U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 0-28077
 GENELINK, INC.
  Pennsylvania
State of Incorporation
    
    23-2795613
I.R.S. Employer I.D. No.
 317 Wekiva Springs Road, #200
Longwood, FL 32779    (800) 588-4363
  None
 Common Stock, $.01 Par Value
  o þ
  o þ
  þ o
 o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ  o þ




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TABLE OF CONTENTS
 ITEM 1.
    
    DESCRIPTION OF BUSINESS
    
    
    2ITEM 1A.
    
    RISK FACTORS
    
    
    10ITEM 1B
    
    UNRESOLVED STAFF COMMENTS
    
    
    21ITEM 2.
    
    PROPERTIES
    
    
    21ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    21ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    22ITEM 5.
    
    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
    
    
    23ITEM 6
    
    SELECTED FINANCIAL DATA
    
    
    26ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    
    
    26ITEM 7A
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    34ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTS
    
    
    34ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
    
    
    63ITEM 9A.
    
    CONTROLS AND PROCEDURES
    
    
    63ITEM 9B
    
    OTHER INFORMATION
    
    
    64ITEM 10.
    
    DIRECTORS; EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    65ITEM 11.
    
    EXECUTIVE COMPENSATION
    
    
    70ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
    
    
    78ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
    
    
    80ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    80ITEM 15.
    
    EXHIBITS
    
    
    81




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FORWARD LOOKING STATEMENTS
  1




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GENERAL
    TM
    Oxidative Stress Profiles
  2




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Oxidative Stress for Skin Health and Skin Aging Profile
    Other SNP Profiles Developed by the Company
  3




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Intellectual Property
    4




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Scientific Advisory Board
  GeneWize Life Sciences, Inc.
     5




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Affiliates and Licensing and Distribution Partners
     6




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State and Federal Regulation
        7




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Federal Trade Commission Regulations
  FDA Regulation of Nutritional Supplements
  Privacy Protection and HIPAA
  8




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Dermagenetics
  9




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DNA Banking
  Competition
     IF OUR FORMER CHIEF EXECUTIVE OFFICER PREVAILS WITH RESPECT TO HIS LITIGATION AGAINST US, WE MAY
NOT BE ABLE TO PAY ANY JUDGMENT AND COULD BE FORCED TO CEASE OUR OPERATIONS.
   10




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WE NEED TO RAISE ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE, TO CONTINUE OUR OPERATIONS.
   
    
    the successful commercialization of our existing products and services;
    
    progress in our product development efforts;
    
    progress with regulatory affairs activities;
    
    the growth and success of effective sales and marketing activities;
    
    the cost of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights; and
    
    the development of strategic alliances for the marketing of our products.
  THE GLOBAL ECONOMIC DOWNTURN COULD RESULT IN A REDUCED DEMAND FOR OUR PRODUCTS AND INCREASED
VOLATILITY IN OUR STOCK PRICE.
  11




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CHANGES IN CREDIT CARD ASSOCIATION AND DEBIT NETWORK FEES OR PRODUCTS COULD INCREASE COSTS OR
OTHERWISE LIMIT OUR OPERATIONS.
  INCREASED HOLDBACKS BY CREDIT CARD PROCESSORS MAY ADVERSELY AFFECT OUR CASH FLOW AND FINANCIAL
CONDITION.
  12




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GENELINK AND ITS SUBSIDIARIES MAY BECOME AFFECTED BY LAWS, GOVERNMENTAL REGULATIONS, ADMINISTRATIVE
DETERMINATIONS, COURT DECISIONS AND SIMILAR CONSTRAINTS WHICH COULD MAKE COMPLIANCE COSTLY AND
SUBJECT GENELINK AND ITS SUBSIDIARIES TO ENFORCEMENT ACTIONS BY GOVERNMENTAL AGENCIES.
     13




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WE ARE SUBJECT TO GOVERNMENT REGULATION, WHICH MAY SIGNIFICANTLY INCREASE OUR COSTS AND DELAY
INTRODUCTION OF FUTURE PRODUCTS
  WE HAVE A HISTORY OF LOSSES AND MAY HAVE CONTINUED LOSSES FOR THE FORESEEABLE FUTURE.
  OUR BUSINESS CURRENTLY DEPENDS PRIMARILY ON THE SUCCESS OF PRODUCT SALES AND OUR TECHNOLOGY
LICENSING PROGRAM, WHICH IF UNSUCCESSFUL, WILL THREATEN OUR SURVIVAL.
   14




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OUR COMMON STOCK PRICE IS VOLATILE AND WE HAVE A THIN TRADING MARKET.
  WE EXPECT FUTURE DILUTION TO SHAREHOLDERS AND INVESTORS.
  OUR LIMITED OPERATING HISTORY AND RECENT CHANGE IN MARKETING STRATEGY MAKE IT DIFFICULT TO EVALUATE
OUR PROSPECTS.
  15




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IF ETHICAL AND OTHER CONCERNS SURROUNDING THE USE OF GENETIC INFORMATION BECOME WIDESPREAD, WE MAY
HAVE LESS DEMAND FOR OUR PRODUCTS.
  DUE TO THE HIGH LEVEL OF COMPETITION IN OUR INDUSTRY, WE MIGHT FAIL TO RETAIN OUR CUSTOMERS AND
DISTRIBUTORS, WHICH WOULD HARM OUR FINANCIAL CONDITION AND OPERATING RESULTS.
  THE MARKET FOR OUR PRODUCTS AND SERVICES IS UNPROVEN.
  16




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NEW PRODUCTS MAY RENDER OUR PRODUCTS OBSOLETE AND OUR SALES MAY SUFFER.
  THE SALE OF OUR PRODUCTS INVOLVES PRODUCT LIABILITY AND RELATED RISKS THAT COULD EXPOSE US TO
SIGNIFICANT INSURANCE AND LOSS EXPENSES.
    WE ARE DEPENDENT ON A LIMITED NUMBER OF INDEPENDENT SUPPLIERS, LABORATORIES AND MANUFACTURERS OF
OUR PRODUCTS.
  17




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WE ARE DEPENDENT ON KEY PERSONNEL.
  OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY OR
SOMEONE CLAIMS THAT WE ARE INFRINGING ON THEIR PROPRIETARY TECHNOLOGY.
   18




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INTERRUPTIONS TO OR FAILURE OF OUR INFORMATION PROCESSING SYSTEMS MAY DISRUPT OUR BUSINESS AND OUR
SALES MAY SUFFER.
  THE FAILURE TO RECRUIT, MAINTAIN AND MOTIVATE A LARGE BASE OF PRODUCTIVE INDEPENDENT DISTRIBUTORS
COULD LIMIT GENEWIZES ABILITY TO GENERATE REVENUES.
   19




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ADVERSE PUBLICITY ASSOCIATED WITH GENEWIZES PRODUCTS, INGREDIENTS OR NETWORK MARKETING PROGRAM, OR
THOSE OF SIMILAR COMPANIES, COULD HARM GENEWIZES FINANCIAL CONDITION AND OPERATING RESULTS.
  WE ARE SUBJECT TO, AMONG OTHER THINGS, REQUIREMENTS REGARDING THE EFFECTIVENESS OF INTERNAL CONTROL
OVER FINANCIAL REPORTING AND OUR FAILURE TO IDENTIFY OR CORRECT DEFICIENCIES AND AREAS OF WEAKNESS
IN THE COURSE OF THESE AUDITS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
  OUR ARTICLES OF INCORPORATION AND BYLAWS COULD DELAY OR DISCOURAGE A TAKEOVER ATTEMPT.
  20




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John R. DePhillipo v. Robert P. Ricciardi
 John R. DePhillipo v.
GeneLink, Inc.,
 21




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DePhillipo, et.al. v. GeneLink, Inc. t/a GeneLink Biosciences, Inc., et. al.
      22




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ITEM 5.
    
    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
  2008
    
    High
    
    Low1st Quarter
    
    $
    0.12
    
    
    $
    0.072nd Quarter
    
    
    0.53
    
    
    
    0.073rd Quarter
    
    
    0.56
    
    
    
    0.224th Quarter
    
    
    0.35
    
    
    
    0.10
 2007
    
    High
    
    Low1st Quarter
    
    $
    0.07
    
    
    $
    0.052nd Quarter
    
    
    0.11
    
    
    
    0.043rd Quarter
    
    
    0.20
    
    
    
    0.094th Quarter
    
    
    0.21
    
    
    
    0.08
   23




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EQUITY COMPENSATION PLAN INFORMATION
 Number ofsecurities remainingavailable for futureNumber of
    
    
    
    
    
    
    issuance undersecurities to be
    
    
    
    
    
    
    equityissued upon exercise
    
    
    Weighted-average
    
    
    compensation plansof outstanding
    
    
    exercise price of
    
    
    (excluding securitiesoptions, warrants
    
    
    outstanding options
    
    
    reflected in columnand rights
    
    
    warrants and rights
    
    
    (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity
compensation
plans approved
by security
holders1
    
    
    5,850,000
    
    
    $
    0.19
    
    
    
    150,000Equity
compensation
plans not
approved
by security
holders
    
    
    10,437,499
    
    
    $
    0.21
    
    
    
    0Total
    
    
    16,287,499
    
    
    $
    0.20
    
    
    
    150,000
 
 1
    
    Granted pursuant to the Companys 2007 Stock Option Plan RECENT SALES OF UNREGISTERED SECURITIES.
     24




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Number of
    
    Original Exercise Price
    
    RevisedExisting Warrants
    
    of Existing Warrants
    
    Exercise Price7,346,577
    
    $0.075-$0.10
    
    $0.054,872,704
    
    $0.20-$0.25
    
    $0.062,755,500
    
    $0.40-$0.50
    
    $0.082,246,250
    
    $0.60-$1.00
    
    $0.09
  John R. DePhillipo v. GeneLink, Inc.
  1 4
    25




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ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 You should read the following discussion and analysis in conjunction with our consolidated
financial statements and related notes in Item 8 in this Annual Report on Form 10-K.
 Overview
   Results of Operations
  Assets
  26




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Liabilities
  Equity
  Revenues
   27




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Cost of Goods Sold
  Expenses
  Losses
   Assets.
 28




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Liabilities
 Losses
 Revenues.
 Expenses.
 29




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Segment Operating Results
  GeneLink
    
    Dermagenetics
    
    GeneWize LifeInc.
    
    Inc.
    
