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Document and Entity Information
 9 Months Ended
Sep. 30, 2012
Nov. 15, 2012
Document And Entity Information
Entity Registrant Name
 5Barz International, Inc.
Entity Central Index Key
 0001454124
Document Type
 10-Q
Document Period End Date
 Sep. 30, 2012
Amendment Flag
 false
Current Fiscal Year End Date
 --12-31
Is Entity a Well-known Seasoned Issuer?
 No
Is Entity a Voluntary Filer?
 No
Is Entity's Reporting Status Current?
 No
Entity Filer Category
 Smaller Reporting Company
Entity Common Stock, Shares Outstanding
 110,027,456
Document Fiscal Period Focus
 Q3
Document Fiscal Year Focus
 2012

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Consolidated Balance Sheets (USD $)
Sep. 30, 2012
Dec. 31, 2011
ASSETS
Cash
 $ 50,594 $ 49,209
Prepaid expenses and deposits
 21,621 19,159
TOTAL CURRENT ASSETS
 72,215 68,368
FIXED ASSETS:
Equipment, net
 4,973 4,185
OTHER ASSETS:
Due from Cellynx - Line of credit
 250,152
Deposit on investment in Cellynx
 170,000
Intangible assets
 2,232,387 1,883,650
Goodwill
 1,364,038
Total other assets
 3,596,425 2,303,802
TOTAL ASSETS
 3,673,613 2,376,355
Current liabilities:
Accounts payable and accrued expenses
 2,244,465 236,446
Due to Cellynx
 1,196,701
Due to escrow agent
 52,321 53,033
Warrant liability
 8,562
Related party loans
 22,825 120,437
Accrued derivative liabilities
 491,874
Convertible debentures
 12,000
Notes payable (net of discount)
 621,990 55,318
Total current liabilities
 3,454,037 1,661,935
Long term liabilities:
TOTAL LIABILITIES
 3,454,037 1,661,935
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 250,000,000 shares authorized; 109,627,456 and 90,182,785 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively
 109,627 90,183
Capital in excess of par value
 4,651,812 1,458,086
Deficit accumulated during the development stage
 (2,742,718) (834,377)
Treasury stock
 (1,800,000)
Minority interest
 855 528
Total stockholders' deficit
 219,576 714,420
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 $ 3,673,613 $ 2,376,355

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Consolidated Balance Sheets (Parenthetical) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Statement of Financial Position [Abstract]
Common stock, par value
 $ 0.001 $ 0.001
Common stock, authorized
 250,000,000 250,000,000
Common stock, issued
 109,627,456 90,182,785
Common stock,outstanding
 109,627,456 90,182,785

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Consolidated Statements of Operations (USD $)
 3 Months Ended 9 Months Ended 47 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Income Statement [Abstract]
Sales
Cost of Sales
Selling general and administrative expenses:
Amortization and depreciation
 831 236 2,689 416 3,742
Bank charges and interest
 2,957 3,899 140,880 14,776 184,277
Sales and marketing expenses
 7,871 39,284 94,635 162,982 324,376
General and administrative expenses
 332,404 102,208 1,507,354 402,824 2,088,344
Total operating expenses
 344,062 145,627 1,745,558 580,998 2,600,739
(Loss) from operations
 (344,062) (145,627) (1,745,558) (580,998) (2,600,739)
Other income (expense):
Interest Income
 (1,128) 4,419 1,212 7,538 17,878
Change in fair value of accrued beneficial conversion liability
 (147,530) (75,556) (75,556)
Debt discount on derivative liability
 (74,623) (92,288) (92,288)
Changed in warrant liability
 (2,402) (2,402)
Loss on disposition of assets
 (781)
Foreign currency gain (loss)
 (2,054) 5,052 (1,735) 5,051 2,913
Minority interest share of net loss
 139 684 955
(Loss)from other expenses
 (225,195) 9,471 (170,084) 12,589 (149,280)
Net (loss)
 $ (569,258) $ (136,156) $ (1,915,642) $ (568,409) $ (2,750,019)
Basic earnings (loss) per common share
 $ (0.0052) $ (0.0015) $ (0.0188) $ (0.0064)
Weighted average number of shares outstanding
 108,607,401 88,878,906 102,081,180 88,556,147

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Consolidated Statements of Cash Flows (USD $)
 9 Months Ended 47 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
 $ (1,915,642) $ (568,409) $ (2,750,019)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
 2,689 416 3,158
Common shares issued for services
 452,990 460,490
Minority interest share of net loss
 (3,878) (4,135)
Changes in operating assets and liabilities:
Change in amount due to related party
 (97,612) (8,602) (97,612)
Change in accounts payable and accrued liabilities
 369,976 145,497 606,422
Change in warrant liability - Cellynx
 5,120 5,120
Change in prepaid expenses and deposits
 2,462 (16,697)
Change in fair value of beneficial conversion liability
 491,874 491,874
Debt discount on convertible notes
 18,868 18,868
Due to escrow agent
 53,033
Unpaid interest income
 (1,212) (7,538) (1,212)
Unpaid interest expense
 139,223 8,147 162,056
Net cash from (used in) operating activities
 (535,142) (430,489) (1,068,654)
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits on investment in Cellynx
 (170,000) (170,000)
Increase in furniture and equipment assets
 (5,572) (4,653)
Net cash used in investing activities
 (175,572) (174,653)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under line of credit agreement Cellynx
 (126,088) (233,500) (376,240)
Notes payable Asset Acquisition
 (292,688)
Payment of amount due to Cellynx - intellectual property acquisition
 (238,915) (242,865)
Proceeds from issuance of notes payable
 278,500 110,013 392,139
Proceeds from issuance of convertible debentures
 12,000 12,000
Notes payable - Dollardex Assignment agreement
 (324,576)
Proceeds used to settle notes payable
 (65,362) (65,362)
Common stock issued for cash
 358,000 1,262,500 1,751,306
Proceeds from issue of common stock to minority interest - 5BARz AG
 79,476 156,101
Loans from shareholder
 (8,602)
Net cash provided by financing activities
 536,526 607,410 1,293,901
NET INCREASE IN CASH
 1,384 1,349 50,594
CASH, BEGINNING OF PERIOD
 49,209
CASH, END OF PERIOD
 50,594 1,349 50,594
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest
 16,800 4,776 60,197
Common stock issued for settlement of debts
 (55,247) (55,247)
Acquisition of interest in Cellynx Group, Inc.
Common stock issued upon acquisition of Cellynx Group, Inc.
 250,000 250,000
Settlement of prepaid deposit upon acquisition of Cellynx Group, Inc.
 170,000 170,000
Fair market value of notes converted upon acquisition of Cellynx
 455,000 455,000
Fair market value of net assets acquired (Note 11)
 875,000 875,000
Investment in Cellynx Intellectual property for shares
 $ 1,800,000 $ 1,800,000

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Organization and Basis of Reporting
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Organization and Basis of Reporting

Note 1 – Organization and basis of reporting

 

5Barz International, Inc. and its’ consolidated subsidiaries is the owner of a proprietary technology for the wireless marketplace, branded as 5BARz™. The Company provides innovative and affordable solutions, 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.  

