10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2006

Commission File Number: 001-32715

INTERLEUKIN GENETICS, INC.

(Exact name of registrant in its charter)

Delaware	94-3123681
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
135 Beaver Street, Waltham, MA	02452
(Address of principal executive offices)	(Zip Code)

Registrant’s Telephone Number: (781) 398-0700

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 xNO o

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

Large accelerated filer o Accelerated filer x Non-accelerated filer o.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES oNO x

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements of Interleukin Genetics, Inc. and Subsidiary	2
	Consolidated Balance Sheets as of March 31, 2006 (Unaudited) and December 31, 2005 (Audited)	2
	Consolidated Statements of Operations (Unaudited)	3
	Consolidated Statement of Stockholders’ Equity (Unaudited)	4
	Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to Interim Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	23
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Submission of Matters to a Vote of Security Holders	23
Item 5.	Other Information	24
Item 6.	Exhibits	24
Signatures		25
Exhibit Index		26

PART I—FINANCIAL INFORMATION

Item 1.Financial Statements.

INTERLEUKIN GENETICS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	March 31, 2006			December 31, 2005
	(Unaudited)			(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,896,248		$	3,415,174
Accounts receivable from related party	75,720			—
Accounts receivable	—			278
Prepaid expenses and other current assets	167,186			174,204
Total current assets	3,139,154			3,589,656
Fixed assets, net	925,051			956,828
Other assets	449,077			423,591
Total Assets	$	4,513,282		$	4,970,075
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	131,358		$	170,474
Accrued expenses	400,662			520,512
Deferred receipts	602,760			2,002,760
Commitments for funded research and development projects	265,469			318,019
Current portion of capital lease obligations	—			2,977
Total current liabilities	1,400,249			3,014,742
Convertible debt, net of discount of $808,280 and $923,748 at March 31, 2006 and December 31, 2005, respectively	1,787,056			1,671,588
Total liabilities	3,187,305			4,686,330
Stockholders’ equity:
Convertible preferred stock - $0.001 par value- 6,000,000 shares authorized; 5,000,000 shares of Series A issued and outstanding at March 31, 2006 and December 31, 2005; aggregate liquidation preference of $18,000,000 at March 31, 2006	5,000			5,000
Common stock, $0.001 par value - 75,000,000 shares authorized; 24,140,459 and 23,927,326 shares issued and outstanding at March 31, 2006 and December 31, 2005, respectively	24,141			23,927
Additional paid-in capital	64,082,094			61,450,598
Accumulated deficit	(62,785,258		)	(61,195,780		)
Total stockholders’ equity	1,325,977			283,745
Total liabilities and stockholders’ equity	$	4,513,282		$	4,970,075

The accompanying notes are an integral part of these consolidated financial statements.

2

INTERLEUKIN GENETICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended March 31,
	2006			2005
Revenue:
Revenue from related party	$	216,818		$	—
Revenue from others	15,416			7,359
Total revenue	232,234			7,359
Cost of revenue	197,652			—
Gross profit	34,582			7,359
Operating Expenses:
Research and development	729,095			684,003
Selling, general and administrative	765,111			703,939
Total operating expenses	1,494,206			1,387,942
Loss from operations	(1,459,624		)	(1,380,583		)
Other income (expense):
Interest income	38,451			21,473
Interest expense	(52,837		)	(40,386		)
Amortization of note discount	(115,468		)	(115,468		)
Total other expense	(129,854		)	(134,381		)
Net loss	$	(1,589,478	)	$	(1,514,964	)
Basic and diluted net loss per common share	$	(0.07	)	$	(0.06	)
Weighted average common shares outstanding	24,019,004			23,604,882

The accompanying notes are an integral part of these consolidated financial statements.

3

INTERLEUKIN GENETICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, 2006

(Unaudited)

	Convertible Preferred Stock				Common Stock			Additional
						$0.001		Paid-in			Accumulated
	Shares	Amount			Shares	par value		Capital			Deficit			Total
Balance as of December 31, 2005 (Audited)	5,000,000		$	5,000	23,927,326	$	23,927	$	61,450,598		$	(61,195,780	)	$	283,745
Net loss	—		—		—	—		—			(1,589,478		)	(1,589,478		)
Investment by Alticor:
Research funding	—		—		—	—		629,747			—			629,747
Other	—		—		—	—		1,309,210			—			1,309,210
Common stock issued:
Exercise of warrants	—		—		125,000	125		312,375			—			312,500
Exercise of stock options	—		—		62,734	63		229,362			—			229,425
Employee stock purchase plan	—		—		639	1		2,906			—			2,907
Restricted stock issued to employees	—		—		24,760	25		(25		)	—			—
Stock-based compensation expense	—		—		—	—		147,921			—			147,921
Balance as of March 31, 2006	5,000,000		$	5,000	24,140,459	$	24,141	$	64,082,094		$	(62,785,258	)	$	1,325,977

The accompanying notes are an integral part of these consolidated financial statements.

4

INTERLEUKIN GENETICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Three Months Ended March 31,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,589,478	)	$	(1,514,964	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	87,937			80,957
Amortization of note discount	115,468			115,468
Stock-based compensation expense	147,921			—
Changes in operating assets and liabilities:
Accounts receivable	(75,442		)	9,242
Prepaid expenses and other current assets	7,018			23,169
Accounts payable	(39,116		)	(12,208		)
Accrued expenses	(119,850		)	(238,480		)
Deferred receipts	(125,790		)	(4,000		)
Commitments for funded R&D	(52,550		)	—
Net cash used in operating activities	(1,643,882		)	(1,540,816		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets	(44,382		)	(9,187		)
Increase in other assets	(37,264		)	(29,191		)
Cash used in investing activities	(81,646		)	(38,378		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from investment by Alticor	664,747			65,500
Proceeds from exercises of warrants and stock options	541,925			83,860
Proceeds from employee stock purchase plan	2,907			1,047
Principal payments of capital lease obligations, net	(2,977		)	(5,694		)
Net cash provided by financing activities	1,206,602			144,713
Net decrease in cash and cash equivalents	(518,926		)	(1,434,481		)
Cash and cash equivalents, beginning of period	3,415,174			4,528,425
Cash and cash equivalents, end of period	$	2,896,248		$	3,093,944
Supplemental disclosures of cash flow information:
Non-cash investing and financing activities:
Deferred receipt reclassified to equity	$	1,274,210		—
Interest and income taxes paid:
Cash paid for interest	$	52,837		$	40,386

The accompanying notes are an integral part of these consolidated financial statements.

5

INTERLEUKIN GENETICS, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of Interleukin Genetics, Inc. and its wholly-owned subsidiary, Interleukin Genetics Laboratory Services, Inc., (collectively referred to as the “Company” or “Interleukin”) as of March 31, 2006 and have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. All intercompany accounts and transactions have been eliminated. These unaudited interim consolidated financial statements, which, in the opinion of management, reflect all adjustments (including normal recurring adjustments) necessary for a fair presentation, should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.  Operating results for the three months ended March 31, 2006 are not necessarily indicative of the results that may be expected for any future interim period or for the entire fiscal year.

