UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1*
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED
DECEMBER 31, 2010
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission File No. 333-1258321
5BARz International Inc.
(Exact name of registrant as specified in it
charter)
Nevada
|
|
26-4343002
|
(State or other jurisdiction of incorporation or
|
|
(IRS Employer Identification
|
organization)
|
|
No.)
|
2025
First Avenue, Suite 440
Seattle, Washington 98121
(Address of principal executive offices)
949-916-3261
(Registrant's telephone number, including area
code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
x
No
o
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).
Yes
x
No
o
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,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large Accelerated filer
|
o
|
Non-Accelerated Filer
|
o
|
Accelerated Filer
|
o
|
Smaller Reporting Company
|
x
|
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).
Yes
o
No
x
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each issuer's classes
of common stock, as of the latest practicable date: 104,661,108 issued and outstanding as of May 1, 2012.
* 10Q/A – March 31, 2012 has been amended to include officers
certifications 31.2, 32.1 and 32.2 which had inadvertently been deleted as Exhibits from our original filing, and to correct the
typographical errors in Section 4, Controls and Procedures.
1
TABLE OF CONTENTS
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Page
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PART I
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FINANCIAL INFORMATION
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3
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Item 1.
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Financial Statements
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3
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|
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|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
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22
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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40
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Item 4.
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Controls and Procedures
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40
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PART II
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OTHER INFORMATION
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|
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Item 1.
Item 1A
|
Legal Proceedings
Risk Factors
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41
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|
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|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
42
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Item 3.
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Defaults Upon Senior Securities
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42
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Item 4.
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(Removed and Reserved)
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42
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Item 5.
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Other Information
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42
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Item 6.
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Exhibits
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43
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2
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements
5BARz INTERNATIONAL INC.
|
|
|
|
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|
( A Development stage Company)
|
|
|
|
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CONSOLIDATED BALANCE SHEETS
|
|
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|
AS AT MARCH 31, 2012 AND DECEMBER 31, 2011
|
|
|
|
|
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|
March 31,
|
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Dec. 31,
2011
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|
|
2012
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(unaudited)
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|
|
|
|
ASSETS
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|
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|
|
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CURRENT ASSETS:
|
|
|
|
|
|
|
Cash
|
$
|
76,861
|
|
$
|
49,209
|
|
Prepaid expenses and deposits
|
|
19,959
|
|
|
19,159
|
|
TOTAL CURRENT ASSETS
|
|
96,820
|
|
|
68,368
|
|
|
|
|
|
|
|
|
FIXED ASSETS:
|
|
|
|
|
|
|
Equipment, net
|
|
6,108
|
|
|
4,185
|
|
OTHER ASSETS:
|
|
|
|
|
|
|
Due from Cellynx - Line of credit
|
|
-
|
|
|
250,152
|
|
Deposit on investment in Cellynx
|
|
-
|
|
|
170,000
|
|
Intangible assets
|
|
2,228,368
|
|
|
1,883,650
|
|
Goodwill
|
|
1,364,038
|
|
|
-
|
|
Total other assets
|
|
3,592,406
|
|
|
2,303,802
|
|
TOTAL ASSETS
|
$
|
3,695,334
|
|
$
|
2,376,355
|
|
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
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Current liabilities:
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
2,034,753
|
|
$
|
236,446
|
|
Due to Cellynx
|
|
|
|
|
1,196,701
|
|
Due to escrow agent
|
|
53,033
|
|
|
53,033
|
|
Warrant liability
|
|
3,442
|
|
|
|
|
Accrued derivative liabilities
|
|
501,258
|
|
|
|
|
Notes payable (net of discount)
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|
490,661
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|
55,318
|
|
Total current liabilities
|
|
3,083,147
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|
|
1,541,498
|
|
|
|
|
|
|
|
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Related party loans
|
|
74,373
|
|
|
120,437
|
|
TOTAL LIABILITIES
|
|
3,157,520
|
|
|
1,661,935
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Common stock, $.001 par value, 250,000,000 shares
authorized;
104,119,452 and 90,182,785 shares issued and outstanding
as of
March 31, 2012 and December 31, 2011, respectively
|
|
104,119
|
|
|
90,183
|
|
Capital in excess of par value
|
|
4,089,227
|
|
|
1,458,086
|
|
Deficit accumulated during the development stage
|
|
(1,856,576)
|
|
|
(834,377)
|
|
Treasury stock
|
|
(1,800,000)
|
|
|
|
|
Minority interest
|
|
1,044
|
|
|
528
|
|
Total stockholders' deficit
|
|
537,814
|
|
|
714,420
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
3,695,334
|
|
$
|
2,376,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
The accompanying notes are an integral part
of these financial statements
3
5BARz INTERNATIONAL INC. AND SUBSIDIARIES
|
|
|
|
|
( A Development Stage Company)
|
|
|
|
|
STATEMENT OF LOSS AND DEFICIT FOR THE THREE
MONTHS ENDED MARCH 31, 2012 AND 2011
|
|
|
|
|
AND FOR THE PERIOD FROM INCEPTION
(November 14, 2008) TO MARCH 31, 2012
|
|
|
|
|
|
|
Cumulative,
|
3 Months Ended
|
|
|
November 14, 2008
|
|
|
March 31, 2012
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|
|
March 31, 2011
|
|
to March 31, 2012
|
|
|
(unaudited)
|
|
|
(unaudited)
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Sales
|
|
-
|
|
|
-
|
|
|
-
|
Cost of Sales
|
|
|
|
|
-
|
|
|
-
|
|
|
|
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|
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Selling general and administrative expenses:
|
|
|
|
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|
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|
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Amortization and depreciation
|
$
|
1,243
|
|
$
|
190
|
|
$
|
46
|
Bank charges and interest
|
|
58,019
|
|
|
14,622
|
|
|
4,913
|
Sales and marketing expenses
|
|
286,429
|
|
|
56,688
|
|
|
51,701
|
General and administrative expenses
|
|
1,016,447
|
|
|
435,457
|
|
|
99,477
|
Total operating expenses
|
|
1,362,138
|
|
|
506,957
|
|
|
156,137
|
|
|
|
|
|
|
|
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|
(Loss) from operations
|
|
(1,362,138)
|
|
|
(506,957)
|
|
|
(156,137)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
108
|
|
|
-
|
Interest Income
|
|
16,774
|
|
|
376,569
|
|
|
|
Change in fair value of accrued beneficial
conversion liability
|
|
376,569
|
|
|
15,250
|
|
|
|
Debt discount on derivative liability
|
|
15,250
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|
|
|
|
|
|
Loss on disposition of assets
|
|
(781)
|
|
|
|
|
|
|
Foreign currency gain (loss)
|
|
1,216
|
|
|
(3,432)
|
|
|
|
Minority interest share of net loss
|
|
816
|
|
|
545
|
|
|
|
(Loss)from other expenses
|
|
409,844
|
|
|
389,040
|
|
|
(156,137)
|
Net (loss)
|
|
(952,294)
|
|
|
(117,917)
|
|
|
(156,137)
|
|
|
|
|
|
|
|
|
|
|
|
|
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(0.0013)
|
|
|
( 0.0018)
|
Basic earnings (loss) per common share
|
|
|
|
|
91,812,982
|
|
|
88,151,050
|
Weighted average number of shares outstanding
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
The accompanying notes are an integral part of these financial
statements
4
5BARz INTERNATIONAL INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
( A Development Stage Company)
|
|
|
|
|
|
|
|
STATEMENT OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 2012 AND 2011
|
|
|
|
|
|
|
AND FOR THE PERIOD FROM INCEPTION
(November 14, 2008) TO MARCH 31, 2012
|
|
|
|
|
|
|
|
|
Cumulative,
|
|
3 Months Ended
|
|
November 14, 2008
|
|
Mar 31, 2012
|
|
Mar 31, 2011
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
to March 31, 2012
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(952,294)
|
|
$
|
(117,917)
|
|
$
|
(156,137)
|
Adjustments to reconcile net loss to net cash
used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
659
|
|
|
190
|
|
|
(873)
|
Minority interest share of net loss
|
|
816
|
|
|
545
|
|
|
-
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease in amount due to related party
|
|
(46,064)
|
|
|
(46,064)
|
|
|
(59,814)
|
Increase in accounts payable and accrued liabilities
|
|
2,034,752
|
|
|
1,798,307
|
|
|
112,806
|
Decrease in amount due to Cellynx
|
|
(1,196,701)
|
|
|
(1,196,701)
|
|
|
|
Increase in warrant liability - Cellynx
|
|
3,442
|
|
|
3,442
|
|
|
-
|
Increase in prepaid expenses and deposits
|
|
(19,959)
|
|
|
(800)
|
|
|
|
Change in fair value of beneficial conversion liability
|
|
(501,258)
|
|
|
(501,258)
|
|
|
|
Debt discount on convertible notes
|
|
(69,477)
|
|
|
(69,477)
|
|
|
|
Due to escrow agent
|
|
53,033
|
|
|
-
|
|
|
|
Unpaid interest expense
|
|
23,536
|
|
|
703
|
|
|
-
|
Net cash from (used in) operating activities
|
|
(669,515)
|
|
|
(129,030)
|
|
|
(104,018)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Deposits on investment in Cellynx
|
|
(170,000)
|
|
|
-
|
|
|
(60,000)
|
Minority interest
|
|
(1,044)
|
|
|
(516)
|
|
|
|
Notes converted upon acquistion of Cellynx
|
|
73,500
|
|
|
73,500
|
|
|
|
Investment in Cellynx IP for shares
|
|
(1,800,000)
|
|
|
(1,800,000)
|
|
|
|
Investment in Celllynx IP for debt
|
|
(383,650)
|
|
|
1,500,000
|
|
|
|
Goodwill - investment of Cellynx Group, Inc.
