            
            Total
              ($)John
      P. Thornton, Former
              President,
      CEO, CFO, Secretary and Treasurer
            
            
            2008
            
            12,000
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            12,0002007
            
            12,000
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            12,000






The
following summary compensation table reflects all compensation for fiscal years
2007 and 2008 received by CelLynx’s principal executive officer and two most
highly compensated executive officers whose salary exceeded
$100,000.




Summary
Compensation Table – CelLynx





Name
      and Principal Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
              Awards
              (
      $)
            
            Option
              Awards
              ($)
            
            Non-Equity
              Incentive
      Plan
              Compensation
              ($)
            
            Non-qualified
              Deferred
              Compensation
      Earnings
              ($)
            
            All
      Other
              Comp
              -ensation
              (
      $)
            
            Total
              ($)Daniel
      R. Ash, President, Chief Executive Officer, Chief Operating Officer
      Secretary and Director
            
            2008
            
            
            170,000
            
            --
            
            
            --
            
            217,671
            (2)
            
            --
            
            --
            
            
            --
            
            387,6712007
            
            
            30,000
            
            --
            
            
            63,333
            (1)
            --
            
            
            --
            
            --
            
            
            --
            
            93,333Tareq
      Risheq, Chief Strategy Officer and Director (3)
            
            2008
            
            
            108,000
            
            --
            
            
            --
            
            159,330
            (2)
            
            --
            
            --
            
            
            --
            
            267,3302007
            
            
            30,000
            
            --
            
            
            63,333
            (1)
            --
            
            
            --
            
            --
            
            
            --
            
            93,333





(1)
            
            The
      value of the stock award was determined based on the fair market value of
      the services performed.(2)
            
            The
      Company used the Black-Scholes option-pricing model to value the
      options.  The assumptions used in calculating the fair value of
      options granted are as follows:
              
              Expected
      life (years):      2.5 – 3.5
              Risk-free
      interest rate:     2.37% -- 4.05%
              Expected
      volatility:         100%
              Expected
      dividend yield: 0%


24





(3)
            
            Mr.
      Risheq resigned as Chief Strategy Officer on December 12,
      2008.






Outstanding
Equity Awards




The
following table sets forth certain information concerning stock and granted to
our named executive officers.





OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-ENDOPTION
      AWARDS
            
            STOCK
      AWARDSName
            
            Number
      of securities underlying unexercised options (#)
    Exercisable
            
            Number
      of securities underlying unexercised options (#)
              Unexercisable
            
            Equity
      Incentive Plan Awards: Number of Securities underlying unexercised
      unearned options (#)
            
            Option
      exercise price ($)
            
            Option
      expiration date
            
            Number
      of shares or units of stock that have not vested (#)
            
            Market
      value of shares or units of stock that have not vested ($)
            
            Equity
      incentive plan awards: number of unearned shares, units or other rights
      that have not vested (#)
            
            Equity
      incentive plan awards: Market or payout value of unearned shares, units or
      other rights that have not vested ($)Daniel
      R. Ash (1)
            
            
            —
            
            4,587,979
            
            —
            
            $
            0.0787
            
            10/01/2012Daniel
      R. Ash (2)
            
            
            349,426
            
            —
            
            —
            
            $
            0.0787
            
            04/21/2013Daniel
      R. Ash (1)
            
            
            —
            
            8,475,233
            
            —
            
            $
            0.0787
            
            05/20/2013Tareq
      Risheq (1)
            
            
            —
            
            4,587,979
            
            —
            
            $
            0.0787
            
            10/01/2012Tareq
      Risheq (2)
            
            
            349,426
            
            —
            
            —
            
            $
            0.0787
            
            04/21/2013Tareq
      Risheq (1)
            
            
            —
            
            4,708,484
            
            —
            
            $
            0.0787
            
            05/20/2013




_______________________


(1)
            
            Option
      vests 33.3% after one year, with the remaining 66.7% to vest evenly over
      the remaining months.




(2)
            
            Option
      fully vested after 90 days of the grant date of April 21,
      2008.




Retirement
Plans




We
currently have no plans that provide for the payment of retirement benefits, or
benefits that will be paid primarily following retirement, including but not
limited to tax-qualified defined benefit plans, supplemental executive
retirement plans, tax-qualified defined contribution plans and nonqualified
defined contribution plans.




Potential
Payments upon Termination or Change-in-Control




Except as
described below under “Employment Agreements,” we currently have no contract,
agreement, plan or arrangement, whether written or unwritten, that provides for
payments to a named executive officer at, following, or in connection with any
termination, including without limitation resignation, severance, retirement or
a constructive termination of a named executive officer, or a change in control
of the registrant or a change in the named executive officer’s responsibilities,
with respect to each named executive officer.


25





Employment
Agreements




On
October 1, 2007, the Board of Directors of CelLynx-California approved the
following compensation packages for Daniel R. Ash and Tareq Risheq:




Annual
      Base Salary:
            $200,000Bonus
      Plan:
            Participation
      in the CelLynx Bonus Plan can amount up to 30% of the annual base salary,
      but is conditioned upon achievement of the goals and objectives of the
      then current plan, including those related to overall company
      performance.




Fringe
      Benefits:
            Fifteen
      paid vacation days per year.  Ten paid holidays per
      year.  Health insurance with hospital
  coverage.




Stock
      Options:
            3%
      of the current outstanding common stock based the fair market value on the
      date of hire of $0.10 per share.  The options vest over three
      years with 33.3% vesting after the first year and monthly vesting
      thereafter of 1/24th
      of the remaining 66.6%.




Severance:
            If
      employment is terminated without cause, Mr. Ash and Mr. Tareq will receive
      six months pay.




Acquisition:
            If
      CelLynx-California is acquired, all outstanding stock options will become
      fully vested.




The Board
of Directors of CelLynx-California amended this compensation package on May 20,
2008 to provide for an annual salary of $170,000 for Mr. Ash and $108,000 for
Mr. Risheq.  Mr. Risheq resigned as Chief Strategy Officer on December
12, 2008 and is no longer entitled to this compensation.




On July
22, 2008, CelLynx-California entered into a consulting agreement (the
“Consulting Agreement”) with Kevin Pickard whereby Mr. Pickard agreed to serve
as the Company’s interim Chief Financial Officer for a period beginning on the
date of the Consulting Agreement and ending on the earlier of (i) the date that
the Company retains a permanent Chief Financial Officer, (ii) the 90th day
after the closing of the reverse take-over transaction contemplated by the
Exchange Agreement, or (iii) the date which the Company notifies Mr. Pickard
that he has been terminated in writing, and which notification may occur at any
time for any reason.  As an inducement to enter into the Consulting
Agreement, CelLynx-California granted Mr. Pickard 100,000 shares of
CelLynx-California common stock and $5,000 in cash.  The
CelLynx-California common stock were converted into 62,896 shares of the
Company's common stock and 62,897 shares of the Company's Series A Preferred
Stock upon the closing of the reverse take-over transaction.  The
Series A Preferred Stock automatically converted into 62,897 shares of the
Company’s common stock upon the filing of a Certificate of Amendment to the
Company’s Articles of Incorporation increasing the number of authorized common
stock from 100,000,000 to 400,000,000 on November 7, 2008.




Director
Compensation




On July
15, 2008, CelLynx-California entered into an agreement with Mr. Norman W.
Collins that granted Mr. Collins a stock option to purchase 610,000 shares of
CelLynx-California’s common stock at an exercise price of $0.09 per share that
vests 25% per year so long as Mr. Collins remains a director of
CelLynx.  Upon the closing of the Exchange Agreement, this option was
exchanged for an option to purchase 767,337 shares of the Company's common stock
at an exercise price of $0.0715 per share.




Other
than as described above, we do not pay any compensation to members of our board
of directors for their service on the board. However, we intend to review and
consider future proposals regarding board compensation.


26





ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS




Securities
Authorized for Issuance under Equity Compensation Plans




Set forth
in the table below is information regarding awards made through compensation
plans or arrangements through September 30, 2008, the most recently completed
fiscal year.





Equity
      Compensation Plan InformationPlan
      category
            Number
      of
              securities
      to be
              issued
      upon exercise
              of
      outstanding
              options,
      warrants
              and
      rights
              (a)
            
            Weighted-
              average
              exercise
              price
      of
              outstanding
              options,
              warrants
              and
      rights
              (b)
            
            Number
      of
              securities
              remaining
              available
      for future
              issuance
      under
              equity
              compensation
              plans
      (excluding
              securities
      reflected
              in
      column (a))
              (c)Equity
      compensation plans approved by security holders
            --
            
            $
            --
            
            --Equity
      compensation plans not approved by security holders
            53,901,899
            
            $
            $0.073
            
            21,098,101Total
            53,901,899
            
            
            
            
            21,098,101




Security
Ownership of Certain Beneficial Owners and Management




Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. Unless otherwise indicated in the table, the persons and
entities named in the table have sole voting and sole investment power with
respect to the shares set forth opposite the shareholder’s name. Unless
otherwise indicated, the address of each beneficial owner listed below is 25910
Acero, Suite 370, Mission Viejo, California 92691.  The percentage of
class beneficially owned set forth below is based on 126,068,846 shares
outstanding as of December 19, 2008.




