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, 2009





OR


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





For the transition period
fromto





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.


Yeso Noþ





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


Yeso Noþ





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. Yesþ  Noo





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).


Yeso  Noo





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 filero
        Accelerated filero





Non-accelerated
filero  
        Smaller reporting companyþ





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yeso Noþ





At March
31, 2009, the end of our second fiscal quarter, the aggregate market value of
common stock held by non-affiliates of the registrant was approximately
$10,363,442 based on the closing price of $0.15 as reported on the
Over-the-Counter Bulletin Board.





Number of
shares of common stock outstanding as of January 13,
2010:  159,448,988.










TABLE
OF CONTENTS


TO
ANNUAL REPORT ON FORM 10-K


FOR
YEAR ENDED SEPTEMBER 30, 2009





PagePART
      IItem
      1.
            
            Business
            
            1Item
      1A.
            
            Risk
      Factors
            
            14Item
      1B.
            
            Unresolved
      Staff Comments
            
            14Item
      2.
            
            Properties
            
            14Item
      3.
            
            Legal
      Proceedings
            
            15Item
      4.
            
            Submission
      of Matters to a Vote of Security Holders
            
            15PART
      IIItem
      5.
            
            Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            
            15Item
      6.
            
            Selected
      Financial Data
            
            16Item
      7.
            
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            16Item
      7A.
            
            Quantitative
      and Qualitative Disclosures About Market Risk
            
            23Item
      8.
            
            Financial
      Statements and Supplementary Data
            
            23Item
      9.
            
            Disagreements
      With Accountants on Accounting and Financial Disclosure
            
            23Item
      9A.
            
            Controls
      and Procedures
            
            24Item
      9B.
            
            Other
      Information
            
            25PART
      IIIItem
      10.
            
            Directors,
      Executive Officers and Corporate Governance
            
            25Item
      11.
            
            Executive
      Compensation
            
            30Item
      12.
            
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            
            34Item
      13.
            
            Certain
      Relationships and Related Transactions, and Director
      Independence
            
            36Item
      14.
            
            Principal
      Accounting Fees and Services
            
            38PART
      IVItem
      15.
            
            Exhibits,
      Financial Statement Schedules
            
            38Signatures








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.








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.  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 was 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.





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”).







1


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.





2


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.





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.





3


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.  Mr. Legendre subsequently resigned on May 4,
2009.





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.





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.





4


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.  The Company
has not received any payment under the agreement and we are currently
re-negotiating the agreement with Dollardex.





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.





FY
2009 Events





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.





5


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.





Recent
Events





Ingram
Micro Agreement





In
November 2009, we signed an agreement with Ingram Micro Inc. to distribute the
line of mobile phone boosters.  This agreement accelerates CelLynx
Group’s go-to-market channel strategy and expands the reach of its product
distribution to include all 50 states, D.C., U.S. Territories & Possessions,
as well as Military Bases and U.S. embassies abroad.  Ingram Micro
Inc. is the world’s largest technology distributor and a leading technology
sales, marketing and logistics company.  It offers a broad array of
solutions and services to more than 170,000 resellers by distributing and
marketing hundreds of thousands of IT products worldwide from more than 1,500
vendors.  We expect to distribute our product through online
distributors and traditional retailers.





Changes
in Directors





On May 4,
2009, Robert Legendre, the Company’s Executive Chairman of the Board resigned as
a member of our board of directors to devote his full time to other career
responsibilities.  There were no disagreements between Mr. Legendre
and any of our officers or directors.





Effective
May 8, 2009, the Company’s Board of Directors appointed Donald A. Wright, as
Chairman of the Board of Directors of the Company.  Additionally,
effective December 19, 2009, the Company’s Board of Directors appointed Dwayne
Yaretz as a Director of the Company.  More information is provided
about Messrs. Wright and Yaretz below in the section “Directors, Executive
Officers, and Corporate Governance.”





Securities
Issuance Agreement





On May 4,
2009, the Company entered into a Securities Issuance Agreement, dated as of
April 23, 2009 (the "Agreement"), with Dollardex Group Corp., a Panamian
corporation (the "Purchaser") and Robert Legendre (“Mr. Legendre”) and Tareq
Risheq (“Mr. Risheq”). Pursuant to the Agreement, the Purchaser agreed to invest
$278,500 in the Company and would receive 2,785,000 shares of its common stock
(“Shares”) and warrants to purchase 2,785,000 Shares at an exercise price of
$0.10 per share.  The warrants have a term of 36 months after the
issue date of May 5, 2009.





6


Under the
Agreement, we accepted the resignation of Mr. Legendre as Executive Chairman of
the Board of Directors of the Company (discussed above).  The Company
agreed that all of Mr. Legendre’s options would be immediately
cancelled.  As full compensation for his services to the Company to
date, he would receive 2,000,000 Shares of common stock.  The Company
agreed that all of Mr. Risheq’s options would be immediately
cancelled.  As full compensation for his services to the Company to
date, he would receive 1,500,000 Shares of common stock.  As discussed
above, on December 12, 2008, Mr. Risheq had resigned as the Company’s Chief
Strategy Officer but remains a Director of the Company.





Overview
of CelLynx





CelLynx
develops and markets 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 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.





7


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.





Our first
product, The Road Warrior, has passed FCC Certification and in July 2009, we
ordered 220 units from our manufacturer in the Philippines.  We used
66 of the units as demo units and started selling the remainder.  Due
to cash flow issues, we recently placed an order for an additional 1,000 units
and have received the first 250 units in November 2009.





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.








8




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
has  occurred in July 2009 for the North American
model.  The European and Asian models are expected to be introduced in
mid 2010.





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
2010.  The European and Asian models are expected to be introduced
mid-year 2010.





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.





9


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 5BARzproducts.








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.





10


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.





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.





In
November 2009, we signed an agreement with Ingram Micro Inc. to distribute the
line of mobile phone boosters.  This agreement accelerates CelLynx
Group’s go-to-market channel strategy and expands the reach of its product
distribution to include all 50 states, the District of Columbia, U.S.
Territories and Possessions, as well as Military Bases and U.S. embassies
abroad.  Ingram Micro Inc. is the world’s largest technology
distributor and a leading technology sales, marketing and logistics
company.  It offers a broad array of solutions and services to more
than 170,000 resellers by distributing and marketing hundreds of thousands of IT
products worldwide from more than 1,500 vendors.  We expect to
distribute our product through online distributors and traditional
retailers.





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.





11


CelLynx
has selected a CM in the Philippines which produced the first 220 units in
coordination with the Company’s engineering team.  The first initial
mass production  units were used for UL testing, product
demonstrations, and remaining FCC approved units were sold as initial
sales.





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.








Competitive
      Matrix
            Wi-Ex
            CellAntenna
            JD
      TECK
            Wilson
            CelLynxYX500-PCS
            CAE50PCS
            JD
      55-PR
            PCS
      60dBClaimed
      Coverage
            2,500
      sq. ft
            3,000
      sq ft
            1,200
      sq ft
            2,500
      sq ft
            2,500
      sq ftOpen
      area
            Open
      areaAdaptive/AGC
            Yes
            No
            No
            Yes
            YesFreq./Carrier
      Specific
            No
            No
            No
            No
            NoMaximum
      System Gain
            55dB
            50dB
            55dB
            60dB
            70dBCable
      Length/Type
            35’
      RG6
            33’
      RG6
            33’
      RG6
            Buy
      separately
            None
      RequiredMarket
            Consumer
            Industrial
            Industrial
            Industrial
            ConsumerDistribution
            Direct
            Direct
            Direct
            Distributors
            DirectMaster
      VAR
            (Online
      (3rd
      Party)
            Master
      VAR
            Master
      VAR
            DistributorsRetail
            
            
            Online
      (3rd
      Party)
            OnlineOnline
      (3rd
      Party)Price
      (MSRP)
            $299.99
            $499.99
            $395.00
            $699.95
            $299.00Installation:
            Recommended
            Yes
            Yes
            Yes
            None
      RequiredPrice
            $150.00
            >$300
            $250
            >$300External
      Antennae
            1
            2
            2
            2
            0




12


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:





Matter
      ID
            
            Title
            
            Matter
      Type
            
            Serial
      Number
            
            Status101710.0001
      P CT
            
            Cell
      Phone Signal Booster
            
            Patent
      – P CT
            
            P
      CT/US07/060827
            
            Pending101710.0001
      US
            
            Cell
      Phone Signal Booster
            
            Patent
      – US
            
            11/625331
            
            Pending101710.0001
      US2
            
            Dual
      Cancellation Loop Wireless Repeater
            
            Patent
      – US
            
            12/106468
            
            Pending101710.0002
      PRO
            
            Method
      to Remotely Enable and Disable the Operation of a Wireless
      Repeater
            
            Patent
      – Provisional
            
            61/018765
            
            Pending101710.0003
      PRO
            
            Method
      to Integrate a Wireless Repeater into the Wireless System for Control and
      Monitoring
            
            Patent
      – Provisional
            
            61/018892
            
            Pending101710.0004
      PRO
            
            Method
      for a Wireless System Home Base Station
            
            Patent
      – Provisional
            
            61/019097
            
            Pending101710.0005
      PRO
            
            Dual
      Loop Active and Passive Repeater Antenna Isolation
    Improvement
            
            Patent
      – Provisional
            
            61/045662
            
            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.





13


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
environmentally conscience in every aspect of its operations.





Employees





CelLynx
has approximately six (6) 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 its 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 March 31, 2010 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.





14


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





None.





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 2008
            $0.23
            $0.122nd
      Quarter 2008
            $0.35
            $0.183rd
      Quarter 2008
            $0.28
            $0.184th
      Quarter 2008
            $0.26
            $0.121st
      Quarter 2009
            $0.22
            $0.152nd
      Quarter 2009
            $0.17
            $0.093rd
      Quarter 2009
            $0.33
            $0.094th
      Quarter 2009
            $0.27
            $0.17





Holders





As of
January 12, 2010, there were approximately 177 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.





