GeneLink (GNLKQ) 10-Q 2011 Q1 Quarterly report

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File No. 000-30518

GENELINK, INC. 

(Exact name of registrant specified in its charter)

PENNSYLVANIA	23-2795613
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
317 Wekiva Springs Road, #200 Longwood, Florida	32779 (Zip Code)
(Address of principal executive offices)

(800) 558-4363

 Registrant’s telephone number, including area code

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 ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer   ¨ (Do not check if a smaller reporting company)	Smaller reporting company x

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨  No x

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 16, 2011   162,074,026

PART I.          FINANCIAL INFORMATION

		Page
ITEM 1	Financial Statements.
	Consolidated Balance Sheets at March 31, 2011 (unaudited) and December 31, 2010	3
	Consolidated Statements of Income (unaudited) for the three months ended March 31, 2011 and 2010	4
	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2011 and 2010	5-6
	Notes to Consolidated Financial Statements	7-9

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GENELINK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	(Unaudited) March 31, 2011			December 31, 2010
ASSETS
Current Assets
Cash and cash equivalents	$	227,073		$	429,299
Accounts receivable		397,220			404,624
Inventory		338,393			223,697
Prepaid expenses		261,329			243,244
Total current assets		1,224,014			1,300,864
Property and equipment, net		175,383			205,163
Acquired Intangible Assets, net		271,846			279,159
Other assets		2,540			0
Total assets	$	1,673,784		$	1,785,186
LIABILITIES
Current maturity of long-term debt	$	12,414		$	27,503
Accounts payable and accrued expenses		1,326,570			1,292,480
Accrued compensation		17,300			146,600
Deferred revenue		275,341			254,668
Loans payable		10,000			10,000
Total current liabilities		1,641,625			1,731,250
Convertible promissory notes payable, net of issuance of debt and stock conversion discounts		965,576			951,503
Total liabilities	$	2,607,201		$	2,682,754
SHAREHOLDERS’ EQUITY (DEFICIENCY)
Common stock, $.01 par value, 250,000,000 shares authorized as of March 31, 2011 and December 31, 2010; 164,933,185 shares and 155,373,185 shares issued as of March 31, 2011 and December 31, 2010, respectively;160,574,026  shares and 151,014,026 shares outstanding as of March 31, 2011 and December 31, 2010, respectively		1,649,332			1,553,732
Additional paid in capital		15,188,113			14,863,493
Stock warrants		3,798,467			3,686,077
Accumulated deficit		(20,017,094	)		(20,448,635	)
Treasury stock, 4,359,169 shares as of March 31, 2011 and December 31, 2009, at cost		(552,235	)		(552,235	)
Total shareholders’ equity (deficiency)		(933,417	)		(897,568	)
Total liabilities and shareholders’ equity (deficiency)	$	1,673,784		$	1,785,186

The accompanying notes are an integral part of the consolidated financial statements

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GENELINK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three months ended March 31,	2011			2010
REVENUE	$	1,400,187		$	2,221,111
COSTS OF GOODS SOLD		500,408			851,078
GROSS PROFIT		899,779			1,370,033
EXPENSES
Selling, general and administrative		1,378,806			1,815,582
Research and development		9,024			968
		1,387,830			1,816,550
OPERATING LOSS		(488,051	)		(446,517	)
OTHER EXPENSES
Amortization and depreciation		38,783			37,964
Interest expense		41,625			36,321
		80,408			74,285
NET LOSS BEFORE PROVISION FOR INCOME TAXES		(568,459	)		(520,802	)
PROVISION FOR INCOME TAXES		0			0
NET LOSS	$	(568,459	)	$	(520,802	)
NET LOSS PER SHARE, BASIC & DILUTED	$	(0.004	)	$	(0.004	)
Weighted average common shares and diluted potential common shares		157,145,518			119,146,695

The accompanying notes are an integral part of the consolidated financial statements