Note 2. Significant Accounting Policies

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates. The Company’s most critical accounting policies are in the areas of its strategic alliance with Alticor, revenue recognition, stock-based compensation, income taxes, long-lived assets, intellectual property, beneficial conversion feature of convertible instruments and below market interest rate. These critical accounting policies are more fully discussed in these notes to consolidated financial statements.

Strategic Alliance with Alticor

In a private placement on March 5, 2003, the Company entered into a Stock Purchase Agreement with Alticor, pursuant to which Alticor purchased from the Company 5,000,000 shares of the Company’s Series A Preferred Stock, $0.001 per share, for $7,000,000 in cash and $2,000,000 in cash to be paid, if at all, upon the Company reaching a milestone pursuant to the terms of the Stock Purchase Agreement (see Note 3). The Series A Preferred Stock issued in the private placement was initially convertible into 28,157,683 shares of the Company’s Common Stock at the purchaser’s discretion. Pursuant to the terms of the Stock Purchase Agreement, Alticor also agreed to refinance, in the form of convertible debt, certain of the Company’s indebtedness in the form of previously issued promissory notes that were held by Alticor and certain individuals. This transaction amounted to $2,595,336 in debt refinanced and was initially convertible into 5,219,903 shares of the Company’s Common Stock. Concurrent with the closing of the Stock Purchase Agreement, the Company entered into a research agreement with Alticor that would provide additional funding of $5,000,000 to be paid quarterly over a two-year period.

In accordance with Emerging Issues Task Force (EITF) No. 01-1, Accounting for Convertible Instruments Granted or Issued to a Nonemployee for Goods or Services or a Combination of Goods or

6

INTERLEUKIN GENETICS, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 2. Significant Accounting Policies (Continued)

Services and Cash (EITF No. 01-1), the terms of both the agreement for goods or services provided and the convertible instruments should be evaluated to determine whether their separately stated pricing is equal to the fair value of the goods or services provided and the convertible instruments. If that is not the case, the terms of the respective transactions should be adjusted. The convertible instruments should be recognized at its fair value with a corresponding increase or decrease in the sales price of the goods or services.

On March 5, 2003, the Company was obligated to issue up to 33,377,586 shares of its common stock underlying the convertible preferred stock and the convertible debt issued. Based on a last reported trade price of $0.71 per common share of the Company’s common stock on March 5, 2003, the convertible instruments had a fair value of $23,698,086 on the date of issuance. Based on the fair value of the convertible instruments and the guidance provided by EITF 01-1, the Company will recognize the fair value of the convertible instruments, to the extent of proceeds received, with a corresponding decrease to the sales price of the goods and services provided. Therefore, at March 5, 2003, the Company treated the $5,000,000 committed research funding as an equity investment rather than revenue and any costs of performing the research services under the agreement were classified as research and development expenses. Any subsequent proceeds that the Company will receive from Alticor that are linked to the March 2003 transaction, will be considered equity rather than revenue to the extent of the fair value of the convertible instruments at March 5, 2003. In June 2004, the Company entered into another research agreement with Alticor for potential funding up to $2,200,000 and in March 2005, the Company entered into two more agreements to provide additional funding of $5,057,651 over two years beginning April 1, 2005 (see Note 3). In addition, since March 5, 2003, the Company received various purchase orders from Alticor valued at $501,800 to conduct genotyping tests for research purposes and in February 2006, the Company received $35,000 to purchase capital equipment. These purchase orders, together with the research agreements entered into in June 2004 and March 2005, are deemed to be linked to the March 2003 transaction and, accordingly, are treated as equity rather than revenue. In addition, in March 2004, the Company entered into a Distribution Agreement with Alticor to provide genetic testing services. As part of the agreement, Alticor made a $2.0 million prepayment in April 2005 for genetic testing services. The Distribution Agreement expired on March 22, 2006 and $1,274,210 has been reclassified from deferred receipts to equity. As of March 31, 2006, proceeds received from Alticor which were recorded as consideration for the fair value of the convertible instruments issued in March 2003, amounted to $22,910,855. As of March 31, 2006, there was $787,231 of unrecognized fair value of the convertible instruments.

Revenue Recognition

Revenue from genetic testing is recognized when the Company has finished providing the service, generally when the results have been reported to the individual who ordered the test. To the extent that tests have been prepaid but results have not yet been reported, recognition of all related revenue is deferred. These amounts are presented as deferred receipts in the accompanying consolidated balance sheets.

7

INTERLEUKIN GENETICS, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 2. Significant Accounting Policies (Continued)

Stock-Based Compensation

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 123 (Revised 2004), Share-Based Payment (SFAS No. 123R) for all share-based payments, using the modified prospective transition basis. The statement replaces SFAS No.123, Accounting for Stock-Based Compensation (SFAS No. 123) and supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. Under this transition method, compensation cost recognized during the three months ended March 31, 2006 includes: (1) compensation expense recognized over the requisite service period for all share-based awards granted prior to, but not yet fully vested, as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and (2) compensation cost for all share-based awards granted on or subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R, of which the Company has none to date.  Upon adoption of SFAS No. 123R, the Company elected to retain its method of valuation for share-based awards granted using the Black-Scholes option-pricing model which was also used for the Company’s pro forma information required under SFAS No. 123 with the following assumptions used: 1) expected volatility is based on the standard deviation of the historical volatility of the weekly adjusted closing price of the Company’s shares for a period equivalent to the expected life of the option, which is the same method used by the Company both prior and subsequent to the adoption of SFAS 123R; 2) the expected life represents the period of time that the option is expected to be outstanding, taking into account the contractual term, historical exercise/forfeiture behavior, and the vesting period, if any; and 3) the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected life of the option. The Company is recognizing compensation expense over the requisite service period for the entire award (straight-line attribution method). Compensation cost for these awards amounted to $125,945 for the three months ended March 31, 2006.

Purchases made under the Company’s Employee Stock Purchase Plan are now deemed to be compensatory under SFAS No. 123R because employees may purchase stock at a price equal to 85% of the fair market value of the Company’s common stock on either the first day or the last day of a calendar quarter, whichever is lower. During the three months ended March 31, 2006, employees purchased 639 shares of common stock at a purchase price of $4.55. Compensation cost associated with these awards amounted to $1,661 for the three months ended March 31, 2006.

During the three months ended March 31, 2006, the Company granted 24,760 restricted stock awards to employees. These awards vest at various dates during 2006 assuming continued employment with the Company and the holders of these awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights. The employees are not required to pay any consideration to the Company for these restricted stock awards. The recognition of compensation expense for these types of awards did not change as a result of adopting SFAS No. 123R on January 1, 2006. The Company measured the fair value of the shares based on the last reported price at which the Company’s common stock traded on the date of the grant and compensation cost is recognized over the vesting period. Compensation cost associated with these awards amounted to $20,315 for the three months ended March 31, 2006.