15


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





During
the three months ended September 30, 2009, the Company issued 3,060,000 shares
of the Company’s common stock for proceeds of $334,500.  The Company
also issued 298,181 shares for services rendered to the Company valued at
$45,599.





In each
issuance discussed above, the shares of common stock were issued without
registration under the 1933 Act in reliance on Section 4(2) of the 1933 Act and
the rules and regulations promulgated thereunder





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, 2009 and 2008 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.





16


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 are a
producer 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 line, CelLynx 5BARzTM , uses our
patent pending technology to create a single-piece plug ‘n play unit that
strengthens weak cellular signals to deliver higher quality signals for voice,
data and video reception on cell phones and other cellular devices being used
indoors or in vehicles.





Our first
product, The Road Warrior, has passed FCC Certification and in July 2009, we
ordered 220 units from our manufacturer in the Philippines.  We used
66 of the units as demo units and started selling the remainder.  Due
to cash flow issues, we just recently placed an order for an additional 1,000
units and have received the first 250 units in November
2009.


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.  We plan to commercialize this technology, with production
and distribution scheduled to begin, in the first quarter of 2010. 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 is designed to eliminate 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 is expected 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 complete development leading
to commercialization.





17


Our
product line is being manufactured by contract manufacturers located in
Philippines, with whom CelLynx has established manufacturing and supply chain
relationships.   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.





In
November 2009, we signed an agreement with Ingram Micro Inc. to distribute the
line of mobile phone boosters.  This agreement accelerates CelLynx
Group’s go-to-market channel strategy and expands the reach of its product
distribution to include all 50 states, D.C., U.S. Territories & Possessions,
as well as Military Bases and U.S. embassies abroad.  Ingram Micro
Inc. is the world’s largest technology distributor and a leading technology
sales, marketing and logistics company.  It offers a broad array of
solutions and services to more than 170,000 resellers by distributing and
marketing hundreds of thousands of IT products worldwide from more than 1,500
vendors.  We expect to distribute our product through online
distributors and traditional retailers.





We have
financed our operations primarily through proceeds from the issuance of common
stock, and we will need to raise additional capital in order to finance our
working capital requirements as we continue to increase our sales.  If
we are unable to raise additional capital, 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 consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America.  The preparation of these consolidated
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.





While our
significant accounting policies are more fully described in Note 2 to our
consolidated 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:





Use of
Estimates





The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Significant areas requiring the use of management estimates relate to the
determination of depreciation rates for equipment, reserves for slow moving and
obsolete inventory, future tax rates used to determine future income taxes, and
the carrying values of goodwill and accrued derivative liabilities. Actual
results could differ from these estimates upon which the carrying values were
based.





18


Fair Value
Measurements





For
certain of our financial instruments, including cash and cash equivalents,
restricted cash, accounts receivable, accounts payable, accrued liabilities and
short-term debt, the carrying amounts approximate their fair values due to their
short maturities. In addition, we have long-term debt with financial
institutions. The carrying amounts of the line of credit and other long-term
liabilities approximate their fair values based on current rates of interest for
instruments with similar characteristics.





ASC Topic
820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair
value of financial instruments held us. ASC Topic 825, “Financial Instruments”
defines fair value, and establishes a three-level valuation hierarchy for
disclosures of fair value measurement that enhances disclosure requirements for
fair value measures.  The carrying amounts reported in the
consolidated balance sheets for receivables and current liabilities each qualify
as financial instruments and are a reasonable estimate of their fair values
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 of valuation hierarchy are defined as follows:





●
            Level
      1 inputs to the valuation methodology are quoted prices 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 ASC 480, “Distinguishing Liabilities from Equity,” and ASC
815.





Income
Taxes





The
Company accounts for income taxes in accordance with ASC Topic 740, “Income
Taxes.” ASC 740 requires a company to use the asset and liability method of
accounting for income taxes, whereby deferred tax assets are recognized for
deductible temporary differences, and deferred tax liabilities are recognized
for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion, or all of, the
deferred tax assets will not be realized.  Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.





Under ASC
740, 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 effect on the Company’s consolidated financial
statements.





19


Stock-based
Compensation





We record
stock-based compensation in accordance with ASC Topic 718 “Compensation – Stock
Compensation.”  ASC 718 requires companies to measure compensation
cost for stock-based employee compensation at fair value at the grant date and
recognize the expense over the employee’s requisite service period. Under ASC
718, our volatility is based on the historical volatility of our stock or the
expected volatility of similar companies. The expected life assumption is
primarily based on historical exercise patterns and employee post-vesting
termination behavior. The risk-free interest rate for the expected term of the
option is based on the U.S. Treasury yield curve in effect at the time of
grant.





Shares Issued for
Services





From time
to time, we issued stock for services. The shares were valued based upon
the fair market value of the Company’s shares determined as the closing stock
price as reported by the OTCBB at the dates of issuance.





Intangible
Assets





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 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. Licensing right is amortized on a straight-line basis over a
period of 10 years.





Results
of Operations





Comparison
of the Years Ended September 30, 2009 and 2008







Year
      ended September 302009
              
              
              2008
              
              
              $
      Change
              
              
              %
      ChangeREVENUE
              
              $
              10,373
              
              
              $
              -
              
              
              
              10,373
              
              
              
              100.0%COST
      OF REVENUE
              
              
              7,554
              
              
              
              -
              
              
              
              7,554
              
              
              
              100.0%GROSS
      PROFIT
              
              
              2,819
              
              
              
              -
              
              
              
              2,819
              
              
              
              100.0%OPERATING
      EXPENSES
              
              
              3,635,153
              
              
              
              4,706,037
              
              
              
              (1,070,884
              )
              
              
              -22.8%OTHER
      INCOME (EXPENSE)
              
              
              (346,428
              )
              
              
              (1,952,499
              )
              
              
              1,606,071
              
              
              
              -82.3%NET
      LOSS
              
              $
              (3,978,762
              )
              
              $
              (6,658,536
              )
              
              $
              2,679,774
              
              
              
              -40.2%


20


Revenue
and Cost of Revenue





During
the year ended September 30, 2009, we generated $10,373 in revenue that arose
from the initial sale of our 5Barz units which became sellable in July
2009.  Cost of revenues were $7,554 resulting in a gross profit of
$2,819.   During the same period of 2008, we were in development
stage and did not recognize any revenues, cost of revenues, and gross
profit.





Operating
Expenses





Total
operating expenses incurred for the year ended September 30, 2009 was $3,635,153
compared to $4,706,037 for the year ended September 30, 2008, which decreased by
$1,070,884.  The significant decrease was due to a significant
decrease in share based compensation.  During the year ended September
30, 2008, we recognized $2,625,106 of share based compensation expense compared
to $690,353 for the year ended September 30, 2009, for a decrease of $1,934,753
or 73.7%.  The decrease is due to the cancellation of 35,734,111
options during the year and only granted 9,546,081 options.  We also
had an increase in consulting fees of $411,715 from $563,151 for the year ended
September 30, 2008 to $974,866 for the year ended September 30, 2009, for a
73.1% increase.  We incurred additional operating expenses as we
continued to build our infrastructure.





Non
Operating Income and Expenses





Total
non-operating income expenses incurred for the year ended September 30, 2009 was
$346,428 compared to $1,952,499 for the year ended September 30, 2008 which was
a decrease of $1,606,071.  The difference was due to a beneficial
conversion liability which was expensed in the year ended September 30, 2008
offset by increased fair value of warrants for the year ended September 30, 2009
which were issued in 2008.





Liquidity
and Capital Resources





Financial
Condition





As of
September 30, 2009,  we had cash of $6,776 and we had a working
capital deficit of $1,024,034, compared to cash of $599,024 and a working
capital deficit of $5,301,132 as of September 30, 2008   The
decrease in working capital deficit is due to the reclassification of the
share-based compensation liability, accrued beneficial conversion liability and
accrued warrant liability to additional paid-in capital on November 7, 2008 as
we increased our authorized shares to 400,000,000, which provided sufficient
shares to cover the potential conversion of the options, warrants and the
convertible promissory notes.





During
the year ended September 30, 2009, cash used in operating activities was
$1,421,759.  Cash used in operating activities consisted of a net loss
of $3,978,762 and change in fair value of beneficial conversion liability of
$251,410, offset by non cash expenses of $798,599 for stock issued for services,
$690,353 for stock based compensation, $419,571 for the change in fair value of
accrued warrant liability and an increase of $641,163 for change in accounts
payable and accrued expenses.





We used
$26,489 for the purchase of intangible assets and equipment for the year ended
September 30, 2009 compared to $53,551 for the year ended September 30,
2008.





21


Cash
provided by financing activities was $856,000 for the year ended September 30,
2009 compared to $753,884 for the year ended September 30, 2008.  We
received $143,000 from promissory notes and $713,000 from the issuance of common
stock for the year ended September 30, 2009 compared to $7,600 from stockholders
notes and $746,284 from the issuance of common stock for the year ended
September 30, 2008.  We have financed our operations primarily through
proceeds from the issuance of common stock.  We anticipate raising an
additional $3 million during the next four to six months through private equity
offerings.





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, 2009,
and the effect these obligations are expected to have on our liquidity and cash
flows in future periods.






Contractual
      obligation
              
              Total
              
              
              Less
      than 1 year
              
              
              1-3
      yearsNote
      Payable
              
              
              362,356
              
              
              
              -
              
              
              
              362,356Stockholder
      notes
              
              
              103,000
              
              
              
              103,000
              
              
              
              -Operating
      lease
              
              
              41,200
              
              
              
              41,200
              
              
              
              -506,556
              
              
              
              144,200
              
              
              
              362,356


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.





Recent
Pronouncements





On
January 1, 2009, we adopted ASC sub-topic 810-10 (formerly SFAS
No. 160, “Accounting and Reporting on Non-controlling Interest in
Consolidated Financial Statements, an Amendment of ARB 51”). ASC 810-10 states
that accounting and reporting for minority interests are to be recharacterized
as noncontrolling interests and classified as a component of equity. The
calculation of earnings per share continues to be based on income amounts
attributable to the parent. ASC 810-10 applies to all entities that prepare
consolidated financial statements, except not-for-profit organizations, but
affects only those entities that have an outstanding noncontrolling interest in
one or more subsidiaries or that deconsolidate a subsidiary.  The
adoption of ASC 810-10 did not have a material impact on our consolidated
financial statements.


