##### Table of Contents



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 June 30, 2010
 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. 000-30518
 GENELINK, INC.
 (Exact name of registrant specified in its charter)
 PENNSYLVANIA
    
    23-2795613(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)317 Wekiva Springs Road, #200Longwood, Florida
    
    32779(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
  Number of Shares of Common Stock
Outstanding on July 30, 2010
    
    
    131,215,525




---



##### 



PagePART I. FINANCIAL INFORMATIONITEM 1 Financial Statements.Consolidated Balance Sheets at June 30, 2010 (unaudited)
and December 31, 2009
    
    
    3Consolidated Statements of Income (unaudited) for the
three months and six months ended June 30, 2010 and 2009
    
    
    4Consolidated Statements of Cash Flows (unaudited) for the
six months ended June 30, 2010 and 2009
    
    
    5-6Notes to Consolidated Financial Statements
    
    
    7-10Exhibit 31.1Exhibit 32.1
   2




---



##### Table of Contents



GENELINK, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)June 30, 2010
    
    
    December 31, 2009ASSETSCash and cash equivalents
    
    $
    436,256
    
    
    $
    196,857Accounts receivable
    
    
    439,600
    
    
    
    465,780Inventory
    
    
    296,221
    
    
    
    494,737Prepaid expenses
    
    
    138,546
    
    
    
    141,397Total current assets
    
    
    1,310,623
    
    
    
    1,298,771Property and equipment
    
    
    263,138
    
    
    
    302,887Other assets
    
    
    284,749
    
    
    
    279,139Total assets
    
    $
    1,858,510
    
    
    $
    1,880,797LIABILITIESCurrent liabilitiesCurrent maturity of long-term debt
    
    $
    250
    
    
    $
    36,079Accounts payable and accrued expenses
    
    
    1,146,426
    
    
    
    1,189,709Accrued compensation
    
    
    225,888
    
    
    
    206,272Deferred revenue
    
    
    293,744
    
    
    
    277,132Loans payable
    
    
    10,000
    
    
    
    18,000Total current liabilities
    
    
    1,676,308
    
    
    
    1,727,192Convertible promissory notes payable, net of issuance of debt and
stock conversion discounts
    
    
    922,574
    
    
    
    893,395Total liabilities
    
    
    2,598,882
    
    
    
    2,620,587SHAREHOLDERS EQUITY (DEFICIENCY)Common stock, $.01 par value, 250,000,000 shares authorized as
of June 30, 2010 and December 31, 2009; 137,791,695 and
118,861,347 shares issued as of June 30, 2010 and December 31,
2009, respectively; and 133,432,536 and 114,407,132 shares
outstanding as of June 30, 2010 and December 31, 2009,
respectively.
    
    
    1,377,917
    
    
    
    1,188,617Additional paid in capital
    
    
    14,059,765
    
    
    
    12,969,561Stock warrants
    
    
    3,466,136
    
    
    
    3,656,227Accumulated deficit
    
    
    (19,091,955
    )
    
    
    (18,001,960
    )Treasury stock, 4,359,169 shares as of June 30, 2010 and December
31, 2009, at cost
    
    
    (552,235
    )
    
    
    (552,235
    )Total shareholders equity (deficiency)
    
    
    (740,372
    )
    
    
    (739,790
    )Total liabilities and shareholders equity (deficiency)
    
    $
    1,858,510
    
    
    $
    1,880,797
 The accompanying notes are an integral part of the consolidated financial statements
  3




---



##### Table of Contents



GENELINK, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 For The
    
    
    For The
    
    
    For The
    
    
    For TheThree Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009REVENUE
    
    $
    2,019,066
    
    
    $
    2,113,177
    
    
    $
    4,240,177
    
    
    $
    4,085,215COST OF GOODS SOLD
    
    
    722,643
    
    
    
    937,532
    
    
    
    1,573,721
    
    
    
    1,862,307GROSS PROFIT
    
    
    1,296,423
    
    
    
    1,175,645
    
    
    
    2,666,456
    
    
    
    2,222,908EXPENSESSelling, general and administrative
    
    
    1,790,781
    
    
    
    1,936,388
    
    
    
    3,605,456
    
    
    
    3,447,555Research and development
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    01,790,781
    
    
    
    1,936,388
    
    
    
    3,605,456
    
    
    
    3,447,555OPERATING LOSS
    
    
    (494,358
    )
    
    
    (760,743
    )
    
