<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2000
COMMISSION FILE NO. 0-28077
GENELINK, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
PENNSYLVANIA 23-2795613
------------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 S. Thurlow Street
Margate, New Jersey 08402
----------------------------------- -----
(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER: (609) 823-6991
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date.
Number of Shares of Common Stock
Outstanding on May 5, 2000 10,798,082
Transitional Small Business Disclosure Format Yes ___ No X
1
<PAGE> 2
GENELINK, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Balance Sheet at March 31, 2000 and March 31, 1999 (unaudited)
Statement of Income for the three months ended March 31, 2000 and 1999
(unaudited)
Statement of Cash Flows for the three months ended March 31, 2000 and
1999 (unaudited)
Notes to Financial Statements (unaudited)
2
<PAGE> 3
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
MARCH 31, MARCH 31,
2000 1999
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 47,512 $ 1,585
Accounts Receivable 2,285 768
Inventory 10,720 11,138
Prepaid Expenses 36,080 17,245
--------- ---------
TOTAL CURRENT ASSETS 96,597 30,736
--------- ---------
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 (15,018) (10,228)
--------- ---------
TOTAL FIXED ASSETS 50,262 55,052
--------- ---------
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 (87,952) (87,736)
--------- ---------
TOTAL OTHER ASSETS 3,893 4,109
--------- ---------
TOTAL ASSETS $ 150,752 $ 89,897
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
MARCH 31, MARCH 31,
2000 1999
---- ----
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable & Accrued Expenses $ 136,820 $ 110,076
Accrued Payroll Taxes 18,968 355
Accrued Interest Payable 13,865 0
Accrued Compensation 182,055 79,375
Notes Payable - Current Portion 260,183 0
----------- -----------
TOTAL CURRENT LIABILITIES 611,891 189,806
----------- -----------
LONG-TERM LIABILITIES
Loans Payable Affiliates -
Net of current portion 43,229 30,500
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, $.01 par value,
75,000,000 shares authorized
10,919,262 and 9,665,041 shares
issued, 10,823,082 and
956,886 outstanding as of
March 31, 2000 and 1999,
respectively 109,193 96,651
Treasury Stock, 96,180 shares (109,860) (109,860)
Additional Paid-in Capital 3,715,911 3,460,085
Stock Subscriptions Receivable (711,788) (631,107)
Deferred Compensation (400,000) (600,000)
Deficit Accumulated during the
the development stage (3,107,824) (2,346,178)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (504,368) (130,409)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 150,752 $ 89,897
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE 9/21/94
THREE MONTHS THREE MONTHS (DATE OF
ENDED ENDED INCEPTION)
3/31/00 3/31/99 TO 3/31/00
------- ------- ----------
<S> <C> <C> <C>
REVENUE $ 9,463 $ 2,452 $ 242,889
COSTS OF GOOD SOLD 853 526 36,971
------------ ----------- -----------
GROSS PROFIT 8,610 1,926 205,918
------------ ----------- -----------
EXPENSES
Selling, general and administrative 279,734 266,511 2,413,628
Consulting 20,870 16,200 247,541
Professional fees 25,851 16,115 258,998
Advertising and promotion 3,955 11,204 124,226
Amortization and
Depreciation 1,252 1,251 85,396
------------ ----------- -----------
331,662 311,281 3,129,789
------------ ----------- -----------
INTEREST EXPENSE 17,927 0 181,080
------------ ----------- -----------
INTEREST INCOME 84 233 14,701
------------ ----------- -----------
NET (LOSS) BEFORE PROVISION
FOR INCOME TAXES AND
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE (340,895) (309,122) (3,090,250)
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 0 (17,574) (17,574)
------------ ----------- -----------
NET (LOSS) BEFORE PROVISION
FOR INCOME TAXES (340,895) (326,696) (3,107,824)
PROVISION FOR INCOME TAXES 0 0 0
------------ ----------- -----------
NET (LOSS) $ (340,895) $ (326,696) $(3,107,824)
============ =========== ===========
NET (LOSS) PER SHARE BASIC
AND DILUTED $ (.03) $ (.03)
Weighted average common
shares and diluted potential
common shares 10,745,727 9,631,028
------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE 9/21/94
THREE MONTHS THREE MONTHS (DATE OF
ENDED ENDED INCEPTION)
3/31/00 3/31/99 TO 3/31/00