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GENELINK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Three months ended March 31	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(568,459	)	$	(520,802	)
Adjustments to reconcile net loss to net cash used by operating activities
Depreciation and amortization		38,783			37,964
Amortization of discounts on loans payable		14,073			14,621
Common stock issued for services		27,000			0
Fair value of options granted for services		62,330			25,000
Changes in operating assets and liabilities
Accounts receivable		7,404			(46,181	)
Inventory		(114,696	)		152,508
Prepaid expenses		(18,085	)		8,915
Other assets		(2,540	)		0
Accounts payable and accrued expenses		(34,090	)		112,719
Accrued compensation		(39,300	)		68,627
Deferred revenue		20,673			34,873
Net cash used in operating activities		(538,727	)		(109,881	)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(1,690	)		(23,570	)
Patent acquisition costs		0			0
Net cash used in investing activities		(1,690	)		(23,570	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock and warrants, net		373,000			245,000
Principal payments on note payable		(15,089	)		(21,497	)
Commissions paid for fundraising costs		(19,720	)		(17,836	)
Net cash provided by financing activities		338,191			205,667

The accompanying notes are an integral part of the consolidated financial statements

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GENELINK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Three months ended March 31	2011			2010
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS		(202,226	)		72,216
Cash and cash equivalents, beginning of period		429,299			196,857
Cash and cash equivalents, end of period	$	227,073		$	269,073
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest	$	5,456		$	5,926
Non-cash investing and financing transactions:
Stock warrants granted for services	$	62,330		$	51,500
Stock warrants granted for fundraising	$	50,000		$	223,653
Common stock issued for services	$	27,000		$	15,000

The accompanying notes are an integral part of the consolidated financial statements

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GENELINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 – DESCRIPTION OF ORGANIZATION

GeneLink, Inc. (the “Company”) and its subsidiaries, Dermagenetics, Inc., GeneWize Life Sciences, Inc. and Helix Health Solutions LLC operate in Florida.  The Company was organized under the laws of the Commonwealth of Pennsylvania and Dermagenetics, Inc. and GeneWize Life Sciences, Inc. were organized under the laws of the State of Delaware.  Helix Health Solutions, LLC was organized under the laws of the State of Florida. The Company is the successor to a Delaware corporation organized under the same name on September 21, 1994.  The Company’s offices are located in Longwood, Florida. The Company 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 adverse health conditions or physical attributes and tendencies.  The growth of scientific knowledge in this area has been accelerating as a direct result of the National Institutes of Health Genome Project. On May 1, 2007, the Company received a U.S. patent for its proprietary method for assessing skin health in humans. The Company has also developed proprietary SNP-based genetic profiles named GeneLink Nutragenetic Profile™ and Dermagenetics® profiles.  These profiles provide a means of assessing an individual's inherent genetic capacity to combat such conditions as oxidative stress and other important selected areas of physiologic health. The profiles, for example, can measure a person's potential to efficiently control oxygen free radical damage, eliminate hydrogen peroxide, protect and repair oxidized phospholipids and destroy harmful environmental compounds.  The Company's profile assessment enables nutritional and skin care companies and health care professionals to recommend a specific and targeted regime of antioxidant vitamins, nutrients or skin care formulations that have been specifically designed to compensate for identified deficiencies. On August 1, 2008, GeneWize Life Sciences, Inc., held its grand opening launch conference with over 1,600 participants from around the country.  GeneWize is the first direct selling company to focus exclusively on marketing nutritional supplements and skin care products specifically tailored to an individual’s genetic makeup.  Genetic assessment results drive an analysis that generates a nutritional or skin assessment linked to a proprietary titration- matrix custom recipe for each customer. In order to help compensate for any anticipated need for additional supplementation, genetically-indicated ingredients and nutrients (SNPboostTM, or “snip boosts”) are blended into a comprehensive base formulation. Thus, each customer’s product is individually custom manufactured each month.