    Sciences, Inc.Net Revenues
    
    $
    291,206
    
    
    $
    29,738
    
    
    $
    6,056,499Operating expenses
    
    
    1,973,028
    
    
    
    40,113
    
    
    
    6,980,049Other income
    
    
    12,238
    
    
    
    
    
    
    
    Pre-tax earnings (loss)
    
    
    (1,669,584
    )
    
    
    (10,375
    )
    
    
    (923,550
    )
  GeneLink
    
    DermageneticsInc.
    
    Inc.Net Revenues
    
    $
    30,458
    
    
    $
    67,286Operating expenses
    
    
    1,479,300
    
    
    
    190,648Other income
    
    
    10,956
    
    
    
    624Pre-tax earnings (loss)
    
    
    (1,437,886
    )
    
    
    (122,738
    )
 Liquidity and Capital Resources
   30




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Cash and Cash Equivalents.
    Critical Accounting Policies
 Stock options:
  31




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Intangible assets and amortization of patents:
  Revenue and cost recognition
      32




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Allowance for sales returns and allowances:
   Accounts receivable
  Use of Estimates:
  33




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INDEX TO FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    35Financial StatementsConsolidated Balance Sheets
    
    
    36-37Consolidated Statements of Operations
    
    
    38Consolidated Statements of Changes in Stockholders Equity (Deficiency)
    
    
    39Consolidated Statements of Cash Flows
    
    
    40-41Notes to Consolidated Financial Statements
    
    
    42-62
 34




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 35




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GENELINK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2008 and 2007ASSETS
 2008
    
    
    2007CURRENT ASSETSCash and cash equivalents
    
    $
    435,197
    
    
    $
    972,371Accounts receivable
    
    
    713,565
    
    
    
    35,327Inventory
    
    
    739,515
    
    
    
    3,646Prepaid expenses
    
    
    53,688
    
    
    
    11,273Total current assets
    
    
    1,941,965
    
    
    
    1,022,617PROPERTY AND EQUIPMENT
    
    
    281,984
    
    
    
    38,476OTHER ASSETS
    
    
    321,277
    
    
    
    322,731Total assets
    
    $
    2,545,226
    
    
    $
    1,383,824
  36




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GENELINK, INC. AND SUBSIDIARIES
 LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)
December 31, 2008 and 2007
 2008
    
    
    2007CURRENT LIABILITIESCurrent maturity of long-term debt
    
    $
    60,269
    
    
    $
    0Accounts payable and accrued expenses
    
    
    2,034,322
    
    
    $
    439,399Accrued compensation
    
    
    218,664
    
    
    
    144,168Deferred revenue
    
    
    161,727
    
    
    
    100,922Loans payable
    
    
    18,000
    
    
    
    18,000Total current liabilities
    
    
    2,492,982
    
    
    
    702,489Convertible secured promissory notes payable, net of
debt issuance and stock conversion discounts
    
    
    0
    
    
    
    487,968Total liabilities
    
    
    2,492,982
    
    
    
    1,190,457STOCKHOLDERS EQUITY (DEFICIENCY)Common stock, par value $0.01 per share; authorized:125,000,000 and 75,000,000 shares as of December 31,
2008 and 2007, respectively; issued: 104,561,291 and
66,673,591 shares as of December 31, 2008 and 2007,
respectively; outstanding: 100,202,132 and 66,267,422
shares as of December 31, 2008 and 2007, respectively
    
    
    1,045,613
    
    
    
    666,736Additional paid in capital
    
    
    12,235,833
    
    
    
    8,277,692Stock warrants
    
    
    2,608,240
    
    
    
    4,245,692Accumulated deficit
    
    
    (15,285,207
    )
    
    
    (12,681,698
    )Treasury stock, 4,359,159 and 406,169 shares as of
December 31, 2008 and 2007, respectively, at cost
    
    
    (552,235
    )
    
    
    (315,055
    )Total stockholders equity (deficiency)
    
    
    52,244
    
    
    
    193,367Total liabilities and stockholders equity (deficiency)
    
    $
    2,545,226
    
    
    $
    1,383,824
  37




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GENELINK, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2008 and 2007
 2008
    
    
    2007Revenues:
    
    $
    6,377,443
    
    
    $
    97,744Cost of goods sold:
    
    
    1,812,488
    
    
    
    70,809Gross profit
    
    
    4,564,955
    
    
    
    26,935Expenses:Selling, general and administrative
    
    
    6,749,406
    
    
    
    1,268,022Research and development
    
    
    48,950
    
    
    
    24,4006,798,356
    
    
    
    1,292,422OPERATING LOSS
    
    
    (2,233,401
    )
    
    
    (1,265,487
    )OTHER EXPENSESDebt conversion costs
    
    
    229,025
    
    
    
    48,053Amortization and depreciation
    
    
    87,053
    
    
    
    58,406Interest expense
    
    
    57,030
    
    
    
    188,678370,108
    
    
    
    295,137NET LOSS BEFORE PROVISION FOR
INCOME TAXES
    
    
    (2,603,509
    )
    
    
    (1,560,624
    )PROVISION FOR INCOME TAXES
    
    
    0
    
    
    
    0NET LOSS
    
    $
    (2,603,509
    )
    
    $
    (1,560,624
    )Loss per share, basic and diluted:
    
    $
    (0.03
    )
    
    $
    (0.03
    )Weighted average common shares and
diluted potential common shares
    
    
    82,530,959
    
    
    
    48,117,402
  38




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GENELINK, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders Equity (Deficiency)
YEARS ENDED DECEMBER 31, 2008 AND 2007
 ADDITIONALCOMMON STOCK
    
    
    TREASURY
    
    
    PAID IN
    
    
    STOCK
    
    
    ACCUMULATEDSHARES
    
    
    AMOUNT
    
    
    STOCK
    
    
    CAPITAL
    
    
    WARRANTS
    
    
    DEFICIT
    
    
    TOTALBalance, December 31, 2006
    
    
    41,739,000
    
    
    $
    417,390
    
    
    $
    (315,055
    )
    
    $
    7,148,427
    
    
    $
    3,011,009
    
    
    $
    (11,121,074
    )
    
    $
    (859,303
    )Issuance of common stock and stock warrants
related to convertible secured promissory
notes
    
    
    687,500
    
    
    
    6,875
    
    
    
    
    
    
    
    22,163
    
    
    
    
    
    
    
    
    
    
    
    29,038Conversion of secured promissory notes and
accrued interest to common stock
    
    
    5,093,024
    
    
    
    50,931
    
    
    
    
    
    
    
    203,722
    
    
    
    
    
    
    
    
    
    
    
    254,653Stock conversion discount related to
convertible secured promissory notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,500
    
    
    
    
    
    
    
    
    
    
    
    27,500Issuance of common stock and stock warrants
for fundraising services
    
    
    68,750
    
    
    
    688
    
    
    
    
    
    
    
    (447,731
    )
    
    
    447,043
    
    
    
    
    
    
    
    Issuance of common stock and warrants
pursuant to private placement offering
    
    
    19,085,329
    
    
    
    190,852
    
    
    
    
    
    
    
    970,306
    
    
    
    270,240
    
    
    
    
    
    
    
    1,431,398Issuance of stock warrants as payment of
accrued compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    508,617
    
    
    
    154,000
    
    
    
    
    
    
    
    662,617Commissions paid for fundraising costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (155,312
    )
    
    
    
    
    
    
    
    
    
    
    (155,312
    )Issuance of stock warrants for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    363,400
    
    
    
    
    
    
    
    363,400Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,560,624
    )
    
    
    (1,560,624
    )24,934,603
    
    
    
    249,346
    
    
    
    
    
    
    
    1,129,265
    
    
    
    1,234,683
    
    
    
    (1,560,624
    )
    
    
    1,052,670Balance, December 31, 2007
    
    
    66,673,603
    
    
    
    666,736
    
    
    
    (315,055
    )
    
    
    8,277,692
    
    
    
    4,245,692
    
    
    
    (12,681,698
    )
    
    
    193,367Purchase of treasury stock from former officer
    
    
    
    
    
    
    
    
    
    
    (237,180
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (237,180
    )Fair value of vested stock warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384,081
    
    
    
    
    
    
    
    384,081Conversion of secured promissory notes and
accrued interest to
common stock
    
    
    17,640,813
    
    
    
    176,408
    
    
    
    
    
    
    
    705,633
    
    
    
    
    
    
    
    
    
    
    
    882,041Exercise of stock warrants
    
    
    11,711,527
    
    
    
    117,119
    
    
    
    
    
    
    
    2,611,403
    
    
    
    (2,021,533
    )
    
    
    
    
    
    
    706,989Common stock issued for cash, net
    
    
    8,535,000
    
    
    
    85,350
    
    
    
    
    
    
    
    641,105
    
    
    
    
    
    
    
    
    
    
    
    726,455Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,603,509
    )
    
    
    (2,603,509
    )37,887,340
    
    
    
    378,877
    
    
    
    (237,180
    )
    
    
    3,958,141
    
    
    
    (1,637,452
    )
    
    
    (2,603,509
    )
    
    
    (141,123
    )Balance, December 31, 2008
    
    
    104,560,943
    
    
    
    1,045,613
    
    
    
    (552,235
    )
    
    
    12,235,833
    
    
    
    2,608,240
    
    
    
    (15,285,207
    )
    
    
    52,244
  39




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##### 



GENELINK, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31, 2008 and 2007
 2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (2,603,509
    )
    
    $
    (1,560,624
    )Adjustments to reconcile net loss to net cash used in
operating activities:Loss on abandonment of leasehold improvements
    
    
    0
    
    
    
    62,420Depreciation and amortization
    
    
    87,053
    
    
    
    58,406Amortization of discounts on loans payable
    
    
    240,844
    
    
    
    140,196Fair value of options granted for services
    
    
    384,081
    
    
    
    363,400Changes in assets and liabilities:Accounts receivable
    
    
    (678,238
    )
    
    
    (3,142
    )Inventory
    
    
    (735,869
    )
    
    
    2,126Prepaid expenses
    
    
    (42,415
    )
    
    
    3,148Other assets
    
    
    13,700
    
    
    
    (44,801
    )Deferred revenue
    
    
    60,805
    
    
    
    85,441Accounts payable and accrued expenses
    
    
    1,748,152
    
    
    
    91,882Accrued compensation
    
    
    74,496
    
    
    
    96,462Net cash used in operating activities
    
    
    (1,450,900
    )
    
    
    (705,086
    )CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    (244,393
    )
    
    
    (6,633
    )Patent acquisition costs
    
    
    (37,015
    )
    
    
    (84,194
    )Net cash used in investing activities
    
    
    (281,408
    )
    
    
    (90,827
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from loans and notes payable
    
    
    54,582
    
    
    
    272,462Proceeds from issuance of common stock and
warrants, net
    
    
    726,455
    
    
    
    1,431,400Purchase of treasury stock
    
    
    (237,180
    )
    
    
    0Proceeds from exercise of stock warrants
    
    
    706,989
    
    
    
    0Principal payments on capital lease obligations
    
    
    (25,222
    )
    
    
    0Principal payments on note payable
    
    
    (30,490
    )
    
    
    0Common stock issued for bridge loans conversion
    
    
    0
    
    
    
    70,038Commissions paid for fundraising costs
    
    
    0
    
    
    
    (155,311
    )Net cash provided by financing activities
    
    
    1,195,134
    
    
    
    1,618,589
  40




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##### 



GENELINK, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2008 and 2007
 2008
    
    
    2007NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
    
    
    (537,174
    )
    
    
    822,676CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    972,371
    
    
    
    149,695CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    435,197
    
    
    $
    972,371SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATIONCash payments for:Interest:
    
    $
    2,988
    
    
    
    0Non-cash financing transactions:Stock options and warrants granted for services
    
    $
    303,616
    
    
    $
    363,400Common stock and warrants granted for fundraising
    
    $
    80,465
    
    
    $
    450,731Conversion of secured promissory notes into
common stock
    
    $
    487,968
    
    
    $
    0
  41




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##### 



GENELINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2008 AND 2007
 Note 1.
    