------- ------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(340,895) $(326,696) $(3,107,824)
Adjustments to reconcile net (loss)
to net cash provided (used) by
operating activities
Depreciation and Amortization 1,252 18,825 102,970
Fair value of officers compensation 0 0 718,000
Fair value of compensation related
to vested options 200,000 200,000 700,000
Common Stock issued for services 27,900 0 142,000
Accrued Interest-On Subordinated
Debt converted to common stock 0 0 74,861
Accrued Interest on Debentures 10,246 0 86,390
(Increase) decrease in assets
Accounts receivable (1,178) (569) (2,285)
Inventory 155 132 (10,721)
Prepaid expenses (23,302) 2,180 (36,080)
Increase in organization costs 0 0 (90,205)
Deposit on utilities 0 0 (1,640)
Increase (decrease) in liabilities
Accounts payable & accrued
Expenses 41,291 (9,861) 136,822
Accrued payroll taxes 1,840 (465) 18,968
Accrued interest 7,685 0 13,864
Accrued compensation 54,312 49,375 182,055
--------- --------- -----------
Net cash provided (used)
by operating activities (20,694) (67,079) (1,072,825)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment 0 0 (65,280)
(Increase) decrease in Subscriptions
Receivables (5,500) 63,330 (658,398)
--------- --------- -----------
Net cash provided (used) by investing
activities (5,500) 63,300 (723,678)
--------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
GENELINK ,INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE 9/21/94
THREE MONTHS THREE MONTHS (DATE OF
ENDED ENDED INCEPTION)
03/31/00 3/31/99 TO 3/31/00
-------- ------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayments) from loans and
notes payable 12,730 (6,000) 417,905
Proceeds from Debentures Issued 45,000 0 295,000
Proceeds relating to issuance
of common stock (net) 10,000 0 1,131,110
-------- -------- ----------
Net cash provided by financing
activities 67,730 (6,000 1,844,015
-------- -------- ----------
NET INCREASE (DECREASE) IN CASH 41,536 (9,749) 47,512
Cash, beginning of period 5,976 11,334 0
-------- -------- ----------
Cash, end of period $ 47,512 $ 1,585 $ 47,512
======== ======== ==========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 0 $ 0 $ 0
======== ======== ==========
Interest paid $ 0 $ 0 $ 0
======== ======== ==========
NON-CASH FINANCING TRANSACTIONS:
Conversion of Debt to Stock $ 0 $ 0 $ 374,675
-------- -------- ----------
Reduction of Subscriptions Receivable
via relinquishment of common stock
(net) $ 0 $ 0 $ 115,496
-------- -------- ----------
Increase in Note receivable-officer
cashless exercise of options $ 0 $ 40,242 $ 62,118
-------- -------- ----------
Stock issued related to debenture
financing $ 28,050 $ 0 $ 121,207
-------- -------- ----------
Redemption of common stock-due to
cancellation of marketing agreement $ 0 $ 67,500 $ 67,500
-------- -------- ----------
Accrued interest on Subscriptions
Receivable $ 11,341 $ 9,069 $ 152,133
-------- -------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - DESCRIPTION OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
BUSINESS ORGANIZATION
Genelink, Inc. (the Company) was organized in the 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 and after an individual dies. This DNA
can be used to establish whether or not the disease or disorder that
caused death was genetic in origin. As researchers continue to identify
diseases linked to defective genes, living family members can use the
stored DNA to discover if they are at risk for certain 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.
8
<PAGE> 9
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 up to 75 years. Upon the
client's request, and upon the payment of a retrieval fee, the stored
DNA specimen can be retrieved and sent to a laboratory for testing.
More than one test can be made on the same DNA specimen.
INTERIM FINANCIAL STATEMENTS
These interim financials, which are unaudited, include all necessary
adjustments which in the opinion of management are necessary in order
to make the financial statements not misleading.
CASH AND CASH EQUIVALENTS
Highly liquid debt instruments purchased with a maturity of three
months or less are considered to be cash equivalents. At times cash and
cash equivalents may exceed insured limits. The Company maintains some
cash balances with Merrill Lynch, which is SIPC insured up to $300,000.
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.