Name
      and Position
            
            Number
      of
              Shares
      of
              Common
              Stock
              Beneficially
              Owned
              (1)
            
            
            Percent
      of
              Shares
      of
              Common
              Stock
              Beneficially
              Owned
      (2)Daniel
      R. Ash, President, Chief Executive Officer, Chief Operating Officer,
      Secretary and Director (3)
            
            
            32,864,326
            
            
            
            25.2
            %Tareq
      Risheq, Chief Strategy Officer and Director (4)
            
            
            32,864,326
            
            
            
            25.2
            %Kevin
      Pickard, Chief Financial Officer and Treasurer
            
            
            382,970
            
            
            
            *Robert
      J. Legendre, Chairman of the Board
            
            
            --
            
            
            
            *Norman
      W. Collins, Director
            
            
            490,793
            
            
            
            *All
      Executive Officers and Directors as a Group (5 persons)
            
            
            66,602,415
            
            
            
            49.3
            %




________________


* Less
than 1%


27





(1)
            Under
      Rule 13d-3, a beneficial owner of a security includes any person who,
      directly or indirectly, through any contract, arrangement, understanding,
      relationship, or otherwise has or shares: (i) voting power, which includes
      the power to vote, or to direct the voting of shares; and (ii) investment
      power, which includes the power to dispose or direct the disposition of
      shares. Certain shares may be deemed to be beneficially owned by more than
      one person (if, for example, persons share the power to vote or the power
      to dispose of the shares). In addition, shares are deemed to be
      beneficially owned by a person if the person has the right to acquire the
      shares (for example, upon exercise of an option) within 60 days of the
      date as of which the information is provided. In computing the percentage
      ownership of any person, the amount of shares outstanding is deemed to
      include the amount of shares beneficially owned by such person (and only
      such person) by reason of these acquisition rights. As a result, the
      percentage of outstanding shares of any person as shown in this table does
      not necessarily reflect the person’s actual ownership or voting power with
      respect to the number of shares of common stock actually
      outstanding.





(2)
            Percentage
      based upon 126,068,846 issued and outstanding shares of the Company’s
      capital stock.




(3)
            Includes
      28,345,452 shares of common stock, options to purchase 1,877,223 shares of
      common stock at an exercise price of $0.0787 per share, a $20,000 note
      convertible into 2,515,858 shares of common stock at a conversion price of
      $0.0079 per share and a $10,000 note convertible into 125,793 shares of
      common stock at a conversion price of $0.0795 per
share.(4)
            Includes
      28,345,452 shares of common stock, options to purchase 1,877,223 shares of
      common stock at an exercise price of $0.0787 per share, a $20,000 note
      convertible into 2,515,858 shares of common stock at a conversion price of
      $0.0079 per share and a $10,000 note convertible into 125,793 shares of
      common stock at a conversion price of $0.0795 per share.  Mr.
      Risheq resigned as Chief Strategy Officer on December 12, 2008 but remains
      a director of the Company.







ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE





Share
Exchange Agreement




On July
24, 2008, in a reverse take-over transaction, we acquired a cellular amplifier
business based in California by executing the Exchange Agreement by and among
the Company, CelLynx-California, and the CelLynx Owners.




Under the
Exchange Agreement, on the Closing Date, we acquired all of the issued and
outstanding shares of CelLynx-California through the issuance of 32,454,922
restricted shares of our common stock and 45,516,034 restricted shares of our
Series A Preferred Stock to the CelLynx Owners. Immediately prior to the
exchange transaction, we had 37,597,890 shares of common stock issued and
outstanding and no shares of Series A Preferred Stock issued and outstanding.
Immediately after the issuance of the shares to the CelLynx Owners, we had
80,552,812 shares of common stock issued and outstanding (including the shares
issued in the Financing) and 45,516,034 shares of Series A Preferred Stock
issued and outstanding. The Series A Preferred Stock automatically converted
into common stock upon the filing of a Certificate of Amendment to our Articles
of Incorporation increasing the number of authorized common stock from
100,000,000 to 400,000,000.  As a result of this exchange transaction,
the CelLynx Owners became our controlling shareholders and CelLynx-California
became our wholly owned subsidiary. In connection with CelLynx-California
becoming our wholly owned subsidiary, we acquired the business and operations of
CelLynx-California, which has become our principal business.





Related
Party Transactions of CelLynx




On
October 1, 2007, CelLynx-California granted to Robert J. Legendre, the Company’s
current Executive Chairman of the Board, options to purchase 9,725,991 shares of
CelLynx-California’s common stock at an exercise price of $0.09 per share in
exchange for executive management services rendered as a
consultant.  Upon the closing of the Exchange Agreement, this option
was exchanged for an option to purchase 12,234,608 shares of the Company’s
common stock at an exercise price of $0.0715 per share.


28





On March
27, 2007, CelLynx-California entered into a two-year convertible promissory note
with Daniel R. Ash, the Company’s current Chief Executive Officer and a
director, and Tareq Risheq, currently a director of the Company, in the amount
of $20,000 each in exchange for cash leant to CelLynx-California.  The
unpaid principal balance accrues interest at a rate of 4% per annum, computed on
the basis of the actual number of days elapsed and a year of 365
days.  The note and accrued interest is convertible into
CelLynx-California common stock at a conversion rate of $0.01 per
share.  Upon the closing of the Exchange Agreement, these notes were
exchanged for notes of the Company at a conversion rate $0.0079 per
share.




On
October 25, 2007, CelLynx-California entered into a two-year convertible
promissory note with Mssrs. Ash and Risheq in the amount of $10,000 each in
exchange for cash leant to CelLynx-California.  The unpaid principal
balance accrues interest at a rate of 4% per annum, computed on the basis of the
actual number of days elapsed and a year of 365 days.  The note and
accrued interest is convertible into CelLynx-California common stock at a
conversion rate of $0.10 per share.  Upon the closing of the Exchange
Agreement, these notes were exchanged for notes of the Company at a conversion
rate $0.0795 per share.




On
February 12, 2008, CelLynx-California entered into a Stock Purchase Agreement
with Norman Collins, currently a director of the Company, under which
CelLynx-California issued an aggregate of 1,111,111 shares of common stock in
exchange for an investment of $100,000.  Pursuant to the Stock
Purchase Agreement, 100,000 shares were delivered to Mr. Collins and 1,011,111
shares were held in escrow and automatically cancelled upon the closing of the
Exchange Agreement.  The remaining 100,000 shares were converted into
125,793 shares of the Company.





On July
15, 2008, CelLynx-California entered into an agreement with Mr. Collins that
granted Mr. Collins a stock option to purchase 610,000 shares of
CelLynx-California’s common stock at an exercise price of $0.09 per share that
vests 25% per year so long as Mr. Collins remains a director of
CelLynx.  Upon the closing of the Exchange Agreement, this option was
exchanged for an option to purchase 767,337 shares of the Company’s common stock
at an exercise price of $0.0715 per share.





Other
than the transactions described above, there were no transactions or proposed
transactions since the beginning of CelLynx’s last fiscal year in which CelLynx
was or is to be a participant and the amount involved exceeds the lesser of
$120,000 or one percent of the average of CelLynx’s total assets at year-end for
the last three completed fiscal years, and in which any related person had or
will have a direct or indirect material interest.




Director
Independence





One of
our directors – Norman W. Collins – is an independent director as that term
is defined under NASDAQ Rules and Regulations.







ITEM 14.   PRINCIPAL ACCOUNTING FEES AND
SERVICES




The
aggregate fees billed for the two most recently completed fiscal years ended
September 30, 2008 and 2007 for professional services rendered by the principal
accountant for the audit of the Corporation’s annual financial statements and
review of the financial statements included our quarterly reports and services
that are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for these fiscal periods were as
follows:




Year
      Ended September 30, 2008
            Year
      Ended September 30, 2007Audit
      Fees
            $35,000
            $60,000Audit
      Related Fees
            -
            -Tax
      Fees
            -
            -All
      Other Fees
            -
            -Total
            $35,000
            $60,000





29


Fees for
audit services include fees associated with the annual audit and the review of
documents filed with the Securities and Exchange Commission. Audit-related fees
principally include fees reasonably related to the performance of the audit or
review of our financial statements and that are not reported as Audit Fees. Tax
fees included tax compliance, tax advice and tax planning work.







PART
IV





ITEM 15.   EXHIBITS, FINANCIAL STATEMENT
SCHEDULES




Financial
Statements





A list of
the financial statements of the Company filed as part of this Report can be
found in the Index to Financial Statements on page F-1.





Exhibits





INDEX TO
EXHIBITS





Exhibit
              Number
            
            Description2.1
            
            Share
      Exchange Agreement by and among the Company, CelLynx-California and the
      CelLynx Owners dated January 3, 2008 (1)2.2
            
            Amendment
      Agreement to Share Exchange Agreement between the Company and
      CelLynx-California dated May 20, 2008 (2)2.3
            
            Waiver
      of Conditions Precedent *3.1
            
            Articles
      of Incorporation of CelLynx Group, Inc. (3)3.2
            
            Articles
      of Merger of CelLynx Group, Inc. (4)3.3
            
            Bylaws
      of CelLynx Group, Inc. (4)3.4
            
            Certificate
      of Designation of CelLynx Group, Inc. (5)3.5
            
            Articles
      of Merger of CelLynx Group, Inc. (8)3.6
            
            Certificate
      of Amendment to Articles of Incorporation of CelLynx Group, Inc.
      (9)10.1
            
            Form
      of Subscription Agreement dated July 23, 2008 (6)10.2
            
            Form
      of Warrant dated July 23, 2008 (6)10.3
            
            Master
      Global Marketing and Distribution Agreement between CelLynx and Dollardex
      Group Corp. dated July 22, 2008 (7)10.4
            
            Palomar
      Ventures III, LP Amended and Restated Subordinated Convertible Promissory
      Note dated November 10, 2007 (7)10.5
            
            Lease
      Agreement between CelLynx-California and CSS Properties, LLC dated
      February 21, 2008 (7)


30





10.6
            
            CelLynx-California
      2007 Stock Incentive Plan (7)10.7
            
            Amendment
      No. 1 to CelLynx-California 2007 Stock Incentive Plan
  (7)10.8
            
            Form
      of Lock-Up Agreement dated July 22, 2008 (7)10.9
            
            Norman
      W. Collins Offer Letter dated July 15, 2008 (7)10.10
            
            Kevin
      Pickard Consulting Agreement dated July 22, 2008 (7)10.11
            
            Convertible
      Promissory Note between CelLynx-California and Daniel Ash dated March 27,
      2007 (7)10.12
            