|
|
(1,364,038)
|
|
|
(1,364,038)
|
|
|
|
Increase in furniture and equipment assets
|
|
(6,386)
|
|
|
(1,733)
|
|
|
-
|
Net cash used in investing activities
|
|
(3,651,618)
|
|
|
(1,592,787)
|
|
|
(60,000)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payments under the line of credit agreement Cellynx
|
|
(573,173)
|
|
|
(80,156)
|
|
|
(200,000)
|
Reallocation of proceeds paid for intangibles to revolving line of credit agreement - Cellynx
|
|
346,048
|
|
|
346,048
|
|
|
(112,878)
|
Proceeds from issuance of notes payable
|
|
180,000
|
|
|
137,500
|
|
|
|
Proceeds used to settle notes payable
|
|
(42,500)
|
|
|
(42,500)
|
|
|
|
Deposits paid on Cellyx acquisition
|
|
170,000
|
|
|
170,000
|
|
|
|
Notes payable
|
|
1,549,987
|
|
|
-
|
|
|
|
Conversion of debt on acquistion of Cellynx
|
|
73,500
|
|
|
73,500
|
|
|
|
Common stock issued for acquisition of Cellynx
|
|
250,000
|
|
|
250,000
|
|
|
|
Common shares issued for services
|
|
155,000
|
|
|
155,000
|
|
|
|
Common stock issued for cash
|
|
1,997,734
|
|
|
440,077
|
|
|
650,000
|
Loans from shareholder
|
|
(8,602)
|
|
|
|
|
|
|
Amendment to acquisition of 5BARz IP for debt
|
|
(1,500,000)
|
|
|
(1,500,000)
|
|
|
|
Common stock issued for intangible assets - Cellynx
|
|
1,800,000
|
|
|
1,800,000
|
|
|
-
|
Net cash provided by financing activities
|
|
4,397,994
|
|
|
1,749,469
|
|
|
337,122
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
|
|
76,861
|
|
|
27,652
|
|
|
173,104
|
|
|
|
|
|
|
|
|
|
CASH, BEGINNING OF PERIOD
|
|
0
|
|
|
49,209
|
|
|
-
|
|
|
|
|
|
|
|
|
|
CASH, END OF PERIOD
|
$
|
76,861
|
|
$
|
76,861
|
|
$
|
173,104
|
|
|
-
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
|
$
|
14,586
|
|
$
|
1,018
|
The accompanying notes are an integral part of these
financial statements
5
5BARz INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
Note 1 – Organization and basis of reporting
5Barz International,
Inc. and its’ consolidated subsidiaries is the owner of a proprietary technology for the wireless marketplace, branded as
5BARz™
. The Company provides innovative and affordable solutions that improve poor mobile
phone and wireless data signals for phones, laptops, and tablets. The Company’s developing product lines, reduce dropped
calls, improve reception, and in many cases eliminate dead zones by improving wireless signal within the immediate vicinity of
the user.
The Company was incorporated under the laws of the State of Nevada
on November 17, 2008. At that time, the Company held certain technology related to bio-degradable product and operated under the
name “Bio-Stuff”.
On December 29, 2010 the Company changed its name to 5BARz International,
Inc. and on December 30, 2010, the Company acquired a set of agreements through which the Company acquired from Cellynx Group,
Inc. certain intellectual property underlying the 5BARz products, a highly engineered microcell technology referred to as a “cellular
network infrastructure device”. The 5BARz device captures cell signal and provides a smart amplification and resend of that
cell signal giving the user improved cellular reception in their home, office or while mobile. Pursuant to the agreements referred
to above, the Company was engaged as the exclusive agent for the global sales and marketing of the 5BARz products. On March 29,
2012, 5Barz International, Inc. entered into an amendment agreement with Cellynx Group Inc. through which 5BARz acquired a 60%
interest in the intellectual property referred to as the 5BARz technology, and acquired a 60% ownership interest in Cellynx Group,
Inc. among other amendments (see Note 7).
On November 6, 2011, the Company incorporated a subsidiary Company
in Zurich, Switzerland called 5BARz AG which is a 99.2% held subsidiary at March 31, 2012. That entity has been licensed the marketing
and distribution rights for 5BARz products in Germany, Austria and Switzerland.
On March 29, 2012, the Company acquired a 60% interest in the common
stock of Cellynx Group, Inc., a Company which holds a 100% interest in Cellynx Inc. Those entities hold the patents, trademarks
and license rights comprising the 5BARz technology, and represent a strategic partner of 5BARz International Inc. prior to this
acquisition transaction. In conjunction with the asset purchase agreement also completed on March 29, 2012, 5BARz International
Inc. issued 9,000,000 shares representing an 8.7% reciprocal holding by Cellynx Group Inc. in the registrant.
These financial statements reflect the financial position and results
of operations for the Company and its subsidiary Company 5BARz AG, for the fiscal year commencing January 1, 2012 to March 31,
2012 and the financial position and results of operation for Cellynx Group Inc. and its
wholly owned subsidiary Cellynx Inc. for the period from the date
of acquisition, March 29, 2012 to March 31, 2012.
6
5BARz
INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
Going concern
These financial statements have been prepared on a going concern
basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.
At March 31, 2012, the Company was
engaged in a business and had suffered losses from development stage activities to date. In addition, the Company has minimal operating
funds. Although management is currently developing its sales and marketing program for the sales of
5BARz™
product, the Company has made no revenue to date. The Company is seeking additional sources of equity or debt financing,
and there is no assurance these activities will be successful. These factors raise substantial doubt about the ability of the Company
to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
Development stage
The Company has been in the development stage since its formation
and has not yet realized any revenues from its planned operations.
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. The accompanying consolidated financial
statements include the accounts of 5Barz International Inc., and its 99.2% owned subsidiary, 5Barz AG., and it’s 60% owned
subsidiary Cellynx Group, Inc. and that Company’s 100% owned subsidiary Cellynx, Inc. All intercompany accounts and transactions
have been eliminated upon consolidation.
Cash
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.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
7
5BARz INTERNATIONAL SUBSIDIARIES INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
Concentration of credit risk
Cash includes deposits in accounts maintained at financial institutions. Certain
financial instruments, which subject the Company to concentration of credit risk, consist of cash. The Company maintains balances
at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks
located in the United States. As of March 31, 2012 and 2011, the Company did not have any deposits in excess of federally-insured
limits. To date, the Company has not experienced any losses in such accounts.
Equipment
Equipment is recorded at historical cost and is depreciated using
the straight-line method over their estimated useful lives. The useful life and depreciation method are reviewed periodically
to ensure that the depreciation method and period are consistent with the anticipated pattern of future economic benefits. Expenditures
for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. Gains and losses
on disposals are included in the results of operations. The useful life of the equipment is being depreciated over three to 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. All research
and development costs incurred in developing the patentable idea are expensed as incurred. The licensing right is amortized on
a straight-line basis over a period of 10 years.
Impairment or disposal of long-lived assets
The Company applies the provisions of Accounting Standards Codification
(“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’
8
5BARz INTERNATIONAL AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
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 March 31, 2012 and 2011, there was no significant
impairment of its long-lived assets.
Revenue recognition
The Company's revenue recognition policies are in compliance with
ASC Topic 605, “Revenue Recognition.” Revenue is recognized at the date of shipment to customers, and when
the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability
is reasonably assured.
Foreign currency translation
Transactions in foreign currencies have been translated into US
dollars using the temporal
method. Under this method, monetary assets and liabilities are translated
at the year-end exchange rate. Non-monetary assets have been translated at the historical rate of exchange prevailing at the date
of the transaction. Expenses have been translated at the exchange rate at the time of the transaction. Realized and unrealized
foreign exchange gains and losses are included in operations.
Fair value of financial instruments
We have adopted Accounting Standards Codification regarding
Disclosure
About Derivative Financial Instruments and Fair Value of Financial Instruments
. The carrying amounts of cash, accounts payable,
accrued expenses, and other current liabilities approximate fair value because of the short maturity of these items. These fair
value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot
be determined with precision. Changes in assumptions could significantly affect these estimates. We do not hold or issue
financial instruments for trading purposes, nor do we utilize derivative instruments in the management of foreign exchange, commodity
price or interest rate market risks.
Accounting for Derivatives
The Company evaluates its convertible instruments, options, warrants
or other contracts to determine if those contracts or components of those contracts qualify as derivatives to be separately accounted
for under ASC Topic 815, “Derivatives and Hedging”. The result of this accounting treatment is that the fair value
of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is
recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion
or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value
is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under
ASC Topic 815 are reclassified to liability at the fair value of the instrument on the reclassification date.
9
5BARz INTERNATIONAL AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
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 financial statements. Penalties
and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No
significant penalties or interest relating to income taxes have been incurred during the quarters ended March 31, 2012 and 2011.
Net loss per share
The Company reports loss per share in accordance with the ASC Topic
260, “Earnings Per Share.” , which requires presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements,
basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares of common
stock outstanding during the period. We do not have a complex capital structure requiring the computation of diluted
earnings per share.
Recent accounting pronouncements
In December 2010, the FASB issued updated guidance on when and how
to perform certain steps of the periodic goodwill impairment test for public entities that may have reporting units with zero or
negative carrying amounts. This guidance is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2010, with early adoption prohibited. The adoption of this standard update did not impact the Company’s
consolidated financial statements.
In May 2011, the FASB issued guidance to amend certain measurement
and disclosure requirements related to fair value measurements to improve consistency with international reporting standards. This
guidance is effective prospectively for public entities for interim and annual reporting periods beginning after December 15, 2011,
with early adoption by public entities prohibited. The Company is currently evaluating this guidance, but does not expect its adoption
will have a material effect on its consolidated financial statements.
10
5BARz
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
In June 2011, the FASB issued new guidance on the presentation of
comprehensive income that will require a company to present components of net income and other comprehensive income in one continuous
statement or in two separate, but consecutive statements. There are no changes to the components that are recognized in net income
or other comprehensive income under current GAAP. This guidance is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2011, with early adoption permitted. The Company is currently evaluating
this guidance, but does not expect its adoption will have a material effect on its consolidated financial statements.
Note 3 – Furniture & equipment
Equipment consisted of the following as at March 31, 2012 and 2011:
|
|
March 31, 2012
|
|
December 31, 2011
|
Furniture and equipment
|
|
$
|
9,879
|
|
$
|
-
|
Computer equipment
|
|
|
4,653
|
|
|
4,653
|
|
|
|
14,532
|
|
|
4,653
|
Accumulated depreciation
|
|
|
8,424
|
|
|
468
|
Furniture & equipment net
|
|
$
|
6,108
|
|
$
|
4,185
|
During the three months ended March 31, 2012 the Company incurred
depreciation expense of $190,(2011 - $46 ).
