<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT: NOT APPLICABLE
SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT: COMMON STOCK, $.01
PAR VALUE
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL BACKGROUND
GeneLink, Inc. (the "Company") is a development stage company which was
organized to offer to the public the safe collection and preservation of a
family's DNA material for later use by the family to identify and potentially
prevent inherited diseases. The Company is the successor by merger with
GeneLink, Inc., a Delaware corporation, in September, 1994. Prior to the merger,
which occurred in February, 1995, the predecessor entity engaged in no
operations.
The Company has never achieved a profit, having realized net losses each
year, including net losses of $118,330 in 1997, $648,202 in 1998 and $431,031
for the nine months ended September 30, 1999. Revenues for the Company were
$43,945 in 1997, $2,263 in 1998 and $10,444 for the nine months ended September
30, 1999. There can be no assurance that the Company will ever realize
significant sales or become profitable.
In February 1998, the Company affected a 75-for-1 stock split of its
Common Stock. The primary reasons for the stock split were to increase the
number of shares of outstanding stock in order to have a sufficient float to
entice market markers to create a market for the stock on the NASDAQ OTC
Bulletin Board and to reduce the price per share of Common Stock in anticipation
of the private placement of 800,000 shares of the Company's Common Stock, which
occurred from April through June, 1998.
The Company was founded in response to the explosion of 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. Most of the more than 4,500 diseases are genetically based.
The ability to diagnose genetic disease has greatly expanded over the
past ten years. In decades past, once a family member becomes deceased, the
opportunity to know whether living family members have inherited defective genes
was lost forever. Future generations could not benefit from the DNA store of
knowledge. For this reason, the Company has created a DNA banking service which
stores one's genes through the collection and preservation of pure DNA. 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 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.
THE PRODUCT
The Company has developed a DNA Collection Kit(TM) 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 non-invasive and takes less than
five minutes to complete. The client forwards the swabs to the University of
North Texas Health Science Center (the "Health Science Center") 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.
<PAGE> 3
Currently, the Company charges $350 to customers for its products and
services for customers who are introduced to the Company by funeral homes which
collect the DNA specimens on behalf of the Company, and the Company in turn pays
funeral homes $60 for collecting the DNA specimens. The Company charges $250 to
its customers for its products and services for customers who order directly
through the Company's web-site, www.bankdna.com. This fee includes the kit, the
analysis of the DNA specimen, which takes place prior to storage, and the 25
year storage fee, and is paid upfront directly to the Company. The Company
subcontracts the storage of the DNA specimens to the Health Science Center, and
pays a separate one-time upfront non-refundable fee to Health Science Center for
this service.
The Health Science Center will store the DNA specimen for 25 year
intervals. 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. The Company charges its
clients $50.00 plus shipping costs for retrieval of a DNA specimen. To date, the
Company has not received any retrieval requests, but has retrieved six specimens
to prove the accuracy of the retrieval system.
AFFILIATES
The Company has an agreement with the Health Science Center through
March 2006 for the storage of the genetic material obtained using the Company's
DNA Collection Kit(TM). The Health Science Center will continue to store any DNA
specimens after such date for the balance of the 25 year storage period, but
after March 2006 will no longer be obligated to receive and store any additional
DNA specimens. The Company has established procedures with the Health Science
Center whereby the Health Science Center will receive a sample in an envelope
enclosed with the kit. The Health Science Center will then analyze the sample to
determine the quantity and quality of the DNA to insure that enough genetic
material is present, extract and store the pure DNA in a frozen state. The
samples are stored in freezers (at minus 20 degrees centigrade) solely used for
the purpose of DNA storage.
The Health Science Center opened its DNA/Identity Laboratory (the
"Laboratory") in 1990. The Laboratory is accredited by the American Association
of Blood Banks and has received Clinical Laboratory Improvement Amendment (CLIA)
certification by the U.S. Department of Health & Human Services. A recent
expansion of the facility, the DNA Systems Laboratory, has broadened DNA-based
analysis capabilities to include PCR typing, which provides rapid and reliable
testing for infectious diseases.
The Health Science Center is a multidisciplinary center that has been a
state institution since 1975 under the governance of the same state-appointed
Board of Regents that directs the University of North Texas (UNT) in Denton,
Texas. UNT, founded in 1890 and now the state's fourth largest university, is an
emerging national research institution. The two institutions collaborate on a
variety of biomedical research, social service and health care programs.
The Health Science Center charges the Company, not the Company's
clients, for each DNA sample stored. To date, the Company has advanced $12,955
against such fees. In addition, the Health Science Center charges the Company
fees for the retrieval and shipping of stored DNA specimens upon the request of
the Company's clients. The Company charges its clients a $50 fee per retrieval
request, plus a shipping fee.
MARKETING
Since its inception, the Company has considered a number of alternatives
for the marketing of its DNA collection kits. Because of its limited financial
resources and the size of its staff, the Company has elected to concentrate its
marketing activities in the funeral home or death-care industry.
The Company's strategy in capturing the death-care industry is to reach
the individual funeral home locations, whether corporate-owned or independently
operated, through its own servicing representatives.
<PAGE> 4
The Company plans to capture 2,000 funeral homes with at-need and
pre-need sales averaging 3 sales per month. The Company is currently negotiating
with a national company which sells its services to funeral homes to create a
marketing company to sell and market the Company's products and services to the
at-need funeral industry. While no assurance can be given that the Company will
be able to reach an arrangement with this company to create a marketing company
to market and sell the Company's products and services in the funeral industry,
the Company is hopeful that it will be able to enter into an agreement and
announce its new sales and marketing program in the first quarter of 2000.
The sales approach which would be taken by the marketing company is to
have the funeral home collect the DNA specimen and notify the marketing company
of such collection. The marketing company would then attempt to make the sale to
the family of the deceased. The past practice has been to have the funeral home
attempt to make the sale on behalf of the Company.
Historically, the death-care industry has consisted of thousands of
individual family-owned businesses, each owning a single facility, which in most
cases has been passed from one generation to the next. This trend of ownership
started changing in the late 60's. The trend toward corporate-owned funeral
homes has mushroomed all across the United Stated and Canada. Each year, more
and more market share is gained by corporate entities through acquisitions of
independent funeral home operators. The major corporations are Service
Corporation International, The Loewen Group, Stewart Enterprises, Inc., Prime
Succession, Inc., Carriage Services, and Keystone, Inc.
As the competition increases in the death-care industry to capture
market share, the need for unique marketing techniques is apparent. The
traditional lead generating approach for the funeral home and cemetery has been
telemarketing and/or door to door surveys. Typically a funeral home discount is
offered or a free cemetery space given away as a door-opener. These worn-out
approaches have left the funeral home operator and cemetery owner searching for
new creative techniques in lead generation that add value to the communities in
which they serve. The Company offers the funeral home operator and cemetery
owner the fresh new approach they desperately need in capturing market share.
The last chance to gather a person's DNA is at the time of death. The
funeral director, as part of his routine at-need sales process, raises the
Company enrollment opportunity and seeks approval from the family for the
collection of the DNA of the deceased. Once the trauma of the funeral is over
and several weeks have passed, the funeral director, armed with the Company's
DNA Bank Certificate, can easily visit the family and seek additional sales of
both the Company and funeral pre-need services.
The basic strategy of the Company in capturing the death-care market is
to reach the individual funeral home locations, whether corporate-owned or
independently operated, through our own servicing representatives. Much like
other vendors supplying the death-care industry (vault companies, casket
companies, funeral home supply companies, etc.), the Company (or the marketing
company, if created) will develop a sales force to individually service each
participating funeral home/cemetery location. The funeral home operator will
collect the DNA specimen and notify the Company (or the marketing company, if
created) and the Company (or the marketing company, if created) will attempt to
make the sale to the representative of the deceased.
The Company has an existing relationship with Prime Succession, Inc., a
national corporate funeral entity with 143 funeral homes and 22 cemeteries which
will give the Company the opportunity to cultivate and refine all aspects of the
sales process. Additionally, this relationship will provide the initial area of
concentration for the Company. Currently, virtually all of the Company's sales
occur through sales by Prime Succession, Inc. owned funeral homes. No contract
exists between the Company and Prime Succession, Inc. Once success is met within
this limited target market, the Company will be poised and ready to cultivate
further relationships with other funeral/cemetery corporate entities.
<PAGE> 5
GOVERNMENT REGULATION
Pursuant to a letter dated January 23, 1996, the Food and Drug
Administration has determined that the Company's kit is a device and subject to
regulation, but has cleared the kits for sale to the public.
INTELLECTUAL PROPERTY
The Company has filed a patent application on its method of DNA
gathering, which patent application is pending. The Company has received
trademark protection for its name and logo and for the name "DNA Collection
Kit(TM)."
EMPLOYEES AND LABOR RELATIONS
The Company considers its labor relations to be good and, none of its
employees is covered by a collective bargaining agreement. As of September 30,
1999, the Company employed a total of 12 people, 2 on a full time basis, in the
following areas:
<TABLE>
<CAPTION>
Category Number of Full Time
Employees Employees
-------- ---------- ---------
<S> <C> <C>
Sales and marketing ....................... 3 0
Business Development....................... 2 1
General and administration, including
customer service ..................... 2 1
Lab Director and Scientists at the
University ........................... 5 0
</TABLE>
COMPETITION
DNA collection and banking is offered on a regional basis by hospitals
and laboratories throughout the United States. To the best of the Company's
knowledge, its other competitor which targets the funeral home industry, is DNA
Analysis, Inc. However, DNA Analysis, Inc.'s product involves an invasive
collection procedure (the drawing of blood with a needle), and is stored at
local laboratories. The DNA collected with the Company's kit is extracted and
stored at the Health Science Center. The advantage to storage at the Health
Science Center is that the client can feel confident that the Health Science
Center, which is located at the University of North Texas, a university with
over a 100 year history, will more likely continue to exist throughout the term
of the storage agreement. Most local laboratories do not have a comparable
history or standing in the community.
Neither the Company nor DNA Analysis, Inc., nor any other company, has
realized any significant market penetration. Methods of competition include
sales through funeral homes and hospitals and marketing directly to consumers.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
PLAN OF OPERATION
The Company intends to implement its Planned Death-care Industry
Marketing Program during the next 12 months. See "DESCRIPTION OF BUSINESS --
Marketing".
<PAGE> 6
In order to fund its planned death-care industry marketing program, the
Company will require approximately $2 million. If the potential marketing
affiliation is realized, the marketing partner will incur a portion of these
costs and the Company will have to hire a chief operating officer and up to 2
additional full-time employees. The Company has engaged an advisor with respect
to raising the required funds. It is anticipated that after the Company is
relisted on the NASDAQ OTC Bulletin Board, it will sell shares of stock through
a private placement to raise the required funds. Currently, the Company can
satisfy its cash requirements through January 2000. 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.
RESULTS OF OPERATIONS
The following table sets forth certain operating information regarding
the Company:
<TABLE>
<CAPTION>
NINE MONTH
PERIOD ENDED
SEPTEMBER 30, 1999 YEAR ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998 DECEMBER 31, 1997
-------------- ------------ ------------
<S> <C> <C> <C>
Revenues $ 10,444 $ 2,263 $ 43,945
Cost of Goods Sold $ 1,238 $ 532 $ 2,524
Net Earnings (Loss) ($431,041) $(648,207) $(118,330)
Net Earnings (Loss) Per Share $ (.04) $ (.07) $ (.02)
</TABLE>
The following summary table presents comparative cash flows of the
Company for the fiscal years ended December 31, 1997 and December 31, 1998, and
for the nine months ended September 30, 1999.
<TABLE>
<CAPTION>
NINE MONTH
PERIOD ENDED
SEPTEMBER 30, 1999 YEAR ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998 DECEMBER 31, 1997
----------- ----------------- -----------------
<S> <C> <C> <C>
Net cash used in operating
activities $(201,665) $427,080 $ 82,058
Net cash provided by investing
activities $ 30,082 $252,314 $115,433
Net cash provided by financing
activities $ 179,000 $617,810 $258,175
</TABLE>
The Company had cash balances totaling $11,334 at December 31, 1998, and
$18,751 at September 30, 1999.
COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 1998 TO FISCAL YEAR ENDED DECEMBER
31, 1997
Financial Condition
Assets of the Company increased from $750,838 at December 31, 1997 to
$845,827 at December 31, 1998, an increase of $94,989. This increase was
primarily due to the
<PAGE> 7
increase of long term note receivables from $613,169 at December 31, 1997 to
$725,611 at December 31, 1998. The increase of leasehold improvements from $0.00
at December 31, 1997 to $50,000 at December 31, 1998, was partially offset by
the decrease in cash from $72,918 at December 31, 1997 to $11,334 at December
31, 1998.
Liabilities decreased from $556,605 at December 31, 1997 to $187,260 at
December 31, 1998, a decrease of $369,345. This decrease was primarily due to
the decrease in notes payable, current portion from $331,500 at December 31,
1997 to $0.00 at December 31, 1998, as a result of the conversion of $331,500 of
debt into common stock of the Company.
Losses. The Company incurred a loss of $648,207 for the fiscal year
ended December 31, 1998, compared to a loss of $118,330 for the fiscal year
ended December 31, 1997.
Revenues. Total revenues for the fiscal year ended December 31, 1998
amounted to $2,263, representing a decrease of $41,682 compared to the fiscal
year ended December 31, 1997. This decrease in revenues is primarily as a result
of a number of distributors purchasing DNA specimen kits in 1997 for resale to
funeral homes and the public and the failure of these distributors to continue
the distribution relationship with the Company in 1998, due to the inability of
these distributors to resell the kits to funeral homes or the general public.
Expenses. Total expenses for the fiscal year ended December 31, 1998
were $689,405, an increase of $521,685 from the fiscal year ended December 31,
1997. This increase is primarily attributable to the increase of selling,
general administrative expenses from $110,087 in the fiscal year ended December
31, 1997 to $301,274 for the fiscal year ended December 31, 1998, primarily
resulting from increased marketing and sales efforts, an increase in consulting
expenses from $620 for the fiscal year ended December 31, 1997 to $241,352 for
the fiscal year ended December 31, 1998, primarily resulting from fees paid in
connection with consulting and marketing services provided to the Company in
1998 which were not incurred in 1997, and an increase of the payment of
professional fees from $40,270 for the fiscal year ended December 31, 1997 to
$85,668 for the fiscal year ended December 31, 1998, primarily resulting from
additional professional fees paid in connection with the preparation of the
private placement memorandum in 1998 in connection with the sale by the Company
of 800,000 shares of common stock of the Company at the purchase price of $1.00
per share from April through June, 1998.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
Financial Condition
Assets of the Company decreased from $845,827 at December 31, 1998 to
$844,059 at September 30, 1999, a decrease of $1,768. This decrease was
primarily due to the decrease in long-term notes receivable from officers of the
Company.
Liabilities increased from $187,260 at December 31, 1998 to $486,425 at
September 30, 1999, an increase of $299,165. This increase was primarily due to
an increase in accrued compensation from $30,000 at December 31, 1998 to
$150,028 at September 30, 1999 and an increase in notes payable from $0 at
December 31, 1998 to $185,000 at September 30, 1999, the proceeds of which were
used by the Company primarily for working capital purposes.
CURRENT YEAR PERFORMANCE AND EARNINGS OUTLOOK
Losses. The Company incurred a loss of $431,041 for the nine months
ended September 30, 1999 as compared to a loss of $532,733 for the nine months
ended September 30, 1998. This decrease in the amount of loss is primarily due
to a decrease in consulting fees from $223,725 for the nine months ended
September 30, 1998 to $17,650 for the nine months ended September 30, 1999. A
significant portion of the consulting fees for 1998 were incurred in connection
with the Company's raising $800,000 of funds
<PAGE> 8
through a private placement of 800,000 shares of its common stock at a purchase
price of $1.00 per share from April through June, 1998.
Revenues. The total revenues for the nine months ended September 30,
1999 equal $10,444, representing an increase of $9,084 compared to the nine
months ended September 30, 1998.
Expenses. Total expenses for the nine months ended September 30, 1999
were $403,519 as compared to $556,550 for the nine months ended September 30,
1998, a decrease of $153,051, primarily resulting from a decrease in consulting
expenses from $223,775 for the nine months ended September 30, 1998 to $17,650
for the nine months ended September 30, 1999. A significant portion of the
consulting expenses for 1998 were in connection with marketing services provided
in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity requirement has been the implementation
and funding of its sales and marketing efforts and the payment of compensation
to officers and other employees. In 1998 the Company received net proceeds of
$641,810 from the sale of 800,000 shares of its common stock from April through
June, 1998. In the first nine months of 1999 the Company has raised $185,000
through the issuance of debentures.
Cash and cash equivalents at September 30, 1999 amounted to $18,751 as
compared to $11,334 at December 31, 1998, an increase of $7,417. During 1998,
the Company's operating activities utilized $324,108 as compared to utilizing
$82,058 in 1997. During the first nine months of 1999, the Company's operating
activities utilized $201,665, as compared to $348,522 for the first nine months
of 1998. Cash utilized during these periods resulted from Company's net loss for
such periods.
Investing activities provided $30,082 for the nine months ended
September 30, 1999 as compared to utilizing $214,810 for the nine months ended
September 30, 1998. Primary sources/uses of funds for investing activities were
related to long-term notes receivables to John DePhillipo, the President and
Chief Executive Officer of the Company. Financing activities provided $179,000
for the nine month period ended September 30, 1999 as compared to $626,810 for
the nine months ended September 30, 1998. Financing activities in 1999 primarily
resulted from the issuance of $185,000 of debentures throughout the first nine
months of 1999, as the Company required additional funds for working capital
purposes. Financing activities in 1998 primarily resulted from the issuance of
800,000 shares of common stock by the Company in a private placement from April
through June, 1998.
The Company will require approximately $2,000,000 to implement its sales
and marketing strategy in the year 2000. The Company intends to raise funds
through a private placement of securities after it is relisted on the NASDAQ OTC
Bulletin Board. 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.
The Company received net proceeds of $641,810 from the sale of 800,000
shares of its common stock through a private placement from April through June
1998. The private offering was made pursuant to Rule 504 promulgated under
Regulation D of the Securities Act of 1933, as amended. The Company also
converted $175,000 of principal of its 9% Subordinated Notes, plus accrued
interest and warrants to acquire common stock into 242,847 shares of restricted
stock at the price of $.72 per share and converted an aggregate of $156,500
principal amount of short-term loans plus accrued interest, into 208,665 shares
of its common stock at a conversion price of $.75 per share. The conversion of
the Subordinated Notes was made at a discount to the eventual $1.00 per share
offering price of the private placement primarily due to the fact that the
holders of the debt would be receiving stock that was not freely traded, as
opposed to the investors receiving shares of common stock under Rule 504, and as
a result of the holders of Subordinated Notes agreeing to terminate the warrants
which they received in connection with the issuance of the Subordinated Notes.
Additionally, the Company had
<PAGE> 9
not yet priced the common stock to be issued in the private placement at the
time of the conversion of the debt. With respect to the conversion of the short
term loans, these notes were becoming due, the Company did not have sufficient
funds to pay the principal and accrued interest on such notes and did not want
to use the proceeds of the private placement offering for such purposes. As a
result, the Company reached agreement with the holders of the short-term notes
to convert such debt into equity, and to forego interest, at a price of $.72 per
share.
For the nine months ended September 30, 1999, the Company raised
$185,000 through the issuance of 12% Debentures due December 31, 1999. The
Company also issued 185,000 shares of common stock to the holders of the
Debentures as additional consideration making the effective interest rate on the
Debentures equal to 84.7%. 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. The maturity
date for the Debentures has been extended until January 31, 2000. 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 basically closing bid price of the stock on the date of maturity.
At the closing bid price of $.19 per share at December 13, 1999, this could
result in the Company issuing approximately an additional two million shares of
common stock to the holders of the Debentures, or approximately 12% of the
Company on a fully-diluted basis.
Due to the lack of cash flow of the Company from inception and the
inability to pay salaries to officers of the Company from inception, the Company
has lent money to officers of the Company from time to time as funds became
available. Due the periodic nature of these loans and the inability of the
Company to meet payroll obligations, the Company has agreed to allow officers to
repay these loans, which become due December 31, 2003, through the transfer to
the Company of shares of the Company's common stock at such time of conversion
having a fair market value equal to the principal and accrued interest on such
loans at any time on or before December 31, 2003.
ITEM 3. PROPERTIES
The Company leases its principal executive offices located in Margate,
New Jersey at no cost from John and Maria DePhillipo. John DePhillipo is the
Chief Executive Officer and President and a member of the Board of Directors of
the Company, and Maria DePhillipo is the owner of 14.0% of the shares of the
Company's Common Stock.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The total number of shares of Common Stock of the Company beneficially
owned by each of the officers and directors of the Company, and all of such
directors and officers as a group, all beneficial owners of 10% or more of the
Company's Common Stock and their percentage ownership of the outstanding Common
Stock of the Company as of September 30, 1999, are as follows:
<PAGE> 10
<TABLE>
<CAPTION>
No. of % of
Shares Outstanding(1)
------ --------------
<S> <C> <C>
Dr. Robert P. Ricciardi(2) 4,250,000 34.15%
137 Forge Road
Glen Mills, PA 19342
John R. DePhillipo(3) 3,185,600 27.01%
100 S. Thurlow Avenue
Margate, NJ 08402
Edmund T. and Linda J.
DelGuercio, as tenants
by the entireties 2,250,000 21.54%
7 Forrest Lake Drive
Media, PA 19067
Cede & Co.(4)
P.O. Box 222
Bowling Green Station
New York, New York 10274 1,827,490 17.50%
All officers and
directors a group
(2 persons) 7,886,800 52.89%
--------- ------
</TABLE>
(1) Includes 10,293,861 shares currently outstanding, options to acquire
3,600,000 shares and warrants to acquire 229,375 shares.