    OrganizationGeneLink, Inc. (the Company) and its subsidiaries, Dermagenetics, Inc. and GeneWize
Life Sciences, Inc., operate in Florida. The Company was organized under the laws of
the Commonwealth of Pennsylvania and Dermagenetics, Inc. and GeneWize Life Sciences,
Inc. were organized under the laws of the State of Delaware. The Company is the
successor to a Delaware corporation organized under the same name on September 21,
1994. The Companys offices are located in Longwood, Florida.The Company was founded in response to the information being generated in the field of
human molecular genetics. Scientists are discovering an increasing number of
connections between genes and specific diseases or physical attributes and tendencies.
The growth of scientific knowledge in this area has been accelerating as a direct
result of the National Institutes of Health Genome Project.The Company has developed and received a patent on a DNA Collection Kit® for the
collection of DNA specimens of clients. The kit is classified as a non-medical device.The Company has also developed proprietary SNP-based genetic profiles (named GeneLink
Nutragenetic ProfileTM and Dermagenetics® profiles. These profiles provide
a means of predicting an individuals inherent genetic capacity to combat such
conditions as oxidative stress and other important selected areas of physiologic
health. The profiles, for example, can measure a persons potential to efficiently
control oxygen free radical damage, eliminate hydrogen peroxide, protect and repair
oxidized phospholipids and destroy harmful environmental compounds. The Companys
profile assessment enables nutritional and skin care companies and health care
professionals to recommend a specific and targeted regime of antioxidant vitamins,
nutrients or skin care formulations that have been specifically designed to compensate
for predicted deficiencies and to help provide individuals the best of health and
appearance.On December 12, 2007, the Company formed a new wholly owned subsidiary, GeneWize Life
Sciences, Inc., to operate its direct sales efforts. GeneWize is the first direct
selling company to focus exclusively on marketing nutritional supplements and skin care
products specifically tailored to an individuals genetic makeup.GeneWizes product offering in 2008 consisted of its foundational LifeMap Nutrition
System. The LifeMap Nutrition System is the first comprehensive system of
personalized (mass customized) nutritional supplement manufacturing based on genetic
testing that measures single nucleotide polymorphisms (SNPs; pronounced snips) in
DNA. GeneLinks patented pending assessments, such as
 42




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GeneLink Healthy Aging Assessment and Oxidative Stress, form the foundation. Genetic
test results drive a proprietary algorithm that generates a nutritional report linked
to an individual titration matrix. In order to help compensate for any predicted
deficiencies, genetically selected ingredients and nutrients (SNPboosts, or snip
boosts) are titrated and blended into the individual nutritional formulation. Thus,
each customers product is individually customized and manufactured, just for that
customer.GeneWize, as a direct selling company, offers customers the opportunity to participate
in selling and distributing the products to others and receive compensation for doing
so. These independent marketing affiliates must agree to and comply with the companys
policies related to sales and distribution of product, particularly as it relates to
product claims or, in the case of recruiting other affiliates, income potential. In
return for creating sales and complying with appropriate policies and regulations,
GeneWize provides commissions and incentives. It also provides internet ordering
sites, business management tools, marketing materials, training and events in support
of these affiliates.Note 2.
    
    Summary of Significant Accounting PoliciesPrinciples of consolidation:The consolidated financial statements include the accounts of the Company and its
Subsidiaries, each of which are wholly owned. All significant intercompany accounts
and transactions have been eliminated in the consolidation.Use of estimates:The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results could differ from
those estimates.Cash and cash equivalents:Highly liquid debt instruments purchased with a maturity of three months or less are
considered to be cash equivalents. At times, cash and cash equivalents may exceed
insured limits. The Company also maintains certain cash balances with Fifth Third
Bancorp, which is FDIC insured up to $250,000.Property and equipment:Property and equipment are stated at cost. Expenditures for maintenance and repairs
are charged against operations. Renewals and betterments that materially extend the
life of the assets are capitalized. Depreciation is computed using the straight-line
method over the estimated useful lives of 5 to 39 years of the related assets.
 43




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Revenue and cost recognition:GeneLink receives separate fees for the kits and for the lab services. Upon entering
into a distribution arrangement with GeneLink, a distributor will order kits at a
price negotiated between GeneLink and the distributor. Upon the distributor receiving
from a customer of such distributor an order for the underlying genetically guided
skin care or nutrition product that the distributor is selling, a sample of the
customers DNA will be obtained and the kit will be sent to the lab for analysis. At
that time the distributor will be charged an agreed upon price for the lab services.
This is an addition to the price of the kits.The price of each of the kits and the lab services come about through arms-length
negotiations between GeneLink and its distributors and are based upon the costs
incurred by GeneLink for the kits and the lab services.Upon termination of a distribution arrangement. GeneLink is not required to
repurchase any kits remaining in the possession of the distributor. Typically, only a
small number of kits are purchase at any time. The distributor has some period after
the end of the distribution arrangement to sell off any remaining kits If it does,
GeneLink will provide the lab services for each kit sold.Revenue from genetic testing services is recognized when there is persuasive evidence
of an arrangement, service has been rendered, the sales price is determinable and
collectability is reasonably assured. Service is deemed to be rendered when the
results have been reported to the individual who ordered the test. To the extent that
tests have been prepaid but results have not yet been reported, recognition of all
related revenue is deferred.Revenue from product sales is recognized when there is persuasive evidence of an
arrangement, delivery has occurred and title and risk of loss have transferred to the
customer, the sales price is determinable and collectability is reasonably assured.
The Company has no consignment sales. Product revenue is reduced for allowances and
adjustments, including returns, discontinued items, discounts, trade promotions and
slotting fees.Revenue from distributor sales and marketing kits is recognized when there is
persuasive evidence of an arrangement, delivery has occurred and title and risk of
loss have transferred to the customer, the sales price is determinable and
collectability is reasonably assured. To the extent that kits have been received from
distributors but the related products or services have not been fully delivered,
recognition of all related revenue is deferred. Consistent with its return policy,
the Company recognizes revenues from the sales of products immediately upon shipment
and transfer of title. It offers no returns but allows for refunds on a product for
the first 90 days after an initial order as a trial period. No refunds are offered
on genetic assessments, marketing materials, non-customized products or on customized
products beyond 90 days of initial order unless it constitutes the correction of a
billing error.
 44




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##### 



Allowance for Sales Returns and Allowances:The Company predominantly sells customized products and ships on an as-requested
basis. As a consequence of customization, there is no resulting finished product
inventory at the Company or any affiliate or distributor location for which to accrue
returns allowance. The Company did maintain an inventory for sale of some marketing
and sales materials for separate resale, but the amounts were immaterial. The Company
does provide a refund policy, only on customized product, for up to 90 days.The Company analyzes sales returns in accordance with SFAS No. 48, Revenue Recognition
When Right of Return Exists. The Company is able to make reasonable and reliable
estimates based on its history. The Company also monitors the buying patterns of the
end-users of its products based on sales data received. The Company reviews its
estimated product allowances based on historical refunds of its customers. The Company
believes that this analysis creates appropriate estimates of expected future returns.Accounts ReceivableAccounts receivable include amounts due from credit card service partners, including
any holdbacks or reserves, and to a lesser degree trade accounts receivable. A
provision may be made for estimated bad trade debts based on managements estimate of
the amount of possible credit losses in the Companys existing trade accounts
receivable. As of December 31, 2008 and 2007, the Company has not recorded any reserve
for bad debts from trade or credit receivables.Intangible Assets and Amortization of Patents:Legal and professional fees and expenses in connection with the filing of patent and
trademark applications have been capitalized and are amortized over fifteen years on a
straight-line basis. The Company has filed for and has patents pending in the USA and
foreign countries on its method of DNA gathering. The Company also filed for and has
patents pending on its three proprietary genetic indicator tests. The Company has a
registered trademark for its name, logo, and the name DNA Collection Kit®. In March
2001, the Company reached a Notice of Allowance of Patent on its method of DNA
gathering, and has received trademark protection for its name, logo, and the name DNA
Collection Kit®.Research and DevelopmentResearch and development costs are expensed as incurred.Inventory:Inventory consists primarily of raw materials products for the custom nutritional
products sold by GeneWize. Other inventories include marketing materials for
 45




