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, 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.
 
 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(Address of principal executive offices)
    
    (Zip Code)
 
 þ o
 o o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ
 o þ
  Number of Shares of Common StockOutstanding on August 12, 2009
    
    109,782,025




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PagePART I.   FINANCIAL INFORMATIONITEM 1
    
    Financial Statements.Consolidated Balance Sheets at June 30, 2009 (unaudited)
and December 31, 2008
    
    
    3Consolidated Statements of Income for the three months
and six months ended June 30, 2009 and 2008 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the six months
ended June 30, 2009 and 2008 (unaudited)
    
    
    5-6Notes to Consolidated Financial Statements
    
    
    7-10
 2




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GENELINK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 (Unaudited)June 30, 2009
    
    
    December 31, 2008ASSETSCash and cash equivalents
    
    $
    347,941
    
    
    $
    435,197Accounts receivable
    
    
    613,481
    
    
    
    713,565Inventory
    
    
    654,541
    
    
    
    739,515Prepaid expenses
    
    
    66,309
    
    
    
    53,688Total current assets
    
    
    1,682,272
    
    
    
    1,941,965Property and equipment
    
    
    247,591
    
    
    
    281,984Other assets
    
    
    317,279
    
    
    
    321,277Total assets
    
    $
    2,247,142
    
    
    $
    2,545,226LIABILITIESCurrent maturity of long-term debt
    
    $
    3,617
    
    
    $
    60,269Accounts payable and accrued expenses
    
    
    1,077,096
    
    
    
    2,034,322Accrued compensation
    
    
    199,710
    
    
    
    218,664Deferred revenue
    
    
    250,694
    
    
    
    161,727Loans payable
    
    
    18,000
    
    
    
    18,000Total current liabilities
    
    
    1,549,117
    
    
    
    2,492,982Convertible promissory notes payable, net of issuance of debt and
stock conversion discounts
    
    
    863,955
    
    
    
    0Total liabilities
    
    
    2,413,072
    
    
    
    2,492,982SHAREHOLDERS EQUITY (DEFICIENCY)Common stock, $.01 par value, 250,000,000 shares and 125,000,000
shares authorized as of June 30, 2009 and December 31, 2008,
respectively; 110,836,291 shares and 104,561,291 shares issued
as of June 30, 2009 and December 31, 2008 respectively;
106,477,132 shares and 100,202,132 shares outstanding as of
June 30, 2009 and December 31, 2008, respectively
    
    
    1,108,363
    
    
    
    1,045,613Additional paid in capital
    
    
    12,712,172
    
    
    
    12,235,833Stock warrants
    
    
    3,181,843
    
    
    
    2,608,240Accumulated deficit
    
    
    (16,616,073
    )
    
    
    (15,285,207
    )Treasury stock, 4,359,169 shares as of June 30, 2009 and December
31, 2008, at cost
    
    
    (552,235
    )
    
    
    (552,235
    )Total shareholders equity (deficiency)
    
    
    (165,930
    )
    
    
    52,244Total liabilities and shareholders equity (deficiency)
    
    $
    2,247,142
    
    
    $
    2,545,226
 The accompanying notes are an integral part of the consolidated financial statements
 3




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##### 



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, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008REVENUE
    
    $
    2,113,177
    
    
    $
    124,503
    
    
    $
    4,085,215
    
    
    $
    152,960COST OF GOODS SOLD
    
    
    937,532
    
    
    
    109,172
    
    
    
    1,862,307
    
    
    
    137,502GROSS PROFIT
    
    
    1,175,645
    
    
    
    15,331
    
    
    
    2,222,908
    
    
    
    15,458EXPENSESSelling, general and administrative
    
    
    1,936,388
    
    
    
    852,598
    
    
    
    3,447,555
    
    
    
    1,242,515Research and development
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    12,9511,936,388
    
    
    
    852,598
    
    
    
    3,447,555
    
    
    
    1,255,466OPERATING LOSS
    
    
    (760,743
    )
    
    
    (837,267
    )
    
