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<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, comprised of highly
engineered devices, 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 acquired a set of agreements to acquire from Cellynx Group, Inc. certain rights and 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 June 30, 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. In conjunction with the asset purchase agreement
completed on March 29, 2012, 5BARz International Inc. issued 9,000,000 shares representing an 8.7% reciprocal holding by Cellynx
Group Inc. in 5Barz International Inc.</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 June 30, 2012
and the financial position and results of operation for Cellynx Group Inc. and its wholly owned subsidiary Cellynx Inc. for the
period from the date of acquisition, March 29, 2012 to June 30, 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">During the fiscal year June 30, 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="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 June 30, 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: 10pt 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">June 30, 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="background-color: #CCEEFF">
<td style="width: 48%; vertical-align: top; font-size: 11pt">Furniture and equipment</td>
<td style="width: 4%; vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="width: 2%; vertical-align: bottom; font-size: 11pt; text-align: right">$</td>
<td style="width: 20%; vertical-align: bottom; border-top: Black 1pt none; font-size: 11pt; text-align: right">9,879</td>
<td style="width: 4%; vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="width: 2%; vertical-align: bottom; font-size: 11pt; text-align: right">$</td>
<td style="width: 20%; vertical-align: bottom; border-top: Black 1pt none; font-size: 11pt; text-align: right">-</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; font-size: 11pt">Computer equipment</td>
<td style="vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">4,653</td>
<td style="vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">4,653</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; font-size: 11pt"> </td>
<td style="vertical-align: top; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; font-size: 11pt; font-weight: bold; text-align: right"> </td>
<td style="vertical-align: bottom; font-size: 11pt; font-weight: bold; text-align: right">14,532</td>
<td style="vertical-align: top; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; font-size: 11pt; font-weight: bold; text-align: right"> </td>
<td style="vertical-align: bottom; font-size: 11pt; font-weight: bold; text-align: right">4,653</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; font-size: 11pt">Accumulated depreciation</td>
<td style="vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">8,992</td>
<td style="vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">   468</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; font-size: 11pt">Furniture & equipment net</td>
<td style="vertical-align: top; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">$</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: right">5,540</td>
<td style="vertical-align: top; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">$</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: right">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 six months ended June 30, 2012 the Company incurred depreciation
expense of $965, (2011 - $180).</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Note 4 – Intangible Assets</b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">Intangible assets are comprised of patents, trademarks and
license rights which are recorded at cost, comprised of legal fees and acquisition costs. Once each patent or trademark is issued,
capitalized costs are amortized on a straight-line basis over a period not to exceed 20 years and 10 years, respectively. License
rights are amortized over the period of the respective license agreement.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 48%"> </td>
<td style="width: 4%; font-weight: bold; text-align: center"> </td>
<td style="width: 2%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center"> </td>
<td style="width: 20%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">June 30, 2012</td>
<td style="width: 4%; font-weight: bold; text-align: center"> </td>
<td style="width: 2%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center"> </td>
<td style="width: 20%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">December 31, 2011</td></tr>
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<td style="vertical-align: top">Patents</td>
<td style="vertical-align: top; text-align: center"> </td>
<td style="vertical-align: bottom; text-align: right">$</td>
<td style="vertical-align: bottom; text-align: right">1,998,943</td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">$</td>
<td style="vertical-align: bottom; text-align: right">1,685,867</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top">Trademarks</td>
<td style="vertical-align: top; text-align: center"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">234,277</td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">197,783</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">License rights</td>
<td style="vertical-align: top; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; text-align: right">4,214</td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right">-</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top"> </td>
<td style="vertical-align: top; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; text-align: right">$</td>
<td style="vertical-align: bottom; font-weight: bold; text-align: right">2,237,434</td>
<td style="vertical-align: bottom; font-weight: bold; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">$</td>
<td style="vertical-align: bottom; font-weight: bold; text-align: right">1,883,650</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">Accumulated amortization</td>
<td style="vertical-align: top; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; text-align: right">7,168</td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right">-</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top">Intangibles, net</td>