            Convertible
      Promissory Note between CelLynx-California and Tareq Risheq dated March
      27, 2007 (7)10.13
            
            Convertible
      Promissory Note between CelLynx-California and Daniel Ash dated October
      25, 2007 (7)10.14
            
            Convertible
      Promissory Note between CelLynx-California and Tareq Risheq dated October
      25, 2007 (7)10.15
            
            Incentive
      Stock Option Agreement between CelLynx-California and Daniel Ash dated
      October 1, 2007 (7)10.16
            
            Incentive
      Stock Option Agreement between CelLynx-California and Tareq Risheq dated
      October 1, 2007 (7)




10.17
            
            Incentive
      Stock Option Agreement between CelLynx-California and Robert Legendre
      dated October 1, 2007 (7)10.18
            
            Non-Qualified
      Stock Option Agreement between CelLynx-California and Daniel Ash dated
      October 1, 2007 (7)10.19
            
            Non-Qualified
      Option Agreement between CelLynx-California and Tareq Risheq dated October
      1, 2007 (7)10.20
            
            Non-Qualified
      Stock Option Agreement between CelLynx-California and Robert Legendre
      dated October 1, 2007 (7)10.21
            
            Non-Qualified
      Stock Option Agreement between CelLynx-California and Daniel Ash dated
      April 21, 2008 (7)10.22
            
            Non-Qualified
      Option Agreement between CelLynx-California and Tareq Risheq dated April
      21, 2008 (7)10.23
            
            Non-Qualified
      Stock Option Agreement between CelLynx-California and Daniel Ash dated May
      20, 2008 (7)10.24
            
            Non-Qualified
      Option Agreement between CelLynx-California and Tareq Risheq dated May 20,
      2008 (7)10.25
            
            Non-Qualified
      Option Agreement between CelLynx-California and Norman Collins dated July
      20, 2008 (7)


31





10.26
            
            Stock
      Purchase Agreement between CelLynx-California and Norman Collins dated
      February 12, 2008 (7)10.27
            
            Lease
      Agreement between CelLynx and Dolphinshire, L.P. dated August 26, 2008
      *17.1
            
            Letter
      of Resignation from John P. Thornton to the Board of Directors
      (7)21.1
            
            List
      of Subsidiaries (7)31.1
            
            Section 302
      Certification by the Corporation’s Chief Executive Officer
    *31.2
            
            Section 302
      Certification by the Corporation’s Chief Financial Officer
    *32.1
            
            Section 906
      Certification by the Corporation’s Chief Executive Officer
    *32.2
            
            Section 906
      Certification by the Corporation’s Chief Financial Officer
    *


__________________


*
      Filed Herewith.





(1)
            Filed
      on January 9, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(2)
            Filed
      on May 27, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(3)
            Filed
      as an exhibit to our Registration Statement on Form 10SB originally filed
      on August 26, 1999, as amended, an incorporated herein by
      reference.(4)
            Filed
      as an exhibit to our Quarterly Report on Form 10-QSB for the fiscal period
      ended September 30, 2003, and incorporated herein by
      reference.


(5)
            Filed
      on July 15, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(6)
            Filed
      on July 23, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(7)
            Filed
      on July 30, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(8)
            Filed
      on August 8, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(9)
            Filed
      on November 21, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.







32




INDEX TO FINANCIAL
STATEMENTS   PAGEFINANCIAL
      STATEMENTSReport
      of Independent Registered Public Accounting Firm
              
              F-2Balance
      Sheets as of September 30, 2008 and September 30, 2007
              
              F-3Statements
      of Operations and Comprehensive Loss for the years ended September 30,
      2008, 2007 and the period from inception (October 11, 2005) through
      September 30, 2008
              
              F-4Statements
      of Cash Flows for the years ended September 30, 2008, 2007 and the period
      from inception (October 11, 2005) through September 30,
    2008
              
              F-5Statements
      of Stockholders' Equity (Deficit) for the years ended September 30, 2008,
      2007 and the period from inception (October 11, 2005) through September
      30, 2008
              
              F-6Notes
      to financial statements
              
              F-7




F-1




Report
of Independent Registered Public Accounting Firm
  
  To the
Board of Directors and Stockholders
 CelLynx
Group, Inc.
 Mission
Viejo, California
 
 We have
audited the accompanying consolidated balance sheets of CelLynx Group, Inc.
(formerly Norpac Technologies, Inc.) (a development stage company) as of
September 30, 2008 and 2007, and the related consolidated statements of
operations, stockholders’ deficit and cash flows for the years then ended and
for the period from October 11, 2005 (date of inception) to September 30, 2008.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material
misstatement.  The company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control over financial reporting.
Accordingly, we express no such opinion.An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of CelLynx Group, Inc. (a
development stage company) as of September 30, 2008 and 2007, and the results of
operations and cash flows for the years then ended and for the period from
October 11, 2005 (date of inception) to September 30, 2008, in conformity with
accounting principles generally accepted in the United States of
America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1
to the consolidated financial statements, the Company has net operating cash
flow deficits and a deficit accumulated during the development
stage.  These conditions raise substantial doubt about its ability to
continue as a going concern.  Management’s plans regarding those
matters also are described in Note1.  The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
 
 
 /s/ Moore Stephens Wurth Frazer andTorbet, LLP
 Walnut,
California
 December
19, 2008






F-2





CELLYNX
      GROUP, INC.(A
      Development Stage Company)CONSOLIDATED
      BALANCE SHEETSAS
      OF SEPTEMBER 30, 2008 AND 2007September
      30,
              
              
              September
      30,2008
              
              
              2007ASSETSCURRENT
      ASSETS:Cash
              
              $
              599,024
              
              
              $
              2,371Other
      current assets
              
              
              6,862
              
              
              
              -Total
      current assets
              
              
              605,886
              
              
              
              2,371EQUIPMENT,
      net
              
              
              9,658
              
              
              
              755INTANGIBLE
      ASSETS, net
              
              
              70,776
              
              
              
              28,406OTHER
      ASSETS
              
              
              11,526
              
              
              
              -TOTAL
      ASSETS
              
              $
              697,846
              
              
              $
              31,532LIABILITIES AND
      STOCKHOLDERS' DEFICITCURRENT
      LIABILITIES:Accrued
      liabilities
              
              
              206,298
              
              
              
              37,569Note
      payable
              
              
              -
              
              
              
              250,000Accrued
      interest
              
              
              12,507
              
              
              
              12,192Share-based
      compensation liability
              
              
              2,714,724
              
              
              
              -Accrued
      beneficial conversion liability
              
              
              2,358,439
              
              
              
              -Accrued
      warrant liability
              
              
              603,993
              
              
              
              -Convertible
      stockholder notes, net of debt discount of  $28,943 and
      $0
              
              
              11,057
              
              
              
              -Total
      current liabilities
              
              
              5,907,018
              
              
              
              299,761LONG
      TERM LIABILITIESStockholder
      notes
              
              
              -
              
              
              
              52,400Convertible
      promissory note, net of debt discount of  $241,067 and
      $0
              
              
              21,289
              
              
              
              -Convertible
      stockholder notes, net of debt discount of  $17,031 and
      $0
              
              
              2,969
              
              
              
              -Total
      liabilities
              
              
              5,931,276
              
              
              
              352,161STOCKHOLDERS'
      DEFICIT:Series
      A Preferred Stock, $0.001 par value;100,000,000 shares
      authorized:45,516,034
      and 41,107,396 shares issued and outstanding
              
              
              45,516
              
              
              
              41,107Common
      stock, $0.001 par value, 100,000,000 authorized; 80,552,812
      and27,153,988
      shares issued and outstanding
              
              
              80,553
              
              
              
              27,154Additional
      paid in capital
              
              
              2,335,949
              
              
              
              648,022Deficit
      accumulated during the development stage
              
              
              (7,695,448
              )
              
              
              (1,036,912
              )Total
      stockholders' deficit
              
              
              (5,233,430
              )
              
              
              (320,629
              )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              697,846
              
              
              $
              31,532The
      accompanying notes are an integral part of these consolidated financial
      statements








F-3




CELLYNX
      GROUP, INC.(A
      Development Stage Company)CONSOLIDATED
      STATEMENTS OF OPERATIONSFOR
      THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007 AND THE
      PERIODFROM
      OCTOBER 11, 2005 (DATE OF INCEPTION) TO SEPTEMBER 30, 2008For
      the period
                fromOctober
      11, 2005Year
      Ended
              
              
              Year
      Ended
              
              
              (date
      of inception)September
      30,
                2008
              
              
              September
      30,
                2007
              
              
              to
      September 30,
                2008Net
      Revenue
              
              $
              -
              
              
              $
              -
              
              
              $
              -Cost
      of Revenue
              
              
              -
              
              
              
              -
              
              
              
              -Gross
      profit
              
              
              -
              
              
              
              -
              
              
              
              -Operating
      expensesResearch
      and development
              
              
              308,906
              
              
              
              81,218
              
              
              
              599,825General
      and administrative
              
              
              4,397,131
              
              
              
              254,650
              
              
              
              5,133,026Total
      operating expenses
              
              
              4,706,037
              
              
              
              335,868
              
              
              
              5,732,851Loss
      from operations
              
              
              (4,706,037
              )
              
              
              (335,868
              )
              
              
              (5,732,851
              )Non-operating
      income (expense):Interest
      income
              
              
              4,198
              
              
              
              173
              
              
              
              6,292Interest
      and financing costs
              
              
              (932,393
              )
              
              
              (10,548
              )
              
              
              (944,585
              )Change
      in fair value of accrued beneficial conversion feature
              
              
              (1,151,992
              )
              
              
              -
              
              
              
              (1,151,992
              )Change
      in fair value of accrued warrant liability
              
              
              127,688
              
              
              
              -
              
              
              
              127,688Total
      non-operating (expense) income
              
              
              (1,952,499
              )
              