---



##### 



distribution as well as DNA kits. Inventory is valued at the lower of cost (using the
first-in, first-out method) or market. The shelf life of inventory items is generally
one year.Income taxes:The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes and FIN 48
Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement No.
109, which requires the use of an asset and liability approach for financial
accounting and reporting for income taxes and to consider the likelihood of a tax
position to be accepted by federal and state taxing authorities. Under this method,
deferred tax assets and liabilities are recognized based on the expected future tax
consequences of temporary differences between the financial statement carrying amounts
and tax basis of assets and liabilities as measured by the enacted tax rates that are
expected to be in effect when taxes are paid or recovered.Long lived assets:The Company reviews for the impairment of long-lived assets and certain identifiable
intangibles whenever events or changes indicate that the carrying amount of an asset
may not be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of an asset and its eventual disposition
are less than its carrying amount. The Company has not identified any such impairment
losses during the years ended December 31, 2008 and 2007.Per share data:Effective November 12, 1998, the Company adopted SFAS No. 128, Earnings Per Share.
The provisions of SFAS 128 establish standards for computing and presenting earnings
per share (EPS). This standard replaces the presentation of primary EPS with a
presentation of basic EPS. Additionally, it requires dual presentation of basic and
diluted EPS for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the diluted EPS computation.
Diluted EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
Diluted EPS for 2007 and 2006 excludes any effect from such securities, as their
inclusion would be antidilutive.Stock-Based Compensation:The Company accounts for its stock-based compensation expense in accordance with
SFAS No. 123 (Revised 2004), Share-Based Payment(SFAS No. 123R) using the modified
prospective basis. SFAS No. 123R addresses all forms of share-based payment (SBP)
awards, including shares issued under employee stock purchase plans, stock options,
restricted stock and stock appreciation rights. SFAS No. 123R requires the Company to
expense SBP awards with compensation cost for SBP transactions measured at fair value.
SFAS No. 123R applies to new equity awards
 46




---



##### 



and to equity awards modified, repurchased or canceled after the effective date,
January 1, 2006. Additionally, compensation cost for the portion of awards for which
the requisite service has not been rendered that are outstanding as of the effective
date shall be recognized as the requisite service is rendered on or after the
effective date. The compensation cost for that portion of awards shall be based on the
grant-date fair value of those awards as calculated from the pro forma disclosures
under SFAS No. 123. Additionally, the Company records an expense for the amount that
the fair market value exceeds the purchase cost for common stock purchased pursuant to
its employee stock purchase plan.Recent Accounting Pronouncements:In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157,
Fair Value Measurements. SFAS No. 157 was issued to provide consistency and
comparability in determining fair value measurements and to provide for expanded
disclosures about fair value measurements. The definition of fair value maintains the
exchange price notion in earlier definitions of fair value but focuses on the exit
price of the asset or liability. The exit price is the price that would be received to
sell the asset or paid to transfer the liability adjusted for certain inherent risks
and restrictions. Expanded disclosures are also required about the use of fair value to
measure assets and liabilities. The effective date is for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years. The Company has not yet determined the impact, if any, of adopting this
statement on its financial position, results of operations and cash flows.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115,
which is effective for fiscal years beginning after November 15, 2007. The statement
permits entities to choose to measure many financial instruments and certain other
items at fair value. The Company has not yet determined the impact, if any, of adopting
this statement on its financial position, results of operations and cash flows.In July 2007, the Emerging Issues Task Force (EITF) issued EITF 07-3, Accounting for
Nonrefundable Advance Payments for Goods or Services to be Used in Future Research and
Development Activities (EITF 07-3). EITF 07-3 clarifies the accounting for
nonrefundable advance payments for goods or services that will be used or rendered for
research and development activities. EITF 07-3 states that such payments should be
capitalized and recognized as an expense as the goods are delivered or the related
services are performed. If an entity does not expect the goods to be delivered or the
services rendered, the capitalized advance payment should be charged to expense. EITF
07-3 is effective for fiscal years beginning after December 15, 2007. The Company is
currently evaluating the effect of EITF 07-3 on its financial statements but does not
expect the adoption of EITF 07-3 to have a material effect on the Companys financial
position or results of operations.In December 2007, the FASB issued Statement No. 141R, Business Combinations, which
establishes principles for how an acquirer recognizes and measures in its
 47




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##### 



financial statements the identifiable assets acquired and liabilities assumed in a
business combination, recognizes and measures the goodwill acquired in a business
combination, and determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of a business
combination. The Company is required to apply this Statement prospectively to business
combinations for which the acquisition date is on or after January 1, 2009. Earlier
application is not permitted.In December 2007, the FASB ratified a consensus opinion reached by the EITF on EITF
Issue 07-1, Accounting for Collaborative Arrangements (EITF 07-1). The guidance in
EITF 07-1 defines collaborative arrangements and establishes presentation and
disclosure requirements for transactions within a collaborative arrangement (both with
third parties and between participants in the arrangement).The consensus in EITF 07-1 is effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2008. The consensus requires
retrospective application to all collaborative arrangements existing as of the
effective date, unless retrospective application is impracticable. The impracticability
evaluation and exception should be performed on an arrangement-by-arrangement basis.The Company intends to adopt EITF 07-1 effective January 1, 2009 and retrospectively
apply the requirements of this consensus to its collaborative arrangements in
existence on that date.Reclassifications:Certain amounts in the prior years financial statement have been reclassified to
conform with the current years presentation.Note 3.
    
    Property and EquipmentAs of December 31, 2008 and 2007, property and equipment consisted of the following:
 2008
    
    
    2007Office furniture and equipment
    
    $
    82,803
    
    
    $
    50,598Equipment
    
    
    143,421
    
    
    
    8,050Leasehold improvements
    
    
    6,781
    
    
    
    0Software
    
    
    234,147
    
    
    
    102,712467,152
    
    
    
    161,360Less accumulated depreciation
and amortization
    
    
    185,168
    
    
    
    122,884$
    281,984
    
    
    $
    38,476
 Depreciation expense was $62,284 and $37,832 for the years ended December 31, 2008
and 2007, respectively.
 48




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##### 



Note 4.
    
    Other AssetsAs of December 31, 2008 and 2007, other assets consisted of the following:
 2008
    
    
    2007Patents and trademarks
    
    $
    394,485
    
    
    $
    357,470Deposits
    
    
    31,101
    
    
    
    41,001Less accumulated
amortization
    
    
    104,309
    
    
    
    79,540$
    321,277
    
    
    $
    318,931
 Amortization expense was $24,769 and $21,024 for the years ended December 31, 2008 and
2007, respectively.The future estimated minimum amortization expense that will be charged to
operations as of December 31, 2008
is as follows:
 Year endingDecember 31,2009
    
    $
    27,1992010
    
    
    27,1992011
    
    
    27,1992012
    
    
    27,1992013
    
    
    27,199Thereafter
    
    
    258,491$
    394,486
 Note 5.
    
    Income TaxesAt December 31, 2008 and 2007, the Company had federal and state tax net operating
loss carry forwards of approximately $19,569,000 and $16,794,000, respectively. The
difference between the operating loss carry forwards on a tax basis and a book basis
is due principally to differences in depreciation, amortization, and treatment of
stock options. The federal carry forwards begin to expire in 2009 and the state carry
forwards began to expire in 2003.The Company had a net deferred tax asset of $3,910,000 and $2,180,000 at December 31,
2008 and 2007, respectively, primarily from net operating loss carry forwards. A
valuation allowance was recorded to reduce the net deferred tax asset to zero. The
 49




---



##### 



deferred tax asset valuation allowance increased $1,730,000 for the year ended December
31, 2008 and $225,000 for the year ended December 31, 2007.Note 6.
    
    Stockholders Equity TransactionsCommon StockIn November 2008, the Company issued a private placement memorandum for up to
$1,000,000 of stock at a price of $0.10 per share. Through December 31, 2008, the
Company issued secured $853,500 in gross proceeds and issued 8,535,000 shares of Common
Stock pursuant to such private placement.In June 2008, 1,562,500 warrants were exercised in cashless exercises in which the
Company held back 425,564 warrants as payment for the exercise prices and issued
1,136,936 shares of Common Stock in connection with such exercises.In June 2008, the holders of all of the outstanding convertible secured promissory
notes (the Notes) issued by the company converted the Notes into shares of the
Companys Common Stock at a conversion price of $0.05 per share. The Notes were issued
in consideration for certain loans provided to the Company by third parties between May
12, 2006 and June 6, 2007. $882,041 in principal and accrued interest of Notes were
converted into 17,640,813 shares of Common Stock.Effective May 9, 2008 through June 12, 2008, pursuant to a tender offer undertaken by
the Company, holders of warrants, not including warrants issued to officers and
directors of the Company in June 2007 and September 2007, were entitled to exercise
their warrants at reduced exercise prices as follows:
 Number of
    
    Original Exercise Price
    
    RevisedExisting Warrants
    
    of Existing Warrants
    
    Exercise Price7,346,577
    
    $0.075-$0.10
    
    $
    0.054,872,704
    
    $0.20-$0.25
    
    $
    0.062,755,500
    
    $0.40-$0.50
    
    $
    0.082,246,250
    
    $0.60-$1.00
    
    $
    0.09
 A total of 10,574,951 warrants were exercised in the tender offer for cash proceeds of
$706,989.Pursuant to an Order of Settlement dated May 13, 2008 (the Settlement), the Company
and John R. DePhillipo settled all issues, claims and counterclaims each party may have
with respect to the Action entitled, John R. DePhillipo v. GeneLink, Inc.(Superior
Court of New Jersey Law Division: Atlantic County, Docket No. ATL-L-7479-05). Under the
Settlement, the Company acquired 3,953,000 shares from Mr. DePhillipo and his family
and paid Mr. DePhillipo and his family $0.06 per share, resulting in a purchase price
of $237,180. Additionally, under the Settlement
 50




---



##### 



the Company paid Mr. DePhillipo $220,000. As part of the Settlement, the Company and Mr.
DePhillipo delivered general releases to each other.In August 2007, the Company issued a private placement memorandum for up to $1,700,000
of units consisting of restricted common stock at $.075 per share with an attached
warrant to acquire 1/4 of a share of common stock. The warrants are exercisable for 5
years at a price of $.10 per share. During November, 2007 the Company closed on
$1,431,400 units with proceeds allocated to stock of $1,161,159 and attached warrants
of $270,241.In connection with this offering, the Company issued 2,575,250 of dealer warrants with
5 year terms. 515,050 of the dealer warrants have an exercise price of $.10 per share,
while the remaining 2,060,200 are exercisable at $.075 per share.The Company issued 68,750 and 68,750 shares of common stock for services rendered,
valued at $3,688 and $688 for the years ended December 31, 2008 and 2007, respectively.During the year ended December 31, 2008 and 2007, the Company issued $0 and $137,500
principal amount of convertible secured promissory notes and issued 0 and 687,500
shares of restricted Common Stock in connection with the issuance of the notes.In June 2008, the holders of all of the outstanding convertible secured promissory
notes (the Notes) issued by the company converted the Notes into shares of the
Companys Common Stock at a conversion price of $0.05 per share. The Notes were issued
in consideration for certain loans provided to the Company by third parties between May
12, 2006 and June 6, 2007. $882,041 in principal and accrued interest of Notes were
converted into 17,640,813 shares of Common Stock.During 2007 the Company issued 5,093,024 shares of common stock as conversion of
promissory notes and accrued interest. The value of the notes converted as of December
31, 2007 was $254,653.In connection with the convertible secured promissory notes and shares of Common Stock
issued, the Company issued 410,000 shares of Common Stock valued at $22,950, warrants
to acquire 1,640,000 shares of Common Stock at an exercise price of $.05 valued at
$49,200, and paid a cash commission of $57,400 to the Administrative Agent. The total
costs of $129,550 have been recorded as a reduction of the proceeds in accordance with
AICPA Technical Practice Aid 4110.01.Stock Options and WarrantsThe Financial Accounting Standards Board has issued SFAS No. 123R, which defines a fair
value based method of accounting for an employee stock option and similar equity
instruments and requires all entities to adopt that method of accounting for all of
their employee stock compensation plans.
 51