<td style="vertical-align: top; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right">$</td>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; font-weight: bold; text-align: right">2,230,266</td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right">$</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: right">1,883,650</td></tr>
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<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </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. This 9,000,000 share position represents a reciprocal share position held by Cellynx Group, Inc. 5Barz International
Inc.</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="font: 11pt Times New Roman, Times, Serif; margin: 0 0 6pt"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 6pt">During the period from April 1, 2012 to June 30, 2012 the
Company issued 2,936,667 shares of common stock at prices ranging from $0.08 to $0.15 per share. Proceeds received for the private
placements are comprised of cash of $39,500 and the settlement of debts for services in the amount of $267,932.</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 cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px; padding-bottom: 13.15pt; font-size: 12pt"> </td>
<td style="width: 48px; padding-bottom: 13.15pt">(i)</td>
<td style="padding-bottom: 13.15pt; text-align: justify">An “Amended and Restated Master Global Marketing and Distribution Agreement.”</td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px; padding-bottom: 13.15pt; font-size: 12pt"> </td>
<td style="width: 48px; padding-bottom: 13.15pt">(ii)</td>
<td style="padding-bottom: 13.15pt; text-align: justify">An “Asset Purchase Agreement”</td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px; padding-bottom: 13.15pt; font-size: 12pt"> </td>
<td style="width: 48px; padding-bottom: 13.15pt">(iii)</td>
<td style="padding-bottom: 13.15pt; text-align: justify">A “Revolving line of credit agreement and security agreement”.</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 cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 10px; padding-bottom: 13.15pt; font-size: 12pt"> </td>
<td style="width: 48px; padding-bottom: 13.15pt; font-size: 7pt"> </td>
<td style="padding-bottom: 13.15pt; font-size: 12pt; text-align: justify"><font style="font-size: 11pt">i.</font><font style="font-size: 7pt">            </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>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-right: 0; text-align: center"></p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 10px; padding-bottom: 13.15pt; font-size: 12pt"> </td>
<td style="width: 48px; padding-bottom: 13.15pt; font-size: 7pt"> </td>
<td style="padding-bottom: 13.15pt; font-size: 12pt; text-align: justify"><font style="font-size: 11pt">ii.</font><font style="font-size: 7pt">            </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 $643,182 has been advanced as of June 30, 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 June 30, 2012, the Company had converted $139,200 of the amount due under the revolving line of credit facility for 854,745,971 shares of the capital stock of Cellynx Group, Inc. Cellynx is a consolidated subsidiary of 5Barz International Inc., since March 29, 2012. 5Barz currently holds a 58.6% equity interest in Cellynx Group, Inc.</font></td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 10px; font-size: 12pt"> </td>
<td style="width: 48px; font-size: 7pt"> </td>
<td style="font-size: 12pt"><font style="font-size: 11pt">iii.</font><font style="font-size: 7pt">            </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="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 Times New Roman, Times, Serif; margin: 0">On February 27, 2012, 5BARz International Inc., (“the Company”),
completed a transaction pursuant to a Promissory Note agreement (the Note), through which the Company borrowed $37,500. The Note
bears interest at a rate of 8%, and is due on November 29, 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 at a variable conversion
price equal to 55% of the average of the three lowest closing bid prices for the Company’s common stock for a period of 10
days prior to the date of notice of conversion.</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 3, 2012, 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 February 3, 2013, (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 at a variable conversion
price equal to 55% of the average of the three lowest closing bid prices for the Company’s common stock for a period of 10
days prior to the date of notice of conversion.</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/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 & Equity Investment 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">In January 2012, the Company negotiated potential agreements for
a convertible debenture and an equity investment agreement with a private investment firm. As contemplated, the convertible debenture
agreement provided that the investor could convert the principal and unpaid interest into a certain number of shares 180 days from
the date of the agreement. As at June 30, 2012, the Company had received $150,000 in funding from the private investment firm.</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 August 2, 2012 and August 13, 2012, the Company received conversion
notices that materially conflict with the parties’ negotiations and the terms of the agreement. Based on those and related
communications, the Company has concluded that there has been no meeting of the minds between the Company and the private investment
firm on key provisions of the putative agreements.</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">As of today’s date, the Company is in discussions with the
investment firm to resolve the situation and to enter into an alternative financing agreement. The Company intends to continue
these discussions, but there remains a possibility that the Company could become involved in litigation relating to the situation.
Based on its analysis of the facts known at this time, the Company has recorded no contingent liability with respect to the disagreement.