 

The Company was incorporated under the laws of the State of Nevada on November 17, 2008. At that time, the Company held certain technology related to bio-degradable product and operated under the name “Bio-Stuff”.

 

On December 29, 2010 the Company changed its name to 5BARz International, Inc. and 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).

 

On November 6, 2011, the Company incorporated a subsidiary Company in Zurich, Switzerland called 5BARz AG which is a 94.6% held subsidiary at September 30, 2012. That entity has been licensed the marketing and distribution rights for 5BARz products in Germany, Austria and Switzerland.

 

On March 29, 2012, the Company acquired a 60% interest in the common stock of Cellynx Group, Inc., a Company which holds a 100% interest in Cellynx Inc. 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.

 

These financial statements reflect the financial position for the Company and its subsidiary Companies 5BARz AG, Cellynx Group Inc. and its wholly owned subsidiary Cellynx Inc. as at September 30, 2012. Results of operations for subsidiary Companies are reflected only from the date of acquisition of that subsidiary for the period indicated in the respective statement.  

 

 Going concern

 

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.

 

During the nine months ended September 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 5BARz™ product, the Company has made no revenue to date.  The Company is seeking additional sources of equity or debt financing, and there is no assurance these activities will be successful. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Development stage

 

The Company has been in the development stage since its formation and has not yet realized any revenues from its planned operations.

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Summary of significant accounting policies
 9 Months Ended
Sep. 30, 2012
Accounting Policies [Abstract]
Summary of significant accounting policies

Note 2 - Summary of significant accounting policies

 

Basis of presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements include the accounts of 5Barz International Inc., and its 94.6% owned subsidiary, 5Barz AG., and it’s 60% owned subsidiary Cellynx Group, Inc. and that Company’s 100% owned subsidiary Cellynx, Inc. All intercompany accounts and transactions have been eliminated upon consolidation.

 

Cash

 

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

 

Use of estimates

 

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

  

Concentration of credit risk

 

Cash includes deposits in accounts maintained at financial institutions.  Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash. The Company maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located in the United States. As of September 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.

 

Equipment

 

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

 

Intangible assets

 

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

 

Capitalized costs for patents are amortized on a straight-line basis over the remaining twenty-year legal life of each patent after the costs have been incurred. Once each patent or trademark is issued, capitalized costs are amortized on a straight-line basis over a period not to exceed 20 years and 10 years, respectively. All research and development costs incurred in developing the patentable idea are expensed as incurred. The licensing right is amortized on a straight-line basis over a period of 10 years.

 

Impairment or disposal of long-lived assets

 

The Company applies the provisions of Accounting Standards Codification (“ASC”) Topic 360, “Property, Plant, and Equipment,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’

 

carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review, the Company believes that as of September 30, 2012 and 2011, there was no significant impairment of its long-lived assets.

  

 

Revenue recognition

 

The Company's revenue recognition policies are in compliance with ASC Topic 605, “Revenue Recognition.”  Revenue is recognized at the date of shipment to customers, and when the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured.

 

Foreign currency translation

 

Transactions in foreign currencies have been translated into US dollars using the temporal method. Under this method, monetary assets and liabilities are translated at the year-end exchange rate. Non-monetary assets have been translated at the historical rate of exchange prevailing at the date of the transaction. Expenses have been translated at the exchange rate at the time of the transaction. Realized and unrealized foreign exchange gains and losses are included in operations.

 

Fair value of financial instruments

 

We have adopted Accounting Standards Codification regarding Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments. The carrying amounts of cash, accounts payable, accrued expenses, and other current liabilities approximate fair value because of the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates.  We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments in the management of foreign exchange, commodity price or interest rate market risks.

 

Accounting for Derivatives

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging”. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liability at the fair value of the instrument on the reclassification date. 

 

 Income taxes

 

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

 

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s financial statements.  Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.  No significant penalties or interest relating to income taxes have been incurred during the nine months ended September 30, 2012 and 2011.

 

Net loss per share

 

The Company reports loss per share in accordance with the ASC Topic 260, “Earnings Per Share” , which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.  In the accompanying financial statements, basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period.  

 

 

Recent accounting pronouncements

 

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.

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Furniture & equipment
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Furniture & equipment

Note 3 – Furniture & equipment

 

Equipment consisted of the following as at September 30, 2012 and 2011:

 

 

    September 30, 2012   December 31, 2011
Furniture and equipment   $ 9,879   $ -
Computer equipment     4,653     4,653
      14,532     4,653
Accumulated depreciation     9,559     468
Furniture & equipment net   $ 4,973   $ 4,185

 

During the nine months ended September 30, 2012 the Company incurred depreciation expense of $1,451, (2011 - $416).

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Intangible Assets
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Intangible Assets

Note 4 – Intangible Assets

 

Intangible assets are comprised of patents, trademarks and license rights which are recorded at cost, comprised of legal fees and acquisition costs. Once each patent or trademark is issued, capitalized costs are amortized on a straight-line basis over a period not to exceed 20 years and 10 years, respectively. License rights are amortized over the period of the respective license agreement.

 

      September 30, 2012     December 31, 2011
Patents   $ 2,001,493   $ 1,685,867
Trademarks     234,277     197,783
License rights     4,214     -
    $ 2,239,984   $ 1,883,650
Accumulated amortization     7,597     -
Intangibles, net   $ 2,232.387   $ 1,883,650

 

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Cumulative Sales of Stock
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Cumulative Sales of Stock

Note 5 - Cumulative sales of stock:

 

Since its inception, we have issued shares of common stock as follows:

On November 17, 2008, our Directors authorized the issuance of 7,100,000 founder shares at par value of $0.001. These shares are restricted under rule 144 of the Securities Exchange Commission.

On various days in December 2008, our Directors authorized the issuance of 1,776,100 shares of common stock at a price of $0.01 per share as fully paid and non-assessable to the subscriber. These shares are not restricted and are free trading.

On November 15, 2010, our Directors initiated a forward stock split of 18:1 and increased the authorized shares from 100,000,000 to 250,000,000

On December 30, 2010, the Directors approved the cancellation of 87,800,000 shares of common stock, held by the Director and CEO of the Company.