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GeneWize’s foundational product offerings consist of its GeneWize Me Made Exclusively™ Nutrition System and its Me Made Exclusively™ Skin Serum.  The Me Made Exclusively ™ Nutrition System and Me Made Exclusively™ Skin Serum are the first systems of personalized nutritional supplements and skin products manufacturing based on GeneLink’s genetic testing.  GeneLink’s patented pending assessments, such as GeneLink Healthy Aging Assessment™ and Oxidative Stress, form the foundation science for GeneWize’s proprietary solutions.  Genetic assessment results drive a proprietary formulation with an assessment report linked to an individual “titration matrix.”  In order to help compensate for any predicted deficiencies, “genetically selected ingredients” (SNPboosts™, or “snip boosts”) are blended into an individual nutritional or skin formulation.  Thus, each product is individually manufactured for just that customer. GeneWize, as a direct selling company, offers customers the opportunity to participate in selling and distributing the products to others and receive compensation for doing so.  These independent marketing Affiliates must agree to and comply with the company’s policies related to sales and distribution of product, particularly as it relates to product claims or, in the case of recruiting other affiliates, income potential.  In return for creating sales and complying with appropriate policies and regulations, GeneWize provides commissions and incentives.  It also provides internet ordering sites, business management tools, marketing materials, training and events in support of these affiliates.

2 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X relating to interim financial statements.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of GeneLink, Inc. and Subsidiaries for the year ended December 31, 2010. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the information set forth in the accompanying consolidated financial statements have been included.  The results reported in these consolidated financial statements for the three-month period ended March 31, 2011 should not be regarded as necessarily indicative of results that may be expected for the year ended December 31, 2011.

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3– STOCKHOLDERS' EQUITY TRANSACTIONS AND CONVERTIBLE SECURED PROMISSORY NOTES

During the three months ended March 31, 2011, the Company sold 8,760,000 shares of restricted Common Stock of the Company at an exercise price of $0.05 per share pursuant to a Confidential Private Offering Memorandum, and received an aggregate gross amount of $438,000 In connection with the above offering, the Company incurred a total of $19,720 in placement fees and expenses and issued warrants to acquire 493,000 shares of Common Stock at an exercise price of $0.05 per share to First Equity Capital Securities, Inc., as placement agent, in connection with the sale of some of these units. Kenneth R. Levine, a holder of more than five percent of the equity securities of the Company and a member of the Company’s Scientific Advisory Board, is an officer and owner of First Equity Capital Securities, Inc.

4-SUBSEQUENT EVENT

From April 1, 2011 through the date of this filing, the Company sold an additional 1,500,000 shares of restricted Common Stock of the Company at an exercise price of $0.05 per share pursuant to a Confidential Private Offering Memorandum, and received an aggregate amount of $75,000.00.

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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, 2011 are not necessarily indicative of the results that may be expected for the full fiscal year.

GENERAL

The Company has created a breakthrough methodology for SNP (single nucleotide polymorphism) based genetic profiling (patents issued and pending) and the Company is marketing and/or licensing these proprietary assessments to companies that manufacture or market to the nutraceutical, personal care and skin care industries, as well as developing our own proprietary products for sale based on its profiling system.

The Company’s expansion into the bioscience field with its innovative genetic profiles help companies create and deliver customized products – personalized wellness and “quality of life” products tailored to their customer’s individual needs – based on the science of genetics, thereby allowing the consumer and/or their health care provider to determine what vitamin/nutritional supplements, skin-care products, and health care or weight loss regimens are indicated for their individual needs.

The Company also does business through wholly-owned subsidiaries.  GeneWize Life Sciences, Inc. (“GeneWize”) provides genetically customized products and services to the nutrition and skincare markets.  GeneWize formally launched its products and services in August 2008 and distributes its products through a network marketing system, which is a form of direct selling. Helix Health Solutions, LLC also provides nutritional and skin care solutions via an internet strategy through a joint marketing agreement with a healthcare-related sales and marketing organization.

OVERVIEW

In the first quarter, the Company continued to develop its position as the leader in the genetically customized nutritional and personal care solutions industry.