22


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





As
previously reported by the Company in a Current Report on Form 8-K filed on
January 7, 2010, On January 4, 2010, the Company was notified that, effective
January 1, 2010, certain partners of Moore Stephens Wurth Frazer and Torbet, LLP
(“MSWFT”) and Frost, PLLC (“Frost”) formed Frazer Frost, LLP (“Frazer Frost”), a
new partnership. Pursuant to the terms of a combination agreement by and among
MSWFT, Frazer Frost and Frost (the “Combination Agreement”), each of MSWFT and
Frost contributed all of their assets and certain of their liabilities to Frazer
Frost, resulting in Frazer Frost assuming MSWFT’s engagement letter with the
Company and becoming the Company’s new independent accounting
firm.  Frazer Frost is registered with the Public Company Accounting
and Oversight Board (PCAOB).





The
Company had engaged MSWFT on October 29, 2008.  The audit report of
MSWFT on the Company’s financial statements for the fiscal year ended September
30, 2008, did not contain an adverse opinion or a disclaimer of opinion, other
than for a going concern, and were not qualified or modified as to uncertainty,
audit scope or accounting principles.





Since the
engagement of MSWFT on October 29, 2008, and through January 1, 2010, the
Company did not consult with Frazer Frost on (i) the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that may be rendered on the Company’s financial statements, and
Frazer Frost did not provide either a written report or oral advice to the
Company that was an important factor considered by the Company in reaching a
decision as to any accounting, auditing, or financial reporting issue; or (ii)
the subject of any disagreement, as defined in Item 304 (a)(1)(iv) of Regulation
S-K and the related instructions, or a reportable event within the meaning set
forth in Item 304(a)(1)(v) of Regulation S-K.





Since the
engagement of MSWFT on October 29, 2008, and through the date of this Current
Report, there were: (i) no disagreements between the Company and MSWFT on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope or procedures, which disagreements, if not resolved to the
satisfaction of MSWFT, would have caused MSWFT to make reference to the subject
matter of the disagreement in their reports on the Company’s financial
statements for such years, and (ii) no reportable events within the meaning set
forth in Item 304(a)(1)(v) of Regulation S-K.





The
Company’s Board of Directors approved the engagement of Frazer Frost as the
Company’s independent auditor.





The
Company provided MSWFT a copy of the disclosures in the Form 8-K and requested
that MSWFT furnish it with a letter addressed to the Securities and Exchange
Commission stating whether or not MSWFT agrees with the Company’s statements in
this Item 4.01(a). A copy of the letter dated January 7, 2010, furnished by
MSWFT in response to that request was filed as Exhibit 16.1 to the January 7,
2010, Form 8-K.





23


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 were effective as of the date of the
evaluation.





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, 2009, 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.





24


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) inInternal Control –
Integrated Framework.  Because of the material weaknesses
described in the preceding paragraph, Management believes that, as of September
30, 2009, 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, 2009 that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.





ITEM
9B. OTHER INFORMATION





None.





PART III





ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





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
            
            48
            
            President,
      Chief Executive Officer, Chief Operating Officer, Secretary and
      Director
            
            July
      24, 2008Kevin
      Pickard
            
            46
            
            Chief
      Financial Officer and Treasurer (2)
            
            July
      24, 2008Tareq
      Risheq (1)
            
            45
            
            Director
            
            July
      24, 2008Norman
      W. Collins
            
            69
            
            Director
            
            July
      24, 2008Don
      Wright
            
            58
            
            Chairman
      of the Board
            
            May
      8, 2009Dwayne
      Yaretz
            
            49
            
            Director
            
            December
      19, 2009




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





(2)
            Mr.
      Pickard is an outside consultant providing services commonly provided by a
      Chief Financial Officer and
Treasurer.




25


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 – Director





Tareq
Risheq currently serves as a Director and formerly served as the Company’s 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(Outside Consultant)





Since 1998,
Mr. Pickard has been a principal officer and owner of Pickard & Green
CPAs (formerly Pickard & Company, CPAs, 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 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.





26


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.





Don
Wright – Chairman of the Board





Mr.
Wright is currently the CEO of Confluence Capital Group, a firm that provides
business consulting services to institutional investors and companies including:
raising capital, capital restructuring, business and marketing plans, reporting
systems and metrics for stakeholders and management. He also serves on the board
of International Stem Cell Corporation (OTCBB: ISCO). Mr. Wright was Chief
Executive Officer and President of Pacific Aerospace & Electronics, Inc., an
engineering and manufacturing company that he helped to found and that designs,
manufactures and sells components primarily for the aerospace, defense and
transportation industries, from 1995 until 2006.





Dwayne
Yaretz –  Director





Mr.
Yaretz been involved with numerous privately held companies in various industry
sectors to capitalize, manage growth strategies and operate as going concerns in
North America over the past 26 years. Internationally, Mr. Yaretz has acted as
Vice-President for Asia Power Engineering and China Power Corporation, both Honk
Kong based companies specializing in design, construction and operations in the
energy co-generation sector in the Peoples’ Republic of China.  Since
1996 Mr. Yaretz has acted for several public companies in various capacities.
Mr. Yaretz has served as a Director, Corporate Secretary, CFO as well a
President and CEO of several private and public companies, including two Capital
Pool Companies that have successfully completed Qualifying Transactions by way
of an IPO.  Currently, Mr. Yaretz in President of Griffin Corporate
Concepts, a consulting firm focused on partnering with companies that are
positioned for high growth potential in international markets.  Mr.
Yaretz is currently a Director of Cantronic Systems Inc., a Tier 1 TSX.V listed
company and Benzai Capital Ltd., a Capital Pool Company listed on the
TSX.V.  In addition, Mr. Yaretz is also a Director of PAKIT Inc., a
technology company and leading designer, developer and supplier of cellulose
fiber moulding equipment to the packaging industry.





Family
Relationships





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





27


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;





(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.





28


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, 2009, 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 Norman W. Collins to serve as a
member of our audit committee, although he does not qualify 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
four 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.


29


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
            
            
            2009
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --2008
            
            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.





30


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
              Compensation
              (
      $)
            
            Total
              ($)Daniel
      R. Ash, President, Chief Executive Officer, Chief Operating Officer
      Secretary and Director
            
            2009
            
            
            170,000
            
            --
            
            --
            
            --
            
            --
            
            --
            
            --
            
            170,0002008
            
            
            170,000
            
            --
            
            --
            
            217,671
            (2)
            --
            
            --
            
            --
            
            387,671Tareq
      Risheq, Chief Strategy Officer and Director (3)
            
            2009
            
            
            --
            
            --
            
            --
            
            --
            
            --
            
            --
            
            --
            
            --2008
            
            
            108,000
            
            --
            
            --
            
            159,330
            (2)
            --
            
            --
            
            --
            
            267,330




(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%





(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.





31





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)
            
            
            2,920,469
            
            1,667,510
            
            —
            
            $
            0.0787
            
            10/01/2012Daniel
      R. Ash (2)
            
            
            349,426
            
            —
            
            —
            
            $
            0.0787
            
            04/21/2013Daniel
      R. Ash (1)
            
            
            3,598,027
            
            4,877,206
            
            —
            
            $
            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.





32


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 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 as of that date was 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 shares
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.  On November 1, 2008, the Company entered into an
updated agreement with Mr. Pickard’s accounting firm that provides for monthly
cash compensation of $5,000 per month and the issuance of 350,000 shares of the
Company’s common stock.





33


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.





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, 2009, 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
              exerciseprice
      of
              outstanding
              options,warrants
              and
      rights
              (b)
            
            Number
      ofsecurities
              remainingavailable
              for
      futureissuance
              underequity
              compensation
              plans
      (excluding
              securities
      reflected
              in
      column (a))
              (c)Equity
      compensation plans approved by security holders
            --
            
            $
            --
            
            --Equity
      compensation plans not approved by security holders
            27,713,833
            
            $
            $0.102
            
            47,286,167Total
            27,713,833
            
            
            
            
            47,286,167





34


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 146,418,791 shares
outstanding as of December 31, 2009.





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)
            
            
            37,855,024
            
            
            
            24.3%Kevin
      Pickard, Chief Financial Officer and Treasurer (4)
            
            
            382,970
            
            
            
            *Tareq
      Risheq, Director (5)
            
            
            32,487,103
            
            
            
            21.8%Don
      Wright, Chairman of the Board (6)
            
            
            878,101
            
            
            
            *Norman
      W. Collins, Director (7)
            
            
            213,383
            
            
            
            *Dwayne
      Yaretz, Director
            
            
            -
            
            
            
            *All
      Executive Officers and Directors as a Group (6 persons)
            
            
            71,816,581
            
            
            
            44.0%


________________


* Less
than 1%





(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.





35


(2)
            Percentage
      based upon 146,418,791 issued and outstanding shares of the Company’s
      capital stock.





(3)
            Includes
      28,345,452 shares of common stock, options to purchase 6,867,921 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)
            Mr.
      Pickard is an outside consultant providing services commonly provided by a
      Chief Financial Officer and Treasurer.  This figure does not
      include 400,000 shares owned of record by Pickard & Green, CPAs, an
      entity in which Mr. Pickard is a partner.  Mr. Pickard disclaims
      beneficial ownership of such 400,000
shares.





(5)
            Includes
      29,845,452 shares of common stock, 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.





(6)
            Consisting
      of options to purchase 878,101 shares of the Company’s common
      stock.





(7)
            Consisting
      of options to purchase 213,383 shares of the Company’s common
      stock.





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.





36


Related
Party Transactions of CelLynx





On
October 1, 2007, CelLynx-California granted to Robert J. Legendre, the Company’s
former 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.  Mr. Legendre
resigned from the Company on May 4, 2009.





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.