The Company will seasonably update this disclosure to reflect any material developments relating to this situation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 3pt 0 0pt; text-align: center"></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>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 two convertible
promissory notes outstanding at June 30, 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: 11pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
<td style="width: 20%; vertical-align: top; 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: 1%; vertical-align: bottom; font-weight: bold; text-align: right"> </td>
<td style="width: 13%; vertical-align: top; font-weight: bold; text-decoration: underline; text-align: center">Principal Amount</td>
<td style="width: 18%; vertical-align: top; font-weight: bold; text-decoration: underline; text-align: center">Date of Maturity</td>
<td style="width: 4%; vertical-align: top; font-size: 9pt"> </td>
<td style="width: 1%; vertical-align: top; font-weight: bold; text-align: right"> </td>
<td style="width: 11%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Accrued</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Interest</u></b></p></td>
<td style="width: 4%; vertical-align: top; font-size: 9pt"> </td>
<td style="width: 1%; vertical-align: top; font-weight: bold; text-align: right"> </td>
<td style="width: 11%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Beneficial</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Conversion</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Factor</u></b></p></td>
<td style="width: 4%; vertical-align: top; font-size: 9pt"> </td>
<td style="width: 1%; vertical-align: top; font-weight: bold; text-align: right"> </td>
<td style="width: 11%; vertical-align: top; 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>June 30, 2012</u></b></p></td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">January 8, 2012</td>
<td style="vertical-align: bottom; text-align: center">$</td>
<td style="vertical-align: bottom; text-align: center">15,000 (1)</td>
<td style="vertical-align: bottom; text-align: center">July 8, 2012</td>
<td style="vertical-align: top; font-size: 9pt"> </td>
<td style="vertical-align: top; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: center">299</td>
<td style="vertical-align: bottom; font-size: 9pt; text-align: center"> </td>
<td style="vertical-align: top; text-align: right"> </td>
<td style="vertical-align: top; text-align: center">43,237</td>
<td style="vertical-align: bottom; font-size: 9pt; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">$</td>
<td style="vertical-align: bottom; text-align: right">15,000</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">May 24, 2012</td>
<td style="vertical-align: bottom; text-align: center">$</td>
<td style="vertical-align: bottom; text-align: center">37,500 (2)</td>
<td style="vertical-align: bottom; text-align: center">November 20, 2012</td>
<td style="vertical-align: top; font-size: 9pt"> </td>
<td style="vertical-align: top; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: center">304</td>
<td style="vertical-align: bottom; font-size: 9pt; text-align: center"> </td>
<td style="vertical-align: top; text-align: right"> </td>
<td style="vertical-align: top; text-align: center">36,321</td>
<td style="vertical-align: bottom; font-size: 9pt; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">37,500</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>
<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">(1)</font></td><td><font style="font-size: 11pt">The terms of this note are such that subsequent to the prepayment date six months after the issue
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 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. This note was paid off by the Company on
the prepayment date (see subsequent events note).</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: 0.25in"></td><td style="width: 0.25in"><font style="font-size: 11pt">(2)</font></td><td><font style="font-size: 11pt">The terms of this note are such that subsequent to the prepayment date six months after the issue
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 variable conversion factor. The variable conversion factor is calculated
by dividing the amount to be converted by the conversion price which is equal to 51% 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
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.</font></td></tr></table>
<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 interest rate in the note differential from fair market value interest for the Company, 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">  </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 June 30, 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 June 30, 2012, are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt 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; text-align: center"> </td>
<td style="padding-bottom: 1.1pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: windowtext 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">June 30, 2012</p></td>
<td style="padding-bottom: 1.1pt; text-align: center"> </td>
<td style="padding-bottom: 1.1pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: windowtext 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; text-align: center"> </td>
<td style="padding-bottom: 1.1pt; 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"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #B6DDE8">
<td style="width: 1%; text-align: right">$</td>
<td style="width: 18%; text-align: right">0.0006</td>
<td style="width: 3%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 25%; text-align: right">12,500,000</td>
<td style="width: 2%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 20%; text-align: right">0.0006</td>
<td style="width: 4%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 20%; text-align: right">5.00</td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right">$</td>
<td style="text-align: right">0.014 - 0.05</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,000,000</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.017</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3.93</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: right">$</td>