Note 4 – Intangible Assets
Intangible assets are comprised of patents, trademarks and
license rights which are recorded at cost, comprised of legal fees and acquisition costs. 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. License
rights are amortized over the period of the respective license agreement.
|
|
|
March 31, 2012
|
|
|
December 31, 2011
|
Patents
|
|
$
|
1,996,785
|
|
$
|
1,685,867
|
Trademarks
|
|
|
234,277
|
|
|
197,783
|
License rights
|
|
|
4,214
|
|
|
-
|
|
|
$
|
2,235,276
|
|
$
|
1,883,650
|
Accumulated amortization
|
|
|
6,908
|
|
|
-
|
Intangibles, net
|
|
$
|
2,228,368
|
|
$
|
1,883,650
|
11
5BARz
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
Note 5 - Cumulative sales of stock:
Since its inception, we have issued shares of common stock
as follows:
On November 17, 2008, our Directors
authorized the issuance of 7,100,000 founder shares at par value of $0.001. These shares are restricted under rule 144 of the Securities
Exchange Commission.
On various days in December 2008,
our Directors authorized the issuance of 1,776,100 shares of common stock at a price of $0.01 per share as fully paid and non-assessable
to the subscriber. These shares are not restricted and are free trading.
On November 15, 2010, our Directors
initiated a forward stock split of 18:1 and increased the authorized shares from 100,000,000 to 250,000,000
On December 30, 2010, the Directors
approved the cancellation of 87,800,000 shares of common stock, held by the Director and CEO of the Company.
On December 31, 2010, the Directors issued 15,600,000 shares in
conjunction with the acquisition of the agreements to acquire an interest in the 5BARz intellectual property, and hold the exclusive
global sales and marketing rights for the 5BARz products.
During the period January to March 2011 the Company issued 650,000
shares of common stock at a price of $1.00 per share for aggregate proceeds of $650,000.
During the period from April 1, 2011 to June 30, 2011 the Company
issued 575,500 shares at prices ranging from $0.70 per share to $ 1.00 per share for aggregate proceeds of $553,500.
During the period from July 1, 2011 to September 30, 2011 the Company
issued 134,610 shares at prices ranging from $0.20 per share to $ 1.00. per share for aggregate proceeds of $46,500.
During the period from October 1, 2011 to December 31, 2011, the
Company issued 1,080,180 shares at prices ranging from $0.10 per share to $0.15 per share for aggregate proceeds of $128,018.
On December 1, 2011 the Company issued 355,695 shares of common
stock at a price of $0.20 per share for conversion of a Convertible Debenture Agreement, dated August 15, 2011 in the principal
amount of
Fifty Thousand Euros (€50,000), along with accrued interest thereon
.
During the period, December 1, 2011 to March 31, 2012, 5BARz AG
sold 78,000 common shares with a par value of 0.01 per share, at a price of CHF 3.00 ($3.26 US) per share, for aggregate proceeds
of 234,000 CHF (US – $250,380). The proceeds received have been credited to additional paid in capital in these consolidated
financial statements.
12
5BARz
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
During the period January 1, 2012 to March 31, 2012 the Company
issued 2,136,667 shares at prices ranging from $0.10 to $0.15 per share for proceeds of $ 251,500. These private placements are
exempt from registration pursuant to Regulation S under the securities act of 1934.
During the period from January 1, 2012 to March 31, 2012 the Company
settled $155,000 of debt to consultants of the Company by the issuance of shares at a price of $0.10 per share, and issued in aggregate
1,550,000 shares.
On March 29, 2012 the Company issued 9,000,000 shares to Cellynx
Group, Inc. at the market price of $0.20 per share for payment in full of a 60% interest in the patents and trademarks which comprise
the 5BARz technology.
On March 29, 2012 the Company issued 1,250,000 shares of common
stock to two founders of Cellynx Group, Inc., along with $170,000 in cash for 63,412,638 shares of the capital stock of Cellynx
Group, Inc.
Note 6 - Asset acquisition agreement:
On December 31, 2010, the Company
acquired three agreements as follows;
|
(i)
|
An “Amended and Restated Master Global Marketing and Distribution
Agreement.”
|
|
(ii)
|
An “Asset Purchase Agreement”
|
|
(iii)
|
A “Revolving line of credit agreement
and
security agreement”.
|
These agreements with Cellynx Group,
Inc. provide for the exclusive global marketing and distribution of the 5BARz line of products and related accessories and a 50%
ownership interest in the 5BARz intellectual property. In addition, a revolving line of credit facility has been made available
to Cellynx.
On March 29, 2012, the Company and
Cellynx Group Inc. entered into an agreement which provided several amendments to the agreement referred to above. As a result
of those amendments, the following arrangements between the Companies were established;
|
|
i.
5BARz International, Inc. acquired a 60% interest in the patents and trademarks held by Cellynx
Group Inc., referred to as the “
5BARz™” technology.
That interest in the
technology was acquired for proceeds comprised of 9,000,000 shares of the common stock of the Company, valued at the date of acquisition
at $0.20 per share or $1,800,000 USD. The acquisition agreement also clarified that the ownership interest in the intellectual
property does represent that proportionate interest in income earned from the intellectual property.
|
13
5BARz
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
|
|
ii.
The Company agreed to make available to Cellynx Group, Inc a revolving line of credit facility
in the amount of $2.2 million dollars of which $636,606 has been advanced as of March 31, 2012. This revolving line of credit facility
expires on October 5, 2013. Under the terms of the line of credit facility, the Company has the right to convert amounts due under
the facility into common stock of Cellynx, at a conversion rate which is the lesser of a fixed conversion rate of $0.00015 per
share or a variable rate which is calculated at 25% of the average lowest three closing bid prices of the Cellynx Group, Inc. common
stock for a period which is ten (10) days prior to the date of conversion. This conversion rate was established previously by other
parties that have funded Cellynx, and is being matched by 5BARz. At March 31, 2012, the Company converted $78,500 of the amount
due under the revolving line of credit facility for 350,000,000 shares of the capital stock of Cellynx Group, Inc. As a result,
Cellynx became a consolidated subsidiary of 5Barz International Inc., on March 29, 2012.
|
|
|
iii.
Pursuant to the Master Global Marketing and Distribution agreement between 5Barz International
Inc and Cellyx Group, Inc., the registrant was obligated to pay to Cellynx Group, Inc a royalty fee amounting to 50% of the Company’s
Net Earnings. That fee would be paid on a quarterly basis, payable in cash or immediately available funds and shall be due and
payable not later than 45 days following the end of each calendar quarter of the year. The asset acquisition agreement amendment
referred to herein specified that the royalties would be paid in relation to the ownership of the intellectual property. In addition
as a result of the recent acquisition of a 60% interest in Cellynx Group, Inc. by the registrant, this royalty item is an intercompany
transaction which in the future will be eliminated upon consolidation in financial reporting of the consolidated financial results
of 5BARz International Inc. and Subsidiaries.
|
14
5BARz
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
Note 7 – Options Warrants and Convertible Securities:
Promissory note
On September 20, 2011, 5BARz International Inc., (“the Company”),
completed a transaction pursuant to a Promissory Note agreement (the Note), through which the Company borrowed $42,500. The Note
bears interest at a rate of 8%, and is due on June 22, 2012, (the “Due Date”). The Company may settle that
note within the first 90 days following the issue date by paying to the Lender 140% of the principle amount of the note plus
accrued interest. The Company may settle the note during the period which is 91 days from the issue date of the note to 180 days
from the issue date of the note by payment of 150% of the principle amount of the note plus accrued interest. In the event that
the note is not repaid 180 days from the date of issue, the note is convertible into common stock. On March 20, 2012 the note,
along with accrued interest and a prepayment amount was settled by payment of $65,361.52, and the note was cancelled.
Securities Purchase Agreements
Convertible debenture agreement
On February 3, 2012 the Company entered into a Convertible Debenture
Agreement with an investor for aggregate proceeds of $500,000 of which $100,000 is paid in cash and a promissory note in the principal
amount of $400,000 is due to the Company by no later than August 3, 2013. The debenture bears interest at a rate of 4.75%, and
is due on February 3, 2016, (the “Maturity Date”). The promissory note from the investor for $400,000 bears interest
at a rate of 5%. The agreement is subject to an early pre-payment provision whereby the Company may prepay the $100,000 by May
8, 2012 and the agreements may be cancelled in their entirety.
On May 8, 2012 the $100,000 was not repaid. The Company has recorded
a beneficial conversion valuation liability of $ 4,931 based upon the conversion valuation at the date of inception of the convertible
debenture. In addition, the Company has recorded a debt discount of
$15,250 of which $ 2,382 has been amortized to interest income based
upon the fair market value of debt at inception of the convertible debenture.
In the event that the convertible debenture is not prepaid, the
investor may convert the principle and unpaid interest due under the agreement 180 days from the date of the agreement at a price
which is 110% of the lesser of $1.00, or 80% of the average of the three lowest trading prices of the Company’s common stock
over the twenty one trading days prior to the date of the conversion. Such conversions are subject to a restriction such that holder
may not own greater than 4.99% of the issued and outstanding capital stock of the Company.
If, on the date the holder delivers
a conversion notice, the applicable conversion price is below $0.06, the Company may prepay that portion of the Debenture that
Holder elected to convert in an amount equal to one hundred twenty percent (120%) of the amount to be converted.
15
5BARz INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
Equity Investment Agreement
On February 3, 2011, in conjunction with the convertible
debenture agreement referred to above the Company granted to the investor the right to purchase of up to $5,000,000 of the Company's
common stock, beginning on August 3, 2012. Such investment is limited to the 4.99% limitation on ownership in the reporting Company
referred to above. In addition, the investor is required to purchase a minimum of $50,000 per month beginning two hundred ten (210)
days from the issue date or September 3, 2012.
Cellynx Group, Inc. – Convertible Promissory Notes
The Company’s subsidiary, Cellynx Group, Inc. has three convertible
promissory notes outstanding at March 31, 2012 as follows;
Issue Date
|
|
Principal Amount
|
Date of Maturity
|
|
|
Accrued
Interest
|
|
|
Beneficial
Conversion
Factor
|
|
|
Principle due
March 31, 2012
|
Mar 10, 2011
|
$
|
42,500
|
Dec. 7, 2011
|
|
$
|
3,059
|
|
$
|
114,990
|
|
$
|
13,400
|
May 18, 2011
|
$
|
32,500
|
Nov. 18, 2011
|
|
|
2,258
|
|
|
282,837
|
|
$
|
32,500
|
Jan 8, 2012
|
$
|
15,000
|
July 8, 2012
|
|
|
266
|
|
|
122,469
|
|
$
|
15,000
|
The notes incur interest at a rate of 8% per annum.