9
<PAGE> 10
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 March 31, 2000 and
1999:
Professional Legal Fees $ 76,471
Professional Accounting Fees $ 10,505
--------
$ 86,976
Less: Accumulated Amortization (86,976)
--------
Net Organization Costs $ 0
========
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.
10
<PAGE> 11
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 the first quarter of 2000 and 1999.
RECLASSIFICATIONS
Certain balances not affecting net income have been reclassified to
conform to the current year presentation.
PER SHARE DATA
Effective November 12, 1998, the Company adopted SFAS No. 128,
"Earnings Per Share." The provisions of SFAS No. 128 establish
standards for computing and presenting earnings per share (EPS). This
standard replaces the presentation of primary EPS with a presentation
of basic EPS. Additionally, it requires dual presentation of basic and
diluted EPS for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the
diluted EPS computation. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. Diluted EPS for 2000 and
1999 excludes any effect from such securities as their inclusion would
be antidilutive. Per share amounts for all periods presented have been
restated to conform with the provisions of SFAS No. 128.
11
<PAGE> 12
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.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES
Effective fiscal years beginning after December 15, 1998, SOP 98-5
requires organization costs to be expensed. As a result of these
charges, any unamortized organization costs should be written off as a
cumulative effect of an accounting change. The cumulative effect of
this change in accounting on unamortized organization costs was $17,574
which is reflected in 1999 Financial Statements.
NOTE 2 - DEVELOPMENT STAGE OPERATIONS
The Company which was formed in 1994, since its inception, has had
limited operations and its focus has predominantly been on raising
capital and completing the research and development of its product in
order to market it according to the Company's business plans.
The deficit accumulated during the development stage was $3,107,824.
Although the Company has had sales from inception to date, these sales
were to distributors who intended to resell products and services to
funeral homes and to the general public. These distributors were
unsuccessful in selling and reselling the products and services to
funeral homes and the general public, but were not entitled to return
any unsold kits to the Company. No significant sales to funeral homes
or to the general public have occurred since inception. During 1996,
1998, 1999 and 2000, the Company issued common stock, in connection
with services. Certain services were charged to operations and other
amounts were offset to additional paid in capital, as they were
directly attributable to raising capital. The shares were valued at the
fair market value at time of issuance per FAS No. 123 (Financial
Accounting Series "For Stock Based Compensation.")
12
<PAGE> 13
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - PROPERTY & EQUIPMENT
As of March 31, 2000 and 1999, property and equipment consisted of the
following:
2000 1999
---- ----
Office Furniture $ 1,154 $ 1,154
Office Equipment 14,126 14,126
Leasehold Improvement 50,000 50,000
------- -------
$65,280 $65,280
======= =======
Depreciation expense amounted to $1,198 and $1,197 for the three months
ended March 31, 2000 and 1999, respectively.
NOTE 4 - LOANS PAYABLE-AFFILIATES
The Company's unsecured long-term debt as of March 31, 2000 and 1999
consists of loans from various shareholders with no stated repayment
terms.
2000 1999
---- ----
Total Obligations $43,236 $30,500
Less: Current Portion 0 0
------- -------
$43,236 $30,500
======= =======
NOTE 5 - DEBENTURE-NOTES PAYABLE
The Company entered into the following debenture notes payable with
terms indicated below:
<TABLE>
<CAPTION>
Shares of Common
Stock Issued as
Amount of Interest Due Additional
Debenture Date Issued Rate Date Consideration
--------- ----------- ---- ---- -------------
<S> <C> <C> <C> <C>
$ 50,000 April 30, 1999 12% 3-31-00 50,000
$ 15,000 April 30, 1999 12% 3-31-00 15,000
$ 10,000 July 29, 1999 12% 6-01-00 10,000
$ 100,000 August 6, 1999 12% 6-01-00 100,000
$ 10,000 August 8, 1999 12% 6-01-00 10,000
$ 15,000 November 15, 1999 12% *3-31-00 15,000
$ 50,000 December 3, 1999 12% 6-01-00 50,000
$ 25,000 March 24, 2000 12% 6-30-00 25,000
$ 20,000 March 29, 2000 12% 6-30-00 20,000
---------
$ 295,000
$ (15,000) *Less Amounts converted to stock
---------
$ 280,000
=========
</TABLE>
13
<PAGE> 14
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - DEBENTURE-NOTES PAYABLE (CONTINUED)
Interest is to be paid quarterly with the principal balance due
December 31, 1999, however the Company as of March 31, 2000 extended
all debenture due dates, except for two debentures having an aggregate
principal amount of $65,000. The Company is negotiating with the
holders of these debentures with respect to extending the due dates. If
an agreement to extend the due dates cannot be reached, the Company
will have the option to pay the principal and accrued interest on these
Debentures in cash or in common stock, at a value of $.29 per share.