8

INTERLEUKIN GENETICS, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 2. Significant Accounting Policies (Continued)

A summary of compensation cost included in the statement of operations for the three months ended March 31, 2006 is as follows:

Cost of revenue	$	5,431
Research and development expenses	73,763
Selling, general and administrative expenses	68,727
Total	$	147,921

In accordance with the modified prospective transition method, the Company’s Consolidated Financial Statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS No. 123R.  Had compensation cost for the Company’s employee stock awards been determined consistent with SFAS No. 123, the Company’s net loss applicable to common stock and net loss per share would have been as follows for the three months ended March 31, 2005:

Net loss applicable to common stockholders:
As reported	$	(1,514,964	)
Stock-based employee compensation	(220,943		)
Pro forma	$	(1,735,907	)
Basic and diluted net loss per common share:
As reported	$	(0.06	)
Pro forma	$	(0.07	)

Income Taxes

The preparation of its consolidated financial statements requires the Company to estimate its income taxes in each of the jurisdictions in which it operates, including those outside of the United States, which may be subject to certain risks that ordinarily would not be expected in the United States. The income tax accounting process involves estimating its actual current exposure together with assessing temporary differences resulting from different treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in the recognition of deferred tax assets and liabilities. The Company must then record a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized.

Significant management judgment is required in determining the Company’s provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against its deferred tax assets. The Company has recorded a full valuation allowance against its deferred tax assets of $18.5 million as of March 31, 2006, due to uncertainties related to its ability to utilize these assets. The valuation allowance is based on management’s estimate of future taxable income by jurisdiction in which the Company operates and the period over which the deferred tax assets will be recoverable. In the event that actual results differ from these estimates or management adjusts these estimates in future periods, the Company may need to adjust its valuation allowance which could materially impact the financial position and results of operations.

9

INTERLEUKIN GENETICS, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 2. Significant Accounting Policies (Continued)

Long-Lived Assets

The Company applies the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144).  SFAS No. 144 requires that the Company evaluate its long-lived assets for impairment whenever events or changes in circumstances indicate that carrying amounts of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. Any write-downs, based on fair value, are to be treated as permanent reductions in the carrying amount of the assets. The Company believes that no impairment exists related to the Company’s long-lived assets at March 31, 2006.

Intellectual Property

Prior to March 2003, costs incurred in connection with patents were expensed as incurred due to the possibility that the Company would never be able to derive any benefits from its patents. The Company has exclusive rights (subject to rights granted to an affiliate of Alticor within the fields of dermagenomics and nutrigenomics) in twenty issued U.S. patents and has a number of U.S. patent applications pending. The Company has also been granted a number of corresponding foreign patents and a number of foreign counterparts of its U.S. patents and patent applications pending. Since inception, the Company has expensed approximately $3.0 million in the effort to obtain patent protection for its intellectual property. Due to the alliance with Alticor Inc. that was entered into on March 5, 2003, the Company began capitalizing certain costs of patents for which the prospect of deriving benefits had become more likely. As of March 31, 2006 and December 31, 2005, the Company has capitalized $489,769 and $452,504, respectively, in patent costs and is included in other assets on the accompanying consolidated balance sheets. The Company amortizes these costs over the shorter of the life of the patent or ten years, their expected useful life. Accumulated amortization of capitalized patent costs was $77,109 and $65,331 at March 31, 2006 and December 31, 2005, respectively.

Beneficial Conversion Feature of Convertible Instruments

Based on EITF No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments (EITF No. 00-27), which provides guidance on the calculation of a beneficial conversion feature of a convertible instrument, the Company has determined that the convertible debt issued on March 5, 2003 contained a beneficial conversion feature.

Based on the effective conversion price of the convertible debt of $0.2875 and the market value per share of $0.71 at March 5, 2003, the intrinsic value was calculated to be $2,205,522; however in accordance with EITF No. 00-27, the amount of the discount allocated to the beneficial conversion feature is limited to the amount of the proceeds allocated to the instrument. The beneficial conversion feature resulted in a discount of the convertible debt of $1,500,609 at March 5, 2003. The amount of the discount allocated to the beneficial conversion feature of the convertible debt is amortized from the date of issuance to the earlier of the maturity or conversion date. Therefore, the Company charged $77,617 for each of the three months ended March 31, 2006 and 2005 to amortization of note discount.

10

INTERLEUKIN GENETICS, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 2. Significant Accounting Policies (Continued)

Below Market Interest Rate

The convertible debt has a stated interest rate of prime plus 1%. However, the promissory notes, which were refinanced with the convertible debt, originally had a stated interest rate of 15%. Therefore, the Company determined the fair value of the convertible debt, using an interest rate comparable to that of the refinanced promissory notes, at $1,863,553. The resulting discount of $731,783 is amortized from the date of issuance to the earlier of maturity or conversion date. Therefore, the Company charged $37,851 to amortization of note discount for the three months ended March 31, 2006 and 2005.

Basic and Diluted Net Loss per Common Share

The Company applies SFAS No. 128, Earnings per Share (SFAS No. 128), which establishes standards for computing and presenting earnings per share. Basic and diluted net loss per share was determined by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is the same as basic loss per share for all the periods presented, as the effect of the potential common stock equivalents is anti-dilutive due to the loss in each period. Potential common stock equivalents excluded from the calculation of diluted net loss per share consists of stock options, warrants, preferred stock and convertible debt as described in the table below:

	Three Months Ended March 31,
	2006	2005
Options outstanding	2,388,831	2,920,048
Warrants outstanding	400,000	525,000
Preferred stock	28,160,200	28,160,200
Convertible debt	4,060,288	4,060,288
Total	35,009,319	35,665,536

Recent Accounting Pronouncements

In November 2005, FASB issued FASB Staff Position No. FAS 123(R)-3, Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards. The Company is currently evaluating whether it will adopt the alternative transition method provided in the FASB Staff Position for calculating the tax effects of stock-based compensation pursuant to SFAS No. 123R. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool that are outstanding upon adoption of  SFAS No. 123R.

Note 3. Strategic Alliance with Alticor Inc.

On March 5, 2003, the Company entered into a broad strategic alliance with several affiliates of the Alticor family of companies to develop and market novel nutritional and skin care products. The alliance utilizes Interleukin Genetics’ intellectual property and expertise in genomics to develop personalized consumer products. Alticor has a long history of manufacturing and distributing high quality nutritional supplements and skin care products to a worldwide market.