On December 30, 2010, the Company signed a binding letter of intent with a new strategic channel partner, a company formed and led by Mr. Robert Trussell, which is focused on developing a direct response distribution channel for GeneLink assessments and products.  Mr. Trussell was the founder of Tempurpedic, Inc. and continues to serve as that company’s vice-chairman. Revenues from this agreement are anticipated to begin in the third quarter of 2011.

On March 12, 2011, the Company initiated a soft-launch of additional products through GeneWize.  New products include a DNA supportive weight management product and additional complementary skin care products which create a complete skin care regimen.  Formal launch of these products in GeneWize is expected toward the end of the second quarter of 2011.

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Nearly all of the $1,400,187 of revenues realized in the first quarter of 2011 was through GeneWize, its direct selling subsidiary.  During the quarter ended March 31, 2011, GeneWize added 465 new independent sales affiliates and 160 additional non-affiliate customers.

RECENT REGULATORY DEVELOPMENTS

In July 2010, the FDA held a public workshop on its proposal to extend formal regulatory oversight to laboratory developed tests (LDTs).  In the public meeting notice the FDA cited a variety of safety concerns related to current LDTs, noting that the tests have become increasingly complex and utilized for significant medical decisions, sometimes in place of similar tests that have been reviewed and approved by the FDA.  It is possible that the FDA may require all LDTs to undergo some form of pre-market clearance as a medical device.  However, no formal guidance has yet been issued discussing the nature of the changes the FDA may make with respect to the regulation of LDTs, nor the scope of potential regulation.  Legislation has also been introduced in Congress that could affect the framework for regulatory approval of LDTs.

As part of the FDA’s evolving position on the regulation of LDTs, the FDA has begun issuing letters to a number of companies that primarily related to direct to consumer (DTC) genetic testing products. On September 13, 2010, GeneWize received such a letter.  In these letters, the FDA expresses concern about consumers making medical decisions in reliance on genetic tests that have not undergone the FDA’s premarket review.  GeneLink and GeneWize filed a timely response to the FDA’s request, expressing the Company’s position and belief that its assessment does not constitute a regulated medical device.  The FDA has not responded to the Company on the matter.

The U.S. Government Accounting Office (GAO) issued a report in July 2010 to the effect that DTC tests are misleading to consumers and that the test results are further complicated by deceptive marketing practices.  Later that month, the U.S. House of Representatives Committee on Energy and Commerce held a hearing on the public health implications of direct-to-consumer genetic testing.  In the course of broader public testimony at the hearing, representatives from GAO made reference to allegedly improper marketing practices utilized by an independent distributor of GeneWize products.  The Federal Trade Commission (FTC) may also examine aspects of marketing of DTC tests.

On March 25, 2011, the Company received interrogatories and a request to produce documents from the FTC as part of its investigation into unnamed persons engaged directly or indirectly in the advertising or marketing of dietary supplements, foods, drugs, devices, or any other product or service intended to provide a health benefit or to affect the structure or function of the body.   The Company believes that this request is related to the July 2010 GAO report referenced above.  The Company is presently complying with their request for information.

LIQUIDITY AND CAPITAL RESOURCES

For the three months ended March 31, 2011, the Company’s primary liquidity requirements have been the funding of its sales and marketing efforts and the payment of staff compensation, operating expenses and accounts payable.

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Cash and cash equivalents at March 31, 2011 amounted to $227,073 as compared to $429,299 at December 31, 2010, a decrease of $202,226.  During the first three months of 2011, the Company’s operating activities utilized $538,727, as compared to $109,881for the first three months of 2010, an increase of $428,846.  This increase is primarily related to changes in inventory and accounts payable for the periods. In addition, cash utilized during these periods partially funded the Company’s operating losses for such periods.

Financing activities provided $373,000 in proceeds for the three month period ended March 31, 2011 as compared to $245,000 in proceeds for the three month period ended March 31, 2010, an increase of $21,880.  Financing activities during the three months ended March 31, 2011 primarily consisted of the issuance of $438,000 of restricted common stock, less costs associated with such offerings.