    
    (939,000
    )
    
    
    (1,224,647
    )OTHER EXPENSESAmortization and depreciation
    
    
    38,498
    
    
    
    21,404
    
    
    
    76,462
    
    
    
    55,948Interest expense
    
    
    38,212
    
    
    
    38,490
    
    
    
    74,533
    
    
    
    50,27176,710
    
    
    
    59,894
    
    
    
    150,995
    
    
    
    106,219NET LOSS BEFORE PROVISION FOR INCOME TAXES
    
    
    (571,068
    )
    
    
    (820,637
    )
    
    
    (1,089,995
    )
    
    
    (1,330,866
    )PROVISION FOR INCOME TAXES
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0NET LOSS
    
    $
    (571,068
    )
    
    $
    (820,637
    )
    
    $
    (1,089,995
    )
    
    $
    (1,330,866
    )NET LOSS PER SHARE, BASIC AND DILUTED
    
    $
    (0.004
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )Weighted average common shares and
diluted potential common shares
    
    
    129,652,251
    
    
    
    110,313,235
    
    
    
    122,083,223
    
    
    
    106,532,888
 The accompanying notes are an integral part of the consolidated financial statements
  4




---



##### Table of Contents



GENELINK, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Six months ended June 30
    
    2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (1,089,995
    )
    
    $
    (1,330,866
    )Adjustments to reconcile net loss
to net cash used by operating activitiesDepreciation and amortization
    
    
    76,462
    
    
    
    55,948Amortization of discounts on loans payable
    
    
    29,179
    
    
    
    19,295Stock and warrants issued for services
    
    
    0
    
    
    
    35,000Common stock issued for services
    
    
    0
    
    
    
    15,000Fair value of options granted for services
    
    
    188,950
    
    
    
    153,950Changes in operating assets and liabilitiesAccounts receivable
    
    
    26,180
    
    
    
    100,084Inventory
    
    
    198,516
    
    
    
    84,974Prepaid expenses
    
    
    2,851
    
    
    
    (12,621
    )Other assets
    
    
    (18,750
    )
    
    
    (8,592
    )Accounts payable and accrued expenses
    
    
    (72,603
    )
    
    
    (957,225
    )Accrued compensation
    
    
    19,616
    
    
    
    (18,954
    )Deferred revenue
    
    
    16,612
    
    
    
    88,967Net cash used in operating activities
    
    
    (622,982
    )
    
    
    (1,775,040
    )CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    (23,573
    )
    
    
    (8,414
    )Patent acquisition costs
    
    
    0
    
    
    
    (550
    )Net cash used in investing activities
    
    
    (23,573
    )
    
    
    (8,964
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from loans and notes payable
    
    
    0
    
    
    
    1,250,000Proceeds from issuance of common stock and warrants, net
    
    
    956,500
    
    
    
    617,500Principal payments on capital lease obligation
    
    
    0
    
    
    
    (32,560
    )Principal payments on note payable
    
    
    (43,829
    )
    
    
    (24,092
    )Commissions paid for fundraising costs
    
    
    (26,717
    )
    
    
    (114,100
    )Net cash provided by financing activities
    
    
    885,954
    
    
    
    1,696,748
 The accompanying notes are an integral part of the consolidated financial statements
  5




---



##### Table of Contents



GENELINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Six months ended June 30
    
    2010
    
    
    2009NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    239,399
    
    
    
    (87,256
    )Cash and cash equivalents, beginning of period
    
    
    196,857
    
    
    
    435,197Cash and cash equivalents, end of period
    
    $
    436,256
    
    
    $
    347,941SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest
    
    $
    0
    
    
    $
    2,934Non-cash investing and financing transactions:Stock warrants granted for services
    
    $
    188,950
    
    
    $
    160,000Stock warrants granted for fundraising
    
    $
    97,835
    
    
    $
    178,795Common stock issued for services
    
    
    0
    
    
    $
    15,000
 The accompanying notes are an integral part of the consolidated financial statements
  6




---



##### Table of Contents



GENELINK, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1  DESCRIPTION OF
ORGANIZATIONOrganizationGeneLink, Inc. (the Company) and
its subsidiaries, GeneWize Life
Sciences, Inc. Dermagenetics, Inc.
and Helix Health Solutions LLC,
operate in Florida. The Company
was organized under the laws of
the Commonwealth of Pennsylvania
and Dermagenetics, Inc. GeneWize
Life Sciences, Inc. were organized
under the laws of the State of
Delaware and Helix Health
Solutions LLC was organized under
the laws of the State of Florida.
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.The Company has 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 are performed under
contract in leading genomics
laboratories whose credentials
include College of American
Pathologists CAP accreditation,
CLIA certification, and State of
California licensure and have been
independently validated by the
laboratories.
  7