On December 31, 2010, the Directors issued 15,600,000 shares in conjunction with the acquisition of the agreements to acquire an interest in the 5BARz intellectual property, and hold the exclusive global sales and marketing rights for the 5BARz products.

 

During the period January to March 2011 the Company issued 650,000 shares of common stock at a price of $1.00 per share for aggregate proceeds of $650,000.

 

During the period from April 1, 2011 to June 30, 2011 the Company issued 575,500 shares at prices ranging from $0.70 per share to $ 1.00 per share for aggregate proceeds of $553,500.

 

During the period from July 1, 2011 to September 30, 2011 the Company issued 134,610 shares at prices ranging from $0.20 per share to $ 1.00. per share for aggregate proceeds of $46,500.

 

During the period from October 1, 2011 to December 31, 2011, the Company issued 1,080,180 shares at prices ranging from $0.10 per share to $0.15 per share for aggregate proceeds of $128,018.

 

On December 1, 2011 the Company issued 355,695 shares of common stock at a price of $0.20 per share for conversion of a Convertible Debenture Agreement, dated August 15, 2011 in the principal amount of Fifty Thousand Euros (€50,000), along with accrued interest thereon.

  

During the period, December 1, 2011 to March 31, 2012, 5BARz AG sold 78,000 common shares with a par value of 0.01 per share, at a price of CHF 3.00 ($3.26 US) per share, for aggregate proceeds of 234,000 CHF (US – $250,380). The proceeds received have been credited to additional paid in capital in these consolidated financial statements. 

 

During the period January 1, 2012 to March 31, 2012 the Company issued 2,136,667 shares at prices ranging from $0.10 to $0.15 per share for proceeds of $ 251,500. These private placements are exempt from registration pursuant to Regulation S under the securities act of 1934.

 

During the period from January 1, 2012 to March 31, 2012 the Company settled $155,000 of debt to consultants of the Company by the issuance of shares at a price of $0.10 per share, and issued in aggregate 1,550,000 shares.

 

On March 29, 2012 the Company issued 9,000,000 shares to Cellynx Group, Inc. at the market price of $0.20 per share for payment in full of a 60% interest in the patents and trademarks which comprise the 5BARz technology. This 9,000,000 share position represents a reciprocal share position held by Cellynx Group, Inc. 5Barz International Inc.

 

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.

 

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. In addition, 5BARz AG sold 2,000 shares of common stock for CHF 6,000 ($6,300USD).

During the period from July 1, 2012 to September 30, 2012 the Company issued 2,571,388 shares of common stock at prices ranging from $0.03 to $0.20 per share. Proceeds received on the private placements are comprised of cash in the amount of $122,000, shares issued for services for $50,000 and shares issued on the conversion of notes equal to $12,000.

During the period July 1, 2012 to September 30, 2012, 5BARz AG sold 12,000 shares of common stock for CHF 36,000 ($37,800USD).

 On August 14, 2012 and September 4, 2012 the Company entered into two convertible debenture agreements for $12,000. The Convertible debentures yields interest at a rate of 10% per annum and are convertible 90 days from the date of inception of the agreement at a rate which is a 25% discount to market. The conversion rate is capped at a price of $0.15 per share. The convertible debenture matures six months from the date of inception.

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Asset Acquisiton Agreement
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Asset Acquisiton Agreement

Note 6 - Asset acquisition agreement:

 

On December 31, 2010, 5BARz International Inc. acquired three agreements as follows;

  (i) An “Amended and Restated Master Global Marketing and Distribution Agreement.”
  (ii) An “Asset Purchase Agreement”
  (iii) A “Revolving line of credit agreement and security agreement”.

These agreements with Cellynx Group, Inc. provide for the exclusive global marketing and distribution of the 5BARz line of products and related accessories and a 50% ownership interest in the 5BARz intellectual property. In addition, a revolving line of credit facility has been made available to Cellynx.

On March 29, 2012, the Company and Cellynx Group Inc. entered into an agreement which provided several amendments to the agreement referred to above. As a result of those amendments, the following arrangements between the Companies were established;

    i.            5BARz International, Inc. acquired a 60% interest in the patents and trademarks held by Cellynx Group Inc., referred to as the “5BARz™” technology. That interest in the technology was acquired for proceeds comprised of 9,000,000 shares of the common stock of the Company, valued at the date of acquisition at $0.20 per share or $1,800,000 USD. The acquisition agreement also clarified that the ownership interest in the intellectual property does represent that proportionate interest in income earned from the intellectual property.

 

    ii.            The Company agreed to make available to Cellynx Group, Inc a revolving line of credit facility in the amount of $2.2 million dollars of which $668,844 has been advanced as of September 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 September 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.

 

    iii.            Pursuant to the Master Global Marketing and Distribution agreement between 5Barz International Inc and Cellyx Group, Inc., the registrant was obligated to pay to Cellynx Group, Inc a royalty fee amounting to 50% of the Company’s Net Earnings, from products or license arrangements related to the 5BARz technology, in a ratio equal to the Cellynx proportionate interest in that technology. 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.

 

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Options Warrants and Convertible Securities
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Options Warrants and Convertible Securities

Note 7 – Options Warrants and Convertible Securities:

Promissory note 

 

On September 20, 2011, 5BARz International Inc., (“the Company”), completed a transaction pursuant to a Promissory Note agreement (the Note), through which the Company borrowed $42,500. The Note bears interest at a rate of 8%, and is due on June 22, 2012, (the “Due Date”).  The Company may settle that note within the first 90 days following the issue date by paying to the Lender 140% of the principle amount of the note plus accrued interest. The Company may settle the note during the period which is 91 days from the issue date of the note to 180 days from the issue date of the note by payment of 150% of the principle amount of the note plus accrued interest. In the event that the note is not repaid 180 days from the date of issue, the note is convertible into common stock. On March 20, 2012 the note, along with accrued interest and a prepayment amount was settled by payment of $65,361.52, and the note was cancelled.

 

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. On September 10, 2012, the Company redeemed $12,000 payable on that note, by the issuance of 401,338 common shares at a price of $0.0299 per share. On September 28, 2012, the company provided written confirmation of acceptance of an offer to settle the balance of the note and accrued interest by payment of $35,000. That amount is due immediately. If the Company does not pay that amount, the Company could become involved in a litigation related to the situation.

 

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 proceeds were received by the Company on May 24, 2012. 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.

 

On September 18, 2012, The Company completed a transaction pursuant to a Promissory Note agreement (the Note), through which the Company borrowed $13,500. The Note bears interest at a rate of 8%, and is due on March 17, 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.