11

INTERLEUKIN GENETICS, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 3. Strategic Alliance with Alticor Inc. (Continued)

The alliance initially included an equity investment, a multi-year research and development agreement, a licensing agreement with royalties on marketed products, the deferment of outstanding loan repayment and the refinancing of bridge financing obligations. The major elements of the initial alliance were:

·The purchase by Alticor of $7,000,000 of equity in the form of 5 million shares of Series A Preferred Stock for $1.40 per share. These were convertible into 28,157,683 shares of common stock at a stated conversion price equal to $0.2486 per share. On March 11, 2004, upon achievement of a defined milestone, Alticor contributed an additional $2,000,000 to the Company for a total equity funding of $9,000,000 and a new stated conversion price of $0.3196 per share, or 28,160,200 shares of common stock.

·The right of the Series A Preferred Stockholders to nominate and elect four directors to a five person Board of Directors.

·A research and development agreement (Research Agreement I) providing the Company with funding of $5.0 million, payable over the twenty-four month period from April 2003 through March 2005, to conduct certain research projects with a royalty on resulting products.

·Credit facilities in favor of the Company, as follows:

·$1,500,000 working capital credit line to initiate selected research agreements with third party entities approved by the board of directors of the Company;

·$2,000,000 refinancing of notes previously held by Alticor, extending the maturity date and reducing the interest rate; and

·$595,336 refinancing on July 1, 2003 of bridge financing notes previously held by third parties, extending the maturity date and reducing the interest rate.

As of March 31, 2006, there was $2,595,336 outstanding under the terms of these credit facilities (see Note 4).

On June 17, 2004, the Company entered into another research agreement (Research Agreement II), valued at $2.2 million, as amended, with Alticor to conduct research into the development of a test to identify individuals with specific genetic variations that affect how people gain and maintain weight. During 2004, the Company received $1,380,000 in research funding under this agreement. No funding related to this agreement was received during the three months ended March 31, 2006 and the Company is not anticipating any additional funding under this agreement.

On March 5, 2005, the Company entered into an agreement with Alticor to expand the research being performed under Research Agreement I (Research Agreement III) to provide additional funding of $2,716,151 over the two years beginning April 1, 2005. Also on March 5, 2005, the Company entered into an additional research agreement (Research Agreement IV) with Alticor for exploratory research valued at $2,341,500 over a two-year period commencing April 1, 2005. The Company received $629,747 in funding related to these agreements during the three months ended March 31, 2006 and is expecting to receive the remaining $1,910,434 in research funding through March 2007 with these agreements.

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INTERLEUKIN GENETICS, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 3. Strategic Alliance with Alticor Inc. (Continued)

Also on April 18, 2005, Alticor paid the Company $2.0 million as a non-refundable advance payment for genetic risk assessment tests to be processed under the terms of a Distribution Agreement which expired on March 22, 2006. On February 23, 2006, the Company entered into two new purchase agreements with Alticor. The two new purchase agreements cover two genetic health assessment tests that Interleukin Genetics developed on behalf of Alticor. These are: 1) the heart health genetic test, which analyzes DNA variations in the Interleukin-1A and 1B genes to identify whether an individual may  have a predisposition for chronically elevated measures of inflammation and an increased risk for heart disease; and 2) thegeneral nutrition genetic test, which analyzes DNA variations in two genes that affect Vitamin B metabolism and four genes that are involved in responding to oxidative stress. The purchase agreement for the heart health genetic tests provides for sales of these tests to Alticor through March 2008. Both parties agreed that $600,000 of the $2.0 million prepayment received pursuant to the Distribution Agreement would be applied to purchases made under the purchase agreement for the heart health genetic tests from March 23, 2006 through December 31, 2006 to the extent tests are processed. Of the remaining $1.4 million prepayment, $125,790 was recognized as revenue for tests processed during the remaining term of the Distribution Agreement and the balance of $1,274,210 has been reclassified from deferred receipts to equity. The general nutrition genetic test purchase agreement term is through January 2008.

Note 4. Debt

On March 5, 2003 as part of its strategic alliance with Alticor Inc., the Company was granted credit facilities as follows:

·$1,500,000 working capital credit line to initiate selected research agreements with third party entities approved by the board of directors of Interleukin;

·$2,000,000 refinancing of notes previously held by Pyxis, extending the maturity date and reducing the interest rate; and

·$595,336 refinancing on July 1, 2003 of bridge financing notes previously held by third parties, extending the maturity date and reducing the interest rate.

There was $2,595,336 outstanding under the terms of these credit facilities, net of unamortized discount of $808,280 and $923,748 at March 31, 2006 and December 31, 2005, respectively. The credit facilities will mature in December 2007, bear interest at 1% over the prime rate (8.75 % at March 31, 2006), are collateralized by a security interest in the Company’s intellectual property (except intellectual property related to periodontal disease and sepsis), and are convertible at the election of Alticor into shares of common stock at a conversion price equal to $0.6392 per share.

On February 23, 2006, these credit facilities with Alticor were amended to provide the Company with access to an additional $2.0 million of working capital borrowing at any time prior to April 1, 2007. Any amounts borrowed will bear interest at prime plus 1%, require quarterly interest payments and be due five years from the date of borrowing issuance. In addition, the restrictions on the existing $1.5 million line of credit were removed so that it can be used for general working capital purposes. No amounts are outstanding under these credit facilities as of March 31, 2006.

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INTERLEUKIN GENETICS, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 5. Capital Stock

Authorized Common and Preferred Stock

At March 31, 2006, the Company had authorized 6,000,000 shares of Series A Preferred stock of which 5,000,000 shares were issued and outstanding. At March 31, 2006, the Company had authorized 75,000,000 shares of $0.001 par value common stock of which 61,900,825 shares were outstanding or reserved for issuance. Of those, 24,140,459 shares were issued and outstanding, 28,160,200 shares were reserved for issuance upon the conversion of the Series A Preferred Stock to common stock, 4,060,288 shares were reserved for issuance upon the conversion of approximately $2.6 million of debt, 4,689,810 shares were reserved for issuance upon the exercise of authorized and outstanding stock options and stock awards, 400,000 shares were reserved for issuance upon the exercise of outstanding warrants to purchase common stock and 450,068 shares were reserved for issuance upon the exercise of rights held under the Employee Stock Purchase Plan.

Series A Preferred Stock

On March 5, 2003, the Company entered into a Purchase Agreement with Alticor, pursuant to which Alticor purchased from the Company Series A Preferred Stock for $7,000,000 in cash on that date, and an additional $2,000,000 in cash that was paid, as a result of the Company achieving a certain milestone, on March 11, 2004.

The Series A Preferred Stock accrues dividends at the rate of 8% of the original purchase price per year, payable only when, as and if declared by the Board of Directors and are non-cumulative. To date, no dividends have been declared on these shares. If the Company declares a distribution, with certain exceptions, payable in securities of other persons, evidences of indebtedness issued by us or other persons, assets (excluding cash dividends) or options or rights to purchase any such securities or evidences of indebtedness, then, in each such case the holders of the Series A Preferred Stock shall be entitled to a proportionate share of any such distribution as though the holders of the Series A Preferred Stock were the holders of the number of shares of our Common Stock into which their respective shares of Series A Preferred Stock are convertible as of the record date fixed for the determination of the holders of our Common Stock entitled to receive such distribution.