The Company will require approximately $2,000,000 of additional funds to further implement its sales and marketing strategy, enhancements to manufacturing, for research and development and for other working capital needs.  If the Company is not able to secure such additional required funding, it will continue to realize negative cash flow and losses and may not be able to continue operations.

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2011 TO THE THREE MONTHS ENDED MARCH 31, 2010

Financial Condition

Assets of the Company decreased from $1,785,186 at December 31, 2010 to $1,673,784 at March 31, 2011, a decrease of $111,402.  This decrease was primarily due to a decrease in cash and cash equivalents of $202,226 offset by an increase in inventory of $114,696

Liabilities increased from $2,682,754 at December 31, 2009 to $2,607,201 at March 31, 2011, a decrease of $75,553. The decrease is attributable to the conversion of $90,000 of accrued compensation to 1,800,000 shares in the Confidential Private Placement, offset by stock conversion discounts. The $965,576 amount of convertible promissory notes payable reflected on the March 31, 2011 balance sheet is net of debt issuance costs and stock conversion discounts.  As of March 31, 2011, $1,250,000 principal amount of convertible secured promissory notes were outstanding.

Results of Operations

Revenues.  Total revenues for the three months ended March 31, 2011 were $1,400,187 as compared to $2,221,111 for the three months ended March 31, 2010, a decrease of $820,924 or 37%. The drop is largely due to a reduction in GeneWize of new affiliate enrollments which began mid-2010, attributable in largely to leadership transitions within the Company and resulting uncertainty among the independent GeneWize Affiliates sales force.  Transitions included the departure of GeneWize’s founding CEO in January 2010, departure of its founding COO in April 2010, and the appointment of a new GeneLink CEO in February.  In addition, the Company continued to feel the impact of consumer responses toward a premium-priced product in the context of ongoing public concerns of the overall economy.

Gross Profit.  Gross profit decreased from $1,370,033 for the three months ended March 31, 2010 to $899,779 for the three months ended March 31, 2011. Gross profit margin increased from 61.6% to 64.26% for the three months ended March 31, 2010 and March 31, 2011, respectively. Gross profit margins increased due to management’s continued efforts to streamline productivity and decrease production costs.

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Expenses.  Expenses for the three months ended March 31, 2011 were $1,387,830 as compared to $1,816,550 for the three months ended March 31, 2010, a decrease of $428,720 or 24%. The decrease in expenses for the three months ended March 31, 2011 primarily resulted from decreased commissions as well as efforts of management to reduce overhead, including salaries, outside services for professional fees and other administrative costs.  Sales commission expenses paid to sales affiliates totaled $497,183 for the three months ended March 31, 2011, as compared to $840,829 for the three months ended March 31, 2010. Such commission expense represented 35% and 38% of Company revenues for the three months ended March 31, 2011 and 2010, respectively.

Operating Losses.  The Company incurred an operating loss of $488,051 for the three months ended March 31, 2011, as compared to an operating loss of $446,517 for the three months ended March 31, 2010, an increase of $41,534, all of which is attributable to an increase in non-cash compensation of options and stock. The loss for the three months ended March 31, 2011 and 2010 includes $89,330and $25,000, respectively, of non-cash expenses related to stock and option grants that were issued during such quarter or that vested from prior periods.

Net Losses.  The Company incurred a net loss of $568,459 for the three months ended March 31, 2011 as compared to a net loss of $520,802 for the three months ended March 31, 2010, an increase of $47,657 or 9%. The loss for the three months ended March 31, 2011 primarily relates to the reduction in sales as noted above, yielding a lower gross profit. The reduction in gross profit was mitigated by management’s continued efforts to reduce production costs and overhead expenses which were reduced by 41% and 24%, respectively for the three months ended March 31, 2011 over the three months ended March 31, 2010.