---



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SFAS 123R requires the recognition of the fair value of stock at the dates stock
options are granted to employees at exercise prices equal to the fair market value of
our stock at the dates of grant. Generally, options are fully vested within three
years from the grant date and have a term of 10 years. Performance awards are granted
to officers and key employees are payable in shares of common stock. The number of
performance award shares actually issued, if any, varies depending on the achievement
of certain performance goals. In general, performance grants vest ratably over the
service period. The Company recognizes the stock-based compensation expense over the
requisite service period of the individual grantees, which generally equals the vesting
period. The Company provides newly issued shares and treasury stock to satisfy stock
option exercise and for the issuance of performance awards.During 2007 the Company granted options to Board members, executives and advisors in
lieu of compensation in accordance with the Companys Stock Option Plan. Options
granted under this plan primarily vested over 4 years beginning in 2007. The options
have terms of 10 years and a fair value based on the Companys lattice valuation model
of $.08/ share. The compensation recognized in relation to the issuance of these
options for the years ended December 31, 2008 and 2007 is $384,081 and $363,400,
respectively.Effective May 9, 2008 through June 12, 2008, pursuant to a tender offer undertaken by
the Company, holders of warrants, not including warrants issued to officers and
directors of the Company in June 2007 and September 2007, were entitled to exercise
their warrants at reduced exercise prices as follows:
 Number of
    
    Original Exercise Price
    
    RevisedExisting Warrants
    
    of Existing Warrants
    
    Exercise Price7,346,577
    
    $0.075-$0.10
    
    $
    0.054,872,704
    
    $0.20-$0.25
    
    $
    0.062,755,500
    
    $0.40-$0.50
    
    $
    0.082,246,250
    
    $0.60-$1.00
    
    $
    0.09
 A total of 10,574,951 warrants were exercised in the tender offer for cash proceeds of
$706,989.In June 2008, 1,562,500 warrants were exercised in cashless exercises in which the
Company held back 425,564 warrants as payment for the exercise prices and issued
1,136,936 shares of Common Stock in connection with such exercises.In addition, in connection with an officer of the Company reducing deferred
compensation due to him, the Company issued 1,400,000 in options to such officer in
September 2007 at an exercise of $0.11 per share, to settle a deferred compensation
liability with an advisor. The options issued with a 10 year term had a fair value of
$154,000.
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##### 



A summary of the status of the Companys stock options and warrants as of December 31,
2008 and 2007, and changes during the years ending of those dates are presented below:
 2008
    
    
    
    
    
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Exercise
    
    
    Average
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOptions/warrants outstanding
at beginning of year
    
    
    31,043,535
    
    
    $
    0.19
    
    
    
    14,992,987
    
    
    $
    0.38Granted
    
    
    7,112,249
    
    
    
    0.37
    
    
    
    17,721,581
    
    
    
    0.08Exercised
    
    
    (12,137,453
    )
    
    
    (0.06
    )
    
    
    
    
    
    
    Expired
    
    
    (2,995,000
    )
    
    
    (0.44
    )
    
    
    (1,671,033
    )
    
    
    (0.80
    )Cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options/warrants outstanding
at end of year
    
    
    23,023,331
    
    
    $
    0.17
    
    
    
    31,043,535
    
    
    $
    0.19Options/warrants exercisable
at end of year
    
    
    15,039,162
    
    
    
    
    
    
    
    26,886,035Weighted-average fair value
of options granted during
the year
    
    
    
    
    
    $
    0.38
    
    
    
    
    
    
    $
    0.11
 The following table summarizes information about stock options and warrants
outstanding at December 31, 2008:
 Weighted-AverageNumber
    
    RemainingExercise
    
    Outstanding
    
    Contractual Life
            ExercisablePrice
    
    at 12/31/08
    
    (Years)
    
    Warrants0.05
    
    
    1,915,000
    
    
    
    2.70
    
    
    
    1,915,0000.075
    
    
    2,310,200
    
    
    
    6.75
    
    
    
    2,310,2000.08
    
    
    8,700,000
    
    
    
    8.58
    
    
    
    6,094,9960.10
    
    
    3,135,633
    
    
    
    4.07
    
    
    
    3,135,6330.12
    
    
    1,800,000
    
    
    
    9.00
    
    
    
    1,075,0000.20
    
    
    375,000
    
    
    
    1.09
    
    
    
    375,0000.25
    
    
    50,000
    
    
    
    0.57
    
    
    
    50,0000.50
    
    
    4,737,498
    
    
    
    9.58
    
    
    
    83,33223,023,331
    
    
    
    
    
    
    
    15,039,162
 Stock options were valued using a lattice model approach. Significant assumptions used to calculate the fair value of all options issued for services are as follows:
 Risk free interest rate of return
    
    
    4.5 - 5
    %Expected option life
    
    5 - 10 yrs.Expected dividends
    
    
    $0.00Expected volatility
    
    
    169 - 170
    %
 53




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##### 



Note 7.
    
    Net Loss Per ShareEarnings per share is calculated under the provisions of Statement of Financial
Accounting Standards (SFAS) No. 128 Earnings Per Share.Basic EPS is calculated using the weighted average number of common shares outstanding
for the period and diluted EPS is computed using the weighted average number of common
shares and dilutive common equivalent shares outstanding. Given that the Company is
in a loss position, there is no difference between basic EPS and diluted EPS since the
common stock equivalents would be antidilutive.
 2008
    
    
    2007Net loss
    
    $
    (2,603,509
    )
    
    $
    (1,560,624
    )Weighted average number of common shares
outstanding for computing basic earning per share
    
    
    82,530,959
    
    
    
    48,117,402Dilutive effect of warrants and stock options after
application of the treasury stock method
    
    
    
    
    
    
    Weighted average number of common shares outstanding for computing diluted earnings per share
    
    
    82,530,959
    
    
    
    48,117,402Net loss per share  basic and diluted
    
    $
    (0.03
    )
    
    $
    (0.03
    )
 The following common stock equivalents are excluded from the earnings per share
calculation as their effect would have been antidilutive:
 Years Ended December 312008
    
    
    2007Warrants and stock options
    
    
    23,023,331
    
    
    
    31,043,535
 Note 8.
    
    AdvertisingThe Company expenses the production costs of advertising when incurred. Advertising
expense was $62,230 and $31,810 for the years ended December 31, 2008 and 2007,
respectively.Note 9.
    
    RentThe Company leases its offices in Longwood, Florida. The lease is for a term of
three years, ending December 2010, and provides for monthly rental payments of $5,500.
 54




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##### 



The future minimum lease payments that will be charged to operations as of
December 31, 2008 is as follows:
 Year endingDecember 31,2009
    
    $
    66,0002010
    
    
    66,000$
    132,000
 Note 10.
    
    Related Party Transactions and Convertible Secured Promissory NotesIn January 2006 the Company entered into an Exclusivity and Indemnity Agreement with
First Equity Capital Securities, Inc. (First Equity), pursuant to which the Company
granted First Equity the exclusive right to assist the Company in raising between
$200,000 and $2,000,000 in debt financing and agreed to indemnify First Equity from
any claims made as a result of First Equity providing services to or on behalf of the
Company. This exclusive arrangement continued through May 2006. Kenneth R. Levine, a
holder of greater than five percent (5%) of the Companys outstanding common stock, is
a principal and officer of First Equity.In May 2006, December 2006, January 2007 and June 2007, pursuant to the terms of a
Convertible Secured Loan Agreement, dated as of May 12, 2006 (as amended and
supplemented, the Loan Agreement), the Company issued $965,390 principal amount of
Notes.The Company issued to First Equity Capital Securities, Inc., as Administrative Agent
under the Loan Agreement, an aggregate of 435,000 shares of restricted Common Stock of
the Company and warrants to acquire 1,740,000 shares of restricted Common Stock of the
Company at an exercise price of $0.05 per share in connection with the issuance of the
Notes. The Company also paid First Equity Capital Securities, Inc. a placement fee of
$60,900, equal to 7% of all loans raised pursuant to the Loan Agreement. Kenneth R.
Levine, a holder of more than five percent of the equity securities of the Company, is
an officer and principal of First Equity Capital Securities, Inc. Mr. Levine
purchased $69,078 of Notes and received 345,390 shares of restricted Common Stock of
the Company in connection with the issuance of the Notes.In December 2008, the Company issued $853,500 of Common Stock in a private placement,
and in connection with such offering the Company issued to First Equity
 55




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##### 



Capital Securities, Inc. warrants to acquire 597,250 shares of Common Stock and paid First
Equity Capital Securities, Inc. a cash fee of $47,780.A family trust of which Robert Hoekstra, a director of the Company, is a trustee,
acquired 1,050,000 shares in this offering for a purchase price of $105,000.Short Term Loans PayableAs of December 31, 2008, the Company has various shareholders of the Company who
provided short term obligations, as follows:
 2008
    
    
    2007Note payable, due no specific maturity with
no stated interest. All interest and principal
due at maturity
    
    $
    10,000
    
    
    $
    10,000Note payable, no specific maturity with no stated
Interest. All interest and principal
due at maturity
    
    
    8,000
    
    
    
    8,00018,000
    
    
    
    18,000Less: Discount for warrants issued
    
    
    (         -
    )
    
    
    (-
    )Total short term loans payable
    
    $
    18,000
    
    
    $
    18,000
 Employees and ConsultantsThe Company is dependent on the services of Monte E. Taylor, Jr., its Chief Executive
Officer. The Company is in the process of negotiating an employment agreement with
Mr. Taylor. A new agreement has not been signed.The Company has entered into a consulting agreement with Dr. Ricciardi (shareholder
and officer) dated February 24, 1998. The initial term of the agreement was five (5)
years.Pursuant to an agreement dated September 27, 2007, Dr. Ricciardi agreed to reduce the
accrued compensation payable to him to $90,000 as of September 30, 2007, payable when
the Board of Directors of the Company determines that the Companys financial position
can accommodate such payments, and to reduce the compensation payable to him for
future services to be rendered pursuant to the consulting arrangement to $30,000 per
year, payable in monthly installments of $2,500 each commencing, October 2007 and
payable on the last day of each month. The Company reimbursed Dr. Ricciardi $10,000
for legal fees incurred in connection with the litigation instituted by John R.
DePhillipo, the former Chief Executive Officer and President of the Company against
the Company and Dr. Ricciardi in connection with Mr. DePhillipos termination;
released Dr. Ricciardi from any potential claims the Company may have against the
directors and officers of the Company in connection with actions taken prior to the termination of Mr. DePhillipos
employment; and issued Dr. Ricciardi a full-vested warrant to acquire
 56




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##### 



1,400,000 shares of Common Stock of the Company at an exercise price per share of $0.11, the closing
price per share as of September 27, 2007. Dr. Ricciardi will remain eligible to
receive additional option and warrant grants as a member of the Board of Directors and
the Advisory Board of the Company.Convertible Secured Promissory Notes PayableAs of December 31, 2007, the Company had various shareholders of the Company who
provided convertible secured promissory note obligations, as follows:
 2008
    
    
    2007Notes payable, due May 12, 2011 with interest at
12%. All interest and principal due at maturity.
All Company assets pledged as collateral.
    