(2) Includes options to acquire 1,000,000 shares at an exercise price of
$.10 per share and options to acquire 1,000,000 shares at an exercise price of
$1.00 per share.
(3) Includes 1,436,800 shares owned by Maria DePhillipo, spouse of John R.
DePhillipo, all of whose shares are attributed to Mr. DePhillipo solely for
purposes of this presentation, 250,000 shares owned by trusts, the beneficiaries
of whom are minor children of Mr. DePhillipo and the trustee of whom is Maria
DePhillipo, all of which shares are attributed to Mr. DePhillipo solely for
purposes of this presentation, options to acquire 498,800 shares at an exercise
price of $.10 per share, and options to acquire 1,000,000 at an exercise price
of $1.00 per share.
(4) Cede & Co. Is a nominee holder of shares of Common Stock of the Company
as a depository for brokerage firms and others.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --- --- --------
<S> <C> <C>
John R. DePhillipo 58 Chairman, Chief
Executive Officer, President
Secretary and
Director
Robert P. Ricciardi 52 Treasurer and
Director
</TABLE>
John R. DePhillipo - Since 1995, Mr. DePhillipo has been the President,
Chief Executive Officer and a member of the Board of Directors of the Company.
Mr. DePhillipo, educated at Temple University in Business Administration, served
from 1990 to 1994 as the Chairman/CEO of Applied Safety, Inc., which developed a
retro-fit driver's side airbag for installation in new or used vehicles. In
August, 1994, Applied Safety ceased operations and entered into a license and
royalty agreement with a New York Stock Exchange company which was a worldwide
manufacturer and supplier of airbags. In October of 1995, after a lawsuit was
filed in Florida by the other party seeking to terminate the agreement and avoid
future royalty payments, Applied Safety filed for protection under Chapter 11 of
the U.S. Bankruptcy Code, Case #95-17950 DAS. In
<PAGE> 11
September 1997, Applied Safety's plan was confirmed by the bankruptcy court, and
Applied Safety has emerged from bankruptcy.
Robert P. Ricciardi, Ph.D. - Since 1995, Dr. Ricciardi has been the
Treasurer and a member of the Board of Directors of the Company. Since 1992, Dr.
Robert Ricciardi has been a Professor of Microbiology at the University of
Pennsylvania, where he is Chairman of the Microbiology and Virology Program of
the Molecular Biology Graduate Group. He received his Ph.D. from the University
of Illinois at Urbana in cellular biology. He was a postdoctoral fellow at
Brandeis University and Harvard Medical School in the Department of Biological
Chemistry and was awarded fellowships by the American Cancer Society, National
Institutes of Health and Charles A. King Trust. He developed one of the first
techniques in molecular biology which has been widely used both to map genes and
determine the proteins they encode. While most of his research has centered on
basic mechanisms of cancer, he has developed, patented and has a patent pending
for recombinant delivery vectors for use as vaccines and for potential use in
gene therapy. Dr. Ricciardi has served as a consultant to The National
Institutes of Health, Smith Kline and Beckman's Department of Molecular
Genetics, and Children's Hospital of Philadelphia's Department of Infectious
Disease. He has authored 55 publications, has been awarded a NATO Visiting
Professorship at Ferrara Medical School, Italy, and has been an invitational
speaker at various scientific meetings and a seminar guest speaker at the Mayo
Clinic and Johns Hopkins University.
ITEM 6. EXECUTIVE COMPENSATION.
Since its inception and until the execution of an employment agreement
in February 1998, in lieu of salary the Company loaned funds periodically to Mr.
DePhillipo in consideration of his substantially full-time service on its
behalf. The loans totaled $41,270 in 1994, $175,000 in 1995, $120,650 in 1996
$108,650 in 1997, $205,387 in 1998 and $60,000 in 1999. Mr. DePhillipo has paid
back $103,571 on account of the loans in 1999. The $60,000 of loans in 1999
represents the exercise price of options exercised by Mr. DePhillipo in 1999 and
was lent to Mr. DePhillipo pursuant to the terms of the options granted to Mr.
DePhillipo. Each loan bears interest at the applicable federal rate, as
determined under Section 1274(d) of the Internal Revenue Code. The balance on
these loans as of September 30, 1999 was $742,755. It is possible that these
loans could be treated as compensation for federal and state income tax
purposes.
Mr. DePhillipo has executed notes payable to the Company to evidence his
obligations on account of the loans. Under the terms of his obligations, in
repayment thereof, Mr. DePhillipo will have the right, at any time on or before
December 31, 2003, to transfer to the Company, at their 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, at which time the loans become due. 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 Mr. DePhillipo to the
Company. If the Shares are not publicly-traded, fair market value shall be
determined by appraisal by an independent auditor not otherwise engaged in
services for the Company or Mr. DePhillipo, which appraisal shall be final and
binding upon both Mr. DePhillipo and the Company.
The employment agreement between Mr. DePhillipo and the Company entered
into September 1997 and memorialized and dated February 24, 1998, which provides
for an initial salary of $125,000 per year, an initial term of five (5) years,
benefits, a grant of options to acquire 1,200,000 Shares at an exercise price of
$.10 per share, 600,000 of which have vested with the remaining balance vesting
in equal annual installments of 200,000 each commencing January 1, 2000,
registration rights and a two (2) year restrictive covenant.
The Company has entered into a consulting agreement with Dr. Ricciardi,
which was entered into September 1997 and memorialized and dated February 24,
1998, and which provides for initial compensation of $30,000 per year in 1998
and $60,000 per year in 1999, an initial term of five (5) years, the grant of
options to acquire 1,000,000 Shares at an exercise price of $.10 per Share,
400,000 of which have vested with the
<PAGE> 12
remaining balance vesting in four (4) equal annual installments of 200,000 each
commencing January 1, 2000, registration rights and requires Dr. Ricciardi to
perform eight (8) hours of consulting service per week. The Company has accrued,
but has not paid, the sums due Dr. Ricciardi under the consulting agreement.
The following charts set forth information regarding options granted to
executive officers of the Company in 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Individual Grants Stock Price Appreciation
for Option Term
Percent of
Total
Number of Options/
Securities SARs Granted to
Name Underlying Option/ Employees in Fiscal Exercise of Base Expiration
SARs Granted (#) Year Price Date 5% ($) 10% ($)
($/Sh)
<S> <C> <C> <C> <C> <C> <C>
John R.
DePhillipo 1,200,000 54.54% $0.10/share 12/31/03 $1,776,000 $2,388,000
Robert P.
Ricciardi 1,000,000 45.45% $0.10/share 12/31/03 $1,480,000 $1,990,000
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired On Value Options/SARs at Fiscal Options/SARs at
Name Exercise (#) Realized Year-End (#) Fiscal Year-End ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C>
John R. DePhillipo n/a 0 400,000/800,000 $40,000/$80,000
Robert P. Ricciardi n/a 0 200,000/800,000 $20,000/$80,000
</TABLE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Since its inception and until the execution of an employment agreement
in February 1998, in lieu of salary the Company loaned funds periodically to Mr.
DePhillipo in consideration of his substantially full-time service on its
behalf. The loans totaled $41,270 in 1994, $175,000 in 1995, $120,650 in 1996
$108,650 in 1997, $205,387 in 1998 and $60,000 in 1999. Mr. DePhillipo has paid
back $103,573 on account of the loans in 1999. The $60,000 of loans in 1999
represents the exercise price of options exercised by Mr. DePhillipo in 1999 and
was lent to Mr. DePhillipo pursuant to the terms of the options granted to Mr.
DePhillipo. Each loan bears interest at the applicable federal rate, as
determined under Section 1274(d) of the Internal Revenue Code. The balance on
these loans as of September 30, 1999 was $742,755. If the Internal Revenue
Service were to take the position, and successfully maintain, that any of such
loans should have been treated as compensation, both the Company and Mr.
DePhillipo would be liable for income taxes, plus interest and penalties. The
state of New Jersey, where Mr. DePhillipo resides, could also take a similar
position and seek to collect income and other taxes.
<PAGE> 13
Mr. DePhillipo has executed notes payable to the Company to evidence his
obligations on account of the loans. Under the terms of his obligations, in
repayment thereof, Mr. DePhillipo will have the right, at any time on or before
December 31, 2003, to transfer to the Company, at their 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, at which time the loans become due. 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 Mr. DePhillipo to the
Company. If the Shares are not publicly-traded, fair market value shall be
determined by appraisal by an independent auditor not otherwise engaged in
services for the Company or Mr. DePhillipo, which appraisal shall be final and
binding upon both Mr. DePhillipo and the Company.
Upon the start of the Company's operations, Dr. Robert P. Ricciardi, the
treasurer, a member of the Board of Directors of the Company and a holder of
2,250,000 shares of the Company's common stock, and Dr. Edmund T. DelGuercio, a
holder of 2,250,000 shares of the Company's common stock, each loaned money to
the Company. As of September 30, 1999, the Company owed Dr. Ricciardi $15,000
and Dr. DelGuercio $15,500.
In March 1998, the Company entered into a settlement agreement with
William Parisi, a former officer of the Company. The Company lent Mr. Parisi
$148,501 from time to time during his affiliation with the Company, as it was
unable to pay him a salary. Upon his becoming an officer of the Company, Mr.
Parisi became entitled to shares of common stock of the Company. The Company and
Mr. Parisi were unable to agree upon the value of the common stock to be
received by Mr. Parisi. Pursuant to the terms of the settlement agreement, Mr.
Parisi received 300,000 shares of common stock and the Company received a
release from Mr. Parisi. Mr. Parisi then exchanged 148,501 shares of common
stock to the Company (at the then fair market value of $1.00 per share) to repay
in full the outstanding balance of the loan from the Company to him.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is authorized to issue 75,000,000 shares of Common Stock,
$.01 par value. At September 30, 1999, there were 10,293,861 shares of Common
Stock issued and outstanding. There were 83 shareholders of record of the Common
Stock of the Company as of September 30, 1999.
COMMON STOCK
Holders of Common Stock are entitled to receive ratably such dividends
as may be declared by the Board of Directors, out of funds legally available,
without any preference. Holders of Common Stock are entitled to one vote per
share. Cumulative voting is not allowed for purposes of the election of
directors. Thus, the holders of more than 50% of the shares voting for directors
can elect all directors. The holders of the Common Stock of the Company have no
preemptive rights to purchase new issues of the securities of the Company. There
are no redemption or conversion features attached to the Common Stock.
At the present time, the Company does not intend to pay any dividends on
its Common Stock.
Upon liquidation or dissolution of the Company, holders of Common Stock
are entitled to receive pro rata, either in cash or in kind, all of the assets
of the Company after payment of debts.
WARRANTS AND OPTIONS
As of September 30, 1999, there were outstanding 229,375 warrants to
acquire shares of Common Stock of the Company and 3,600,000 options to purchase
shares of Common Stock of the Company, consisting of 2,000,000 options having an
exercise price of $1.00 per share, 800,000 of which have vested, and 1,578,820
options having an exercise price of $.10 per share, 600,000 of which have
vested.
<PAGE> 14
PENNSYLVANIA CORPORATE LAW
The Company is a Pennsylvania corporation, and may become subject to the
anti-takeover provisions of the Pennsylvania Business Corporation Law (the
"Pennsylvania Law"). In general, Pennsylvania Law prevents take-over offers to
acquire equity securities of a Pennsylvania corporation if the offeror would
become a beneficial owner of more than 20% of any class of outstanding equity
securities, and other similar provisions, subject to certain exceptions such as
the written approval of the board of directors. The existence of these
provisions would be expected to have an anti-takeover effect, including attempts
that might result in a premium over the market price for the shares of Common
Stock held by Shareholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock of the Company is
StockTrans, Inc., 7 East Lancaster Avenue, Ardmore, Pennsylvania; telephone
(610) 649-7300.
REPORTS TO SHAREHOLDERS
The Company will furnish its shareholders with annual reports containing
the consolidated financial statements of the Company examined by independent
certified public accountants. The Company may distribute other reports to the
Shareholders as it deems appropriate.
<PAGE> 15
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
GENERAL
From November 1998 until December 1, 1999, the Common Stock of the
Company was traded on the NASDAQ Bulletin Board over-the-counter market under
the symbol GNLK. On December 2, 1999, the Company's Common Stock was delisted
from the NASDAQ OTC Bulletin Board and is currently traded on the National
Quotation Board Pink Sheets under the symbol GNLK.
MARKET PRICE
The Company's Commons Stock has been traded since November, 1998. The
Company's market maker is Olsen, Payne & Company, 215 South State Street, Suite
750, Salt Lake City, Utah 84110.
The following table sets forth the range of high and low closing bid
prices per share of the Common Stock of the Company as reported or the NASDAQ
Bulletin Board for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31, 1998 High Bid(1) Low Bid(1)
- ---------------------------- -------- -------
<S> <C> <C>
3rd Quarter.......................... Unpriced Unpriced
4th Quarter.......................... $1.31 $0.94
<CAPTION>
Year Ending December 31, 1999
- -----------------------------
<S> <C> <C>
1st Quarter ......................... $1.41 $0.50
2nd Quarter.......................... $0.88 $0.25
3rd Quarter.......................... $0.63 $0.18
</TABLE>
- -------------------------------------------
(1) The Company is unaware of the factors which resulted in the significant
fluctuations in the prices per share during the periods being presented,
although it is aware that there is a thin market for the Common Stock, that
there are frequently few shares being traded and that any sales activity
significantly impacts the market.
The closing bid and ask prices of the Common Stock of the Company on December
13, 1999, were $.19 and $.34, respectively.
DIVIDENDS
The Company has not paid any dividends on its Common Stock and does not
expect to do so in the foreseeable future. The Company intends to apply its
earnings, if any, in expanding its operations and related activities.
The payment of cash dividends in the future will be at the discretion of
the Board of Directors and will depend upon such factors as earnings levels,
capital requirements, the Company's financial condition and other factors deemed
relevant to the Board of Directors. In addition, the Company's ability to pay
dividends may become limited under future loan agreements of the Company which
may restrict or prohibit the payment of dividends.
<PAGE> 16
ITEM 2. LEGAL PROCEEDINGS.
The Company may become subject to legal proceedings and claims which
arise in the ordinary course of business. The Company's management does not
expect that the results in any of these legal proceedings will have a material
adverse effect on the Company's financial condition or results of operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In 1997, S&S Family Partnership, Benjamin DeYoung, Dr. and Mrs. Pierre
Ghayad and Dr. Jacques Khoury converted notes aggregating $40,000 plus accrued
interest into 50,850 shares at a price of $.79 per share pursuant to Rule 506 of
Regulation D under the Securities Act of 1933.
In March 1998, the Company converted an aggregate of $175,000 principal
amount of its 9% Subordinated Notes, plus accrued interest and warrants to
acquire Common Stock held by Thomas Price, James Fulmer, Jr., Wanda Smith,
Benjamin DeYoung, Dave Canter, Matthew Foley and Susan Sundstrom, and R.A.
Hamilton Corp., into 242,847 shares at a conversion price of $.72 per share
pursuant to Rule 506 of Regulation D under the Securities Act of 1933, and the
Company converted an aggregate of $156,500 principal amount of 11.5% short-term
loans, plus accrued interest, made to the Company by Kelly/Waldron & Co., Star
Machine, Inc., S&S Family Partnership and Michael Caridi in November and
December, 1997 into 208,665 shares, at a conversion price of $.75 per share
pursuant to Rule 504 of Regulation D under the Securities Act of 1933.
Also in March 1998, the Company granted an aggregate of 30,000
shares to members of its Medical Advisory Board for agreeing to serve on the
Medical Advisory Board, and granted 300,000 shares to William E. Parisi pursuant
to a settlement agreement entered into between the Company and Mr. Parisi, each
issued pursuant to Rule 506 of Regulation D under the Securities Act of 1933.
The Company lent Mr. Parisi $148,501 from time to time during his affiliation
with the Company, as it was unable to pay him a salary. Upon his becoming an
officer of the Company, Mr. Parisi became entitled to shares of common stock of
the Company. The Company and Mr. Parisi were unable to agree upon the value of
the common stock to be received by Mr. Parisi. Pursuant to the terms of the
settlement agreement, Mr. Parisi received 300,000 shares of common stock and the
Company received a release from Mr. Parisi. Mr. Parisi then exchanged 148,501
shares of common stock to the Company (at the then fair market value of $1.00
per share) to repay in full the outstanding balance of the loan from the Company
to him.
From April through June 1998, the Company issued 800,000 shares of its
Common Stock for $800,000 in a limited offering made in reliance upon Rule 504
of Regulation D under the Securities Act of 1933. Upon completion of the
offering in June 1998, the Company granted Shannon/Rosenbloom Marketing, Inc.
250,000 shares of its Common Stock for marketing and promotional services
rendered pursuant to Rule 506 of Regulation D of the Securities Act of 1933 and
sold to Shannon/Rosenbloom Marketing, Inc. 250,000 shares of its Common Stock
for $25,000 pursuant to Rule 504 of Regulation D under the Securities Act of
1933, under the terms of an option granted to Shannon/Rosenbloom to convert
$25,000 of compensation into 250,000 shares of the Company's Common Stock.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The provisions of the Pennsylvania Business Corporation Law provides for
the indemnification of the directors and officers of the Company. These
provisions generally permit indemnification of directors and officers against
certain costs, liabilities and expenses of any threatened, pending or completed
action, suit or proceeding that any such person may incur by reason of serving
in such positions if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such persona had been adjudged to be liable
to
<PAGE> 17
the corporation, unless and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstance of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which a
court shall deem proper. Any determination that indemnification of a director or
an officer, unless ordered by the court, must be made by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum; or by a committee of such directors designated by majority
vote of such directors even though less than a quorum; or if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion; or by the shareholders.
<PAGE> 18
PART F/S
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report F-1
Balance Sheets, December 31, 1998 and December 31, 1997 F-2
Statements of Operations and Retained Earnings (Deficit),
Years ended December 31, 1998 and December 31, 1997 F-4
Statements of Changes in Stockholder Equity,
Years Ended December 31, 1998 and 1997 F-5
Statements of Cash Flow, Years ended December 31, 1998 and 1997 F-6
Notes to Financial Statements F-8
Balance Sheets, September 30, 1999 and 1998 (unaudited) F-25
Statements of Operations and Retained Earnings (Deficit),
Nine months ended September 30, 1999 and 1998(unaudited) F-27
Statements of Changes in Stockholder's Equity,
Nine months ended September 30, 1999 and 1998(unaudited) F-28
Statements of Cash Flow, Nine months ended September 30, 1999
and 1998(unaudited) F-29
Notes to Financial Statements F-31
<PAGE> 19
Genelink, Inc.
(A Development Stage Company)
Margate, New Jersey
We have audited the accompanying balance sheets of Genelink, Inc. (a development
stage company) as of December 31, 1998 and 1997, and the related statements of
income, retained earnings and cash flows for the years then ended and for the
period September 21, 1994 (date of inception) to December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Genelink, Inc. as of December
31, 1998 and 1997, and the results of its operation and its cash flows for the
years then ended and for the period September 21, 1994 (date of inception) to
December 31, 1998 in conformity with generally accepted accounting principles.
SIEGAL & DROSSNER, P.C.
Certified Public Accountants
Philadelphia, Pennsylvania
March 12, 1999
F-1
<PAGE> 20
GENELINK, INC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1998 & 1997
<TABLE>
<CAPTION>
ASSETS
------
1998 1997
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 11,334 $ 72,918
Accounts Receivable 198 0
Inventory 11,272 10,587
Prepaid Expenses 19,426 13,171
------ --------
TOTAL CURRENT ASSETS 42,230 96,676
------ --------
LONG TERM RECEIVABLE
Notes Receivable - Officers 725,611 613,169
--------- --------
FIXED ASSETS
Office Furniture 1,154 0
Office Equipment 14,126 8,355
Leasehold Improvements 50,000 0
------ -----
65,280 8,355
Less: Accumulated Depreciation (8,613) (5,251)
------ --------
TOTAL PROPERTY AND EQUIPMENT 56,667 3,104
------ -----
OTHER ASSETS
Deposits 1,640 600
Organization Costs 86,976 86,976
Patent 3,229 3,229
----- -----
91,845 90,805
Less: Accumulated Amortization (70,526) (52,916)
--------- --------
TOTAL OTHER ASSETS 21,319 37,889
------ --------
TOTAL ASSETS $ 845,827 $ 750,838
========= ========
</TABLE>
See Accountants' Auditors Report and Accompanying Notes.
<PAGE> 21
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1998 & 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 87,613 $ 128,516
Accrued Payroll Taxes 822 1,582
Accrued Interest 0 15,069
Accrued Expenses 32,325 19,438
Accrued Compensation 30,000 0
Notes Payable - Current Portion 0 331,500
Loans Payable Affiliates -
Current Portion 6,500 24,000
----- ------
TOTAL CURRENT LIABILITIES 157,260 520,105
--------- ---------
LONG-TERM LIABILITIES
Loans Payable Affiliates -
Net of current portion 30,000 36,500
------ ------
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value,
75,000,000 shares authorized
9,643,861 and 102,678 shares
issued and outstanding as of
December 31, 1998 & 1997
respectively. 96,439 1,027
Additional Paid-in Capital 1,554,277 537,148
Deficit Accumulated during the
the development stage (992,149) (343,942)
--------- ----------
TOTAL STOCKHOLDERS' EQUITY 658,567 194,233
--------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 845,827 $ 750,838
========= ==========
</TABLE>
See Accountants' Auditors Report and Accompanying Notes.
