0001454124
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2012-03-31
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2012-03-31
0001454124
2012-05-01
iso4217:USD
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5Barz International, Inc.
0001454124
10-Q
2012-03-31
false
--12-31
No
No
Yes
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Q1
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<p style="margin: 0pt"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Note 1 – Organization and basis of reporting</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 11pt">5Barz International,
Inc. and its’ consolidated subsidiaries is the owner of a proprietary technology for the wireless marketplace, branded as
</font>5BARz™<font style="font-size: 11pt">. 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.  </font></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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”.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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).</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">wholly owned subsidiary Cellynx Inc. for the period from the date
of acquisition, March 29, 2012 to March 31, 2012.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Going concern </u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 11pt">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 </font>5BARz™<font style="font-size: 11pt">
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.</font></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Development stage </u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">The Company has been in the development stage since its formation
and has not yet realized any revenues from its planned operations.</p>
<p style="margin: 0pt"> </p>
<p style="margin: 0"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Note 2 - Summary of significant accounting policies</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Basis of presentation</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Cash</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Use of estimates</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Concentration of credit risk</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Equipment</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Intangible assets</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Impairment or disposal of long-lived assets</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">  </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Revenue recognition</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Foreign currency translation</u></b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">Transactions in foreign currencies have been translated into US
dollars using the temporal</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: left"><b><u>Fair value of financial instruments</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">We have adopted Accounting Standards Codification regarding <i>Disclosure
About Derivative Financial Instruments and Fair Value of Financial Instruments</i>. 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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Accounting for Derivatives</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.<b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> <u>Income taxes</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Net loss per share</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Recent accounting pronouncements</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">  </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Basis of presentation</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Cash</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Use of estimates</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Concentration of credit risk</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Equipment</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Intangible assets</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Impairment or disposal of long-lived assets</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Revenue recognition</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Foreign currency translation</u></b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">Transactions in foreign currencies have been translated into US
dollars using the temporal</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: left"><b><u>Fair value of financial instruments</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">We have adopted Accounting Standards Codification regarding <i>Disclosure
About Derivative Financial Instruments and Fair Value of Financial Instruments</i>. 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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Accounting for Derivatives</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.<b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> <u>Income taxes</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Net loss per share</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Recent accounting pronouncements</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">  </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="margin: 0pt"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Note 3 – Furniture & equipment</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">Equipment consisted of the following as at March 31, 2012 and 2011:</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 9pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: center">March 31, 2012</td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: center">December 31, 2011</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="width: 41%; font-size: 11pt">Furniture and equipment</td>
<td style="width: 2%; font-size: 11pt; text-align: center"> </td>
<td style="width: 3%; font-size: 11pt; text-align: center">$</td>
<td style="width: 20%; border-top: windowtext 1pt solid; font-size: 11pt; text-align: center">  9,879</td>
<td style="width: 2%; font-size: 11pt; text-align: center"> </td>
<td style="width: 4%; font-size: 11pt; text-align: center">$</td>
<td style="width: 28%; border-top: windowtext 1pt solid; font-size: 11pt; text-align: center">          -</td></tr>
<tr style="vertical-align: top; background-color: White">