    $
    
    
    
    $
    728,812
    
    
    
    728,812Less: Debt issue discount
    
    
    
    
    
    
    (105,864
    )Less: Stock conversion discount
    
    
    
    
    
    
    (134,980
    )Less: Debt proceeds not received
    
    
    
    
    
    
    Total short term loans payable
    
    $
    
    
    
    $
    487,968
 In connection with issuance of the convertible secured promissory notes, the
Company has recognized a debt issuance discount as of December 31, 2008 and 2007 of
$0 and $29,038, respectively, that is being amortized over the term of the notes.
As of December 31, 2008 and 2007, the unamortized debt issuance discount is $0 and
$134,980, respectively.In connection with issuance of the convertible secured promissory notes, the
Company has recognized a stock conversion discount as of December 31, 2008 and 2007
of $0 and $27,500, respectively, that is being amortized over the term of the
notes. As of December 31, 2008 and 2007, the unamortized stock conversion discount
is $0 and $105,864, respectively.Interest expense related to notes payable is $283,036 and $192,723 for the years
ended December 31, 2008 and 2007, respectively.In June 2008, the holders of all of the outstanding convertible secured promissory
notes (the Notes) issued by the company converted the Notes into shares of the
Companys Common Stock at a conversion price of $0.05 per share. The Notes were
issued in consideration for certain loans provided to the Company by third parties
between May 12, 2006 and June 6, 2007. $882,041 in principal and accrued interest
of Notes were converted into 17,640,813 shares of Common Stock.
 57




---



##### 



Note 11.
    
    Segment InformationThe Company distinguishes its two main operating segments by entity and
the types of products they sell.The following table sets forth the net revenues, operating expenses and pre-tax
earnings of our segments for the year ended December 31, 2008 and 2007:
 GeneWize LifeGeneLink
    
    
    Dermagenetics
    
    
    SciencesInc.
    
    
    Inc
    
    
    Inc.2008Net Revenues
    
    $
    291,206
    
    
    $
    29,738
    
    
    $
    6,056,499Operating expenses
    
    
    1,973,028
    
    
    
    40,113
    
    
    
    6,980,049Other income
    
    
    12,238Pre-tax earnings (loss)
    
    
    (1,669,584
    )
    
    
    (10,375
    )
    
    
    (923,550
    )2007Net Revenues
    
    
    30,458
    
    
    $
    67,286Operating expenses
    
    
    1,479,300
    
    
    
    190,648Other income
    
    
    10,956
    
    
    
    624Pre-tax earnings (loss)
    
    
    (1,437,886
    )
    
    
    (122,738
    )
 Note 12.
    
    Going ConcernThe Companys financial statements are prepared using generally accepted accounting
principles applicable to a going concern, which contemplates the realization of assets
and liquidation of liabilities in the normal course of business. The Company incurred
a net loss of $2,603,509 and $1,560,624 for the years ended December 31, 2008 and
2007, respectively. The Company reported a deficit of $15,285,207 and $12,681,698 as
of December 31, 2008 and 2007, respectively. The Company has announced marketing
plans to enhance sales and, as a result, management believes that they will be able to
generate sufficient revenue and cash flow for the Company to continue as a going
concern. Should the Company be unable to continue as a going concern, assets and
liabilities would require restatement on a liquidation basis that would differ
materially from the going concern basis.
 58




---



##### 



Note 13.
    
    Commitments and ContingenciesEffective October 14, 2005, we terminated the employment of John R. DePhillipo, our
former Chief Executive Officer and President and a former director. In 2005, Mr.
DePhillipo commenced two lawsuits allegedly arising out of his termination by us for
cause, as defined in his Employment Agreement with us.In an Action filed in the United States District Court for the Eastern District of
Pennsylvania, John R. DePhillipo v. Robert P. Ricciardi, Civil Action No. 05-5906, Mr.
DePhillipo alleged that Dr. Ricciardi, a Director and Officer of the Company, (1)
caused Mr. DePhillipos employment with us to be wrongfully terminated and therefore
is personally liable for all severance owed Mr. DePhillipo, in the amount of at least
$75,000; (2) was personally liable for Mr. DePhillipos unpaid back salary of $84,000
simply because Dr. Ricciardi is an officer and/or director of the Company; and (3)
acted sufficiently maliciously to justify punitive damages being assessed against Dr.
Ricciardi of $10,000,000. Counsel for Dr. Ricciardi entered an answer to this action
and subsequently the action against Dr. Ricciardi was dismissed with prejudice against
Mr. DePhillipo in March 2006.In a separate Action filed by Mr. DePhillipo against us in November 2005 in the
Superior Court of New Jersey, Law Division, Atlantic County, John R. DePhillipo v.
GeneLink, Inc.,Docket No. ATL-L-7479-05, Mr. DePhillipo alleged that his termination
by us for cause was improper and therefore he was entitled to in excess of
$1,500,000 in severance pay under the terms of an employment agreement, allegedly
entered into effective January 1, 2005 (the Employment Agreement) and an additional
$84,000 in accrued and unpaid compensation. We filed an Answer denying the material
allegations of the Complaint and asserted a number of affirmative defenses. We filed
counterclaims against Mr. DePhillipo for breach of fiduciary duty, conversion,
negligent misrepresentation, unjust enrichment and fraud while Mr. DePhillipo served
as our Chief Executive Officer, President and Chief Financial Officer. The
counterclaims sought recovery in excess of that sought by Mr. DePhillipo in the
Complaint.Pursuant to the Settlement, on May 13, 2008 we and Mr. DePhillipo settled all issues,
claims and counterclaims each may have with respect to the Action. Under the
Settlement, we acquired 3,953,000 shares from Mr. DePhillipo and his family and paid
Mr. DePhillipo and his family $0.06 per share, resulting in a purchase price of
$237,180. Additionally, under the Settlement we paid Mr. DePhillipo $220,000. As
part of the Settlement, we and Mr. DePhillipo delivered general releases to each
other.On August 12, 2008, in an Action filed in the Philadelphia Court of Common Pleas,
DePhillipo, et.al. v. GeneLink, Inc. t/a GeneLink Biosciences, Inc., et. al.,
Philadelphia County Court of Common Pleas, August Term 2008 No. 1128, Mr. DePhillipo
and Maria DePhillipo, his spouse, filed suit against the Company, GeneWize and certain
of the Companys officers, directors and advisors. Mr. and Mrs. DePhillipo allege,
among other things, that the Company and certain of these officers, directors and/or
advisors fraudulently and/or negligently conspired to induce
 59




---



##### 



Mr. DePhillipo to enter into the Settlement and to cause Mr. and Mrs. DePhillipo to
sell their shares of the Companys common stock to the Company, that the Company and
its counsel fraudulently and negligently misrepresented the Companys financial
condition to induce Mr. DePhillipo to enter into the Settlement and to cause Mr. and
Mrs. DePhillipo sell their shares of the Companys common stock, and that the Company
failed to timely disclose information concerning the formation and operation of
GeneWize. Mr. and Mrs. DePhillipo seek approximately $20 million in damages based
upon an alleged value of the Companys common stock of $5.00 per share. They also
seek rescission of the Settlement and thus the return of the 3,953,000 shares of the
Companys common stock sold by them to us pursuant to the Settlement.We have agreed to indemnify our offices, directors and advisors who have been named as
defendants in the Action and will be liable for any costs or expenses incurred by or
judgments entered against such defendant.On October 1, 2008, the Company, as well as all of the other defendants, moved to
dismiss the Action in its entirety through the filing of preliminary objections.
These preliminary objections are currently pending before the court.We and our Board of Directors deny the claims set forth in the Action and are
vigorously defending the baseless claims made by Mr. and Mrs. DePhillipo.Note 14.
    
    Quarterly Results of Operations (unaudited)Below is a summary of the quarterly results of operations for each quarter of the years ended
December 31, 2008 and 2007:
 2008
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthSales
    
    $
    26,424
    
    
    $
    124,503
    
    
    $
    1,829,669
    
    
    $
    4,396,847Gross profit
    
    
    1,104
    
    
    
    15,331
    
    
    
    1,403,963
    
    
    
    3,144,557Net income (loss)
    
    
    (448,250
    )
    
    
    (1,107,479
    )
    
    
    (513,472
    )
    
    
    (534,308
    )Net income (loss)
per
common share
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.005
    )
    
    
    (0.005
    )
 2007
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthSales
    
    $
    31,385
    
    
    $
    27,182
    
    
    $
    26,150
    
    
    $
    13,027Gross profit
    
    
    6,262
    
    
    
    6,935
    
    
    
    14,252
    
    
    
    (514
    )Net income (loss)
    
    
    (359,792
    )
    
    
    (225,196
    )
    
    
    (550,747
    )
    
    
    424,889Net income (loss)
per
common share
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.01
    )
 60




---



##### 



Note 15.
    