 

 

 

Securities Purchase Agreements

Convertible Debenture Agreement & Equity Investment Agreement

 

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 invest up to $500,000 and convert the principal and unpaid interest into a certain number of shares, 180 days from the date of the agreement. The equity investment agreement provided to Holder the right, from time to time during the term of the Agreement, to invest in the Company through the purchase of up to $5,000,000 of the Company's Common Stock. Each purchase under this Agreement was to be made at 150% of the “Volume Weighted Average Price” (VWAP) on the day prior to the day the investment is made (the “Purchase Price"). Beginning on the date that is one hundred eighty (180) days following the Issue Date, Holder shall have the right to purchase Common Stock under this Agreement. Provided the VWAP is above $0.06, Holder shall purchase a minimum of $50,000 per month beginning two hundred ten (210) days from the Issue Date.

As at September 30, 2012, the Company had received $150,000 in funding from the private investment firm. In addition the Company had taken back a $400,000 note receivable from the investment firm under the terms of the convertible debenture agreement.

 

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. The Company has offered to repay the amounts invested along with accrued interest and additional share compensation, but arrived at no settlement.

 

On October 16, 2012, the investment firm filed a complaint in the federal court for the Northern District of California claiming breach of contract and seeking compensatory damages and alleged loss of profits of in excess of $2,500,000, based upon their $150,000 investment made under the putative agreements. La Jolla Cove Investors, Inc. v. 5Barz International, Inc., 3:12-CV-5333 (N.D. Cal.). The Company intends to vigorously defend itself against the plaintiff’s claims. On November 8, 2012, the Company filed an answer, affirmative defenses, and counterclaims, against the plaintiff.

 

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 has recorded the $150,000 as a current liability along with interest calculated at a rate of 8% per annum. The Company will seasonably update this disclosure to reflect any material developments relating to this situation.

 

Convertible Debentures

 

On August 14, 2012 and September 4, 2012 the Company entered into two convertible debenture agreements for proceeds of $12,000. The Convertible debentures yields interest at a rate of 10% per annum and are convertible 90 days from the date of inception of the agreement at a rate which is a 25% discount to market. The conversion rate is capped at a price of $0.15 per share. The convertible debenture matures six months from the date of inception.

 

  

Cellynx Group, Inc. – Convertible Promissory Notes 

 

The Company’s subsidiary, Cellynx Group, Inc. has two convertible promissory notes outstanding at September 30, 2012 as follows;

 

 

Issue Date

 

 

   Principal Amount Date of Maturity    

Accrued

Interest

    

Beneficial

Conversion

Factor

    

Principle due

September 30, 2012

May 24, 2012 $ 37,500 (1) February 18, 2013   $ 1,060     37,048     37,500
September 18, 2012 $ 12,500 (2) June 15, 2013   $ 49     12,057     12,500

 

The notes incur interest at a rate of 8% per annum.

     

 

  (1& 2)

The terms of these 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.

 

The Company has the right to pre-pay the debt up to six months from the date of issue. During the first 120 days following the issue date of the Note may be settled by paying 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

 

The Company determined that the notes contain a beneficial conversion feature because the conversion rate is less than the share price. In addition, the Company records a debt discount related to the interest rate in the note differential from fair market value interest for the Company, which is amortized over the term of the loan.

 

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.

 

 

 

Cellynx Group Inc. - Options and Warrants

  

At September 30, 2012 Cellynx Group Inc. has the following Options and Warrants outstanding;

 

The number and weighted average exercise prices of all options exercisable as of September 30, 2012, are as follows:

 

Options Exercisable  

Range of

Exercise Price

    

 

Number Outstanding as of

September 30, 2012

    

Weighted Average

Exercise Price

    

Weighted Average

Remaining Contractual

Life (Years)

  
                     
$ 0.0006       12,500,000       0.0006       4.72  
$ 0.001       2,500,000       0.001       2.44  
$ 0.10 - 0.25       21,554,757       0.17       0.20  
$ 0.26 - 4.00       2,000,000       2.00       .17  
          38,554,757                  

 

 

Warrants

 

The following table summarizes the warrant activity:

 

Number of

Warrants

  

Weighted Average

Exercise Price

  

Average Remaining

Contractual Life

  

Aggregate

Intrinsic Value
Outstanding at December 31, 2011   42,514,757   $ 0.12        
Granted   —     —        
Exercised   —     —        
Expired   10,060,000     —        
Outstanding at September 30, 2012   32,454,757   $ 0.27     .88   $ 0
Exercisable at September 30, 2012   32,454,457   $ 0.27     .88   $ 0

 

 

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Related Party Transaction
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Related Party Transaction

Note 8 – Related party transactions

On December 30, 2010 the Company acquired by way of an assignment agreement all right title and interest in a set of agreements from a Company of which the President and Director is also the President and Director of the reporting Company. The proceeds to be paid for that assignment agreement is comprised of a note payable in the amount of $370,000, and the issuance of 15,600,000 shares of common stock.  During the nine months ended September 30, 2012 the Company paid $67,494 of principle and interest on that note. At September 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 accrued interest at a rate of 5% per annum, and during the nine months ended September 30, 2012, interest in the amount of $115 was charged pursuant to the terms of this note.

 

In addition, at September 30, 2012 the Company had an amount due to that related party comprised of payments made by the related party on behalf of the Company aggregating $22,825 (December 31, 2011 - $79,803). That amount due is non interest bearing and has no specific terms of repayment.

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Investment in 5BARz AG
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Investment in 5BARz AG

Note 9 – Investment in 5BARz AG

 

On October 6, 2011, the Company commenced the organization of a subsidiary Company under the laws of Switzerland, in the Canton of Zurich, called 5BARz AG. 5BARz AG issued 10,000,000 common shares of which 5,100,000 are held by the Company, 450,000 are held by officers and a consultant to the Company and 4,450,000 were held in escrow for resale, by an independent escrow agent under the control of the Company. 5BARz AG issued the shares with a stated or par value of CHF 0.01 per share for proceeds of CHF 100,000 (US - $108,752). The net proceeds received on re-sale above the stated or par value of the shares, is paid into 5Barz AG as additional paid in capital. During the nine months ended September 30, 2012, sales of those securities aggregated 71,000 shares sold for proceeds of $213,000 CHF ($223,650 USD). At September 30, 2012 the Company holds a 94.6% controlling interest in 5BArz AG represented by 9,458,000 shares.

 

On October 19, 2011, the registrant, 5BARz International Inc. entered into a Marketing and Distribution agreement with 5BARz AG, through which 5BARz AG holds the exclusive rights for the marketing and distribution of products produced under the 5BARz brand for markets in Switzerland, Austria and Germany. That agreement does not have a royalty payment requirement, and remains effective as long as 5BARz Ag is controlled by the Company. 5BARz Ag is a consolidated subsidiary of the Company in these financial statements.

