<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT FOR THE QUARTERLY PERIOD
ENDED JUNE 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 August 3, 2000 12,193,582
----------
</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 June 30, 2000 and June 30, 1999 (unaudited)
Statements of Income for the three months and six months ended June
30, 2000 and 1999 (unaudited)
Statements of Cash Flows for the six months ended June 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)
JUNE 30, JUNE 30,
2000 1999
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash $ 39,207 $ 15,253
Accounts Receivable 100 1,434
Inventory 10,615 11,257
Prepaid Expenses 35,582 15,493
--------- ---------
TOTAL CURRENT ASSETS 85,504 43,437
--------- ---------
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 (16,395) (11,426)
--------- ---------
TOTAL FIXED ASSETS 52,339 53,854
--------- ---------
OTHER ASSETS
Deposits 840 1,640
Organization Costs 86,976 86,976
Patent 3,229 3,229
--------- ---------
91,045 91,845
Less: Accumulated Amortization (88,006) (87,790)
--------- ---------
TOTAL OTHER ASSETS 3,039 4,055
--------- ---------
TOTAL ASSETS $ 140,882 $ 101,346
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
JUNE 30, JUNE 30,
2000 1999
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable & Accrued Expenses $ 151,738 $ 134,123
Accrued Payroll Taxes 23,779 365
Accrued Interest Payable 12,958 1,304
Accrued Compensation 170,367 36,238
Notes Payable - Current Portion 208,769 128,750
----------- -----------
TOTAL CURRENT LIABILITIES 567,611 300,780
----------- -----------
LONG-TERM LIABILITIES
Loans Payable Affiliates -
Net of current portion 43,229 30,500
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, $.01 par value,
75,000,000 shares authorized
12,204,762 and 10,130,041 shares
issued, 12,108,582 and
9,568,861 outstanding as of
June 30, 2000 and 1999,
respectively 122,048 101,301
Treasury Stock, 96,180 shares (109,860) (109,860)
Additional Paid-in Capital 3,948,111 3,542,391
Stock Subscriptions Receivable (734,044) (680,017)
Deferred Compensation (400,000) (600,000)
Deficit Accumulated during
the development stage (3,296,213) (2,483,749)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (469,958) (229,934)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 140,882 $ 101,346
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For The For The For The For The For The Period
Three Months Three Months Six Months Six Months September 21, 1994
Ended Ended Ended Ended (Date of Inception)
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 To June 30, 2000
<S> <C> <C> <C> <C> <C>
REVENUE $ 4,073 $ 3,497 $ 13,536 $ 5,949 $ 246,962
COST OF GOODS SOLD 641 $ 230 1,494 756 37,612
------------ ------------ ------------ ------------ ------------
GROSS PROFIT 3,432 3,267 3,267 5,193 209,350
EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE 72,513 59,582 352,247 326,093 2,486,411
CONSULTING 44,550 39,450 65,420 55,650 292,091
PROFESSIONAL FEES 31,136 18,963 56,987 35,078 290,134
ADVERTISING AND PROMOTION 13,740 9,973 17,695 21,177 137,966
AMORTIZATION AND DEPRECIATION 1,431 1,252 2,683 2,503 86,827
------------ ------------ ------------ ------------ ------------
163,370 129,220 495,032 440,501 3,293,159
INTEREST EXPENSE 28,631 12,197 46,558 12,197 209,711
------------ ------------ ------------ ------------ ------------
INTEREST INCOME 180 578 264 811 14,881
------------ ------------ ------------ ------------ ------------
NET (LOSS) BEFORE PROVISION FOR INCOME
TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (188,389) (137,572) (529,284) (446,694) 13,278,639
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- -- (17,574) (17,574)
NET (LOSS) BEFORE PROVISION FOR INCOME
TAXES (188,389) (137,572) (529,284) (464,694) (3,296,213)
PROVISION FOR INCOME TAXES -- -- -- -- --
NET (LOSS) 188,389 (137,572) (529,284) (464,268)
============ ============ ============ ============
NET (LOSS) PER SHARE BASIC AND DILUTED $ (0.02) $ (0.01) $ (0.05) $ (0.05)
Weighted average common shares and diluted
potential common shares 11,585,176 9,765,305 11,165,453 9,745,500
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the 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
SIX MONTHS SIX MONTHS SEPT. 21, 1994
ENDED ENDED (DATE OF INCEPTION)
JUNE 30, 2000 JUNE 30, 1999 TO JUNE 30, 2000
------------- ------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (529,284) $ (464,268) $ (3,296,213)
Adjustments to reconcile net (loss)
to net cash provided (used) by
operating activities
Depreciation and Amortization 2,683 20,077 104,401
Fair value of officers compensation 0 0 718,000