On January 6, 2012 the terms of the note have been amended such
that subsequent to the maturity date if not paid, holder may convert principal and unpaid interest on the note into shares
of the Company’s common stock, with the number of shares issuable determined to be the lesser of the variable conversion
factor or a fixed conversion factor of $0.00015 per share. The variable conversion factor is calculated by dividing the amount
to be converted by the conversion price which is equal to 25% of the average of the three lowest closing bid prices of the Company’s
common stock over the ten trading days prior to the date of the conversion. Holder is prohibited under the from converting amounts
if principal and interest that would result in holder receiving shares, which when combined with shares of the Company’s
common stock held, would result in investor holding more than 4.99% of the Company’s then- outstanding common stock. The
shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant to the terms of Rule
144.
Pursuant to the terms of the Notes, while there
remains any unpaid amounts owing, Cellynx Group, Inc. may not incur additional debt without investors approval except for (i) debt
that was owed or committed as of the date of the agreement and of which the Company had informed investor; (ii) indebtedness to
trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000;
or (d) debt the proceeds of which are used to repay the Note.
16
5BARz INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
The Company has the right to pre-pay the debt
up to six months from the date of issue. During the first 120 days following the issue date of the Note may be settled by paying
150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.
The Company determined that the notes contain
a beneficial conversion feature because the conversion rate is less than the share price . In addition, the Company records a debt
discount related to the beneficial conversion factor which is amortized over the term of the loan.
Cellynx Group Inc. - Options and Warrants
At March 31, 2012 Cellynx Group Inc. has the following Options and
Warrants outstanding;
The number and weighted average exercise prices
of all options exercisable as of March 31, 2012, are as follows:
Options Exercisable
|
|
Range of
Exercise Price
|
|
|
Number Outstanding as of
September 30, 2011
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining Contractual
Life (Years)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.014 - 0.05
|
|
|
|
3,415,170
|
|
|
|
0.018
|
|
|
|
3.93
|
|
$
|
0.06 - 0.100
|
|
|
|
4,007,338
|
|
|
|
0.074
|
|
|
|
0.96
|
|
$
|
0.110 - 0.150
|
|
|
|
8,566,279
|
|
|
|
0.126
|
|
|
|
2.86
|
|
$
|
0.160 - 0.200
|
|
|
|
1,792,667
|
|
|
|
0.177
|
|
|
|
2.68
|
|
$
|
0.210 - 0.260
|
|
|
|
1,260,040
|
|
|
|
0.217
|
|
|
|
2.43
|
|
|
|
|
|
|
19,041,494
|
|
|
|
|
|
|
|
|
|
Warrants
The following table summarizes the warrant
activity:
|
|
Number of
Warrants
|
|
|
Weighted Average
Exercise Price
|
|
|
Average Remaining
Contractual Life
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding at December 31, 2011
|
|
|
36,114,757
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Outstanding at March 31, 2012
|
|
|
36,114,757
|
|
|
$
|
0.27
|
|
|
|
1.18
|
|
|
$
|
0
|
|
Exercisable at March 31, 2012
|
|
|
36,114,757
|
|
|
$
|
0.27
|
|
|
|
1.18
|
|
|
$
|
0
|
|
17
5BARz INTERNATIONAL INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
Note 8 - Related party transactions:
On December 30, 2010 the Company acquired by way of an assignment
agreement all right title and interest in a set of agreements from a Company of which the President and Director is also the President
and Director of the reporting Company. The proceeds to be paid for that assignment agreement is comprised of a note payable in
the amount of $370,000, and the issuance of 15,600,000 shares of common stock. During the quarter ended March 31, 2012
the Company paid $40,633 of principle and interest on that note. At March 31, 2012 the Company had a remaining balance on that
note payable in the amount of Nil (December 31, 2011 - $30,618 ). The note payable accrues interest at a rate of 5% per annum,
and during the three months ended March 31, 2012, interest in the amount of $115 was charged pursuant to the terms of this note.
In addition the Company had an amount due to that related party
comprised of payments made by the related party on behalf of the Company aggregating $ 74,373 (December 31, 2011 - $79,803). That
amount due is non interest bearing and has no specific terms of repayment.
Note 9 - Formation of subsidiary company, 5BARz AG
On October 6, 2011, the Company commenced the organization of a
subsidiary Company under the laws of Switzerland, in the Canton of Zurich, called 5BARz AG. 5BARz AG issued 10,000,000 common shares
of which 5,100,000 are held by the Company and 4,900,000 are held in escrow for resale, by an independent escrow agent under the
control of the Company. 5BARz AG issued the shares with a stated or par value of CHF 0.01 per share for proceeds of CHF 100,000
(US - $108,752). The net proceeds received on re-sale above the stated or par value of the shares, is paid into 5Barz AG as additional
paid in capital.
During the quarter ended March 31, 2012, sales of those securities aggregated 57,000 shares sold for proceeds
of $171,000 CHF ($182,970 USD)
On October 19, 2011, the registrant, 5BARz International Inc. entered
into a Marketing and Distribution agreement with 5BARz AG, through which 5BARz AG holds the exclusive rights for the marketing
and distribution of products produced under the 5BARz
brand for markets in Switzerland, Austria and Germany. That agreement
does not have a royalty payment requirement, and remains effective as long as 5BARz Ag is controlled by the Company. 5BARz Ag is
a consolidated subsidiary of the Company in these financial statements.
Note 10 - Stock acquisition agreement, Cellynx Group, Inc.
On January 7, 2011 the Company entered into a stock purchase agreement
with two founding shareholders of Cellynx Group, Inc. to acquire in aggregate 63,412,638 shares of the capital stock of Cellynx
Group, Inc. for total proceeds of $634,126. At that date the Company had paid $170,000 as a deposit made under that agreement.
On March 29, 2012 the Company entered into a securities exchange agreement and settlement agreement with each of the two founding
shareholders of Cellynx Group, Inc. whereby in addition to the $170,000 paid, the Company issued 1,250,000 shares of common stock
of the issuer in exchange for the 63,412,638 shares of Cellynx Group, Inc. and mutual releases were signed between the parties
releasing each from any further obligation.
18
5BARz INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
Note 11 - Business combination
On March 29, 2012, the Company acquired a 60% interest in Cellynx
Group, Inc. a Company based in California, which was the owner of the 5BARz intellectual property and is in the business of the
development and commercialization of that technology. The objective of the acquisition is to integrate the global commercialization
of the 5BARz technology and products, into a combined business and operating strategy. The purchase price, which was settled in
cash, shares, and the settlement of convertible debt was $875,000, as follows;
i.
|
|
Cash consideration paid
|
|
$
|
$ 170,000
|
|
ii.
|
|
1,250,000 common shares of the registrant issued at a market price of $0.20 per share
|
|
|
250,000
|
|
iii.
|
|
Redemption of convertible debt for 350 million shares of Cellynx Group Inc. common stock
|
|
|
455,000
|
(a)
|
|
|
|
|
|
|
|
|
|
Fair market value of consideration paid
|
|
$
|
$ 875,000
|
|
|
(a)
|
The valuation of the debt instrument with an embedded conversion feature is calculated at the
face value of the debt instrument of $73,500 plus the intrinsic value attributable to the conversion of the debt instrument at
a 75% discount to market, based upon the lowest 3 closing bid prices of the common stock for a period of 30 days prior to the date
of conversions. That intrinsic valuation is calculated to be $ 381,500.
|
The amounts recognized for each class of the acquiree’s assets
and liabilities recognized at the acquisition date, March 29, 2012 are as follows;
Description
|
|
Net book value of Cellynx Group, Inc. consolidated assets and liabilities
|
|
Adjustments (i)
|
|
Valuation attributed to assets acquired
|
Current assets
|
$
|
3,260
|
|
|
$
|
3,260
|
Patents, trademarks, and license
|
|
44,718
|
|
|
|
44,718
|
Investment in 5BARz
|
|
1,800,000
|
|
|
|
1,800,000
|
Furniture and equipment
|
|
2,113
|
|
|
|
2,113
|
Accounts payable and accruals
|
|
1,735,112
|
|
|
|
1,735,112
|
Notes payable (net of discount)
|
|
368,411
|
|
|
|
368,411
|
Beneficial conversion liability
|
|
5,856,633
|
$
|
(5,621,027)
|
|
235,606
|
LOC payable – 5BARz (net)
|
|
514,745
|
|
( 514,745)
|
|
0
|
Net book value of assets acquired
|
$
|
(6,624,810)
|
|
(6,135,772)
|
|
(489,038)
|
Goodwill
|
|
|
|
|
|
1,364,038
|
Purchase price
|
|
|
|
|
$
|
875,000
|
|
(i)
|
In determining the NBV of assets acquired, the Company wrote off the
convertible debt owed to the acquirer and the beneficial conversion liability attributed to that debt.
|
19
5BARz INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
The individual results of operation
for Cellynx Group Inc. for the quarter ended March 31, 2012 are available at the web site
www.sec.gov
,
as that entity is a reporting public company, trading on the OTCBB in the US under trading symbol “CYNX”.
The business combination and simultaneous acquisition of the intellectual
property effects the ongoing royalty expense to the registrant, which prior to these items represented a contractual cost of 50%
of the net income earned by the Company. As a result of the asset purchase agreement as amended, the registrant will be eligible
to receive 60% of that royalty income back from Cellynx. In addition, through the acquisition of a 60% interest in Cellynx, a further
equity participation in the residual royalty income is available to the consolidated entity.
Note 12 - Subsequent events
Sales of Common Stock
On various days in April 2012 the Company issued in aggregate 331,667
shares in the capital stock of the Company in settlement of $ 55,247 of debts, at prices ranging from $0.12 to $0.15 per share.
On April 18, 2012 the Company sold 100,000 shares in the common
stock of the Company at a price of $0.15 per share in a private placement for aggregate proceeds of $15,000. The shares issued
were sold pursuant to a Regulation “S” exemption from registration pursuant to the Exchange Act of 1934.
On May 4, 2012 the Company sold 66,667 shares in the common stock
of the Company at a price of $0.12 per share in a private placement, for aggregate proceeds of $8,000.. The shares issued were
sold pursuant to a Regulation “S” exemption from registration pursuant to the Exchange Act of 1934.