<td style="font-size: 11pt">Computer equipment</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center">   4,653</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center">   4,653</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> 14,532</td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="font-size: 11pt; font-weight: bold; text-align: center">   4,653</td></tr>
<tr style="vertical-align: top; background-color: White">
<td style="font-size: 11pt">Accumulated depreciation</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center">   8,424</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center">      468</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="font-size: 11pt">Furniture & equipment net</td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center">$</td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: center">  6,108</td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center">$</td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: center">   4,185</td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">During the three months ended March 31, 2012 the Company incurred
depreciation expense of $190,(2011 - $46 ).</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Note 4 – Intangible Assets</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">Intangible assets are comprised of patents, trademarks and
license rights which are recorded at cost, comprised of legal fees and acquisition costs. Once each patent or trademark is issued,
capitalized costs are amortized on a straight-line basis over a period not to exceed 20 years and 10 years, respectively. License
rights are amortized over the period of the respective license agreement.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 9pt Times New Roman, Times, Serif; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 27%; font-size: 11pt"> </td>
<td style="width: 4%; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="width: 2%; border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="width: 33%; border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: center">March 31, 2012</td>
<td style="width: 3%; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="width: 3%; border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="width: 28%; border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: center">December 31, 2011</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="font-size: 11pt">Patents</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="font-size: 11pt; text-align: center">$</td>
<td style="font-size: 11pt; text-align: right">1,996,785</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="font-size: 11pt; text-align: center">$</td>
<td style="font-size: 11pt; text-align: right">1,685,867</td></tr>
<tr style="vertical-align: top; background-color: White">
<td style="font-size: 11pt">Trademarks</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="font-size: 11pt; text-align: right"> 234,277</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="font-size: 11pt; text-align: right">197,783</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="font-size: 11pt">License rights</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right"> 4,214</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">-</td></tr>
<tr style="vertical-align: top; background-color: White">
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="font-size: 11pt; text-align: center">$</td>
<td style="font-size: 11pt; font-weight: bold; text-align: right">2,235,276</td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="font-size: 11pt; text-align: center">$</td>
<td style="font-size: 11pt; font-weight: bold; text-align: right">1,883,650</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="font-size: 11pt">Accumulated amortization</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right"> 6,908</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right"> -</td></tr>
<tr style="vertical-align: top; background-color: White">
<td style="font-size: 11pt">Intangibles, net</td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center">$</td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: right">2,228,368</td>
<td style="font-size: 11pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: center">$</td>
<td style="border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: right">1,883,650</td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="margin: 0pt"> </p>
<p style="margin: 0pt"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Note 5 - Cumulative sales of stock:</b></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 13.15pt">Since its inception, we have issued shares of common stock
as follows:</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 13.15pt; text-align: justify">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 13.15pt; text-align: justify">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 13.15pt; text-align: justify">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</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 13.15pt; text-align: justify">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> 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 <font style="color: black">Fifty Thousand Euros (€50,000), along with accrued interest thereon</font>.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">  </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="margin: 0pt"> </p>
<p style="margin: 0pt"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 6pt"><b>Note 6 - Asset acquisition agreement:</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 6pt"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 13.15pt; text-align: justify">On December 31, 2010, the Company
acquired three agreements as follows;</p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 13.15pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.5in"><font style="font-size: 11pt">(i)</font></td><td style="text-align: justify"><font style="font-size: 11pt">An “Amended and Restated Master Global Marketing and Distribution
Agreement.”</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 13.15pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.5in"><font style="font-size: 11pt">(ii)</font></td><td style="text-align: justify"><font style="font-size: 11pt">An “Asset Purchase Agreement”</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 13.15pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.5in"><font style="font-size: 11pt">(iii)</font></td><td style="text-align: justify"><font style="font-size: 11pt">A “Revolving line of credit agreement </font>and<font style="font-size: 11pt">
