U.S. SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO 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.
 (Exact name of registrant specified in its charter)
 PENNSYLVANIA
    
    23-2795613(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)317 Wekiva Springs Road, #200
Longwood, Florida
    
    32779
(Zip Code)(Address of principal executive offices)
 Registrants telephone number, including area code
 þ o
 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
  Number of Shares of Common StockOutstanding on May 1, 2009
    
    106,022,025




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Page No.PART I. FINANCIAL INFORMATIONITEM 1. Financial Statements.Consolidated Balance Sheets at March 31, 2009
(unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Operations for the three
months ended March 31, 2009 and 2008 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the three
months ended March 31, 2009 and 2008 (unaudited)
    
    
    5-6Notes to Interim Consolidated Financial Statements
    
    
    7-11
 2




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##### 



GENELINK, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)March 31,
    
    December 31,2009
    
    2008ASSETSCash and cash equivalents
    
    $
    676,251
    
    
    $
    435,197Accounts receivable
    
    
    588,088
    
    
    
    713,565Inventory
    
    
    784,210
    
    
    
    739,515Prepaid expenses
    
    
    101,510
    
    
    
    53,688Total current assets
    
    
    2,150,059
    
    
    
    1,941,965Property and equipment
    
    
    268,995
    
    
    
    281,984Other assets
    
    
    323,537
    
    
    
    321,277Total assets
    
    $
    2,742,591
    
    
    $
    2,545,226LIABILITIESCurrent maturity of long-term debt
    
    $
    25,670
    
    
    $
    60,269Accounts payable and accrued expenses
    
    
    1,115,747
    
    
    
    2,034,322Accrued compensation
    
    
    208,965
    
    
    
    218,664Deferred revenue
    
    
    161,727
    
    
    
    161,727Loans payable
    
    
    18,000
    
    
    
    18,000Total current liabilities
    
    
    1,530,109
    
    
    
    2,492,982Convertible promissory notes payable, net of issuance of debt and
stock conversion discounts
    
    
    818,308
    
    
    
    0Total liabilities
    
    
    2,348,417
    
    
    
    2,492,982SHAREHOLDERS EQUITY (DEFICIENCY)Common stock, $.01 par value, 125,000,000 shares authorized as
of March 31, 2009 and December 31, 2008; 110,211,129 and
104,561,291 shares issued as of March 31, 2009 and December 31,
2008, respectively; and 105,852,132 and 100,202,132 shares
outstanding as of March 31, 2009 and December 31, 2008,
respectively.
    
    
    1,102,113
    
    
    
    1,045,613Additional paid in capital
    
    
    12,860,333
    
    
    
    12,235,833Stock warrants
    
    
    2,779,399
    
    
    
    2,608,240Accumulated deficit
    
    
    (15,795,436
    )
    
    
    (15,285,207
    )Treasury stock, 4,359,159 shares as of March 31, 2009 and December
31, 2008, at cost
    
    
    (552,235
    )
    
    
    (552,235
    )Total shareholders equity (deficiency)
    
    
    344,174
    
    
    
    52,244Total liabilities and shareholders
equity (deficiency)
    
    $
    2,742,591
    
    
    $
    2,545,226
 See notes to the consolidated financial statements
 3




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##### 



GENELINK, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 Three months ended March 31,
    
    2009
    
    
    2008REVENUE
    
    $
    1,972,038
    
    
    $
    26,424COSTS OF GOODS SOLD
    
    
    924,774
    
    
    
    25,315GROSS PROFIT
    
    
    1,047,264
    
    
    
    1,109EXPENSESSelling, general and administrative
    
    
    1,517,738
    
    
    
    389,656Research and development
    
    
    0
    
    
    
    12,9511,517,738
    
    
    
    402,607OPERATING LOSS
    
    
    (470,474
    )
    
    
    (401,498
    )OTHER EXPENSESAmortization and depreciation
    
    
    27,974
    
    
    
    13,368Interest expense
    
    
    11,781
    
    
    
    33,38439,755
    
    
    