Commitment to Issue Stock and Options
During February and March 2012 the Company appointed certain senior
industry executives to the Company’s advisory board to assist with the development of the Company, and the integration of
its technology and products into the global marketplace. Pursuant to those appointments the company has committed 2,150,000 shares
to be issued pursuant to a 2012 employee, consultant and director stock option plan, or for services rendered, subject to Director
approval. This stock option arrangement is in process for approval by the Board of Directors of the Company.
Restriction on the Re-Sale of 5BARz International
Inc shares held by Cellynx;
On March 29, 2012 5Barz International Inc.
issued 9,000,000 shares of common stock to Cellynx Group, Inc. for the acquisition of a 60% interest in the 5BARz technology owned
by Cellynx. Pursuant to an amending agreement entered into May 15, 2012, those shares have been restricted
20
5BARz
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012 and 2011
(Unaudited)
from trading by mutual agreement between the
parties. Pursuant to the provisions of that agreement the shares are generally restricted from trading without mutual agreement
between the parties. Further that should the shares be traded, that at no time shall the shares be traded in denominations of greater
than 5% of the balance of the shares held by Cellynx in any one month.
Investment in Cellynx Group, Inc.
On April 13, 2012 the Company converted a further $7,700 of debt
under the revolving line of credit agreement for 51,333,333 shares of the capital stock of Cellynx, re-establishing the 60% equity
interest held in that consolidated subsidiary with 464,745,971 shares held.
On May 15, 2012 the Company converted a further $ 58,500 of debt
under the revolving line of credit agreement for 390,000,000 shares of the capital stock of Cellynx, re-establishing the 60% equity
interest held in that consolidated subsidiary with 854,745,971 shares held.
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Forward Looking Statements
Certain statements in the Management’s Discussion and Analysis
(“MD&A”), other than purely historical information, including estimates, projections, statements relating to our
business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified
by the words “believe,” “project,” “expect,” “anticipate,” “forecast,”
“estimate,” “intend,” “strategy,” “plan,” “may,” “should,”
“will,” “would,” “will be,” “will continue,” “will likely result,”
and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks
and uncertainties which may cause actual results to differ materially from the forward-looking statements. We undertake
no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events,
or otherwise.
As used in this Form 10-Q, unless the context requires otherwise,
“we” or “us” or the “Company” or “5BARz” means 5BARz International Inc..
Plan of Operations
5BARz International Inc.(“5BARz” or the “Company”)
is in the business of the development, sales and marketing of a line of cellular network infrastructure devices for use in the
small office, home and mobile market places. This next generation cellular network extender, branded as 5BARz™
incorporates a patented technology to create a highly engineered, 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.
The Company’s initial product,
the Road Warrior
,
won the prestigious 2010 innovation of the year award at CES (the largest consumer electronics show in the world) for achievements
in product design and engineering. The
Road Warrior
, has passed FCC Certification, and has been produced in limited quantities
to date by a contract manufacturer in the Philippines.
The market opportunity for the 5Barz technology represents
some 5.4 billion cell phone subscribers worldwide serviced by 900 cellular network operators. These cellular network operators
represent the Company’s primary point of entry to the Global marketplace.
The 5BARz business opportunity to bring this state of the art
technology to market represents a significant step forward in the deployment of micro-cell technology, referred to as
a ‘cellular network infrastructure device” in the industry. A step that management believes will significantly improve
the functionality of cellular networks by managing cellular signal within the vicinity of the user. This technology
facilitates cellular usage in areas where structures, create “cellular shadows” or weak spots within metropolitan areas,
and highly congested areas such as freeways, and also serves to amplify cellular signal as users move away from cellular towers
in urban areas. The market potential of the technology is far reaching.
22
Company History
5BARz was incorporated on November
17, 2008 and is a Nevada Corporation. On December 30, 2010 the Company acquired the “
Master Global
Marketing and Distribution Agreement” for the marketing and distribution of 5BARz products throughout the world. In addition
to the acquisition of the marketing and distribution rights, the Company entered into an agreement, as amended, for the acquisition
of a 60% interest in the underlying intellectual property comprising the 5BARz products, and holds a security interest over the
balance of those assets.
On March 27, 2012, subsequent to
the balance sheet date for this 10K, 5BARz acquired a 60% controlling interest in Cellynx Group, Inc. the entity which originally
developed the 5BARz technology. This represents a significant step forward in bringing the originators of the technology together
and under common control with the Company, to facilitate a more synergistic and clearly defined development platform for the globalization
of the 5BARz technology.
On November 7, 2011, the Company commenced the incorporation
of a subsidiary Company in Zurich Switzerland called 5BARz AG. At December 31, 2011 the Company held a 99.5% equity interest in
that entity. 5Barz Ag has been granted the exclusive rights by way of a sub-license for the Sales and Marketing of the 5BARz products
in the region, commonly referred to as the “DACH” in Europe, comprised of Germany, Austria and Switzerland.
Prior to December 30, 2010 the Registrant was a designated
shell Company pursuant to Section 12B-2 of the Exchange Act of 1934, and operated under the name Bio-Stuff Inc. The business of
Bio-Stuff was comprised of the development of bio-degradeable products. That business has been abandoned by the Company.
Milestones
2007: A 5BARz working prototype was developed of an
affordable consumer friendly single piece plug ‘n play booster with a minimum of 45dB of gain in both up and down paths.
July 22, 2008: Dollardex Group entered into an exclusive
“Master Global Marketing and Distribution Agreement” (the “Distribution Agreement”) for the 5BARz products.
July 2009: First production run and FCC Certification
of 5BARz Road Warrior
August 2009: Field testing and final modification of
5BARz Road Warrior
January 2010: 5BARz Road Warrior Selected as CES Innovations
2010 Design and Engineering Award. Marketing commenced in the US.
January 2011: 5BARz International Inc. acquires the
“
Master Global Marketing and Distribution Agreement” for the marketing and distribution
of 5BARz products throughout the world, and enters into agreement for the acquisition of a 50% interest in the underlying intellectual
property from Dollardex.
23
2011 – 5BARz International Inc. engages sales
agents in Latin America, to present prototype products to R&D departments at major wireless carriers in the region, with positive
results.
July 2011 – The
Company received initial purchase order for the balance of limited production in the 5BARz Road Warrior units comprised of 16,000
units or $3.2 million dollar purchase order.
November 2011 – Incorporated a subsidiary Company, 5BARz
Ag (completed in March 2012), and sub-licensed that entity for the Sales and Marketing Rights for the region commonly referred
to as the “DACH”, Germany, Austria and Switzerland. The Company engaged the services of BDC Investment Ag, of Zurich,
Switzerland to finance that entity and develop within the German speaking European marketplace.
February/March 2012 – The Company formed an Advisory
Board comprised of leading executives within the technology sector to assist in the integration of the 5BARz technology and products
into global markets. See bios in news – www.5barz.com
Dr. Gil Amelio
|
– Director ATT, Former CEO –Apple Computer
|
Mr. Marcelo Caputo
|
– CEO Telefonica USA
|
Mr. Finis Connor
|
– Founder of Seagate Technology and Connor Peripherals
|
Mr. George Lauro
|
– Co-founder of Alteon Capital Partners with Dr. Amelio
|
March 2012 – 5BARz International Inc. completed the acquisition
of a 60% interest in Cellynx Group, Inc. (the originator of the 5BARz technology), developing a fully integrated subsidiary for
the global deployment of the 5BARz business opportunity.
The Market Opportunity
The market opportunity for
the 5BARz technology represents some 4.8 billion cell phone subscribers worldwide and is growing as a result of the following factors;
·
|
Dead zones, weak signals, and dropped calls are the biggest problems in the industry. Now, by adding internet and video, the quality issue is increasing exponentially.
|
·
|
76% of cellular subscribers use their mobile phone as the primary phone
|
·
|
More consumers are using mobile phones for web browsing, up and down- loading photos, videos and music
|
·
|
More mobile phones are operating at higher frequencies which have less ability to penetrate buildings
|
24
·
|
Weak signals make internet applications inaccessible and slow and increase the drain on cell phone batteries.
|
·
|
Forty percent of all mobile phone users report inadequate service in their homes or office and we estimate that 60% of the 4.8 billion mobile phone users worldwide consider continuous connectivity to be very important.
|
Why Poor Signals Exist
A variety of factors may cause
dropped calls and dead zones, including congestion, radio signal interference, tower hand-off, and lack of coverage. Despite continued
infrastructure investment by operators, and antenna technology improvements by base station providers and mobile phone makers,
these problems will continue for the foreseeable future. This is because many of the contributing factors can't be controlled by
the operators and manufacturers. To understand how innovative 5BARz products are in improving phone signals, it's first important
to understand the causes of poor signal quality.
Congestion
In 1999, sales of mobile phones
surpassed combined sales of personal computers and automobiles. By 2010, mobile phones had replaced land-line phones in 30% of
U.S. households. Smart phones, led by iPhones and Android phones, have become indispensible personal assistants. Laptop computer
sales outnumber desktop computer sales, and most laptops are equipped with cellular data chipsets or USB modems. Apple's iPad has
sparked the connected tablet market too. Vending machines, automobiles, mobile sensors, and many other devices include "machine
to machine" cellular data modules. As a result, the number of cellular voice and data devices will soon exceed the number
of people on Earth.
If sheer numbers weren't enough,
new uses for mobile devices are causing even faster growth in bandwidth usage. Obvious uses include video entertainment, videoconferencing,
downloaded and streaming music, MMS, email, and application downloads. Facebook, Twitter, Foursquare, and many other social networking
applications put further load on operator networks. Also, surprising sources of traffic have emerged, such as deliberate "miscalls".
A miscall is when one subscriber calls another, but hangs up before the receiving party answers. Since operators don't charge for
these uncompleted calls, subscribers are using miscalls as a free way to communicate. In India, orders for milk are made this way.
In Syria, five miscalls in a row signals the recipient to "go online" to the Internet and chat. In Bangladesh, it's estimated
that up to 70% of traffic at peak times is due to miscalls. This practice isn't limited to countries with low per-capita income,
and yet it places a high load on operator networks.
There
are sources of congestion based on location and time, too. Transportation clusters like airports, major highway intersections,
bridges, and toll road gates all bring many people together at peak times. Also, because of home land-line replacement, many residential
neighborhoods have many mobile phones in simultaneous use in mornings and evenings. Lastly, local population growth and immigration
can result in too many phones for existing infrastructure. Due to long planning times, investment requirements, local government
permits, and construction time, it's difficult for infrastructure to keep up with the pace of change in many developing areas,
especially in growth countries.