security agreement”.</font></td></tr></table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 13.15pt; text-align: justify">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 13.15pt; text-align: justify">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;</p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 13.15pt"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.5in"><font style="font: 7pt Times New Roman, Times, Serif"> </font></td><td style="text-align: justify"><font style="font-size: 11pt">i.</font><font style="font: 7pt Times New Roman, Times, Serif">           
</font><font style="font-size: 11pt">5BARz International, Inc. acquired a 60% interest in the patents and trademarks held by Cellynx
Group Inc., referred to as the “</font>5BARz™” technology. <font style="font-size: 11pt">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.</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 13.15pt"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.5in"><font style="font: 7pt Times New Roman, Times, Serif"> </font></td><td style="text-align: justify"><font style="font-size: 11pt">ii.</font><font style="font: 7pt Times New Roman, Times, Serif">           
</font><font style="font-size: 11pt">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.</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.5in"><font style="font: 7pt Times New Roman, Times, Serif"> </font></td><td><font style="font-size: 11pt">iii.</font><font style="font: 7pt Times New Roman, Times, Serif">           
</font><font style="font-size: 11pt">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.</font></td></tr></table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="margin: 0pt"> </p>
<p style="margin: 0pt"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 13.15pt"><b>Note 7 – Options Warrants and Convertible Securities:</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Promissory note </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt/115% Times New Roman, Times, Serif; margin: 0 0 10pt"><b><u>Securities Purchase Agreements</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Convertible debenture agreement</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">$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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: center"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify"><b><u>Equity Investment Agreement</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 12pt">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Cellynx Group, Inc. – Convertible Promissory Notes </u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">The Company’s subsidiary, Cellynx Group, Inc. has three convertible
promissory notes outstanding at March 31, 2012 as follows;</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 9pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 16%; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Issue Date</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p></td>
<td style="width: 4%; font-size: 11pt; font-weight: bold; text-align: right; vertical-align: bottom"> </td>
<td style="width: 11%; font-size: 11pt; font-weight: bold; text-decoration: underline; text-align: center">Principal Amount</td>
<td style="width: 21%; font-size: 11pt; font-weight: bold; text-decoration: underline">Date of Maturity</td>
<td style="width: 3%; font-size: 11pt; font-weight: bold; text-align: right"> </td>
<td style="width: 11%; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: right"><b><u>Accrued</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: right"><b><u>Interest</u></b></p></td>
<td style="width: 2%; font-size: 11pt; font-weight: bold; text-align: right"> </td>
<td style="width: 14%; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: right"><b><u>Beneficial</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: right"><b><u>Conversion</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: right"><b><u>Factor</u></b></p></td>
<td style="width: 2%; font-size: 11pt; font-weight: bold; text-align: right"> </td>
<td style="width: 16%; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: right"><b><u>Principle due</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: right"><b><u>March 31, 2012</u></b></p></td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="font-size: 11pt">Mar 10, 2011</td>
<td style="font-size: 11pt; text-align: right; vertical-align: bottom">$</td>
<td style="font-size: 11pt; text-align: center">42,500</td>
<td style="font-size: 11pt">Dec. 7, 2011</td>
<td style="font-size: 11pt; text-align: right">$</td>
<td style="font-size: 11pt; text-align: right">3,059</td>
<td style="font-size: 11pt; text-align: right">$</td>
<td style="font-size: 11pt; text-align: right">114,990</td>
<td style="font-size: 11pt; text-align: right">$</td>
<td style="font-size: 11pt; text-align: right">13,400</td></tr>
<tr style="vertical-align: top; background-color: White">
<td style="font-size: 11pt">May 18, 2011</td>
<td style="font-size: 11pt; text-align: right; vertical-align: bottom">$</td>
<td style="font-size: 11pt; text-align: center">32,500</td>
<td style="font-size: 11pt">Nov. 18, 2011</td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt; text-align: right"> 2,258</td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt; text-align: right">282,837</td>
<td style="font-size: 11pt; text-align: right">$</td>
<td style="font-size: 11pt; text-align: right">32,500</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="font-size: 11pt">Jan 8, 2012</td>
<td style="font-size: 11pt; text-align: right; vertical-align: bottom">$</td>
<td style="font-size: 11pt; text-align: center">15,000</td>
<td style="font-size: 11pt">July 8, 2012</td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt; text-align: right"> 266</td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt; text-align: right">122,469</td>
<td style="font-size: 11pt; text-align: right">$</td>
<td style="font-size: 11pt; text-align: right">15,000</td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">The notes incur interest at a rate of 8% per annum.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><u>Cellynx Group Inc. - Options and Warrants</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">At March 31, 2012 Cellynx Group Inc. has the following Options and
Warrants outstanding;</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The number and weighted average exercise prices