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 March 31, 2000
was $13,714.
In connection with the Company issuing the debenture notes payable,
additional shares of common stock were issued in amounts equal to the
principal amount of the debenture. The fair market value, of the
amortizable debenture discounts, was recorded net with the debenture
notes payable and will be amortized over the life of the debenture.
As of March 31, 2000 the Company's Amortizable Debenture Discounts were
as follows:
Original Cumulative
Amortizable Amortization/ Net Amortizable
Debenture Interest Debenture
Discounts Expense Discounts
----------- -------- ---------------
$106,207 $86,390 $19,817
======== ======= =======
NOTE 6 - OPERATING LEASES
The Corporation has various noncancellable operating leases with terms
of 24 to 36 months. The following is a schedule of future minimum
rentals under the leases for the three months as of March 31, 2000:
2000 1999
---- ----
1999 $ -- $ 8,137
2000 3,475 4,633
2001 764 764
-------- --------
$ 4,239 $ 13,534
Less Current Portion (4,239) (10,849)
-------- --------
Long Term Portion $ 0 $ 2,685
======== ========
14
<PAGE> 15
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 - INCOME TAXES
At March 31, 2000, the Company had federal and state tax net operating
loss carryforwards of approximately $1,848,000. 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 $462,000 at March 31, 2000
primarily from net operating loss carryforwards. A valuation allowance
was recorded to reduce the net deferred tax asset to zero.
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS
The Company's shareholder equity consists of the following:
A. SUBSCRIPTION RECEIVABLE-OFFICERS
Since its inception and until the execution of an employment agreement
in early 1998, the Company advanced funds periodically to an officer.
Subscription Receivable-Officers represents loans and accrued interest
of $711,788 and $631,107 at March 31, 2000 and 1999, respectively. The
loans accrue interest using the average applicable one-month Federal
Rates (AFRs). The average AFR used for 2000 and 1999 was 6.31%.
The officers have executed notes payable to the Company to evidence
their obligation on account of his loans. Under the terms of his
obligation, in repayment thereof, the officer will have the right, at
any time on or before December 31, 2003, to transfer to the Company, at
the then fair market value, shares of the Company's common stock. Any
transfer not in full satisfaction of the obligation will first be
applied to accrued interest and then to principal. No payments of
interest or principal shall be due on account of the loans prior to
December 31, 2003. Fair market value of the Company's shares shall be
equal to the average between the bid and asked price in the market in
which it is publicly-traded on the last date on which such trades
occurred prior to the transfer of shares from the officer to the
Company.
The Company recorded these subscription receivables as a contra-equity
account in the Company's balance sheet in accordance with Staff
Accounting Bulletin Topic 4G, with related interest income on these
notes also being recorded in the Company's equity section.
During the three month period ended March 31, 1999, the officer repaid
a portion of this subscription receivable by exercising 21,180 shares
of vested options which were valued at the then fair market value of
$2.00 per share. The officer then returned these shares to the Company
and used the fair market value of $40,242 as a repayment of his
advance.
15
<PAGE> 16
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONTINUED)
A. SUBSCRIPTION RECEIVABLE-OFFICER (CONTINUED)
The Company advanced 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.
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.
B. STOCK SPLIT
During February 1998, the Company affected a 75-for-1 stock split
thereby authorizing the issuance of up to 75,000,000 shares of Common
Stock. Stockholders equity has been adjusted to give retro-active
effect to the stock split and in addition, all common shares redeemed
as a result of the aforementioned stock split were retired. The Company
increased its number of shares authorized from 1,000,000 to 75,000,000
with par value remaining at $.01.
C. 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. Interest expense was recorded
in the amount of $55,631 representing the difference between the fair
value of the Company's stock and the value of the notes at the date of
conversion.