25
Radio Signal Interference
Interference comes from both obvious
and subtle causes. Certain materials aren't transparent to radio signals, especially durable materials used in buildings, large
structures, and even automobiles. As a result there are radio shadows in which a mobile phone can't sense the signal from a base
station. In addition, radio signals from adjacent channels or reflected signals can interfere with each other due to wave cancellation
effects. In some cases these forms of interference primarily attenuate the signal (make it weaker). However, interference can also
add noise, so that the ratio of signal to noise becomes too low for the mobile phone and the base station to understand each other.
Tower Hand-Off
Mobile phone networks are called
"cellular" networks because they are made up of overlapping areas of coverage that are provided by base stations in fixed
locations. As a mobile subscriber travels by automobile or train, he will eventually reach the limit of a base station's coverage.
At that point, his mobile phone will "hand off" to a base station for the next coverage area. If signal quality is poor
due to interference, or if the new base station is congested with too many mobile phones, the subscriber's connection may be lost.
Lack of Coverage
·
Some rural or developing areas
don't have enough people or population density for operators to justify the cost of installing base stations except at wide intervals.
In these areas the signal strength from the base station or the mobile phone may be too low to create or maintain a connection.
This results in "dead zones" or dropped calls.
Solutions to Poor Signal Quality
Operators know that dead zones,
dropped calls, and poor voice quality are big problems, and that re-dialing while driving can be unsafe. Operators also are concerned
about subscribers' ability to make emergency calls. They understand that people rely on mobile phones for business and connecting
with family. As mobile phones replace landlines, operators are especially aware that mobile signal quality is critical. Operators
also see that wireless data is increasingly important for personal and business use.
To help, operators work with phone
and base station manufacturers to improve antenna performance. They invest in new base stations in growth areas. They invest in
technologies that enable more connections per base station. Operators have even provided refunds for dropped calls.
However, many factors causing poor
signal quality can't be controlled by operators. Therefore products have emerged to help, provided by operators or companies who
sell to either operators or subscribers.
26
Femtocells
Operators can provide femtocells
to subscribers with poor signal quality at home. Usually the subscriber pays for hardware, installation, or a monthly fee. Femtocells
are carrier grade, and are like small base stations that communicate with operators by using the home Internet connection as a
"backhaul". They often can't be moved after installation, must be installed by a skilled technician in order to work
properly and to avoid causing network problems. Many femtocells provide only a voice connection, not data. Lastly, femtocells usually
only work with phones from one operator, so families with phones from multiple operators may have to request multiple femtocells.
Repeaters
Repeaters are usually carrier-grade
equipment and are programmed for a specific operator. They extend cellular networks into buildings and small offices. As with femtocells,
installation is complex and if not done properly they can cause network problems. Unlike femtocells, repeaters do not use the local
Internet connections, but rather receive and re-transmit the signals between base stations and mobile phones.
Boosters
Boosters are usually sold online
and through retail. They vary widely in amplification power, quality of amplification, and power balance. For example, these products
amplify signals at 1, 3, 5, or even 10 watts all the time. Using power over 1 watt increases the probability that a booster will
interfere with surrounding mobile devices. Also, it would be more energy efficient to adapt amplification power as needed, rather
than to simply use the same wattage constantly. Many boosters don't support balanced power in both directions between base station
and mobile phone. This may result in only solving the signal quality problem in one direction. Since communication is bi-directional,
this doesn't actually solve the problem. Varying quality of amplification also introduces noise, which can interfere with surrounding
devices.
A New Class of Solution
5BARz
has evaluated the causes of poor signal quality, the needs of both operators and subscribers, and the solutions in the market.
Femtocells, repeaters, and boosters either don't solve all parts of the problem, or aren't optimal due to cost or other drawbacks.
Using expertise from a team of engineers who designed sophisticated base station amplifiers for operators, 5BARz has developed
a new class of carrier-grade technology. This is a hybrid of repeaters and boosters, and is intended for automotive, home, and
office use. 5BARz has tested these products in the lab, in the real world, and with operators, and also won the Innovation of the
Year award at the 2010 CES conference. These products advance the state of the art to provide the following advantages;
Low Power Use
5BARz products only amplify when
required. The automotive products use less than 1/2 watt, while the home product uses less than 1 watt. This not only saves energy,
but also minimizes interference with other wireless devices and the network itself. In fact, new rules being proposed by the U.S.
Federal Communications Commission are expected to mandate low power standards such as 5BARz now provides.
27
Simple Setup
5BARz products don't require a
technician to run wires, carefully determine proper location, or optimize orientation. No use of home Internet connection is required,
and there are no switches or settings.
Balanced Amplification
Received and sent signals need
balanced assistance in order for both directions of a communication channel to be improved. 5BARz products are not only
smart
about adapting amplification levels, but also about balancing amplification for incoming signals from the base station, and return
signals from the mobile phone.
Signal Stability
5BARz
has done extensive design, testing, and re-design to avoid a number of problems experienced by the antenna design of alternatives.
For example, booster products can experience oscillations when people, animals, or vehicles move nearby. These oscillations can
weaken the booster effect or cause interference with other wireless devices. Many booster products achieve size similar to 5BARz'
products by putting antennas close together in the same product package, but don't optimize radio wave interactions between those
antennas. This weakens the boosters' effectiveness, and is one reason why other manufacturers compensate by using too much wattage,
in turn wasting power and increasing the probability of interfering with other radio frequency devices and the network.
Choosing the Right 5BARz Product
5BARz has one model in production
and three in development of three mobile products with a range of features and prices, as well as a home/office product:
5BARz offers three mobile products with a range
of features and prices, as well as a home product:
Road Warrior
|
The Road Warrior won the 2010 CES Innovation
of the Year award for product design and engineering. It improves wireless voice and data signals in the home, office, or vehicle.
It works with any wireless operator, needs no installation, and can easily be moved.
The Road Warrior features real-time radio frequency
monitoring, self-adjusting radio frequency levels, and balanced power control for incoming and return signals. It is FCC compliant,
and supports 3G cellular and PCS bands. There is no backhaul (Internet connection) required. The 45 dB maximum gain is limited
to the small area around the phone cradle.
|
28
5BARz SC
|
The 5BARz SC provides the benefits of
the Road Warrior in a single unit (with optional cradle) with a larger coverage area of about 2 meters. It only amplifies communication
signals, not noise.
In addition to the 45 dB gain and features
of the Road Warrior, the Road Warrior II provides a medium power option, and radio frequency band auto configuration.
In addition, the Road Warrior II uses a state-of-the-art,
high-performance antenna by Pinyon
TM
.
|
5BARz 4G
|
The Road Warrior 4G is a single unit
package with a 45 dB gain and a coverage area of about 2 meters.
It provides the features and benefits
of the Road Warrior II, but additionally supports a full radio frequency range of 700Mhz to 2.6Ghz, and supports 4G. It also supports
multiple phones simultaneously. It is also programmable according to operator requirements.
|
5BARz 3000
|
5BARz 3000 product provides a 70dB maximum
gain at a maximum power of 0.6 watts, with coverage over a large area inside the home. It supports 3G and 4G, both voice and data,
for multiple phones simultaneously.
@Home is a single unit package with
both antennas in the base unit. It is a carrier-grade product and operator configurable (fully programmable from 700Mhz to 2.6Ghz).
It includes patent-pending isolation feedback, with radio frequency isolation typically 30dB better than the Road Warrior.
@Home can optionally be configured with
GPS and wireless LAN.
|
29
Intellectual
property
5BARz technology is based on achieving
unique isolation between antennas, without oscillation greatly improving signal gain for individual, home and office coverage.
Title
|
Patent Application
|
Patent Issued
|
Cell Phone Signal Booster
|
11/625331
|
8005513
|
Dual Cancellation Loop Wireless Repeater
|
12/106468
|
|
Wireless Repeater Management Systems
|
12/328076
|
|
Dual Loop Active and Passive Repeater Antenna Isolation Improvement
|
12/425615
|
|
5BARz Trademark
|
78/866260
|
|
Multi-Band Wireless Repeater
|
12/235313 + Foreign filings
|
8027636
|
Antenna Docking Station
|
12/625347
|
|
Turning Weak Spots Into Sweet Spots
Trademark
|
78-938374
|
|
30
Comparative Analysis
|
5BARz
|
Femtocell
|
Traditional Repeaters
|
Options for Consumer
|
·
Plug and play solutions that significantly improve wireless service
|
·
Carrier-specific box that connects to the internet through the broadband service at the home and acts like a short-range network tower site
|
·
Bi-directional amplifier and external antennas Installation of antennas required with minimum spacing of 35 feet or more between the antennas
|
Easy to Understand
|
·
Simply place the unit where there is some or marginal wireless service, turn on the unit and the voice and data wireless service is improved for everyone
|
·
Connect the unit to your broadband service where your router is located and the
voice only
wireless service should be improved throughout the home
|
·
Need to determine what the two pieces of equipment, cables, and multiple
power cords are for
·
Complex manual … Determine the ideal location for both antennas,
outdoor network antenna and indoor coverage antenna, then determine ideal location for the bi-directional amplifier for proper
cable routing to the antennas
·
|
Cost
|
·
One-time equipment charge only$299 5BARz Road Warrior
|
·
Equipment charge $250 for each carrier, 2 carrier house or SOHO equals $500 equipment charge Equipment won’t work if you change carriers Possible monthly fee Requires use of broadband service
|
·
Equipment charge starting at $350 for dual band Professional installation starting at $200Higher performance antennas starting at $100
|
Setup
|
·
Plug ‘n play No adjustments One part works for all carriers
|
·
Carrier-specific set up May require ISP support Currently Voice Only
|
·
Go on roof to measure signal level; outdoor network antenna placement based on testing for 2 bars or more signal strength Antennas need to be spaced 35 feet or more apart
|
Reliability
|
·
Designed by engineers and brought to production by
managers trained in the Six Sigma quality process Self contained, fewest cables/connectors
·
Oscillation suppression circuitry
|
Broadband vulnerable: Degraded broadband throughput Power outage Depends on carrier down/power down on carrier command Intermittent handoffs with macro network
|
·
External antennas less reliable Connectors Outdoor mounting Oscillation prone
|
Installation
|
·
None; Plug ‘n play
|
·
Needs to be collocated with broadband service GPS antenna may need to be installed near a window with a cable going to the femtocell
|
·
Professional installation recommended
|
31
MARKETING STRATEGY – 2012
The Company has embarked upon a multi channel marketing strategy
with significant emphasis in Latin America as a direct result of the very favorable factors and the stage of development of the
cellular markets in South and Central America and Mexico, more fully addressed herein.