<PAGE> 22
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
AND FOR THE PERIOD SEPTEMBER 21, 1994 (DATE OF INCEPTION)
TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE FOR THE 9/21/94
YEAR ENDED YEAR ENDED (DATE OF INCEPTION)
12/31/98 12/31/97 TO 12/31/98
-------- -------- -----------
<S> <C> <C> <C>
REVENUE $ 2,263 $ 43,945 $ 220,978
------- ------- ---------
COST OF GOODS SOLD 532 2,524 34,330
------- ------- ------
GROSS PROFIT 1,731 41,421 186,648
------- ------- ---------
EXPENSES
Selling, general and
administrative 301,274 110,087 645,928
Consulting 241,352 620 279,432
Professional fees 85,668 40,370 186,860
Advertising and promotion 40,139 7,362 83,389
Amortization and depreciation 20,972 19,281 79,139
------- --------- ------
689,405 177,720 1,274,748
------- --------- ---------
INTEREST EXPENSE 4,219 15,406 19,734
------- ------ ------
INTEREST INCOME 43,686 33,375 115,685
------- ------ ---------
NET LOSS BEFORE PROVISION
FOR INCOME TAXES (648,207) (118,330) (992,149)
------- --------- ---------
PROVISION FOR INCOME TAXES 0 0 0
--------- --------- --------
NET LOSS (648,207) (118,330) (992,149)
ACCUMULATED DEFICIT-BEGINNING
(343,942) (209,524) 0
------- --------- --------
PRIOR PERIOD ADJUSTMENTS 0 (16,088) 0
--------- --------- --------
ACCUMULATED DEFICIT-ENDING $(992,149) $(343,942) $ (992,149)
======= ======= =========
NET LOSS PER SHARE BASIC
AND DILUTED $ (.07) (.02)
---- ----
Weighted Average common shares
and diluted potential common shares 9,018,348 7,687,200
--------- ---------
</TABLE>
See Accountants' Auditors Report and Accompanying Notes.
<PAGE> 23
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON COMMON ADDITIONAL DURING
STOCK STOCK TREASURY PAID IN DEVELOPMENT
# OF SHARES AMOUNT STOCK CAPITAL STAGE TOTAL
----------- ------ ----- ------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 21, 1994 (INCEPTION) - $ - $ - $ - $ - $ -
ISSUANCE OF COMMON STOCK FOR CASH 66,000 660 - 119,040 0 119,700
ISSUANCE OF COMMON STOCK FOR CONSULTING
SERVICES 30,000 300 - - - 300
NET LOSS - - - - (9,805) (9,805)
---------- ------- -------- --------- -------- --------
BALANCE AT DECEMBER 31, 1994 96,000 $ 960 $ - $ 119,040 $ (9,805) $ 110,195
========== ======= ======== ========= ======== ========
ISSUANCE OF COMMON STOCK FOR CASH 5,280 53 - 329,947 - 330,000
NET LOSS - - - - (170,825) (170,825)
---------- ------- -------- --------- -------- --------
BALANCE AT DECEMBER 31, 1995 101,280 $ 1,013 $ - $ 448,987 $ (180,630) $ 269,370
========== ======= ======== ========= ======== ========
ISSUANCE OF COMMON STOCK FOR CASH 480 5 - 29,995 - 30,000
ISSUANCE OF COMMON STOCK FOR CONSULTING
SERVICES 240 2 - 14,998 - 15,000
NET LOSS - - - - (44,982) (44,982)
---------- ------- -------- --------- -------- --------
BALANCE AT DECEMBER 31, 1996 102,000 $ 1,020 $ - $ 493,980 $ (225,612) $ 269,388
========== ======= ======== ========= ========= ========
CONVERSION OF DEBT TO COMMON STOCK 678 7 - 43,168 - 43,175
NET LOSS - - - - (118,330) (118,330)
---------- ------- -------- --------- -------- --------
BALANCE AT DECEMBER 31, 1997 102,678 $ 1,027 $ - $ 537,148 $ (343,942) $ 194,233
========== ======= ======== ========= ========= ========
STOCK SPLIT 75 FOR 1 7,598,172 75,982 - (75,982) - -
ISSUANCE OF COMMON STOCK FOR CASH 800,000 8,000 - 633,810 - 641,810
ISSUANCE OF COMMON STOCK FOR CONSULTING
SERVICES 691,499 6,915 - 113,085 - 120,000
CONVERSION OF DEBT TO COMMON STOCK 451,512 4,515 - 346,216 - 350,731
NET LOSS - - - - (648,207) (648,207)
---------- ------- -------- --------- -------- --------
BALANCE AT DECEMBER 31, 1998 9,643,861 $ 96,439 $ - $1,554,277 $ (992,149) $658,567
========== ======= ======== ========= ========= =======
</TABLE>
See Accountants' Auditors Report and Accompanying Notes
F-5
<PAGE> 24
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
AND THE PERIOD SEPTEMBER 21, 1994 (DATE OF INCEPTION)
TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE FOR THE 9/21/94
YEAR YEAR
(DATE OF ENDED
INCEPTION)
12/31/98 12/31/97 TO 12/31/98
-------- -------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(648,207) $(118,330) $(992,149)
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation and Amortization 20,972 19,281 79,139
Prior Period Adjustments (Net) 0 (388) 0
Common Stock issued for services 238,501 0 254,201
Accrued interest-Note receivable-
Officers (32,552) (25,998) (84,654)
(Increase) decrease in assets
Accounts Receivable (198) 0 (198)
Inventory (685) (90) (11,272)
Prepaid expenses (6,255) (13,171) (19,426)
Increase in organization costs 0 0 (90,205)
Deposit on utilities (1,040) 0 (1,640)
Increase (decrease) in liabilities
Accounts payable (40,902) 23,960 87,614
Accrued payroll taxes (760) 1,011 822
Accrued interest (15,069) 12,229 0
Accrued expenses 12,785 19,438 32,223
Accrued marketing expenses 102 0 102
Accrued compensation 30,000 0 30,000
Net Interest Accrued on
Subordinated debt/advances
converted to stock 16,228 0 16,228
-------- --------- --------
Net cash provided (used)
by operating activities (427,080) (82,058) (699,215)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (56,926) 0 (65,281)
Notes receivable-Officers (195,388) (115,433) (756,455)
-------- -------- --------
Net cash provided(used)by investing
activities (252,314) (115,433) (821,736)
-------- -------- --------
</TABLE>
See Accountants' Auditors Report and Accompanying Notes.
F-6
<PAGE> 25
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
AND THE PERIOD SEPTEMBER 21, 1994 (DATE OF INCEPTION)
TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE FOR THE 9/21/94
YEAR YEAR
(DATE OF ENDED
INCEPTION)
12/31/98 12/31/97 TO 12/31/98
-------- -------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayments) from loans and
notes payable (24,000) 258,175 411,175
Proceeds from issuance of common
stock (net) 641,810 0 1,121,110
-------- -------- ---------
Net cash provided by financing
activities 617,810 258,175 1,532,285
-------- -------- ---------
NET INCREASE (DECREASE) IN CASH
Cash, beginning of year (61,584) 60,684 11,334
Cash, end of year 72,918 12,234 0
-------- -------- ------
$ 11,334 $ 72,918 11,334
======== ======== =========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 0 $ 0 $ 0
-------- -------- ---------
Interest paid 0 109 109
-------- -------- ---------
Non-cash Financing transactions:
Conversion of Debt to Stock $ 331,500 $ 43,175 374,675
-------- -------- ---------
Repayment of Officers Loan with
Stock $ 148,501 $ 0 $ 148,501
-------- -------- ---------
</TABLE>
See Accountants' Auditors Report and Accompanying Notes.
F-7
<PAGE> 26
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BUSINESS ORGANIZATION
The Company was organized 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 ACTIVITY
The Company was founded in response to the explosion of 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.
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 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 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.
F-8
<PAGE> 27
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
BUSINESS ACTIVITY (CONTINUED)
The Company, during 1994 raised $120,000 from seven individual investors. During
1995 and 1996 the Company completed a private placement offering whereby the
Company received $375,000. During 1997, the Company converted debt of
approximately $40,000 into equity.
During 1998, the Company offered a private placement offering of 800,000 shares
at $1.00 per share.
As of November 25, 1998 the Company's stock began trading under the symbol
"GNLK" on the OTC Bulletin Board.
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 25 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.
NOTE 1 - A SUMMARY OF THE SIGNIFICANT ACCOUNTING POLICIES OF THE
COMPANY APPLIED IN THE PREPARATION OF THE ACCOMPANYING
FINANCIAL STATEMENTS ARE AS FOLLOWS:
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.
F-9
<PAGE> 28
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 1 - A SUMMARY OF THE SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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.
Depreciation expense amounted to $3,362 and $1,670 for the years ended December
31, 1998 & 1997 respectively.
REVENUE AND COST RECOGNITION
Revenue is 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 for 25 years. If the client requests the DNA specimen back at any time
during the 25 year 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 PATENT
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 received trademark for its name and logo
and for the name "DNA Collection Kit (tm)".
F-10
<PAGE> 29
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
AMORTIZATION OF ORGANIZATION COSTS AND PATENT(CONT'D)
ORGANIZATIONAL COSTS CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Professional Legal Fees $76,471 $76,471
Professional Accounting Fees 10,505 10,505
------ ------
86,976 86,976
Less: Accumulated
Amortization (69,402) (52,425)
------ ------
Net Organization Costs $17,574 $34,551
====== ======
</TABLE>
Amortization expense amounted to $17,610 and $17,611 during the year
ended December 31, 1998 and 1997, respectively.
INVENTORY
Inventory consists of DNA 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 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 1998 and 1997.
F-11
<PAGE> 30
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK SPLIT
In February , 1998, the Company's Board of Directors authorized a
seventy-five for one split effected in the form of a 100% tax-free stock
dividend distributed on February 4, 1998 to stockholders of record as of
January 31, 1998. Stockholders' equity at December 31, 1998 reflects the
retroactive effect of the stock split by reclassifying from additional
capital to common stock the par value of the additional shares arising
from the split.
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 earning 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 1998, 1997
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 take
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; however, since the Company
options and warrants issued have been equal to the Fair Market Value at
date of grant, no proforma disclosures are applicable at this time.
RECLASSIFICATION
Certain reclassifications have been made to the 1997 amounts to conform
to the 1998 presentation.
F-12
<PAGE> 31
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
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 $992,149 which included
a loss of $343,942 from the inception of the Company through December 31, 1997.
Although the Company had sales in 1996 and 1997, these sales were to
distributors who intended to resell the 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 and 1998, 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 - NOTES RECEIVABLE - OFFICERS
Notes receivable to officers represents loans and accrued interest of $725,611
and $613,169 at December 31, 1998 and 1997 respectively. The loans accrue
interest using the average applicable one-month Federal Rates (AFRs). The AFR
used for 1998 and 1997 was 5.43%.
The officer has executed notes payable to the Company to evidence his obligation
on account of his loans. Under the terms of his obligation, in repayment
thereof, the officers 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.
F-13
<PAGE> 32
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 4 - LOANS PAYABLE - AFFILIATES
The Company's unsecured long-term debt as of December 31, 1998 and 1997 consists
of loans from various shareholders with no stated repayment terms; however, the
Company's Board of Directors approved the payment of $3,000 per month on one of
the loans starting in April, 1998 with no interest being accrued.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Total Obligations $ 36,500 $60,500
Less: Current Portion (6,500) (24,000)
------- ------
$ 30,000 $36,500
======= ======
</TABLE>
NOTE 5 - NOTES PAYABLE
During 1997 the Company entered into short-term subordinated notes with the
following lenders:
<TABLE>
<CAPTION>
NOTE AMOUNT OF INTEREST DATE
LENDER DATE NOTES RATE NOTE DUE
------ ---- ----- ---- --------
<S> <C> <C> <C> <C>
K.Waldron 12/05/97 $100,000 11.5% 12/05/98
Star Machine 11/18/97 10,000 11.5% 11/18/98
S&S Fam.Ptr. 12/08/97 25,000 11.5% 12/08/98
M. Caridi 11/05/97 21,500 11.5% 11/05/98
T. Price 11/20/96 15,000 9.0% 11/20/97
J. Fulmer, Jr. 11/09/96 25,000 9.0% 11/09/97
W. Smith 11/08/96 25,000 9.0% 11/08/97
B. DeYoung 11/20/96 10,000 9.0% 11/20/97
D. Canter 4/10/97 25,000 9.0% 4/10/98
Foley & Sound 1/08/97 25,000 9.0% 1/08/98
R. A. Hamilton 7/16/97 50,000 9.0% 7/16/98
-------
$331,500
=======
</TABLE>
Interest was accrued in the amount of $15,069 as of December 31, 1997.
During 1998, the Company converted short-term subordinated notes totaling
$331,500 in the aggregate plus accrued interest in the amount of $19,231 into
451,512 shares of common stock.
F-14
<PAGE> 33
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 5 - NOTES PAYABLE (CONTINUED)
CONVERSION OF DEBT TO STOCK
During 1997, the following lenders converted their prior Subordinated Notes
bearing 11.5% interest per annum into stock as follows:
<TABLE>
<CAPTION>
DATE
NOTE INTEREST CONVERTED ACCRUED ISSUED
LENDER DATE NOTES RATE TO STOCK INTEREST SHARES
------ ---- ----- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
S&S Fam. Ptr. 9/30/96 5,000 11.5% 4/8/97 299 83
B. DeYoung 7/14/96 5,000 11.5% 4/8/97 422 85
Dr.& Mrs. Ghayad 7/08/96 15,000 11.5% 4/8/97 1,295 256
Dr. Khoury 8/06/96 15,000 11.5% 4/8/97 1,159 254
------ ----- ---
$40,000 $3,175 678
====== ===== ===
</TABLE>
NOTE 6 - SALES, PRICING & INTEREST INCOME
The following summarizes the Company's sales history:
<TABLE>
<CAPTION>
Approximate Sales: Units Dollars
----- ---------
<S> <C> <C>
1995 0 $ 0
1996 2,700 175,000
1997 700 44,000
1998 24 2,200
</TABLE>
The Company charges funeral homes which purchase kits between $71.00 and $77.50
per kit with a minimum order of 200 kits. The kits are sold to the public by
funeral homes at a price of $175.00 to $275.00 per kit. In addition, there is a
$50 retrieval fee each time the client desires to have a specimen retrieved from
storage and shipped for testing.
The UNTHSC charges the Company for each DNA sample stored. The Company has
advanced $13,070 and $13,171 as of December 31, 1998 and 1997 respectively
against such fees. In addition, the UNTHSC charges the Company fees for the
retrieval and shipping of stored DNA specimens upon the request of the Company's
clients. The Company charges its clients a fee per retrieval request.
The Company generated interest income as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Interest accrued on Advances to Officers $ 35,556 $ 32,782
Merrill Lynch, savings account 8,130 593
------ -------
$ 43,686 $ 33,375
======= =======
</TABLE>
F-15
<PAGE> 34
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 7 - ADVERTISING/MARKETING
The Company expenses the production costs of advertising the first time the
advertising takes place. Advertising expense was $40,139 and $7,362 for the
years ended December 31, 1998 and 1997, respectively.
NOTE 8 - OPERATING LEASES
The Corporation has various non-cancelable operating leases with terms of 24 to
36 months. The following is a schedule of future minimum rentals under the
leases at December 31, 1998:
<TABLE>
<S> <C>
1999 $10,849
2000 4,633
2001 764
---
16,246
Less Current Portion (10,849)
------
Long Term Portion $ 5,397
======
</TABLE>
NOTE 9 - INCOME TAXES & NET OPERATING LOSSES
A reconciliation of the difference between the Company's effective tax rate and
the statutory federal income tax rate of 34% for the year ended December 31,
1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Income tax benefit at Statutory rate $220,000 $ 43,000
State income tax benefit, net
of federal effect 43,000 6,000
Increase in Valuation Allowance (263,000) (49,000)
------- -------
$ 0 $ 0
======= =======
</TABLE>
The deferred tax asset as of December 31, 1998 & 1997 of $263,000 and $49,000 is
offset by a valuation allowance of an equal amount because management believes
it is more likely than not that such assets will not be realized.
The Company has loss carry-forwards for the period ending December 31, 1998 of
approximately $990,000 expiring in the year 2013.
F-16
<PAGE> 35
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 10 - SHAREHOLDERS' EQUITY TRANSACTIONS
During the period September 21, 1994 (date of inception) through 1997 the
Company funded its operations primarily from the proceeds of $718,000 of common
stock, $58,000 proceeds of short term convertible debt and $309,000 of services
provided and common stock issued in lieu of cash payments. The Company's
shareholder equity also consists of:
A. 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.
B. CONVERSION OF SUBORDINATED NOTES
During March, 1998, the Company converted an aggregate of $175,000 principal
amount of its 9% Subordinated Notes, plus accrued interest and warrants to
acquire Common Stock into 242,847 shares of restricted stock (after stock split)
at a conversion price of $.72 per share. The Company also converted an aggregate
of $156,500 principal amount of short-term loans, plus accrued interest, made to
the Company during November and December of 1997 into 208,665 shares (after
stock split) at a conversion price of $.75 per share. These notes were converted
using the estimated fair value of the stock at the conversion date. The Company
determined that this price was equivalent to the fair value of the stock since
there was no market value, book value, asset value or other indicated value and
that the Company was contemplating a private placement at $1 share later in the
year.
C. PRIVATE PLACEMENT OFFERING MEMORANDUM/STOCK OPTIONS
During April through June 1998, Genelink, Inc. submitted a private placement
offering memorandum 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 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.
F-17
<PAGE> 36
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 10 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONTINUED)
C. PRIVATE PLACEMENT OFFERING MEMORANDUM/STOCK OPTIONS (CONTINUED)
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.
The Company valued the above mentioned share 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 memorandum offering, the
Company issued shares to individuals on their medical advisory board and other
consultants in a fair value price of 1.00 per share.
D. STOCK OPTIONS AND WARRANTS
During September 1997, Mr. DePhillipo (CEO of the Company) also 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 in January, 1998 of the
remaining balance vesting in four (4) equal annual installments of 200,000 each
commencing January.
The Company also issued Dr. Ricciardi in September, 1997 (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 ten years
from the execution of the agreement and will vest as follows:
(1) 200,000 shares at the execution of the agreement.
(2) 200,000 shares each January 1, beginning January 1, 1999.
Pursuant to APB No. 25 compensation expense has not been recognized in the stock
options and warrants granted as the option/warrants exercise price was equal to
the market value of the Company's common stock at the time of the grant.
F-18
<PAGE> 37
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 10 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONTINUED)
D. STOCK OPTIONS AND WARRANTS (CONTINUED)
The options granted to John DePhillipo and Dr. Ricciardi were granted by the
Company in September 1997 but were not memorialized at such time. In February
1998, in anticipation of preparation of the private offering memorandum in
connection with the proposed sale of 800,000 shares of the common stock of the
Company, the Company entered into a written employment agreement with Mr.
DePhillipo and a written consulting agreement with Dr. Ricciardi.
This memorialized the September 1997 initial grants of 1,200,000 options to Mr.
DePhillipo and 1,000,000 options to Dr. Ricciardi. As of September 1997 no
market existed for the Company's stock as at such time the Company had minimal
sales and a history of net losses. Additionally, a majority of the options were
subject to forfeiture.
The following schedule summarizes stock option and stock warrant activity and
status as of December 31.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Granted 0 2,200,000
Options outstanding at
beginning of the period 0 0
Options vested during period 600,000 0
Options exercised during the
period 0 0
Options Cancelled 0 0
------- -------
Outstanding at End of Period 600,000 0
======= =======
</TABLE>
A summary of outstanding options/warrants along with their exercise price and
dates are as follows:
<TABLE>
<CAPTION>
Exercise Options/Warrants Outstanding Expiration
Price Granted Options/Warrants Date
<S> <C> <C> <C> <C>
December 31, 1997 $0.10 2,200,000 2,200,000 12/31/02
---- --------- --------- -------
December 31, 1998 $0.10 2,200,000 2,200,000 12/31/02
---- --------- --------- --------
</TABLE>
F-19
<PAGE> 38
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 11 - 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>
YEAR ENDED DECEMBER 31, 1998 1997
----------------------- ---- ----
<S> <C> <C>
Net loss $ (648,207) $ (118,330)
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 9,018,348 7,687,200
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 9,018,348 7,687,200
========= =========
Net loss per share-basic & diluted $ (. 07) $ (.02)
========= =========
</TABLE>
*The following common stock equivalents are excluded from earnings per share
calculation as their effect would have been antidilutive:
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1998 1997
- ------------------------- ---- ----
<S> <C> <C>
Warrants and stock options 540,000 540,000
</TABLE>
NOTE 12 - TRANSACTIONS WITH RELATED PARTIES
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, freeze and store the material in the refrigerated area
maintained by the UNTHSC making it available for future retrieval.
F-20
<PAGE> 39
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 12 - TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
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. To date, because of the
Company's limited operations and the limited availability of funds, the
Company's agreement with Kelly/Waldron does not require it to make any payments
to Kelly/Waldron for the latter's services. As its business increases, the
Company expects to commence payment of a management fee to Kelly/Waldron on
terms to be agreed upon between the parties. It is expected that such
arrangement will involve a profit to Kelly/Waldron. As of December 31, 1998 and
1997 the Company owed Kelly/Waldron $19,188 and 19,086 respectively.