Fair value of compensation related
to vested options 200,000 200,000 700,000
Common Stock issued for services 55,950 0 170,050
Accrued interest-on Subordinated
Debt converted to common stock 676 0 75,537
Accrued Interest on Debentures 38,876 9,286 115,020
(Increase) decrease in assets
Accounts receivable 1,007 (1,235) (100)
Inventory 260 14 (10,615)
Prepaid expenses (22,804) 3,932 (35,582)
Increase in organization costs 0 0 (90,205)
Deposits 800 0 (840)
Increase (decrease) in liabilities
Accounts payable & accrued
Expenses 56,207 14,184 151,738
Accrued payroll taxes 6,651 (455) 23,779
Accrued interest 6,778 1,304 12,958
Accrued compensation 102,625 98,750 230,368
------------ ------------ ------------
Net cash provided (used)
by operating activities (79,575) (118,411) (1,131,704)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (3,455) 0 (68,734)
(Increase) decrease in Subscriptions
Receivables (16,469) 63,330 (669,370)
------------ ------------ ------------
Net cash provided(used)by investing
activities (19,924) 63,330 (738,104)
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the 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
SIX MONTHS SIX MONTHS SEPT. 21, 1994
ENDED ENDED (DATE OF INCEPTION)
JUNE 30, 2000 JUNE 30, 1999 TO JUNE 30, 2000
------------- ------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayments) from loans and
notes payable 12,730 (6,000) 417,905
Proceeds from Debentures Issued 65,000 65,000 360,000
Proceeds relating to issuance
of common stock (net) 10,000 0 1,131,110
---------- ---------- ----------
Net cash provided by financing
activities 132,730 59,000 1,909,015
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH 33,231 3,919 39,207
Cash, beginning of period 5,976 11,334 0
---------- ---------- ----------
Cash, end of period $ 39,207 $ 15,253 $ 39,207
========== ========== ==========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 0 $ 0 $ 0
========== ========== ==========
Interest paid $ 0 $ 0 $ 0
========== ========== ==========
NON-CASH FINANCING TRANSACTIONS:
Conversion of Debt to Stock $ 107,008 $ 0 $ 481,683
---------- ---------- ----------
Reduction of Subscriptions Receivable
via relinquishment of common stock
(net) $ 0 $ 0 $ 115,496
---------- ---------- ----------
Increase in Note receivable-officer
cash less exercise of options $ 0 $ 40,242 $ 62,118
---------- ---------- ----------
Stock issued related to debenture
financing $ 66,175 $ 38,350 $ 159,332
---------- ---------- ----------
Redemption of common stock-due to
cancellation of marketing agreement $ 0 $ 67,500 $ 67,500
---------- ---------- ----------
Accrued interest on Subscriptions
Receivable $ 22,537 $ 17,675 $ 391,544
---------- ---------- ----------
Decrease in accrued compensation
payable - cash less exercise of
options $ 60,000 $ 0 $ 60,000
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the 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
BUSINESS ORGANIZATION
Genelink, Inc. (the Company) was organized in 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
recently completed mapping of the human genome. 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 defective
genes, living family members can use the stored DNA to discover if they are at
risk for certain
8
<PAGE> 9
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
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.
INTERIM FINANCIAL STATEMENTS
These interim financials, which are unaudited, include all necessary adjustments
which in the opinion of management are necessary in order to make the financial
statements not misleading.
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.
9
<PAGE> 10
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
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.
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 extraction and quantification 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.
10
<PAGE> 11
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
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 and fifteen years, respectively, 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 June 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 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
11
<PAGE> 12
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
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 first quarter
of 000 and 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.
12
<PAGE> 13
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
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 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.