37


ITEM 14.PRINCIPAL ACCOUNTING FEES AND
SERVICES





The
aggregate fees billed for the two most recently completed fiscal years ended
September 30, 2009 and 2008 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, 2009
            
            
            Year
      Ended
              September
      30, 2008Audit
      Fees
            
            $
            36,000
            
            
            $
            35,000Audit
      Related Fees
            
            $
            45,000
            
            
            
            -Tax
      Fees
            
            
            -
            
            
            
            -All
      Other Fees
            
            
            -
            
            
            
            -Total
            
            $
            81,000
            
            
            $
            35,000




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)





38





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)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)





39


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)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
      (11)


10.28
              
              Securities
      Issuance Agreement executed on May 4, 2009 by and among the Registrant,
      Dollardex Group Corp. and the other parties listed therein
      (10)17.1
              
              Letter
      of Resignation from John P. Thornton to the Board of Directors
      (7)21.1
              
              List
      of Subsidiaries (7)


40




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.(10)
              Filed
      on May 8, 2009, as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(11)
              Filed
      on October 14, 2008, as an exhibit to our Annual Report on Form 10-K, and
      incorporated herein by
reference.






41


CelLynx
Group, Inc.
 Consolidated
Financial Statements
  Contents
    PageReport
      of Independent Registered Public Accounting Firm
              F-2Consolidated
      Financial Statements:Consolidated
      Balance Sheets as of September 30, 2009 and 2008
              F-3Consolidated
      Statements of Operations for the Years Ended September 30, 2009 and
      2008
              F-4Consolidated
      Statements Of Stockholders’ Deficit for the Years Ended September 30, 2009
      and 2008
              F-5Consolidated
      Statements of Cash Flows for the Years Ended September 30, 2009 and
      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.) as of September 30, 2009 and 2008, and the
related consolidated statements of operations, stockholders’ deficit and cash
flows for the years then ended. 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
audit.
 
 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 audit 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 as of
September 30, 2009 and 2008, and the results of operations and cash flows for
the years then ended, 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/
Frazer Frost, LLP
 (Successor
entity of Moore Stephens Wurth Frazer and Torbet, LLP, see Form 8-K filed on
January 7, 2010)
 Brea,
California
 January
13, 2010
 
 F-2
 
 CELLYNX
      GROUP, INC.CONSOLIDATED
      BALANCE SHEETSAS
      OF SEPTEMBER 30, 2009 AND 20082009
                
                
                2008ASSETSCURRENT
      ASSETS:Cash
                
                $
                6,776
                
                
                $
                599,024Inventory
                
                
                16,316
                
                
                
                -Other
      current assets
                
                
                15,750
                
                
                
                6,862TOTAL
      CURRENT ASSETS
                
                
                38,842
                
                
                
                605,886EQUIPMENT,
      net
                
                
                11,359
                
                
                
                9,658INTANGIBLE
      ASSETS, net
                
                
                97,180
                
                
                
                70,776OTHER
      ASSETS
                
                
                16,190
                
                
                
                11,526TOTAL
      ASSETS
                
                $
                163,571
                
                
                $
                697,846LIABILITIES AND
      STOCKHOLDERS' DEFICITCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                
                $
                832,634
                
                
                $
                206,298Accrued
      interest
                
                
                28,334
                
                
                
                12,507Accrued
      derivative liabilities
                
                
                -
                
                
                
                5,677,156Convertible
      stockholder notes, net of debt discount of $1,092 and
    $28,943as
      of September 30, 2009 and 2008, respectively
                
                
                101,908
                
                
                
                11,057Convertible
      promissory notes, current portion
                
                
                100,000
                
                
                
                -TOTAL
      CURRENT LIABILITIES
                
                
                1,062,876
                
                
                
                5,907,018LONG
      TERM LIABILITIES:Convertible
      promissory note, net of debt discount of  $126,795 and
      $241,067as
      of September 30, 2009 and 2008, respectively
                
                
                135,561
                
                
                
                21,289Convertible
      stockholder notes, net of debt discount of  $0 and
      $17,031
                
                
                -
                
                
                
                2,969TOTAL
      LIABILITIES
                
                $
                1,198,437
                
                
                $
                5,931,276COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      DEFICIT:Series
      A Preferred Stock, $0.001 par value;100,000,000 shares
      authorized;nil
      and 45,516,034  shares issued and outstandingas
      of September 30, 2009 and 2008, respectively
                
                
                -
                
                
                
                45,516Common
      stock, $0.001 par value, 400,000,000 authorized; 137,379,397
      and80,552,812
      shares issued and outstanding as ofSeptember
      30, 2009 and 2008, respectively
                
                
                137,379
                
                
                
                80,553Additional
      paid-in capital
                
                
                10,501,965
                
                
                
                2,335,949Accumulateed
      deficit
                
                
                (11,674,210
                )
                
                
                (7,695,448
                )Total
      stockholders' deficit
                
                
                (1,034,866
                )
                
                
                (5,233,430
                )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                
                $
                163,571
                
                
                $
                697,846
 The
accompanying notes are an integral part of these consolidated financial
statements.
 F-3
 CELLYNX
      GROUP, INC.CONSOLIDATED
      STATEMENTS OF OPERATIONSFOR
      THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008For
      the Years Ended September 30,2009
                
                
                2008Net
      Revenue
                
                $
                10,373
                
                
                $
                -Cost
      of Revenue
                
                
                7,554
                
                
                
                -Gross
      profit
                
                
                2,819
                
                
                
                -Operating
      expensesResearch
      and development
                
                
                340,995
                
                
                
                308,906General
      and administrative
                
                
                3,294,158
                
                
                
                4,397,131Total
      operating expenses
                
                
                3,635,153
                
                
                
                4,706,037Loss
      from operations
                
                $
                (3,632,334
                )
                
                $
                (4,706,037
                )Non-operating
      income (expense):Interest
      income
                
                
                961
                
                
                
                4,198Interest
      and financing costs
                
                
                (179,228
                )
                
                
                (932,393
                )Change
      in fair value of accrued beneficial conversion liability
                
                
                251,410
                
                
                
                (1,151,992
                )Change
      in fair value of accrued warrant liability
                
                
                (419,571
                )
                
                
                127,688Total
      non-operating expense
                
                
                (346,428
                )
                
                
                (1,952,499
                )Loss
      before provision for income taxes
                
                
                (3,978,762
                )
                
                
                (6,658,536
                )Provision
      for income taxes
                
                
                -
                
                
                
                -Net
      loss
                
                $
                (3,978,762
                )
                
                $
                (6,658,536
                )Weighted
      average shares outstanding - Basic and Diluted:
                
                
                125,094,999
                
                
                
                40,407,479Earnings
      per share - Basic and Diluted:
                
                $
                (0.03
                )
                
                $
                (0.16
                )
 The
accompanying notes are an integral part of these consolidated financial
statements.
 F-4
  CELLYNX
      GROUP, INC.CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' DEFICITFOR
      THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008Preferred
      Stock
                  
                  
                  Common
      Stock
                  
                  
                  Additional
                    Paid-in
                  
                  
                  Accumulated
                  
                  
                  TotalStockholders'Shares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  DeficitBalance,
      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
                  )Conversion
      of preferred stock to common stock upon theincrease of authorized
      shares
                  
                  
                  (45,516,034
                  )
                  
                  
                  (45,516
                  )
                  
                  
                  45,516,034
                  
                  
                  
                  45,516
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Reclassification
      of share based compensation liability to equity
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,701,572
                  
                  
                  
                  -
                  
                  
                  
                  2,701,572Fair
      value of share based compensation for employees and
      consultants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  690,353
                  
                  
                  
                  -
                  
                  
                  
                  690,353Reclassification
      of beneficial conversion liability to equity
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,120,181
                  
                  
                  
                  -
                  
                  
                  
                  2,120,181Reclassification
      of warrant liability to equity
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,023,564
                  
                  
                  
                  -
                  
                  
                  
                  1,023,564Issuance
      of common stock for the purchase of licensing rights
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  57,143
                  
                  
                  
                  57
                  
                  
                  
                  7,372
                  
                  
                  
                  -
                  
                  
                  
                  7,429Issuance
      of common stock for promissory note
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  37,500
                  
                  
                  
                  38
                  
                  
                  
                  4,208
                  
                  
                  
                  -
                  
                  
                  
                  4,246Issuance
      of warrants for consulting services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  118,382
                  
                  
                  
                  -
                  
                  
                  
                  118,382Issuance
      of common stock for accounting services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  400,000
                  
                  
                  
                  400
                  
                  
                  
                  71,600
                  
                  
                  
                  -
                  
                  
                  
                  72,000Issuance
      of common stock for consulting services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,970,908
                  
                  
                  
                  3,971
                  
                  
                  
                  722,628
                  
                  
                  
                  -
                  
                  
                  
                  726,599Issuance
      of common stock for cash
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  6,845,000
                  
                  
                  
                  6,844
                  
                  
                  
                  706,156
                  
                  
                  
                  -
                  
                  
                  
                  713,000Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (3,978,762
                  )
                  
                  
                  (3,978,762
                  )Balance,
      September 30, 2009
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  137,379,397
                  
                  
                  $
                  137,379
                  
                  
                  $
                  10,501,965
                  
                  
                  $
                  (11,674,210
                  )
                  
                  $
                  (1,034,866
                  )
   Effective
July 24, 2008, the Company effected a 1.2579 for 1 forward stock split of the
authorized, issued and outstanding common stock, without change to par value.
All share amounts
have been retroactively adjusted for all periods presented.
  Effective
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
retroactively adjusted
for all periods presented.
  The
accompanying notes are an integral part of these consolidated financial
statements.
  F-5
 CELLYNX
      GROUP, INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008For
      the Years Ended September 30,2009
                
                
                2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                
                $
                (3,978,762
                )
                
                $
                (6,658,536
                )Adjustments
      to reconcile net loss to net cashused in operating
      activities:Depreciation
      and amortization
                
                
                6,813
                
                
                
                2,278Warrants
      issued for services
                
                
                118,382
                
                
                
                -Stock
      issued for services
                
                
                798,599
                
                
                
                572,002Stock
      compensation expense for options issued to employees and
      consultants
                
                
                690,353
                
                
                
                2,625,106Change
      in fair value of accrued beneficial conversion liability
                
                
                (251,410
                )
                
                
                1,151,992Change
      in fair value of accrued warrant liability
                
                
                419,571
                
                
                
                (127,688
                )Non
      cash financing costs
                
                
                -
                
                
                
                833,321Amortization
      of debt discount
                
                
                163,400
                
                
                
                86,085Changes
      in operating assets and liabilities:Change
      in inventory
                
                
                (16,316
                )
                
                
                -Change
      in other assets
                
                
                (13,552
                )
                
                
                (18,388
                )Change
      in accounts payable, accrued expenses and accrued interest
                
                
                641,163
                
                
                
                180,034Net
      cash used in operating activities
                
                $
                (1,421,759
                )
                
                $
                (1,353,794
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of equipment
                
                
                (6,663
                )
                
                
                (10,572
                )Purchase
      of intangible assets
                
                
                (19,826
                )
                
                
                (42,979
                )Net
      cash acquired in merger with Norpac Technologies, Inc.
                