<td style="text-align: right">0.06 - 0.100</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">767,337</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.072</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.96</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: right">$</td>
<td style="text-align: right">0.110 - 0.150</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; text-align: right">1,255,000</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.13</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.86</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: windowtext 2.25pt double; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: windowtext 2.25pt double; padding-bottom: 2.25pt; text-align: right">15,522,337</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt"> </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: 11pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.1pt"> </td>
<td style="padding-bottom: 1.1pt"> </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"> </td>
<td style="padding-bottom: 1.1pt"> </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"> </td>
<td style="padding-bottom: 1.1pt"> </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"> </td>
<td style="padding-bottom: 1.1pt"> </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"> </td></tr>
<tr style="vertical-align: bottom">
<td>Outstanding at December 31, 2011</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">36,114,757</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.12</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Granted</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">—</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">—</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Exercised</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">—</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">—</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Expired</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">10,060,000</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">—</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 43%; padding-bottom: 2.25pt">Outstanding at June 30, 2012</td>
<td style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 12%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">26,054,757</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">$</td>
<td style="width: 11%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">0.765</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 11%; padding-bottom: 2.25pt; text-align: right">.55</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; text-align: right">$</td>
<td style="width: 11%; border-bottom: black 2.25pt double; text-align: right">0</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt">Exercisable at June 30, 2012</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">26,054,757</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">0.765</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right">.55</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">0</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt"> </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="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Note 9 – Investment in 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 six months ended June 30, 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="font: 11pt Times New Roman, Times, Serif; margin: 0"><b>Note 10 – Investment in 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="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 at the acquisition date,
which was settled in cash, shares, and the settlement of convertible debt was $875,000, as follows;</p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="background-color: #CCEEFF">
<td style="width: 4%; vertical-align: top; text-align: right">i.</td>
<td style="width: 1%; font-size: 9pt"> </td>
<td style="width: 68%; vertical-align: top">Cash consideration paid </td>
<td style="width: 4%; vertical-align: top"> </td>
<td style="width: 4%; vertical-align: bottom; text-align: right">$</td>
<td style="width: 14%; vertical-align: bottom; text-align: right">$ 170,000</td>
<td style="width: 5%; vertical-align: bottom; text-align: right"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; text-align: right">ii.</td>
<td style="font-size: 9pt"> </td>
<td style="vertical-align: top">1,250,000 common shares of the registrant issued at a market price of $0.20 per share</td>
<td style="vertical-align: top"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">250,000</td>
<td style="vertical-align: bottom; text-align: right"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; text-align: right">iii.</td>
<td style="font-size: 9pt"> </td>
<td style="vertical-align: top">Redemption of convertible debt for 350 million shares of Cellynx Group Inc. common stock</td>
<td style="vertical-align: top"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right">455,000</td>
<td style="vertical-align: bottom">(a)</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; text-align: right"> </td>
<td style="font-size: 9pt"> </td>
<td style="vertical-align: top"> </td>
<td style="vertical-align: top"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; text-align: right"> </td>
<td style="font-size: 9pt"> </td>
<td style="vertical-align: top">Fair market value of consideration paid</td>
<td style="vertical-align: top"> </td>
<td style="vertical-align: bottom; text-align: right">$</td>
<td style="vertical-align: bottom; text-align: right">$ 875,000</td>
<td style="vertical-align: bottom; text-align: right"> </td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px; font-size: 12pt"> </td>
<td style="width: 24px">(a)</td>
<td>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.</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 acquire’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" border="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
<td style="vertical-align: bottom; font-weight: bold; border: Black 1pt solid">Description</td>
<td colspan="2" style="vertical-align: bottom; text-align: center; border: Black 1pt solid"><b>Net
book value of Cellynx Group, Inc. consolidated assets and liabilities</b></td>
<td colspan="2" style="vertical-align: bottom; text-align: center; border: Black 1pt solid"><b>Adjustments
(i)</b></td>
<td colspan="2" style="vertical-align: bottom; text-align: center; border: Black 1pt solid"><b>Valuation