13
<PAGE> 14
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - DEVELOPMENT STAGE OPERATIONS (CONT'D)
The deficit accumulated during the development stage was $3,296,213. 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, 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 June 30, 2000 and 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 amounted to $1,377 and $1,198 for the three months ended
June 30, 2000 and 1999, respectively.
NOTE 4 - LOANS PAYABLE-AFFILIATES
The Company's unsecured long-term debt as of June 30, 2000 and 1999 consists of
loans from various shareholders with no stated repayment terms.
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Total Obligations $43,229 $30,500
Less: Current Portion 0 0
------- -------
$43,229 $30,500
======= =======
</TABLE>
14
<PAGE> 15
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - DEBENTURE-NOTES PAYABLE
The Company entered into the following debenture notes payable with terms
indicated below:
<TABLE>
<CAPTION>
Common
Stock Issued as
Amount of Interest Due Additional
Debenture Date Issued Rate 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
$ 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
---------
$ 360,000
$(115,000) *Less Amounts converted to stock
---------
$ 245,000
=========
</TABLE>
Interest is to be accrued quarterly with the principal balance due at end of the
note period. As of June 30, 2000 these notes have not been repaid and have not
been extended. The Company is currently negotiating with the various debenture
holders to extend the terms of these notes. The Company also issued shares of
common stock as additional consideration equal to the amount of those
debentures. If the debentures have not been redeemed on or before the maturity
date, the debentures will convert into additional shares of common stock of the
Company, with the number of shares issued in the conversion being equal to the
number of shares that the unpaid face value of the debentures would purchase
based on the closing bid price of the stock on the day of maturity.
Accrued interest payable on the debenture notes as of June 30, 2000 was $12,430.
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
15
<PAGE> 16
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - DEBENTURE-NOTES PAYABLE (CONT'D)
discounts, was recorded net with the debenture notes payable and will be
amortized over the life of the debenture.
As of June 30, 2000 the Company's Amortizable Debenture Discounts were as
follows:
<TABLE>
<CAPTION>
Original Cumulative
Amortizable Amortization/ Net Amortizable
Debenture Interest Debenture
Discounts Expense Discounts
----------- --------- -----------
<S> <C> <C>
$ 144,332 $ 108,101 $ 36,231
=========== ========= ===========
</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 for the three months as of June 30, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
1999 $ -- $ 5,429
2000 2,316 4,633
2001 764 764
-------- --------
$ 3,080 $ 10,826
Less Current Portion (3,080) (7,745)
-------- --------
Long Term Portion $ 0 $ 3,081
======== ========
</TABLE>
NOTE 7 - INCOME TAXES
At June 30, 2000, the Company had federal and state tax net operating loss
carryforwards of approximately $2,000,000. 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.
16
<PAGE> 17
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 approximately $498,000 at June 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. 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 loans and accrued interest of $734,044 and
$680,017 at June 30, 2000 and 1999, respectively. 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 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.
17
<PAGE> 18
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONT'D)
During the three month period ended March 31, 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.
B. 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.
C. 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
18
<PAGE> 19
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONT'D)
$.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.
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.
D. TREASURY STOCK
On January 5, 1999, John DePhillipo,(CEO 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 John DePhillipo. The shares had an option price of $.10 a
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 assigned 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.
E. 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
19
<PAGE> 20
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONT'D)
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, Mr. DePhillipo (CEO 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 Dr. Ricciardi (Officer of the
Company) 1,000,000 options that will enable him to acquire shares of the
Company?s common stock exercisable at the 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:
<TABLE>
<CAPTION>
Fair Value
Grant of Options at Exercise
Date # of Options Granted Date of Grant Price Compensation
---- -------------------- ------------- ----- ------------
<S> <C> <C> <C> <C>
1997 2,200,000 $ .60 $ .10 1,100,000
1998 0 -- -- --
</TABLE>
20
<PAGE> 21
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONT'D)
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, John Dephillipo and Dr. Robert Ricciardi(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 thousand options vested immediately with the remaining options vesting
200,000 each on January 1, 2000, 2001, and 2002. During the three months ended
March 31, 2000, the Company also issued 25,000 stock options/warrants to
purchase the Company's common stock at a price of $1.50 per share with
expiration dates in 2003. During the three months ending 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 18, 2000 Dr. Robert Ricciardi exercised 600,000 options to acquire
600,000 shares of common stock at an exercise price of $.10 per share. The
amount due to the Company, $60,000, was offset against monies the company
previously owed to Dr. Ricciardi for accrued compensation.
