<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 2000
COMMISSION FILE NO. 0-28077
GENELINK, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
PENNSYLVANIA 23-2795613
------------ -------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 S. Thurlow Street
Margate, New Jersey 08402
-------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER: (609) 823-6991
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date.
<TABLE>
<S> <C>
Number of Shares of Common Stock
Outstanding on November 9, 2000 12,754,832
------------
</TABLE>
Transitional Small Business Disclosure Format Yes No X
--- ---
1
<PAGE> 2
GENELINK, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Balance Sheets at September 30, 2000 and December 31, 1999 (unaudited)
Statements of Income for the three months and nine months
ended September 30, 2000 and 1999 (unaudited)
Statements of Cash Flows for the nine months ended September 30, 2000
and 1999 (unaudited)
Notes to Financial Statements (unaudited)
2
<PAGE> 3
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2000 1999
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 56,022 $ 5,977
Accounts Receivable 810 1,108
Inventory 10,499 10,875
Prepaid Expenses 47,501 12,778
--------- ---------
TOTAL CURRENT ASSETS 114,832 30,738
--------- ---------
FIXED ASSETS
Office Furniture 1,154 1,154
Office Equipment 17,580 14,126
Leasehold Improvements 50,000 50,000
--------- ---------
68,734 65,280
Less: Accumulated Depreciation (17,772) (13,820)
--------- ---------
TOTAL FIXED ASSETS 50,962 51,460
--------- ---------
OTHER ASSETS
Deposits 840 1,640
Organization Costs 86,976 86,976
Patent 3,229 3,229
--------- ---------
91,045 91,845
Less: Accumulated Amortization (88,060) (87,898)
--------- ---------
TOTAL OTHER ASSETS 2,985 3,947
--------- ---------
TOTAL ASSETS $ 168,779 $ 86,145
========= =========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2000 1999
---- ----
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable & Accrued Expenses $ 125,177 $ 95,530
Accrued Payroll Taxes 5,466 17,126
Accrued Interest Payable 18,728 6,183
Accrued Compensation 177,512 127,742
Notes Payable - Current Portion 353,445 232,987
----------- -----------
TOTAL CURRENT LIABILITIES 680,328 479,568
----------- -----------
LONG-TERM LIABILITIES
Loans Payable - Affiliates 43,230 30,500
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, $.01 par value, 75,000,000 shares
authorized 12,776,012 and 10,612,541 shares issued, 12,679,832 and
10,561,361 outstanding as of
September 30, 2000 and December 31, 1999,
respectively 127,760 106,126
Treasury Stock, 96,180 shares (109,860) (109,860)
Additional Paid-in Capital 4,102,953 3,641,687
Stock Subscriptions Receivable (805,771) (694,947)
Deferred Compensation (400,000) (600,000)
Deficit Accumulated during the
the development stage (3,469,861) (2,766,929)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (554,779) (423,923)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 168,779 $ 86,145
=========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Period
September 21,
For The For The For The For The 1994
Three Months Three Months Nine Months Nine Months (Date of
Ended Ended Ended Ended Inception) To
September 30, September 30, September 30, September 30, September 30,
2000 1999 2000 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUE $ 5,655 $ 4,496 $ 19,192 $ 10,444 $ 252,617
COST OF GOODS SOLD 460 $ 482 1,956 1,238 38,072
----------- ----------- ----------- ----------- -----------
GROSS PROFIT 5,195 4,014 17,236 9,206 214,545
EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE 114,959 89,924 499,982 401,016 2,601,000
CONSULTING 4,688 39,590 37,108 110,240 296,779
PROFESSIONAL FEES 21,055 23,991 78,043 59,068 311,189
ADVERTISING AND PROMOTION 91 8,202 18,007 29,379 138,057
AMORTIZATION AND DEPRECIATION 1,431 1,198 4,114 3,701 88,258
----------- ----------- ----------- ----------- -----------
142,224 162,905 637,254 603,404 3,435,383
INTEREST EXPENSE 37,062 35,345 83,621 47,542 246,773
----------- ----------- ----------- ----------- -----------
INTEREST INCOME 443 110 707 920 15,324
----------- ----------- ----------- ----------- -----------
NET (LOSS) BEFORE PROVISION FOR INCOME TAXES AND (173,648) (194,126) (702,932) (640,820) (3,452,287)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING -- -- -- (17,574) (17,574)
PRINCIPLE
NET (LOSS) BEFORE PROVISION FOR INCOME TAXES (173,648) (194,126) (702,932) (658,394) (3,469,861)
PROVISION FOR INCOME TAXES -- -- -- -- --
----------- ----------- ----------- ----------- -----------
NET (LOSS) $ (173,648) $ (194,126) $ (702,932) $ (658,394) $(3,469,861)
=========== =========== =========== =========== ===========
NET (LOSS) PER SHARE BASIC AND DILUTED $ (0.01) $ (0.02) $ (0.06) $ (0.07)
=========== =========== =========== ===========
Weighted average common shares and diluted potential 12,433,970 10,114,628 11,588,044 9,890,583
=========== =========== =========== ===========
common shares
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE PERIOD
NINE MONTHS NINE MONTHS SEPT. 21, 1994
ENDED ENDED (DATE OF INCEPTION)
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 TO SEPTEMBER 30, 2000
------------------ ------------------ ---------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (702,932) $ (658,394) $(3,469,861)
Adjustments to reconcile net (loss)
to net cash provided (used) by
operating activities
Depreciation and Amortization 4,114 21,275 105,832
Fair value of officers compensation 0 0 718,000
Fair value of compensation related
to vested options 200,000 200,000 700,000
Compensation on options exercised 24,360 0 24,360
Options exercised by reducing
Accrued compensation 60,000 0 60,000
Common Stock issued for services 71,888 8,400 185,988
Accrued interest-on Subordinated
Debt converted to common stock 12,125 0 86,986
Accrued Interest on Debentures 60,937 36,478 137,082
(Increase) decrease in assets
Accounts Receivable 298 (799) (809)
Inventory 376 313 (10,499)
Prepaid expenses (34,723) 5,539 (47,501)