In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the Company’s assets or surplus funds to the holders of its Common Stock by reason of their ownership thereof, the amount of two times the then-effective purchase price per share, as adjusted for any stock dividends, combinations or splits with respect to such shares, plus all declared but unpaid dividends on such share for each share of Series A Preferred Stock then held by them. The liquidation preference at March 31, 2006 was $18,000,000. After receiving this amount, the holders of the Series A Preferred Stock shall participate on an as-converted basis with the holders of common stock in any of the remaining assets.

Each share of Series A Preferred Stock is convertible at any time at the option of the holder into a number of shares of the Company’s common stock determined by dividing the then-effective purchase price ($1.80, and subject to further adjustment) by the conversion price in effect on the date the certificate

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INTERLEUKIN GENETICS, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 5. Capital Stock (Continued)

is surrendered for conversion. As of March 31, 2006, the Series A Preferred Stock is convertible into 28,160,200 shares of Common Stock reflecting a conversion price of $.3196 per share.

Each holder of Series A Preferred Stock is entitled to vote its shares of Series A Preferred Stock on an as-converted basis with the holders of Common Stock as a single class on all matters submitted to a vote of the stockholders, except as otherwise required by applicable law. This means that each share of Series A Preferred Stock will be entitled to a number of votes equal to the number of shares of Common Stock into which it is convertible on the applicable record date.

Note 6. Commitments and Contingencies

Operating Leases

The Company leases its office and laboratory space under a non-cancelable operating lease expiring March 2009. The Company also leases certain office equipment under lease obligations. Future minimum lease commitments under these leases at March 31, 2006 are $1,327,274.

Acquisition of Data Bases

In connection with the research agreement with Alticor dated March 5, 2003, the Company is obligated to purchase two clinical databases. As of June 30, 2004, the Company determined that this obligation met the criteria of SFAS No. 5, Accounting for Contingencies, and estimated the cost of these two databases at $450,000. Accordingly, the Company recorded a liability and charged research and development expenses of $450,000 at that time. As of March 31, 2006, the Company had expenditures of $184,531 associated with the acquisition of these databases. The Company believes that the acquisition of the databases will not exceed the amount that the Company has estimated, however actual amounts could differ.

Sponsored Research Agreements

In connection with the research agreement with Alticor dated June 17, 2004, the Company entered into a sponsored research agreement with Tufts University to conduct a clinical study. The sponsored research agreement is for an amount of $684,149, as amended, and is payable upon achievement of certain milestones. As of March 31, 2006, Tufts University had achieved milestones valued at $523,017. The remaining commitment on this agreement is $161,132. As, and if, Tufts University completes the remaining milestones associated with this sponsored research agreement, the Company will record these costs as research and development expenses.

Employment Agreements

The Company has entered into employment agreements with certain key employees of the Company. These agreements expire March 31, 2009. As of March 31, 2006, the remaining commitment under these agreements was approximately $1,575,000.

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INTERLEUKIN GENETICS, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 7. Segment Information

The Company follows SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS No. 131) which establishes standards for reporting information about operating segments in annual and interim financial statements, and requires that companies report financial and descriptive information about its reportable segments based on a management approach. SFAS No. 131 also establishes standards for related disclosures about products and services, geographic areas and major customers. In applying the requirements of this statement, each of the Company’s geographic areas described below was determined to be an operating segment as defined by the statement, but have been aggregated as allowed by the statement for reporting purposes. As a result, the Company continues to have one reportable segment, which is the development of genetic risk assessment tests and therapeutic targets for common diseases.

The Company has no operations outside of the United States. For the three months ended March 31, 2006 and 2005, the Company had minimal royalty income derived from distributors outside the United States, minimal expenses derived from research partners outside the United States and minimal assets outside of the United States. The Company does not believe this risk is material and does not use derivative financial instruments to manage foreign currency fluctuation risk.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This report on Form 10-Q and the documents incorporated by reference within this document contain certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Words or phrases such as “will likely result”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “project”, “outlook”, or similar expressions are intended to identify forward-looking statements. Forward-looking statements address or may address the following subjects:

·The sufficiency of our current cash resources, together with additional research agreements, anticipated revenue from product launches and other arrangements to fund operations through mid-2007;

·Our expectation that we will receive $1.9 million in funding through March 2007 from Alticor under the terms of various research agreements;

·Our expectation that we will receive genetic risk assessment testing revenue and/or royalty payments from Alticor;

·Our expectation that we may sign additional research agreements;

·Our expectation of the benefits that will result from the ongoing research programs that outside parties are conducting on our behalf;

·Any expectation we may have regarding the success of developing products, the timing of releasing products for sale or the success of these products when they are released;

·Any expectation we may have of attracting business partners to assist in developing, marketing or distribution of our products;

·Any expectation that certain healthcare related trends will emerge or continue that will support our business model;

·Our expectation that our total research and development costs will be between $3.0 million and $3.5 million for the year ended December 31, 2006;

·Our expectation that we might derive substantial benefit from our patented intellectual property; and

·Our expectation that we will continue to experience losses until our genetic risk assessment testing revenue grows substantially from current levels.

Actual results may vary materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from expectations include but are not limited to; risks related to market acceptance of genetic risk assessment tests in general and our products in particular, risks related to technology and product obsolescence, delays in development of products, dependence on third parties, our ability to fund operations through mid-2007, competitive risks and those risks described in this report in Part II, “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2005, as updated from time to time in our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. We cannot be certain that our results will not be adversely affected by one or more of these factors or by other factors not currently anticipated. All information set forth in this Form 10-Q is as of the date of this Form 10-Q. Unless required by law we accept no responsibility to update this information.

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General Overview

We are in the business of personalized health. We are developing tests and products that can help individuals improve and maintain their health through preventive measures. We plan to develop the following types of products: 1) genetic risk assessment tests, 2) preventive (or ameliorative) nutritional products for those individuals at risk, and 3) personalized therapeutics (drug development based in part on genetic information). We will use our intellectual property and expertise to develop products or acquire additional intellectual property that can be leveraged, through collaboration with partners, to address unmet market needs.

Our current commercial strategy is to partner with companies that have sales and marketing capabilities and products or services that complement our own products. We currently have no plans to develop our own sales force; we plan to rely on our strategic partners to promote and distribute our products. The first of these strategic partnerships is the partnership we have with Alticor.

Our revenue model consists of: 1) charging a fee for processing a genetic risk assessment test; and 2) receiving a royalty from sales of products developed with a partner, or profit sharing from product sales. Furthermore, we plan to collaborate with other companies in research and development. In these collaborations, we expect to receive a certain amount of research funding from the partner covering labor, material, overhead and a small amount of profit. Our first such collaboration is with Alticor for the development of personalized nutritional and skincare products.