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 John
DePhillipo an option to acquire 500,000 shares of 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.
21
<PAGE> 22
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
(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 John DePhillipo. The option price was
determined to be $.20 (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 options and stock warrants
activity and status as of June 30, 2000 and 1999 and for the three month period
ending June 30, 2000 and 1999.
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Granted 5,244,375 2,364,375
========== ==========
Vested options outstanding at
beginning of the period 2,133,195 1,123,820
Options vested during period 805,000 19,375
Vested options exercised during
Period (600,000) (400,000)
Cancelled 0 0
---------- ----------
Vested outstanding at End
of Period 2,338,195 743,195
========== ==========
</TABLE>
A summary of outstanding options/warrants along with their exercise price and
dates as of June 30, 2000 are as follows:
<TABLE>
<CAPTION>
EXERCISE OPTIONS/WARRANTS OUTSTANDING EXPIRATION
PRICE GRANTED OPTIONS/WARRANTS DATE
----- ------- ---------------- ----
<S> <C> <C> <C>
$0.10 2,200,000 878,820 12/31/03
$0.20 800,000 800,000 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 3,923,195
========= =========
</TABLE>
22
<PAGE> 23
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
(UNAUDITED)
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.
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30 2000 1999
--------------------- ------------ ------------
<S> <C> <C>
Net loss $ (188,839) $ (137,572)
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 11,585,179 9,765,305
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 11,585,179 765,305
============ ============
Net loss per share-basic & diluted $ (.02) (.01)
============ ============
</TABLE>
*The following common stock equivalents are excluded from earnings per share
calculation as their effect would have been antidilutive:
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30 2000 1999
-------------------- --------- --------
<S> <C> <C>
Warrants and stock options 2,338,195 743,195
========= ========
</TABLE>
NOTE 10 - ADVERTISING
The Company expenses the production costs of advertising the first time the
advertising takes place. Advertising expense was $9,973 and $11,204 for the
three months ending June 30, 2000 and 1999, respectively.
23
<PAGE> 24
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
(UNAUDITED)
NOTE 11 - RENT
The Company leases its primary executive offices located in Margate, New Jersey
at no cost from its officers. Additionally, in September, 1999 the Company
leased office space in Cincinnati, Ohio for a term of one year at a gross annual
rent of $2,220. Rent expense for the period ended June 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 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 agreed
upon compensation of $60,000 in 1999 and $66,000 in 2000.
Officer compensation for the three months ending June 30, 2000 and 1999 was
$54,312 and $49,375.
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
24
<PAGE> 25
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
(UNAUDITED)
NOTE 12 - TRANSACTIONS WITH RELATED PARTIES (CONT'D)
orders and inquiries, processing data and preparing reports for the Company.
As of June 30, 2000 and 1999, the Company owed Kelly/Waldron $20,394 and
$19,560, 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/Rosen-bloom 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/Rosen-bloom 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.
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
25
<PAGE> 26
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
(UNAUDITED)
NOTE 13 - COMMITMENT & CONTINGENCIES (CONT'D)
$800,000 to approximately $40,000 and sales have not increased enough to support
operations, however, the Company is in negotiations for a $1,000,000 Bridge Loan
and has announced new 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.
26
<PAGE> 27
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 six-month period ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the full fiscal
year.
LIQUIDITY AND CAPITAL RESOURCES
For the six month period ended June 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 six months of 2000 the Company has
raised $132,730, primarily through the issuance of Debentures.
Cash and cash equivalents at June 30, 2000 amounted to $39,207 as compared to
$15,253 at June 30, 1999, an increase of $23,954. During the first six months of
2000, the Company's operating activities utilized $79,575, as compared to
$118,411 for the first six months of 1999. Cash utilized during these periods
resulted from Company's net losses for such periods.
Financing activities provided $132,730 for the six month period ended June 30,
2000 as compared to $59,000 for the six months ended June 30, 1999. Financing
activities in the six months ended June 30, 2000 resulted primarily from the
issuance of $110,000 principal amount of Debentures throughout the first six
months of 2000, as the Company required additional funds for working capital
purposes.