Increase in organization costs 0 0 (90,205)
Deposits 800 0 (840)
Increase (Decrease) in liabilities
Accounts payable & accrued Expenses 29,647 32,267 125,178
Accrued payroll taxes (11,660) (351) 5,468
Accrued interest 12,545 5,596 18,725
Accrued compensation 49,770 148,125 177,513
----------- ----------- -----------
Net cash provided (used)
by operating activities (222,455) (201,551) (1,274,583)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (3,455) 0 (68,734)
(Increase) decrease in Subscriptions Receivables (21,000) 30,082 (673,901)
----------- ----------- -----------
Net cash provided (used) by investing activities $ (24,455) $ 30,082 $ (742,635)
----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE PERIOD
NINE MONTHS NINE MONTHS SEPT. 21, 1994
ENDED ENDED (DATE OF INCEPTION)
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 TO SEPTEMBER 30, 2000
------------------ ------------------ ---------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayments) from loans and notes payable $12,730 $(6,000) $417,905
Net Proceeds from Debentures Issues 274,225 185,000 524,225
Proceeds relating to issuance
of common stock (net) 10,000 0 1,131,110
------- ------- ---------
Net cash provided by financing
Activities 296,955 179,000 2,073,240
------- ------- ---------
NET INCREASE (DECREASE) IN CASH 50,045 7,531 56,022
Cash, beginning of period 5,977 11,334 0
------- ------- ---------
Cash, end of period $56,022 $18,865 $56,022
------- ------- ---------
SUPPLEMENTAL DISCLOSURES
Income taxes paid 0 0 0
======= ======= =========
Interest paid 0 0 0
======= ======= =========
NON-CASH FINANCING TRANSACTIONS:
Conversion of Debt to Stock 115,000 0 489,675
------- ------- ---------
Reduction of Subscriptions Receivable
via relinquishment of common stock (net) 0 0 115,496
------- ------- ---------
Increase in Note receivable-officer cashless
exercise of options 60,000 62,118 122,118
------- ------- ---------
Stock issued related to debenture
financing 66,175 71,450 159,332
------- ------- ---------
Redemption of common stock-due to
cancellation of marketing agreement 0 135,000 67,500
------- ------- ---------
Accrued interest on Subscriptions
Receivable 34,264 27,465 403,271
------- ------- ---------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - DESCRIPTION OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
GOING CONCERN
The 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's cash reserves have decreased since the Company's private
placement from $800,000 to approximately $56,000 and sales have not increased
enough to support operations. The Company incurred an operating loss of $702,932
and $658,394 for the nine months ended September 30, 2000 and 1999,
respectively. The Company reported a deficit of $3,469,861 and $2,766,929 as of
September 30, 2000 and as of December 31, 1999, respectively. The Company has
announced marketing plans to enhance sales and therefore, 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 which would differ materially from the going concern basis.
BUSINESS ORGANIZATION
Genelink, Inc. (the Company) was organized under the laws of the Commonwealth of
Pennsylvania to offer to the public the safe collection and preservation of a
family's DNA material for later use by the family to determine genetic linkage.
The Company is the successor by merger to a Delaware Corporation organized under
the same name on September 21, 1994. Prior to the merger, which occurred in
February, 1995, the predecessor entity engaged in no operations. The Company's
executive offices are located in Margate, New Jersey.
BUSINESS DESCRIPTION
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. These findings are a
direct result of the National Institutes of Health Genome Project, which has as
its goal the total mapping of the human genome by the year 2005. Doctors and
scientists have known for years that many individuals and their family members
are predisposed to certain diseases. This inherited disposition is contained
within DNA. DNA, the hereditary material of life, is contained in all of the
genes which make up who we are. If one of these genes is defective it can cause
disease. There are more than 100,000 genes in the human body, most of which are
in charge of the transmission of hereditary characteristics. Many of the more
than 4,500 diseases are genetically based.
Management believes future generations could benefit from the DNA store of
knowledge. For this reason, the Company has created a DNA banking service that
stores DNA before and after an individual dies. This DNA can be used to
establish whether or not the disease or disorder that caused death was genetic
in origin. As researchers continue to identify diseases linked to
8
<PAGE> 9
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
defective genes, living family members can use the stored DNA to discover if
they are at risk for certain diseases such as cancer. DNA banking shifts the
emphasis from diagnosis and treatment, to disease prediction and prevention. It
allows future generations to access their family genetic history. See Note 2
regarding the development stage nature of operations of the Company to date.
THE PRODUCT
The Company has developed a DNA Collection Kit for the collection of DNA
specimens of its clients. No licensing or training is necessary for the
collection by the client of his or her DNA specimen. The collection process,
which uses six swabs, is self administered and takes less than five minutes to
complete. The client forwards the swabs to the University of North Texas Health
Science Center at Fort Worth (UNTHSC) and completes and forwards a data form to
the Company. Specimens can be collected during an individual's lifetime or up to
36 to 40 hours after death. UNTHSC will store the DNA specimens for up to 75
years. Upon the client's request, and upon the payment of a retrieval fee, the
stored DNA specimen can be retrieved and sent to a laboratory for testing. More
than one test can be made on the same DNA specimen.
BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS
The interim financial statements of Genelink, Inc. presented in this form 10-Q
are unaudited. In the opinion of management, the accompanying financial
statements reflect all adjustments (which include only normal recurring
adjustments) which are necessary for a fair presentation of operations for the
three and nine month periods ended September 30, 2000 and 1999. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission.
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 maintains some cash balances with Merrill
Lynch, which is SIPC insured up to $300,000.
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 the related assets.
9
<PAGE> 10
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
REVENUE AND COST RECOGNITION
Revenues are recorded when the kits are sold as opposed to when monies are
received. The Company receives the entire non-refundable fee up front for the
DNA kits and provides the DNA analysis testing at that time, then stores the
specimen up to 75 years. If the client requests the DNA specimen back at any
time during the storage period, they will be entitled to receive the specimen
upon payment of an additional retrieval fee but will not be entitled to any
refund of the original storage fee. Direct costs related to sale of kits include
purchase of kits, samples and delivery expense. The direct costs of kits are
recognized at time of sale to the customers as opposed to the time of purchase
by Genelink, Inc. from vendor. Kits purchased by Genelink, Inc. not yet sold
remain in inventory.
AMORTIZATION OF ORGANIZATION COSTS AND PATENTS
Legal and professional fees and expenses in connection with the formation of the
Company and filing of patent and trademark applications have been capitalized
and are amortized over five 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, which patent application is pending. The Company has
registered trademark for its name and logo and for the name "DNA Collection
Kit".
Organization costs consists of the following as of September 30, 2000 and 1999:
<TABLE>
<S> <C>
Professional Legal Fees $ 76,471
Professional Accounting Fees $ 10,505
-------
$ 86,976
Less: Accumulated Amortization (86,976)
--------
Net Organization Costs $ 0
========
</TABLE>
INVENTORY
Inventory consists of kits held for resale. Inventory is valued at the lower of
cost (using the first-in, first-out method) or market. The shelf life of the DNA
kits is estimated by the Company to be in excess of 30 years.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") NO. 109, "ACCOUNTING FOR INCOME TAXES", which
requires the use of an asset and liability approach for financial accounting and
reporting for income taxes. Under this
10
<PAGE> 11
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
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 nine months
ended September 30, 2000 and the year ended December 31, 1999.
RECLASSIFICATIONS
Certain balances not affecting net income have been reclassified to conform to
the current year presentation.
PER SHARE DATA
Effective November 12, 1998, the Company adopted SFAS No. 128, "Earnings Per
Share." The provisions of SFAS No. 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 2000 and 1999 excludes any effect
from such securities as their inclusion would be antidilutive. Per share amounts
for all periods presented have been restated to conform with the provisions of
SFAS No. 128.
STOCK OPTIONS
The Financial Accounting Standards Board has issued SFAS 123, which defines a
fair value based method of accounting for an employee stock option and similar
equity instruments and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation cost for those plans using
the method of accounting prescribed by Accounting Principles Board Opinion No.
25 (APB 25). Entities electing to remain with the accounting in APB 25 must make
11
<PAGE> 12
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
proforma disclosures of net income (loss) and, if presented, earnings (loss) per
share, as if the fair value based method accounting defined in SFAS 123 had been
adopted. The Company has elected to account for its stock-based compensation
plans under APB 25.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES
Effective fiscal years beginning after December 15, 1998, SOP 98-5 requires
organization costs to be expensed. As a result of these charges, any unamortized
organization costs should be written off as a cumulative effect of an accounting
change. The cumulative effect of this change in accounting on unamortized
organization costs was $17,574 which is reflected in 1999 Financial Statements.
NOTE 2 - DEVELOPMENT STAGE OPERATIONS
The Company, which was formed in 1994, since its inception has had limited
operations and its focus has predominantly been on raising capital and
completing the research and development of its product in order to market it
according to the Company's business plans.
The deficit accumulated during the development stage was $3,469,861. Although
the Company has had sales from inception to date, these sales were to
distributors who intended to resell products and services to funeral homes and
to the general public. These distributors were unsuccessful in selling and
reselling the products and services to funeral homes and the general public, but
were not entitled to return any unsold kits to the Company. No significant sales
to funeral homes or to the general public have occurred since inception. During
1996, 1998 and 1999 and 2000, the Company issued common stock, in connection
with services. Certain services were charged to operations and other amounts
were offset to additional paid in capital, as they were directly attributable to
raising capital. The shares were valued at the fair market value at time of
issuance per FAS No. 123 (Financial Accounting Series "For Stock Based
Compensation.")
NOTE 3 - PROPERTY & EQUIPMENT
As of September 30, 2000 and December 31, 1999, property and equipment consisted
of the following:
<TABLE>
<CAPTION>
2000 1999
----- ----
<S> <C> <C>
Office Furniture $ 1,154 $ 1,154
Office Equipment 17,580 14,126
Leasehold Improvement 50,000 50,000
------- -------
$68,734 $65,280
======= =======
</TABLE>
Depreciation expense was to $3,952 and $3,593 for the nine months ended
September 30, 2000 and 1999, respectively.
12
<PAGE> 13
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - LOANS PAYABLE-AFFILIATES
The Company's unsecured long-term debt as of September 30, 2000 and December 31,
1999 consists of loans from various shareholders with no stated repayment terms.