16
<PAGE> 17
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONTINUED)
D. PRIVATE PLACEMENT OFFERING MEMORANDUM/STOCK OPTIONS
From April to June 1998, Genelink, Inc. commenced a private placement
offering of 800,000 Shares of its common stock at $1 per share to the
residents of New York, New Jersey, Florida and the District of Columbia
under Rule 504 of Regulation D, which provides an exemption for limited
offerings and sales of securities not exceeding $1,000,000. The
proceeds of approximately $640,000 of the offering were used to fund
research and development, marketing, working capital, payments of
salaries to officers, and general administrative expenses. The Company
compensated Shannon/Rosenbloom Marketing, Inc., $100,000 for marketing,
promotional and investor relations services which was paid upon the
successful completion of the offering. The offering expenses included
travel, consulting fees, "blue sky"fees, legal and accounting expenses
in connection with the Private Placement Offering mentioned above the
Company entered into an agreement with Shannon/Rosenbloom Marketing,
Inc. dated January 21, 1998 to assist the Company in raising up to
$1,000,000 through a public offering of its common stock under SEC rule
504. In connection with this agreement Shannon/Rosenbloom Marketing,
Inc. received a cash fee of $100,000 along with the option to convert
up to $25,000 of its cash fee into the Company's common stock at a
conversion rate of $.10 per share (250,000 shares) and also receive
250,000 shares of restricted stock. Shannon/Rosenbloom Marketing, Inc.
exercised its option and converted $25,000 of its fee into common
stock.
The Company valued the above mentioned shares at the then determined
fair value as the Company had minimal sales, history of net losses, no
market value and the shares were subject to restrictions imposed under
state laws.
Subsequent to the completion of the private placement offering, the
Company issued shares to individuals on their medical advisory board
and other consultants at a fair value price of $1.00 per share.
E. TREASURY STOCK
On January 5, 1999, John DePhillipo, (CEO of the company) purchased
21,180 shares of common stock by exercising stock options for $2,118.
On the same day, the Company acquired 21,180 shares of common stock in
exchange for $40,242 of debt owed to the Company by John DePhillipo.
The shares had an option price of 10 cents 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.
17
<PAGE> 18
GENELINK,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONTINUED)
E. TREASURY STOCK (CONTINUED)
Simultaneously on March 17, 1999 the Company assigned 75,000 of the
aforementioned shares to an investment advisor to promote the Company
stock and obtain additional funding. The Company valued the shares at
the then fair market value of $67,500.
F. STOCK OPTIONS AND WARRANTS
The Financial Accounting Standards Board has issued SFAS 123, which
defines a fair value based method of accounting for an employee stock
option and similar equity instruments and encourages all entities to
adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to continue to
measure compensation cost for those plans using the method of
accounting prescribed by Accounting Principles Board Opinion No. 25
(APB 25). Entities electing to remain with the accounting in APB 25
must make proforma disclosures of net income (loss) and, if presented
earnings (loss) per share, as if the fair value based method accounting
defined in SFAS 123 had been adopted. The Company has elected to
account for its stock-based compensation plans under APB 25.
During September, 1997, 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, and 200,000 shares
each January 1, beginning January 1, 1999, 2000, 2001, and 2002.
18
<PAGE> 19
GENELINK,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONTINUED)
F. STOCK OPTIONS AND WARRANTS (CONTINUED)
Pursuant to APB No. 25 compensation has been recognized based upon the
difference of the fair value of the Company's stock at grant date and
the officers exercise price as follows:
Fair Value
Grant of Options at Exercise Additional
Date # of Options Granted Date of Grant Price Compensation
----- -------------------- ------------- ------- ------------
1997 2,200,000 $.60 $.10 1,100,000
1998 0 -- -- --
In connection with the Company issuing the options to the officers
noted above, the Company recorded a deferred compensation charge of
$1,100,000 reflected in the equity section. The Company will record
compensation expense based upon the vesting schedules of these options
as noted below:
YEAR AMOUNT
---- ------
1998 $300,000
1999 $200,000
2000 $200,000
2001 $200,000
2002 $200,000
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 three months ended March 31, 2000, the Company also
issued 25,000 stock options/warrants to purchase the Company's common
stock at a price of $1.50 per share with expiration dates in 2003.