In March 2003, we entered into a broad strategic alliance with Alticor to develop and market personalized nutritional and skin care products. The alliance utilizes our intellectual property and expertise in genomics to develop personalized consumer products. Alticor has a long history of manufacturing and distributing high quality nutritional supplements and skin care products to a worldwide market through the multi-level marketing channel.

We are devoting most of our resources to the support of the strategic collaboration with Alticor which includes the development of our genetic risk assessment tests to be sold in combination with Alticor’s products. A portion of our resources is also devoted to the development of a new product for the periodontal market. Our funding has consisted primarily of research payments from Alticor and trivial royalties from PST®. Additionally, we expect to continue incurring losses as we continue to develop our new tests and products.

The alliance has included an equity investment, multi-year research and development agreements, a licensing agreement with royalties on marketed products, the deferment of outstanding loan repayment and the refinancing of bridge financing obligations. The financial elements of this alliance are described in greater detail in the section titled “Liquidity and Capital Resources”.

Sufficiency of working capital remains our greatest challenge. The amount of cash generated from research collaborations with Alticor is not adequate to fund our operations, resulting in an annual negative cash burn. The situation is described in greater detail in the “Liquidity and Capital Resources” section. Our current cash resources, together with additional research agreements, anticipated revenue from product launches, and other arrangements are adequate to fund operations through mid-2007.

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that our most critical accounting policies upon which our financial condition depends, and which involve the most complex or subjective decisions or assessments are:

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Strategic alliance with Alticor:

We account for our strategic alliance with Alticor in accordance with Emerging Issues Task Force (EITF) No. 01-1, Accounting for Convertible Instruments Granted or Issued to a Nonemployee for Goods or Services or a Combination of Goods or Services and Cash (EITF No. 01-1). Under EITF No. 01-1, the proceeds received from Alticor in connection with the March 5, 2003 transaction must first be allocated to the fair value of the convertible instruments issued. As of March 5, 2003, the fair value of the convertible instruments issued was $23.7 million; therefore any proceeds received from Alticor in connection with the March 5, 2003 transaction, up to $23.7 million, will be recorded as equity.

Stock-based compensation:

We account for our stock-based compensation expense in accordance with Statement of Financial Accounting Standards (SFAS) No. 123 (Revised 2004), Share-Based Payment (SFAS No. 123R) using the modified prospective basis.  SFAS No. 123R addresses all forms of share-based payment (SBP) awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. SFAS No. 123R requires the Company to expense SBP awards with compensation cost for SBP transactions measured at fair value. SFAS No. 123R applies to new equity awards and to equity awards modified, repurchased or canceled after the effective date. Additionally, compensation cost for the portion of awards for which the requisite service has not been rendered that are outstanding as of the effective date shall be recognized as the requisite service is rendered on or after the effective date. The compensation cost for that portion of awards shall be based on the grant-date fair value of those awards as calculated from the pro forma disclosures under SFAS No. 123. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions used: 1) expected volatility is based on the standard deviation of the historical volatility of the weekly adjusted closing price of our shares for a period equivalent to the expected life of the option, which is the same method we used both prior and subsequent to the adoption of SFAS 123R; 2) the expected life represents the period of time that the option is expected to be outstanding, taking into account the contractual term, historical exercise/forfeiture behavior, and the vesting period, if any; and 3) the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected life of the option. Additionally, common stock purchased pursuant to our employee stock purchase plan will be expensed based upon the fair market value in excess of purchase price.

Income taxes:

The preparation of our consolidated financial statements requires us to estimate our income taxes in each of the jurisdictions in which we operate, including those outside the United States, which may be subject to certain risks that ordinarily would not be expected in the United States. The income tax accounting process involves estimating our actual current exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in the recognition of deferred tax assets and liabilities. We must then record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.

Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. We have recorded a full valuation allowance against our deferred tax assets of $18.5 million as of March 31, 2006, due to uncertainties related to our ability to utilize these assets. The valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods we may need to adjust our valuation allowance which could materially impact our financial position and results of operations.

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Results of Operations

Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005

Revenue for the three months ended March 31, 2006 was $232,000 compared to $7,000 for the three months ended March 31, 2005, an increase of $225,000 or 3056%. The increase was largely due to revenue from Alticor for the heart health genetic test and the general nutrition genetic test of $215,000, both of which were launched by Alticor during the quarter. We expect revenue from these tests to increase in the quarter ending June 30, 2006. However, we cannot be certain whether, or to what extent, revenues will be sustained beyond that period. We also receive a royalty on Alticor’s product sales associated with the heart health genetic test and for the three months ended March 31, 2006, this royalty revenue was $2,000. In addition, we processed tests for research purposes for revenue of $8,000. The balance was from royalties on PSTÒ sales.  Cost of revenue was $198,000 for the three months ended March 31, 2006. Gross profit was $35,000, or 15% of revenue, for the three months ended March 31, 2006.

Research and development expenses were $729,000 for the three months ended March 31, 2006 compared to $684,000 for the three months ended March 31, 2005, an increase of $45,000 or 6%. Funded research and development expenses were $334,000 for the three months ended March 31, 2006 compared to $360,000 for the three months ended March 31, 2005, a decrease of $25,000 or 7%. In March 2003, we entered into a research agreement with Alticor to develop genetic tests and software to assess personalized risk and develop and use screening technologies to validate the effectiveness of the nutrigenomic consumables Alticor is developing. Additionally, we are playing a key role in enhancing and maintaining scientific credibility in academic and medical communities. After our initial focus in developing products in the United States and Canada, we expect that we will expand our focus to include developing nutigenomic products for sale overseas and developing products in the United States and overseas in other areas of wellness and skin care. This agreement expired in March 2005. In March 2005, we entered into two new agreements with Alticor to continue the research being performed. Direct expenses associated with these agreements were $242,000 and $256,000 for the three months ended March 31, 2006 and 2005, respectively. In June 2004, we entered into another research agreement with Alticor to conduct research into the development of a test to identify individuals with specific genetic variations that affect how people gain and maintain weight. Direct expenses associated with this agreement were $92,000 and $43,000 for the three months ended March 31, 2006 and 2005, respectively.  In addition, during 2005, we conducted genotyping tests for Alticor for research purposes. The costs associated with these tests were $61,000 for the three months ended March 31, 2005. Other research and development expenses, including overhead costs associated with research and development activities, were $395,000 for the three months ended March 31, 2006 compared to $324,000 for the three months ended March 31, 2005, an increase of $70,000 or 22%. This increase was largely attributable to the recording of $74,000 of stock-based compensation expense as a result of adopting SFAS No.123R for the three months ended March 31, 2006.