                
                -
                
                
                
                1,250,114Net
      cash (used in) provided by investing activities
                
                $
                (26,489
                )
                
                $
                1,196,563CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from convertible promissory notes
                
                
                75,000
                
                
                
                -Proceeds
      from related parties
                
                
                68,000
                
                
                
                -Proceeds
      from issuance of common stock
                
                
                713,000
                
                
                
                746,284Proceeds
      from stockholders notes
                
                
                -
                
                
                
                7,600Net
      cash provided by financing activities
                
                $
                856,000
                
                
                $
                753,884NET
      (DECREASE) INCREASE IN CASH
                
                
                (592,248
                )
                
                
                596,653CASH,
      BEGINNING OF PERIOD
                
                
                599,024
                
                
                
                2,371CASH,
      END OF PERIOD
                
                $
                6,776
                
                
                $
                599,024SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for interest
                
                $
                -
                
                
                $
                -Cash
      paid for income taxes
                
                $
                -
                
                
                $
                -SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING AND FINANCING:Issuance
      of stock for licensing agreement
                
                $
                7,429
                
                
                $
                -Increase
      in convertible promissory note for interest payable
                
                $
                -
                
                
                $
                12,356Reclassification
      of share-based compensation liability to additional paid-in
      capital
                
                $
                2,701,572
                
                
                $
                -Reclassification
      of accrued beneficial conversion liability to additional paid-in
      capital
                
                $
                2,120,181
                
                
                $
                -Reclassification
      of accrued warrant liability to additional paid-in capital
                
                $
                1,023,564
                
                
                $
                -
 
 F-6
 
 CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 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.
 
 On
November 7, 2008, the Company amended the Articles of Incorporation to increase
the number of authorized shares to 400,000,000 and converted the 45,516,034
shares of Series A Preferred Stock into 45,516,034 shares of the Company’s
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., were $1,248,748.
 
 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 share 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.
  F-7
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
 On
October 27, 2008, the Board of Directors approved a change of the Company’s
fiscal year end from June 30 to September 30 to agree with the fiscal year of
CelLynx-California.  The fiscal year end change was effective for the
year ended September 30, 2008.
 
 The
Company develops and manufactures a cell phone signal amplifier.
 
 Development Stage Company
and Going Concern
 
 The
Company was in the development stage through June 30, 2009.  In July
2009, the Company received the first 220 units from its
manufacturer.  The Company used 66 of the units as demo units and
began selling the remainder.  The Company is fully operational and as
such is no longer considered a development stage company.  During the
period that the Company was considered a development stage company, the Company
incurred accumulated losses of approximately $10,948,625.
 
 These
consolidated 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 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, 2009, the Company incurred a net
loss of $3,978,762.  As
of September 30, 2009, the Company has an accumulated deficit of $11,674,210.
These consolidated 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 and to generate cash from the sale of its
product.
 Note
2 - Summary of Significant Accounting Policies
 
 Basis of
Presentation
 
 The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and have been consistently applied.  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 in consolidation.
 
 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 materially differ from those
estimates, upon which the carrying values were based.
  F-8
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
  Concentration of Credit
Risk
 
 Cash
includes deposits 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.  As of September 30, 2009 and 2008, the Company had deposits
in excess of federally-insured limits totaling $0 and $399,204.  The
Company has not experienced any losses in such accounts.
 
 Cash and Cash
Equivalents
 
 Cash and
cash equivalents include cash in hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less.
 
 Inventory
 
 Inventory
consists of finished goods ready for sale and is valued at the lower of cost
(determined on a first-in, first-out basis) or market.
 
 Equipment
 
 Equipment
is stated at cost, less accumulated depreciation.  Major renewals are
charged directly to the equipment accounts, while replacements, maintenance, and
repairs which do not improve or extend the respective lives of the assets are
expensed currently.  Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, which are reviewed
periodically to ensure that the depreciation method and period are consistent
with the anticipated pattern of future economic benefits. Gains and losses on
disposals are included in the results of operations. The useful life of the
equipment being depreciated is between three and five years.
 
 Intangible
Assets
 
 Acquired
patents, licensing rights 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
costs for 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. Licensing right is amortized on a straight-line over a period of
10 years.
 
 Impairment or Disposal of
Long-lived Assets
 
 The
Company applies the provisions of ASC Topic 360, “Property, Plant, and
Equipment,” which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. ASC 360 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets’ carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair value of the long-lived assets. Loss on long-lived assets to be disposed of
is determined in a similar manner, except that fair values are reduced for the
cost of disposal. Based on its review, the Company believes that as of September
30, 2009 and 2008, there was no significant impairment of its long-lived
assets.
  F-9
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
  Revenue
Recognition
 
 The
Company's revenue recognition policies are in compliance with SEC Staff
Accounting Bulletin (SAB) 104.  Revenue is recognized at the date of
shipment to customers, the price is fixed or determinable, the delivery is
completed, no other significant obligations of the Company exist and
collectability is reasonably assured.
 
 Accrued Warrant Liability
and Accrued Beneficial Conversion Liability
 
 Pursuant
to ASC Topic 815, “Derivatives and Hedging,” the Company recorded the fair value
of all outstanding options, warrants, and beneficial conversion features as
accrued liabilities at September 30, 2008, since the Company did not have enough
authorized shares to satisfy the exercise of its outstanding, options, warrants,
and the conversion of the convertible promissory notes.  The Company
reclassified the liabilities into additional paid-in capital on November 7,
2008, when the Company increased the number of authorized shares to
400,000,000.
 
 Fair Value of Financial
Instruments
 
 For
certain of the Company’s financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, accrued liabilities and
short-term debt, the carrying amounts approximate their fair values due to their
short maturities. In addition, the Company has long-term debt with financial
institutions. The carrying amounts of the line of credit and other long-term
liabilities approximate their fair values based on current rates of interest for
instruments with similar characteristics.
 
 ASC Topic 820, “Fair Value Measurements
and Disclosures,” requires disclosure of the fair value of financial instruments
held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value,
and establishes a three-level valuation hierarchy for disclosures of fair value
measurement that enhances disclosure requirements for fair value
measures.  The carrying amounts reported in the consolidated balance
sheets for receivables and current liabilities each qualify as financial
instruments and are a reasonable estimate of their fair values 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
of valuation hierarchy are defined as follows:
 
 ·
                Level
      1 inputs to the valuation methodology are quoted prices 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.
 
 As of
September 30, 2009, the Company did not identify any assets and liabilities that
are required to be presented on the balance sheet at fair value.
 
 F-10
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
  Income
Taxes
 
 The
Company accounts for income taxes in accordance with ASC Topic 740, “Income
Taxes.” ASC 740 requires a company to use the asset and liability method of
accounting for income taxes, whereby deferred tax assets are recognized for
deductible temporary differences, and deferred tax liabilities are recognized
for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion, or all of, the
deferred tax assets will not be realized.  Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
 
 Under ASC
740, 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 effect on the Company’s consolidated financial
statements.
 
 Earnings Per
Share
 
 Earnings
per share is calculated in accordance with the ASC Topic 260, “Earnings Per
Share.”  Basic earnings per share is based upon the weighted average
number of common shares outstanding.  Diluted earnings per share is
based on the assumption that all dilutive convertible shares and stock warrants
were converted or exercised. 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.  Due to the net loss, none of the
potential dilutive securities have been included in the calculation of dilutive
earning per share since their effect would be anti-dilutive.
 
 Stock-Based
Compensation
 
 The
Company records stock-based compensation in accordance with ASC Topic 718,
“Compensation – Stock Compensation.”  ASC 718 requires companies to
measure compensation cost for stock-based employee compensation at fair value at
the grant date and recognize the expense over the employee’s requisite service
period. Under ASC 718, the Company’s volatility is based on the historical
volatility of the Company’s stock or the expected volatility of similar
companies. The expected life assumption is primarily based on historical
exercise patterns and employee post-vesting termination behavior. The risk-free
interest rate for the expected term of the option is based on the U.S. Treasury
yield curve in effect at the time of grant.
 
 The
Company uses the Black-Scholes option-pricing model which was developed for use
in estimating the fair value of options. Option-pricing models require the input
of highly complex and subjective variables including the expected life of
options granted and the Company’s expected stock price volatility over a period
equal to or greater than the expected life of the options. Because changes in
the subjective assumptions can materially affect the estimated value of the
Company’s employee stock options, it is management’s opinion that the
Black-Scholes option-pricing model may not provide an accurate measure of the
fair value of the Company’s employee stock options. Although the fair value of
employee stock options is determined in accordance with ASC 718 using an
option-pricing model, that value may not be indicative of the fair value
observed in a willing buyer/willing seller market transaction.
 