19
<PAGE> 20
GENELINK,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SHAREHOLDERS' EQUITY TRANSACTIONS (CONTINUED)
F. STOCK OPTIONS AND WARRANTS (CONTINUED)
The following schedule summarizes the vested stock options and stock
warrants activity and status as of March 31, 2000 and 1999 and for the
three month period ending March 31, 2000 and 1999.
2000 1999
---- ----
Granted 4,434,375 2,345,000
========= =========
Vested options outstanding
At beginning of the period 1,428,195 600,000
Options vested during period 825,000 545,000
Vested options exercised
during Period (100,000) (21,180)
Cancelled (20,000) 0
--------- ---------
Vested outstanding at End
of Period 2,133,195 1,123,820
========= =========
A summary of outstanding options/warrants along with their exercise
price and dates as of March 31, 2000 are as follows:
EXERCISE OPTIONS/WARRANTS OUTSTANDING EXPIRATION
PRICE GRANTED OPTIONS/WARRANTS DATE
$0.10 2,200,000 1,478,820 12/31/03
$0.75 45,000 45,000 12/31/04
$1.00 2,100,000 2,100,000 12/31/03
$1.50 89,375 89,375 12/31/03
--------- ---------
4,434,375 3,713,195
========= =========
20
<PAGE> 21
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 - NET LOSS PER SHARE
Earnings per share is calculated under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share."
Basic EPS is calculated using the weighted average number of common
shares outstanding for the period and diluted EPS is computed using the
weighted average number of common shares and dilutive common equivalent
shares outstanding. Given that the Company is in a loss position, there
is no difference between basic EPS and diluted EPS since the common
stock equivalents would be antidilutive.
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31 2000 1999
--------------------- ---- ----
<S> <C> <C>
Net loss $ (340,895) $ (326,696)
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 10,745,727 9,631,028
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 10,745,727 9,631,028
============ ===========
Net loss per share-basic & diluted $ (.03) $ (.03)
============ ===========
</TABLE>
*The following common stock equivalents are excluded from earnings per
share calculation as their effect would have been antidilutive:
PERIOD ENDED MARCH 31 2000 1999
--------------------- ---- ----
Warrants and stock options 2,133,195 1,123,820
========= =========
NOTE 10 - ADVERTISING
The Company expenses the production costs of advertising the first time
the advertising takes place. Advertising expense was $3,955 and $11,204
for the three months ending March 31, 2000 and 1999, respectively.
21
<PAGE> 22
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 - RENT
The Company leases its primary executive offices located in Margate,
New Jersey at no cost from its officers. Additionally, in September,
1999 the Company leased office space in Cincinnati, Ohio for a term of
one year at a gross annual rent of $2,220. Rent expense for the period
ended March 31, 2000 was $370.
NOTE 12 - TRANSACTIONS WITH RELATED PARTIES
The Company is dependent, to a large degree, on the services of John
DePhillipo, its Chairman and Chief Executive Officer and the Company
has entered into a five (5) year employment agreement dated February
24, 1998, with compensation of $137,500 in 1999 and $151,250 in 2000.
Also, in 1998 the Company entered into a five year employment agreement
with Robert Ricciardi, Vice President of Research and Development, with
an agreed upon compensation of $60,000 in 1999 and $66,000 in 2000.
Officer compensation for the three months ending March 31, 2000 and
1999 was $54,312 and $49,375.
The Company has an agreement with the UNTHSC through March, 2006 for
the storage of the genetic material obtained using one of the Company's
kits. Two (2) doctors associated with the UNTHSC own approximately
20,000 Shares of the Company. The Company has established protocols
with the UNTHSC whereby the UNTHSC will receive a sample in an envelope
enclosed with the kit, measure the quantity to assure that enough
genetic material is present, analyze the sample to extract the DNA and
freeze and store the material in the refrigerated area maintained by
the UNTHSC making it available for future retrieval.
A portion of the Company's operations are conducted by Kelly/Waldron &
Company in East Brunswick, New Jersey, which owns 289,333 Shares of the
Company. Kelly/Waldron, which provides various services to members of
the pharmaceutical industry, acts as the Company's back office,
receiving orders and inquiries, processing data and preparing reports
for the Company.
As of March 31, 2000 and 1999, the Company owed Kelly/Waldron $20,166
and $19,650, respectively.
22
<PAGE> 23
GENELINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 12 - 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.