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Total Obligations $43,230 $30,500
Less: Current Portion 0 0
------- -------
$42,230 $30,500
======= =======
</TABLE>
NOTE 5 - DEBENTURE-NOTES PAYABLE
The Company entered into the following debenture notes payable with terms
indicated below:
<TABLE>
<CAPTION>
COMMON STOCK
ISSUED AS
INTEREST ADDITIONAL
AMOUNT OF DEBENTURE DATE ISSUED RATE DUE DATE CONSIDERATION
------------------- ----------- ---- -------- -------------
<S> <C> <C> <C> <C>
$ 50,000 April 30, 1999 12% 3-31-00 50,000
$ 15,000 April 30, 1999 12% 3-31-00 15,000
$ 10,000 July 29, 1999 12% 6-01-00 10,000
$100,000 August 6, 1999 12% *6-01-00 100,000
$ 10,000 August 8, 1999 12% 6-01-00 10,000
$ 15,000 November 15, 1999 12% *3-31-00 15,000
$ 50,000 December 3, 1999 12% 6-01-00 50,000
--------
$250,000 Subtotal Debentures issued in 1999
--------
$ 25,000 March 24, 2000 12% 6-30-00 25,000
$ 20,000 March 29, 2000 12% 6-30-00 20,000
$ 15,000 June 15, 2000 10% 12-15-00 25,000
$ 50,000 June 23, 2000 8.5% 12-24-00 82,500
$ 20,000 August 28, 2000 9% 12-28-00 25,000
$ 50,000 September 6, 2000 9% 1-06-01 62,500
$ 10,000 September 6, 2000 9% 1-06-01 12,500
$ 10,000 September 6, 2000 9% 1-06-01 12,500
$ 25,000 September 6, 2000 9% 1-06-01 31,250
$ 25,000 September 19, 2000 9% 1-19-01 31,250
$ 20,000 September 20, 2000 9% 1-20-01 25,000
$ 25,000 September 26, 2000 9% 1-26-01 31,250
--------
$295,000 Subtotal Debentures issued in 2000.
--------
$545,000 Total Debentures Issued.
(115,000) *Less amounts converted to stock
--------
$430,000
========
</TABLE>
Accrued interest payable on the debenture notes as of September 30, 2000 and
December 31, 1999 were $17,824 and $6,183, respectively.
13
<PAGE> 14
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - DEBENTURE-NOTES PAYABLE (CONT'D)
In connection with the Company issuing the debenture notes payable, additional
shares of common stock were issued in amounts equal to the principal amount of
the debenture. The fair market value, of the amortizable debenture discounts,
was recorded net with the debenture notes payable and will be amortized over the
life of the debenture.
The Company's Amortizable Debenture Discounts were as follows:
<TABLE>
<CAPTION>
9/30/00 12/31/99
------- --------
<S> <C> <C>
Original Amortizable Debenture Discounts $ 213,637 $ 93,157
Less Cumulative Amortization/Interest Exp. (137,082) (76,144)
--------- ---------
Net Amortizable Debenture Discounts $ 76,555 $ 17,013
========= =========
</TABLE>
The Company's Net Debenture Notes Payable were as follows:
<TABLE>
<CAPTION>
9/30/00 12/31/99
------- --------
<S> <C> <C>
Original Debenture Issued $ 545,000 $ 250,000
Less Amounts Converted to Stock (115,000) 0
Net Amortizable Debenture Discounts (76,555) (17,013)
--------- ---------
Net Debenture Notes Payable $ 353,455 $ 223,987
========= =========
</TABLE>
NOTE 6 - OPERATING LEASES
The Corporation has various noncancellable operating leases with terms of 24 to
36 months. The following is a schedule of future minimum rentals under the
leases as of September 30, 2000 and December 31, 1999.
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
2000 $ 1,158 $ 4,633
2001 $ 764 $ 764
------- -------
$ 1,922 $ 5,397
Less Current Portion $(1,922) $(4,633)
------- -------
Long Term Portion $ 0 $ 764
======= =======
</TABLE>
NOTE 7 - INCOME TAXES
At September 30, 2000, the Company had significant federal and state tax net
operating loss carryforwards of approximately $2,040,000. The difference between
the operating loss carryforwards on a tax basis and a book basis is due
principally to differences in depreciation, amortization, and development costs.
The federal carryforwards will begin to expire in 2009 and the state
carryforwards will begin to expire in 2005.
14
<PAGE> 15
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 - INCOME TAXES (CONT'D)
The Company had a net deferred tax asset of $510,000 at September 30, 2000
primarily from net operating loss carryforwards. A valuation allowance was
recorded to reduce the net deferred tax asset to zero.
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS
The Company's shareholder equity consists of the following:
A. COMMON STOCK
During the nine month period ended September 30, 2000 and for the year ended
December 31, 1999 the Company did not issue any shares of common stock for cash
consideration.
The Company issued 300,000 common shares of stock for consulting services valued
at $71,888 for the nine months ended September 30, 2000.
The Company issued 383,750 common shares of stock as additional consideration
for Debenture Notes Payable valued at $99,704 during the nine month period ended
September 30, 2000.
The Company converted $115,000 of Debenture Notes Payable into 479,721 common
shares of stock valued at $122,684 at the date of conversion during the nine
month period ended September 30, 2000.