attributed to assets acquired</b></td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; width: 36%; border: Black 1pt solid">Current assets</td>
<td style="vertical-align: bottom; text-align: right; width: 6%; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid">$</td>
<td style="vertical-align: bottom; text-align: right; width: 14%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">3,260</td>
<td style="vertical-align: bottom; text-align: right; width: 6%; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; width: 17%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none"> </td>
<td style="vertical-align: bottom; text-align: right; width: 7%; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid">$</td>
<td style="vertical-align: bottom; text-align: right; width: 14%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">3,260</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; border: Black 1pt solid">Patents, trademarks, and license</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">44,718</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">44,718</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; border: Black 1pt solid">Investment in 5BARz</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">1,800,000</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">1,800,000</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; border: Black 1pt solid">Furniture and equipment</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">2,113</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">2,113</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; border: Black 1pt solid">Accounts payable and accruals</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">1,735,112</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">1,735,112</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; border: Black 1pt solid">Notes payable (net of discount)</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">368,411</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">368,411</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; border: Black 1pt solid">Beneficial conversion liability</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">5,856,633</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid">$</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">(5,621,027)</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">235,606</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; border: Black 1pt solid">LOC payable – 5BARz (net)</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">514,745</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">( 514,745)</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">0</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; border: Black 1pt solid">Net book value of assets acquired</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid">$</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">(6,624,810)</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">(6,135,772)</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">(489,038)</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; border: Black 1pt solid">Goodwill</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">1,364,038</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; border: Black 1pt solid">Purchase price</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none"> </td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt none; border-bottom: Black 1pt solid; border-left: Black 1pt solid">$</td>
<td style="vertical-align: bottom; text-align: right; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt none">875,000</td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 10px; font-size: 12pt"> </td>
<td style="width: 10px; font-family: Calibri, Helvetica, Sans-Serif">(i)</td>
<td style="font-family: 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.</td></tr>
</table>
<p style="font: 11pt Calibri, Helvetica, Sans-Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"><font style="color: black">The individual results of operation for
Cellynx Group Inc. for the quarter ended June 30, 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 Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0">Subsequent to the date of acquisition, 5Barz International Inc.
converted two amounts of debt due from Cellynx Group Inc. in order to maintain their 60% equity interest. On April 13, 2012 the
company converted $7,700 of debt in exchange for 51,333,333 shares of Cellynx and on May 15, 2012 5Barz converted $58,500 dollars
of debt due from Cellynx for 390,000,000 shares of Cellynx.  </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 July 9, 2012 the Company issued in aggregate 520,000 shares in
the capital stock of the Company for proceeds of $52,000, at a price of $0.10 per share. This private placement is exempt from
registration pursuant to Regulation “S” of the Securities 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 July 20, 2012 the company issued 250,000 shares at a price of
$0.20 per share as an initial retainer under the terms of an Investment Banking agreement.</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 August 10 and August 14 the company issued in aggregate 1,000,000
shares in the capital stock of the Company for proceeds of $50,000 at a price of $0.05 per share. This private placement is exempt
from registration pursuant to Regulation “S” of the Securities 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 August 14, 2012 the Company entered into a convertible debenture
agreement for $7,000. The Convertible debenture yields interest at a rate of 10% per annum and is convertible 90 days from the
date of inception of the agreement at a rate which is a 25% discount to market at the date of conversion. The conversion rate is
capped at a price of $0.15 per share. The convertible debenture matures six months from the date of inception, February 14, 2013.</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>Settlement of Convertible Debenture </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 July 9, 2012 the Company paid out a convertible debenture owed
by its subsidiary Company, Cellynx Group, Inc. on the six month anniversary of the note for proceeds of $30,582. The payment represents
payment in full of principle, interest at a rate of 8% per annum and a pre-payment penalty of $14,400.</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="font-size: 11pt"> </td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: center">June 30, 2012</td>