of all options exercisable as of March 31, 2012, are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 9pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td colspan="14" style="border-bottom: black 1pt solid; font-size: 10pt; text-align: center">Options Exercisable</td>
<td style="padding-bottom: 1.1pt; font-size: 10pt"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Range of</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p></td>
<td style="padding-bottom: 1.1pt; font-size: 11pt; text-align: center"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 1.1pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number Outstanding as of</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">September 30, 2011</p></td>
<td style="padding-bottom: 1.1pt; font-size: 11pt; text-align: center"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 1.1pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p></td>
<td style="padding-bottom: 1.1pt; font-size: 11pt; text-align: center"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining Contractual</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Life (Years)</p></td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="2" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td colspan="2" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td colspan="2" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td colspan="2" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 1%; font-size: 11pt">$</td>
<td style="width: 29%; font-size: 11pt; text-align: right">0.014 - 0.05</td>
<td style="width: 1%; font-size: 11pt"> </td>
<td style="width: 1%; font-size: 11pt"> </td>
<td style="width: 1%; font-size: 11pt"> </td>
<td style="width: 20%; font-size: 11pt; text-align: right">3,415,170</td>
<td style="width: 1%; font-size: 11pt"> </td>
<td style="width: 1%; font-size: 11pt"> </td>
<td style="width: 1%; font-size: 11pt"> </td>
<td style="width: 20%; font-size: 11pt; text-align: right">0.018</td>
<td style="width: 1%; font-size: 11pt"> </td>
<td style="width: 1%; font-size: 11pt"> </td>
<td style="width: 1%; font-size: 11pt"> </td>
<td style="width: 20%; font-size: 11pt; text-align: right">3.93</td>
<td style="width: 1%; font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font-size: 11pt">$</td>
<td style="font-size: 11pt; text-align: right">0.06 - 0.100</td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">4,007,338</td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">0.074</td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">0.96</td>
<td style="font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-size: 11pt">$</td>
<td style="font-size: 11pt; text-align: right">0.110 - 0.150</td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">8,566,279</td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">0.126</td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">2.86</td>
<td style="font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font-size: 11pt">$</td>
<td style="font-size: 11pt; text-align: right">0.160 - 0.200</td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">1,792,667</td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">0.177</td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">2.68</td>
<td style="font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-size: 11pt">$</td>
<td style="padding-bottom: 1.1pt; font-size: 11pt; text-align: right">0.210 - 0.260</td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 1.1pt; font-size: 11pt; text-align: right">1,260,040</td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt; text-align: right">0.217</td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt; text-align: right">2.43</td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; font-size: 11pt; text-align: right">19,041,494</td>
<td style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt"> </td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Warrants</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes the warrant
activity:</p>
<table cellspacing="0" cellpadding="0" style="font: 9pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 1.1pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number of</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Warrants</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 1.1pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 1.1pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average Remaining</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Contractual Life</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td style="padding-bottom: 1.1pt; font-size: 11pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Aggregate</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Intrinsic Value</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.1pt; font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 11pt">Outstanding at December 31, 2011</td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">36,114,757</td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt">$</td>
<td style="font-size: 11pt; text-align: right">0.12</td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td colspan="2" style="font-size: 11pt"> </td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td colspan="2" style="font-size: 11pt"> </td>
<td nowrap="nowrap" style="font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font-size: 11pt">Granted</td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">—</td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">—</td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td colspan="2" style="font-size: 11pt"> </td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td colspan="2" style="font-size: 11pt"> </td>
<td nowrap="nowrap" style="font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font-size: 11pt">Exercised</td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">—</td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">—</td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td colspan="2" style="font-size: 11pt"> </td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td colspan="2" style="font-size: 11pt"> </td>
<td nowrap="nowrap" style="font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font-size: 11pt">Expired</td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">—</td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right"> </td>