    
    (1,224,647
    )
    
    
    (1,240,008
    )OTHER INCOME (EXPENSES)Amortization and depreciation
    
    
    (21,404
    )
    
    
    (23,695
    )
    
    
    (55,948
    )
    
    
    (37,063
    )Interest income (expense)
    
    
    (38,490
    )
    
    
    (246,517
    )
    
    
    (50,271
    )
    
    
    (279,901
    )(59,894
    )
    
    
    (270,212
    )
    
    
    (106,219
    )
    
    
    (316,964
    )NET LOSS BEFORE PROVISION FOR INCOME TAXES
    
    
    (820,637
    )
    
    
    (1,107,479
    )
    
    
    (1,330,866
    )
    
    
    (1,556,972
    )PROVISION FOR INCOME TAXES
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0NET LOSS
    
    $
    (820,637
    )
    
    $
    (1,107,479
    )
    
    $
    (1,330,866
    )
    
    $
    (1,556,972
    )NET LOSS PER SHARE, BASIC & DILUTED
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.02
    )Weighted average common shares and
diluted potential common shares.
    
    
    110,313,235
    
    
    
    70,518,164
    
    
    
    106,532,888
    
    
    
    67,634,734
 The accompanying notes are an integral part of the consolidated financial statements
 4




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GENELINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Six months ended June 30
    
    2009
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (1,330,866
    )
    
    $
    (1,556,972
    )Adjustments to reconcile net loss
to net cash used by operating activitiesDepreciation and amortization
    
    
    55,948
    
    
    
    37,063Amortization of discounts on loans payable
    
    
    19,295
    
    
    
    240,844Stock and warrants issued for services
    
    
    35,000
    
    
    
    0Common stock issued for services
    
    
    15,000
    
    
    
    0Fair value of options granted for services
    
    
    153,950
    
    
    
    84,200Changes in operating assets and liabilitiesAccounts receivable
    
    
    100,084
    
    
    
    (245,460
    )Inventory
    
    
    84,974
    
    
    
    (146,258
    )Prepaid expenses
    
    
    (12,621
    )
    
    
    (159,776
    )Other assets
    
    
    (8,592
    )
    
    
    24,000Accounts payable and accrued expenses
    
    
    (957,225
    )
    
    
    285,116Accrued compensation
    
    
    (18,954
    )
    
    
    (54,168
    )Deferred revenue
    
    
    88,967
    
    
    
    1,044,427Net cash used by operating activities
    
    
    (1,775,040
    )
    
    
    (446,984
    )CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    (8,414
    )
    
    
    (144,740
    )Patent acquisition costs
    
    
    (550
    )
    
    
    (25,488
    )Net cash used by investing activities
    
    
    (8,964
    )
    
    
    (170,228
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from loans and notes payable
    
    
    1,250,000
    
    
    
    0Proceeds from issuance of common stock and warrants, net
    
    
    617,500
    
    
    
    0Principal payments on capital lease obligation
    
    
    (32,560
    )
    
    
    (2,456
    )Principal payments on note payable
    
    
    (24,092
    )
    
    
    0Commissions paid for fundraising costs
    
    
    (114,100
    )
    
    
    0Purchase of treasury stock
    
    
    0
    
    
    
    (237,180
    )Proceeds from exercise of stock warrants
    
    
    0
    
    
    
    706,990Net cash provided by financing activities
    
    
    1,696,748
    
    
    
    467,354
 The accompanying notes are an integral part of the consolidated financial statements
 5




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GENELINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Six months ended June 30
    
    2009
    
    2008NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (87,256
    )
    
    
    (149,858
    )Cash and cash equivalents, beginning of period
    
    
    435,197
    
    
    
    972,371Cash and cash equivalents, end of period
    
    $
    347,941
    
    
    $
    822,513SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest
    
    $
    2,934
    
    
    $
    0Non-cash investing and financing transactions:Equipment acquired under capital lease
    