    46,752NET LOSS BEFORE PROVISION FOR INCOME TAXES
    
    
    (510,229
    )
    
    
    (448,250
    )PROVISION FOR INCOME TAXES
    
    
    0
    
    
    
    0NET LOSS
    
    $
    (510,229
    )
    
    $
    (448,250
    )NET LOSS PER SHARE, BASIC & DILUTED
    
    $
    (0.01
    )
    
    $
    (0.01
    )Weighted average common shares
and diluted
potential common shares
    
    
    105,094,902
    
    
    
    66,673,591
 See notes to the consolidated financial statements.
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GENELINK, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Three months ended March 31,
    
    2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (510,229
    )
    
    $
    (448,250
    )Adjustments to reconcile net loss to net cash used in
operating activitiesDepreciation and amortization
    
    
    27,974
    
    
    
    13,368Amortization of discounts on loans payable
    
    
    4,466
    
    
    
    11,819Fair value of options granted for services
    
    
    5,000
    
    
    
    0Changes in operating assets and liabilitiesAccounts receivable
    
    
    125,477
    
    
    
    (18,170
    )Inventory
    
    
    (4,695
    )
    
    
    (30,091
    )Prepaid expenses
    
    
    (47,822
    )
    
    
    (24,591
    )Other assets
    
    
    (8,280
    )
    
    
    (6,000
    )Accounts payable and accrued expenses
    
    
    (918,575
    )
    
    
    67,776Accrued compensation
    
    
    (9,699
    )
    
    
    0Net cash used in operating activities
    
    
    (1,376,383
    )
    
    
    (434,139
    )CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    (8,414
    )
    
    
    (34,447
    )Patent acquisition costs
    
    
    (550
    )
    
    
    (20,119
    )Net cash used in investing activities
    
    
    (8,964
    )
    
    
    (54,566
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from loans and notes payable
    
    
    1,200,000
    
    
    
    0Proceeds from issuance of common stock and warrants, net
    
    
    565,000
    
    
    
    0Principal payments on capital lease obligations
    
    
    (16,280
    )
    
    
    0Principal payments on note payable
    
    
    (18,319
    )
    
    
    0Commissions paid for fundraising costs
    
    
    (104,000
    )
    
    
    0Net cash provided by financing activities
    
    
    1,626,401
    
    
    
    0
 See notes to the consolidated financial statements.
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##### 



GENELINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three months ended March 31,
    
    2009
    
    
    2008NET DECREASE IN CASH AND
CASH EQUIVALENTS
    
    
    241,054
    
    
    
    (488,705
    )Cash and cash equivalents, beginning of period
    
    
    435,197
    
    
    
    972,371Cash and cash equivalents, end of period
    
    
    676,251
    
    
    
    483,666SUPPLEMENTARY CASH FLOW INFORMATIONCash paid for interest
    
    $
    0
    
    
    $
    0
 See notes to the consolidated financial statements.
 6




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GENELINK, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1 DESCRIPTION OF 
ORGANIZATIONOrganizationGeneLink, Inc. (the Company) and its subsidiaries,
GeneWize Life Sciences, Inc. and Dermagenetics, 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s scientific foundation developed as a
result of discoveries in the field of human molecular
genetics. Research supported by the National Institute
of Health, including the Human Genome Project, as well
as academic, commercial research and research by the
scientists on GeneLinks Scientific Advisory Board,
enabled the identification of an increasing number of
connections between genes, SNPs (single-nucleotide
polymorphisms) and the specific function of enzymes
and receptors relating to nutrition and skin health.Specifically, the Company developed proprietary
SNP-based genetic profiles (named GeneLink
Nutragenetic Profile  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
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.The Companys laboratory assessments performed under
contract in leading genomics laboratories and have
been independently validated by the laboratories. In
March 2009, the Company expanded its international
network of qualified laboratories with the addition of
a highly automated United States based clinical
laboratory whose credentials include College of
American Pathologists CAP accreditation, CLIA
certification, and State of California licensure.
 7