Officers of the Company exercised Options to purchase 1,000,000 shares of common
stock. The Company received cash proceeds of $10,000 upon the exercise of
100,000 $.10 Options. 600,000 $.10 Options valued at $60,000 offset accrued
compensation due to an officer and 300,000 $.20 Options, valued at a fair market
price of $.28 at the exercise date, were recorded as additional subscriptions
receivable and as compensation expense to an officer in the amounts of $60,000
and $24,360, respectively.
B. SUBSCRIPTION RECEIVABLE-OFFICERS
Since its inception and until the execution of an employment agreement in early
1998, the Company advanced funds periodically to an officer. Subscription
Receivable-Officers represents officers loans and accrued interest of $805,771
and $694,947 at September 30, 2000 and December 31, 1999. The loans accrue
interest using the average applicable one-month Federal Rates (AFRs).
The officers have executed notes payable to the Company to evidence their
obligation on account of his loans. Under the terms of his obligation, in
repayment thereof, the officer will have the right, at any time on or before
December 31, 2003, to transfer to the Company, at the then fair market value,
shares of the Company's common stock. Any transfer not in full satisfaction of
the obligation will first be applied to accrued interest and then to principal.
No payments of
15
<PAGE> 16
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 SHAREHOLDERS' EQUITY TRANSACTIONS (CONT'D)
interest or principal shall be due on account of the loans prior to December 31,
2003. Fair market value of the Company's shares shall be equal to the average
between the bid and asked price in the market in which it is publicly-traded on
the last date on which such trades occurred prior to the transfer of shares from
the officer to the Company.
The Company recorded these subscription receivables as a contra-equity account
in the Company's balance sheet in accordance with Staff Accounting Bulletin
Topic 4G, with related interest income on these notes also being recorded in the
Company's equity section.
During 1999, the officer repaid a portion of this subscription receivable by
exercising 21,180 shares of vested options which were valued at the then fair
market value of $2.00 per share. The officer then returned these shares to the
Company and used the fair market value of $40,242 as a repayment of his advance.
C. STOCK SPLIT
During February 1998, the Company affected a 75-for-1 stock split thereby
authorizing the issuance of up to 75,000,000 shares of Common Stock.
Stockholders equity has been adjusted to give retro-active effect to the stock
split and in addition, all common shares redeemed as a result of the
aforementioned stock split were retired. The Company increased its number of
shares authorized from 1,000,000 to 75,000,000 with par value remaining at $.01.
D. PRIVATE PLACEMENT OFFERING MEMORANDUM/STOCK OPTIONS
From April to June 1998, Genelink, Inc. commenced a private placement offering
of 800,000 Shares of its common stock at $1 per share to the residents of New
York, New Jersey, Florida and the District of Columbia under Rule 504 of
Regulation D, which provides an exemption for limited offerings and sales of
securities not exceeding $1,000,000. The proceeds of approximately $640,000 of
the offering were used to fund research and development, marketing, working
capital, payments of salaries to officers, and general administrative expenses.
The Company compensated Shannon/Rosenbloom Marketing, Inc., $100,000 for
marketing, promotional and investor relations services which was paid upon the
successful completion of the offering. The offering expenses included travel,
consulting fees, "blue sky" fees, legal and accounting expenses in connection
with the Private Placement Offering mentioned above the Company entered into an
agreement with Shannon/Rosenbloom Marketing, Inc. dated January 21, 1998 to
assist the Company in raising up to $1,000,000 through a public offering of its
common stock under SEC rule 504. In connection with this agreement
Shannon/Rosenbloom Marketing, Inc. received a cash fee of $100,000 along with
the option to convert up to $25,000 of its cash fee into the Company's common
stock at a conversion rate of $.10 per share (250,000 shares) and also receive
250,000 shares of restricted stock. Shannon/Rosenbloom Marketing, Inc. exercised
its option and converted $25,000 of its fee into common stock.
16
<PAGE> 17
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONT'D)
The Company valued the above mentioned shares at the then determined fair value
as the Company had minimal sales, history of net losses, no market value and the
shares were subject to restrictions imposed under state laws.
Subsequent to the completion of the private placement offering, the Company
issued shares to individuals on their medical advisory board and other
consultants at a fair value price of $1.00 per share.
E. TREASURY STOCK
On January 5, 1999, an officer of the company purchased 21,180 shares of common
stock by exercising stock options for $2,118. On the same day, the Company
acquired 21,180 shares of common stock in exchange for $40,242 of debt owed to
the Company by an officer. The shares had an option price of 10(cents) per share
and the fair market value was $2.00 per share.
On March 17, 1999, the Company received 150,000 shares which were previously
issued to Shannon/Rosenbloom. These shares were recorded as treasury stock at
the then fair market value of $135,000.
Simultaneously on March 17, 1999 the Company issued 75,000 of the aforementioned
shares to an investment advisor to promote the Company stock and obtain
additional funding. The Company valued the shares at the then fair market value
of $67,500.
F. STOCK OPTIONS AND WARRANTS
The Financial Accounting Standards Board has issued SFAS 123, which defines a
fair value based method of accounting for an employee stock option and similar
equity instruments and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation cost for those plans using
the method of accounting prescribed by Accounting Principles Board Opinion No.
25 (APB 25). Entities electing to remain with the accounting in APB 25 must make
proforma disclosures of net income (loss) and, if presented earnings (loss) per
share, as if the fair value based method accounting defined in SFAS 123 had been
adopted. The Company has elected to account for its stock-based compensation
plans under APB 25.
During September, 1997, an officer of the Company was granted options to acquire
1,200,000 Shares at $.10 per Share, for services provided to the Company from
its inception, 400,000 of which vested upon the execution of the employment
agreement with the remaining balance vesting in four (4) equal annual
installments of 200,000 each commencing January.