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Investment in Cellynx Group, Inc.
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Investment in Cellynx Group, Inc.

Note 10 – Investment in Cellynx Group, Inc.

 

On January 7, 2011 the Company entered into a stock purchase agreement with two founding shareholders of Cellynx Group, Inc. to acquire in aggregate 63,412,638 shares of the capital stock of Cellynx Group, Inc. for total proceeds of $634,126. At that date the Company had paid $170,000 as a deposit made under that agreement. On March 29, 2012 the Company entered into a securities exchange agreement and settlement agreement with each of the two founding shareholders of Cellynx Group, Inc. whereby in addition to the $170,000 paid, the Company issued 1,250,000 shares of common stock of the issuer in exchange for the 63,412,638 shares of Cellynx Group, Inc. and mutual releases were signed between the parties releasing each from any further obligation.

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Business combination
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Business combination

Note 11 – Business combination

 

On March 29, 2012, the Company acquired a 60% interest in Cellynx Group, Inc. a Company based in California, which was the owner of the 5BARz intellectual property and is in the business of the development and commercialization of that technology. The objective of the acquisition is to integrate the global commercialization of the 5BARz technology and products, into a combined business and operating strategy. The purchase price at the acquisition date, which was settled in cash, shares, and the settlement of convertible debt was $875,000, as follows;

 

i.   Cash consideration paid    $ 170,000  
ii.   1,250,000 common shares of the registrant issued at a market price of $0.20 per share     250,000  
iii.   Redemption of convertible debt for 350 million shares of Cellynx Group Inc. common stock     455,000 (a)
             
    Fair market value of consideration paid   $ 875,000  

 

  (a) The valuation of the debt instrument with an embedded conversion feature is calculated at the face value of the debt instrument of $73,500 plus the intrinsic value attributable to the conversion of the debt instrument at a 75% discount to market, based upon the lowest 3 closing bid prices of the common stock for a period of 30 days prior to the date of conversions. That intrinsic valuation is calculated to be $ 381,500.

 

The amounts recognized for each class of the acquire’s assets and liabilities recognized at the acquisition date, March 29, 2012 are as follows;

 

Description Net book value of Cellynx Group, Inc. consolidated assets and liabilities Adjustments (i) Valuation attributed to assets acquired
Current assets $ 3,260     $ 3,260
Patents, trademarks, and license   44,718       44,718
Investment in 5BARz   1,800,000       1,800,000
Furniture and equipment   2,113       2,113
Accounts payable and accruals   1,735,112       1,735,112
Notes payable (net of discount)   368,411       368,411
Beneficial conversion liability   5,856,633 $ (5,621,027)   235,606
LOC payable – 5BARz (net)   514,745   ( 514,745)   0
Net book value of assets acquired $ (6,624,810)   (6,135,772)   (489,038)
Goodwill           1,364,038
Purchase price         $ 875,000

 

  (i) In determining the NBV of assets acquired, the Company wrote off the convertible debt owed to the acquirer and the beneficial conversion liability attributed to that debt.

 

The individual results of operation for Cellynx Group Inc. for the quarter ended June 30, 2012 are available at the web site www.sec.gov, as that entity is a reporting public company, trading on the OTCBB in the US under trading symbol “CYNX”.

 

Subsequent to the date of acquisition, 5Barz International Inc. converted two amounts of debt due from Cellynx Group Inc.. 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.  

 

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Subsequent Events
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Subsequent Events

Note 12 – Subsequent events

 

Sales of Common Stock

 

On October 12, 2012 the Company issued 300,000 shares at a price of $0.05 per share for proceeds of $15,000. The shares have been issued pursuant to a Regulation “S” exemption from registration under the Securities and Exchange Act of 1934.

 

In October 26, 2012 the Company issued 100,000 shares at a price of $0.05 per share for proceeds of $5,000. The shares have been issued pursuant to a Regulation “S” exemption from registration under the Securities and Exchange Act of 1934.

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Summary of significant accounting policies (Policies)
 9 Months Ended
Sep. 30, 2012
Accounting Policies [Abstract]
Basis of Presentation

Basis of presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements include the accounts of 5Barz International Inc., and its 94.6% owned subsidiary, 5Barz AG., and it’s 60% owned subsidiary Cellynx Group, Inc. and that Company’s 100% owned subsidiary Cellynx, Inc. All intercompany accounts and transactions have been eliminated upon consolidation.
Cash

Cash

 

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.
Use of estimates

Use of estimates

 

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

Concentration of credit risk

 

Cash includes deposits in accounts maintained at financial institutions.  Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash. The Company maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located in the United States. As of September 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.
Equipment

Equipment

 

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

Intangible assets

 

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

 

Capitalized costs for patents are amortized on a straight-line basis over the remaining twenty-year legal life of each patent after the costs have been incurred. Once each patent or trademark is issued, capitalized costs are amortized on a straight-line basis over a period not to exceed 20 years and 10 years, respectively. All research and development costs incurred in developing the patentable idea are expensed as incurred. The licensing right is amortized on a straight-line basis over a period of 10 years.
Impairment or disposal of long-lived assets

Impairment or disposal of long-lived assets

 

The Company applies the provisions of Accounting Standards Codification (“ASC”) Topic 360, “Property, Plant, and Equipment,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’

 

carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review, the Company believes that as of September 30, 2012 and 2011, there was no significant impairment of its long-lived assets.
Revenue recognition

Revenue recognition

 

The Company's revenue recognition policies are in compliance with ASC Topic 605, “Revenue Recognition.”  Revenue is recognized at the date of shipment to customers, and when the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured.
Foreign currency translation

Foreign currency translation

 

Transactions in foreign currencies have been translated into US dollars using the temporal method. Under this method, monetary assets and liabilities are translated at the year-end exchange rate. Non-monetary assets have been translated at the historical rate of exchange prevailing at the date of the transaction. Expenses have been translated at the exchange rate at the time of the transaction. Realized and unrealized foreign exchange gains and losses are included in operations.
Fair value of financial instruments

Fair value of financial instruments

 

We have adopted Accounting Standards Codification regarding Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments. The carrying amounts of cash, accounts payable, accrued expenses, and other current liabilities approximate fair value because of the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates.  We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments in the management of foreign exchange, commodity price or interest rate market risks.
Accounting for Derivatives

Accounting for Derivatives

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging”. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liability at the fair value of the instrument on the reclassification date. 
Income Taxes

Income taxes

 

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

 

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s financial statements.  Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.  No significant penalties or interest relating to income taxes have been incurred during the nine months ended September 30, 2012 and 2011.
Net loss per share

Net loss per share

 

The Company reports loss per share in accordance with the ASC Topic 260, “Earnings Per Share” , which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.  In the accompanying financial statements, basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period.  
Recent accounting pronouncements

Recent accounting pronouncements

 

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.