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; text-align: right">—</td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td colspan="2" style="font-size: 11pt"> </td>
<td nowrap="nowrap" style="font-size: 11pt"> </td>
<td style="font-size: 11pt"> </td>
<td colspan="2" style="font-size: 11pt"> </td>
<td nowrap="nowrap" style="font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 43%; padding-bottom: 2.25pt; font-size: 11pt">Outstanding at March 31, 2012</td>
<td style="width: 1%; padding-bottom: 2.25pt; font-size: 11pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="width: 12%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; font-size: 11pt; text-align: right">36,114,757</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; font-size: 11pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; font-size: 11pt">$</td>
<td style="width: 11%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; font-size: 11pt; text-align: right">0.27</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; font-size: 11pt; text-align: right"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="width: 11%; padding-bottom: 2.25pt; font-size: 11pt; text-align: right">1.18</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; font-size: 11pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; font-size: 11pt">$</td>
<td style="width: 11%; border-bottom: black 2.25pt double; font-size: 11pt; text-align: right">0</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt; font-size: 11pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.25pt; font-size: 11pt">Exercisable at March 31, 2012</td>
<td style="padding-bottom: 2.25pt; font-size: 11pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; font-size: 11pt; text-align: right">36,114,757</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; font-size: 11pt">$</td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; font-size: 11pt; text-align: right">0.27</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt; text-align: right">1.18</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; font-size: 11pt"> </td>
<td style="padding-bottom: 2.25pt; font-size: 11pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; font-size: 11pt">$</td>
<td style="border-bottom: black 2.25pt double; font-size: 11pt; text-align: right">0</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; font-size: 11pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></p>
<p style="margin: 0pt"> </p>
<p style="margin: 0pt"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 13.15pt"><b>Note 8 - Related party transactions:</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="margin: 0pt"> </p>
<p style="margin: 0pt"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Note 9 - Formation of subsidiary company, 5BARz AG</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.<b> </b>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)</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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<b> </b>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.</p>
<p style="margin: 0pt"> </p>
<p style="margin: 0pt"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Note 10 - Stock acquisition agreement, Cellynx Group, Inc.</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="margin: 0pt"> </p>
<p style="margin: 0pt"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Note 11 - Business combination</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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 $875,000, as follows;</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 9pt Times New Roman, Times, Serif; border-collapse: collapse">
<tr style="background-color: rgb(204,238,255)">
<td style="width: 4%; vertical-align: top; font-size: 11pt; text-align: right">i.</td>
<td style="width: 1%"> </td>
<td style="width: 68%; vertical-align: top; font-size: 11pt">Cash consideration paid </td>
<td style="width: 4%; vertical-align: top; font-size: 11pt"> </td>
<td style="width: 4%; vertical-align: bottom; font-size: 11pt; text-align: right">$</td>
<td style="width: 14%; vertical-align: bottom; font-size: 11pt; text-align: right">$ 170,000</td>
<td style="width: 5%; vertical-align: top; font-size: 11pt; text-align: right"> </td></tr>
<tr style="background-color: White">
<td style="vertical-align: top; font-size: 11pt; text-align: right">ii.</td>
<td> </td>
<td style="vertical-align: top; font-size: 11pt">1,250,000 common shares of the registrant issued at a market price of $0.20 per share</td>
<td style="vertical-align: top; font-size: 11pt"> </td>
<td style="vertical-align: bottom; font-size: 11pt; text-align: right"> </td>
<td style="vertical-align: bottom; font-size: 11pt; text-align: right">250,000</td>
<td style="vertical-align: top; font-size: 11pt; text-align: right"> </td></tr>
<tr style="background-color: rgb(204,238,255)">
<td style="vertical-align: top; font-size: 11pt; text-align: right">iii.</td>
<td> </td>
<td style="vertical-align: top; font-size: 11pt">Redemption of convertible debt for 350 million shares of Cellynx Group Inc. common stock</td>
<td style="vertical-align: top; font-size: 11pt"> </td>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; font-size: 11pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; font-size: 11pt; text-align: right">455,000</td>
<td style="vertical-align: bottom; font-size: 11pt">(a)</td></tr>
<tr style="background-color: White">
<td style="vertical-align: top; font-size: 11pt; text-align: right"> </td>
<td> </td>
<td style="vertical-align: top; font-size: 11pt"> </td>
<td style="vertical-align: top; font-size: 11pt"> </td>
<td style="vertical-align: bottom; font-size: 11pt; text-align: right"> </td>
<td style="vertical-align: bottom; font-size: 11pt; text-align: right"> </td>
<td style="vertical-align: top; font-size: 11pt; text-align: right"> </td></tr>
<tr style="background-color: rgb(204,238,255)">
<td style="vertical-align: top; font-size: 11pt; text-align: right"> </td>
<td> </td>
<td style="vertical-align: top; font-size: 11pt">Fair market value of consideration paid</td>
<td style="vertical-align: top; font-size: 11pt"> </td>
<td style="vertical-align: bottom; font-size: 11pt; text-align: right">$</td>
<td style="vertical-align: bottom; font-size: 11pt; text-align: right">$ 875,000</td>