MARKETING
The Company has assembled a marketing team consisting of four(4) individuals
focusing on the Insurance Industry, Funeral Industry, Senior Citizen Clinics,
Direct Mail Programs and Genetic Counselors. Training has begun in 10 states
and will encompass approximately 35 locations for the Funeral Industry.
Pursuant to the terms of a marketing agreement, the Company engaged
Shannon/Rosenbloom to perform marketing, promotional and investor relations
services for the Company. 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.
CONSULTING
The Company has entered into a consulting agreement with Dr. Ricciardi
(shareholder and officer) dated February 24, 1998, which provides for initial
compensation of $30,000 in 1998 and $60,000 per year in 1999. The initial term
of the agreement is five (5) years. The agreement was entered into September
1997 and memorialized and dated February 24, 1998 also grants Dr. Ricciardi the
grant of options to acquire 1,000,000 Shares at an exercise price of $.10 per
Share, 200,000 of which vested upon execution of the consulting agreement with
the remaining balance vesting in four (4) equal annual installments of 200,000
each commencing January 1, 1999.
F-21
<PAGE> 40
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 12 - TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
SUPPLIER
The Company's kits are assembled by J. Knipper & Company, Lakewood, New Jersey,
which is engaged in supplying various products to the pharmaceutical industry.
Knipper warehouses the kits for the Company and ships the kits directly to the
funeral home or distributor ordering the kits. The components of the kits are
provided by five (5) suppliers.
NOTE 13 - COMMITMENT AND CONTINGENCIES
The Company is not at this time involved in any litigation, nor to the
knowledge of management is any litigation threatened against the Company which
might materially affect 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 on the normal course of
business. The Company's cash reserves have decreased since the company's
private placement of $800,000 to approximately $10,000. Sales have slipped from
700 units to 24 units from 1997 to 1998, however, the company is in
negotiations for a $1,000,000 Bridge Loan and during 1999 the Company raised
$185,000 through the issuance of debentures and received $233,000 of net
proceeds in connection with issuing shares of common stock. The Company has
announced new marketing plans to enhance sales. The company believes that they
will be able to generate sufficient revenue and cash flow for the Company to
continue as a going concern.
The Company also intends to raise $2,000,000 through another private placement
of securities.
NOTE 14 - RELATED PARTY TRANSACTIONS
The Company lent Mr. Parisi $148,501 from time to time during his affiliation
with the Company, as evidenced by a promissory note. Upon his becoming an
officer of the Company, Mr. Parisi became entitled to shares of common stock of
the Company. The Company and Mr. Parisi were unable to agree upon the value of
common stock to be received and, pursuant to the terms of a settlement
agreement, the Company issued 300,000 shares to Mr. Parisi as recognition of
his past services and fund raising efforts on behalf of the Company at a price
of $.10 per share. Subsequently Mr. Parisi then exchanged 148,501 shares of
common stock to the Company (at the then fair market value of $1.00 per share)
to repay in full this outstanding balance of the loans from the Company to him.
The outstanding balance of the loans included interest using the average
applicable one-month federal rates (AFR). The AFR used for 1998 and 1997 was
5.43%.
The Company recorded the issuance of the shares to compensation expense in the
amount of $148,501 with the balance being charged to offset additions paid in
capital, for they were directly attributable to raising capital.
F-22
<PAGE> 41
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 15 - SUBSEQUENT EVENTS
FINANCING
The Company has received a letter of intent dated March 18, 1999 from Brennan
Dyer & Company, LLC, a venture capital group, to obtain an additional $1 to 2
million of equity based financing through the issuance of Convertible Preferred
Stock. The Preferred Stock is expected to be issued with a convertible price in
the $1-1 1/2 per share price range depending on market conditions.
MARKETING AGREEMENT
On January 22, 1998, Genelink and Shannon/Rosenbloom entered into a marketing
agreement. Shannon/Rosenbloom was to provide certain marketing and promotional
services on behalf of Genelink upon the completion of GeneLink's Rule 504
offering and received compensation of $75,000 and 250,000 shares of restricted
Genelink stock and 250,000 of unrestricted stock. Shannon/Rosenbloom did not
perform all services on behalf of Genelink which it had agreed to perform under
the marketing agreement. In March, 1999, Genelink and Shannon/Rosenbloom agreed
to mutually resolve any and all existing and potential claims and disputes each
may have against the other with respect to the marketing agreement. The terms
also include the transfer from Shannon/Rosenbloom to Genelink 75,000 shares of
unrestricted Common Stock and 75,000 shares of restricted common stock
previously issued to Shannon/Rosenbloom.
On January 5, 1999 the Company announced plans to become one of the first
companies to enter the online DNA banking business. The Company's website will
enable consumers worldwide to order the Company's DNA Collection Kit.
NOTES RECEIVABLE-OFFICERS
During the first quarter of 1999, the President and Chief Executive Officer
repaid the Company $110,242 in loans previously advanced to him.
WARRANTS
During the first quarter of 1999, the Company issued 100,000 warrants for
investment banking activities and advice. The Company also issued 45,000
warrants to associates at UNTHSC for their continuing support efforts. These
warrants entitle the holders to purchase 145,000 shares of common stock at
anytime on or before December 31, 2003 at the exercise price of $1.50 per share.
F-23
<PAGE> 42
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 & 1997
NOTE 15 - SUBSEQUENT EVENTS(CONTINUED)
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 of $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.
F-24
<PAGE> 43
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
------
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 18,751 $ 11,334
Accounts Receivable 997 198
Inventory 10,959 11,272
Prepaid Expenses 13,887 19,426
-------- --------
TOTAL CURRENT ASSETS 44,594 42,230
-------- --------
LONG TERM RECEIVABLE
Note Receivable - Officer 742,755 725,611
-------- --------
FIXED ASSETS
Office Furniture 1,154 1,154
Office Equipment 14,126 14,126
Leasehold Improvements 50,000 50,000
-------- --------
65,280 65,280
Less: Accumulated Depreciation (12,624) (8,613)
-------- --------
TOTAL FIXED ASSETS 52,656 56,667
-------- --------
OTHER ASSETS
Deposits 1,640 1,640
Organization Costs 86,976 86,976
Patent 3,229 3,229
-------- --------
91,845 91,845
Less: Accumulated Amortization (87,791) (70,526)
-------- --------
TOTAL OTHER ASSETS 4,054 21,319
-------- --------
TOTAL ASSETS $ 844,059 $ 845,827
======== ========
</TABLE>
F-25
<PAGE> 44
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
---- ----
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable & Accrued Expenses $ 152,205 $ 119,938
Accrued Payroll Taxes 471 822
Accrued Interest Payable 5,596 0
Accrued Compensation 178,125 30,000
Loans Payable Affiliates -
Current Portion 0 6,500
Notes Payable - Current Portion 150,028 0
----------- -----------
TOTAL CURRENT LIABILITIES 486,425 157,260
----------- -----------
LONG-TERM LIABILITIES
Loans Payable Affiliates -
Net of current portion 30,500 30,000
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value,
75,000,000 shares authorized
10,465,041 and 9,643,861 shares
issued, 10,293,861 and
9,643,861 outstanding as of
September 30, 1999 & December
31, 1998, respectively 104,651 96,439
Treasury Stock, 171,180 shares (177,360) 0
Additional Paid-in Capital 1,823,033 1,554,277
Deficit Accumulated during the
the development stage (1,423,190) (992,149)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 327,134 658,567
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 844,059 $ 845,827
=========== ===========
</TABLE>
F-26
<PAGE> 45
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the 9/21/94
Nine Months Nine Months (Date of
Ended Ended Inception)
9/30/99 9/30/98 To 9/30/99
------- ------- ----------
<S> <C> <C> <C>
REVENUE $ 10,444 $ 1,360 $ 231,422
COSTS OF GOODS SOLD 1,238 47 35,568
----------- ----------- -----------
GROSS PROFIT 9,206 1,313 195,854
----------- ----------- -----------
EXPENSES
Selling, general and administrative 293,721 268,271 939,649
Consulting 17,650 223,775 297,082
Professional fees 59,068 37,768 245,928
Advertising and promotion 29,379 21,961 112,768
Amortization and depreciation 3,701 14,775 82,840
----------- ----------- -----------
403,519 566,550 1,678,267
----------- ----------- -----------
INTEREST EXPENSE 47,542 4,219 67,276
----------- ----------- -----------
INTEREST INCOME 28,388 36,723 144,073
----------- ----------- -----------
NET (LOSS) BEFORE PROVISION
FOR INCOME TAXES AND
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE (413,467) (532,733) (1,405,616)
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 17,574 0 17,574
NET (LOSS) BEFORE PROVISION
FOR INCOME TAXES (431,041) (532,733) (1,423,190)
PROVISION FOR INCOME TAXES 0 0 0
----------- ----------- -----------
NET (LOSS) $ (431,041) $ (532,733) $ (1,423,190)
=========== =========== ===========
NET (LOSS) PER SHARE BASIC
AND DILUTED $ (.04) $ (.06)
Weighted Average common shares
and diluted potential common shares 9,839,750 8,819,478
--------- ---------
</TABLE>
F-27
<PAGE> 46
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON COMMON
STOCK STOCK TREASURY
# OF SHARES AMOUNT STOCK
----------- ------ -----
<S> <C> <C> <C>
BALANCE AT SEPTEMBER 21, 1994 (INCEPTION) - $ - $ -
ISSUANCE OF COMMON STOCK FOR CASH 66,000 660 -
ISSUANCE OF COMMON STOCK FOR CONSULTING
SERVICES 30,000 300 -
NET LOSS - - -
----------- ---------- ------------
BALANCE AT DECEMBER 31, 1994 96,000 $ 960 $ -
=========== ========== ============
ISSUANCE OF COMMON STOCK FOR CASH 5,280 53 -
NET LOSS - - -
----------- ---------- ------------
BALANCE AT DECEMBER 31, 1995 101,280 $ 1,013 $ -
=========== ========== ============
ISSUANCE OF COMMON STOCK FOR CASH 480 5 -
ISSUANCE OF COMMON STOCK FOR CONSULTING
SERVICES 240 2 -
NET LOSS - - -
----------- ---------- ------------
BALANCE AT DECEMBER 31, 1996 102,000 $ 1,020 $ -
=========== ========== ============
CONVERSION OF DEBT TO COMMON STOCK 678 7 -
NET LOSS - - -
----------- ---------- ------------
BALANCE AT DECEMBER 31, 1997 102,678 $ 1,027 $ -
=========== ========== ============
STOCK SPLIT 75 FOR 1 7,598,172 75,982 -
ISSUANCE OF COMMON STOCK FOR CASH 800,000 8,000 -
ISSUANCE OF COMMON STOCK FOR CONSULTING
SERVICES 691,499 6,915 -
CONVERSION OF DEBT TO COMMON STOCK 451,512 4,515 -
NET LOSS - - -
----------- ---------- ------------
BALANCE AT DECEMBER 31, 1998 9,643,861 $ 96,439 $ -
=========== ========== ============
EXERCISE OF OPTIONS FOR COMMON STOCK 621,180 6,212 -
COMPANY REPURCHASE-COMMON STOCK - - (42,360)
COMMON STOCK SUBJECT TO RECISSION OF
MARKETING AGREEMENT - - (135,000)
ISSUANCE OF COMMON STOCK-ADDITIONAL
CONSIDERATION FOR DEBENTURES 185,000 1,850 -
ISSUANCE OF COMMON STOCK FOR CONSULTING
SERVICES 15,000 150 -
NET LOSS FOR THE PERIOD ENDED 9/30/99 - - -
----------- ---------- ------------
BALANCE AT SEPTEMBER 30, 1999 (UNAUDITED) 10,465,041 $ 104,651 $ (177,360)
=========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING
PAID IN DEVELOPMENT
CAPITAL STAGE TOTAL
------- ----- -----
<S> <C> <C> <C>
BALANCE AT SEPTEMBER 21, 1994 (INCEPTION) $ - $ - $ -
ISSUANCE OF COMMON STOCK FOR CASH 119,040 - 119,700
ISSUANCE OF COMMON STOCK FOR CONSULTING
SERVICES - - 300
NET LOSS - (9,805) (9,805)
----------- ----------- -----------
BALANCE AT DECEMBER 31, 1994 $ 119,040 $ (9,805) $ 110,195
=========== =========== ===========
ISSUANCE OF COMMON STOCK FOR CASH 329,947 - 330,000
NET LOSS - (170,825) (170,825)
----------- ----------- -----------
BALANCE AT DECEMBER 31, 1995 $ 448,987 $ (180,630) $ 269,370
=========== =========== ===========
ISSUANCE OF COMMON STOCK FOR CASH 29,995 - 30,000
ISSUANCE OF COMMON STOCK FOR CONSULTING
SERVICES 14,998 - 15,000
NET LOSS - (44,982) (44,982)
----------- ----------- -----------
BALANCE AT DECEMBER 31, 1996 $ 493,980 $ (225,612) $ 269,388
=========== =========== ===========
CONVERSION OF DEBT TO COMMON STOCK 43,168 - 43,175
NET LOSS - (118,330) (118,330)
----------- ----------- -----------
BALANCE AT DECEMBER 31, 1997 $ 537,148 $ (343,942) $ 194,233
=========== =========== ===========
STOCK SPLIT 75 FOR 1 (75,982) - -
ISSUANCE OF COMMON STOCK FOR CASH 633,810 - 641,810
ISSUANCE OF COMMON STOCK FOR CONSULTING
SERVICES 113,085 - 120,000
CONVERSION OF DEBT TO COMMON STOCK 346,216 - 350,731
NET LOSS - (648,207) (648,207)
----------- ----------- -----------
BALANCE AT DECEMBER 31, 1998 $ 1,554,277 $ (992,149) $ 658,567
=========== =========== ===========
EXERCISE OF OPTIONS FOR COMMON STOCK 55,906 - 62,118
COMPANY REPURCHASE-COMMON STOCK - - (42,360)
COMMON STOCK SUBJECT TO RECISSION OF
MARKETING AGREEMENT 135,000 - -
ISSUANCE OF COMMON STOCK-ADDITIONAL
CONSIDERATION FOR DEBENTURES 69,600 - 71,450
ISSUANCE OF COMMON STOCK FOR CONSULTING
SERVICES 8,250 - 8,400
NET LOSS FOR THE PERIOD ENDED 9/30/99 - (431,041) (431,041)
----------- ----------- -----------
BALANCE AT SEPTEMBER 30, 1999 (UNAUDITED) $ 1,823,033 $ (1,423,190) $ 327,134
=========== =========== ===========
</TABLE>
F-28
<PAGE> 47
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE 9/21/94
NINE MONTHS NINE MONTHS (DATE OF
ENDED ENDED INCEPTION)
9/30/99 9/30/98 TO 9/30/99
------- ------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (431,041) $ (532,733) $(1,423,190)
Adjustments to reconcile net (loss)
to net cash provided (used) by
operating activities
Depreciation and Amortization 21,275 14,775 100,414
Common Stock issued for services 8,400 188,501 262,601
Accrued Interest-Note Receivable-
Officers (27,467) (24,414) (112,121)
Accrued Interest on Debentures 36,478 0 36,478
(Increase) decrease in assets
Accounts receivable (799) 0 (997)
Inventory 313 (807) (10,959)
Prepaid expenses 5,539 (861) (13,887)
Increase in organization costs 0 0 (90,205)
Deposit on utilities 0 0 (1,640)
Increase (decrease) in liabilities
Accounts payable & accrued
Expenses 32,267 (149,143) 152,205
Accrued payroll taxes (351) 747 471
Accrued interest 5,596 4,163 5,596
Accrued marketing expenses 0 125,000 0
Accrued compensation 148,125 26,250 178,125
Net interest accrued on
subordinated debt/advances
converted to stock 0 0 16,228
--------- --------- ---------
Net cash provided (used)
by operating activities (201,665) (348,522) (900,881)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment 0 (54,078) (65,280)
Notes Receivable - Officer 30,082 (160,732) (726,373)
--------- --------- ---------
Net cash provided(used)by investing
activities 30,082 (214,810) (791,653)
--------- --------- ---------
</TABLE>
F-29
<PAGE> 48
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE 9/21/94
NINE MONTHS NINE MONTHS (DATE OF
ENDED ENDED INCEPTION)
09/30/99 9/30/98 TO 09/30/99
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayments) from loans and
notes payable (6,000) (15,000) 405,175
Proceeds from Debentures Issued 185,000 0 185,000
Proceeds relating to issuance
of common stock (net) 0 641,810 1,121,110
--------- --------- ---------
Net cash provided by financing
activities 179,000 626,810 1,711,285
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH 7,417 63,478 18,751
Cash, beginning of period 11,334 72,918 0
--------- --------- ---------
Cash, end of period $ 18,751 $ 136,396 $ 18,751
========= ========= =========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 0 $ 0 $ 0
========= ========= =========
Interest paid $ 0 $ 0 $ 0
========= ========= =========
Non-cash Financing transactions:
Conversion of Debt to Stock $ 0 $ 350,731 374,675
--------- --------- ---------
Repayment of Officers Notes with
Stock $ 42,360 $ 148,501 $ 190,861
--------- --------- ---------
Increase in Note receivable-officer
cashless exercise of options $ 62,118 $ $ 62,118
--------- --------- ---------
Stock issued related to debenture
financing $ 71,450 $ 0 $ 71,450
--------- --------- ---------
Redemption of common stock-due to
cancellation of marketing agreement $ 135,000 $ 0 $ 135,000
--------- --------- ---------
</TABLE>
F-30
<PAGE> 49
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 state 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 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
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.
F-31
<PAGE> 50
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
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 25 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.
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.
F-32
<PAGE> 51
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF THE SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 analysis testing at that time, then stores the specimen for
25 years. If the client requests the DNA specimen back at any
time during the 25 year 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 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 September 30,
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.
F-33
<PAGE> 52
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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 1999 and 1998.
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 1999
and 1998 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.
F-34
<PAGE> 53
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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; however, since the Company options and warrants issued
to date have been issued with an exercise price equal to the
Fair Market Value at date of grant, no proforma disclosures are
applicable at this time.
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
$1,418,537. 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, 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.")
F-35
<PAGE> 54
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - PROPERTY & EQUIPMENT
As of September 30, 1999, property and equipment consisted of the
following:
<TABLE>
<CAPTION>
1999
----
<S> <C>
Office Furniture $ 1,154
Office Equipment 14,126
Leasehold Improvement 50,000
------
$65,280
======
</TABLE>
Depreciation expense amounted to $3,593 for the nine months ended
September 30, 1999.
NOTE 4 - NOTES RECEIVABLE-OFFICER
Since its inception and until the execution of an employment agreement
in early 1998, the Company advanced funds periodically to an officer.
Notes Receivable-Officer represents loans and accrued interest of
$742,755 at September 30, 1999. The loans accrue interest using the
average applicable one-month Federal Rates (AFRs). The AFR used for
1999 and 1998 was 5.43%.
The officer has executed notes payable to the Company to evidence his
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.
During the nine month period ended September 30, 1999, the officer
repaid $72,441 which included the exercising of 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 $42,360 as a repayment of his
advance.
The Company loaned funds to William E. Parisi, a former officer of the
Company. The cumulative outstanding principal amount of such loans was
$148,501, as of June, 1998, which included accrued interest at the
minimum imputed rate, as determined under Section 1274(d) of the
Internal Revenue Code. As recognition for past services and fund
raising efforts on behalf of the Company, the Company granted Mr.
Parisi 300,000 Shares pursuant to a settlement arrangement it has
entered into with Mr. Parisi.
F-36
<PAGE> 55
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - NOTES RECEIVABLE-OFFICER(CONTINUED)
Mr. Parisi repaid his obligation to the Company in June, 1998 by
foregoing the issuance of 148,501 Shares at their then fair
market value ($1 per Share). The Company then issued 151,499
shares to Mr. Parisi pursuant to the terms of the settlement
agreement.
NOTE 5 - LOANS PAYABLE-AFFILIATES
The Company's unsecured long-term debt as of September 30, 1999
consists of loans from various shareholders with no stated
repayment terms.
<TABLE>
<CAPTION>
1999
----
<S> <C>
Total Obligations $ 30,500
Less: Current Portion 0
-------
$ 30,500
=======
</TABLE>
NOTE 6 - DEBENTURE-NOTES PAYABLE
During 1999, the Company entered into the following (5) five
debenture notes payable with terms indicated below:
<TABLE>
<CAPTION>
Shares of Common
Stock Issued as
Amount of Additional
Debenture Date Issued Interest Rate Compensation
--------- ----------- ------------- ------------
<S> <C> <C> <C>
$ 50,000 April 30, 1999 12% 50,000
$ 15,000 April 30, 1999 12% 15,000
$ 10,000 July 29, 1999 12% 10,000
$100,000 August 6, 1999 12% 100,000
$ 10,000 August 8, 1999 12% 10,000
</TABLE>
Interest is to be paid quarterly with the principal balance due
December 31, 1999. 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 September 30, 1999 was $5,596.
In connection with the Company issuing five (5) 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.
F-37
<PAGE> 56
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 - DEBENTURE-NOTES PAYABLE(CONTINUED)
As of September 30, 1999 the Company's Amortizable Debenture
Discounts were as follows:
<TABLE>
<CAPTION>
Original
Amortizable Net Amortizable
Debenture Amortization Interest Debenture
Debenture# Discounts Period Expense Discounts
---------- ------------ -------------- ------------- -----------
<S> <C> <C> <C> <C>
1 $ 29,500 8 months $ 18,438 $ 11,062
2 $ 8,850 8 months $ 5,531 $ 3,319
3 $ 5,600 5 months $ 2,254 $ 3,346
4 $ 25,000 5 months $ 9,354 $ 15,646
5 $ 2,500 5 months $ 901 $ 1,599
------- ------- -------
Total $ 71,450 $ 36,478 $ 34,972
======= ======= =======
</TABLE>
NOTE 7 - NOTES PAYABLE
During the first quarter of 1998, the Company converted
short-term subordinated notes totaling $331,500 in the aggregate
plus accrued interest in the amount of $19,231 into 451,512
shares of common stock.