 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.
  F-11
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
  Recent Accounting
Pronouncements
 
 In June
2008, FASB issued ASC Topic 815, “Derivatives and Hedging,” which provides a
two-step model to determine whether a financial instrument or an embedded
feature is indexed to an issuer’s own stock and thus able to qualify for the
scope exception in ASC 815-10-15-74. This standard is effective for financial
statements issued for fiscal years beginning after December 15,
2008.  This standard triggers liability accounting on all instruments
and embedded features exercisable at strike prices denominated in any currency
other than the functional currency of the operating.  The Company does
not believe that the adoption of this pronouncement will have an impact on the
Company’s consolidated financial statements.
 
 On
January 1, 2009, the Company adopted ASC sub-topic 810-10 (formerly SFAS
No. 160, “Accounting and Reporting on Non-controlling Interest in
Consolidated Financial Statements, an Amendment of ARB 51”). ASC 810-10 states
that accounting and reporting for minority interests are to be recharacterized
as noncontrolling interests and classified as a component of equity. The
calculation of earnings per share continues to be based on income amounts
attributable to the parent. ASC 810-10 applies to all entities that prepare
consolidated financial statements, except not-for-profit organizations, but
affects only those entities that have an outstanding noncontrolling interest in
one or more subsidiaries or that deconsolidate a subsidiary.  The
adoption of ASC 810-10 did not have a material impact on the Company’s
consolidated financial statements.
 
 During
the second quarter of 2009, the Company adopted guidance issued by the Financial
Accounting Standards Board (“FASB”) in April 2009 that is intended to
provide additional application guidance and enhance disclosures about fair value
measurements and impairments of securities and guidance that expanded the fair
value disclosures required for all financial instruments within the scope of ASC
Topic 825 “Financial Instruments” to interim periods. The adoption of this
guidance did not materially impact the consolidated financial
statements.
 
 In April
2009, the FASB issued an accounting standard to make the other-than-temporary
impairments guidance more operational and to improve the presentation of
other-than-temporary impairments in the financial statements. This standard will
replace the existing requirement that the entity’s management assert it has both
the intent and ability to hold an impaired debt security until recovery with a
requirement that management assert it does not have the intent to sell the
security, and it is more likely than not it will not have to sell the security
before recovery of its cost basis. This standard provides increased disclosure
about the credit and noncredit components of impaired debt securities that are
not expected to be sold and also requires increased and more frequent
disclosures regarding expected cash flows, credit losses, and an aging of
securities with unrealized losses. Although this standard does not result in a
change in the carrying amount of debt securities, it does require that the
portion of an other-than-temporary impairment not related to a credit loss for a
held-to-maturity security be recognized in a new category of other comprehensive
income and be amortized over the remaining life of the debt security as an
increase in the carrying value of the security. This standard became effective
for interim and annual periods ending after June 15, 2009. The adoption of
this standard did not have a material impact on the Company’s consolidated
financial statements.
 
 In April
2009, the FASB issued an accounting standard that requires disclosures about
fair value of financial instruments not measured on the balance sheet at fair
value in interim financial statements as well as in annual financial statements.
Prior to this accounting standard, fair values for these assets and liabilities
were only disclosed annually. This standard applies to all financial instruments
within its scope and requires all entities to disclose the method(s) and
significant assumptions used to estimate the fair value of financial
instruments. This standard does not require disclosures for earlier periods
presented for comparative purposes at initial adoption, but in periods after the
initial adoption, this standard requires comparative disclosures only for
periods ending after initial adoption. The adoption of this standard did not
have a material impact on the disclosures related to its consolidated financial
statements.
 
 In June
2009, the FASB issued an accounting standard amending the accounting and
disclosure requirements for transfers of financial assets. This accounting
standard requires greater transparency and additional disclosures for transfers
of financial assets and the entity’s continuing involvement with them and
changes the requirements for derecognizing financial assets. In addition, it
eliminates the concept of a qualifying special-purpose entity (“QSPE”). This
accounting standard is effective for financial statements issued for fiscal
years beginning after November 15, 2009. The Company has not completed the
assessment of the impact this new standard will have on the Company’s
financial condition, results of operations or cash flows.
  F-12
 CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
 In
June 2009, the FASB issued guidance which amends certain ASC concepts
related to consolidation of variable interest entities (formerly SFAS
No. 167, “Amendments to FASB Interpretation No. 46(R)”). This guidance
is effective for fiscal years beginning after November 15, 2009. The
Company is currently evaluating the impact the adoption of this guidance will
have on the consolidated financial statements.
 
 In August
2009, the FASB issued an Accounting Standards Update (“ASU”) regarding measuring
liabilities at fair value. This ASU provides additional guidance clarifying the
measurement of liabilities at fair value in circumstances in which a quoted
price in an active market for the identical liability is not available; under
those circumstances, a reporting entity is required to measure fair value using
one or more of the valuation techniques, as defined. This ASU is effective for
the first reporting period, including interim periods, beginning after the
issuance of this ASU. The adoption of this ASU did not have a material impact on
the Company’s consolidated financial statements.
 
 In
October 2009, the FASB issued an ASU regarding accounting for own-share lending
arrangements in contemplation of convertible debt issuance or other
financing.  This ASU requires that at the date of issuance of the
shares in a share-lending arrangement entered into in contemplation of a
convertible debt offering or other financing, the shares issued shall be
measured at fair value and be recognized as an issuance cost, with an offset to
additional paid-in capital. Further, loaned shares are excluded from basic and
diluted earnings per share unless default of the share-lending arrangement
occurs, at which time the loaned shares would be included in the basic and
diluted earnings-per-share calculation.  This ASU is effective for
fiscal years beginning on or after December 15, 2009, and interim periods within
those fiscal years for arrangements outstanding as of the beginning of those
fiscal years. The Company is currently evaluating the impact of this ASU on its
consolidated financial statements.
 
 Note 3 - Equipment
 
 Equipment
consists of the following:
 
 September
      30,
              
              
              September
      30,2009
              
              
              2008Office
      furniture & equipment
              
              $
              9,879
              
              
              $
              4,211Computer
      equipment
              
              
              8,930
              
              
              
              7,93518,809
              
              
              
              12,146Less:
      accumulated depreciation
              
              
              (7,450
              )
              
              
              (2,488
              )Equipment,
      net
              
              $
              11,359
              
              
              $
              9,658
 
 The
Company recorded depreciation expense of $ 4,962, and $1,669 for the years ended
September 30, 2009 and 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 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.
  F-13
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
  September
      30,
              
              
              September
      30,2009
              
              
              2008Patents
              
              $
              78,724
              
              
              $
              59,198Trademarks
              
              
              12,487
              
              
              
              12,187License
      rights
              
              
              8,429
              
              
              
              -99,640
              
              
              
              71,385Less:
      accumulated amortization
              
              
              (2,460
              )
              
              
              (609
              )Intangibles,
      net
              
              $
              97,180
              
              
              $
              70,776
 
 The
Company recorded amortization expense related to trademarks of $1,851 and $609
for the years ended September 30, 2009 and 2008, respectively.  No
amortization has been recorded for the patents as of September 30, 2009, 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,
                
                Amount2010
                
                $
                4,2092011
                
                
                4,2092012
                
                
                4,2092013
                
                
                4,2092014
                
                
                4,209
    F-14
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
  Note
5 - Convertible Promissory Notes
 
 Convertible Promissory Note
Issued August 15, 2006
 
 On August
15, 2006, the Company issued a secured promissory note (the “August 2006 Note”)
for $250,000 to an unrelated entity (the “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 the 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) the occurrence of an event of default.  At the date
of conversion, the Company determined that the Amended note had a beneficial
conversion feature with a fair value of $767,047. The Company recorded a debt
discount of $262,356 and expensed as financing costs the $504,691 of the
beneficial conversion feature that exceeded the principal balance.
 
 Convertible Promissory Note
Issued February 19, 2009
 
 On
February 18, 2009, the Company issued to an unrelated third party, (1) an
unsecured convertible promissory note for an aggregate principal balance of
$75,000 with a conversion price of $0.20 per share, and (2) 37,500 shares of the
Company’s restricted common stock.  The interest rate on the note is
4.0% per annum and had an original maturity date of March 31, 2009, which was
subsequently amended to May 31, 2009.  The Company determined the
relative fair value of the convertible promissory note and the stock on the date
of issuance.  The fair value of the stock was $4,246 which was
recorded as a debt discount and was amortized over the original maturity date
and included in financing expenses in the accompanying consolidated financial
statements.  As of
September 30, 2009, the promissory note was in default for non-payment; however
on January 12, 2010, the Company and the note holder agreed to settle the
principal and accrued interest due for a cash payment of $25,000 and 765,625
shares of the Company’s common stock.
 
 Convertible Promissory Note
Issued March 3, 2009
 
 On March
3, 2009, the Company issued an unsecured convertible promissory note to an
unrelated third party for an aggregate principal balance of $25,000 with a
conversion price of $0.20.  The convertible promissory note was due on
April 30, 2009 and is non-interest bearing.  However, the note was
subsequently amended to extend the due date to May 31, 2009.  As of
September 30, 2009, the promissory note was in default for non-payment; however,
the Company and the note holder have verbally agreed to settle the principal and
accrued interest due for a cash payment of $12,500 and 156,250 shares of the
Company’s common stock.
 
 The
Company recorded interest expense relating to the convertible promissory notes
of $12,327 and $10,056 for the years ended September 30, 2009 and 2008,
respectively.
 