Selling, general and administrative expenses were $765,000 for the three months ended March 31, 2006 compared to $704,000 for the three months ended March 31, 2005, an increase of $61,000 or 9%. This increase was largely attributable to the recording of $69,000 of stock-based compensation expense as a result of adopting SFAS No.123R for the three months ended March 31, 2006 and was partially offset by the departure of the Chief Financial Officer/Chief Operating Officer in August 2005. In March 2006, we announced the addition of Gregg Mayer as Chief Business Officer. Mr. Mayer will lead the efforts to build product and testing revenues beyond the current commercialization partnership with Alticor. In March 2006, we also announced that Philip R. Reilly, MD, JD will continue in his position as Chairman of the Board of Directors but has stepped down as CEO. He has signed a two-year part-time employment agreement with the Company and will develop genetic testing opportunities with executive management while continuing to provide valuable strategic insight to the Board. Kenneth S. Kornman, DDS, Ph.D., founder, President and Chief Scientific Officer of the Company, will assume the additional role of Chief

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Executive Officer. Dr. Kornman will continue to oversee the relationship with the Company’s primary strategic partner, Alticor, to facilitate the launch of genetic tests globally.

Interest income was $38,000 for the three months ended March 31, 2006 compared to $21,000 for the three months ended March 31, 2005. The increase of 79% is primarily the result of an increase in the prevailing interest rates. Interest expense of $53,000 was incurred during the three months ended March 31, 2006, compared to $40,000 for the same period in 2005. The increase of 31% is primarily due to the increase in the prevailing interest rates over the two periods from 6.25% in 2005 to 8.25% in 2006.

We recorded amortization of note discount of $115,000 for each of the three months ended March 31, 2006 and 2005. Of the $115,000 expense, $78,000 is due to the amortization of the $1.5 million of discount resulting from the beneficial conversion feature of the convertible debt issued in March 2003 and $37,000 is due to the amortization of the $732,000 of discount associated with the below market stated interest rate.   

Liquidity and Capital Resources

Cash is one of the key financial performance indicators for us. As of March 31, 2006, we had cash and cash equivalents of $2.9 million. Net cash used in operating activities was $1.6 million and $1.5 million for the three months ended March 31, 2006 and 2005. Cash was used primarily to fund operations.

Investing activities used cash of $82,000 for the three months ended March 31, 2006 and $38,000 for the same period in 2005. Cash was used primarily for the purchase of equipment and capitalized patent costs.

Financing activities provided cash of $1.2 million for the three months ended March 31, 2006 compared to $145,000 for the three months ended March 31, 2005. During 2006, we received $665,000 from our strategic alliance with Alticor, $542,000 from the exercise of stock options and warrants and $3,000 from stock purchases through the employee stock purchase plan. These amounts were offset by $3,000 of payments of our capital lease obligations. During 2005, we received $66,000 from our strategic alliance with Alticor, $85,000 from the exercise of stock options and $1,000 from stock purchases through the employee stock purchase plan. These amounts were offset by $6,000 of payments of our capital lease obligations. We currently do not have any commitments for any material capital expenditures.

A summary of our contractual obligations as of March 31, 2006 is included in the table below:

	Payments Due By Period
Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years			More than 5 Years
Long-Term Debt Obligations	$	2,595,336	$	—	$	2,595,336		$	—		$	—
Operating Lease Obligations	1,327,274		445,608		881,666			—			—
TOTAL	$	3,922,610	$	445,608	$	3,477,002		$	—		$	—

In March 2003, we entered into a broad strategic alliance with Alticor to develop and market personalized nutritional and skin care products. As part of the strategic alliance, we entered into a research agreement (Research Agreement I) with Alticor, governing the terms of developing and validating nutrigenomic and dermagenomic tests and products. Alticor provided us with $5.0 million during the twenty-four months ending March 2005, to conduct certain research projects. In addition, Alticor made available a $1.5 million working capital credit line to initiate selected research agreements with third parties through March 2005 (Research Loans).

In March 2004, and subsequently amended in February 2005, we entered into a Distribution Agreement with Alticor to provide not less than 20,000 genetic tests at a price of $70 per genetic test for a period of one year from the date of obtaining a registration number as required under the Clinical

21

Laboratory Improvement Amendments of 1988, as amended (CLIA). A registration number was obtained from CLIA on March 22, 2005.

In June 2004, we entered into a research agreement (Research Agreement II) with Alticor, valued at $2.2 million, as amended, to conduct research into the development of a test to identify individuals with specific genetic variations that affect how people gain and maintain weight. During 2004, we received $1.4 million in research funding under this agreement. No funding related to this agreement was received during the three months ended March 31, 2006 and we are not anticipating any additional funding under this agreement.

In March 2005, we entered into an agreement with Alticor to expand the research being performed under Research Agreement I (Research Agreement III) to provide additional funding of $2.7 million over the two years beginning April 1, 2005. Also in March 2005, we entered into an additional research agreement (Research Agreement IV) with Alticor for exploratory research valued at $2.3 million over a two-year period commencing April 1, 2005. We received $630,000 in funding related to these agreements during the three months ended March 31, 2006 and are expecting to receive the remaining $1.9 million in research funding through March 2007 under these agreements.

In addition, in April 2005, Alticor paid us $2.0 million as an advance payment for genetic risk assessment tests to be processed under the terms of the Distribution Agreement. Further, Alticor agreed to extend the drawdown period of the Research Loans through 2007.

In February 2006, we entered into an agreement with Alticor to provide us with access to an additional $2.0 of working capital borrowing at any time prior to April 1, 2007. Any amounts borrowed will bear interest at prime plus 1%, require quarterly interest payments and be due five years from the date of borrowing.  Also in February 2006, Alticor amended the Research Loans to remove certain restrictions to permit us to use the loans for general working capital purposes. No amounts are outstanding under these credit facilities as of March 31, 2006.

Also in February 2006, we entered into two new purchase agreements with Alticor. The two new purchase agreements cover two genetic health assessment tests that we developed on behalf of Alticor. These are: 1) the heart health genetic test, which analyzes DNA variations in the Interleukin-1A and 1B genes to identify whether an individual may have a predisposition for chronically elevated measures of inflammation and an increased risk for heart disease; and 2) the general nutrition genetic test, which analyzes DNA variations in two genes that affect Vitamin B metabolism and four genes that are involved in responding to oxidative stress. The purchase agreement for the heart health genetic tests provides for sales of these tests to Alticor, through March 2008. The general nutrition genetic test purchase agreement term is through January 2008.

We believe our current cash resources, together with additional research agreements, anticipated revenue from product launches, and other arrangements are adequate to fund operations through mid-2007.

Effects of Inflation

We believe that inflation and changing prices over the past three years have not had a significant impact on our net revenue or on our income from continuing operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative or trading purposes.

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Interest Rate Risk

We are exposed to market risk from changes in interest rates primarily through our financing activities. Interest on our notes payable accrues at a rate equal to the prime rate of interest plus 1% per annum. Our ability to carry out our business plan or our ability to finance future working capital requirements may be impacted if the cost of carrying debt fluctuates to the point where it becomes a burden on our resources.