NOTE 8 - SALES & INTEREST INCOME
The following summarizes the Company's sales history:
<TABLE>
<CAPTION>
Approximate Sales
Units Dollars
----- -------
<S> <C> <C>
1995 0 $ 0
1996 2,700 175,000
1997 700 44,000
1998 24 2,200
Nine Months 1999 65 10,000
</TABLE>
The Company generated interest income as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1999
----
<S> <C>
Interest accrued on
Advances to Officers $ 27,467
Merrill Lynch, savings account 921
------
$ 28,388
=======
</TABLE>
F-38
<PAGE> 57
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
(UNAUDITED)
NOTE 9 - 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 nine months as of
September 30, 1999:
<TABLE>
<CAPTION>
1999
----
<S> <C>
1999 $ 8,137
2000 4,633
2001 764
------
$13,534
Less Current Portion (10,849)
------
Long Term Portion $ 2,685
======
</TABLE>
NOTE 10- INCOME TAXES
At September 30, 1999, the Company had federal and state
tax net operating loss carryforwards of approximately
$1,418,000. 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.
The Company had a net deferred tax asset of $354,500 at
September 30, 1999 primarily from net operating loss
carryforwards. A valuation allowance was recorded to reduce the
net deferred tax asset to zero.
NOTE 11- SHAREHOLDERS' EQUITY TRANSACTIONS
The Company's shareholder equity consists of the following:
A. 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.
B. CONVERSION OF SUBORDINATED NOTES
During March, 1998, the Company converted an aggregate of
$175,000 principal amount of its 9% Subordinated Notes, plus
accrued interest and warrants to acquire Common Stock into
242,847 shares of restricted stock (after stock split) at a
conversion price of $.72 per share. The Company also converted
an aggregate of $156,500 principal amount of short-term loans,
plus accrued interest, made to the Company during November and
December of 1997 into 208,665 shares (after stock split) at a
conversion price of $.75 per share.
F-39
<PAGE> 58
GENELINK
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONTINUED)
B. CONVERSION OF SUBORDINATED NOTES (CONTINUED)
These notes were converted using the estimated fair value of the
stock at the conversion date. The Company determined that this
price was equivalent to the fair value of the stock since there
was no market value, book value, asset value or other indicated
value and that the Company was contemplating a private placement
at $1 share later in the year.
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 $.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.
F-40
<PAGE> 59
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONTINUED)
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 10cents 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.
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
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; however, since the Company options and warrants issued
have been equal to the Fair Market Value at date of grant, no
proforma disclosures are applicable at this time.
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.
F-41
<PAGE> 60
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONTINUED)
F. STOCK OPTIONS AND WARRANTS(CONTINUED)
Pursuant to APB No. 25 compensation expense has not been
recognized in connection with the stock options and warrants
granted as the options/warrants exercise price was equal to the
market value of the Company's common stock at the time of the
grant.
The options granted to John DePhillipo and Dr. Ricciardi were
granted by the Company in September 1997 but were not
memorialized at such time. In February 1998, in anticipation of
preparation of the private offering memorandum in connection
with the proposed sale of 800,000 shares of the common stock of
the Company, the Company entered into a written employment
agreement with Mr. DePhillipo and a written consulting agreement
with Dr. Ricciardi. This memorialized the September 1997 initial
grants of 1,200,000 options to Mr. DePhillipo and 1,000,000
options to Dr. Ricciardi. The Company determined that the fair
value of these shares has been valued at $.10 per share as of
September 1997, since no market existed for the Company's stock
at such time, the Company had minimal sales and a history of net
losses. Additionally, a majority of the options were subject to
forfeiture.
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
options vested immediately with the remaining options vesting
200,000 each on January 1, 2000, 2001, and 2002. During the nine
months ended September 30, 1999, the Company also issued 229,375
stock options/warrants to purchase the Company's common stock at
a price between $.75 and $1.50 per share with expiration dates
in 2003 and 2004.
The following schedule summarizes stock option and stock warrants activity and
status for the nine months of September 30, 1999.
<TABLE>
<S> <C>
Granted 2,229,375
=========
Options outstanding at
beginning of the period 600,000
Options vested during period 1,429,375
Options exercised during period (621,180)
Cancelled 0
---------
Outstanding at End of Period 1,408,195
==========
</TABLE>
F-42
<PAGE> 61
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
E. STOCK OPTIONS AND WARRANTS(CONTINUED)
A summary of outstanding options/warrants along with their exercise price and
dates as of September 30, 1999 are as follows:
<TABLE>
<CAPTION>
EXERCISE OPTIONS/WARRANTS OUTSTANDING EXPIRATION
PRICE GRANTED OPTIONS/WARRANTS DATE
-------- ------- ---------------- ----
<S> <C> <C> <C>
$0.10 2,200,000 1,578,820 12/31/03
$0.75 45,000 45,000 12/31/04
$1.00 2,120,000 2,120,000 12/31/03
$1.50 64,375 64,375 12/31/03
---- ------ --------- --------
4,429,375 3,808,195
</TABLE>
NOTE 12 - 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 SEPTEMBER 30,1999
------------------------------
<S> <C>
Net loss $ (431,041)
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 9,839,750
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 9,839,750
=========
Net loss per share-basic & diluted $(.04)
=========
</TABLE>
*The following common stock equivalents are excluded from
earnings per share calculation as their effect would have been
antidilutive:
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1999
-------------------------------
<S> <C>
Warrants and stock options 862,778
</TABLE>
F-43
<PAGE> 62
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 13-ADVERTISING
The Company expenses the production costs of advertising the first time
the advertising takes place. Advertising expense was $29,379 for the
nine months ending September 30, 1999.
NOTE 14-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.
NOTE 15-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 $125,000. Officer
compensation for the nine months ending September 30, 1999 was $103,125.
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 $30,000 in 1998 and $60,000 in 1999.
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, 1999 the Company owed Kelly/Waldron $19,608.
F-44
<PAGE> 63
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 15-TRANSACTIONS WITH RELATED PARTIES(CONTINUED)
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.
SUPPLIER
The Company's kits are assembled by J. Knipper & Company,
Lakewood, New Jersey, which is engaged in supplying various
products to the pharmaceutical industry. Knipper warehouses the
kits for the Company and ships the kits directly to the funeral
home or distributor ordering the kits. The components of the
kits are provided by five (5) suppliers.
NOTE 16 - COMMITMENT & CONTINGENCIES
The Company is not at this time party to any litigation, nor to
the knowledge of management is any litigation threatened against
the Company which might materially affect 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 $800,000 to approximately $10,000 and sales have slipped
from 700 units to 25 units from 1997 to 1999, 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. During the nine months ending September 30,
1999 the Company raised $185,000 through the issuance of
debentures. The Company also intends to raise $2,000,000 through
another private placement of securities.
F-45
<PAGE> 64
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 17 - SUBSEQUENT EVENTS
FINANCING
The Company has received a letter of intent dated March 18, 1999
from Brennan Dyer & Company, LLC, a venture capital group, to
obtain an additional $1 to 2 million of equity based financing
through the issuance of Convertible Preferred Stock. The
Preferred Stock is expected to be issued with a convertible
price in the $1-1 1/2 per share price range depending on market
conditions. The Company, however, has not received any financing
as of the report date.
MARKETING AGREEMENT
On January 5, 1999 the Company announced plans to become one of
the first companies to enter the online DNA banking business.
The Company's website will enable consumers worldwide to order
the Company's DNA Collection Kit.
COMPANY'S STATUS
On December 2, 1999 the Company's stock was delisted from the
OTC Bulletin Board and since then its shares have been traded on
the National Quotation Board (Pink sheets) under the symbol
GNLK. The Company anticipates that it will be relisted during
the first quarter of 2000.
F-46
<PAGE> 65
PART III
ITEM 1. INDEX TO EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
3(i) Articles of Incorporation of the Registrant
3(ii) By-Laws of the Registrant
10 Material Contracts
10.1 DNA Specimen Repository Agreement Between University of North
Texas Health Science Center at Fort Worth and GeneLink, Inc. dated June 21,
1995;
10.2 Amendment No. 1 to Agreement Between GeneLink, Inc. and
University of North Texas Health Science Center at Fort Worth dated November 5,
1995;
10.3 Collateral License Agreement By and Between GeneLink, Inc. and
University of North Texas Health Science Center dated July 1, 1996;
10.4 Employment Agreement By and Between GeneLink, Inc. and John R.
DePhillipo dated February 24, 1998;
10.5 Amendment to Employment Agreement By and Between GeneLink, Inc.
and John R. DePhillipo dated December 31, 1998;
10.6 Consulting Agreement By and Between GeneLink, Inc. and Robert P.
Ricciardi, Ph.D. dated February 24, 1998;
10.7 Amendment to Consulting Agreement By and Between GeneLink, Inc.
and Robert P. Ricciardi, Ph.D. dated December 31, 1998.
11 Statement re: computation of per share earnings. Reference is made
to the Consolidated
Statements of Operations
of the Registrant for its
fiscal years ended
December 31, 1998, and
1997, which are
incorporated herein by
reference.
23 Consent of Accountants
27 Financial Data Schedule
</TABLE>
<PAGE> 66
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
GENELINK, INC.
Date: December 27, 1999 By: /s/ John R. DePhillipo
-----------------------------
John R. DePhillipo, Chairman,
Chief Executive Officer,
President, Secretary and
Director
Date: December 27, 1999 By: /s/ Robert P. Ricciardi
-----------------------------
Robert P. Ricciardi, Treasurer
and Director
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION FOR PROFIT
OF
GENELINK, INC.
In compliance with the requirements of the applicable provision of 15 Pa.C.S.
(relating to corporations and unincorporated associations) the undersigned,
desiring to incorporate a corporation for profit hereby, state(s) that:
1. The name of the corporation is: GeneLink, Inc.
2. The address of this corporation's initial registered office in this
Commonwealth is:
c/o CT Corporation
Seven Penn Center
1635 Market Street
Philadelphia, PA 19103
(Philadelphia County)
3. The corporation is incorporated under the provisions of the Business
Corporation Law of 1988.
4. The aggregate number of shares authorized is: 1,000,000 shares of common
stock having $.01 par value per share.
5. The name and address of the incorporator is:
Elizabeth F. Bethel
c/o Pelino & Lentz, P.C.
One Liberty Place, 32nd Floor
Philadelphia, PA 19103-7393
6. The specified effective date, if any, is N/A
7. The purpose of the corporation is as follows:
The Corporation shall have unlimited power to engage in and to do any
lawful act concerning any and all lawful business for which corporations
may be incorporated under the Business Corporation Law of 1988, as
amended, including but not limited to the power to engage in the
manufacture, fabrication, assembly, merchandising and distribution of
various items.
The shareholders of the corporation shall not have the right to cumulate
their votes for the election of directors of the corporation.
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<PAGE> 2
IN TESTIMONY WHEREOF, the incorporator has signed these Articles of
Incorporation this 5th day of January, 1995.
/s/ Elizabeth F. Betchel
--------------------------------------
Elizabeth F. Betchel
2
<PAGE> 3
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
In compliance with the requirements of 15 Pa.C.S. Section 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: GeneLink, Inc.
2. The (a) address of this corporation's current office in this Commonwealth
or (b) name of its commercial registered office provider and the county
of venue is (the Department is hereby authorized to correct the following
information to conform to the records of the Department):
------------------------------------------------------------------
c/o CT Corporation 1635 Market Street Philadelphia, PA 19103 Philadelphia
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is: 15 Pa.S.C. Section
1306
4. The date of its incorporation is: January 6, 1995.
5. (Check, and if appropriate complete, one of the following):
_X_ The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
___ The amendment shall be effective on: ____________ at ______________.
Date Hour
6. (Check one of the following):
___ The amendment was adopted by the shareholders (or members) pursuant
to 15 Pa.C.S. Section 1914(a) and (b).
_X_ The amendment was adopted by the board of directors pursuant to 15
Pa.C.S. Section 1914 (c).
3
<PAGE> 4
7. (Check, and if appropriate complete, one of the following):
___ The amendment adopted by the corporation, set forth in full, is as
follows:
See Exhibit "A" attached hereto.
_X_ The amendment adopted by the corporation is set forth in full in
Exhibit "A" attached hereto and made a part hereof.
8. (Check if the amendment restates the Articles):
___ The restated Articles of Incorporation supersede the original
Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
23rd day of February, 1998.
GENELINK, INC.
By: /s/ John R. DePhillipo
-----------------------------
Title: President
4
<PAGE> 5
EXHIBIT A
Pursuant to 15 Pa.C.S.A. Section 1914(c)(3)(ii) the following amendment
to the Articles of Incorporation of GeneLink, Inc. has been approved by the
Board of Directors in order to effectuate a stock split of 75 shares to 1:
4. The aggregate number of shares authorized is 75,000,000 shares of
common stock having $.01 par value per share.
5
<PAGE> 1
EXHIBIT 3.2
BYLAWS
Of
GENELINK, INC.
Adopted January 6, 1995
ARTICLE I - OFFICES
1.1 Offices. The Corporation may have such offices as the board of
directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II - SEAL
2.1 Corporate Seal. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and words "Corporate
Seal, Pennsylvania".
ARTICLE III - SHAREHOLDERS' MEETINGS
3.1 Location of Shareholders' Meetings. Meetings of shareholders shall
be held at the registered office of the corporation or at such other place as
shall be determined by the board of directors.
3.2 Annual Meeting. The annual meeting of the shareholders shall be
held each year on such date and at such time between April 1 and July 1 as shall
be determined by the board of directors for the purpose of electing directors
and for the transaction of such other business as may be properly brought before
the meeting. In each election of directors, the candidates receiving the highest
number of votes, up to the number of directors to be elected in such election,
shall be elected.
3.3 Quorum. The presence, in person or by proxy, of shareholders
entitled to cast a least a majority of the votes which all shareholders are
entitled to cast on the particular matter shall constitute a quorum for the
purpose of considering such matter. The shareholders present at a duly organized
meeting can continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
3.4 Action by Shareholders. Except as otherwise specified herein or
provided by law, whenever any action is to be taken by vote of the shareholders,
it shall be authorized upon receiving the affirmative vote of a majority of the
votes cast by all shareholders entitled to vote thereon.
3.5 Notice of Meetings. Written notice of every meeting of the
shareholders shall be given to each shareholder of record entitled to vote at
the meeting at least ten days prior to the day
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<PAGE> 2
named for a meeting called to consider a fundamental change under Chapter 19 of
the Business Corporation Law of 1988, as amended or at least five days prior to
the day named for other meetings, unless a greater period of notice is required
in a particular case by law.
3.6 Adjourned Meetings. When a meeting of shareholders is adjourned it
shall not be necessary to give any notice of the adjourned meeting or of the
business to be transacted at an adjourned meeting, other than by announcement at
the meeting at which the adjournment is taken, unless the board of directors
fixes a new record date for the adjourned meeting.
3.7 Judges of Election. In advance of any meeting of shareholders, the
board of directors may appoint judges of election, who need not be shareholders,
to act at such meeting or any adjournment thereof. If judges of election are not
so appointed, the presiding officer of any such meeting may, and on the request
of any shareholder shall, make such appointment at the meeting. The number of
judges shall be one or three. No person who is a candidate for office shall act
as a judge.
3.8 Special Meetings. Except as otherwise provided by law, special
meetings of shareholder may be called by and held at such places as shall be
fixed by the President or the board of directors. The Secretary of this
corporation shall, within three business days after receipt of a written request
by persons who have duly called such meeting, fix the time of the meeting, which
shall be held not more than 60 days after receipt of the request, and the
Secretary or the President shall give notice thereof to the shareholders. If the
Secretary neglects or refuses, within such three business days to fix the time
of the meeting, then the President or the board of directors may do so.
3.9 Record Date. The books of the corporation shall not be closed
against transfers of shares. The record date for determining shareholders for
any purpose where such date has not been fixed by the Board of directors or by
law, shall be at the close of business on the day on which the board of
directors adopt the resolution relating thereto.
ARTICLE IV - DIRECTORS
4.1 Number of Directors; Election; Term. The business of this
corporation shall be managed by a board of directors, consisting of not less
than three nor more than nine in number. The members of the board of directors
shall be elected by the shareholders at the annual meeting of shareholders and
each director shall serve until the next annual meeting of shareholders and
until the director's successor shall have been elected and qualified, or the
director's earlier resignation or removal. The number of directors to be elected
by the shareholders in any year shall be determined by the shareholders at the
annual meeting, and in the absence of such a determination, shall be the same
number as in the preceding year. Within the limits stated in this paragraph, the
number of directors may be increased at any time by the board of directors.
4.2 Quorum. A majority of the directors in office shall be necessary
to constitute a quorum for the transaction of business and the acts of a
majority of the directors present at a meeting at which a quorum is present
shall be the acts of the board of directors.
2
<PAGE> 3
4.3 Regular and Special Meetings - Timing, Location and Notice.
Regular and special meeting of the board of directors shall be held at such
times and places as shall be fixed by the board of directors. Written notice of
every special meeting of the board of directors shall be given to each director
at least one day before the day named for the meeting. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
board need be specified in the notice of the meeting.
4.4 Committees Generally. The board of directors may, by resolution
adopted by a majority of the directors in office, establish one or more
committees, each committee to consist of one or more of the directors. A
committee, to the extent provided in the resolution of the board of directors
creating it, shall have and may exercise all of the powers and authority of the
board of directors except that a committee shall not have any power or authority
regarding: (i) the submission to shareholders of any actin requiring the
approval of shareholders under the Pennsylvania Business Corporation Law of
1988, as amended, (ii) the creation or filling of vacancies in the board of
directors, (iii) the adoption, amendment or repeal of the bylaws, (iv) the
amendment, adoption or repeal of any resolution of the board that by its terms
is amendable or repealable only by the board, or (v) action on matters committed
by the bylaws or resolution of the board to another committee of the board. Each
committee of the board shall serve at the pleasure of the board.
ARTICLE V - ACTION OF WRITTEN CONSENT AND USE
OF CONFERENCE TELEPHONE
5.1 Actions by Unanimous Written Consent. Any action required or
permitted to be taken at any meeting of the shareholders or the directors, or of
any committee of directors may be taken without a meeting if, prior or
subsequent to the action, a consent thereto in writing setting forth the action
so taken is signed by all the shareholders who would be entitled to vote at a
meeting for such purpose, or by all of the directors in office, or by all of the
members of such committee in office, as the case may be, and is filed with the
Secretary of the Corporation.
5.2 Participation in Meetings by Conference Telephone. One or more
persons may participate in a meeting of the shareholders, of the directors, or
of any committee of directors, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at the meeting.
5.3 Actions by Partial Written Consent of Shareholders. Any action
required or permitted to be taken at a meeting of the shareholders or of a class
of shareholders may be taken without a meeting upon the written consent of
shareholders who would have been entitled to cast the minimum number of votes
that would be necessary to authorize the action at a meeting at which all
shareholders entitled to vote thereon were present and voting. The action shall
not become effective until after at least ten days' written notice of the action
has been given to each shareholder entitled to vote thereon who has not
consented thereto.
3
<PAGE> 4
ARTICLE VI - OFFICERS
6.1 Officers; Term. The corporation shall have a President, Secretary,
and Treasurer and such other officers and assistant officers as the board of
directors shall authorize from time to time who shall be elected or appointed by
the board of directors each to serve for such term as shall be determined by the
board of directors and until his or her successor is chosen and shall have
qualified or until his or her earlier resignation or removal. Any of the
foregoing offices may be held by the same person.
6.2 Authority and Duties of Officers. The officers shall have such
authority and perform such duties customarily associated with their respective
offices unless the board of directors shall determine otherwise.
6.3 Removal. Any officer or agent elected or appointed by the board of
directors may be removed by the board of directors with or without cause,
without prejudice to the contract rights, if any, of the person so removed.
ARTICLE VII - SHARE CERTIFICATES
7.1 Execution of share Certificates. Every share certificate shall be
executed by facsimile or otherwise, by or on behalf of the corporation, by the
President and countersigned by the Treasurer or an Assistant Treasurer or by the
Secretary or an Assistant Secretary. In the event any officer who has signed, or
whose facsimile signature has been placed upon any share certificate shall have
ceased to be such officer because of resignation, removal or otherwise, before
the certificate is issued, it may be issued by the corporation with the same
effect as if the officer had not ceased to be such at the date of issue.
7.2 Transfer of Shares. Transfers of shares shall be made on the books
of the corporation upon surrender of the certificates therefor, endorsed by the
person named in the certificates. No transfer shall be made in a manner
inconsistent wit the provisions of Article VIII of the Pennsylvania Uniform
Commercial Code and its amendments and supplements.
7.3 Lost Certificates. Any person claiming a share certificate to be
lost or destroyed shall be issued a new certificate after furnishing the
corporation with a satisfactory affidavit that such certificate has been lost or
destroyed, and, if required by the board of directors, a bond of indemnity to
the corporation with satisfactory surety to protect the corporation or any
person injured by the issue of a new certificate from any liability or expense
by reason thereof.