---



##### Table of Contents



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.GeneLinks patented and patent
pending assessments, such as
GeneLink Healthy Aging
AssessmentTMand
Oxidative Stress, form the
foundation of its product
offerings. Genetic test results
drive a proprietary analysis which
in turn generates a nutritional
report linked to an individual
ingredient 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.The nutritional and skin solutions
developed by the Company are the
first personalized
(mass-customized) nutritional and
skincare products manufactured
based on genetic testing that
measures single nucleotide
polymorphisms (SNPs; pronounced
snips) in DNA.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
2009 and first two quarters of
2010 consisted of its foundational
Life Map NutritionTM
System.GeneWize, as a direct selling
company, also 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.Helix Health Solutions LLC was
created on June 23, 2010 to
facilitate sales receipt for the
Company of a private label joint
marketing agreement signed March
17, 2010 with a healthcare-related
marketing company. Revenues from
the joint marketing agreement are
anticipated to begin in the third
quarter of 2010.
  8




---



##### Table of Contents



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, 2009.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 June 30,
2010 should not be regarded as
necessarily indicative of results
that may be expected for the year
ended December 31, 2010.3  STOCKHOLDERS
EQUITY
TRANSACTIONS AND
CONVERTIBLE
SECURED
PROMISSORY NOTES


    
    During the three months ended
March 31, 2010, the Company sold
2,450,000 shares of restricted
Common Stock of the Company and
issued 1,225,000 warrants to
purchase Common Stock at an
exercise price of $.15 per share,
at a purchase price of $0.10 per
unit (each unit consisting of one
share of Common Stock and 1/2 of a
warrant) pursuant to a continued
Confidential Private Offering
Memorandum, and received an
aggregate gross amount of
$245,000. During the three months
ended June 30, 2010, the terms of
the private offering were revised
to a sale of shares at $0.05 per
share without warrants, and as a
result 1,125,000 of the warrants
were canceled and an additional
1,125,000 shares of restricted
Common Stock were issued in their
place.In connection with the above, the
Company paid cash commissions of
$11,600 and granted 145,000 and
72,000 warrants to acquire shares
of Common Stock at exercise prices
of $0.10 and $0.15 per share,
respectively, to First Equity
Capital Securities, Inc., which
has been recorded as a reduction
of the proceeds in accordance with
AICPA Technical Practice Aid
4110.01. Kenneth R. Levine, a
holder of more than five percent
of the equity securities of the
Company, is an officer and owner
of First Equity Capital
Securities, Inc. During the three
months ended June 30, 2010, as a
result of the Company revising the
terms of its private placement
offering these warrants were
canceled and 250,000 warrants at
an exercise price of $.05 were
issued in their place.During the three months ended June
30, 2010, the Company sold
14,230,000 shares of restricted
Common Stock of the Company
pursuant to the revised terms of
the Confidential Private Offering
Memorandum and received an
aggregate gross amount of
$711,500. In connection, the
Company incurred cash commissions
of $29,320 and granted 1,118,000
warrants to acquire shares of
Common Stock at an exercise price
of $.05 to First Equity Capital
Securities, Inc., which has been
recorded as a reduction of the
proceeds in accordance with AICPA
Technical Practice Aid 4110.01.
Kenneth R. Levine, a holder of
more than five percent of the
equity securities of the Company,
is an officer and owner of First
Equity Capital Securities, Inc.
  9




---



##### Table of Contents



During the six months ended June
30, 2010, the Company granted
1,859,000 options to acquire
shares of Common Stock at exercise
prices ranging from $.08 and $.13
for services provided.
Compensation expense of $44,500
was recorded for the 400,000 of
those options that vested.4 SUBSEQUENT EVENTS