During September, 1997 the Company also issued another officer of the Company
1,000,000 options that will enable him to acquire shares of the Company's common
stock exercisable at the
17
<PAGE> 18
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONT'D)
price of $.10 per Share for services provided to the Company from its inception.
These options will expire December 31, 2003 and will vest as follows:
200,000 shares at the execution of the agreement.
200,000 shares each January 1, beginning January 1, 1999, 2000, 2001,
and 2002.
Pursuant to APB No. 25 compensation has been recognized based upon the
difference of the fair value of the Company's stock at grant date and the
officers exercise price as follows:
FAIR VALUE OF OPTIONS AT EXERCISE
<TABLE>
<CAPTION>
Grant Date # of Options Granted Date of Grant Price Compensation
---------- -------------------- ------------- ----- ------------
<S> <C> <C> <C> <C>
1997 2,220,000 $.60 $.10 1,100,000
1998 0 - - -
</TABLE>
In connection with the Company issuing the options to the officers noted above,
the Company recorded a deferred compensation charge of $1,100,000 reflected in
the equity section. The Company will record compensation expense based upon the
vesting schedules of these options as noted below:
<TABLE>
<S> <C>
1998 $300,000
1999 $200,000
2000 $200,000
2001 $200,000
2002 $200,000
</TABLE>
On July 1, 1999, two officers of the Company each received 1,000,000 options to
purchase shares of the Company's common stock, one cent par value, at the
exercise price of $1.00 per share. Four hundred options vested immediately with
the remaining options vesting 200,000 each on January 1, 2000, 2001, and 2002.
During the quarter ended March 31, 2000, the Company also issued 25,000 stock
options/warrants to purchase the Company's common stock at $1.50 per share with
expiration dates in 2003. During the second quarter ended June 30, 2000, the
Company issued options to acquire 10,000 shares of common stock at $1.00 per
share. These options vest 5,000 annually on April 17, 2000 and April 17, 2001.
These options were issued in consideration for marketing services to be rendered
over the next two years.
On May 22, 2000 the Company established an incentive stock option plan pursuant
to which the Company is entitled to issue options to acquire 2,500,000 shares of
its stock. During the second quarter of 2000, the Company granted to an officer
an option to acquire 500,000 shares of the common stock at an exercise price of
$.20 per share (equal to 110% of the per share fair market price as of the date
of the grant). These options were vested on the date of issue, May 22, 2000.
18
<PAGE> 19
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONT'D)
On May 22, 2000 the Company established a non-qualified stock option agreement
in which it granted 300,000 shares to an officer. The option price was
determined to be $.20 per share (110% of the fair market value of the company
stock as of the date of the grant). These options vested immediately at the date
of the grant.
The following schedule summarizes the vested stock option and stock warrants
activity and status as of September 30, 2000 and December 31, 1999, and for the
nine month period ending September 30, 2000 and for the year ended December 31,
1999.
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Granted 5,244,375 4,409,375
========== ==========
Vested options outstanding at beginning 1,388,195 600,000
of the period
Options vested during period 1,630,000 1,409,375
Vested options exercised during period (1,000,000) (621,180)
Cancelled 0 0
--------------------------------------- ---------- ----------
Vested outstanding 2,018,195 1,388,195
========== ==========
at End of Period
</TABLE>
A summary of outstanding options/warrants along with their exercise price and
dates as of September 30, 2000 are as follows:
<TABLE>
<CAPTION>
OPTIONS/WARRANTS OUTSTANDING EXPIRATION
EXERCISE PRICE GRANTED OPTIONS/WARRANTS DATE
-------------- ------- ---------------- ----
<S> <C> <C> <C>
$0.10 2,200,000 878,820 12/31/03
$0.20 800,000 500,000 12/31/05
$0.75 45,000 45,000 12/31/04
$1.00 2,010,000 2,010,000 12/31/03
$1.50 189,375 189,375 12/31/03
----- ------- -------
5,244,375 3,623,195
========= =========
</TABLE>
NOTE 9 - NET LOSS PER SHARE
Earnings 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.
19
<PAGE> 20
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 - NET LOSS PER SHARE (CONT'D)
<TABLE>
<CAPTION>
FOR THE NINE FOR THE YEAR
MONTHS ENDED ENDED
9/30/00 12/31/99
------- --------
<S> <C> <C>
Net Loss $ (702,932) $ (658,394)
Weighted average number of shares
of common stock and common stock equivalents
outstanding: ________ ________
Weighted average number of common shares
outstanding for computing basic earnings per
share 11,588,044 9,890,583
Dilute 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 11,588,044 9,890,583
============ ============
Net loss per share-basic & diluted $ (.06) $ (.07)
============ ============
</TABLE>
*The following common stock equivalents are excluded from earnings per share
calculation as their effect would have been antidilutive:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
2000 1999
---- ----
<S> <C> <C>
Warrants and stock options 2,018,195 1,388,195
========= =========
</TABLE>
NOTE 10 - ADVERTISING
The Company expenses the production costs of advertising the first time the
advertising takes place. Advertising expense was $18,007 and $29,379 for the
nine months ending September 30, 2000 and 1999.
NOTE 11 - RENT
The Company leases its primary executive offices located in Margate, New Jersey
at no cost from its officers. Rent expense for the period ended September 30,
2000 was $0.