              
              (10,375
              )
              
              
              (1,962,597
              )Loss
      before provision for income taxes
              
              
              (6,658,536
              )
              
              
              (346,243
              )
              
              
              (7,695,448
              )Provision
      for income taxes
              
              
              -
              
              
              
              -
              
              
              
              -Net
      loss
              
              $
              (6,658,536
              )
              
              $
              (346,243
              )
              
              $
              (7,695,448
              )Weighted
      average shares outstanding :Basic
              
              
              40,407,479
              
              
              
              23,823,351
              
              
              
              27,445,697Diluted
              
              
              40,407,479
              
              
              
              23,823,351
              
              
              
              27,445,697Earnings
      per share:Basic
              
              $
              (0.16
              )
              
              $
              (0.01
              )
              
              $
              (0.28
              )Diluted
              
              $
              (0.16
              )
              
              $
              (0.01
              )
              
              $
              (0.28
              )The
      accompanying notes are an integral part of these consolidated financial
      statements








F-4




CELLYNX
      GROUP, INC.(A
      Development Stage Company)CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' DEFICITFOR
      PERIOD FROM OCTOBER 11, 2005 (DATE OF INCEPTION) TO SEPTEMBER 30,
      2008DeficitAccumulatedDuring
              
              
              TotalPreferred
      Stock
              
              
              Common
      Stock
              
              
              Additional
      Paid
              
              Development
              
              Stockholders'Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              in
      Capital
              
              Stage
              
              
              DeficitBalance,
      October 11, 2005 (Date of Inception)
              
              
              -
              
              
              $
              -
              
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Shares
      issued for cash
              
              
              28,120,280
              
              
              
              28,120
              
              
              
              18,800,734
              
              
              
              18,801
              
              
              
              215,043
              
              
              
              -
              
              
              
              261,964Shares
      issued for services
              
              
              2,222,540
              
              
              
              2,223
              
              
              
              1,523,576
              
              
              
              1,523
              
              
              
              294,054
              
              
              
              -
              
              
              
              297,800Options
      issues to employees and non employees
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              16,652
              
              
              
              -
              
              
              
              16,652Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (690,669
              )
              
              
              (690,669
              )Balance,
      September 30, 2006
              
              
              30,342,820
              
              
              $
              30,343
              
              
              
              20,324,310
              
              
              
              20,324
              
              
              
              525,749
              
              
              
              (690,669
              )
              
              
              (114,253
              )Shares
      issued for services
              
              
              10,764,576
              
              
              
              10,764
              
              
              
              6,829,678
              
              
              
              6,830
              
              
              
              122,273
              
              
              
              -
              
              
              
              139,867Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (346,243
              )
              
              
              (346,243
              )Balance,
      September 30, 2007
              
              
              41,107,396
              
              
              $
              41,107
              
              
              
              27,153,988
              
              
              
              27,154
              
              
              
              648,022
              
              
              
              (1,036,912
              )
              
              
              (320,629
              )Shares
      issued for cash
              
              
              -
              
              
              
              -
              
              
              
              938,897
              
              
              
              939
              
              
              
              745,345
              
              
              
              -
              
              
              
              746,284Shares
      issued for services
              
              
              4,408,638
              
              
              
              4,409
              
              
              
              4,362,037
              
              
              
              4,362
              
              
              
              563,231
              
              
              
              -
              
              
              
              572,002Fair
      value of stock options reclassified to share-basedcompensation
      liability
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (89,618
              )
              
              
              -
              
              
              
              (89,618
              )Shares
      issued in merger with Norpac Technologies, Inc.
              
              
              -
              
              
              
              -
              
              
              
              48,097,890
              
              
              
              48,098
              
              
              
              1,200,650
              
              
              
              
              
              
              
              1,248,748Fair
      value of warrants transferred to liability
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (731,681
              )
              
              
              -
              
              
              
              (731,681
              )Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (6,658,536
              )
              
              
              (6,658,536
              )Balance,
      September 30, 2008
              
              
              45,516,034
              
              
              $
              45,516
              
              
              
              80,552,812
              
              
              $
              80,553
              
              
              $
              2,335,949
              
              
              $
              (7,695,448
              )
              
              $
              (5,233,430
              )Effective
      July 24, 2008, the Company effected a 1.2579 for 1 forward stock split of
      the authorized, issued and outstanding common stock, without a change to
      the par value. All shareamounts
      have been retroactively adjusted for all periods presentedEffective
      July 24, 2008, the Company issued Series A Preferred Stock on a pro rata
      basis to the shareholders of CelLynx, Inc. All share amounts have
      been retroactivelyadjusted
      for all periods presentedThe
      accompanying notes are an integral part of these consolidated financial
      statements








F-5




CELLYNX
      GROUP, INC.(A
      Development Stage Company)CONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007 AND THE
      PERIODFROM
      OCTOBER 11, 2005 (DATE OF INCEPTION) TO SEPTEMBER 30, 2008For
      the periodfrom
      October 11, 2005Year
      Ended
              
              
              Year
      Ended
              
              
              (date
      of inception)September
      30,
                2008
              
              
              September
      30,
                2007
              
              
              to
      September 30,
                2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
              
              $
              (6,658,536
              )
              
              $
              (346,243
              )
              
              $
              (7,695,448
              )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Depreciation
      and amortization
              
              
              2,278
              
              
              
              504
              
              
              
              3,097Stock
      issued for services
              
              
              572,002
              
              
              
              139,867
              
              
              
              1,009,669Stock
      compensation expense for options issued to employees
              
              
              2,625,106
              
              
              
              -
              
              
              
              2,641,758Change
      in fair value of accrued beneficial conversion feature
              
              
              1,151,992
              
              
              
              -
              
              
              
              1,151,992Change
      in fair value of accrued warrant liability
              
              
              (127,688
              )
              
              
              -
              
              
              
              (127,688
              )Non
      cash financing costs
              
              
              833,321
              
              
              
              -
              
              
              
              833,321Amortization
      of debt discount
              
              
              86,085
              
              
              
              -
              
              
              
              86,085Changes
      in operating assets and liabilities:Change
      in other assets
              
              
              (18,388
              )
              
              
              -
              
              
              
              (18,388
              )Change
      in accrued liabilities
              
              
              167,363
              
              
              
              6,832
              
              
              
              204,932Change
      in accrued interest
              
              
              12,671
              
              
              
              10,548
              
              
              
              24,863Net
      cash used in operating activities
              
              
              (1,353,794
              )
              
              
              (188,492
              )
              
              
              (1,885,807
              )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of equipment
              
              
              (10,572
              )
              
              
              -
              
              
              
              (12,146
              )Increase
      in intangible assets
              
              
              (42,979
              )
              
              
              (13,704
              )
              
              
              (71,385
              )Net
      cash acquired in merger with Norpac Technologies, Inc.
              
              
              1,250,114
              
              
              
              -
              
              
              
              1,250,114Net
      cash provided by (used in) investing activities
              
              
              1,196,563
              
              
              
              (13,704
              )
              
              
              1,166,583CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from notes payable
              
              
              -
              
              
              
              -
              
              
              
              250,000Proceeds
      from issuance of common stock
              
              
              746,284
              
              
              
              -
              
              
              
              1,008,248Proceeds
      from stockholders note payable
              
              
              7,600
              
              
              
              52,400
              
              
              
              60,000Net
      cash provided by financing activities
              
              
              753,884
              
              
              
              52,400
              
              
              
              1,318,248NET
      (DECREASE) INCREASE IN CASH
              
              
              596,653
              
              
              
              (149,796
              )
              
              
              599,024CASH,
      BEGINNING OF PERIOD
              
              
              2,371
              
              
              
              152,167
              
              
              
              -CASH,
      END OF PERIOD
              
              $
              599,024
              
              
              $
              2,371
              
              
              $
              599,024SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Interest
      paid
              
              $
              -
              
              
              $
              -
              
              
              $
              -Income
      taxes paid
              
              $
              -
              
              
              $
              -
              
              
              $
              -SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING AND FINANCING:Increase
      in convertible promissory note for interest payable
              
              $
              12,356
              
              
              $
              -
              
              
              $
              12,356The
      accompanying notes are an integral part of these consolidated financial
      statements





F-6
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008










Note
1 - Organization and Basis of Presentation





Organization and Line of
Business





CelLynx Group, Inc. formerly known as NorPac Technologies,
Inc. (hereinafter referred to as “CelLynx” or the “Company”) was originally
incorporated under the laws of the State of Minnesota on April 1,
1998.





On July
23, 2008, prior to the closing of the Share Exchange Agreement (described
below), the Company entered into a Regulation S Subscription Agreement pursuant
to which the Company issued 10,500,000 shares of its common stock and warrants
to purchase 10,500,000 shares of common stock at an exercise price of $0.20 per
share to non-U.S. persons for an aggregate purchase price of
$1,575,000.




On July
24, 2008, the Company entered into a Share Exchange Agreement, as amended, with
CelLynx, Inc. a California corporation ("CelLynx-California") and twenty-three
(23) CelLynx-California shareholders who, immediately prior to the closing of
the transaction collectively held 100% of CelLynx-California’s issued and
outstanding shares of capital stock.  As a result, the
CelLynx-California shareholders were to receive 77,970,956 shares of the
Company’s common stock in exchange for 100% or 61,983,580 shares of capital
stock of CelLynx-California’s common stock.   However, the
Company had only 41,402,110 authorized, unissued and unreserved shares of common
stock available, after taking into account the shares of common stock issued in
the July 23, 2008 financing described above.  Pursuant to the Share
Exchange Agreement, in the event that there were an insufficient number of
authorized but unissued and unreserved common stock to complete the transaction,
the Company was to issue all of the available authorized but unissued and
unreserved common stock to the CelLynx-California shareholders in a pro rata
manner and then establish a class of Series A Convertible Preferred Stock
(“Series A Preferred Stock”) and issue that number of shares of Series A
Preferred Stock such that the common stock underlying the Series A Preferred
Stock plus the common stock actually issued to the CelLynx-California
shareholders would equal the total number of shares of common stock due to the
CelLynx-California shareholders under the Share Exchange
Agreement.  As a result, the Company issued to the CelLynx-California
shareholders an aggregate of 32,454,922 shares of common stock and 45,516,034
shares of Series A Preferred Stock.  The Series A Preferred Stock
automatically converts into common stock on a one-to-one ratio upon the
authorized capital stock of the Company being increased to include not less than
150,000,000 shares of common stock.