    $
    0
    
    
    $
    31,000Stock warrants granted for services
    
    $
    160,000
    
    
    $
    84,200Stock warrants granted for fundraising
    
    $
    178,795
    
    
    $
    0Conversion of notes payable and accrued
interest to common stock
    
    $
    0
    
    
    $
    882,041Common stock issued for services
    
    $
    15,000
    
    
    $
    0
 The accompanying notes are an integral part of the consolidated financial statements
 6




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GENELINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1DESCRIPTION
OFORGANIZATIONOrganizationGeneLink, 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.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 and
have been independently validated by
the laboratories. In early 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 two quarters of 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 and patent
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 OFPRESENTATION
    
    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 June 30,
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
    
    During the six months ended June 30,
2009, the Company sold 6,175,000
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 $617,500.
The Company granted 375,000 Warrants
to acquire shares of Common Stock at
an exercise price of $0.11 to
investors in connection with the
purchase.During the six months ended June 30,
2009, the Company issued $1,250,000
principal amount of Convertible
Notes and issued 1,875,000 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. Of the
$1,250,000 total proceeds, $175,341
was allocated to the warrants and
$150,000 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.The Convertible Notes are
convertible at the option of the
holders of 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.During the six months ended June 30,
2009, the Company issued Common
Stock valued at $15,000 and paid
$10,000 as advances on
 9




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##### 



commissions
for investment banking services.In connection with the convertible
secured promissory notes and shares
of Common Stock issued, the Company
paid cash commissions of $114,100
and granted 178,795 Warrants to
acquire shares of Common Stock at
exercise prices of $0.10 and $0.11
per share, to First Equity Capital
Securities, Inc., as the 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.During the six months ended June 30,
2009, the Company granted 1,225,000
Warrants to acquire shares of Common
Stock at exercise prices of $0.13
and $0.16 per share for services
provided.On June 1, 2009, the shareholders of
the Company approved an amendment to
the Companys Articles of
Incorporation to increase the
authorized capital of the Company
from 125,000,000 shares of Common
Stock, $0.01 par value, to
250,000,000 shares of Common Stock,
$0.01 par value, and adopted the
Companys 2009 Stock Option Plan.4 SUBSEQUENT EVENTS
    
    In July 2009, the Company sold an
additional $305,000 of restricted
Common Stock at a purchase price of
$.10 per share (see Note 3).
 10




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




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Me (made exclusively) Me Me
   12




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LIQUIDITY AND CAPITAL RESOURCES
     COMPARISON OF THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2009 TO THE THREE MONTHS AND  SIX MONTHS ENDED JUNE 30, 2008
 Financial Condition
   13




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Results of Operations
 Revenues
 Gross Profit
 Expenses
 ,
 Operating Losses
 Net Losses
 14




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FACTORS AFFECTING THE COMPANYS BUSINESS AND PROSPECTS
   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




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Item 2
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Item 3
    
    DEFAULTS UPON SENIOR SECURITIES
  Item 4
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
  16




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Nominee
    
    Votes For
    
    Votes WithheldRobert Hoekstra
    
    
    52,496,208
    
    
    
    4,131,403Dr. Bernard L. Kasten, Jr.
    
    
    55,070,613
    
    
    
    1,556,998Robert P. Ricciardi, Ph.D.
    
    
    55,068,613
    
    
    
    1,558,998John H. Souza
    
    
    55,068,613
    
    
    
    1,558,998Monte E. Taylor, Jr.
    
    
    54,685,001
    
    
    
    1,642,610
  Votes For
    
    Votes Against
    
    
    Abstain55,433,560
    
    
    1,188,851
    
    
    
    5,200
  Votes For
    
    Votes Against
    
    
    Abstain55,096,856
    
    
    1,521,505
    
    
    
    9,250
 Item 5
    
    OTHER INFORMATION
  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.
 17




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GENELINK, INC.
(Registrant)Date: August 14, 2009
    By:
    s/ Monte E. Taylor, Jr.Monte E. Taylor, Jr., Chief ExecutiveOfficer and  Chief Financial Officer 18