The Company assigned 75,000 of the aforementioned shares to an
investment advisor engaged to promote additional fund raising
activities.
NOTE 13 - COMMITMENT & CONTINGENCIES
The Company is involved in a trademark opposition regarding the use of
its trademark Genelink(R), however, management believes it will prevail
in this matter, and will have no material adverse effect on the
Company.
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. The Company's cash reserves have
decreased since the Company's private placement from $800,000 to
approximately $50,000 and sales have not increased enough to support
operations, however, the Company is in negotiations for a $1,000,000
Bridge Loan and has announced new marketing plans to enhance sales and
therefore management believes that they will be able to generate
sufficient revenue and cash flow for the Company to continue as a going
concern.
23
<PAGE> 24
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements in this Report that relate to future results and events are
based on the Company's current expectations. Actual results in future periods
may differ materially from those currently expected or desired because of a
number of risks and uncertainties. For a discussion of factors affecting the
Company's business and prospects, see "Item 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations - Factors Affecting
the Company's Business and Prospects."
Operating results for the three-month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the full
fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
For the three month period ended March 31, 2000, the Company's primary
liquidity requirements have been the implementation and funding of its sales and
marketing efforts, the payment of compensation to officers and other employees
and the payment of accounts payable. In the first three months of 2000 the
Company has raised $67,730, primarily through the issuance of $45,000 principal
amount of 12% Debentures.
Cash and cash equivalents at March 31, 2000 amounted to $47,512 as
compared to $1,585 at March 31, 1999, an increase of $45,927. During the first
three months of 2000, the Company's operating activities utilized $20,694, as
compared to $67,079 for the first three months of 1999. Cash utilized during
these periods resulted from Company's net losses for such periods.
Investing activities utilized $5,500 for the three months ended March
31, 2000 as compared to realizing $63,330 for the three months ended March 31,
1999. Primary sources/uses of funds for investing activities were related to
subscriptions receivable from John DePhillipo, the President and Chief Executive
Officer of the Company. Financing activities provided $67,730 for the three
month period ended March 31, 2000 as compared to $0 for the three months ended
March 31, 1999. Financing activities in the three months ended March 31, 2000
primarily resulted from the issuance of $45,000 principal amount of 12%
Debentures throughout the first three months of 2000, as the Company required
additional funds for working capital purposes.
The Company will require approximately $2,000,000 to implement its
sales and marketing strategy in the year 2000. The Company intends to raise
funds through a private placement of securities. The Company has received a
letter of intent from Brennan Dyer & Company, LLC, a venture capital group, to
advise the Company in seeking to obtain investors to provide these funds.
Brennan Dyer & Company, LLC has assisted the Company in all of the financing it
has received since its inception. Unless the Company can increase its revenues
and increase its stock price, it is unlikely that the Company will be able to
secure such financing. If the Company is not able to secure such additional
required capital, it will continue to realize negative cash flow and losses and
it is unlikely that it will be able to continue operations.
For the three months ended March 31, 2000, the Company raised $45,000
through the issuance of 12% Debentures. The Company also issued 45,000 shares of
common stock to the holders of the Debentures as additional consideration making
the effective interest rate on the Debentures equal to 128%. The issuance of
shares were required by the investors as a condition to agreeing to lend money
to the Company. No alternative
24
<PAGE> 25
sources of financing were available to the Company, and the Company would have
been unable to fund its operations without receiving such financing. The Company
has the option to convert the Debentures into shares of common stock. At such
time the Company will have the right to convert the Debentures into shares of
common stock of the Company equal to the value of the principal and accrued
interest on the Debentures at the closing bid price of the stock on the date of
maturity. At the closing bid price of $.29 per share at May 5, 2000, this could
result in the Company issuing approximately an additional 155,172 shares of
common stock to the holders of the Debentures, or approximately 1.0% of the
Company on a fully-diluted basis.