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Furniture & equipment (Tables)
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Furniture and Equipment
    September 30, 2012   December 31, 2011
Furniture and equipment   $ 9,879   $ -
Computer equipment     4,653     4,653
      14,532     4,653
Accumulated depreciation     9,559     468
Furniture & equipment net   $ 4,973   $ 4,185

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Intangible Assets (Tables)
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Intangible Assets
      September 30, 2012     December 31, 2011
Patents   $ 2,001,493   $ 1,685,867
Trademarks     234,277     197,783
License rights     4,214     -
    $ 2,239,984   $ 1,883,650
Accumulated amortization     7,597     -
Intangibles, net   $ 2,232.387   $ 1,883,650

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Options Warrants and Convertible Securities (Tables)
 9 Months Ended
Sep. 30, 2012
Options Warrants And Convertible Securities Tables
Convertible Promissory Note

Issue Date

 

 

   Principal Amount Date of Maturity    

Accrued

Interest

    

Beneficial

Conversion

Factor

    

Principle due

September 30, 2012

May 24, 2012 $ 37,500 (1) February 18, 2013   $ 1,060     37,048     37,500
September 18, 2012 $ 12,500 (2) June 15, 2013   $ 49     12,057     12,500
Weighted Average Exercise Price of all Options
Options Exercisable  

Range of

Exercise Price

    

 

Number Outstanding as of

September 30, 2012

    

Weighted Average

Exercise Price

    

Weighted Average

Remaining Contractual

Life (Years)

  
                     
$ 0.0006       12,500,000       0.0006       4.72  
$ 0.001       2,500,000       0.001       2.44  
$ 0.10 - 0.25       21,554,757       0.17       0.20  
$ 0.26 - 4.00       2,000,000       2.00       .17  
          38,554,757                  
Warrant Activity
 

Number of

Warrants

  

Weighted Average

Exercise Price

  

Average Remaining

Contractual Life

  

Aggregate

Intrinsic Value
Outstanding at December 31, 2011   42,514,757   $ 0.12        
Granted   —     —        
Exercised   —     —        
Expired   10,060,000     —        
Outstanding at September 30, 2012   32,454,757   $ 0.27     .88   $ 0
Exercisable at September 30, 2012   32,454,457   $ 0.27     .88   $ 0

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Business combination (Tables)
 9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Acquistion of Cellynx Group, Inc.
i.   Cash consideration paid    $ 170,000  
ii.   1,250,000 common shares of the registrant issued at a market price of $0.20 per share     250,000  
iii.   Redemption of convertible debt for 350 million shares of Cellynx Group Inc. common stock     455,000 (a)
             
    Fair market value of consideration paid   $ 875,000  
Assets and Liabilities recognized at acquisition date
Description Net book value of Cellynx Group, Inc. consolidated assets and liabilities Adjustments (i) Valuation attributed to assets acquired
Current assets $ 3,260     $ 3,260
Patents, trademarks, and license   44,718       44,718
Investment in 5BARz   1,800,000       1,800,000
Furniture and equipment   2,113       2,113
Accounts payable and accruals   1,735,112       1,735,112
Notes payable (net of discount)   368,411       368,411
Beneficial conversion liability   5,856,633 $ (5,621,027)   235,606
LOC payable – 5BARz (net)   514,745   ( 514,745)   0
Net book value of assets acquired $ (6,624,810)   (6,135,772)   (489,038)
Goodwill           1,364,038
Purchase price         $ 875,000

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Organization and Basis of Reporting (Details)
 9 Months Ended 3 Months Ended
Sep. 30, 2012
5BARz AG
Mar. 31, 2012
CeLlynx Group, Inc.
Mar. 29, 2012
CeLlynx Group, Inc.
Business Acquisition [Line Items]
Agreement date
 Nov. 06, 2011 Mar. 29, 2012
Acquired interest
 94.60% 60.00%
Common Stock issued
 9,000,000
Recipocal holding
 8.70%
Ownership in Entity
 CeLlynx Inc.
Percentage Owned
 100.00%

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Property and Equipment (Details Narrative) (USD $)
 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Property, Plant and Equipment [Line Items]
Property and Equipment
 $ 14,532 $ 4,653
Accumulated depreciation
 9,559 468
Furniture & equipment net
 4,973 4,185
Depreciation Expense
 1,451 416
Furniture and Equipment
Property, Plant and Equipment [Line Items]
Property and Equipment
 9,879
Computer Equipment
Property, Plant and Equipment [Line Items]
Property and Equipment
 $ 4,653 $ 4,653

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Intangible Assets (Details) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Intangible Assets, Gross
 $ 2,239,984 $ 1,883,650
Accumulated amortization
 7,597
Intangibles Assets, net
 2,232 1,883,650
Patents
Intangible Assets, Gross
 2,001,493 1,685,867
Trademarks
Intangible Assets, Gross
 234,277 197,783
License rights
Intangible Assets, Gross
 $ 4,214

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Intangible Assets (Details Narrative)
 9 Months Ended
Sep. 30, 2012
Maximum
Life of amortization
 20 years
Minimum
Life of amortization
 10 years

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Cumulative Sales of Stock (Details) (USD $)
 1 Months Ended 1 Months Ended 3 Months Ended 1 Months Ended 4 Months Ended 1 Months Ended 3 Months Ended
Mar. 29, 2012
Sep. 30, 2012
Dec. 31, 2011
Dec. 31, 2010
Common Stock
Dec. 31, 2008
Common Stock
Sep. 30, 2012
Common Stock
Jun. 30, 2012
Common Stock
Mar. 31, 2012
Common Stock
Dec. 31, 2011
Common Stock
Sep. 30, 2011
Common Stock
Jun. 30, 2011
Common Stock
Mar. 30, 2011
Common Stock
Sep. 30, 2012
Common Stock
5BARz AG
Jun. 30, 2012
Common Stock
5BARz AG
Nov. 30, 2010
Stock Split
Nov. 17, 2008
Founders Shares
Mar. 31, 2012
Additional Paid In Capital
Mar. 29, 2012
Common Stock For Cellynx
Dec. 31, 2011
Conversion Of Convertible Debenture
Jun. 30, 2012
Services
Mar. 31, 2012
Services
Issuance of restricted common stock/founders shares
 7,100,000
Par Value
 $ 0.001 $ 0.001 $ 0.01 $ 0.001 $ 0.01
Forward stock split
 18
Authorized Shares-before stock split
 100,000,000
Authorized Shares-After Stock split
 250,000,000
Cancellation of Common Stock, shares
 87,800,000
Issuance of common stock (in shares)
 1,776,100 2,936,667 2,136,667 1,080,180 134,610 575,500 650,000 12,000 2,000 78,000
Issuance of common stock
 $ 39,500 $ 251,500 $ 128,018 $ 46,500 $ 553,500 $ 650,000 $ 37,800 $ 6,300 $ 250,380
Common stock issued for services (in shares)
 2,571,388 1,550,000
Common stock issued for services
 122,000 267,932 155,000
Common stock issued forAcquistions (in shares)
 15,600,000
Conversion of Convertible Debenture Agreement (in shares)
 335,695
Conversion of Convertible Debenture Agreement (Euro's)
 50,000
Issuance of common stock (in shares) for Cellynx Group, Inc.
 1,250,000
Cash for Cellynx Group, Inc.
 $ 170,000
Common Stock recieved from Cellynx Group, Inc.
 63,412,638