ARTICLE VIII - INDEMNIFICATION AND LIMITATION
OF DIRECTOR LIABILITY
8.1 Indemnification. Any person who is or is a party or is threatened
to be made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative (whether or not the
liability arises or arose from any threatened, pending or completed action by or
in the right of the corporation) by reason of the fact that the
4
<PAGE> 5
person at any time is or shall have been a director or officer of the
corporation or any of its subsidiaries, or is or shall have been serving at the
written request of the corporation as a director, officer, employee or agent of
another corporation, for profit or not-for-profit, partnership, joint venture,
trust or other enterprise, and such person's heirs, executors and
administrators, shall be indemnified by the corporation, to the fullest extent
permitted by applicable law, against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action or proceeding unless the act or
failure to act giving rise to the claim for indemnification is determined to
have constituted willful misconduct or recklessness. The determination that
indemnification shall be made because such standard of conduct has been met may
be made by a court, or in the absence of a court determination, shall be made by
the board by a majority vote of any directors who were not parties to the
action, or proceeding, even though such directors are less than a quorum, or, if
no directors are disinterested, by independent legal counsel in a written
opinion.
8.2 Advancing Expenses. The right to indemnification conferred in this
Article shall include the right to be paid by the corporation the expenses
(including attorneys' fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative actin, suit or proceeding in
advance of its final disposition upon receipt by the corporation of an
undertaking by or on behalf of the indemnitee to repay such amount if it shall
ultimately be determined that the indemnities is not entitled to be indemnified
for such expenses under this Article or otherwise.
8.3 Contract Right. The right of a person covered by Section 8.1
hereof to be indemnified or to receive an advancement or reimbursement of
expenses pursuant to Section 8.2 hereof (1) may also be enforced as a contract
right pursuant to which the person entitled thereto may bring suit as if the
provisions hereof were set forth in a separate written contract between the
corporation and such person, and (2) shall continue to exist, if this Article 8
is rescinded or restrictively modified, with respect to events, acts or
omissions occurring before such rescission or restrictive modification is
adopted.
8.4 Non-Exclusivity of Indemnification; Insurance. The foregoing right
of indemnification shall not be deemed exclusive of other rights to which any
director officer, employee, agent or other person may be entitled in any
capacity as a matter of law or under any bylaw, agreement, vote of directors, or
otherwise. The corporation may purchase and maintain insurance on behalf of any
person to the full extent permitted by Pennsylvania law as in effect at the
adoption of this bylaw or as amended from time to time. The corporation may
create a fund of any nature which may, but need not be, under the control of a
trustee, or otherwise secure or insure in any manner its indemnification under
this bylaw.
8.5 Limitation of Director Liability. Each person who at any time is
or shall have been a director of this corporation shall not be personally liable
for monetary damages as such for any action taken, or any failure to take any
action, unless: (1) such person as director has breached or failed to perform
the duties of his office under 15 Pa.C.S. Subchapter 17B, and (2) the breach or
failure to perform constitutes self dealing, willful misconduct or recklessness.
The provisions of this bylaw shall not apply to: (1) responsibility or liability
of such person as director pursuant to any criminal statute; or (2) the
liability of a director for payment of taxes pursuant to local, state or federal
law. The provisions of this bylaw shall be construed to limit the liability of
such person as
5
<PAGE> 6
director in accordance with and to the full extent permitted by Pennsylvania law
as in effect at the time of the adoption of this bylaw or as amended from time
to time.
ARTICLE IX - NOTICE
9.1 Manner of Giving Notice. Except as otherwise specifically provided
in these bylaws, whenever the corporation is required to give written notice to
any person under these bylaws or by statute, it may be given to such person,
either personally or by sending a copy thereof by first class or express mail,
postage prepaid, or by telegram (with messenger service specified), telex or TWX
(with answerback received), courier service, charges prepaid, or by telecopier
to his address (or to his telex, TWX, telecopier or telephone number) appearing
on the books of the corporation or, in the case of directors, supplied by him to
the corporation for the purpose of notice. If the notice is sent by mail,
telegraph or by courier service, it shall be deemed to have been given to the
person entitled thereto when deposited in the United State mail, with a courier
service or with a telegraph office for delivery to such person or, in the case
of telex or TWX, when dispatched. Such notice shall specify the place, day and
hour of the meeting and, in the case of a special meeting of shareholders, the
general nature of the business to be transacted.
ARTICLE X - AMENDMENTS
10.1 Amendments to Bylaws. The bylaws of the corporation may be amended
or repealed by a majority vote of the members of the board of directors, unless
otherwise provided by law, subject always to the power of the shareholders
entitled to vote to change such action.
ARTICLE XI - FISCAL YEAR
11.1 Fiscal Year. The fiscal year of the corporation shall be fixed by
the board of directors.
ARTICLE XII - CORPORATE DIVISION
12.1 Plan of Division. Any plan of division shall require approval of
the shareholders, in the manner provided in Section 3.4 hereof, notwithstanding
any provision in the Pennsylvania Business Corporation Law of 1998, as amended
to the contrary.
6
<PAGE> 1
EXHIBIT 10.1
DNA SPECIMEN REPOSITORY AGREEMENT
Agreement made this 21st day of June, 1995 between the UNIVERSITY OF
NORTH TEXAS HEALTH SCIENCE CENTER AT FORTH WORTH ("UNTHSC"), an entity of the
State of Texas located in Fort Worth, Texas, and GENELINK, INC. ("GeneLink"), a
Pennsylvania corporation, with its principal office located in Margate, New
Jersey.
NOW, THEREFORE, in consideration of the premises hereinafter set forth,
the parties hereto mutually covenant and agree as follows:
1. Purpose. GeneLink has originated a program to market kits ("Kits")
by which an individual (the "Client") can obtain his or her DNA specimens
("Specimens") which will then be preserved for 25 years and be available for
various DNA laboratory analysis from time-to-time. A Kit shall be used by one
individual Client to furnish Specimens of that one individual. UNTHSC is willing
to serve as the repository to receive and extract the Specimens, preserve them
for a period of 25 years and make them available for analysis, on the terms set
forth in this Agreement.
2. Term.
2.1 GeneLink shall designate by notice to UNTHSC the
commencement date of this Agreement, which shall be when GeneLink commences the
sale of Kits and after GeneLink has paid the $13,600 referred to in Section 9.5
below ("Effective Date"). In no event shall the Effective Date be later than
April 30, 1996. Unless sooner terminated in the manner set forth below, the
primary term of this Agreement shall be for a period of five years after the
Effective Date, the parties shall negotiate a possible renewal of the Agreement,
but there shall be no obligation to renew.
2.2 The expiration or earlier termination of the term of this
Agreement shall relieve UNTHSC of the responsibility to continue to receive new
Specimens. It shall not relieve UNTHSC of the responsibilities to continue to
preserve Specimens already received by it for the full period of 25 years from
time of receipt of the Specimens, and to retrieve such Specimens for analysis,
as provided below, nor shall it relieve GeneLink of its obligations hereunder
with regard to such preserved Specimens; provided, however, that at any time
after the expiration or earlier termination of this Agreement GeneLink may
elect, at its expense, to transfer the Specimens to another repository, and
UNTHSC shall cooperate with GeneLink in arranging such transfer.
3. Exclusivity.
3.1 Within the United States of America, UNTHSC agrees that it
will not during the term of this Agreement and for a period of one year after
termination of this Agreement, engage in any business or perform any service,
directly or indirectly, in competition with the business of GeneLink, or have
any interest, whether as proprietor, partner, stockholder, principal, agent,
consultant, or in any other capacity or manner whatsoever, in any enterprise
which shall so engage,
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<PAGE> 2
but only to the extent that UNTHSC's purpose of such interest is to provide
long-term DNA specimen preservation services which is in competition with the
business of GeneLink. For purposes of this Section 3.1, "business of GeneLink"
shall not include the provision of analysis and extraction of DNA, including,
without limitation, the DNA analysis and extraction services currently provided
by UNTHSC. During the period of one year after non-renewal, UNTHSC's only
obligation under this Section shall be to refrain from competing in association
with those entities with which GeneLink is doing business and which are listed
by GeneLink in a notice to UNTHSC. UNTHSC for any reason set forth in Section
4.1, then this Section shall have no effect and UNTHSC shall not be bound by the
noncompete clause incorporated herein.
3.2 During the term of this Agreement, GeneLink agrees not to
engage any entity other than UNTHSC to provide long-term preservation of
Specimens for GeneLink's clients.
4. Termination.
4.1 Subject to Section 2.2 above, either party ("Terminating
Party") may elect immediately to terminate this Agreement prior to the end of
the term in the event that the other party ("Defaulting Party"): (1) dissolves,
disbands, or a liquidator or trustee is appointed or takes possession of the
Defaulting Party's property and such appointment or possession remains in effect
for more than 90 days; (2) is adjudicated bankrupt or insolvent or a petition is
filed against it under any bankruptcy law and is not dismissed within 90 days
after filing; (3) fails to account and/or make any payment due hereunder, and
such failure is not cured within 30 days after written notice is given; (4)
fails in any material and substantial manner to perform any other obligation
required of it hereunder and such failure is not cured within 30 days after
written notice thereof is given; or (5) is found by a court of competent
jurisdiction to have engaged in material acts of deceit or fraud, and all
applicable appeal periods have expired without any appeals being filed, or if
any appeals have been filed, a final, unappealable decision has affirmed such
finding.
4.2 Termination shall be effected by the Terminating Party
providing notice in accordance with this Agreement to the other party declaring
its election to terminate. Termination shall not affect any right of either
party which accrued prior to such termination. Termination shall be without any
further liability on the part of the Terminating Party. In the event of
termination under clause (1) or (2) of subsection 4.1, if no successor is
performing GeneLink's obligations under this Agreement, then GeneLink shall make
available to UNTHSC the names and addresses of each Client and his
identification number and his payment history, so that UNTHSC can identify
Clients requesting retrieval of Specimens.
5. The Kits.
5.1 GeneLink shall furnish to UNTHSC prototype of any versions
of Kits that it puts into production from time-to-time, and UNTHSC shall
cooperate with GeneLink by promptly furnishing any comments with regard to such
prototypes. However, since the parties are independent contractors, the design,
appearance and specifications of the Kits shall be under the complete control
and responsibility of GeneLink, and UNTHSC shall have no responsibility
therefor, except as follows:
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GeneLink may in its marketing of Kits state that the
Specimens shall be stored at repositories located at
UNTHSC and that quantitative extraction of the
Specimens shall be performed by UNTHSC, or words to
that effect. The parties agree that the language set
forth in Exhibit C attached hereto and made a part
hereof is an acceptable statement for purposes of
this section, and UNTHSC shall cooperate with
GeneLink in approving unreasonably withheld or
delayed. GeneLink shall obtain the written approval
of UNTHSC prior to using the name of UNTHSC in its
advertising, marketing, distributing or selling of
the Kits, or in any other manner, other than as
stated in this section and Exhibit C, and Section
7.4.
UNTHSC shall approve in writing: (a) the specifications for
the implement which the Client shall use in
collecting the Specimen; (b) the Client instructions
included with the Kit; and (c) any written
instructions inclusive of the data from furnished by
GeneLink to the Client in connection with retrieval
of Specimens as described below, which approvals
shall not be unreasonably withheld or delayed.
GeneLink agrees that the Client instructions or any
data form included with the Kit shall refer to the
repository, the disposal of Specimens at the end of
the 25 years, confidentiality of the Client's name,
and a statement that the Specimen may not be
appropriate for certain types of genetic analysis.
If GeneLink shall submit a specification or
instruction in writing to UNTHSC, UNTHSC shall have
been deemed to approve such specification or
instruction unless it notifies GeneLink in writing
within 30 days after receipt thereof. The parties
agree that initially the specification for the swabs
set forth in Exhibit D attached hereto and made a
part hereof and the collection procedure described
in Exhibit A are approved by the parties.
Unless otherwise agreed by the parties, each Kit shall contain 21 bar
coded labels, with an adhesive that is mutually
acceptable to the parties, which acceptance shall
not be unreasonably withheld or delayed.
6. Full Requirements. In performing its services of collecting,
preserving and retrieving Specimens as provided herein, UNTHSC shall maintain
such staff and facilities as may be necessary to meet the full requirements of
GeneLink under this Agreement. The parties recognize that the program is a new
venture and that it is not possible to predict accurately the volume of
Specimens that may be received. The parties recognize that the success of
GeneLink's program will depend, in part, on the ability of UNTHSC to process,
and preserve and retrieve Specimens in whatever quantity GeneLink is able to
produce. GeneLink will cooperate with UNTHSC in advising UNTHSC on the first and
fifteenth of each month of the expected volume of Specimens, and UNTHSC shall be
responsible for process, preserving and retrieving under this Agreement whatever
quantity of Specimens is required by GeneLink to serve its Clients.
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7. Collection Procedure.
7.1 GeneLink or the Client shall ship to UNTHSC the Specimens,
which shall contain a number for identification purposes. GeneLink shall
maintain the record of the Client name identified with each number, and UNTHSC
shall be furnished only the numbers for each Specimen.
7.2 UNTHSC shall furnish at the UNTHSC campus and shall
maintain during the term of this Agreement and for a period of 25 years from the
time the last Specimen is received pursuant to this Agreement, a repository
sufficient to store and preserve all Specimens furnished pursuant to this
Agreement and shall maintain the repository in accordance with the following
conditions:
Two separate freezers used to store Specimens shall be kept
at a minimum temperature of -20 degrees c. at all
times; provided, however, that UNTHSC may designate
another minimum temperature that will prohibit
bacteriological growth and maintain the integrity of
the Specimen, subject to the consent of GeneLink,
which consent shall not be unreasonably withheld.
The Specimens shall be kept in a secured environment, with
an alarm system to notify UNTHSC security of
unauthorized entry or of any failure of freezer
temperature.
The repository shall be staffed on an 8 hour per day/40
hour per week basis. The repository shall be closed
in accordance with the holiday schedule and
emergencies declared by administration of UNTHSC.
UNTHSC shall maintain a data base for the repository which
shall contain information regarding receipt and
storage of all Specimens in accordance with their
identification number.
7.3 UNTHSC shall maintain computer contact with GeneLink for
quick and efficient communication.
7.4 UNTHSC shall provide to GeneLink written and pictorial
material describing the repository, UNTHSC and its personnel that shall be
suitable for promotional use by GeneLink if it should choose to do so, and
UNTHSC hereby authorized such use.
7.5 UNTHSC shall process Specimens received pursuant to this
Agreement within three working days of receipt.
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7.6 Upon receipt of Specimen, UNTHSC shall:
Enter the identification number of the Specimens that it
receives into the repository data base immediately
upon receipt, and advise GeneLink thereof on a daily
basis.
Provide technicians and equipment necessary to extract the
DNA from the swabs in accordance with the procedure
set forth in Exhibit A hereto, which is incorporated
by reference into this Agreement. UNTHSC may in
writing from time-to-time adopt other scientifically
acceptable PROCEDURES THAT ARE EQUIVALENT IN
ACCURACY TO THE PROCEDURES SET FORTH IN exhibit a,
and shall advise GeneLink of any such new procedure.
In case of objection by GeneLink, the parties shall
meet and attempt to resolve the matter. UNTHSC shall
seek to extract all available human specific DNA.
Preserve the Specimen (if at least 4,5000 nanograms of
human specific DNA), half in each of the two
freezers for a period of 25 years form the date of
receipt, and advise GeneLink on a daily basis of the
Specimens on that day placed in the freezers and the
semi-quantitative approximate of the total quantity
of DNA in each Specimen.
7.7 UNTHSC shall not be responsible for determining the length
of the DNA from a Specimen. both parties acknowledge that by not determining the
length of the DNA, certain analytical DNA procedures may not be able to be
performed.
7.8 In the event that the testing of the Specimen by UNTHSC
determines that a Client's Specimen does not yield at least 4,500 nanograms of
DNA, UNTHSC shall preserve the Specimen, notify GeneLink, and GeneLink shall
seek to obtain new Specimens from such Client to replace the initial Specimen.
7.9 Upon placing the Specimen in the freezer, and UNTHSC's
receipt of payment as provided herein, UNTHSC shall issue a certificate to be
sent to the Client by GeneLink which shall certify that UNTHSC is preserving the
Specimen in it repository for the 25 year period. The form of the certificate
shall be agreed to in writing form time-to-time by the parties. the parties
agree that initially the form attached hereto as Exhibit F shall be the form of
the certificate.
7.10 In the event that shipping instructions and payment of
reasonable shipping and handling costs have not been received by UNTHSC within
90 days after the expiration of the 25 year preservation period, UNTHSC shall,
at its sole option, ship within the Untied States at UNTHSC's cost, outdated
Specimens to a GeneLink location or subsequent repository as designated by
GeneLink, in group mailings at intervals to be determined by UNTHSC, or
otherwise
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discard the Specimens in accordance with applicable law.
8. Retrieval and Analysis of Specimens.
8.1 GeneLink shall advise UNTHSC when a Client wishes to
retrieve Specimens for analysis and furnish a copy of the Client's consent. Such
consent shall conform with applicable state and federal law. Analysis shall be
performed at such laboratory as the Client shall designate. If UNTHSC shall have
the capability to perform such analysis, GeneLink will include UNTHSC on the
same basis as other qualified laboratories in whatever information about
specific testing laboratories, if any, GeneLink furnishes to the Client or its
representatives.
8.2 Upon being notified by GeneLink that a Client wishes to
access a Specimen, UNTHSC shall within three business days retrieve the
requested Specimens in accordance with the procedures set forth in Exhibit B
attached hereto and incorporated by reference to this Agreement; test the
Specimen for efficacy; package and send the appropriate portion of the Specimen
as directed by GeneLink; and return the unused portion of the Specimen to
storage.
8.3 The size of the portion of the Specimen to be removed shall
be determined by the testing laboratory authorized to perform the Client order
test.
8.4 UNTHSC does not guarantee and shall not be held responsible
for the number of genetic tests that can be performed on an individual's stored
DNA during the storage period.
8.5 GeneLink shall be responsible for collecting retrieval fees
from the Client and paying UNTHSC the appropriate fees prior to the retrieval
and testing of Specimens.
8.6 UNTHSC shall advise GeneLink on a daily basis of the
Specimens shipped to laboratories for analysis.
9. Payment.
9.1 Subject to Section 9.6 below, on or before the 15th day of
each month of the term of this Agreement (or the next succeeding business day),
GeneLink shall pay UNTHSC [Confidential Information filed separately with the
Securities and Exchange Commission] per Client submitting Specimens to UNTHSC
during the previous month. Such payment shall constitute the entire fee for the
DNA extraction and 25 year storage of such Specimen by UNTHSC as provided
herein. Such payment shall be made by GeneLink without regard to the Client's
payment or non-payment to GeneLink.
9.2 At the time of each payment in accordance with Section 9.1,
GeneLink shall also pay UNTHSC [Confidential Information filed separately with
the Securities and Exchange Commission] for or any Client submitting additional
Specimens to UNTHSC during the previous month in order to replace or supplement
deficient Specimens. Such payment shall constitute the entire fee for the
quantitative extraction and 25 year storage of such additional Specimens. Such
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payment shall be made by GeneLink without regard to the individual's payment or
non-payment to GeneLink.
9.3 In the development of GeneLink's program, the selection of
collection materials and the development of the procedure for collection set
forth in Exhibit A, GeneLink has relied upon the advise and assistance of
UNTHSC. If an excessive number of Specimens, for whatever reason, do not contain
the required minimum amount of DNA, then UNTHSC shall work with GeneLink to
resolve the problem.
9.4 Prior to the Effective Date of this Agreement, GeneLink
shall pay to UNTHSC $13,600 to be used for the establishment of the
repositories, approximately as set forth on a capital expenses budget submitted
by UNTHSC to GeneLink prior to the date hereof. Any of such amount that is not
used by UNTHSC for such purpose, shall be returned to GeneLink.
9.5 As the sole method to repay such $13,600 advance, the
payments to UNTHSC in Section 9.1 of this Agreement shall be [Confidential
Information filed separately with the Securities and Exchange Commission] for
the first 5,667 individuals submitting original Specimens. In the event that a
portion of the advance is returned to GeneLink pursuant to Section 9.4, the
number of individuals specified in this Section shall decrease proportionally so
that the amount of repayment equals the advance amount actually used by UNTHSC.
9.6 For UNTHSC's services in retrieving Specimens for analysis
in accordance with exhibit B, GeneLink shall pay UNTHSC a retrieval fee of
[Confidential Information filed separately with the Securities and Exchange
Commission] per Specimen retrieved. In addition to the retrieval fee, UNTHSC
shall be paid [Confidential Information filed separately with the Securities and
Exchange Commission] per daily shipment to a particular laboratory for handling
the shipment, and GeneLink shall be responsible for the actual shipping charge
and out-of-pocket cost of packaging material. Payments under this Section shall
be on the same terms as specified in Section 9.1.
9.7 If, after the expiration of the term or the earlier
termination to this Agreement, Specimens are sent by Clients to UNTHSC, UNTHSC
will forward the Specimens as directed by GeneLink, and GeneLink shall pay the
same amounts as applicable for shipment of Specimens under Section 9.6.
10. Notices. All notices required hereunder shall be sufficient only
if in writing and shall be deemed to have been given if delivered (including by
nationally recognized overnight delivery service) or mailed by certified mail,
return receipt requested, postage prepaid, or by facsimile (receipt confirmed):
If to GeneLink, addressed to:
P.O. Box 3212
100 S. Thurlow Avenue
Margate, NJ 08402
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Attn: Mr. John R. DePhillipo
Fax No.: (609) 823-6616
with a copy to:
Steven J. Serling, Esquire
Pelino & Lentz, P.C.