The
exchange of shares with CelLynx-California was accounted for as a reverse
acquisition under the purchase method of accounting since the shareholders of
CelLynx-California obtained control of the Company. On August 5, 2008, NorPac
Technologies, Inc. changed its name to CelLynx Group,
Inc.  Accordingly, the merger of CelLynx-California into the Company
was recorded as a recapitalization of CelLynx-California, with
CelLynx-California being treated as the continuing entity. The historical
financial statements presented are the financial statements of
CelLynx-California. The Share Exchange Agreement has been treated as a
recapitalization and not as a business combination; therefore, no pro forma
information is disclosed. At the date of this transaction, the net assets of the
legal acquirer (CelLynx Group, Inc. formerly NorPac Technologies, Inc.) were
$1,248,748.


F-7
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008


As a
result of the reverse merger transactions described above the historical
financial statements presented are those of CelLynx-California, the operating
entities.  The CelLynx-California shareholder received 1.2579292
shares of stock in the Company for each shares of CelLynx-California capital
stock.  The consolidated statement of stockholders’ deficit and all
shares and per share information have been retroactively restated for all
periods presented to reflect the reverse merger transaction as took place on
October 11, 2005.





On
October 27, 2008, the Board of Directors approved a change of the Company’s
fiscal year end from June 30 year end to September 30 to agree with the fiscal
year of CelLynx-California.  The fiscal year end change would be
effective for the year ending September 30, 2008.





The
Company develops and manufactures a cell phone signal amplifier. As of September
30, 2008, the Company has not commenced planned operations.





Development Stage Company
and Going Concern





The
Company is considered to be in the development stage as defined in Statement of
Financial Accounting Standards (SFAS) No. 7, "Accounting and Reporting by
Development Stage Enterprises". The Company is in the development stage
since planned principal activities have not commenced and the Company has not
generated any revenue. In a development stage company, management devotes most
of its activities to developing a market for its products and services. These
financial statements have been prepared on a going concern basis, which implies
the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. The Company is unlikely to pay dividends or
generate significant earnings in the immediate or foreseeable future. The
continuation of the Company as a going concern and the ability of the Company to
emerge from the development stage is dependent upon the continued financial
support from its stockholders, the ability of the Company to obtain necessary
equity and debt financing to continue operations and to generate sustainable
revenue. There is no guarantee that the Company will be able to raise adequate
equity or debt financing or generate profitable operations. For the year ended
September 30, 2008 and 2007 and for the period from October 11, 2005 (Date of
Inception) to September 30, 2008, the Company incurred net losses of $6,658,536,
$346,243 and $7,695,448, respectively. As of September 30, 2008 and 2007, the
Company has a deficit accumulated during the development stage of $7,695,448 and
$1,036,912, respectively. These financial statements do not include any
adjustments to the recoverability and classification of recorded asset amounts
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. Management intends to raise additional
funds through equity or debt financing.





Basis of
Presentation





The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America.  The accompanying consolidated financial statements include
the accounts of CelLynx Group, Inc. and its 100% owned subsidiary, CelLynx,
Inc.  All intercompany accounts and transactions have been eliminated
within the consolidation.







F-8
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008








Note
2 - Summary of Significant Accounting Policies





Concentration of credit
risk





Cash
includes cash on hand in accounts maintained in the United States. Certain
financial instruments, which subject the Company to concentration of credit
risk, consist of cash. The Company maintains balances at financial institutions
which, from time to time, may exceed Federal Deposit Insurance Corporation
insured limits for the banks located in the Unites States. As of September 30,
2008 and 2007, the Company had deposits in excess of federally insured limits
totaling $399,204 and $55,938, respectively. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
significant risks on its cash in bank accounts.





Equipment





Equipment
is stated at historical cost and is depreciated using the straight-line method
over their estimated useful lives.  The useful life and depreciation
method are reviewed periodically to ensure that the depreciation method and
period are consistent with the anticipated pattern of future economic benefits.
Expenditures for maintenance and repairs are charged to operations as incurred
while renewals and betterments are capitalized. Gains and losses on disposals
are included in the results of operations. The useful life of the equipment is
being depreciated over three years.





Impairment orDisposalofLong-livedAssets





The
Company applies the provisions of SFAS No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets.”  SFAS No. 144 clarifies the
accounting for the impairment of long-lived assets and for long-lived assets to
be disposed of, including the disposal of business segments and major lines of
business. Long-lived assets are reviewed when facts and circumstances indicate
that the carrying value of the asset may not be recoverable. When necessary,
impaired assets are written down to estimated fair value based on the best
information available. Estimated fair value is generally based on either
appraised value or measured by discounting estimated future cash flows.
Considerable management judgment is necessary to estimate discounted future cash
flows. Accordingly, actual results could vary significantly from such
estimates.  Based on its review, the Company believes that as of
September 30, 2008 and 2007, there were no significant impairments of its
long-lived assets.





Revenue
Recognition





The
Company's financial statements are prepared under the accrual method of
accounting.  Revenues will be recognized in the period the products
are shipped.




F-9
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008





AccruedWarrantLiability andAccruedBeneficialConversionFeature




Pursuant
to Emerging Issues Task Force (“EITF”) No. 00-19, “Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock”, the Company has recorded the fair value of all outstanding options,
warrants, and beneficial conversion features as accrued liabilities since the
Company may not have enough authorized shares to satisfy the exercise of its
outstanding, options, warrants, and the conversion of the convertible promissory
notes.





Fair Value of Financial
Instruments





On
January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements.”
SFAS No. 157 defines fair value, establishes a three-level valuation hierarchy
for disclosures of fair value measurement and enhances disclosures requirements
for fair value measures. The carrying amounts reported in the balance sheets for
receivables and current liabilities each qualify as financial instruments and
are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest. The three levels are defined as
follows:




·
            Level
      1 inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets.




·
            Level
      2 inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the asset or liability, either directly or indirectly, for
      substantially the full term of the financial
  instrument.




·
            Level
      3 inputs to the valuation methodology are unobservable and significant to
      the fair value measurement.





The
Company analyzes all financial instruments with features of both liabilities and
equity under SFAS No. 150, “Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity,” SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities” and EITF 00-19, “Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company’s Own Stock.”





The
Company’s share-based compensation liability is carried at fair value totaling
$2,714,724, as of September 30, 2008. The Company used Level 2 inputs for its
valuation methodology for the share-based compensation liability, and the fair
values is determined by using the Black Scholes option pricing model based on
various assumptions.





The
Company recognized compensation expense of $2,625,106 for the year ended
September 30, 2008.





The
Company’s accrued beneficial conversion liability is carried at fair value
totaling $2,358,439, as of September 30, 2008. The Company used Level 2 inputs
for its valuation methodology for the accrued beneficial conversion liability,
and the fair values is determined by using the Black Scholes option pricing
model based on various assumptions.




F-10
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008





The
Company recognized a $1,151,992 loss on the change in the accrued beneficial
conversion liability for the year ended September 30, 2008.





The
Company’s accrued warrant liability is carried at fair value totaling $603,993,
as of September 30, 2008. The Company used Level 2 inputs for its valuation
methodology for the accrued warrant liability, and the fair values is determined
by using the Black Scholes option pricing model based on various
assumptions.





The
Company recognized a $127,688 gain on the change in the accrued warrant
liability for the year ended September 30, 2008.





The
following table summarizes the fair value of the Company’s financial instruments
at September 30, 2008:





Fair
      Value
              As
      of
              September
      30, 2008
            
            Fair
      Value Measurements at September 30, 2008
              Using
      Fair Value HierarchyLiabilities
            
            
            
            Level
      1
            
            Level
      2
            
            Level
      3Share-based
      compensation liability
            
            $
            2,714,724
            
            
            
            $
            2,714,724Accrued
      beneficial conversion liability
            
            $
            2,358,439
            
            
            
            $
            2,358,439Accrued
      warrant liability
            
            $
            603,993
            
            
            
            $
            603,993





The
Company did not identify any other assets and liabilities that are required to
be presented on the balance sheet at fair value in accordance with SFAS No.
157.





Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.





Income
Taxes





Income
taxes are provided based upon the liability method of accounting in accordance
with SFAS No. 109, “Accounting for Income Taxes”.  Deferred income
taxes are recognized for the tax effect of temporary differences between the
basis of assets and liabilities for financial statement and income tax
purposes.  Pursuant to SFAS No. 109 the Company is required to compute
deferred income tax assets for net operating losses carried forward. The
potential benefits of net operating losses have not been recognized in these
financial statements because the Company cannot be assured it is more likely
than not it will utilize the net operating losses carried forward in future
years.




F-11
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008





The
Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income
Taxes”, during 2007. A tax position is recognized as a benefit only if it is
“more likely than not” that the tax position would be sustained in a tax
examination, with a tax examination being presumed to occur. The amount
recognized is the largest amount of tax benefit that is greater than 50% likely
of being realized on examination. For tax positions not meeting the “more likely
than not” test, no tax benefit is recorded. The adoption had no affect on the
Company’s financial statements.