<td style="vertical-align: top; font-size: 11pt; text-align: right"> </td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><font style="font-size: 11pt">(a)</font></td><td><font style="font-size: 11pt">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.</font></td></tr></table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">The amounts recognized for each class of the acquiree’s assets
and liabilities recognized at the acquisition date, March 29, 2012 are as follows;</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font-size: 11pt">
<tr>
<td style="width: 36%; vertical-align: bottom; border: windowtext 1pt solid; font-weight: bold; text-align: left">Description</td>
<td style="width: 2%; text-align: right; vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 1pt solid"> </td>
<td style="width: 20%; vertical-align: top; border: Black 1pt solid; font-weight: bold">Net book value of Cellynx Group, Inc. consolidated assets and liabilities</td>
<td style="width: 3%; text-align: right; vertical-align: bottom; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid"> </td>
<td style="width: 14%; vertical-align: bottom; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; font-weight: bold; text-align: right">Adjustments (i)</td>
<td style="width: 3%; text-align: right; vertical-align: bottom; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid"> </td>
<td style="width: 22%; vertical-align: top; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; font-weight: bold">Valuation attributed to assets acquired</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid">Current assets</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid">$</td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">3,260</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"> </td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid">$</td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">3,260</td></tr>
<tr style="vertical-align: top; background-color: White">
<td style="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid">Patents, trademarks, and license</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">44,718</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"> </td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">44,718</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid">Investment in 5BARz</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">1,800,000</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"> </td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">1,800,000</td></tr>
<tr style="vertical-align: top; background-color: White">
<td style="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid">Furniture and equipment</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">2,113</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"> </td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">2,113</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid">Accounts payable and accruals</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">1,735,112</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"> </td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">1,735,112</td></tr>
<tr style="vertical-align: top; background-color: White">
<td style="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid">Notes payable (net of discount)</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">368,411</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"> </td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">368,411</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid">Beneficial conversion liability</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">5,856,633</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid">$</td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">(5,621,027)</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">235,606</td></tr>
<tr style="vertical-align: top; background-color: White">
<td style="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid">LOC payable – 5BARz (net)</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">514,745</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">( 514,745)</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">0</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="border-right: Black 1pt solid; border-left: Black 1pt solid">Net book value of assets acquired</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid">$</td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right"> (6,624,810)</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">(6,135,772)</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">(489,038)</td></tr>
<tr style="vertical-align: top; background-color: White">
<td style="border: windowtext 1pt solid">Goodwill</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"> </td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right">1,364,038</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td style="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid">Purchase price</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid"> </td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"> </td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid; border-right: Black 1pt solid">$</td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: right"> 875,000</td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0"><font style="font: 11pt Calibri, Helvetica, Sans-Serif">(i)</font></td><td><font style="font: 11pt Calibri, Helvetica, Sans-Serif">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.</font></td></tr></table>
<p style="font: 11pt Calibri, Helvetica, Sans-Serif; margin: 0"> </p>
<p style="font: 11pt Calibri, Helvetica, Sans-Serif; margin: 0"><font style="color: black">The individual results of operation
for Cellynx Group Inc. for the quarter ended March 31, 2012 are available at the web site </font>www.sec.gov<font style="color: black">,
as that entity is a reporting public company, trading on the OTCBB in the US under trading symbol “CYNX”.</font></p>
<p style="font: 11pt Calibri, Helvetica, Sans-Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 12 - Subsequent events</b></p>
<p style="font: 11pt Calibri, Helvetica, Sans-Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Sales of Common Stock</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Commitment to Issue Stock and Options</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><u>Restriction on the Re-Sale of 5BARz International
Inc shares held by Cellynx;</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b><u>Investment in Cellynx Group, Inc.</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="margin: 0pt"> </p>