One Liberty Place, 32nd Floor
1650 Market Street
Philadelphia, PA 19103-7393
Fax No.: (215) 665-1536
if to UNTHSC, addressed to:
University of North Texas Health Science Center at
Fort Worth
35 Camp Bowie Boulevard
Fort Worth, TX 76107
Attn: Mr. Dennis Shingleton
Fax No.: (817) 735-2424
or such other address as the party to receive the notice shall advise by due
notice hereunder. Notices shall be effective the earlier of receipt or five days
after dispatch.
11. Independent Contractor. This Agreement is not intended as and
shall not be construed as a brokerage agreement or an agreement of joint venture
or partnership or of employment by either party of the other or of its
employees. UNTHSC shall perform all work and services hereunder as an
independent contractor and shall not be an officer, agent, servant or employee
of GeneLink. UNTHSC shall have exclusive control, and the exclusive right to
control, the details of the work and services performed hereunder, and all
persons performing same. Neither UNTHSC nor GeneLink shall incur any
indebtedness, enter into any undertaking or make any commitment in the other
party's name or purporting to be on the other party's behalf except with the
express written permission of the other party.
12. Standard and Care.
12.1 The services to be provided by UNTHSC hereunder shall be
diligently performed with UNTHSC's ordinary and prudent skill and attention and
in conformity with this Agreement and its various exhibits and with the level of
skill appropriate for the preservation and testing of DNA material. without
limiting the foregoing, UNTHSC agrees to be reasonable for all Specimens lost or
damaged while in its possession or control. GeneLink shall use due care in the
performance of its obligations hereunder.
12.2 To the extent permitted by the laws of Texas, UNTHSC agrees
to indemnify and hold harmless GeneLink, its officers, directors, shareholders
and employees from any and all
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demands, actions, suits, claims, liability, damage, cost or expense, that arise
out of or in connection with the performance by UNTHSC of its duties hereunder,
except for and to the extent of any action or inaction of GeneLink, its officers
or employees, or agents.
12.3 GeneLink agrees to indemnify and hold harmless UNTHSC, its
Board of Regents, officers and employees from any and all demands, actions,
suits, claims, liability, damage, cost or expense, that arise out of or in
connection with the development, manufacturing, advertising, marketing,
distribution, sale, use or misuse of the Kits, whether arising out of the acts
or omissions of GeneLink, its officers, employees or agent, or otherwise, except
for and to the extent of any action or inaction of UNTHSC, its officers or
employees, or agents.
13. Confidential Information.
13.1 It is understood that in the performance of its services
under this Agreement, UNTHSC may have access to private or confidential
information of Clients. UNTHSC shall use its best efforts to keep, and have its
employees and agents keep, any and all such information confidential and to use
such information only for the purposes of fulfilling its services under this
Agreement or otherwise as agreed to by the Client. this provision shall not
prohibit UNTHSC from disclosing such information to persons required to have
access thereto for the performance of this Agreement, or pursuant to a
requirement of applicable federal or state law.
13.2 UNTHSC recognized the exclusive right of GeneLink in and to
all of the trademarks of GeneLink applied to the Kits, the GeneLink program, and
the services furnished by GeneLink hereunder and any and all of GeneLink's
copyrights of material used in connection therewith. UNTHSC acknowledges that
the system and procedures utilized by GeneLink in performing the services under
this Agreement may contain commercially valuable proprietary confidential
materials utilized by GeneLink in marketing its products are confidential
information and trade secrets which may be disclosed to UNTHSC on a confidential
basis pursuant to this Agreement. UNTHSC shall have no copyright interest,
patent rights, property rights or other interest in the services provided by
GeneLink hereunder or in any developments or improvements thereto (other than
laboratory procedures developed by UNTHSC that do not involve proprietary
material of GeneLink), whether or not presently existing, nor in any software
programs which may be developed by GeneLink to perform its services hereunder.
UNTHSC agrees to hod confidential and to use only in connection with the
services provided under this Agreement all proprietary information GeneLink
furnishes to UNTHSC, which shall have been marked "confidential" or
"proprietary." UNTHSC's obligations under this Section shall not apply to any
information that was known to UNTHSC prior to disclosure by GeneLink, or is or
becomes generally available to the public other than by breach of this Agreement
or is required to be disclosed in accordance with applicable federal or state
law.
13.3 In any academic publication describing its activities under
this Agreement or findings based thereon, UNTHSC shall refer to and identify
GeneLink as the provider of the GeneLink program.
14. Authority. Each party to this Agreement represents to the other
that it has the full
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right, power and authority to enter into and perform this Agreement in
accordance with all of the terms, provisions, covenants and conditions thereof,
and that the execution and delivery of this Agreement has been duly authorized
by proper corporate or Board of Regents action.
15. Representation of UNTHSC. UNTHSC represents to GeneLink that,
based on UNTHSC's reasonable and prudent professional judgment, based on its
experience in working with DNA and on certain testing procedures it has employed
as described on Exhibit E attached hereto and made a part hereof, UNTHSC is not
currently aware of any scientifically accepted reason why the procedures
described in Exhibits A and B are not appropriate procedures for the purpose of
the collection and extraction of DNA; why DNA Specimens collected, preserved and
retrieved in accordance with such procedures and this Agreement should not
survive for at least 25 years or why stored Specimens should not result in
Specimen material appropriate in quality and quantity for DNA analysis by
independent commercial laboratories to identify various types of DNA related to
diseases or medical conditions.
16. Force Majeure Clause. The parties hereto are relieved of any
liability if unable to meet the terms and conditions of this Agreement due to
any "Act of God", riots, epidemics, strikes, or any act or order which is beyond
the control of the party not in compliance; provided that it takes all
reasonable steps practical and necessary to effect prompt resumption of its
responsibilities hereunder.
17. Non-Waiver. The failure of either party to insist upon the
performance of any term or provision of this Agreement or to exercise any right
herein conferred shall not be construed as a waiver or relinquishment of the
party's right to assert or rely upon any such term or right on any future
occasion.
18. Assignability and Benefit. UNTHSC shall not assign its obligations
or rights hereunder. Any unauthorized assignment or delegation by UNTHSC of its
rights or duties hereunder, without the prior written consent of GeneLink, shall
b void and shall constitute a breach of this Agreement. GeneLink shall not
assign its obligations or rights hereunder without the consent of UNTHSC, which
consent shall not be unreasonably withheld or delayed (except that GeneLink may
assign to an entity controlled by or under common control with GeneLink). The
covenants herein contained shall bind and the benefits and advantages shall
inure to the respective successors and permit assignees of the parties, jointly
and severally.
19. Compliance with Applicable Laws. Each party shall be responsible
for obtaining and maintaining at its sole expense and in its name, all licenses
and permits which such party may require in order to perform the services
described herein. UNTHSC and GeneLink shall each comply with all applicable
federal, state and local laws and regulations respectively applicable to each
party in connection with the services contemplated hereunder. both parties
represent that they have no actual knowledge that any federal, state or other
governmental regulatory approvals are required prior to the execution or
effectiveness of this Agreement. All obligations under this Agreement are
subject to any future required federal, state or other city regulatory
approvals. Each party shall use good faith efforts to obtain any such approvals
which are required because of that party's identity, status or actions, and the
other party or parties shall cooperate with any such efforts.
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If any such approvals are required but not obtained, then, subject to the
provisions of the following sentence, the obligations to which such approvals
apply shall have no force or effect until such time or times as the required
approvals are obtained. If the unenforceability of any such obligations
materially and substantially diminishes the considerations which otherwise would
be received by any party under this Agreement, than that party may terminate
this Agreement without liability in accordance with Section 4 of this Agreement.
20. Severability. In the event that any provision hereof shall be
deemed in violation of any law or held to be invalid by any court in which this
Agreement shall be interpreted, the violation or invalidity of any particular
provision shall not be deemed to affect any other provision hereof, but this
Agreement shall be thereafter interpreted as though the particular provision so
held to be in violation or invalid were not contained herein.
21. Entirety Clause. This written agreement constitutes the entire
agreement of the parties regarding the subject matter of this Agreement.
Statements or representations not included herein shall not be binding upon the
parties, and no subsequent modifications or amendments of any of the terms
hereof shall be valid or binding unless made in writing and signed by both
parties.
22. State Law and Venue. This Agreement shall be construed under the
laws of the State of Texas. the parties consent to the venue of the federal
district court for the Northern District of Texas with respect to legal actions
concerning this Agreement, or, if such court does not have jurisdiction, the
courts of Tarrent County, Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the 21st day of June, 1995.
GENELINK, INC.
June 21, 1995 /s/ John R. DePhillipo
- --------------------- ---------------------------------------
Date John R. DePhillipo
President and CEO
UNIVERSITY OF NORTH TEXAS HEATH
SCIENCE CENTER AT FORT WORTH
By: /s/ David M. Richard, D.O.
--------------------------
President
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EXHIBIT 10.2
AMENDMENT NO. 1 TO
AGREEMENTS
BETWEEN
GENELINK, INC.
AND
UNIVERSITY OF NORTH TEXAS HEALTH SCIENCE CENTER
AT FORTH WORTH
1. PARTIES. This AMENDMENT is made and entered into by and between
UNIVERSITY OF NORTH TEXAS HEALTH SCIENCE CENTER AT FORTH WORTH, whose address is
3500 Camp Bowie Blvd., Forth Worth, Texas 76107-2699, hereinafter referred to as
"UNTHSC", and GENELINK, INC., a Pennsylvania corporation, with its principal
office located in Margate, New Jersey, hereinafter referred to "GeneLink".
2. AMENDED AGREEMENTS. This is an Amendment to the DNA Specimen
Repository Agreement by and between the above listed parties dated June 21,
1995, hereinafter referred to as "AGREEMENT". A copy of the AGREEMENT is
attached hereto and incorporated by reference. In addition, this is an Amendment
to the Collateral License Agreement by and between the above listed parties
dated July 1, 1996, hereinafter referred to as "LICENSE AGREEMENT". A copy of
the LICENSE AGREEMENT is attached hereto and incorporated by reference.
3. AMENDMENT DATE. This AMENDMENT is effective on April 1, 1996.
4. AMENDMENT. In accordance with Section 21 of the AGREEMENT and
Section 1 of the LICENSE AGREEMENT, and for good and valuable consideration,
GeneLink and UNTHSC hereby make the following amendments:
SECTIONS 9.1 AND 2.1 of the AGREEMENT shall be modified as follows:
GeneLink shall continue to pay UNTHSC (***) per client for a
period of 5 years beyond the date of termination of the AGREEMENT
on March 21, 2001. On or about April 1, 2005, the parties shall
negotiate in good faith a possible adjustment of this fee based
upon current technology and costs. Absent a written agreement
signed by both parties adjusting this resulting from such
negotiation, all kits sold under the terms of the AGREEMENT will
be stored by UNTHSC in accordance with the terms of the AGREEMENT
at the rate of (***) per sample through March 30, 2006.
SECTION 2 of the LICENSE AGREEMENT shall be replaced with the following:
This LICENSE AGREEMENT shall be for the term of the AGREEMENT
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and for the term of the AMENDMENT effective on April 1, 1996,
through March 30, 2006, and any other subsequent extensions. This
LICENSE AGREEMENT shall be subject to termination upon the
conditions of the AGREEMENT.
5. CONFLICT. Other than the matters addressed above, this AMENDMENT
does not act to change or alter any other provision of the AGREEMENT or the
LICENSE AGREEMENT. In the event of a conflict between the terms of this
AMENDMENT and the AGREEMENT, the terms of this AMENDMENT will control. In the
event of a conflict between the terms of this AMENDMENT and the LICENSE
AGREEMENT, the terms of this AMENDMENT will control.
UNIVERSITY OF NORTH TEXAS GENELINK, INC.
HEALTH CENTER AT FORT WORTH
By: /s/ David M. Richard, D.O. By: /s/John R. DePhillipo
-------------------------- ------------------------------
David M. Richard, D.O. John R. DePhillipo
President President and CEO
Date: November 11, 1996 Date: November 5, 1996
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EXHIBIT 10.3
COLLATERAL LICENSE AGREEMENT
This agreement is made and entered into as of the 1st day of July, 1996,
by and between GeneLink, Inc., a Corporation of the Common wealth of
Pennsylvania, having a place of business at Margate, New Jersey (hereinafter
"Genelink"); and university of North Texas Health Science Center having a place
of business at 35 Camp Bowie Blvd., Fort Worth, Texas 76107 (hereinafter
"USTHSC").
W I T N E S S E T H
Whereas, Genelink and UNTHSC have entered into a technology agreement
which was effective as of April 1, 1996 and has a termination date of March 31,
2001;
Genelink is owner of U.S. Patent Application Serial No. 08/558,840
entitled "Non-Invasive Identification System" (hereinafter "Patent
Application");
Accordingly, in consideration of one dollar ($1.00) and other valuable
consideration the parties agree as follows:
1. Subject to the terms and conditions set forth in the aforesaid agreement
dated April 1, 1996, Genelink grants UNTHSC a royalty free non-exclusive
license under the Patent Application.
2. This license shall be for the term of the technology agreement and
subject to termination upon the same conditions set therein.
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IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed all as of the day and year first above written.
Attest: /s/ Patti Lloyd UNIVERSITY OF NORTH TEXAS
--------------- HEALTH SCIENCE CENTER
Patti Lloyd
July 8, 1996
By: /s/ David M. Richards, D.O.
-------------------------------
David M. Richards, D.O.
President
Attest: /s/ Dr. Robert P. Ricciardi GENELINK, INC.
-----------------------------
Dr. Robert P. Ricciardi
May 30, 1996
By: /s/ John R. DePhillipo
-------------------------
John R. DePhillipo
President
2
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made and entered as of February 24,
1998 by and among GENELINK, INC. (the "Company"), a New Jersey corporation and
JOHN DEPHILLIPO (the "Executive).
BACKGROUND
The parties want to enter into an employment agreement and to set forth
the terms and conditions of the Executive's employment by the Company.
Accordingly, in consideration of the mutual covenants and agreements set forth
herein and the mutual benefits to be derived herefrom, and intending to be
legally bound, the Company and the Executive agree as follows:
1. EMPLOYMENT.
(a) Duties. The Company will employ the Executive, on the terms
set forth in this Agreement, as Chairman of the Board, President and Chief
Executive Officer. The Executive accepts such employment with the Company and
will perform and fulfill such duties as are reasonable and necessary for such
position for the Company and its subsidiaries, devoting his best efforts to the
performance and fulfillment of his duties and to the advancement of the
interests of the Company, subject only to the direction, approval, control and
directives of the Board.
(b) Place of Performance. In his employment by the Company, the
Executive will be based in the Margate, New Jersey metropolitan area, except for
required travel on Company business.
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2. TERM.
The Executive's employment under this agreement will be for a five year
term (the "Term") commencing as of January 1, 1998 (the "Commencement Date") and
will continue uninterrupted for the Term. Each year, unless one party notified
the other party in writing by November 1 of the preceding year, on the
anniversary date of the Commencement Date, the parties will automatically extend
the Term for an additional year. The parties intend the effect that a full five
year Term will always exist under this Agreement.
3. COMPENSATION.
(a) Base Salary. During the Term, the Executive will be
entitled to receive an annual salary in the calendar year 1998 of $125,000 (the
"Base Salary"). Each year thereafter, Executive will be entitled to an increase
in the Base Salary equal to the greatest of: (i) the percentage increase in the
Consumer Price Index for the previous year as reported by the United States
Department of Commerce; (ii) 10%; or, (iii) an amount determined by the Board or
a committee of the Board designated for this purpose, payable in installments at
such time as the Company customarily pays its other senior executive employees
(but in any event no less often than monthly). The increase determined in the
previous sentence will be added to the then current Base Salary to become the
Base Salary for purposes of this Agreement.
(b) I there is a change in control such as would require the
Company to file a Form 8-K with the Securities and Exchange Commission if the
Company was a reporting company, the Executive will be entitled to be paid a
lump sum payment equal to the aggregate Base Salary, with minimum 10% increases
each year, for the next five years, and a lump sum bonus equal to five time the
largest bonus paid to Executive under this Agreement. The Company will pay the
payments required under the previous sentence within 30 days of the change in
control.
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(c) Bonus. Executive will receive an annual bonus according to
a Company Bonus Plan adopted by the Board.
4. HEALTH INSURANCE AND OTHER BENEFITS.
During the Term, the Executive will be entitled to all employee benefits
offered by the Company to its senior executives and key management employees,
including, without limitation, all pension, profit sharing, retirement, stock
option, salary continuation, deferred compensation, disability insurance,
hospitalization insurance, major medical insurance, medical reimbursement,
survivor income, life insurance or any other benefit plan or arrangement
established and maintained by the Company, subject to the rules and regulations
then in effect regarding participation therein. In addition, the Company will
obtain and fund for Executive a life insurance policy for $1,000,000, with the
beneficiary.
5. REIMBURSEMENT OF EXPENSES.
The Company will reimburse Executive for all items of travel,
entertainment and miscellaneous expenses that the Executive reasonably incurs in
the performance of his duties hereunder, if the Executive submits to the Company
evidence supporting these expenses as the Company may reasonably require.
6. AUTOMOBILE ALLOWANCE.
The Company will pay Executive a monthly automobile allowance of $800 for
the first year of this Agreement, $800 per month for the second year and $1000
per month thereafter, subject to increase by the Board. In the alternative, the
Company may obtain an automobile for the Executive's sole use, to be approved by
the Executive. The Company will pay directly or reimburse Executive for all
expenses of the automobile, including, but not limited to, taxes, insurance,
maintenance, fuel, parking, and the like.
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7. OPTIONS: GRANT OF SHARES.
(a) Upon the execution of this Agreement, the Company will
issue to Executive options to purchase 1,200,000 shares (the "Shares") of the
Company's common stock $.001 par value, exercisable at the price of $0.10 per
Share. These options will expire ten years from the date hereof and will vest as
follows:
(i) 400,000 Shares upon execution of this Agreement, and
(ii) 200,000 Shares each January 1, beginning January 1,
1999. Options will be exercisable upon vesting. If there is a change in control
that would require the Company to file a Form 8-K with the Securities and
Exchange Commission of the Company was a reporting company, all unvested options
will be immediately exercisable. The Executive may exercise vested options by
giving the Company a note equal to the Federal Funds Rate published in the Wall
Street Journal as adjusted from time to time. In the alternative, the Executive
may use Shares owned by the Executive, valued at the then-prevailing market
price of the Shares.
(b) The Executive will also be eligible to participate in any
stock option, stock grant, phantom stock, or other employee incentive plan when,
as and if approved by the Board. Eligibility in no way creates an obligation of
the Company to issue options to Executive, which will be in the sole and
absolute discretion of the Compensation Committee of the Board.
(c) Upon execution of this Agreement. Executive will receive a
grant of 200,000 Shares as a signing bonus.
(d) The stock grants and options granted under this Section 7
of the Agreement will be adjusted for any recapitalizations, stock dividends,
stock splits or other changes in the Company's capital stock.
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8. VACATION.
This Agreement entitles the Executive to four weeks paid vacation in each
calendar year (prorated in any calendar year during which the Company employs
the Executive under this Agreement for less than the entire year according to
the number of days in such calendar year during which he is employed). The
Executive will also be entitled to all paid holidays given by the Company to its
senior executive officer.
9. TERMINATION OF EMPLOYMENT.
(a) Death or Total Disability. If the Executive dies during the
Term, the Agreement will end as of the date of the Executive's death. The
Company will pay the Executive's salary for the remaining Term to Executive's
beneficiary or estate, and all health insurance benefits for Executive's family
will continue for at least two years following the Executive's death. In case of
the Total Disability (as defined below) of the Executive for any consecutive
twelve months during the Term, the Company will have the right to end this
Agreement by giving the Executive thirty (30) days' prior written notice, and
upon the expiration of such thirty (30) day period, the Executive's employment
under this Agreement will end. If there is such a termination, the Company will
pay Executive his salary for the remaining Term. If the Executive will resume
his duties within thirty (30) days after receipt of such a notice of
termination, this Agreement will continue in full force and effect. Upon
termination of this Agreement under this Section 9(a), the Company will have no
further obligations or liabilities under this Agreement, except to pay to the
Executive's estate or the Executive, as the case may be, the portion of salary
that remains unpaid for the Term, including minimum increases and continuation
of benefits.
The term "Total Disability", as used herein, will mean a mental or
physical condition that in the reasonable opinion of an independent medical
doctor selected by the Company
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renders the Executive unable or incompetent to carry out the material duties and
responsibilities of the Executive under this Agreement at the time the Executive
incurred the disabling condition. If the Executive is covered under any policy
or disability insurance under Section 4, the definition of Total Disability
hereunder will be the definition of that term in such policy.
(b) The Company may only terminate this Agreement for cause
under this Section 9(b) or under Section 9(a) of this Agreement. Cause for
termination exists only if the Executive is convicted of a felony involving
fraud or violation of the Federal Securities Laws, or a court of competent
jurisdiction finds that the Executive has engaged in conduct involving the
Company that constitutes gross negligence or intentional misconduct. If the
Company terminates the Executive under this Section, all unvested options or
stock grants will be void and the Executive will not receive any salary or
benefit continuation.
10. NO MITIGATION.
This Agreement does not require the Executive to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor will the amount of any payment provided for in this
Agreement be reduced by any compensation earned by the Executive as the result
of his employment by another employer.
11. RESTRICTIVE COVENANT.
(a) Competition. Executive undertakes and agrees that until two
years after termination of this Agreement, he will not compete, directly or
indirectly, or participate as a director, officer, employee, consultant agent,
consultant, representative or otherwise, or as a stockholder, partner or joint
venture, or have any direct or indirect financial interest, including, without
limitation, the interest of a creditor, in any business competing directly or
indirectly with the business of Company or any of its subsidiaries.