RESULTS OF OPERATIONS
The following table sets forth certain operating information regarding the
Company:
<TABLE>
<CAPTION>
THREE MONTH THREE MONTH
PERIOD ENDED PERIOD ENDED
MARCH 31, 2000 MARCH 31, 1999
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Revenues $ 9,463 $ 2,452
Cost of Goods Sold $ 853 $ 526
Net Earnings (Loss) $(340,895) $(326,696)
Net Earnings (Loss) Per Share $ (.03) $ (.03)
</TABLE>
The following summary table presents comparative cash flows of the Company
for the three months ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
THREE MONTH THREE MONTH
PERIOD ENDED PERIOD ENDED
MARCH 31, 2000 MARCH 31, 1999
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Net cash used in operating
activities $ 20,694 $ 67,079
Net cash provided (used) by
investing activities $ (5,500) $ 63,300
Net cash provided (used) by
financing activities $ 67,730 $ (6,000)
</TABLE>
The Company had cash balances totaling $1,585 at March 31, 1999 and
$47,512 at March 31, 2000.
25
<PAGE> 26
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 TO THREE MONTHS ENDED MARCH 31,
1999
Financial Condition
Assets of the Company increased from $89,897 at March 31, 1999 to
$150,757 at March 31, 2000, an increase of $60,855. This increase was primarily
due to an increase in cash from $1,585 at March 31, 1999 to $47,512 at March 31,
2000 and an increase in prepaid expenses from $17,245 at March 31, 1999 to
$36,080 at March 31, 2000.
Liabilities increased from $220,306 at March 31, 1999 to $655,120 at
March 31, 2000, an increase of $434,814. This increase was primarily due to an
increase in deferred compensation due officers from $79,375 at March 31, 1999 to
$182,055 at March 31, 2000, and an increase in notes payable from $0 at March
31, 1999 to $260,183 at March 31, 2000, the proceeds of which were used by the
Company primarily for working capital purposes.
Current Year Performance and Earnings Outlook
Revenues. The total revenues for the three months ended March 31, 2000
were $9,463 as compared to $2,452 for the three months ended March 31, 1999. The
increase in revenues of $7,011 is primarily due to increased sales and marketing
efforts undertaken by and on behalf of the Company.
Expenses. Total expenses for the three months ended March 31, 2000 were
$349,589 as compared to $311,281 for the three months ended March 31, 1999, an
increase of $38,308, primarily resulting from an increase in professional
expenses from $16,115 for the three months ended March 31, 1999 to $25,851 for
the three months ended March 31, 2000, an increase in interest expenses from $0
for the three months ended March 31, 1999 to $17,927 for the three months ended
March 31, 2000 and an increase in selling, general and administrative expenses
from $266,511 for the three months ended March 31, 1999 to $279,734 for the
three months ended March 31, 2000.
Losses. The Company incurred a loss of $340,895 for the three months
ended March 31, 2000 as compared to a loss of $326,696 for the three months
ended March 31, 1999, an increase of $14,199. This increase in the amount of
losses incurred is primarily due to the $38,308 increase in expenses incurred by
the Company for the three months ended March 31, 2000 as compared to the three
months ended March 31, 1999.
FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS
There are a number of factors that affect the Company's business and
the result of its operations. These factors include general economic and
business conditions; the level of acceptance of the Company's products and
services; the rate and commercial applicability of advancements and discoveries
in the genetics field; and the Company's ability to enter into strategic
alliances with companies in the funeral home and genetics industries; the
ability of the Company to raise the financing necessary to implement its
business and marketing plan, to pay salaries to its officers and employees and
to pay its accounts payable.
26
<PAGE> 27
PART II. OTHER INFORMATION
Item 3. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 27-Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
* * * * * *
27
<PAGE> 28
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENELINK, INC.
--------------
(Registrant)
Date: May 15, 2000 By: /s/ John R. DePhillipo
-------------------------------------
John R. DePhillipo, Chief Executive
Officer and President
28
<PAGE> 29
ITEM 1. INDEX TO EXHIBITS.
Exhibit
- -------
27 Financial Data Schedule
29
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 47,512
<SECURITIES> 0
<RECEIVABLES> 2,285
<ALLOWANCES> 0
<INVENTORY> 10,720
<CURRENT-ASSETS> 96,597
<PP&E> 65,280
<DEPRECIATION> 15,018
<TOTAL-ASSETS> 150,752
<CURRENT-LIABILITIES> 611,891
<BONDS> 0
0
0
<COMMON> (504,368)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 150,752
<SALES> 9,463
<TOTAL-REVENUES> 9,463
<CGS> 853
<TOTAL-COSTS> 279,734
<OTHER-EXPENSES> 51,928
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,927
<INCOME-PRETAX> (340,895)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