Net Loss Per
Share





The
Company reports loss per share in accordance with the provision of SFAS No. 128,
“Earnings Per Share.” SFAS No. 128 requires presentation of basic and diluted
losses per share in conjunction with the disclosure of the methodology used in
computing such losses per share. Basic net loss per share is computed by
dividing the net loss for the period by the weighted average number of common
shares outstanding during the period. Diluted net loss per share is computed by
dividing the net loss for the period by the weighted average number of common
shares outstanding during the period, plus the potential dilutive effect of
common shares issuable upon exercise or conversion of outstanding stock options
and warrants during the period. As of September 30, 2008 and 2007, the following
potential dilutive shares were excluded from diluted loss per share for all
periods presented because of their anti-dilutive effect.





September
      30, 2008
              
              
              September
      30, 2007Options
              
              $
              53,901,861
              
              
              $
              1,415,170Warrants
              
              
              10,500,000
              
              
              
              -Convertible
      promissory note
              
              
              6,340,029
              
              
              
              -Convertible
      shareholder notes
              
              
              5,630,424
              
              
              
              -Total
              
              $
              76,372,314
              
              
              $
              1,415,170




Stock-Based
Compensation





The
Company accounts for its stock-based compensation for employees in accordance
with SFAS No. 123R, "Share-Based Payment, an Amendment of Financial Accounting
Standards Board (“FASB”) Statement No. 123." The Company recognizes in the
statement of operations the grant-date fair value of stock options and other
equity-based compensation issued to employees and non-employees.





Patentsand
Trademarks





Acquired
patents and trademarks are capitalized at their acquisition cost or fair value.
The legal costs, patent registration fees and models and drawings required for
filing patent applications are capitalized if they relate to commercially viable
technologies. Commercially viable technologies are those technologies that are
projected to generate future positive cash flows in the near term. Legal costs
associated with applications that are not determined to be commercially viable
are expensed as incurred. All research and development costs incurred in
developing the patentable idea are expensed as incurred. Legal fees from the
costs incurred in successful defense to the extent of an evident increase in the
value of the patents are capitalized.






F-12
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008


Capitalized
cost for pending patents are amortized on a straight-line basis over the
remaining twenty year legal life of each patent after the costs have been
incurred. Once each patent or trademark is issued, capitalized costs are
amortized on a straight-line basis over a period not to exceed 20 years and 10
years, respectively.





Reclassification





Certain
reclassifications have been made to the 2007 financial statements to conform to
the 2008 financial statement presentation. These reclassifications had no effect
on net loss or cash flows as previously reported.





RecentAccounting
Pronouncements





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”. This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective as of the beginning
of an entity’s first fiscal year that begins after November 15, 2007. The
Company adopted SFAS No. 159 on January 1, 2008. The Company chose not to elect
the option to measure the fair value of eligible financial assets and
liabilities.




In June
2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for use in Future
Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
nonrefundable advance payments for goods or services that used or rendered for
research and development activities should be expensed when the advance payment
is made or when the research and development activity has been performed. The
Company does not expect the adoption of EITF 07-3 to have a significant impact
on its results of operations or financial position.





In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations.” SFAS No. 141 (Revised 2007) changes how a reporting
enterprise accounts for the acquisition of a business. SFAS No. 141
(Revised 2007) requires an acquiring entity to recognize all the assets acquired
and liabilities assumed in a transaction at the acquisition-date fair value,
with limited exceptions, and applies to a wider range of transactions or events.
SFAS No. 141 (Revised 2007) is effective for fiscal years beginning on or
after December 15, 2008 and early adoption and retrospective application is
prohibited.




In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.




F-13
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008




In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities - an amendment of FASB Statement No. 133” (“SFAS 161”),
which changes the disclosure requirements for derivative instruments and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity uses derivative instruments, (b) how derivative instruments
and related hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance and cash flows.
SFAS 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. The Company has not
determined the effect of the application of SFAS 161 on its consolidated
financial statements.





In April
2008, the FASB issued FSP SFAS 142-3 “Determination of the useful life of
Intangible Assets,” which amends the factors a company should consider when
developing renewal assumptions used to determine the useful life of an
intangible asset. FSP SFAS 142-3 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. SFAS 142 requires companies to consider whether renewal can
be completed without substantial cost or material modification of the existing
terms and conditions associated with the asset. FSP SFAS 142-3 replaces the
previous useful life criteria with a new requirement—that an entity consider its
own historical experience in renewing similar arrangements. If historical
experience does not exist, then the Company would consider market participant
assumptions regarding renewal including 1) highest and best use of the asset by
a market participant, and 2) adjustments for other entity-specific factors
included in SFAS 142. The Company is currently evaluating the impact that
adopting FSP SFAS No.142-3 will have on its consolidated financial
statements.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.”  This Statement identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy).  This Statement has no impact
on the Company’s financial statements.





In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60.”  The
scope of this Statement is limited to financial guarantee insurance (and
reinsurance) contracts, as described in this Statement, issued by enterprises
included within the scope of Statement 60. Accordingly, this Statement does not
apply to financial guarantee contracts issued by enterprises excluded from the
scope of Statement 60 or to some insurance contracts that seem similar to
financial guarantee insurance contracts issued by insurance enterprises (such as
mortgage guaranty insurance or credit insurance on trade receivables). This
Statement also does not apply to financial guarantee insurance contracts that
are derivative instruments included within the scope of FASB Statement No. 133,
“Accounting for Derivative Instruments and Hedging Activities.” This Statement
will not have and impact on the Company’s financial statements.




F-14
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008





In June
2008, the FASB issued EITF No. 07-5 “Determining whether an Instrument (or
Embedded Feature) is indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5
is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early
application is not permitted. Paragraph 11(a) of SFAS No. 133 specifies that a
contract that would otherwise meet the definition of a derivative but is both
(a) indexed to the Company’s own stock and (b) classified in
stockholders’ equity in the statement of financial position would not be
considered a derivative financial instrument. EITF 07-5 provides a new two-step
model to be applied in determining whether a financial instrument or an embedded
feature is indexed to an issuer’s own stock and thus able to qualify for the
SFAS 133 paragraph 11(a) scope exception. The Company believes adopting this
statement will have a material impact on the consolidated financial statements
because among other things, any option or warrant previously issued and all new
issuances denominated in US dollars will be required to be carried as a
liability and marked to market each reporting period.





In June
2008, FASB issued EITF Issue No. 08-4, “Transition Guidance for Conforming
Changes to Issue No. 98-5 (“EITF No. 08-4”).” The objective of EITF No.08-4
is to provide transition guidance for conforming changes made to EITF No. 98-5,
“Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios,” that result from EITF No. 00-27
“Application of Issue No. 98-5 to Certain Convertible Instruments,” and SFAS No.
150, “Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity.” This Issue is effective for financial statements issued
for fiscal years ending after December 15, 2008. Early application is
permitted. Management is currently evaluating the impact of adoption of
EITF No. 08-4 on the accounting for the convertible notes and related warrants
transactions.




On
October 10, 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active,” which clarifies
the application of SFAS 157 in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a
financial asset when the market for that financial asset is not active. FSP
157-3 became effective on October 10, 2008, and its adoption did not have a
material impact on the financial position or results for the year ending
September 30, 2008.





Note 3 -
Equipment





Equipment
consisted of the following at September 30, 2008 and 2007:






F-15
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008


September
      30,
              
              
              September
      30,2008
              
              
              2007Office
      furniture & equipment
              
              $
              4,211
              
              
              $
              -Computer
      equipment
              
              
              7,935
              
              
              
              1,57412,146
              
              
              
              1,574Accumulated
      depreciation
              
              
              (2,488
              )
              
              
              (819
              )Equipment,
      net
              
              $
              9,658
              
              
              $
              755





The
Company recorded depreciation expense of $1,669, $504 and $2,488, for the years
ended September 30, 2008 and 2007, and the period ended October 11, 2005 (date
of inception) to September 30, 2008, respectively.





Note
4 – Intangible Assets





The
Company incurred legal costs in acquiring patent and trademark rights. These
costs are projected to generate future positive cash flows in the near term and
have been capitalized to intangible assets in the period incurred. Once each
patent or trademark is issued, capitalized costs are amortized on a
straight-line basis over a period not to exceed 20 years and 10 years,
respectively.





Intangible
assets consist of the following:





September
      30,
              
              
              September
      30,2008
              
              
              2007Patents
              
              $
              59,198
              
              
              $
              24,224Trademarks
              
              
              12,187
              
              
              
              4,18271,385
              
              
              
              28,406Accumulated
      depreciation
              
              
              (609
              )
              
              
              -Intangibles,
      net
              
              $
              70,776
              
              
              $
              28,406





The
Company recorded amortization expense related to the trademarks of $609, $0 and
$609, for the years ended September 30, 2008 and 2007, and the period ended
October 11, 2005 (date of inception) to September 30, 2008,
respectively.





No
amortization has been recorded for the patents as of September 30, 2008, as the
patents have not been issued to the Company.





The
following table summarizes the amortization over the next 5 years:





Years
      ended September 30,
            
            Amount2008
            
            $
            4,1792009
            
            
            4,1792010
            
            
            4,1792011
            
            
            4,1792012
            
            
            4,179




F-16
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008





Note
5 – Convertible Promissory Note





On August
15, 2006, the Company issued a secured promissory note (the “August 2006 Note”)
for $250,000 to an unrelated entity “Holder”.  On November 10, 2007,
the August 2006 Note was amended (the “Amended Note”).  At the date of
the amendment, the Company was obligated to pay to the Holder $262,356 which
represented the principal and accrued interest and the Holder was entitled to
purchase shares of the Company’s securities pursuant to a Warrant to Purchase
Common Stock dated August 15, 2006 (“August 2006 Warrant”).  In
contemplation of the completion of the reverse merger, the Company and the
holder reached an agreement whereby this Amended Note superseded the August 2006
Note and canceled the August 2006 Warrant.  The principal amount of
the Amended Note is $262,356, is unsecured and is convertible into 6,340,029
shares of common stock of the Company and bears interest at 4% per annum,
computed on the basis of the actual number of days elapsed and a year of 365
days.  All unpaid principal, together with any then accrued but unpaid
interest, shall be due and payable upon the earlier of (i) November 9, 2010 at
the written request of the holder to the Company, or (ii) when, upon or after
the occurrence of an event of default.