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The
enhanced laboratory capabilities will allow the
Company to accommodate the increased demand for
genetic testing and improve turnaround time.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.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 and first quarter
2009 consisted of its foundational Life Map
NutritionTM System. The LifeMap
NutritionTMSystem 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 GeneLink Healthy
Aging AssessmentTMand 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 help compensate for any anticipated need for
additional supplementation, genetically selected
ingredients and nutrients (SNPboostsTM, 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 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.
 8




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2 BASIS OF
PRESENTATION
    
    The accompanying unaudited consolidated financial
statements have been prepared by the Company in
accordance with the instructions to Form 10-Q and
Article 10 of Regulation S-X relating to interim
financial statements. Accordingly, they do not
include all of the information and footnotes required
by generally accepted accounting principles for
complete financial statements and should be read in
conjunction with the consolidated financial statements
and notes thereto included in the Annual Report on
Form 10-K of GeneLink, Inc. and Subsidiaries for the
year ended December 31, 2008.In the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary to
present fairly the information set forth in the
accompanying consolidated financial statements have
been included. The results reported in these
consolidated financial statements for the three-month
period ended March 31, 2009 should not be regarded as
necessarily indicative of results that may be expected
for the year ended December 31, 2009.3  STOCKHOLDERS
EQUITY
TRANSACTIONS AND
CONVERTIBLE
SECURED
PROMISSORY NOTES
    
    In January 2009, the Company sold 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 Convertible Notes and
issued 300,000 additional warrants in connection
therewith. Of the $1,200,000 total proceeds, $166,158
was allocated to the warrants and $140,000 was
allocated to the conversion feature.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.In connection with the issue of the Convertible Notes
and warrants, the Company paid a commission of
$104,000 to First Equity Capital Securities, Inc., as
agent for the offering, which has been recorded as a
reduction of the proceeds in accordance with AICPA
Technical Practice Aid 4110.01. First Equity Capital
Securities, Inc., is owned and controlled by Kenneth
R. Levine, a holder of more than five percent of the
outstanding Common Stock of the Company.
 9




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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.4  SUBSEQUENT
EVENTS
    
    In April 2009, the Company issued an additional
$50,000 Convertible Note and 75,000 warrants (see Note
3).
By Order and Opinion dated May 5, 2009 and received on
May 8, 2009, the Court of Common Pleas of
Pennsylvania, Philadelphia County, dismissed an action
brought by the Companys former Chief Executive
Officer, President and Chief Financial Officer, John
DePhillipo, and Mr. DePhillipos wife, Maria
DePhillipo (the Action) in August 2008.  In the
Action, the DePhillipos alleged that the Company, as
well as its subsidiary GeneWize, Inc. and several of
the Companys directors, officers and representatives,
defrauded them into settling a lawsuit previously
commenced by Mr. DePhillipo against the Company in the
Superior Court of New Jersey, Atlantic County (the
New Jersey Action).  In the Action, the DePhillipos
sought the return of 3,953,000 shares of the Companys
common stock sold to the Company pursuant to
the settlement, allegedly worth approximately $20
million based upon an alleged value of $5.00 per
share.The DePhillipos filed a Notice of Appeal with respect
to the Order and Opinion on May 14, 2009.Via its Order and Opinion, the Court dismissed the
Action, concluding that the DePhillipos claims were
not viable.  The Court also determined that it lacked
jurisdiction over the Companys counsel in the New
Jersey Action as well as the Companys advisors.In October 2005, the Company terminated the employment
of Mr. DePhillipo. In 2005, Mr. DePhillipo
commenced the New Jersey Action, alleging that his
termination by the Company for cause was improper
and therefore he was entitled to severance pay.  The
Company filed counterclaims against Mr. DePhillipo for
breach of
 10