The Company will require approximately $2,000,000 implement its sales and
marketing strategy in the year 2000. The Company intends to raise funds through
a private placement of securities. The Company has received a letter of intent
from Brennan Dyer & Company, LLC, a venture capital
27
<PAGE> 28
group, to advise the Company in seeking to obtain investors to provide these
funds. Brennan Dyer & Company, LLC has assisted the Company in all of the
financing it has received since its inception. 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 six months ended June 30, 2000, the Company raised $132,730, primarily
through the issuance of Debentures. The Company also issued 152,500 shares of
common stock to the holders of the Debentures as additional consideration making
the effective interest rate on the Debentures equal to 127%. 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 $.28 per
share at August 3, 2000, this could result in the Company issuing approximately
an additional 545,000 shares of common stock to the holders of the Debentures,
or approximately 4.3% of the Company on a fully-diluted basis.
28
<PAGE> 29
RESULTS OF OPERATIONS
The following table sets forth certain operating information regarding the
Company:
<TABLE>
<CAPTION>
SIX MONTH SIX MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 2000 JUNE 30, 1999
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Revenues $ 13,536 $ 5,949
Cost of Goods Sold $ 1,494 $ 756
Net Earnings (Loss) $(529,284) $(464,268)
Net Earnings (Loss) Per Share $ (.05) $ (.05)
</TABLE>
The following summary table presents comparative cash flows of the
Company for the six months ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
SIX MONTH SIX MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 2000 JUNE 30, 1999
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Net cash used in operating
activities $ 79,575 $ 118,411
Net cash provided (used) by
investing activities $ (19,924) $ 63,330
Net cash provided (used) by
financing activities $ 132,730 $ 59,000
</TABLE>
The Company had cash balances totaling $15,253 at June 30, 1999 and
$39,207 at June 30, 2000.
29
<PAGE> 30
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 TO SIX MONTHS ENDED JUNE 30, 1999
FINANCIAL CONDITION
Assets of the Company increased from $101,346 at June 30, 1999 to $140,882 at
June 30, 2000, an increase of $39,536. This increase was primarily due to an
increase in cash from $15,253 at June 30, 1999 to $39,207 at June 30, 2000 and
an increase in prepaid expenses from $15,493 at June 30, 1999 to $35,582 at June
30, 2000.
Liabilities increased from $331,280 at June 30, 1999 to $610,840 at June 30,
2000, an increase of $279,560. This increase was primarily due to an increase in
accrued compensation due officers from $36,238 at June 30, 1999 to $170,367 at
June 30, 2000, and an increase in notes payable from $128,750 at June 30, 1999
to $208,769 at June 30, 2000, the proceeds of which were used by the Company
primarily for working capital purposes.
CURRENT YEAR PERFORMANCE AND EARNINGS OUTLOOK
Revenues. The total revenues for the six months ended June 30, 2000 were $13,536
as compared to $5,949 for the six months ended June 30, 1999. The increase in
revenues of $7,587 is primarily due to increased sales and marketing efforts
undertaken by and on behalf of the Company.
Expenses. Total expenses for the six months ended June 30, 2000 were $541,590 as
compared to $452,698 for the six months ended June 30, 1999, an increase of
$88,892, primarily resulting from an increase in professional expenses from
$35,078 for the six months ended June 30, 1999 to $56,987 for the six months
ended June 30, 2000, an increase in interest expenses from $12,197 for the six
months ended June 30, 1999 to $46,558 for the six months ended June 30, 2000 and
an increase in selling, general and administrative expenses from $326,093 for
the six months ended June 30, 1999 to $352,247 for the six months ended June 30,
2000.
Losses. The Company incurred a loss of $529,284 for the six months ended June
30, 2000 as compared to a loss of $464,268 for the six months ended June 30,
1999, an increase of $65,016. This increase in the amount of losses incurred is
primarily due to the $88,892 increase in expenses incurred by the Company for
the six months ended June 30, 2000 as compared to the six months ended June 30,
1999.
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.
30
<PAGE> 31
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.
******
31
<PAGE> 32
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: August 11, 2000 By: /s/ John R. DePhillipo
-----------------------------------
John R. DePhillipo, Chief Executive
Officer and President
32
<PAGE> 33
ITEM 1. INDEX TO EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
27 Financial Data Schedule
</TABLE>
33