<td style="font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: center">December 31, 2011</td></tr>
<tr style="background-color: #CCEEFF">
<td style="width: 48%; vertical-align: top; font-size: 11pt">Furniture and equipment</td>
<td style="width: 4%; vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="width: 2%; vertical-align: bottom; font-size: 11pt; text-align: right">$</td>
<td style="width: 20%; vertical-align: bottom; border-top: Black 1pt none; font-size: 11pt; text-align: right">9,879</td>
<td style="width: 4%; vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="width: 2%; vertical-align: bottom; font-size: 11pt; text-align: right">$</td>
<td style="width: 20%; vertical-align: bottom; border-top: Black 1pt none; font-size: 11pt; text-align: right">-</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; font-size: 11pt">Computer equipment</td>
<td style="vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">4,653</td>
<td style="vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">4,653</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; font-size: 11pt"> </td>
<td style="vertical-align: top; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; font-size: 11pt; font-weight: bold; text-align: right"> </td>
<td style="vertical-align: bottom; font-size: 11pt; font-weight: bold; text-align: right">14,532</td>
<td style="vertical-align: top; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; font-size: 11pt; font-weight: bold; text-align: right"> </td>
<td style="vertical-align: bottom; font-size: 11pt; font-weight: bold; text-align: right">4,653</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; font-size: 11pt">Accumulated depreciation</td>
<td style="vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">8,992</td>
<td style="vertical-align: top; font-size: 11pt; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">   468</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top; font-size: 11pt">Furniture & equipment net</td>
<td style="vertical-align: top; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">$</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: right">5,540</td>
<td style="vertical-align: top; font-size: 11pt; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; text-align: right">$</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-size: 11pt; font-weight: bold; text-align: right">4,185</td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 48%"> </td>
<td style="width: 4%; font-weight: bold; text-align: center"> </td>
<td style="width: 2%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center"> </td>
<td style="width: 20%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">June 30, 2012</td>
<td style="width: 4%; font-weight: bold; text-align: center"> </td>
<td style="width: 2%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center"> </td>
<td style="width: 20%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">December 31, 2011</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">Patents</td>
<td style="vertical-align: top; text-align: center"> </td>
<td style="vertical-align: bottom; text-align: right">$</td>
<td style="vertical-align: bottom; text-align: right">1,998,943</td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">$</td>
<td style="vertical-align: bottom; text-align: right">1,685,867</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top">Trademarks</td>
<td style="vertical-align: top; text-align: center"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">234,277</td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">197,783</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">License rights</td>
<td style="vertical-align: top; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; text-align: right">4,214</td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right">-</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top"> </td>
<td style="vertical-align: top; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; text-align: right">$</td>
<td style="vertical-align: bottom; font-weight: bold; text-align: right">2,237,434</td>
<td style="vertical-align: bottom; font-weight: bold; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">$</td>
<td style="vertical-align: bottom; font-weight: bold; text-align: right">1,883,650</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">Accumulated amortization</td>
<td style="vertical-align: top; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; text-align: right">7,168</td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right">-</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top">Intangibles, net</td>
<td style="vertical-align: top; font-weight: bold; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right">$</td>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; font-weight: bold; text-align: right">2,230,266</td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: right">$</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: right">1,883,650</td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 11pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
<td style="width: 20%; vertical-align: top; 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: 1%; vertical-align: bottom; font-weight: bold; text-align: right"> </td>
<td style="width: 13%; vertical-align: top; font-weight: bold; text-decoration: underline; text-align: center">Principal Amount</td>
<td style="width: 18%; vertical-align: top; font-weight: bold; text-decoration: underline; text-align: center">Date of Maturity</td>
<td style="width: 4%; vertical-align: top; font-size: 9pt"> </td>
<td style="width: 1%; vertical-align: top; font-weight: bold; text-align: right"> </td>
<td style="width: 11%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Accrued</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Interest</u></b></p></td>
<td style="width: 4%; vertical-align: top; font-size: 9pt"> </td>
<td style="width: 1%; vertical-align: top; font-weight: bold; text-align: right"> </td>
<td style="width: 11%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Beneficial</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Conversion</u></b></p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Factor</u></b></p></td>
<td style="width: 4%; vertical-align: top; font-size: 9pt"> </td>
<td style="width: 1%; vertical-align: top; font-weight: bold; text-align: right"> </td>