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##### 



fiduciary duty, conversion, negligent
misrepresentation, unjust enrichment and fraud while
Mr. DePhillipo served as the Companys Chief Executive
Officer, President and Chief Financial Officer. The
counterclaims sought recovery in excess of that sought
by Mr. DePhillipo.On May 13, 2008, the Company and Mr. DePhillipo
reached a settlement in the New Jersey Action pursuant
to which the Company and Mr. DePhillipo settled all
issues, claims and counterclaims pending in that
action.  Under such settlement, the Company acquired
3,953,000 shares of the Companys common stock from
Mr. DePhillipo and his family, paying Mr. DePhillipo
and his family $0.06 for each such share and resulting
in a purchase price of $237,180.  The Company also
paid Mr. DePhillipo $220,000. As part of
the settlement, the Company and Mr.
DePhillipo exchanged general releases.
 11




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   GENERAL
    OVERVIEW
   12




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LIQUIDITY AND CAPITAL RESOURCES
     COMPARISON OF THREE MONTHS ENDED MARCH 31, 2009 TO THREE MONTHS ENDED MARCH 31, 2008
 Financial Condition
   13




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Results of Operations
 Revenues
 Gross Profit
 Expenses
 Operating Losses
 Net Losses
 Factors Affecting the Companys Business and Prospects
  14




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Item 3
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKNot Applicable.Item 4.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  PART II. OTHER INFORMATION
 Item 1
    
    LEGAL PROCEDURESBy Order and Opinion dated May 5, 2009 and received on May 8,
2009, the Court of Common Pleas of Pennsylvania, Philadelphia
County, dismissed an action brought by the Companys former Chief
Executive Officer, President and Chief Financial Officer, John
DePhillipo, and Mr. DePhillipos wife, Maria DePhillipo (the
Action) in August 2008.  In the Action, the DePhillipos alleged
that the Company, as well as its subsidiary GeneWize, Inc. and
several of the Companys directors, officers and representatives,
defrauded them into settling a lawsuit previously commenced by Mr.
DePhillipo against the Company in the Superior Court of New
Jersey, Atlantic County (the New Jersey Action).  In the Action,
the DePhillipos sought the return of 3,953,000 shares of the
Companys common stock sold to the Company pursuant to
the settlement, allegedly worth approximately $20 million based
upon an alleged value of $5.00 per share.Via its Order and Opinion, the Court dismissed the Action,
concluding that the DePhillipos claims were not viable.  The
Court also determined that it lacked jurisdiction over the
Companys counsel in the New Jersey Action as well as the
Companys advisors.The DePhillipos filed a Notice of Appeal with respect to the Order
and Opinion on May 14, 2009.
 15




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In October 2005, the Company terminated the employment of Mr. DePhillipo. In 2005, Mr. DePhillipo commenced the New Jersey
Action, alleging that his termination by the Company for cause
was improper and therefore he was entitled to severance pay.  The
Company filed counterclaims against Mr. DePhillipo for breach of
fiduciary duty, conversion, negligent misrepresentation, unjust
enrichment and fraud while Mr. DePhillipo served as the Companys
Chief Executive Officer, President and Chief Financial Officer.
The counterclaims sought recovery in excess of that sought by Mr.
DePhillipo.On May 13, 2008, the Company and Mr. DePhillipo reached a
settlement in the New Jersey Action pursuant to which the
Company and Mr. DePhillipo settled all issues, claims and
counterclaims pending in that action.  Under such settlement, the
Company acquired 3,953,000 shares of the Companys common stock
from Mr. DePhillipo and his family, paying Mr. DePhillipo and his
family $0.06 for each such share and resulting in a purchase price
of $237,180.  The Company also paid Mr. DePhillipo $220,000. As
part of the settlement, the Company and Mr.
DePhillipo exchanged general releases.Item 2
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSNot applicable.Item 3
    
    DEFAULTS UPON SENIOR SECURITIESNot applicable.Item 4
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERSNot applicable.Item 5
    
    OTHER INFORMATIONNot applicable.Item 6.
    
    EXHIBITS AND REPORTS ON FORM 8-K.
 31.1
    
    Certificate of the Acting
Chief Executive Officer and
Acting Chief Financial Officer
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
  16




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GENELINK, INC.
 Date:  May 19, 2009
    By:

/s/ Monte E. Taylor, Jr.Monte E. Taylor, Jr., Chief ExecutiveOfficer and Chief Financial Officer 17