NOTE 12 - TRANSACTIONS WITH RELATED PARTIES
The Company is dependent, to a large degree, on the services of John DePhillipo,
its Chairman and Chief Executive Officer and the Company has entered into a five
(5) year employment agreement dated February 24, 1998, with an initial annual
base compensation of $137,500 in 1999 and $151,250 in 2000. Also, in 1998 the
Company entered into a five year employment agreement with Robert Ricciardi,
Vice President of Research and Development, with an agree upon compensation of
$60,000 in 1999 and $66,000 in 2000.
20
<PAGE> 21
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 12 - TRANSACTIONS WITH RELATED PARTIES (CONT'D)
Officer compensation for the nine months ending September 30, 2000 and 1999 was
$113,438 and $103,125, respectively.
The Company has an agreement with the UNTHSC through March, 2006 for the storage
of the genetic material obtained using one of the Company's kits. Two (2)
doctors associated with the UNTHSC own approximately 20,000 Shares of the
Company. The Company has established protocols with the UNTHSC whereby the
UNTHSC will receive a sample in an envelope enclosed with the kit, measure the
quantity to assure that enough genetic material is present, analyze the sample
to extract the DNA and freeze and store the material in the refrigerated area
maintained by the UNTHSC making it available for future retrieval.
A portion of the Company's operations are conducted by Kelly/Waldron & Company
in East Brunswick, New Jersey, which owns 289,333 Shares of the Company.
Kelly/Waldron, which provides various services to members of the pharmaceutical
industry, acts as the Company's back office, receiving orders and inquiries,
processing data and preparing reports for the Company.
As of September 30, 2000 and December 31, 1999, the Company owed Kelly/Waldron
$20,646 and $19,830, respectively.
MARKETING
The Company had engaged Shannon/Rosenbloom to perform marketing, promotional and
investor relations services, pursuant to the terms of a marketing agreement. The
services rendered by Shannon/Rosenbloom included the dissemination and
publication of the Company's information materials to Shannon/Rosenbloom's
broker networks, market makers and individual investors. During June, 1998 the
Company paid Shannon/Rosenbloom $75,000, sold 250,000 Shares to
Shannon/Rosenbloom for $.10 per share and issued to Shannon/Rosenbloom 250,000
restricted Shares. During the first quarter of 1999, Shannon/Rosenbloom
transferred 150,000 shares back to the Company of the 500,000 shares received
prior as they had not performed all marketing services noted in the original
agreement. The parties have agreed to release each other from any and all
losses, claims, damages or demands.
The Company assigned 75,000 of the aforementioned shares to an investment
advisor engaged to promote additional fund raising activities.
NOTE 13- COMMITMENT & CONTINGENCIES
The Company is involved in a trademark opposition regarding the use of its
trademark Genelink, however, management believes it will prevail in this matter,
and will have no material adverse effect on the Company.
21
<PAGE> 22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Statements in this Report that relate to future results and events are based on
the Company's current expectations. Actual results in future periods may differ
materially from those currently expected or desired because of a number of risks
and uncertainties. For a discussion of factors affecting the Company's business
and prospects, see "Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Factors Affecting the Company's Business
and Prospects."
Operating results for the nine-month period ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the full fiscal
year.
LIQUIDITY AND CAPITAL RESOURCES
For the nine month period ended September 30, 2000, the Company's primary
liquidity requirements have been the implementation and funding of its sales and
marketing efforts, the payment of compensation to officers and other employees
and the payment of accounts payable. In the first nine months of 2000 the
Company has raised $296,955 primarily through the issuance of Debentures.
Cash and cash equivalents at September 30, 2000 amounted to $56,022 as compared
to $5,977 at December 31, 1999, an increase of $50,045. During the first nine
months of 2000, the Company's operating activities utilized $222,455, as
compared to $201,551 for the first nine months of 1999. Cash utilized during
these periods resulted from Company's net losses for such periods.
Financing activities provided $296,955 for the nine month period ended September
30, 2000 as compared to $179,000 for the nine months ended September 30, 1999.
Financing activities in the nine months ended September 30, 2000 resulted
primarily from the issuance of $274,225 principal amount of Debentures
throughout the first nine months of 2000, as the Company required additional
funds for working capital purposes.
The Company will require approximately $2,000,000 to implement its sales and
marketing strategy. The Company intends to raise funds through the private
placement of its securities. Unless the Company can increase its revenues and
increase its stock price, it is unlikely that the Company will be able to secure
such financing. If the Company is not able to secure such additional required
capital, it will continue to realize negative cash flow and losses and it is
unlikely that it will be able to continue operations.
For the nine months ended September 30, 2000, the Company raised $296,955
primarily through the issuance of Debentures. The Company also issued 383,750
shares of common stock to the holders of the Debentures as additional
consideration making the effective interest rate on the Debentures equal to
124%. The issuance of shares were required by the investors as a condition to
agreeing to lend money to the Company. No alternative sources of financing were
available to the Company, and the Company would have been unable to fund its
operations without receiving such financing. The Company has the option to
convert the Debentures into shares of common stock. At such time the Company
will have the right to convert the Debentures into shares of common stock of the
Company equal to the value of the principal and accrued interest on the
Debentures at the closing bid price of the stock on the date of maturity. At the
closing bid price of $.19 per share
22
<PAGE> 23
at November 8, 2000, this could result in the Company issuing approximately an
additional 1,562,921 shares of common stock to the holders of the Debentures, or
approximately 10% of the Company on a fully-diluted basis.
