|Asset Acquisition Agreement
Note 13 – Asset Acquisition
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 had agreed to make available to CelLynx Group, Inc a revolving line of credit facility as amended in the amount of $2.2 million dollars on October 5, 2010. Pursuant to this revolving line of credit facility, which was scheduled to expire on October 5, 2013, the Company advanced $2,394,643 to the date of expiry. At September 30, 2013, the Company agreed to extend the term of the line of credit facility to CelLynx Group, Inc., for the lesser of one year, or the time that CelLynx Group, Inc. becomes self-sustaining from royalty income. Under the amended 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 calculated at 51% 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 December 31, 2016, the Company holds 1,489,745,971 shares of the capital stock of CelLynx Group, Inc. and has a balance of $4,037,994 principle and interest due under the line of credit facility from Cellynx Group, Inc. On September 30, 2014, the Line of Credit agreement between the parties matured. CelLynx is a consolidated subsidiary of 5BARz International Inc., since March 29, 2012, therefore, amounts eliminate in consolidation.
Pursuant to the Master Global Marketing and Distribution agreement between 5BARz International,
Inc. and CelLynx 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 the underlying technology. Subsequent to the acquisition by 5BARz of a 60% interest in the
intellectual property from Cellynx, that Royalty was reduced to an effective Royalty amount of 20% of net earnings from products
or license arrangements related to the 5BARz 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 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.
Write off of debt – Cellynx, Inc.
At the date of acquisition of Cellyx,
Inc, in 2012, certain debts existed on the books of that entity which have not been paid, pursued by the creditor,
nor have any formal or informal demands been made by the creditor. The debts are resident in the State of California
which has a four (4) year statute of limitations. During the year ended December 31, 2016 the Company write off
$579,395 of payables based on the statute of limitations that the liability can be extinguished.