During 2011, that Company has had several NDA’s signed
by major wireless operators in that region as they are currently in the process of analyzing the 5BARz products in their labs.
This is the initial step before full scale endorsement of the technology and integration into their marketing infrastructure.
Advanced levels of interest with major distributors in the
Latam marketplace are expected to see substantive sales results within the current fiscal year. In fact the Company received a
purchase order for the production of 16,000 Road Warrior units to be delivered into Mexico in 2012.
The Company has been expanding its employee/consultant base
in Latin America and USA due to significant product interest. More recently we have set a structure for the development of the
German speaking market place in Europe, through a subsidiary operation 5BARz AG in Zurich Switzerland.
The LATAM Market
The Company has analyzed the fundamentals of the mobile phone
market in the LATAM countries and has determined that to be a key point for market penetration for the 5BARz products for the following
reasons;
First, the mobile phone market has just gone through
a very strong decade of growth in Latin America, with mobile subscriptions having overtaken fixed lines as the preferred method
of communication. As a result Latin America's mobile telephone industry has a high degree of market penetration. Mobile subscriptions
totaled 88.2% of the region's population, compared to 55.2% in Asia Pacific, 90.4% in North America and 50.6% in the Middle East
and Africa. Having recently invested heavily in subscription development, the cellular network operators are now focusing upon
the maintenance of their substantial customer base, and the 5BARz technology can contribute substantially to achieving that customer
satisfaction.
The mobile telephone industry in Latin America has benefited
from generally opening up to competition. This provides a very fertile ground for the introduction of a technology such as 5BARz
to secure customer retention through quality of service.
The inherent geographical difficulties in laying fixed
line infrastructure have encouraged a move to mobiles, but in addition, that geography, the Andean and Rainforest regions and expanses
of
rural areas again benefit from the 5BARz technology whereby
weak cellular signal is amplified within the vicinity of the user.
32
Further the LATAM countries are experiencing a renewed
era of strong growth, reflecting reviving economic growth and improving income levels. This again is a favorable factor for the
introduction of our products to meet the growing demands of consumers.
In addition, the launch of 3G and mobile broadband services
has increased demand for mobile subscriptions. Mobile broadband is particularly desirable in areas with no or limited access to
cable internet services. Moving to mobiles offers consumers the benefits of on-the-move communications and advantageous introductory
deals. Greater access to communications also helps to narrow regional divides. All of these factors are enhanced by the 5BARz experience.
In fact internet usage is set to take off from 2010, with broadband
internet subscriptions generally growing by higher rates than mobile subscriptions Initial 3G market expansion is likely to be
greater in the region's wealthier markets, such as Argentina, Chile and Mexico, and these have been specifically targeted by our
Company with very favorable results.
Number of subscribers
|
•
|
Brazil:
|
194 million
|
•
|
Mexico:
|
93.5 million
|
•
|
Argentina:
|
50.4 million
|
•
|
Colombia:
|
40.5 million
|
•
|
Venezuela:
|
28.1 million
|
•
|
Chile:
|
16.5 million
|
•
|
Other countries:
|
103 million
|
•
|
Total:
|
526 million
|
In fact in 2011 the Company received a purchase order
for 16,000 units of the Road Warrior for proceeds of $3.2 million, from the LATAM marketplace. That order will be filled when
proceeds are available for the production and delivery of those units.
The DACH MARKET – 5BARz AG
The DACH/D-Deutschland or Germany, A-Austria and CH-Switzerland
group of countries in the European Union represents one of the most technologically advanced and progressive sectors of that economic
group representing a German speaking majority population based of 90.3 million people of which Germany, 78.3 million, Austria,
7.4 million, and Switzerland, 4.6 million
33
Formation of Subsidiary Company, 5BARz AG
On October 6, 2011, 5BARz International Inc. commenced the organization
under the laws of Switzerland, in the Canton of Zurich, a wholly owned subsidiary called 5BAR AG. In so doing the registrant acquired
5,100,000 shares, of the issued and outstanding stock of the newly incorporated Company. Aggregate proceeds paid for the shares
were CHF 51,000 representing the fully paid price of CHF 0.01 per share. 5BARz AG simultaneously had approved and issued to an
escrow agent 4,900,000 fully paid shares, at a price of CHF 0.01 per share for aggregate proceeds of CHF 49,000. Those shares are
being held for resale, and are more fully described herein. The net proceeds received on re-sale will be paid into 5BARz AG as
additional paid in capital. The documentation on this transaction was completed on March 26, 2012.
The newly formed subsidiary has appointed two directors, one of
which, Mr. Daniel Bland is the President, CEO and a Director of the registrant. The other Director is Mr. Peter Burkhardt of Oberengstringen,
Zurich, Switzerland.
Engagement of BDC Investment AG:
On October 15, 2011, 5Barz AG, entered into an agreement with BDC
Investment AG., an independent investment Company in Oberengstringen, Zurich, Switzerland to act as agent for the Company for the
sale of the 4,900,000 shares referred to above, on a best efforts basis. In addition to acting as agent for the 5BARz AG, BDC Investment
AG will provide consulting services and will be responsible for corporate communications, for 5BARz AG in the European marketplace.
Global Marketing and Distribution Agreement
On October 19, 2011, 5BARz International Inc. entered into a Marketing
and Distribution agreement with 5BARz AG, through which 5BARz AG holds the exclusive rights for the marketing and distribution
of products produced under the 5BARz
brand for markets in Switzerland, Austria and Germany. This sales and marketing program
will commence upon completion of the corporate formation and funding.
Results of Operations
|
3 Months ended
March 31, 2012
|
3 Months ended
March 31, 2011
|
Cumulative from November 14, 2008 (inception) to March 31, 2012
|
Amortization and depreciation
|
|
190
|
46
|
|
1,243
|
Bank charges & interest
|
|
14,622
|
4,913
|
|
58,019
|
Sales and marketing expenses
|
|
56,688
|
51,701
|
|
286,429
|
General and administrative
|
|
435,457
|
99,477
|
|
1,016,447
|
Total Operating Expenses
|
|
506,957
|
156,137
|
|
1,362,138
|
Other income (expenses)
|
|
389,040
|
-
|
|
409,844
|
Net Loss
|
$
|
117,917
|
156,137
|
$
|
952,294
|
34
The Company has incurred losses from inception, February 17, 2008
to March 31, 2012 in the aggregate amount of $952,294. On or about December 30, 2010 the Company changed from a designated shell
Corporation to an operating business with the acquisition of the assets comprising the 5BARz business opportunity. The loss from
operations of that business for the period January 1, 2011 to March 31, 2012 was $899,064, after giving effect to the loss as a
shell Company of $53,230 comprised of general and administrative expenses.
Our financial statements have been prepared assuming that we will
continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets
and classification of liabilities that might be necessary should we be unable to continue in operation.
The company will require additional capital to meet its’ long
term operating requirements. We expect to raise additional capital through a multi faceted strategy which may include the further
sale of equity securities, debt, and factoring facilities as the Company’s sales progress. In addition in November 2011 the
Company engaged BDC Investment AG, from Zurich, Switzerland to raise equity capital for the Company through the sale of up to 49%
of the Company’s subsidiary common stock, 5BARz AG incorporated in Zurich Switzerland and engaged for the marketing and distribution
of the 5BARz products in Switzerland, Germany and Austria. The Company expects that the acquisition of Cellynx Group, Inc. will
be favorably viewed by capital markets due to the synergy established between 5BARz and Cellynx in the process of commercializing
the 5Barz technology globally.
Three month period ended March 31, 2012 compared to three
month period ended March 31, 2011.
Our net loss for the three month period ended March 31, 2012 was
$117,917 compared to a net loss of $156,137 for the corresponding period for the prior year. During the three month period ended
March 31, 2012 the Company continued to accelerate the development of the 5BARz business opportunity and commenced financing the
business as well as establishing the infrastructure for the sales and marketing of 5BARz products,
During the three month period ended March 31, 2012, the Company
incurred general and administrative expenses of $435,457 compared to $99,477 incurred during the quarter ended September 30, 2010.
These general and administrative expenses incurred, include consulting fees accrued and paid to personnel and consulting firms
that are active in developing equity financing for the Company, on further developing the Latin American initiatives as well as
activity focused upon the development of the Companies product line for 2012. In addition consulting, travel and accommodation
fees have been incurred in order to expand the Company’s listing, investor relations and financing and business activities
into Europe, including the listing of the Companies securities in Berlin. During the quarter administrative fees were incurred
related to the acquisition of Cellynx Group, Inc. which represents a significant accomplishment by the Company, which will have
particularly significant effect on the future operations and financial results of the Company.
Our net loss during the three month period ended March 31, 2012
was $117,917 or ($0.0013) per share compared to a loss from operations of $156,137 or $0.0018 per share during the quarter ended
March 31, 2011. The weighted average number of shares outstanding was 91,812,982 for the three month period ended March 31, 2012
compared to 88,151,050 for quarter ended March 31, 2011, after giving retroactive effect to the 18 for 1 forward stock split completed
on November 29, 2010 and the subsequent cancellation of 87,800,000 shares on December 30, 2010.
35
Liquidity and Capital Resources
As at March 31, 2012
As at March 31, 2012, our current assets were $96,820 and our current
liabilities were $3,083,147, which resulted in a working capital deficit of $2,986,327 . As at March 31, 2012, current liabilities
were comprised in the most part of liabilities that were incurred by Cellynx Group, Inc in the aggregate amount of $2,679,616,
and in fact do not represent direct liabilities of the consolidated entity. Several of these Cellynx liabilities date back many
years, and the Company is intent upon a detailed revoew of those items and dealing with them in conjunction with financings that
are currently in process.
As at March 31, 2012, the Company’s total assets were $3,695,334
comprised of intellectual property in the amount of $2,228,368 and goodwill arising on the acquisition of Cellync Group, Inc in
the amount of $1,364,038.The intellectual property represents the patent applications and trademark registrations and license related
to the 5BARz technology by the combined entity. In addition the Company has made deposits and prepaid expenses of $19,959 in Switzerland
related to their office and operations in 5BARz AG.
As at March 31, 2012, our total liabilities were $3,157,520 comprised
of current liabilities as described above as well as the balance of the amount due to Dollardex Group Corp., of $74,373. The increase
in liabilities as at March 31, 2012 from quarter ended March 31, 2011 was again due to the acquisition of Cellynx Group, Inc on
March 29, 2012.