<td style="width: 11%; vertical-align: top; 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>June 30, 2012</u></b></p></td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">January 8, 2012</td>
<td style="vertical-align: bottom; text-align: center">$</td>
<td style="vertical-align: bottom; text-align: center">15,000 (1)</td>
<td style="vertical-align: bottom; text-align: center">July 8, 2012</td>
<td style="vertical-align: top; font-size: 9pt"> </td>
<td style="vertical-align: top; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: center">299</td>
<td style="vertical-align: bottom; font-size: 9pt; text-align: center"> </td>
<td style="vertical-align: top; text-align: right"> </td>
<td style="vertical-align: top; text-align: center">43,237</td>
<td style="vertical-align: bottom; font-size: 9pt; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">$</td>
<td style="vertical-align: bottom; text-align: right">15,000</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">May 24, 2012</td>
<td style="vertical-align: bottom; text-align: center">$</td>
<td style="vertical-align: bottom; text-align: center">37,500 (2)</td>
<td style="vertical-align: bottom; text-align: center">November 20, 2012</td>
<td style="vertical-align: top; font-size: 9pt"> </td>
<td style="vertical-align: top; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: center">304</td>
<td style="vertical-align: bottom; font-size: 9pt; text-align: center"> </td>
<td style="vertical-align: top; text-align: right"> </td>
<td style="vertical-align: top; text-align: center">36,321</td>
<td style="vertical-align: bottom; font-size: 9pt; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; text-align: right">37,500</td></tr>
</table>
<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: 11pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.1pt"> </td>
<td style="padding-bottom: 1.1pt"> </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"> </td>
<td style="padding-bottom: 1.1pt"> </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"> </td>
<td style="padding-bottom: 1.1pt"> </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"> </td>
<td style="padding-bottom: 1.1pt"> </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"> </td></tr>
<tr style="vertical-align: bottom">
<td>Outstanding at December 31, 2011</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">36,114,757</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.12</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Granted</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">—</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">—</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Exercised</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">—</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">—</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Expired</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">10,060,000</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">—</td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 43%; padding-bottom: 2.25pt">Outstanding at June 30, 2012</td>
<td style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 12%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">26,054,757</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">$</td>
<td style="width: 11%; border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">0.765</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 11%; padding-bottom: 2.25pt; text-align: right">.55</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; text-align: right">$</td>
<td style="width: 11%; border-bottom: black 2.25pt double; text-align: right">0</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 2.25pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt">Exercisable at June 30, 2012</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">26,054,757</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; padding-bottom: 2.25pt; text-align: right">0.765</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right">.55</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">0</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 9pt Times New Roman, Times, Serif; border-collapse: collapse">
<tr style="background-color: rgb(204,238,255)">
<td style="width: 4%; vertical-align: top; font-size: 11pt; text-align: right">i.</td>
<td style="width: 1%"> </td>
<td style="width: 68%; vertical-align: top; font-size: 11pt">Cash consideration paid </td>
<td style="width: 4%; vertical-align: top; font-size: 11pt"> </td>
<td style="width: 4%; vertical-align: bottom; font-size: 11pt; text-align: right">$</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>
<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>
2012-03-29
2011-11-06
0.60
0.9920
0.60
0.087
CeLlynx Inc.
1.00
8992
468
5540
4185
965
180
2237434
1883650
1998943
1685867
234277
197783
4214
7168
2230266
1883650
P20Y
P10Y
1.00
1.00
0.70
1.00
0.2
1.00
0.1
0.15
0.10
0.15
0.10
0.20
3.26
0.20
0.10
.08
.15
0.05
1776100
650000
575500
134610
78000
1080180
2136667
520000
250000
2936667
1000000
52000
155000
267932
50000
9000000
9000000
15600000
170000
Cellynx Group, Inc.
2012-03-29
1800000
643182
10/5/2013
139200
854745971
42500
37500
42500
15000
37500
2013-02-14
2012-07-08
2012-11-20
14400
43237
36321
0.08
0.08
0.08
.08
.08
0.014
0.06
0.110
0.0006
0.05
0.100
0.150
0.0006
15522337
1000000
767337
1255000
12500000
.017
.072
.13
0.0006
P3Y9M3D
P0Y9M6D
P2Y8M6D
P5Y0M0D
65361.52
250000
1250000
0.20
3260
3260
44718
44718
1800000
1800000
2113
2113
1735112
1735112
368411
368411
5856633
-5621027
235606
514745
-514745
0
-6624810
-6135772
-489038
1364038
875000
875000
875000
10000000
5100000
4900000
0.01 CHF
0.01 CHF
57000
108752
182970
2010-12-30
370000
15600000
67494
0.05
115
53057
79803
73500
73500
7100000
18
250000000
87800000
650000
553500
46500
250380
128018
251500
39500
1550000
335695
50000
63412638
100000000
.20
2200000
0.00015
56445
49209
173104
0
18863
19159
75308
68368
250152
170000
2230266
1883650
3594304
2303802
3675153
2376355
2053428
236446
1196701
53033
53033
53057
120437
3308584
1661935
3358584
1661935
107156
90183
4427293
1458086
2418924
834377
1044
528
316568
714420
3675153
2376355
1364038
8562
617432
523072
55318
1800000
50000
6260
180
7313
6070
134
137924
10890
181321
123302
5833
86764
124138
316505
30076
76272
1170548
300617
1751538
735091
194333
1401495
435825
2256676
894538
276572
-1401495
-435825
-2256676
-894538
-276572
-2340
-3119
-19006
-2232
-2377