 The
Company amortized $114,272 and $21,289 of the debt discount for the years ended
September 30, 2009 and 2008, respectively.  The unamortized discount
as of September 30, 2009 and 2008, was $126,795 and $241,067,
respectively.
  F-15
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
  The
following table summarizes the convertible promissory notes:
 
 Description
                
                BalanceBalance,
      September 30, 2008, net
                
                $
                21,289Issue
      convertible note, February 19, 2009
                
                
                75,000Issue
      convertible note, March 3, 2009
                
                
                25,000Additional
      debt discounts
                
                
                (4,245
                )Amortization
      of debt discounts
                
                
                118,517Balance,
      September 30, 2009, net
                
                
                235,561Less,
      current portion
                
                
                (100,000
                )Convertible
      note, long term
                
                $
                135,561
  Note
6 - Convertible Stockholder Notes
 
 Stockholder Notes Issued
March 27, 2007
 
 On March
27, 2007, the Company issued convertible promissory notes to two stockholders of
the Company.  The principal amount 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 were scheduled to
mature on March 27, 2009; however, the maturity dates were extended to July 31,
2009. As of
September 30, 2009, the convertible notes were in default for non-payment;
however on December 3, 2009, the note holder agreed to convert the notes into
shares of the Company’s common stock in accordance with the conversion option
provided for by the notes. 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 into common stock of the
Company, combinations or recapitalizations). All unpaid principal, together with
any then unpaid and accrued interest and any other amounts payable thereunder,
is 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 issuing this convertible promissory note and prior to September 30, 2007, the
two stockholders advanced the Company an additional $6,200 each for a combined
total of $12,400.  The amount due under all notes to these
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
December 3, 2009, the note holder agreed to extend the maturity date until such
time as the Company has sufficient cash to repay these
notes.
 
 Pursuant
to the reverse merger transaction, $40,000 (see above) 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 (see above) 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.
 
 F-16
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
  Stockholder Note Issued
February 4, 2009
 
 On
February 4, 2009, the Company issued an unsecured convertible promissory note to
a related party for an aggregate principal amount of $43,000.  The
convertible promissory note has a conversion price of $0.20.  The
convertible promissory note was due on March 31, 2009, and was non-interest
bearing.  However, the note was subsequently amended to extend the due
date to May 31, 2009, and to accrue interest from the inception of the note at a
rate of 4.0%.  As of
September 30, 2009, the promissory note was in default for non-payment; however
on January 5, 2010, the Company and the note holder agreed to settle the
principal and accrued interest due for a cash payment of $25,000 and 305,625
shares of the Company’s common stock.
 
 The
Company recorded interest expense related to the notes of $3,502 for the year
ended September 30, 2009.
 
 The
Company amortized $44,882 and $64,796 of the debt discount for the years ended
September 30, 2009 and 2008, respectively.  The unamortized discount
as of September 30, 2009 and 2008, was $1,092 and $45,974,
respectively.
  The
following table summarizes the stockholder convertible promissory
notes:
 
  Description
                
                BalanceBalance,
      September 30, 2008, net
                
                $
                14,026Issue
      convertible note, February 4, 2009
                
                
                43,000Amortization
      of debt discounts
                
                
                44,882Balance,
      September 30, 2009, net
                
                $
                101,908
 
 Note
7 - License Agreement
 
 On
January 12, 2009, the Company entered into a License Agreement with an unrelated
party.  The License Agreement gives the Company the right to
manufacture, have manufactured, use, import, and offer to sell, lease,
distribute or otherwise exploit the technology rights and intellectual
rights.  The License Agreement has a term of ten years.  As
consideration for the License Agreement, the Company issued 57,143 shares of its
common stock and paid $1,000 in cash.  The Company determined the fair
value of the License Agreement to be $7,429 based on the market value of its
common stock on the date of the agreement plus the $1,000, for a total
acquisition cost of $8,429, which is included in the accompanying consolidated
balance sheets and is being amortized over ten years.
 
 The
Company recorded amortization expense related to the licensing agreement of $633
and $0 for the years ended September 30, 2009 and 2008,
respectively.
 
 Note
8 - Consulting Agreement
 
 On March
31, 2009, the Company entered into a Consulting Agreement with an outside third
party.  In connection with this Consulting Agreement, the Company
issued warrants to purchase 2,000,000 shares of its Common Stock.  The
exercise price for the warrants is as follows:
 
 Number
      ofwarrants
      issued
                
                Exercise
      Price300,000
                
                $0.10
      per share500,000
                
                $0.15
      per share600,000
                
                $0.20
      per share600,000
                
                $0.25
      per share2,000,000
 
  F-17
 CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
  The
vesting schedule is as follows:
 
 Number
      ofwarrants
      issued
                
                Exercise
      Price
                
                Vesting
      dates300,000
                
                $0.10
      per share
                
                Immediately500,000
                
                $0.15
      per share
                
                Immediately50,000
                
                $0.20
      per share
                
                Immediately550,000
                
                $0.20
      per share
                
                At
      time of extension600,000
                
                $0.25
      per share
                
                12
      months after the execution of consulting agreement2,000,000
 
 On March
31, 2009, the date of issuance, the fair value of the 850,000 vested warrants
was $88,037.  The fair value was computed using the Black-Scholes
option pricing model under the following assumptions: (1) expected life of 3
years; (2) volatility of 110%; (3) risk free interest of 2.22% and (4) dividend
rate of 0%.  The Company recorded $88,037 as consulting expense on the
consolidated financial statements.
 
 At
September 30, 2009, the Company determined the fair value of the 600,000
warrants to be $60,690.  The fair value was computed using the
Black-Scholes option pricing model under the following assumptions: (1) expected
life of 2.50 years; (2) volatility of 110%; (3) risk free interest of 2.22% and
(4) dividend rate of 0%.  The shares vest at 12 months after the
execution of the consulting agreement; therefore, the Company will amortize the
expense over the vesting period of one year.  The Company recorded
$30,345 as consulting expense for the year ended September 30, 2009 which
represents 50% of the fair value at September 30, 2009.  Each quarter,
the Company will determine the fair value of the warrants and record the expense
related to the vested warrants.
 
 Note
9 - Stockholders’ Equity
 
 On
January 13, 2009, the Company issued 57,143 to obtain a licensing right from an
un-related party.
 
 On
February 18, 2009, the Company issued 37,500 shares of common stock to an
unrelated third party in connection to an issuance of a convertible promissory
note agreement.
 
 On March
16, 2009, the Company entered into a six-month consulting agreement with an
unrelated party.  As compensation for the consulting services, the
Company will issue 50,000 shares per month.  On May 28, 2009, the
consulting agreement was amended to obtain additional work for six
months.  The Company will pay $5,000 and issue an additional 22,727
shares per month for six months.  The Company can terminate the
consulting agreement upon a thirty-day written notice to the unrelated
party.
 
 The
Company issued an additional 3,530,000 common stock for consulting services
during the third and fourth quarters of 2009.
 
 On April
23, 2009, the Company entered into a Securities Issuance Agreement (“Securities
Agreement”) with four related parties (the “Investors”).  Pursuant to
the Securities Agreement, the Company agreed to sell and issue to the Investors
2,785,000 shares of its common stock and warrants to purchase 2,785,000 shares
of common stock at $0.10 per share for an aggregate purchase price of
$278,500.  In addition, the company agreed to sell additional common
stock and warrants at $0.10 per share up to 2 million shares.  As of
September 30, 2009 the Company sold 3,785,000 shares of common stock and
warrants.  The Company determined the fair value of the 3,785,000
warrants to be $512,920.  The fair value was computed using the
Black-Scholes option pricing model under the following assumptions: (1) expected
life of 3 years; (2) volatility of 110%; (3) risk free interest of 1.16% - 1.97%
and (4) dividend rate of 0%.  The warrants are exercisable immediately
and have an exercise price based on the share price at the date of
grant.
  F-18
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
 On May 1,
2009, as part of the Securities Agreement, the Company accepted the resignations
of Mr. Legendre as Executive Chairman of the Board of Directors of the Company,
and of Mr. Risheq as an officer of the Company.  The Company agreed
that all of Mr. Legendre’s 12,234,608 options would be immediately
canceled.  As full compensation for his services to the Company
to date, he would receive 2,000,000 shares of common stock.  In
addition, the Company agreed that all of Mr. Risheq’s 9,645,889 options would be
immediately canceled.  As full compensation for his services to the
Company to date, he would receive 1,500,000 shares of common stock.
 
 On May 6,
2009, the Company entered into a one year agreement with its new Executive
Chairman that provides for monthly payments of $10,000 and the issuance of
100,000 options to purchase shares of the Company’s common stock for $0.16 per
share.
 
 As of
September 30, 2009 the Company issued 400,000 shares of common stock for
accounting services.
 
 During
the fourth quarter, the Company entered into stock subscription agreements and
issued a total of 3,060,000 shares of common stock for $334,500.
 
 Stock
Options
 
 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 is 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.  In July 2008, the Company amended to increase
the number of awards from 25,000,000 to 75,000,000.
   F-19
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
 The
following table summarizes information with respect to options issuable under
the Plan and outside the Plan.
  Number of
                Shares
              
              
              Weighted Average
      Exercise Price
              
              
              Aggregate
                Intrinisic
      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 at
      September 30, 2007
              
              
              1,415,170
              
              
              $
              0.015Granted
              
              
              52,486,693
              
              
              $
              0.075Canceled
              
              
              -Exercised
              
              
              -Outstanding at
      September 30, 2008
              
              
              53,901,863
              
              
              $
              0.072Granted
              
              
              9,546,081
              
              
              $
              0.158Canceled
              
              
              (35,734,111
              )
              
              $
              0.074Exercised
              
              
              -Outstanding at
      September 30, 2009
              
              
              27,713,833
              
              
              $
              0.102
              
              $
              2,227,543Exercisable at
      September 30, 2009
              
              
              10,502,335
              
              
              $
              0.075
              
              $
              1,109,850
  F-20
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
 The
number and weighted average exercise prices of all options outstanding as of
September 30, 2009, are as follows:
   Options
      outstandingRange of
                Exercise
      Price
              
              
              Number
                Outstanding
                September
      30, 2009
              
              
              Weighted
                Average
                Exercise
                Price
              
              
              Weighted
                Average
                Remaining
                Contractual Life
                (Years)$
              0.014
              
              
              
              943,447
              
              
              $
              0.014
              
              
              
              6.08$
              0.016
              
              
              
              471,723
              
              
              $
              0.016
              
              
              
              6.25$
              0.072
              
              
              
              3,339,944
              
              
              $
              0.072
              
              
              
              3.71$
              0.079
              
              
              
              13,412,638
              
              
              $
              0.079
              
              
              
              3.42$
              0.110
              
              
              