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Cumulative Sales of Stock Prices (Details) (USD $)
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 30, 2011
Conversion Of Convertible Debenture
Price Per Unit
 $ 0.20
Services
Price Per Unit
 $ 0.10
Additional Paid In Capital
Price Per Unit
 $ 3.26
Minimum | Common Stock
Price Per Unit
 $ 0.03 $ 0.08 $ 0.10 $ 0.1 $ 0.20 $ 0.70 $ 1.00
Maximum | Common Stock
Price Per Unit
 $ 0.20 $ 0.15 $ 0.15 $ 0.15 $ 1.00 $ 1.00 $ 1.00

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Asset Acquistion Agreement (Details) (USD $) (USD $)
 9 Months Ended 3 Months Ended
Sep. 30, 2012
Mar. 31, 2012
CeLlynx Group, Inc.
Mar. 29, 2012
CeLlynx Group, Inc.
Name of Company
 Cellynx Group, Inc.
Date
 Mar. 29, 2012
Asset Purchase Agreement
Interest acquiried in Patents and trademarks
 60.00%
Common stock used for acquisition-shares
 9,000,000
Price per share
 $ 0.20
Cost of acquisition
 $ 1,800,000
Revolving Line of Credit and Security Agreement
Amount of credit facility
 2,200,000
Amount of credit facility advanced
 668,844
Expiration date of credit facility
 10/5/2013
Conversion Rate-per share of 5BARz common stock-Lesser of:
(1) fixed Conversion Rate-per share
 $ 0.00015
(2) Variable Conversion Rate-per share
 25% [1]
Amount of credit facility converted to capital stock of Cellynx Group, Inc.
 $ 139,200
Amount of Shares of Cellynx Group, Inc. resulting from conversion of credit facility
 854,745,971
Equity Interest in Cellynx Group, Inc.
 58.60%
Master Global Marketing and Distribution agreement
Royalty fee to Cellynx Group, as % of Company's Net Earnings
 50% [2]
[1] 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.
[2] 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.

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Promissory Notes (Details) (USD $)
 9 Months Ended
Sep. 30, 2012
Note 1
Issue Date
 Sep. 20, 2011
Principal Amount
 $ 42,500
Date of Maturity
 Jun. 22, 2012
Interest Rate per annum
 8.00%
Date Paid off
 Mar. 20, 2012
Note paid off
 65,361.52
Note 2
Issue Date
 Feb. 27, 2012
Principal Amount
 37,500
Date of Maturity
 Nov. 29, 2012
Interest Rate per annum
 8.00%
Date Paid off
 Sep. 10, 2012
Note paid off
 12,000.00
Common stock issued for debt
 401,338
Price per share
 $ 0.0299
Accrued interest
 35,000
Note 3
Issue Date
 May 03, 2012
Principal Amount
 42,500
Date of Maturity
 Feb. 03, 2013
Interest Rate per annum
 8.00%
Note 4
Issue Date
 Sep. 18, 2012
Principal Amount
 $ 135,200
Date of Maturity
 Mar. 17, 2013
Interest Rate per annum
 8.00%

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Promissory Notes (Details) (Parenthetical)
 9 Months Ended
Sep. 30, 2012
Terms of note

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.
Promissory Note
Terms of note

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.

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Cellynx Group, Inc. - Convertibles Promissory Notes (Details) (USD $)
 9 Months Ended 0 Months Ended
Sep. 30, 2012
Cellynx Note1
Sep. 30, 2012
Cellynx Note2
Jul. 09, 2012
Convertible Debenture Agreement
Issue Date
 May 24, 2012 Sep. 18, 2012
Principal Amount
 $ 37,500 $ 12,500
Date of Maturity
 Feb. 18, 2013 Jun. 15, 2013
Accrued Interest
 1,060 49
Beneficial Conversion Factor
 37,048 12,057
Interest Rate per annum
 8.00% 8.00% 8.00%
Convertible Debt Payment
 30,582
Pre payment penalty
 $ 14,400

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Cellynx Group, Inc. - Convertibles Promissory Notes (Details Narrative)
 9 Months Ended
Sep. 30, 2012
Terms of note

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.
Cellynx Note1
Terms of note

The terms of these 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.

 
Cellynx Note2
Terms of note

The terms of these 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.

 

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Convertible debenture agreement and Equity Investment Agreement (Details) (Investor, USD $)
 9 Months Ended
Sep. 30, 2012
Jan. 31, 2012
Investor
Convertible Debenture Agreement
 $ 500,000
Convertible Debenture issued to investor
 150,000
Note Receivable exchange for convertible debenture
 400,000
Interest Rate
 8.00%
Alleged Damage
 $ 2,500,000

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Convertible debenture agreement and Equity Investment Agreement (Details) (Parenthetical)
 9 Months Ended
Sep. 30, 2012
Terms of note

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.
Investor
Terms of note

Convert the principal and unpaid interest into a certain number of shares, 180 days from the date of the agreement. The equity investment agreement provided to Holder the right, from time to time during the term of the Agreement, to invest in the Company through the purchase of up to $5,000,000 of the Company's Common Stock. Each purchase under this Agreement was to be made at 150% of the Volume Weighted Average Price (VWAP) on the day prior to the day the investment is made (the Purchase Price). Beginning on the date that is one hundred eighty (180) days following the Issue Date, Holder shall have the right to purchase Common Stock under this Agreement. Provided the VWAP is above $0.06, Holder shall purchase a minimum of $50,000 per month beginning two hundred ten (210) days from the Issue Date.