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(b) Trade Secrets. During the Term and after termination for
any reason, Executive will not reveal, divulge, copy or otherwise use any trade
secret of the Company or its subsidiaries, it being acknowledged that all such
information and materials compiled or obtained by or disclosed to Executive
while employed by the Company or its subsidiaries hereunder or otherwise are
confidential and are the exclusive property of the Company and its subsidiaries.
(c) Injunctive Relief. The parties hereto agree that the remedy
at law for any breach of the provisions of this Section 11 will be inadequate
and that this Agreement entitles the Company or any of its subsidiaries or other
successors or assigns to injunctive relief without a bond. Such injunctive
relief will not be exclusive, but will be in addition to any other rights
remedies Company or any of its subsidiaries or their successors or assigns might
have for such breach.
(d) Scope of Covenant. Should the duration, geographical area
or range or prescribed activities contained in subparagraph (a) above be held
unreasonable by any court of competent jurisdiction, then such court may modify
the duration, geographical area or range of prescribed activities to such degree
as to make it or them reasonable and enforceable.
12. INDEMNIFY.
The Company will indemnify and hold the Executive harmless to the maximum
extent permitted by law against any claim, action, demand, loss, damage, cost,
expense, liability or penalty arising out of any act, failure to act, omission
or decision by him while performing services as an officer, director or employee
of the Company, other than an act, omission or decision by the Executive that is
not in good faith and is without his reasonable belief that the same is, or was,
in the best interests of the Company. To the extent permitted by law, the
Company will pay all attorneys' fees, expenses and costs actually incurred by
the Executive in the defense of any of the claims referenced herein.
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13. MISCELLANEOUS.
(a) Notices. Any notice, demand or communication required or
permitted under this Agreement will be in writing and will either be hand
delivered to the other party or mailed to the addresses set forth below by
registered or certified mail, return receipt requested or sent by overnight
express mail or courier or facsimile to such address, if a party has a facsimile
machine. Notice will be deemed to have been given and received when so hand
delivered or after three business days when so deposited in the U.S. Mail, or
when transmitted and received by facsimile or sent by express mail properly
addressed to the other party. The addresses are:
To the Company: GeneLink, Inc.
P.O. Box 3212
Margate, NJ 08402
Fax No. (609) ___-____
To Executive:
The parties may change the foregoing addresses at any time by written notice
given in the manner herein provided.
(b) Integration; Modification. This Agreement is the entire
understanding and agreement between the Company and the Executive regarding its
subject matter and supersedes all prior negotiations and agreements, whether
oral or written, between them with respect to its subject matter. This Agreement
may not be modified except by a written agreement signed by the Executive and a
duly authorized officer of the Company.
(c) Enforceability. If any provision of this Agreement will be
invalid or unenforceable, in whole or in part, such provision will be deemed to
be modified or restricted to the extent and in the manner necessary to render
the same valid and enforceable, or will be deemed excised from this Agreement,
as the case may be, and this Agreement will be construed and
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enforced to the maximum extent permitted by law as if such provision had been
originally incorporated herein as so modified or restricted, or as if such
provision had not been originally incorporated herein, as the case may be.
(d) Binding Effect. This Agreement will be binding upon and
inure to the benefit of the parties, including and their respective heirs,
executors, successors and assigns, except that the Executive may not assign this
Agreement.
(e) Waiver of Breach. No waiver by either party of any
condition or of the breach by the other of any term or covenant contained in
this Agreement, whether by conduct or otherwise, in any one or more instances
will be deemed or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition, or the breach of any
other term or covenant set forth in this Agreement. Moreover, the failure of
either party to exercise any right hereunder will not bar the later exercise of
it.
(f) Governing Law and Interpretation. This Agreement will be
governed by the internal laws of the State of New Jersey. Each party agrees that
he or it, as the case may be, will deal fairly and in good faith with the other
party in performing, observing and complying with the covenants, promises,
duties, obligations, terms and conditions to be performed, observed or complied
with by him or it, as the case may be, hereunder and that this Agreement shall
be interpreted, construed and enforced according to this covenant despite any
law to the contrary.
(g) Headings. The headings of the various sections and
paragraphs have been included herein for convenience only and will not be
considered in interpreting this Agreement.
(h) Counterparts. The parties may execute this Agreement in
several counterparts, each of which will be deemed to be an original but all of
which together will make up the same instrument.
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IN WITNESS WHEREOF, the Executive and the duly authorized officers of the
Company have executed this Agreement on the date first written above.
GENELINK, INC.
By: /s/ John R. DePhillipo
-------------------------------
John R. DePhillipo
/s/ John R. DePhillipo
-------------------------------
John R. DePhillipo
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EXHIBIT 10.5
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT dated as of the 31st day of
December, 1998 by and between GENELINK, INC., a Pennsylvania corporation (the
"Company"), and JOHN R. DEPHILLIPO ("Executive").
BACKGROUND
The Company and Executive are parties to an Employment Agreement dated as
of February 24, 1998 (the "Original Employment Agreement"), pursuant to which
Executive is employed as president and chief executive officer of the Company.
The parties hereto desire to amend the Employment Agreement as further
set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties agree as follows:
1. Amendment to Paragraph 3(d). Paragraph 3(d) of the Original
Employment Agreement is hereby amended to read in its entirety as follows:
"(d) Repayment of Loans. Executive may pay any loans or advances made to
him by the Company using cash, Company Shares, options to acquire Company
Shares, or any combination, by December 31, 2003, unless extended by the
Company."
2. Full Force and Effect. Except as expressly amended hereby, the
Original Employment Agreement shall remain valid, binding and in full force and
effect.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
/s/ John DePhillipo
-------------------------------
JOHN DEPHILLIPO
GENELINK, INC.
By: /s/ John R. DePhillipo
---------------------------
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EXHIBIT 10.6
CONSULTING AGREEMENT
CONSULTING AGREEMENT ("Agreement") made and entered as of February 24,
1998 by and among GENELINK, INC. (the "Company"), a Pennsylvania corporation and
ROBERT P. RICCIARDI, PH.D. (the "Consultant").
BACKGROUND
The parties want to enter into a consulting agreement and to set forth
the terms and conditions of the Consultant's relationship with the Company.
Accordingly, in consideration of the mutual covenants and agreements set forth
herein and the mutual benefits to be derived herefrom, and intending to be
legally bound, the Company and the Consultant agree as follows:
1. ENGAGEMENT
(a) Duties. The Company will engage the Consultant, on the
terms set forth in this Agreement, as a consultant and Treasurer. The Consultant
accepts such relationship with the Company and will perform and fulfill such
duties as are reasonable and necessary for such position for the Company and its
subsidiaries, devoting his best efforts to the performance and fulfillment of
his duties and to the advancement of the interests of the Company, subject only
to the direction of the Board of Directors of the Company (the "Board"). In no
event will the Consultant be required to provide more than eight (8) hours of
consulting services in any week. Notwithstanding the foregoing, the Company will
not require Consultant to provide more hours of service per week than would be
allowed by his current (or any future) position with the University of
Pennsylvania or other academic institution.
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(b) Place of Performance. In his engagement by the Company, the
Consultant will be based in the Philadelphia, Pennsylvania metropolitan area,
except for required travel on Company business.
2. TERM
The Consultant's engagement under this Agreement will be for a five year
term (the "Term") commencing as of the date of an initial closing of the
Company' limited offering (the "Commencement Date") and will continue
uninterrupted for the Term. Each year, unless one party notified the other party
in writing by sixty (60) days prior to the anniversary of the Commencement Date
(the "Anniversary Date"), on the Anniversary Date, the parties will
automatically extend the Term for an additional year. The parties intend the
effect that a full five year Term will always exist under this Agreement.
3. COMPENSATION
(a) Base Compensation. During the Term, the Consultant will be
entitled to receive annual compensation in the calendar year 1998 of $30,000 and
in the calendar year of 1999 of $60,000 (the "Base Compensation"). Each year
thereafter, Consultant will be entitled to an increase in the Base Compensation
equal to the greatest of: (i) the percentage increase in the Consumer Price
Index for the previous year as reported by the United States Department of
Commerce; (ii) 10%; or (iii) an amount determined by the Board or a committee of
the Board designated for this purpose, payable in installments at such time as
the Company customarily pays its senior management (but in any event no less
often than monthly). The increase determined in the previous sentence will be
added to the then current Base Compensation to become the Base Compensation for
purposes of this Agreement.
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(b) If there is a change in control such as would require the
Company to file a Form 8-K with the Securities and Exchange Commission if the
Company was a reporting company under the Securities Exchange Act of 1934 (a
"Change in Control"), the Consultant will be entitled to be paid a lump sum
payment equal to the aggregate Base Compensation, with minimum 10% increases
each year, for the next five years, and a lump sum bonus equal to five times the
largest bonus paid to Consultant under this Agreement. The Company will pay the
payments required under the previous sentence within 30 days of the Change in
Control.
(c) Bonus. Consultant will receive an annual bonus according to
a Company Bonus Plan adopted by the Board.
4. INSURANCE AND OTHER BENEFITS
During the Term, the Consultant will be entitled to opt into all benefits
offered by the Company to its key management employees, including, without
limitation, all pension, profit sharing, retirement, stock option, deferred
compensation, disability insurance, survivor benefits, life insurance or any
other benefit plan or arrangement established and maintained by the Company,
subject to the rules and regulations then in effect regarding participation
therein. In addition, the Company will obtain and fund for Consultant a life
insurance policy for $1,000,000, with beneficiary to be named by Consultant.
5. REIMBURSEMENT OF EXPENSES
The Company will reimburse Consultant for all items of travel,
entertainment and miscellaneous expenses that the Consultant reasonably incurs
in the performance of his duties hereunder, if the Consultant submits to the
Company evidence supporting these expenses as the Company may reasonably
require.
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6. OPTIONS: GRANT OF SHARES
Upon the execution of this Agreement, the Company will issue to
Consultant options to purchase 1,000,000 shares (the
"Shares") of the Company's common stock $.01 par value,
exercisable at the price of $0.10 per Share. These options
will expire ten years from the date hereof and will vest as
follows:
200,000 Shares upon execution of this Agreement, and
200,000 Shares each January 1, beginning January 1, 1999.
Options will be exercisable upon vesting. If there
is a Change of Control, all unvested options will be
immediately exercisable. The Consultant may exercise
vested options by giving the Company a note equal to
the exercise price of the options exercised, which
will bear interest at a floating rate equal to the
Federal Funds Rate published in the Wall Street
Journal as adjusted from time to time. In the
alternative, the Consultant may use Shares owned by
the Consultant may retire debt of the Company to the
Consultant in return for Shares. Shares issued or to
be issued pursuant to these options will be
registered for re-sale by the Company on a Form S-8
as soon as the Company is eligible to use Form S-8.
The Company will bear the entire cost of such
registration.
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The Consultant will also be eligible to participate in any stock option,
stock grant, phantom stock, or other incentive plan when,
as and if approved by the Board. Eligibility in no way
creates an obligation of the Company to issue options to
the Consultant, which will be in the sole and absolute
discretion of the Compensation Committee of the Board.
The stock grants and options granted under this Section 6 of the
Agreement will be adjusted for any recapitalizations, stock
dividends, stock splits or other changes in the Company's
capital stock.
7. TERMINATION OF EMPLOYMENT
Death and Total Disability. If the Consultant dies during the Term, this
Agreement will end as of the date of the Consultant's
death. The Company will pay the Consultant's compensation
for the remaining Term to Consultant's beneficiary or
estate. In case of Total Disability (as defined below) of
the Consultant for any consecutive twelve months during the
Term, the Company will have the right to end this Agreement
by giving the Consultant thirty (30) days' prior written
notice, and upon the expiration of such thirty (30) day
period, the Consultant's employment under this Agreement
will end. If there is such a termination, the Company will
pay Consultant his Compensation for the remaining Term. If
the Consultant will resume his duties within thirty (30)
days after receipt of such a notice of termination, this
Agreement will continue in full force and effect. Upon
termination of this Agreement under this Section 9(a), the
Company will have no further obligations or liabilities
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under this Agreement, except to pay to the Consultant's
estate or the Consultant, as the case may be, the portion
of Compensation that remains unpaid for the Term, including
minimum increases and continuation of benefits.
The term "Total Disability", as used herein, will man a
mental or physical condition that in the reasonable opinion of an independent
medical doctor selected by the Company renders the Consultant unable or
incompetent to carry out the material duties and responsibilities of the
Consultant under this Agreement at the time the Consultant incurred the
disabling condition. If the Consultant is covered under any policy of disability
insurance under Section 4, the definition of Total Disability hereunder will be
the definition of that term in such policy.
The Company may only terminate this Agreement for cause under this
Section 9(b) or under Section 9(a) of this Agreement. Cause
for termination exists only if the Consultant is convicted
of a felony involving fraud or violation of the Federal
Securities laws, or a court of competent jurisdiction finds
that the Consultant has engaged in conduct involving the
Company that constitutes gross negligence or intentional
misconduct. If the Company terminates the Consultant under
this section, all unvested options or stock grants will be
void and the Consultant will not receive any Compensation
or benefit continuation.
8. NO MITIGATION
This Agreement does not require the Consultant to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor will the
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amount of any payment provided for in this Agreement be reduced by any
compensation earned by the Consultant as the result of his employment by another
employer.
9. RESTRICTIVE COVENANT
Competition. Consultant undertakes and agrees that until two years
after termination of this Agreement, he will not compete,
directly or indirectly, or participate as a director,
officer, employee, consultant agent, consultant,
representative or otherwise, or as a stockholder, partner
or joint venturer, or have any direct or indirect financial
interest, including, without limitation, the interest of a
creditor, in any business competing directly or indirectly
with the business of Company or any of its subsidiaries.
Trade Secrets. During the Term and after termination for any reason,
Consultant will not reveal, divulge, copy or otherwise use
any trade secret of the Company or its subsidiaries, it
being acknowledged that all such information and materials
compiled or obtained by or disclosed to Consultant while
employed by the Company or its subsidiaries hereunder or
otherwise are confidential and are the exclusive property
of the Company and its subsidiaries.
Injunctive Relief. The parties hereto agree that the remedy at law for
any breach of the provisions of this Section 9 will be
inadequate and that this Agreement entitles the Company or
any of its subsidiaries or other successors or assigns to
injunctive relief without a bond. Such injunctive relief
will not be exclusive, but will be in addition to any other
rights and remedies Company or any of its subsidiaries or
their successors or assigns might have for such breach.
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Scope of Covenant. Should the duration, geographical area or range or
proscribed activities contained in subparagraph (a) be held
unreasonable by any court of competent jurisdiction, then
such court may modify the duration, geographical area or
range of proscribed activities to such degree as to make it
or them reasonable and enforceable.
10. INDEMNITY
The Company will indemnify and hold the Consultant harmless to the
maximum extent permitted by law against any claim, action, demand, loss, damage,
cost, expense, liability or penalty arising out of any act, failure to act,
omission or decision by him while performing services as an officer, director or
employee of the Company, other than an act, omission or decision by the
Consultant that is not in good faith and is without his reasonable belief that
the same is, or was, in the best interests of the Company. To the extent
permitted by law, the Company will pay all attorneys' fees, expenses and costs
actually incurred by the Consultant in the defense of any of the claims
referenced herein.
11. MISCELLANEOUS
Notices. Any notice, demand or communication required or
permitted under this Agreement will be in writing
and will either be hand-delivered to the other party
or mailed to the addresses set forth below by
registered or certified mail, return receipt
requested or sent by overnight express mail or
courier or facsimile to such address, if a party has
a facsimile machine. Notice will be deemed to have
been given and received when so hand-delivered or
after three business days when so deposited in the
U.S. Mail, or when transmitted and
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received by facsimile or sent by express mail
properly addressed to the other party. The addresses
are:
To the Company: GeneLink, Inc.
P.O. Box 3212
Margate, NJ 08402
Fax No. (609) ____-________
To the Consultant:
The parties may change the foregoing addresses at any time by written notice
given in the manner herein provided.
Integration; Modification. This Agreement is the entire
understanding and agreement between the Company and
the Consultant regarding its subject matter and
supersedes all prior negotiations and agreement,
whether oral or written, between them with respect
to its subject matter. This Agreement may not be
modified except by a written agreement signed by the
Consultant and a duly authorized officer of the
Company.
Enforceability. If any provision of this Agreement will be
invalid or unenforceable, in whole or in part, such
provision will be deemed to be modified or
restricted to the extent and in the manner necessary
to render the same valid and enforceable, or will be
deemed excised from this Agreement, as the case may
be, and this Agreement will be construed and
enforced to the maximum extent permitted by law as
if such provision had been originally incorporated
herein as so
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modified or restricted, or as if such provision had
not been originally incorporated herein, as the case
may be.
Binding Effect. This Agreement will be binding upon and
inure to the benefit of the parties, including and
their respective heirs, executors, successors and
assigns, except that the Consultant may not assign
this Agreement.
Waiver of Breach. No waiver by either party of any
condition or of the breach by the other of any term
or covenant continued in this Agreement, whether by
conduct or otherwise, in any one or more instances
will be deemed or construed as a further or
continuing waiver of any such condition or breach or
a waiver of any other condition, or the breach of
any other term or covenant set forth in this
Agreement. Moreover, the failure of either party to
exercise any right hereunder will not bar the later
exercise of it.
Governing Law and Interpretation. The internal laws of the
State of New Jersey will govern this Agreement. Each
party agrees that he or it, as the case may be, will
deal fairly and in good faith with the other party
in performing, observing and complying with the
covenants, promises, duties, obligations, terms and
conditions to be performed, observed or complied
with by him or it, as the case may be, hereunder;
and that this Agreement shall be interpreted,
construed and enforced according to this covenant
despite any law to the contrary.
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Headings. The headings of the various sections and
paragraphs have been included herein for convenience
only and will not be considered in interpreting this
Agreement.
Counterparts. The parties may execute this Agreement in
several counterparts, each of which will be deemed
to be an original but al of which together will make
up the same instrument.
IN WITNESS WHEREOF, the Consultant and the duly authorized officers of the
Company have executed this Agreement on the date first written above.
GENELINK, INC.
By: /s/ John R. DePhillipo
----------------------
John R. DePhillipo
/s/ Robert P. Ricciardi
-----------------------
Dr. Robert P. Ricciardi
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EXHIBIT 10.7
AMENDMENT TO CONSULTING AGREEMENT
THIS AMENDMENT TO CONSULTING AGREEMENT made and entered to this 31st day
of December, 1998, by and among GENELINK, INC. (the "Company"), a Pennsylvania
corporation, and ROBERT P. RICCIARDI, PH.D. (the "Consultant").
BACKGROUND
The Company and the Consultant are parties to a Consulting Agreement
dated as of February, 1998 (the "Consulting Agreement"). The parties desire to
amend the Consulting Agreement as set forth below.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Amendment to Consulting Agreement. Section 7(a) of the Consulting
Agreement is hereby amended by deleting current Section 7(a) and
replacing it in its entirety as follows:
"(a) Consultant is granted the right and option to purchase
1,000,000 shares (the "Shares") of the Company's Common Stock, exercised at the
price of $.10 per Share, which right and option may be exercised from time to
time, in whole or in pat, on a cumulative basis at any time. Subject to the
provisions of this Section 7(a) to the contrary, in the event that Consultant
ceases to be an employee, consultant, representative or agent of the Company on
or before the dates listed below, Consultant shall be obligated to forfeit to
the Company any and all Shares exercised by Consultant in excess of the number
of Shares set forth below:
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No. of Shares No. of Shares
Consultant May Retain Subject to Termination
Forfeiture Date
200,000 800,000 Prior to January 1, 1999
400,000 600,000 Prior to January 1, 2000
600,000 400,000 Prior to January 1, 2001
800,000 200,000 Prior to January 1, 2002
1,000,000 0 On or after January 1, 2002
Notwithstanding anything in this Section 7(a) to the contrary, Consultant's
obligation to forfeit any Shares he has purchased shall terminate upon a "change
in control" of the Company. For purposes of this Agreement, the term "change in
control" shall be deemed to have occurred when (i) the sale in any one or more
related transaction of 33% or more of the outstanding voting stock of the
Company, (ii) the Company sells 50% or more of its assets in one or a number of
related transactions, or (iii) as a result of a tender offer, merger,
consolidation, sale of assets, or contest for election of directors, or any
combination of the foregoing transactions or events, individuals who were
members of the Board of Directors of the Company immediately prior to any such
transaction or event. The Consultant may exercise options by giving the Company
a note equal to the exercise price of the options exercised, which will bear
interest at a floating rate equal to the Federal Funds Rate published in The
Wall Street Journal as adjusted form time to time. In the alternative, the
Consultant may use Shares owned by the Consultant, valued at the then prevailing
market price of the Shares."
2. No Other Amendment. The Consulting Agreement as amended hereby
remains in full force in effect and, except as expressly as stated
herein, there are no other amendments thereto.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Amendment to
Consulting Agreement as of the date set forth above.
GENELINK, INC.
By: /s/ John R. DePhillipo
---------------------------------
Chief Executive Officer
By: /s/ Robert P. Ricciardi
---------------------------------
Robert P. Ricciardi, Ph.D.
3
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in Form 10-SB of our report dated March 12,
1999, relating to the financial statements of GeneLink, Inc., which is contained
therein.
Philadelphia, Pennsylvania
December 28, 1999 Siegal & Drossner, P.C.
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,334
<SECURITIES> 0
<RECEIVABLES> 198
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 42,230
<PP&E> 65,280
<DEPRECIATION> 8,613
<TOTAL-ASSETS> 845,827
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0
0
<COMMON> 658,567
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<SALES> 2,263
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