The
effective conversion rate based on the $262,356 principal amount and the
6,340,029 common shares that are received upon conversion is $0.0414 and the
share price was $0.15.  Therefore, the Company determined that the
Amended Note contained a beneficial conversion feature.  At the time
the Amended Note was issued and the number of shares determined, the Company did
not have enough authorized shares to satisfy the conversion of the Amended Note
into common stock; therefore, the beneficial conversion feature is considered an
embedded derivative which is required to be bifurcated from the host contract
and accounted for separately. Pursuant to EITF No. 00-19, “Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company’s Own Stock”, the Company has recorded the fair value of
the beneficial conversion feature as an accrued beneficial conversion
liability.





The fair
value of the beneficial conversion feature was $767,047.  The fair
value was computed using the Black-Scholes model under the following
assumptions: (1) expected life of 2.3 years; (2) volatility of 100%; (3) risk
free interest of 2.61% and (4) dividend rate of 0%.  The Company
recorded a discount on the convertible note up to the principal amount of
$262,356 and expensed as financing costs the $504,691 of the beneficial
conversion feature that exceeded the principal balance.





The
Company recorded interest expense related to the convertible promissory note of
$10,056, $10,000 and $21,056 for the years ended September 30, 2008 and 2007 and
the period ended October 11, 2005 (date of inception) to September 30, 2008,
respectively.




F-17
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008





The
Company amortized $21,289 of the debt discount for the year ended September 30,
2008.  As of September 30, 2008 the unamortized debt discount is
$241,067.





Note
6 – Convertible Promissory Note - Related Party





On March
27, 2007, the Company issued convertible promissory notes to two stockholders of
the Company.  The principal of each convertible promissory note was
$20,000 for a combined total of $40,000.  The convertible promissory
notes bear interest at 4% per annum, computed on the basis of the actual number
of days elapsed and a year of 365 days and mature on March 27,
2009.  All or a portion of the outstanding principal amount and
accrued interest was originally convertible at the option of the note holder at
$0.01 per share (adjusted to reflect subsequent stock dividends, stock splits,
combinations or recapitalizations). All unpaid principal, together with any then
unpaid and accrued interest and any other amounts payable hereunder, shall be
due and payable on the earlier of (i) that date which is two years after
the issue date listed above, or (ii) when, upon or after the occurrence of
an Event of Default as defined in the promissory note.





Subsequent
to this convertible promissory note and prior to September 30, 2007, the
stockholders advanced the Company an additional $6,200 each for a combined total
of $12,400.  The amount due under all notes to the stockholders at
September 30, 2007 was $52,400.





On
October 25, 2007, the Company issued convertible promissory notes to the above
stockholders.  Each note was for $10,000 which included the $6,200
that was previously advanced and an additional $3,800.  The combined
total for the two convertible promissory notes was $20,000.  The
promissory notes bear interest at 4% per annum, computed on the basis of the
actual number of days elapsed and a year of 365 days and mature on October 25,
2009.





On
October 1, 2007, the Company did not have enough authorized shares to satisfy
the conversion of notes; therefore, the Company recorded an accrued conversion
feature liability for the fair value of the conversion option for the two
$20,000 convertible promissory notes on October 1, 2007 and the two $10,000
convertible promissory notes on October 25, 2007.





The fair
value of the conversion feature for the two $20,000 notes was
$368,630.  The fair value was computed using the Black-Scholes model
under the following assumptions: (1) expected life of 1.49 years; (2) volatility
of 100%; (3) risk free interest of 4.11% and (4) dividend rate of
0%.  The Company recorded a discount on the convertible promissory
notes up to the principal amount of $40,000 and expensed as financing costs the
$328,630 of the fair value of the conversion feature that exceeded the principal
balance.





The fair
value of the beneficial conversion feature for the two $10,000 convertible
promissory notes was $10,770.  The fair value was computed using the
Black-Scholes model under the following assumptions: (1) expected life of 2
years; (2) volatility of 100%; (3) risk free interest of 3.74% and (4) dividend
rate of 0%.  The Company recorded a discount on the convertible
promissory notes of $10,770.




F-18
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008





Pursuant
to the reverse merger transaction, $40,000 of CelLynx-California convertible
notes with a conversion price of $0.01 per share were converted into $40,000 of
the Company’s convertible notes with a conversion price of approximately $0.0079
per share, and $20,000 of CelLynx-California convertible notes with a conversion
price of $0.10 per share were converted into $20,000 of the Company’s
convertible notes with a conversion price of approximately $0.0795 per
share.  With the conversion of the notes, the Company expensed the
unamortized debt discount at July 24, 2008.  The fair value of the
conversion liability at July 24, 2008 was $743,163.  The change in
value of the convertible promissory notes before the merger and at the merger
date was $397,177, which was allocated $60,000 to discount on notes and $337,177
as change in the conversion liability.




The
Company recorded interest expense related to the notes of $2,614, $548 and
$3,162 for the years ended September 30, 2008 and 2007 and the period ended
October 25, 2005 (date of inception) to September 30, 2008,
respectively.





The
Company amortized $64,796 of the debt discount for the year ended September 30,
2008.  As of September 30, 2008 the unamortized debt discount is
$45,974.





Note
7 – Stockholder’s Equity





Stock
Options





On
October 27, 2005 and December 31, 2005, the Company granted 3,773,788 and
1,886,894 stock options to two board of directors in consideration of the
services to be rendered to the Company.  The options vested equally
every six months from the grant date.  On August 26, 2006, both
directors resigned from the Company and unvested options totaling 4,245,512
were forfeited.





On
December 3, 2007, the Board of Directors adopted the 2007 Stock Incentive Plan
(the “Plan”) of CelLynx, Inc.  All of the Company’s employees,
officers, directors, consultants and advisors are eligible to be granted
options, restricted stock awards, or other stock-based awards under the
Plan.  The Plan will be administered by the Board.  The
Board shall have authority to grant awards and to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it shall
deem advisable.  Subject to certain adjustments, awards may be made
under the Plan for up to 25,000,000 shares of common stock of the
Company.  The Board shall establish the exercise price at the time
each Option is granted.  During July 2008, the 2007 Company amended to
increase the number of awards from 25,000,000 to 75,000,000.




The
following table summarizes information with respect to common stock issuable
under the Plan and outside the Plan.




F-19
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008





Number
      of
              
              
              Weighted
      Average
              
              
              AggregateShares
              
              
              Exercise
      Price
              
              
              Intrinsic
      ValueOutstanding, October
      11, 2005 (date of inception)
              
              
              -Granted
              
              
              5,660,682
              
              
              $
              0.015Forfeited
              
              
              (4,245,512
              )Exercised
              
              
              -Outstanding, September
      30, 2006
              
              
              1,415,170
              
              
              $
              0.015Granted
              
              
              -Canceled
              
              
              -Exercised
              
              
              -Outstanding, September
      30, 2007
              
              
              1,415,170
              
              
              $
              0.015Granted
              
              
              52,486,693
              
              
              $
              0.075Canceled
              
              
              -Exercised
              
              
              -Outstanding at
      September 30, 2008
              
              
              53,901,863
              
              
              $
              0.073
              
              $
              6,983,248Exercisable at
      September 30, 2008
              
              
              9,658,677
              
              
              $
              0.066
              
              $
              1,505,729





The
number and weighted average exercise prices of all common shares outstanding as
of September 30, 2008 are as follows:




Options
      outstandingWeightedWeighted
              
              
              AverageNumber
              
              
              Average
              
              
              RemainingRange
      of
              
              
              Outsanding
              
              
              Exercise
              
              
              Contractual
      LifeExercise
      Price
              
              
              September
      30, 2008
              
              
              Price
              
              
              (Years)$
              0.014
              
              
              
              943,447
              
              
              $
              0.014
              
              
              
              7.08$
              0.016
              
              
              
              471,723
              
              
              $
              0.016
              
              
              
              7.25$
              0.0720
              
              
              
              29,428,166
              
              
              $
              0.072
              
              
              
              4.22$
              0.079
              
              
              
              23,058,527
              
              
              $
              0.079
              
              
              
              4.3853,901,863
              
              
              $
              0.073
              
              
              
              4.37


F-20
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008




Options
      ExercisableWeightedWeighted
              
              
              AverageOptions
              
              
              Average
              
              
              RemainingRange
      of
              
              
              exercisable
              
              
              Exercise
              
              
              Contractual
      LifeExercise
      Price
              
              
              September
      30, 2008
              
              
              Price
              
              
              (Years)$
              0.014
              
              
              
              943,447
              
              
              $
              0.014
              
              
              
              7.08$
              0.016
              
              
              
              471,723
              
              
              $
              0.016
              
              
              
              7.25$
              0.0720
              
              
              
              4,488,793
              
              
              $
              0.072
              
              
              
              4.06$
              0.079
              
              
              
              3,754,714
              
              
              $
              0.079
              
              
              
              4.119,658,677
              
              
              
              0.066
              
              
              
              4.53




The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option-pricing model are as follows:





September
      30, 2008
              
              September
      30, 2007Expected
      life (years)
              
              2.6
      to 4.0
              
              -Risk-free
      interest rate
              
              1.9%
      to 4.1%
              
              -Expected
      volatility
              
              100%
              
              -Expected
      dividend yield
              
              0%
              
              -




The
weighted average grant-date fair value for the options granted during the year
ended September 30, 2008 and 2007 was $0.06 and $0, respectively.





The
compensation expense related to the unvested options as of September 30, 2008 is
$7,005,456 which will be recognized over the weighted average period of 2.39
years. Stock-based compensation expense to employees and non employees for the
year ended September 30, 2008 and 2007 and the period ended October 11, 2005
(date of inception) to September 30, 2008, respectively  was $2,625,106,
$0 and $2,641,758, respectively.