              1,414,960
              
              
              $
              0.110
              
              
              
              4.35$
              0.120
              
              
              
              2,032,520
              
              
              $
              0.120
              
              
              
              4.29$
              0.160
              
              
              
              1,408,961
              
              
              $
              0.160
              
              
              
              4.60$
              0.170
              
              
              
              2,900,000
              
              
              $
              0.170
              
              
              
              4.98$
              0.180
              
              
              
              48,000
              
              
              $
              0.180
              
              
              
              4.20$
              0.210
              
              
              
              1,500,000
              
              
              $
              0.210
              
              
              
              4.85$
              0.260
              
              
              
              241,640
              
              
              $
              0.260
              
              
              
              4.6827,713,833
  
 
 
 
 
 
 
 
 F-21
 
 CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
 The
number and weighted average exercise prices of all options exercisable as of
September 30, 2009, are as  follows:
   Options
      outstandingRange of
                  Exercise
      Price
                
                
                Options
                  exercisable
                  September
      30, 2009
                
                
                Weighted
                  Average
                  Exercise
                  Price
                
                
                Weighted
                  Average
                  Remaining
                  Contractual Life
                  (Years)$
                0.014
                
                
                
                943,447
                
                
                $
                0.014
                
                
                
                6.08$
                0.016
                
                
                
                471,723
                
                
                $
                0.016
                
                
                
                6.25$
                0.072
                
                
                
                1,451,490
                
                
                $
                0.072
                
                
                
                3.68$
                0.079
                
                
                
                6,867,921
                
                
                $
                0.079
                
                
                
                3.36$
                0.110
                
                
                
                267,540
                
                
                $
                0.110
                
                
                
                4.40$
                0.120
                
                
                
                20,054
                
                
                $
                0.120
                
                
                
                4.43$
                0.160
                
                
                
                276,161
                
                
                $
                0.160
                
                
                
                4.60$
                0.180
                
                
                
                48,000
                
                
                $
                0.180
                
                
                
                4.20$
                0.210
                
                
                
                28,295
                
                
                $
                0.210
                
                
                
                4.85$
                0.260
                
                
                
                127,704
                
                
                $
                0.260
                
                
                
                4.6810,502,335
  The
assumptions used in calculating the fair values of options granted using the
Black-Scholes option-pricing model are as follows:
  September
      30, 2009
                
                
                September
      30, 2008Expected
      life (years)
                
                2.63
      to 6.16
                
                
                2.6
      to 4.0Risk-free
      interest rate
                
                .56%
      to 4.57%
                
                
                1.9%
      to 4.1%Expected
      volatility
                
                110%
                
                
                100%Expected
      dividend yield
                
                0%
                
                
                0%
 
 The
weighted average grant-date fair value for the options granted during the year
ended September 30, 2009 and 2008, was $0.076 and $0.06,
respectively.
 
 The
compensation expense related to the unvested options as of September 30, 2009,
was $1,359,254, which will be recognized over the weighted average period of
2.26 years. Stock-based compensation expense to employees and non employees for
the years ended September 30, 2009 and 2008, was $690,353 and $2,625,106,
respectively.
 
 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.  The Warrants expire on
July 22, 2010, except in the event that at any time the Company has manufactured
25 or more of its mobile or home repeater units, then the Company may, at its
option, accelerate the expiration of the warrants by giving notice to the
holder.  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.  The Company gave notice of acceleration on February 27,
2009.  The Company canceled the 10,500,000 warrants as none of them
had been exercised within the required 30 days.
  F-22
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
  The
following table summarizes the warrant activity for the year ended September 30,
2009:
 
 Number
      of
                warrants
      issuedOutstanding,
      September 30, 2008
              
              
              10,500,000Granted
              
              
              5,785,000Cancelled
              
              
              (10,500,000
              )Exercised
              
              
              -Outstanding,
      September 30,2009
              
              
              5,785,000
 
 Note
10 - Commitments and Contingencies
 
 Operating
Leases
 
 On
February 21, 2008, the Company entered into a one-year lease for office space
for its El Dorado Hills, California, office, which was subsequently amended to
extend the lease term to March 31, 2010.  The lease requires monthly
payments of $2,198. 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 recorded rent expense of $77,780 and $13,188 for years ended September
30, 2009 and 2008, respectively.
 
 The
Company expects to pay approximately $41,200 during the year ended September 30,
2010 for the two leases.
 
 Litigation
 
 The
Company is subject to various legal matters in the ordinary course of
business.  After taking into consideration the Company’s legal
counsels’ evaluation of these matters, the Company has determined that the
resolution of these matters will not have a material adverse effect on the
Company’s consolidated financial statements.
 
 Note
11 – Taxes
 
 We have
provided no current income taxes due to the losses incurred from October 11,
2005 (date of inception), through September 30, 2009.  Net operating
losses of approximately $3,877,145 at September 30, 2009, are
available for carryover.  The net operating losses will expire
from 2022 through 2024.  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.
 
 F-23
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
 A
reconciliation of the statutory Federal income tax rate and the effective income
tax rate for the years ended September 30, 2009 and 2008,
follows:
  September
      30,
                
                
                September
      30,2009
                
                
                2008Statutory
      federal income tax rate
                
                
                (0.34
                )
                
                
                (0.34
                )State
      income taxes (benefit), net of federal taxes
                
                
                (0.06
                )
                
                
                (0.06
                )Equity
      instruments issued for compensation/services
                
                
                0.15
                
                
                
                0.19Change
      in derivative liabilities
                
                
                0.02
                
                
                
                0.06Non-cash
      financing costs
                
                
                -
                
                
                
                0.05Valuation
      allowance
                
                
                0.23
                
                
                
                0.10Effective
      income tax rate
                
                
                -
                
                
                
                -
  The
significant components of deferred tax assets and liabilities are as
follows:
  September
      30,
                
                
                September
      30,2009
                
                
                2008Deferred tax
      assets:Net operating loss
      carryforwards
                
                $
                1,694,205
                
                
                $
                836,646Valuation
      allowance
                
                
                (1,694,205
                )
                
                
                (836,646
                )Net deferred tax
      assets
                
                $
                -
                
                
                $
                -
 Note
12 - Subsequent Events
 
 On
October 13, 2009, the Company received $50,000 from an unrelated party for a
subscription agreement at $0.10 per share for a total of 500,000
shares.
 
 On
October 22, 2009, the Company received $140,000 from an unrelated party for a
subscription agreement at $0.10 per share for a total of 1,400,000
shares.
 
 On
November 12, 2009, the Company received $10,000 from an unrelated party for a
subscription agreement at $0.10 per share for a total of 100,000
shares.
 
 On
December 4, 2009, the Company received $110,000 from an unrelated party for a
subscription agreement at $0.06 per share for a total of 1,833,333
shares.  The Company also issued warrants to purchase up to an
additional 1,833,333 shares.
 
 On
December 7, 2009, the Company received $105,000 from an unrelated party for a
subscription agreement at $0.06 per share for a total of 1,750,000
shares.  The Company also issued warrants to purchase up to an
additional 1,750,000 shares.
 
 On
December 9, 2009, the Company received $110,000 from an unrelated party for a
subscription agreement at $0.06 per share for a total of 1,833,333
shares.  The Company also issued warrants to purchase up to an
additional 1,833,333 shares.
 
 F-24
  CELLYNX
GROUP, INC
 Notes to
Consolidated Financial Statements
 For the
Years Ended September 30, 2009 and 2008
  On
December 9, 2009, the Company received $55,000 from an unrelated party for a
subscription agreement at $0.06 per share for a total of 916,667
shares.  The Company also issued warrants to purchase up to an
additional 966,667 shares.
 
 On
December 15, 2009, the Company received $18,000 from an unrelated party for a
subscription agreement at $0.06 per share for a total of 300,000
shares.  The Company also issued warrants to purchase up to an
additional 300,000 shares.
 
 On
December 15, 2009, the Company received $10,000 from an unrelated party for a
subscription agreement at $0.06 per share for a total of 166,667
shares.  The Company also issued warrants to purchase up to an
additional 166,667 shares.
 
 On
December 28, 2009, the Company received $10,000 from an unrelated party for a
subscription agreement at $0.06 per share for a total of 166,667
shares.  The Company also issued warrants to purchase up to an
additional 166,667 shares.
 
 On
January 7, 2010, the Company received $5,000 from an unrelated party for a
subscription agreement at $0.06 per share for a total of 83,335
shares.  The Company also issued warrants to purchase up to an
additional 83,335 shares.
 
 On
January 8, 2010, the Company received $250,000 from an unrelated party for a
subscription agreement at $0.06 per share for a total of 4,166,667
shares.  The Company also issued warrants to purchase up to an
additional 4,166,667 shares.
 
 On
January 12, 2010, the Company received $450,000 from an unrelated party for a
subscription agreement at $0.06 per share for a total of 7,500,000
shares.  The Company also issued warrants to purchase up to an
additional 7,500,000 shares.
 
 On
January 12, 2010, the Company received $60,000 from an unrelated party for a
subscription agreement at $0.06 per share for a total of 1,000,000
shares.  The Company also issued warrants to purchase up to an
additional 1,000,000 shares.
 
 The
Company has performed an evaluation of subsequent events through January 13,
2010, which is the date the consolidated financial statements were issued and no
additional significant subsequent events warrant disclosure.
 
 F-25





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:
      January 13, 2010
            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
            
            January
      13, 2010/s/ Kevin Pickard
              Kevin
      Pickard
            
            Consultant
      providing services commonly provided by a Chief Financial Officer,
      Principal Financing and Accounting Officer
            
            January
      13, 2010/s/ Tareq Risheq
              Tareq
      Risheq
            
            Director
            
            January
      13, 2010/s/ Donald A Wright
              Donald
      A Wright
            
            Chairman
      of the Board
            
            January
      13, 2010/s/ Norman W. Collins
              Norman
      W. Collins
            
            Director
            
            January
      13, 2010/s/ Dwayne Yaretz
              Dwayne
      Yaretz
            
            Director
            
            January
      13, 2010





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