-71974
-71974
304595
17665
17665
32915
-781
-319
-4967
-3751
545
816
-55112
-3119
-75916
333928
-2377
-1346384
-432706
-2180761
-1228467
-274194
-0.0128
-0.0049
-0.0134
-0.0031
104975294
88386568
91812982
88772382
2402
2402
2402
6260
180
6729
-67380
-110050
-67380
1816982
125930
2053428
-1196701
-1196701
8562
8562
617432
617432
53033
53033
972
6958
23805
-165373
-412806
-758890
-170000
-170000
-516
-1044
73500
73500
-1800000
-1800000
1500000
1500000
-1364038
-1364038
1355
-4513
-3298
-1589699
-174513
-3648530
232500
275000
-65362
-65362
550000
550000
402990
402990
291000
1203500
1772032
-8602
1762308
651567
4410833
7236
173104
56445
15534
1018
233500
250152
-318433
-1883650
-242865
1549987
50000
50000
282927
282927
-55247
-55247
76625
295
-18864
-3119
108926118
14532
4653
9879
4653
4653
0.586
2011-09-20
2012-02-27
2012-05-03
2012-01-08
2012-05-24
2012-03-20
0
30618
26054757
36114757
10060000
0.765
0.12
P0Y5M5D
0
51333333
390000000
<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="margin: 0pt"> </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">(1)</font></td><td><font style="font-size: 11pt">The terms of this note are such that subsequent to the prepayment date six months after the issue
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 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. This note was paid off by the Company on
the prepayment date (see subsequent events note).</font></td></tr></table>
<p style="margin: 0pt"></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">(2)</font></td><td><font style="font-size: 11pt">The terms of this note are such that subsequent to the prepayment date six months after the issue
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 variable conversion factor. The variable conversion factor is calculated
by dividing the amount to be converted by the conversion price which is equal to 51% 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
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.</font></td></tr></table>
299
304
7700
58500
30582
7000
0.10
-58989
-58989
<p style="margin: 0pt"> </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><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 June 30, 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 June 30, 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 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"><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 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"> <b> </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 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><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 June 30, 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’</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 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"><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 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"><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">At June 30, 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 June 30, 2012, are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt 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; text-align: center"> </td>
<td style="padding-bottom: 1.1pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: windowtext 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">June 30, 2012</p></td>
<td style="padding-bottom: 1.1pt; text-align: center"> </td>
<td style="padding-bottom: 1.1pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: windowtext 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; text-align: center"> </td>
<td style="padding-bottom: 1.1pt; 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"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #B6DDE8">
<td style="width: 1%; text-align: right">$</td>
<td style="width: 18%; text-align: right">0.0006</td>
<td style="width: 3%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 25%; text-align: right">12,500,000</td>
<td style="width: 2%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 20%; text-align: right">0.0006</td>
<td style="width: 4%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 20%; text-align: right">5.00</td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right">$</td>
<td style="text-align: right">0.014 - 0.05</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,000,000</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.017</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3.93</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: right">$</td>
<td style="text-align: right">0.06 - 0.100</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">767,337</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.072</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.96</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: right">$</td>
<td style="text-align: right">0.110 - 0.150</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; text-align: right">1,255,000</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.13</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.86</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: windowtext 2.25pt double; padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: windowtext 2.25pt double; padding-bottom: 2.25pt; text-align: right">15,522,337</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt"> </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 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 six months ended June 30,
2012 the Company paid $67,494 of principle and interest on that note. At June 30, 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 $53,057 (December 31, 2011 - $79,803). That
amount due is non interest bearing and has no specific terms of repayment.</p>
0.15
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 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.
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.
In January 2012, the Company negotiated potential agreements for a convertible debenture and an equity investment agreement with a private investment firm. As contemplated, the convertible debenture agreement provided that the investor could convert the principal and unpaid interest into a certain number of shares 180 days from the date of the agreement.
25% of average lowest three closing bid prices of Cellynx Group, Inc. common stock for a period which is ten (10) days prior to the date of conversion.