    Subsequent EventsIn January 2009, the Company sold an additional 5,650,000 shares of restricted Common
Stock of the Company at a purchase price of $0.10 per share pursuant to a continued
Confidential Private Offering Memorandum, and received an aggregate gross amount of
$565,000.On February 26, 2009, the Company issued to an accredited investor $1,000,000
principal amount of Convertible Notes and issued 1,500,000 Warrants to acquire shares
of Common Stock at an exercise price of $0.11 per share in connection therewith. The
Warrants are exercisable on or after August 26, 2009 and on or before February 26,
2014. In March 2009, the Company issued an additional $200,000 of notes and issued
300,000 additional warrants in connection therewith.The Convertible Notes mature on February 26, 2014 and bear interest at the rate of 8%
per year through February 26, 2011 and thereafter bear interest at the rate of 10% per
year. The Convertible Notes may not be prepaid without the approval of the holders of
the Convertible Notes.The Convertible Notes are convertible at the option of the holders of the Convertible
Notes upon the earlier to occur of (a) August 26, 2009 or (b) the adoption and filing
of an amendment to increase the capitalization of the Company to at least 175,000,000
shares of Common Stock (the Initial Conversion Date). Additionally, the Convertible
Notes are exercisable at the option of the holders of the Convertible Notes at any
time upon the occurrence of a Change in Control Event (as defined in the Convertible
Notes). A mandatory conversion of the Convertible Notes will occur if after the
Initial Conversion Date the closing price of the Common Stock of the Company is at
least $0.50 per share for 30 consecutive trading days.The conversion price for the Convertible Notes is $0.10 per share, subject to
adjustment in the event of a stock split, combination, reclassification,
reorganization or similar event.Note 16.
    
    Industry Risk and ConcentrationThe business of marketing nutrition and skin care products is highly competitive and
sensitive to the introduction of new products which may rapidly capture a significant
share of the market. These market segments include numerous manufacturers,
distributors, marketers, retailers and physicians that actively compete for the
business of consumers both in the United States and abroad. In addition, the Company
anticipates that it will be subject to increasing competition in the future from
sellers that utilize electronic commerce. Many of these competitors have longer
operating histories, significantly greater financial, technical, product development,
marketing and sales resources, greater name recognition, larger established customer
bases and better-developed distribution channels than does the Company.The Companys present or future competitors may be able to develop products that are
comparable or superior to those offered by the Company, adapt more quickly than
 61




---



##### 



the Company does to new technologies, evolving industry trends and standards or
customer requirements, or devote greater resources to the development, promotion and
sale of their products than does the Company. For example, if the Companys competitors
develop skin care or nutritional treatments that prove to be more effective than our
products, demand for our products could be reduced. Accordingly, the Company may not be
able to compete effectively in our markets and competition may intensify. The Company
is also subject to significant competition for the recruitment of distributors from
other network marketing organizations, including those that market nutritional
supplements and skin care products as well as other types of products.The Companys ability to be competitive will depend, in significant part, on its
success in recruiting and retaining distributors through an attractive compensation
plan, the maintenance of an attractive product portfolio and other incentives. The
cannot ensure that the Companys programs for recruitment and retention of distributors
will be successful, and if they are not, the Companys financial condition and
operating results would be harmed.In addition, the Company relies entirely on a limited number of third parties to supply
raw materials, manufacture our products and perform laboratory tests on the Companys
behalf. In the event any of the Companys third party suppliers, manufacturers or
laboratories were to become unable or unwilling to continue to provide the Company with
services and products in required volumes and at suitable quality levels, the Company
would be required to identify and obtain acceptable replacement sources.
 62




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##### 



ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Change In Internal Controls
  Managements Annual Report on Internal Control over Financial Reporting
   63




---



##### 



ITEM 9B
    
    OTHER INFORMATION
  64




---



##### 



ITEM 10.
    
    DIRECTORS; EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    PositionDr. Bernard L. Kasten, Jr.
    
    
    62
    
    
    Executive Chairman of the Board,
DirectorMonte E. Taylor, Jr.
    
    
    59
    
    
    Chief Executive Officer,
Chief Financial Officer,
DirectorRobert Hoekstra
    
    
    58
    
    
    DirectorRobert P. Ricciardi, Ph.D
    
    
    62
    
    
    Secretary, Chief Science Officer,
DirectorJohn H. Souza
    
    
    47
    
    
    Chief Operating Officer, Director
  st st th
 65




---



##### 



66




---



##### 



Audit Committee
    Nominating Committee
  67




---



##### 



Section 16(a) Beneficial Ownership Reporting Compliance.
  Code of Ethics.
  Meeting of Directors
  Communications with the Board of Directors
  68




---



##### 



REPORT FROM THE AUDIT COMMITTEE
     
 69




---



##### 



Compensation Discussion and Analysis
  Overview of Compensation Philosophy and Objectives
  
    
    help attract and retain the most qualified individuals by being
competitive with compensation packages paid to persons having similar
responsibilities and duties in comparable businesses;
    
    motivate and reward individuals who help us achieve our short term and
long term objectives and thereby contribute significantly to the
success of our company;
    
    relate to the value created for shareholders by being directly tied to
our financial performance and condition and the particular executive
officers contribution; and
    
    reflect the qualifications, skills, experience, and responsibilities
of the particular executive officer.
   70




---



##### 



Executive Compensation Components
  Annual Base Salary
  Stock Options and Stock Awards
   Other Benefits
 
    
    Retirement Benefits.We are looking to establish a 401(k) plan for our
employees. Named executive officers would be eligible to participate
in these plans on the same terms as other eligible employees, subject
to any legal limits on the amount that may be contributed by
executives under the plans.
    
    Medical Benefits. Our employees have a choice of coverage options
under our company-sponsored group health insurance plan. Each option
covers the same services and supplies but differs in the quality of
provider network.
    
    Life Insurance. We maintain a group life insurance plan that provides
for basic life and accidental death and dismemberment coverage. We pay
the premiums under this plan.
    
    Vacation. All employees are eligible for vacation based on years of service.
    
    Other Perquisites. Vehicle and car allowances have been provided for
certain named executives.
 71




---



##### 



Deductibility of Compensation Expenses
  Accounting and Tax Considerations
  REPORT OF COMPENSATION COMMITTEE
   COMPENSATION COMMITTEEDr. Bernard L. Kasten, Jr.Robert Hoekstra 72




---



##### 



EXECUTIVE COMPENSATION
 SUMMARY COMPENSATION TABLE
 Non-Equity
    
    NonqualifiedStock
    
    
    
    
    
    Incentive Plan
    
    DeferredBonus
    
    Awards
    
    Option
    
    Compensation
    
    Compensation
    
    All OtherName and principal position
    
    Year
    
    Salary ($)
    
    ($)
    
    ($)
    
    Awards ($)
    
    ($)
    
    Earnings ($)
    
    Compensation ($)
    
    Total ($)(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)
    
    (g)
    
    (h)
    

(i)
    
    (j)Monte E. Taylor, Jr.
    
    
    2008
    
    
    $
    131,442
    
    
    $
    0
    
    
    $
    0
    
    
    $
    57,000
    1
    
    $
    0
    
    
    $
    0
    
    
    $
    9,562
    2
    
    $
    198,004Chief Executive Officer
    
    
    2007
    
    
    $
    102,500
    
    
    $
    0
    
    
    $
    0
    
    
    $
    158,000
    1
    
    $
    0
    
    
    $
    0
    
    
    $
    13,170
    2
    
    $
    273,670Robert P. Ricciardi, Ph.D.
    
    
    2008
    
    
    $
    22,500
    
    
    $
    0
    
    
    $
    0
    
    
    $
    4,000
    3
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    26,500Chief Science Officer
    
    
    2007
    
    
    $
    97,500
    
    
    $
    0
    
    
    $
    0
    
    
    $
    6,000
    3
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    103,500John A. Souza
    
    
    2008
    
    
    $
    91,506
    
    
    $
    0
    
    
    $
    0
    
    
    $
    49,000
    4
    
    $
    0
    
    
    $
    0
    
    
    $
    8,455
    2
    
    $
    148,961Vice President of Business
    
    
    2007
    
    
    $
    79,500
    
    
    $
    0
    
    
    $
    0
    
    
    $
    102,000
    4
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    181,500DevelopmentDr. Bernard L. Kasten, Jr.
    
    
    2008
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    29,000
    5
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    29,000Chairman
    
    
    2007
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    75,000
    5
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    75,000
 
 1
    
    On June 1, 2007, Mr. Taylor received a fully vested warrant to acquire 1,600,00
shares of common stock of an exercise price of $0.08 per share and received options to acquire
1,500,000 shares of common stock at an exercise price of $0.08 per share, which options vest in
four equal annual installments of 375,000 each, commencing June 1, 2007. On May 20, 2008, Mr.
Taylor received options to acquire 350,000 shares of Common Stock at an exercise price of $0.12 per
share, of which 225,000 options have vested and 125,000 options vest on May 20, 2009. On July 28,
2008, Mr. Taylor received options to acquire 1,883,333 shares of Common Stock at a price of $0.50
per share, of which 516,666 options vest on July 28, 2011, 516,667 options vest on each of July 28,
2012 and July 28, 2013, and 333,333 options vest upon the Company becoming listed on the NASDAQ
National Market or a national stock exchange.2
    
    Represents the cost of health insurance premiums provided from the Company.3
    
    On June 1, 2007, Dr. Ricciardi received a fully-vested warrant to acquire 25,000
shares of common stock at an exercise price of $0.08 per share and received options to acquire
200,000 shares of common stock at an exercise price of $0.08 per share, which options vest in four
equal annual installments of 50,000 each, commencing June 1, 2007. On September 30, 2007, in
connection with the amendment to Dr. Ricciardis consulting agreement, Dr. Ricciardi received a
fully-vested warrant to acquire 1,400,000 shares of common stock at an exercise price of $0.11 per
share.4
    
    On June 1, 2007, Mr. Souza received a fully vested warrant to acquire 1,000,000
shares of common stock at an exercise price of $0.08 per share, and received options to acquire
1,100,000 shares of common stock at an exercise price of $$0.08 per share, which options vest in
four equal installments of 275,000 each, commencing June 1, 2007. On May 20, 2008, Mr. Souza
received options to acquire 350,000 shares of Common Stock, of which 285,000 options have vested
and 125,000 options vest on May 20, 2009. On July 28, 2008, Mr. Souza received options to acquire
1,483,333 shares of Common Stock of which 383,333 options vest on each of July 28, 2011 and July
28, 2012, 383,374 options vest on July 28, 2013 and 333,333 options vest upon the Company becoming
listed on the NASDAQ or National Market or national stock exchange.5
    