RESULTS OF OPERATIONS
The following table sets forth certain operating information regarding the
Company:
<TABLE>
<CAPTION>
NINE MONTH PERIOD NINE MONTH PERIOD
ENDED SEPTEMBER 30, 2000 ENDED SEPTEMBER 30, 1999
------------------------ ------------------------
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Revenues $ 19,192 $ 10,444
Cost of Goods Sold $ 1,956 $ 1,238
Net Earnings (Loss) $ (702,932) $ (658,394)
Net Earnings (Loss) Per Share $ (0.06) $ (0.07)
</TABLE>
The following summary table presents comparative cash flows of the Company for
the nine months ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
NINE MONTH PERIOD NINE MONTH PERIOD
ENDED SEPTEMBER 30, 2000 ENDED SEPTEMBER 30, 1999
------------------------ ------------------------
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Net cash provided (used) by
operating activities $ (222,455) $ (201,551)
Net cash provided (used)
by investing activities $ (24,455) $ 30,082
Net cash provided
by financing activities $ 296,955 $ 179,000
</TABLE>
The Company had a cash balance totaling $56,022 at September 30, 2000.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO THE THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 1999
FINANCIAL CONDITION
Assets of the Company increased from $86,145 at December 31, 1999 to $168,779 at
September 30, 2000, an increase of $82,634. This increase was primarily due to
an increase in cash from $5,977 at December 31, 1999 to $56,022 at September 30,
2000 and an increase in prepaid expenses from $12,778 at December 31, 1999 to
$47,501 at September 30, 2000.
23
<PAGE> 24
Liabilities increased from $510,068 at December 31, 1999 to $723,558 at
September 30, 2000, an increase of $213,490. This increase was primarily due to
an increase in accrued compensation due officers from $127,742 at December 31,
1999 to $177,512 at September 30, 2000, an increase in notes payable from
$232,987 at September 30, 1999 to $353,445 at September 30, 2000, the proceeds
of which were used by the Company primarily for working capital purposes, and an
increase in accounts payable from $95,530 at December 31, 1999 to $125,777 at
September 30, 2000.
CURRENT YEAR PERFORMANCE AND EARNINGS OUTLOOK
Revenues. The total revenues for the nine months ended September 30, 2000 were
$19,192 as compared to $10,444 for the nine months ended September 30, 1999. The
increase in revenues of $8,748, or 83.8%, is primarily due to increased sales
and marketing efforts undertaken by and on behalf of the Company.
Total revenues for the three months ended September 30, 2000 were $5,655 as
compared to the $4,496 for the three months ended September 30, 1999, an
increase of $1,159, or 25.8%. This increase in revenues is primarily due to
increased sales and marketing efforts undertaken by and on behalf of the
Company.
Expenses. Total expenses for the nine months ended September 30, 2000 were
$720,875 as compared to $650,946 for the nine months ended September 30, 1999,
an increase of $69,929, or 10.7%, primarily resulting from an increase in
professional expenses from $59,068 for the nine months ended September 30, 1999
to $78,043 for the nine months ended September 30, 2000, an increase in interest
expenses from $47,542 for the nine months ended September 30, 1999 to $83,621
for the nine months ended September 30, 2000 and an increase in selling, general
and administrative expenses from $401,016 for the nine months ended September
30, 1999 to $499,982 for the nine months ended September 30, 2000, as partially
offset by a decrease in consulting expenses from $110,240 for the nine months
ended September 30, 1999 to $37,108 for the nine months ended September 30,
2000.
Total expenses for the three months ended September 30, 2000 were $179,286 as
compared to $198,250 for the three months ended September 30, 1999, a decrease
of $18,964 primarily resulting from a decrease in consulting expenses from
$39,590 for the nine months ended September 30, 1999 to $4,688 for the nine
months ended September 30, 1999, as partially offset by an increase in selling,
general and administrative expenses from $89,924 for the nine months ended
September 30, 1999 to $114,959 for the months ended September 30, 2000.
Losses. The Company incurred a loss of $702,932 for the nine months ended
September 30, 2000 as compared to a loss of $658,394 for the nine months ended
September 30, 1999, an increase of $44,538. This increase in the amount of
losses incurred is primarily due to the $69,929 increase in expenses incurred by
the Company for the nine months ended September 30, 2000 as compared to the nine
months ended September 30, 1999.
The Company incurred a loss of $173,648 for the three months ended September 30,
2000, as compared to a loss of $194,126 for the three months ended September 30,
1999, a decrease of $20,478. This decrease in the amount of losses incurred is
primarily due to the $18,964 decrease in expenses incurred by the Company for
the three months ended September 30, 2000 as compared to the three months ended
September 30, 1999.
24
<PAGE> 25
FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS
There are a number of factors that affect the Company's business and the result
of its operations. These factors include general economic and business
conditions; the level of acceptance of the Company's products and services; the
rate and commercial applicability of advancements and discoveries in the
genetics field; and the Company's ability to enter into strategic alliances with
companies in the funeral home and genetics industries; the ability of the
Company to raise the financing necessary to implement its business and marketing
plan, to pay salaries to its officers and employees and to pay its accounts
payable.
PART II. OTHER INFORMATION
Item 3. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 27-Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which
this report is filed.
* * * * * *
25
<PAGE> 26
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENELINK, INC.
(Registrant)
Date: November 13, 2000 By: /s/ John R. DePhillipo
----------------------------------------
John R. DePhillipo, Chief Executive
Officer and President
26
<PAGE> 27
ITEM 1. INDEX TO EXHIBITS.
Exhibit
-------
27 Financial Data Schedule
27