FACTORS AFFECTING THE COMPANY’S BUSINESS AND PROSPECTS

Statements included in this Report on Form 10-Q, including within the Management’s Discussion and Analysis of Financial Condition and Results of Operations which are not historical in nature, are intended to be and are hereby identified as “forward looking statements” for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995.  Forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward looking statements due to several factors.  The Company undertakes no obligation to publicly release any revisions to these forward looking statements or reflect events or circumstances after the date hereof.

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 success of the Company’s recent launch of its direct selling efforts; 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 genetics industry.

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Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s Chief Executive Officer (who is currently acting as both the Company’s principal executive officer and principal financial officer) has concluded, based on an evaluation of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)), that such disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the three months ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II.       OTHER INFORMATION

Item 1

LEGAL PROCEEDINGS

By Order and Opinion dated May 5, 2009 and received on May 8, 2009, the Court of Common Pleas of Pennsylvania, Philadelphia County, dismissed an action brought by Mr. DePhillipo and his wife (the "Action") in August 2008.  In the Action, the DePhillipos alleged that the Company, as well as GeneWize and several of the Company's directors, officers and representatives, defrauded them into settling a lawsuit previously commenced by Mr. DePhillipo against the Company in the Superior Court of New Jersey, Atlantic County (the "New Jersey Action").  In the Action, the DePhillipos sought the return of 3,953,000 shares of the Company's common stock sold to the Company pursuant to the settlement, allegedly worth approximately $20 million based upon an alleged value of $5.00 per share. Via its Order and Opinion, the Court dismissed the Action, concluding that the DePhillipos' claims were not viable.  The Court also determined that it lacked jurisdiction over the Company's counsel in the New Jersey Action as well as the Company's advisors. The DePhillipo’s filed a Notice of Appeal with respect to the Order and Opinion on May 14, 2009. On September 13, 2010, the Court of Common Pleas of Pennsylvania, Philadelphia County, affirmed the dismissal of a complaint filed by the Company’s former Chief Executive Officer and President, John DePhillipo, and his wife against the Company, GeneWize and several of the Company’s offices, directors and advisors. On October 13, 2010, the DePhillipos filed a Petition for Allowance of Appeal with the Pennsylvania Supreme Court in response to which the GeneLink, GeneWize and all other respondents have filed an Answer in Opposition to Petition for Allowance of Appeal. By Order dated March 30, 2011, the Supreme Court of Pennsylvania denied the DePhillipos’ Petition for Allowance of Appeal. In September 2009, the Company brought action against two prior law firms, alleging that their failure to timely provide legal services and make or authorize required filings caused the Company to lose valuable Japanese and U.S. patent rights.  In March 2010, the Company voluntarily dismissed one of the law firms from the action.  In August 2010, the remaining law firm filed a counterclaim for alleged unpaid legal fees owed to it by the Company.

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Item 2  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In the quarter ended March 31, 2011, the Company sold an aggregate of 8,760,000 shares of Common Stock at a price of $0.05 per share received gross proceeds of $438,000, as more fully described below.

Date	$ of Investment		Number of Shares Issued		Number of  Investors
1/18/11	$	115,000		2,300,000		2
1/20/11		25,000		500,000		1
1/21/11		40,000		800,000		1
1/24/11		15,000		300,000		2
1/25/11		30,000		600,000		2
1/27/11		78,000		1,560,000		3
1/28/11		55,000		1,100,000		3
1/31/11		40,000		800,000		2
2/4/11		20,000		400,000		1
2/5/11		10,000		200,000		1
3/2/11		10,000		200,000		1
Total	$	438,000		8,760,000		19

Item 3  DEFAULTS UPON SENIOR SECURITIES

None.

Item 4  (REMOVED AND RESERVED)

Item 5  OTHER INFORMATION

Not applicable.

Item 6  EXHIBITS

Exhibit No.	Description
31.1	Certificate of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* * * * * *

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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 12, 2011	By:	s/ Bernard L. Kasten, Jr., M.D.
		Bernard L. Kasten, Jr., M.D., Chief Executive Officer and Principal Financial Officer

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