    On June 1, 2007, Dr. Kasten received a fully-vested amount to acquire 735,000 shares
of Common Stock at an exercise price of $0.08 per share and received options to acquire 850,000
shares of Common Stock at an exercise price of $0.08 per share, which options vest in four equal
annual installments of 282,500 each, commencing June 1, 2007. On May 20, 2008, Dr. Kasten received
a fully-vested option to acquire 100,000 shares of Common Stock at an exercise price of $0.12 per
share. On July 28, 2008, Dr. Kasten received options to acquire 1,120,833 shares of Common Stock
at an exercise price of $0.50 per share, of which 262,500 options vest on each of July 28, 2011,
July 28, 2012 and July 28, 2013, and 333,333 options vest upon the Company becoming listed on the
NASDAQ National Market or a national stock exchange. 73




---



##### 



Employment Agreements with Executive Officers
    74




---



##### 



OPTION GRANTS
   All Other
    
    All OtherStock
    
    Option
    
    
    
    
    
    GrantAwards:
    
    Awards:
    
    Exercise
    
    Date FairNumber
    
    Number of
    
    or Base
    
    Value ofEstimated Future Payouts
    
    Estimated Future Payouts
    
    of Shares
    
    Securities
    
    Price of
    
    StockUnder Non-Equity Incentive
    
    Under Equity Incentive Plan
    
    of Stocks
    
    Underlying
    
    Option
    
    andPlan Awards
    
    Awards
    
    or Units
    
    Options
    
    Awards
    
    OptionsName
    
    Grant Date
    
    Threshold ($)
    
    Target ($)
    
    Maximum ($)
    
    Threshold ($)
    
    Target ($)
    
    Maximum ($)
    
    (#)
    
    (#)
    
    ($/sh)
    
    Awards(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)
    
    (g)
    
    (h)
    
    (i)
    
    (j)
    
    (k)
    
    (l)Monte E. Taylor, Jr.
    
    May 20, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,000
    
    
    $
    0.12
    
    
    $
    0.12July 28, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,883,333
    
    
    $
    0.50
    
    
    $
    0.50John H. Souza
    
    May 20, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,000
    
    
    $
    0.12
    
    
    $
    0.12July 28, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,483,333
    
    
    $
    0.50
    
    
    $
    0.50Dr. Bernard L.
    
    May 20, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    $
    0.12
    
    
    $
    0.12Kasten, Jr.
    
    July 28, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,120,833
    
    
    $
    0.50
    
    
    $
    0.50
 75




---



##### 



OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
 OPTION AWARDS
 Equity IncentivePlan Awards:Number ofSecuritiesNumber of Securities
    
    UnderlyingNumber of Securities Underlying
    
    Underlying Unexercised
    
    Unexercised
    
    Option ExerciseUnexercised Options (#)
    
    Options (#)
    
    Unearned Options
    
    PriceName
    
    Exercisable
    
    Unexercisable
    
    (#)
    
    ($)
    
    Option Expiration Date(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)Monte E. Taylor, Jr.
    
    
    2,350,000
    
    
    
    750,000
    (1)
    
    
    0
    
    
    $
    0.08
    
    
    June 1, 2017225,000
    
    
    
    125,000
    (2)
    
    
    0
    
    
    $
    0.12
    
    
    May 20, 20180
    
    
    
    1,883,333
    (3)
    
    
    0
    
    
    $
    0.50
    
    
    July 28, 2018Robert P. Ricciardi, Ph.D
    
    
    125,000
    
    
    
    100,000
    (4)
    
    
    0
    
    
    $
    0.08
    
    
    June 1, 20171,400,000
    
    
    
    0
    
    
    
    0
    
    
    $
    0.11
    
    
    September 30, 2017John H. Souza
    
    
    1,550,000
    
    
    
    550,000
    (5)
    
    
    0
    
    
    $
    0.08
    
    
    June 1, 2017225,000
    
    
    
    125,000
    (2)
    
    
    0
    
    
    $
    0.12
    
    
    May 20, 20180
    
    
    
    1,483,333
    (6)
    
    
    0
    
    
    $
    0.50
    
    
    July 28, 2018Dr. Bernard L. Kasten, Jr.
    
    
    1,200,000
    
    
    
    425,000
    (7)
    
    
    0
    
    
    $
    0.08
    
    
    June 1, 2017100,000
    
    
    
    0
    
    
    
    0
    
    
    $
    0.12
    
    
    May 20, 20180
    
    
    
    1,120,833
    (8)
    
    
    0
    
    
    $
    0.50
    
    
    July 28, 2018
 
 (1)
    
    375,000 options vest on each of June 1, 2009 and June 1, 2010(2)
    
    The remaining unvested options vest on May 20, 2009(3)
    
    516,666 options vest on July 28, 2011, 516,667 options vest on each of July 28,
2012 and July 28, 2013, and 333,333 options vest upon the Company becoming listed on the NASDAQ
National Market or a national stock exchange.(4)
    
    50,000 options vest on each of June 1, 2009 and June 1, 2010.(5)
    
    275,000 options vest on each of June 1, 2009 and June 1, 2010.(6)
    
    383,333 options vest on each of July 28, 2011 and July 28, 2012, 383,334 options
vest on July 28, 2013, and 333,333 options vest upon the Company becoming listed on the NASDAQ
National Market or national stock exchange.(7)
    
    212,500 options vest on each of June 1, 2009 and June 1, 2010.(8)
    
    262,500 options vest on each of July 28, 2011, July 28, 2012 and July 28, 2013, and
333,333 options vest upon the Company becoming listed on the NASDAQ National Market or national
stock exchange. 76




---



##### 



DIRECTOR COMPENSATION
  DIRECTOR COMPENSATION
 Change inPensionValueandNon-Equity
    
    NonqualifiedFees
    
    Stock
    
    Options
    
    Incentive Plan
    
    Deferred
    
    All OtherEarned
    
    Awards
    
    Awards
    
    Compensation
    
    Compensation
    
    Compensation
    
    TotalName
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)
    
    (g)
    
    (h)Robert Hoekstra
    
    
    0
    
    
    
    0
    
    
    $
    26,000
    (1)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    $
    26,000
 
 (1)
    
    On May 20, 2008, Mr. Hoekstra received options to acquire 500,000 shares of Common
Stock, of which 200,000 options vested on May 20, 2008 and 100,000 options vest on each of May 20,
2009, May 20, 2010 and May 20, 2011. Compensation Committee Interlocks and Insider Participation
  
 77




---



##### 



PRINCIPAL SHAREHOLDERS
    78




---



##### 



Number of Shares
    
    Approximate PercentageName
    
    Beneficially Owned
    
    Of Stock OutstandingChesed Congregation of America
    
    
    10,625,000
    (1)
    
    
    5.9
    %One State Street Plaza, 29th Floor
New York, NY 10004Dr. Bernard L. Kasten, Jr.
    
    
    6,346,192
    (2)
    
    
    4.2
    %4380 27th Court, SW #104
Naples, FL 34116Kenneth R. Levine
    
    
    6,302,046
    (3)
    
    
    5.9
    %2 Oaklawn Road
Short Hills, NJ 07078Robert Hoekstra
    
    
    4,537,196
    (4)
    
    
    3.9
    %317 Wekiva Spring Road, #200
Longwood, Florida 32779Robert P. Ricciardi, Ph.D.
    
    
    4,235,000
    (5)
    
    
    3.9
    %317 Wekiva Spring Road, #200
Longwood, Florida 32779John H. Souza
    
    
    3,351,331
    (6)
    
    
    3.1
    %317 Wekiva Spring Road, #200
Longwood, Florida 32779Monte E. Taylor, Jr.
    
    
    2,727,250
    (7)
    
    
    2.5
    %317 Wekiva Spring Road, #200
Longwood, Florida 32779Directors and Officers as a
    
    
    21,371,971

(2)(4)(5)(6)(7)
    
    
    18.4
    %Group
 
 (1)
    
    Includes 10,000,000 shares of Common Stock issuable upon the conversion of convertible notes.(2)
    
    Includes currently exercisable options and warrants to acquire 2,420,833 shares of Common
Stock.(3)
    
    Includes 6,182,046 shares held directly and 70,000 shares held in a retirement plan. Includes
currently exercisable options and warrants to acquire 50,000 shares of Common Stock.(4)
    
    Includes currently exercisable options and warrants to acquire 620,455 shares of Common Stock.
Includes 1,697,000 shares of Common Stock and warrants to exercise 500,000 shares of Common Stock
held by a family trust for which Mr. Hoekstra is a trustee. Mr. Hoekstra disclaims beneficial
ownership of those shares and warrants.(5)
    
    Includes currently exercisable options and warrants to acquire 1,525,000 shares of Common
Stock.(6)
    
    Includes currently exercisable warrants to acquire 2,506,661 shares of Common Stock.(7)
    
    Include 16,000 shares held by Mr. Taylor and various family members in joint tenancy. Includes
currently exercisable options and warrants to acquire 2,700,000 shares of Common Stock. 
 79




---



##### 



Fees for Independent Auditors for Fiscal Years 2008 and 2007
  2008
    
    
    2007Audit Fees
    
    $
    22,000
    
    
    $
    22,000Audit-Related Fees
    
    
    0
    
    
    
    0Tax Fees
    
    
    0
    
    
    
    0All Other Fees
    
    
    0
    
    
    
    0Total Fees
    
    $
    22,000
    
    
    $
    22,000
  80




---



##### 



(1)
    
    Financial Statements. The financial statements required to be filed are
presented beginning on page 30.(2)
    
    Exhibits. The following Exhibits have been filed pursuant to Item 601 of
Regulation S-K.
 Exhibit Number
    
    Description21
    
    Subsidiaries of the Registrant31.1
    
    Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
 81




---



##### 



SIGNATURES
  GENELINK, INC.
RegistrantDate: March 30, 2009
    
    Monte E. Taylor, Jr.Monte E. Taylor, Jr., Chief ExecutiveOfficer  Signatures
    
    Capacity
    
    Date/s/ Monte E. Taylor, Jr.
    
    Principal Executive Officer, Principal
    
    March 30, 2009Monte E. Taylor
    
    Financial
Officer and DirectorChief Executive Officer/s/ Robert P. Ricciardi
    
    Director
    
    March 30, 2009Robert P. Ricciardi, Ph.D.Director/s/ Bernard L. Kasten, Jr.
    
    Chairman and Director
    
    March 30, 2009Dr. Bernard L. Kasten, Jr./s/ Robert Hoekstra
    
    Director
    
    March 30, 2009Robert Hoekstra/s/ John H. Souza
    
    Director
    
    March 30, 2009John H. Souza
 82