Stockholders’ equity decreased from a deficit at December
31, 2011 of $714,420 to a deficit balance of $537,814 at March 31, 2012. This decrease is attributable in the most part to equity
sales of common stock during the period, and issuances on the acquisition of Cellynx.
Cash Flows from Operating Activities
For the three month period ended March 31, 2012, net cash flows
used in operating activities was $129,030, consisting primarily of a significant increase in liabilities of Cellynxof $1,794,562.
Net cash flows provided by operating activities was decreased by a decrease in line of credit liability which was eliminated on
consolidation of the Cellynx operations. For the three months ended March 31, 2011, net cash flows used in operating activities
was $104,018 as the Company did not consolidate Cellynx Group, Inc at that time..
Cash Flows from Investing Activities
For the three month period ended March 31, 2012, net cash flows
used in investing activities was $1,592,787 comprised of payments made on the acquisition of intellectual property from Cellynx
in the amount of $1,800,000 plus a goodwill factor of $1,364,038 on the acquisition of Cellynx. The original acquisition of IP
from Cellynx for debt was cancelled. For the three months ended March 31, 2012, net cash flows used in investing activities was
$60,000.
36
Cash Flows from Financing Activities
We have financed our operations primarily from the issuance of equity
and notes payable. For the three month period ended March 31, 2012, net cash flows provided from financing activities was $1,749,469,
comprised of proceeds from the sale of common stock in the amount of $440,077, proceeds from the issuance of notes payable of $137,500
and the payment of certain liabilities and assets for common stock aggregating $705,000. In addition, the Company For the three
months ended March 31, 2011 cash flows from financing activities consisted of $337,122 comprised of proceeds on he sale of shares,
net of payments to Cellynx.
We expect that working capital requirements will continue be funded
through further issuances of securities, debt and from proceeds generated by sales, or through the leverage of these payments.
The Company has an outstanding purchase order received for it’s
first purchase order for sales of $3.2 million dollars. Our working capital requirements are expected to increase in line with
the growth of our business.
Plan of Operation and Funding
Existing working capital, further sales of equity securities and
anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no bank financing
arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt and
an increase in liabilities due from individuals and businesses that work with the Company. In connection with our business plan,
management anticipates additional increases in operating expenses and capital expenditures relating to: (i) development and marketing
of our product; and (ii) working capital. We intend to finance these expenses with further issuances of securities. Thereafter,
we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances
of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have
rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms,
or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of
prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
Material Commitments
As of the date of this Quarterly Report,
the Company has entered into a material commitment to Cellynx Group, Inc. to make available under the terms of a line of credit
agreement $2.2 million dollars. This is a subsidiary Company, and this funding will be paid when proceeds comeavailable.
Purchase of Significant Equipment
We do not intend to purchase any significant equipment during the
next twelve months.
Off-Balance Sheet Arrangements
As of the date of this Quarterly Report, we do not have any off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are
material to investors.
37
Going Concern
In our Annual Report on Form 10-K for the year ended December 31,
2010, our independent auditors included an explanatory paragraph in its report relating to our financial statements for the years
ended December 31, 2011 and 2010, which states that we have incurred negative cash flows from operations since inception, and expect
to incur additional losses in the future and have a substantial accumulated deficit. These conditions give rise to substantial
doubt about our ability to continue as a going concern. Our ability to expand operations and generate additional revenue and our
ability to obtain additional funding will determine our ability to continue as a going concern. Our condensed consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
We have prepared our financial statements assuming that we will
continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course
of business
Critical
Accounting Policies and Estimates
Our management’s discussion and analysis of our financial
condition and results of operations are based on our 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 1 to our financial statements, we believe that the following accounting policies are the most critical to aid you in fully
understanding and evaluating this management discussion and analysis.
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 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.
38
Impairment or Disposal of Long-lived Assets
The Company applies the provisions of Accounting Standards Codification
(“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 December
31, 2011, and March 31, 2012, there was no significant impairment of its long-lived assets.
Revenue Recognition
The Company's revenue recognition policies are in compliance with
ASC Topic 605, “Revenue Recognition.” Revenue is recognized at the date of shipment to customers, and when
the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability
is reasonably assured.
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. Penalties
and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No
significant penalties or interest relating to income taxes have been incurred during the three months ended December 31, 2011 and
2010.
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.
39
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Not Applicable.
ITEM 4. 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 a consultant providing
services commonly provided by a Chief Financial Officer ("CFO") carried out an evaluation of the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this report. Based on those evaluations, as of the Evaluation
Date, our CEO and CFO believe that:
(i) our disclosure controls and procedures are designed to ensure
that information required to be disclosed by us in the reports we file under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated
and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure;
and
(ii) our disclosure controls and procedures are effective
Changes in Internal Control over Financial Reporting
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 quarter ended March
31, 2011 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
40
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against
us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any
of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest
adverse to our company, with the exception of actions that have been commenced related to the subsidiary Company, Cellynx Group
Inc which we acquired March 29, 2012 as follows;
Cellynx
Group, Inc
wa
s a
Defendan
t
i
n
a
n
actio
n
brough
t
b
y
Dophinshir
e
L.P
.
regardin
g
its
office
space
in
Mission
Viejo,
CA.
That
action
has
since
been
dismissed.
Dolphinshir
e
L.P.
,
a
Californi
a
limite
d
partnershi
p
v
.
CelLyn
x
Group
,
Inc.
,
a
Nevad
a
corporatio
n
an
d
Doe
s
1
-
10
,
Superio
r
Cour
t
of
California, Orange County,
Case
No. 00521213. On
November 8, 2011, plaintiff
brought
suit against the
Company
for
unlawful
detainer
of
office
s
locate
d
a
t
2591
0
Acero
,
Suit
e
370
,
Missio
n
Viejo
,
C
A
9269
1
pursuan
t
t
o
a
leas
e
agreement
,
seekin
g
a
n
unspecifie
d
amoun
t
o
f
damages
not to exceed $25,000. The Company has engaged in settlement negotiations with the plaintiff and management expected to
settle. Cellynx has since, by agreement, vacated the leased premises and continues to negotiate a payout of past due rent and penalties
and has moved the general office to 4014 Calle Isabella, San Clemente, CA 92672.
A
similar action for
past due rent has been filed as
to its
facility in El
Dorado
Hills, CA.
CS
S
Properties
,
v
.
CelLyn
x
Group
,
Inc.
,
an
d
Doe
s
1
-
10
,
Superio
r
Cour
t
o
f
California
,
E
l
Dorad
o
County
,
Cas
e
No
.
PC
U 2
0
110442.
On October 12, 2010,
plaintiff brought suit against
the Company
for unlawful
detainer of offices
located
at 5047
Robert
J Matthews
Parkway, El
Dorado
Hills,
CA
95762
pursuant to
a
lease
agreement, seeking
an
unspecified amount
of
damages not
to
exceed
$25,000. The
Company has engaged in
settlement
negotiations with
the
plaintiff and
management expected to
settle before eviction. The Company has since, by agreement,
vacated the leased premises and continues to negotiate a payout of past due rent and penalties
.
Cellynx
was also
facing claims for back wages by some of its former employees.
Some of
those claims have been partially
paid and others were expected
to be
paid
in the
normal course of
business
or
were to be otherwise
defended.
Those claims have now been incorporated
into California Labor Commission
awards in favor of
those former employees. Those
awards
total
approximately $312,986.45
depending on
interest
charges.
The
first
award
has
been
converted into
a
judgment in
the
amount of
$118,224. Management had
negotiated
a
monthly payment plan
amounting to
$10,000 per
month
commencing on
February 1,
2012
and
every month thereafter until
the
judgment
has
been satisfied. This agreement is now in the process of revision
.
41
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCEEDS
During the three months ended March 31, 2012 and to the
date of this report we have issued shares of common stock as follows:
During the period, January 1, 2012 to March 31, 2012, 5BARz AG sold
78,000 common shares with a par value of 0.01 per share, at a price of CHF 3.00 ($3.26 US) per share, for aggregate proceeds of
234,000 CHF (US – $250,380). The proceeds received have been credited to additional paid in capital in these consolidated
financial statements.
During the period January 1, 2012 to March 31, 2012 the Company
issued 2,136,667 shares at prices ranging from $0.10 to $0.15 per share for proceeds of $ 251,500. These private placements are
exempt from registration pursuant to Regulation S under the securities act of 1934.
During the period from January 1, 2012 to March 31, 2012 the Company
settled $155,000 of debt to consultants of the Company by the issuance of shares at a price of $0.10 per share, and issued in aggregate
1,550,000 shares.
On March 29, 2012 the Company issued 9,000,000 shares to Cellynx
Group, Inc. at the market price of $0.20 per share for payment in full of a 60% interest in the patents and trademarks which comprise
the 5BARz technology.
On March 29, 2012 the Company issued 1,250,000 shares of common
stock to two founders of Cellynx Group, Inc., along with $170,000 in cash for 63,412,638 shares of the capital stock of Cellynx
Group, Inc.
On various days in April 2012 the Company issued in aggregate 331,667
shares in the capital stock of the Company in settlement of $ 55,247 of debts, at prices ranging from $0.12 to $0.15 per share.
On April 18, 2012 the Company sold 100,000 shares in the common
stock of the Company at a price of $0.15 per share in a private placement for aggregate proceeds of $15,000. The shares issued
were sold pursuant to a Regulation “S” exemption from registration pursuant to the Exchange Act of 1934.
On May 4, 2012 the Company sold 66,667 shares in the common stock
of the Company at a price of $0.12 per share in a private placement, for aggregate proceeds of $8,000.. The shares issued were
sold pursuant to a Regulation “S” exemption from registration pursuant to the Exchange Act of 1934.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
(REMOVED AND RESERVED)
ITEM 5. OTHER INFORMATION
(b)
|
There were no changes to the procedures by which security holders may recommend nominees to our board of directors.
|
42
ITEM 6. EXHIBITS
EXHIBIT INDEX
Exhibit
Number
|
|
Description
|
|
|
|
|
|
|
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 *
|
__________________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
5BARz International Inc.
|
|
(Registrant)
|
|
|
Date: May 24, 2012
|
By:
|
/s/ Daniel Bland
|
|
|
Daniel Bland
|
|
|
Chief Executive Officer
|
43