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Convertible Debentures(Details) (Convertible Debentures, USD $)
 3 Months Ended
Sep. 30, 2012
Convertible Debentures
Issue Date
 Aug. 14, 2012
Issue Date
 2012-09-04
Principal Amount
 $ 12,000
Date of Maturity
 90 days [1]
Interest Rate per annum
 10.00%
Price per share
 $ 0.15
[1] Convertible 90 days from the date of inception of the agreement at a rate which is a 25% discount to market.

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Options Exercisable (Details) (USD $) (USD $)
 9 Months Ended
Sep. 30, 2012
Number of Options
 38,554,757
$0.0006
Exercise price range, lower range (in dollars per share)
 $ 0.0006
Exercise price range, upper range (in dollars per share)
 $ 0.0006
Number of Options
 12,500,000
Weighted Average Exercise Price
 $ 0.0006
Weighted Average Remaining Contractual Life
 4 years 7 months 2 days
$0.001
Exercise price range, lower range (in dollars per share)
 $ 0.0001
Exercise price range, upper range (in dollars per share)
 $ 0.0001
Number of Options
 2,500,000
Weighted Average Exercise Price
 $ 0.001
Weighted Average Remaining Contractual Life
 2 years 4 months 4 days
$0.10-0.25
Exercise price range, lower range (in dollars per share)
 $ 0.10
Exercise price range, upper range (in dollars per share)
 $ 0.25
Number of Options
 21,554,757
Weighted Average Exercise Price
 $ 0.17
Weighted Average Remaining Contractual Life
 0 years 2 months 0 days
$0.26-4.00
Exercise price range, lower range (in dollars per share)
 $ 0.26
Exercise price range, upper range (in dollars per share)
 $ 4.00
Number of Options
 2,000,000
Weighted Average Exercise Price
 $ 2.00
Weighted Average Remaining Contractual Life
 0 years 1 month 7 days

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Warrant Activity (Details) (USD $) (USD $)
 9 Months Ended
Sep. 30, 2012
Warrant Activity
Outstanding at December 31, 2011, Number of Warrants
 42,514,757
Granted, Number of shares
Exercised, Number of shares
Expired, Number of shares
 10,060,000
Outstanding and exercisable at June 30, 2012, Number of Warrants
 32,454,757
Weighted Average Exericse Price
Outstanding at December31, 2011,Weighted average exercise price
 $ 0.12
Granted, Weighted average exercise price
Exercised, Weighted average exercise price
Expired, Weighted average exercise price
Outstanding and exercisable at June 30, 2012, Weighted average exercise price
 $ 0.27
Outstanding at June 30, 2012, Average Remaining Contractual Life
 0 years 8 months 8 days
Outstanding and exercisable at June 30, 2012, Aggregate Intrinsic Value
 $ 0

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Related Party transactions (Details) (USD $)
 3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2012
Dec. 31, 2011
Date of Agreement
 Dec. 30, 2010
Proceeds from Note Payable
 $ 370,000
Issuance of Common Stock
 15,600,000
Payment on Note
 67,494
Balance of Note
 0 0 30,618
Interest Rate
 5.00%
Interest Expense
 115
Payment due to Related Party
 $ 22,825 $ 22,825 $ 79,803

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Investment in 5BARz AG (Details Narrative) (5BARz AG, USD $)
 0 Months Ended 9 Months Ended
Oct. 06, 2011
Sep. 30, 2012
5BARz AG
Subsidiary or Equity Method Investee [Line Items]
5BARz AG Common stock issued, shares
 10,000,000
5BARz AG Common stock issued held by company, shares
 5,100,000 9,458,000
5BARz AG Common stock issued held by officers and a consultant, shares
 450,000
5BARz AG Common stock in escrow, shares
 4,450,000
5BARz AG Common stock, Par Value
 0.01 CHF 0.01 CHF
Common Stock Sold, in shares
 71,000
Proceeds of Common Stock
 $ 108,752 $ 223,650
Acquired interest
 94.60%

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Business Combinations (Details) (USD $)
Mar. 29, 2012
Asset Purchase Agreement
Cash consideration paid
 $ 170,000
1,250,000 common shares of the registrant issued at a market price of $0.20 per share
 250,000
Redemption of convertible debt for 350 million shares of Cellynx Group Inc. common stock
 455,000
Fair market value of consideration paid
 $ 875,000

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Business Combinations (Details) (Parenthetical) (USD $)
 1 Months Ended
Mar. 29, 2012
Common Share of the registrant issued
 1,250,000
Price Per Unit
 $ 0.20
Common Stock For Cellynx
Common Stock recieved from Cellynx Group, Inc.
 63,412,638

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Business Combinations Additional(Details) (USD $)
 9 Months Ended 1 Months Ended
Sep. 30, 2012
Mar. 29, 2012
Common Stock For Cellynx
Terms

The Company has the right to pre-pay the debt up to six months from the date of issue. During the first 120 days following the issue date of the Note may be settled by paying 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

The 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.

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Business Combination - Assets and Liabilites recognized (Details) (USD $)
Mar. 29, 2012
Purchase price
 $ 875,000
Net book Value of Cellynx
Current assets
 3,260
Patents, trademarks, and license
 44,718
Investment in 5BARz
 1,800,000
Furniture and equipment
 2,113
Accounts payable and accruals
 1,735,112
Notes payable (net of discount)
 368,411
Beneficial conversion liability
 5,856,633
LOC payable-5BARz (net)
 514,745
Net book value of assets acquired
 (6,624,810)
Purchase price
 875,000
Adjustments
Beneficial conversion liability
 (5,621,027)
LOC payable-5BARz (net)
 (514,745)
Net book value of assets acquired
 (6,135,772)
Valuation attributed to assets acquired
Current assets
 3,260
Patents, trademarks, and license
 44,718
Investment in 5BARz
 1,800,000
Furniture and equipment
 2,113
Accounts payable and accruals
 1,735,112
Notes payable (net of discount)
 368,411
Beneficial conversion liability
 235,606
LOC payable-5BARz (net)
 0
Net book value of assets acquired
 (489,038)
Goodwill
 1,364,038
Purchase price
 $ 875,000

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Business Combination (Details Narrative) (CeLlynx Group, Inc., USD $)
 0 Months Ended
May 15, 2012
Apr. 13, 2012
CeLlynx Group, Inc.
Conversion of debt
 $ 58,500 $ 7,700
Common Stock Recieved, share
 390,000,000 51,333,333

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Subsequent Events (Details Narrative) (Subsequent, For Cash, USD $)
 0 Months Ended
Oct. 26, 2012
Oct. 12, 2012
Subsequent | For Cash
Common Stock Issued
 100,000 300,000
Value of Common Stock Issued
 $ 5,000 $ 15,000
Price of Stock
 $ 0.05 $ 0.05