    
    On July 7, 2010 the Company
granted five executives warrants
to acquire an aggregate of
5,450,000 shares of Common Stock
at an exercise price of $.08
vesting in four equal annual
installments commencing July 7,
2010. In addition, one executive
received 1,562,500 shares of
Common Stock valued at $0.08 per
share for services rendered, and
one executive received an
additional warrant to acquire
500,000 shares of Common Stock at
an exercise price of $.08 for past
services rendered.On July 7, 2010, the Company
granted to each member of its
scientific advisory board warrants
to acquire an aggregate of
1,100,000 shares of Common Stock
at an exercise price of $.08
vesting in four equal annual
installments commencing July 7,
2010.On July 7, 2010, the Company
granted to each member of its
board members warrants to acquire
an aggregate of 1,000,000 shares
of Common Stock at an exercise
price of $.08 vesting in four
equal annual installments
commencing July 7, 2010.On July 7, 2010, the Company
granted to an owner of more than
5% of the equity securities of the
Company warrants to acquire
250,000 shares of Common Stock at
an exercise price of $.08 for
consulting services, which
warrants vest in four equal annual
installments commencing July 7,
2010.In July 2010, the Company sold
1,500,000 shares of restricted
Common Stock of the Company
pursuant to the revised terms of
the Confidential Private Offering
Memorandum and received an
aggregate gross amount of $75,000.
In connection, the Company paid
cash commissions of $200 and
granted $10,000 warrants to
acquire shares of Common Stock at
an exercise price of $.05 to First
Equity Capital Securities, Inc.,
which has been recorded as a
reduction of the proceeds in
accordance with AICPA Technical
Practice Aid 4110.01. Kenneth R.
Levine, a holder of more than five
percent of the equity securities
of the Company, is an officer and
owner of First Equity Capital
Securities, Inc.
  10




---



##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   GENERAL
     11




---



##### Table of Contents



OVERVIEW
   RECENT REGULATORY DEVELOPMENTS
      12




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
     COMPARISON OF THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2010 TO THE THREE MONTHS AND SIX
MONTHS ENDED JUNE 30, 2009
 Financial Condition
   Results of Operations
 Revenues
  13




---



##### Table of Contents



Gross Profit
 Expenses
 Operating Losses
 Net Losses
 FACTORS AFFECTING THE COMPANYS BUSINESS AND PROSPECTS
    14




---



##### Table of Contents



Item 3
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Item 4T.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  PART II. OTHER INFORMATION
 Item 1
    
    LEGAL PROCEEDINGS
   15




---



##### Table of Contents



Item 2
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Number ofDate
    
    $ of Investment
    
    
    Number of Shares Issued
    
    
    InvestorsApril 6, 2010
    
    $
    30,000
    
    
    
    600,000
    
    
    
    1April 7, 2010
    
    
    50,000
    
    
    
    1,000,000
    
    
    
    1April 9, 2010
    
    
    20,000
    
    
    
    400,000
    
    
    
    1April 20, 2010
    
    
    10,000
    
    
    
    200,000
    
    
    
    1April 21,2010
    
    
    50,000
    
    
    
    1,000,000
    
    
    
    1May 10, 2010
    
    
    60,000
    
    
    
    1,200,000
    
    
    
    3May 12, 2010
    
    
    55,000
    
    
    
    1,100,000
    
    
    
    2May 17, 2010
    
    
    7,500
    
    
    
    150,000
    
    
    
    1May 18, 2010
    
    
    10,000
    
    
    
    200,000
    
    
    
    1May 24, 2010
    
    
    100,000
    
    
    
    2,000,000
    
    
    
    1June 2, 2010
    
    
    105,000
    
    
    
    2,100,000
    
    
    
    3June 11, 2010
    
    
    19,000
    
    
    
    380,000
    
    
    
    2June 14, 2010
    
    
    15,000
    
    
    
    300,000
    
    
    
    1June 15, 2010
    
    
    10,000
    
    
    
    200,000
    
    
    
    1June 25, 2010
    
    
    30,000
    
    
    
    600,000
    
    
    
    2June 29, 2010
    
    
    140,000
    
    
    
    2,800,000
    
    
    
    4$
    711,500
    
    
    
    14,230,000
    
    
    
    26
  Item 3
    
    DEFAULTS UPON SENIOR SECURITIES
  Item 4
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
  Item 5
    
    OTHER INFORMATION
   16




---



##### Table of Contents



Item 6.
    
    EXHIBITS AND REPORTS ON FORM 8-K.
 Exhibit No.
    
    Description31.1
    
    
    Certificate of the Chief
Executive Officer and 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.
   GENELINK, INC.
(Registrant)Date: August 13, 2010
    By:
    /s/ Gary J. BeemanGary J. Beeman, Chief Executive Officerand Principal Financial Officer  17