The
Company granted 17,020,485 options on October 1, 2007 which increased the total
amount of potential outstanding shares over the authorized 60 million shares;
therefore, the Company was required to report the potential exercise of the
options as a liability.  The options that were fully vested at the
issuance of the options were valued at fair value on October 1, 2007 with the
fair value of $89,618 being recorded as a liability and a corresponding
reduction to additional paid in capital.  As of September 30, 2008,
the Company has an accrued share-based compensation liability of
$2,714,724.




F-21
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008




Warrants





On July
23, 2008, the Company issued warrants to purchase 10,500,000 shares of its
common stock at an exercise price of $0.20.





At the
time the warrants were issued, the Company did not have enough authorized shares
to satisfy the exercising of the warrants into common stock.  Pursuant
to Emerging Issues Task Force (“EITF”) No. 00-19, “Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock”, the Company has recorded the fair value of the warrants as an
accrued warrant liability.





The fair
value of the warrant liability at the date of issuance was
$731,681.  The fair value was computed using the Black-Scholes model
under the following assumptions: (1) expected life of 2 years; (2) volatility of
100%; (3) risk free interest of 2.81% and (4) dividend rate of
0%.





The fair
value of the accrued warrant liability at September 30, 2008 is
$603,993.  The fair value was computed using the Black-Scholes model
under the following assumptions: (1) expected life of .32 years; (2) volatility
of 100%; (3) risk free interest of 1.60% and (4) dividend rate of 0%. The
Company recognized a $127,688 gain, on the change in the accrued warrant
liability for the year ended September 30, 2008.





Note
8 – Taxes





We have
provided no current income taxes due to the losses incurred from October 11,
2005 (date of inception) through September 30, 2008.  Net operating
losses of approximately $1,914,644 at September 30, 2008 are available
for carryover.  The net operating losses will expire from 2021
through 2023.  We have provided a 100% valuation allowance
for the deferred tax benefit resulting from the net operating loss carryover due
to our limited operating history.  In addressing the realizability of
deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized.  The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences are deductible.  When we demonstrate
a history of profitable operation we will reduce our valuation allowance at that
time.




A
reconciliation of the statutory Federal income tax rate and the effective income
tax rate for the years ended September 30, 2008 and 2007
follows:




F-22
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008




September
      30,
              September
      30,2008
              
              2007Statutory
      federal income tax rate
              -34%
              
              -34%State
      income taxes (benefit), net of federal taxes
              -6%
              
              -6%Equity
      instruments issued for compensation/services
              19%
              
              17%Change
      in derivative liabilities
              6%
              
              0%Non-cash
      financing costs
              5%
              
              0%Valuation
      allowance
              10%
              
              23%Effective
      income tax rate
              0%
              
              0%




Significant
components of deferred tax assets and liabilities are as follows:





September
      30,
              
              
              September
      30,2008
              
              
              2007Deferred
      tax assets:Net
      operating loss carryforwards
              
              $
              836,646
              
              
              $
              232,072Valuation
      allowance
              
              
              (836,646
              )
              
              
              (232,072
              )Net
      deferred tax assets
              
              $
              -
              
              
              $
              -





The
Company adopted FIN No. 48 on January 1, 2007.  There were no
unrecognized tax benefits as of the date of adoption and there are no
unrecognized tax benefits included in the balance sheet at September 30, 2008,
that would, if recognized, affect the effective tax rate.





Note
9 – Operating Lease





On
February 21, 2008, the Company entered into a one year lease for office space
for its El Dorado Hills, California office.  The lease requires
monthly payments of $2,198.  The Company recorded rent expense of
$13,188 for the year ended September 30, 2008.





On August
26, 2008, the Company entered into an eighteen month lease for office space for
its Mission Viejo, California office beginning on October 1, 2008 and expiring
on March 31, 2010.  The lease requires monthly payments of
$4,664.





The
Company expects to pay $69,156 and $27,984 during the years ended September 30,
2009 and 2010, respectively for the two leases.





Note
10 – Subsequent Events





On
November 7, 2008, the Company filed a Certificate of Amendment to its Articles
of Incorporation (the “Amendment”) with the Secretary of State of the State of
Nevada after shareholders approved a proposal to increase the number of
authorized shares of Common Stock of the Company from 100,000,000 to 400,000,000
by written consent in lieu of a special meeting of shareholders.




F-23
 CelLynx
Group, Inc.
 (A
Development Stage Company)
 Notes
To Financial Statements
 For
the Years Ended September 30, 2008 and 2007 and
 the
Period From October 11, 2005 (Date of Inception) to September 30,
2008




As a
result of filing the Amendment, 45,516,034 shares of the Company’s Series A
Preferred Stock automatically converted into 45,516,034 shares of the Company’s
Common Stock.  The Company now has 126,068,846 shares of Common
Stock and no shares of Series A Preferred Stock issued and
outstanding.





As a
result of the authorized shares being increased to 400,000,000, the Company will
have sufficient shares for the exercise of options, the warrants and the
conversion of the convertible promissory notes.  Therefore, the
Company will reclassify the fair value of the share-based compensation
liability, the accrued warrant liability and the accrued beneficial conversion
liability to equity on November 7, 2008.





Effective
November 17, 2008, Board of Directors of appointed Robert J. Legendre as
Executive Chairman of the Board to assist the Company’s Chief Executive Officer
with strategy and execution of the Company’s manufacturing and supply chain
operations, corporate development, capital markets and investor
relations.  On October 1, 2007, CelLynx,
Inc., the Company’s wholly-owned subsidiary, granted to Mr. Legendre options to
purchase 9,725,991 shares of CelLynx, Inc. Common Stock, at an exercise price of
$0.09 per share, in exchange for executive management services rendered as a
consultant.  These options were subsequently exchanged for options to
purchase 12,234,608 shares of the Company’s Common Stock at an exercise price of
$0.0715 per share in connection with the merger between the Company and CelLynx,
Inc. on July 24, 2008.





Note
11 – Restatement of Quarterly Data (unaudited)
 On July
30, 2008, the Company filed an 8-K which included the financial statements of
CelLynx-California through the six months ended March 31, 2008.  The
balance sheet, statement operations, statement of stockholders’ deficit, and
statement of cash flows for the six months ended March 31, 2008 were
unaudited.  During the preparation of the financial statements for the
year end September 30, 2008, the Company discovered that it did not properly
record the conversion feature associated with the shareholder
notes.  On October 1, 2007, the Company did not have enough authorized
shares to satisfy the conversion of the shareholder notes; therefore, the
Company should have recorded an accrued conversion feature liability for the
fair value of the conversion option for the two $20,000 convertible promissory
notes on October 1, 2007 and the two $10,000 convertible promissory notes on
October 25, 2007.
 
 The
following table shows the effect of the restatement for the period ended March
31, 2008:
 
 For
      the Period FromOctober
      11, 2005(date
      of inception)Previously
                  
                  
                  
                  
                  
                  March
      31, 2008
                  
                  
                  To
      March 31, 2008Reported
                  
                  
                  Adjustment
                  
                  
                  Restated
                  
                  
                  RestatedTotal
      assets
                  
                  $
                  143,734
                  
                  
                  $
                  -
                  
                  
                  $
                  143,734
                  
                  
                  
                  -Current
      liabilities
                  
                  $
                  710,478
                  
                  
                  $
                  342,313
                  
                  
                  $
                  1,052,791
                  
                  
                  
                  -Long
      term liabilities
                  
                  $
                  60,000
                  
                  
                  $
                  (35,036
                  )
                  
                  $
                  24,964
                  
                  
                  
                  -Total
      liabilities
                  
                  $
                  770,478
                  
                  
                  $
                  307,277
                  
                  
                  $
                  1,077,755
                  
                  
                  
                  -Stockholders
      deficit
                  
                  $
                  (626,744
                  )
                  
                  $
                  (307,277
                  )
                  
                  $
                  (934,021
                  )
                  
                  
                  -Revenue
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Operating
      expenses
                  
                  $
                  722,052
                  
                  
                  $
                  -
                  
                  
                  $
                  722,052
                  
                  
                  $
                  1,748,866Loss
      from operations
                  
                  $
                  (722,052
                  )
                  
                  $
                  -
                  
                  
                  $
                  (722,052
                  )
                  
                  $
                  (1,748,866
                  )Non-operating
      income (expense)
                  
                  $
                  (4,349
                  )
                  
                  $
                  (307,277
                  )
                  
                  $
                  (311,626
                  )
                  
                  $
                  (321,754
                  )Net
      loss
                  
                  $
                  (726,401
                  )
                  
                  $
                  (307,277
                  )
                  
                  $
                  (1,033,678
                  )
                  
                  $
                  (2,070,590
                  )





F-24





SIGNATURES




Pursuant
to the requirements of section 13 or 15 (d) of the Securities Exchange Act
of 1934, the Registrant caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.




CELLYNX
      GROUP, INC.Dated:
      December 24, 2008
            By:
            /s/
      Daniel R. Ash
              
              Daniel
      R. Ash,
              President,
      Chief Executive Officer and Chief Operating
  Officer




Pursuant
to the requirements of the Securities and Exchange Act of 1934, this Report has
been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.




Name
            
            Position
            
            Date/s/
      Daniel R. Ash
              
              Daniel
      R. Ash
            
            Director
      and Principal Executive Officer
            
            December
      24, 2008/s/
      Tareq Risheq
              
              Tareq
      Risheq
            
            Director
            
            December
      24, 2008/s/
      Kevin Pickard
              
              Kevin
      Pickard
            
            Principal
      Financial and Accounting Officer
            
            December
      24, 2008/s/
      Robert J. Legendre
              
              Robert
      J. Legendre
            
            Executive
      Chairman of the Board
            
            December
      24, 2008/s/
      Norman W. Collins
              
              Norman
      W. Collins
            
            Director
            
            December
      24, 2008