Foreign Currency Risk

Some of our sales occur outside the United States and are transacted in foreign currencies. Accordingly, we are subject to exposure from adverse movements in foreign currency exchange rates. At this time we do not believe this risk is material and we do not currently use derivative financial instruments to manage foreign currency fluctuation risk. However, if foreign sales increase and the risk of foreign currency exchange rate fluctuation increases, we may in the future consider utilizing derivative instruments to mitigate these risks.

Item 4. Controls and Procedures

(a)   Evaluation of Disclosure Controls and Procedures.   Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were adequate and effective to ensure that material information relating to us, including our consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared.

In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

(b)   Changes in Internal Control Over Financial Reporting.   No change in internal control over financial reporting occurred during the quarter ended March 31, 2006 that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not aware of any current or pending litigation to which we are or may be a party that we believe could materially adversely affect our results of operations or financial condition or net cash flows.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2005, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

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Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed as part of this Quarterly Report on Form 10-Q.

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SIGNATURES

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.

	INTERLEUKIN GENETICS, INC.
Date: May 10, 2006	By:	/s/  KENNETH S. KORNMAN
		Kenneth S. Kornman
		Chief Executive Officer, President and Chief Scientific Officer (Principal Executive Officer)
Date: May 10, 2006	By:	/s/  JOHN J. MCCABE
		John J. McCabe
		Controller and Chief Accounting Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit Number	Exhibit
10.1*	Amendment No. 4 to Note Purchase Agreement between the Company and Pyxis Innovations Inc. dated February 23, 2006
10.2*+	Purchase Agreement between the Company and Access Business Group LLC dated February 23, 2006 effective as of January 31, 2006
10.3*+	Purchase Agreement between the Company and Access Business Group LLC dated February 23, 2006 effective as of March 23, 2006
10.4*@	Amendment No. 3 to Employment Agreement dated March 6, 2006 between the Company and Kenneth S. Kornman
10.5*@	Amendment No. 2 to Employment Agreement dated March 6, 2006 between the Company and Philip R. Reilly
10.6*@	Employment Agreement dated March 31, 2006 between the Company and Kenneth S. Kornman
10.7*@	Employment Agreement dated March 31, 2006 between the Company and Philip R. Reilly
10.8*@	Employment Offer Letter dated May 27, 2005 between the Company and Ramon W. Mohanlal
10.9*@	Employment Offer Letter dated March 23, 2006 between the Company and Gregg Mayer
31.1*	Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*Filed herewith.

+Confidential treatment requested as to certain portions of the document, which portions have been omitted and filed separately with the Securities and Exchange Commission.

@Management contract or compensatory plan, contract or arrangement

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EX-10.1

EXECUTION

AMENDMENT NO. 4 TO
NOTE PURCHASE AGREEMENT

THIS AMENDMENT NO. 4 (the “Amendment”), dated as of February 23, 2006, is by and between INTERLEUKIN GENETICS, INC., a Delaware corporation (the “Company”), and PYXIS INNOVATIONS INC., a Delaware corporation (“Pyxis”).

The Company and Pyxis are parties to a Note Purchase Agreement dated as of October 23, 2002, as amended November 13, 2002, January 28, 2003, and March 5, 2003 (the “Agreement”). Capitalized terms not otherwise defined in this Amendment shall have the meanings given to them in the Agreement.

The parties agree as follows:

1.Recital C of the Agreement is revised to reflect the following developments since the Initial Closing:

Pyxis has purchased, and the Company has sold and issued to Pyxis, a promissory note in a principal amount of $500,000 on each of the following dates: October 23, 2002, November 14, 2002, December 16, 2002, and January 28, 2003 (the “Existing Notes”).

On March 5, 2003, the Company and Pyxis entered into Stock Purchase Agreement (the “Stock Purchase Agreement”) and various agreements referenced therein (collectively, the “Affiliation Agreements”). Pursuant to Section 2.5 of the Stock Purchase Agreement, Pyxis (i) has agreed to extend further credit to the Company to expand its research partnerships (the “Research Loans”), and (ii) refinanced the Company’s bridge financing loans previously due in August 2003 (the “Refinancing Loan”). In addition, pursuant to Section 2.6 of the Stock Purchase Agreement, the Company and Pyxis amended and restated the terms of the Existing Notes.

On March 5, 2005, the Company and Pyxis amended the Stock Purchase Agreement to extend until March 5, 2007 the period during which Pyxis agrees to purchase additional Notes pursuant to Section 2.2B of this Agreement (Research Loans), subject to the terms and conditions of this Agreement.

2.The following new Sections shall be added immediately following Section 2.2D of the Agreement:

2.2E                Working Capital Loans. At any time prior to April 1, 2007, Pyxis hereby agrees to purchase, and the Company hereby agrees to sell and issue to Pyxis, one or more Notes, the aggregate principal amount of which shall not exceed $2,000,000 (each, a “Working Capital Loan”). Subject to the terms and conditions of this Agreement, the closing of these purchases (each, a “Subsequent Closing”) will take place within ten business days following the Company’s written request to Pyxis to make such loan. For the purposes of each Working Capital Loan: (a) Pyxis hereby waives each of the closing conditions set forth in Section 2.5 except Section 2.5.3 (Injunction), Section 2.5.8 (Event of

Default), and Section 2.5.12 (Other Documents); and (b) the Company hereby waives each of the closing conditions set forth in Section 2.4 except Section 2.4.3 (Injunction).

2.2F                Form of Note. The Note for each Working Capital Loan shall be in a form substantially similar to the form of the Existing Notes; provided (a) the term of the Note shall be five years from the date of issuance, (b) interest shall be prime plus 1%, paid quarterly; and (c) the sections entitled “Conversion” and “Amends and Restates” shall be excluded.

3.Section 2.5.1 of the Stock Purchase Agreement and Sections 2.2B and 5.1 of the Agreement are each hereby amended to (a) remove the requirement that the Research Loans be used only for specific purposes, and (b) permit the Research Loans to be used for general working capital purposes.

4.Except as amended hereby, all of the terms and conditions of the Agreement shall remain in full force and effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

This Amendment No. 4 to Note Purchase Agreement is signed as of the date first written above.

INTERLEUKIN GENETICS, INC
By	/s/  PHILIP R. REILLY
Its:	CEO
	PYXIS INNOVATIONS INC.
By	/s/  KIM S. MITCHELL
	Kim S. Mitchell
Its:	Assistant Secretary

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EX-10.2

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMISSION. ASTERISKS DENOTE OMISSIONS.

Exhibit 10.2

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT (the “Agreement”) is made effective as of January 31, 2006, (the “Effective Date”) between ACCESS BUSINESS GROUP INTERNATIONAL LLC, acting as agent for ACCESS BUSINESS GROUP LLC (“Access”), a Michigan limited liability company, having its principal office at 7575 East Fulton Road, Ada, Michigan 49355, United States; and INTERLEUKIN GENETICS, INC., a Delaware corporation having its principal office at 135 Beaver Street, Waltham, MA 02453 (“Seller”). Access and Seller may also be referred to separately as a “party” and collectively as “parties.”

RECITALS

Seller is engaged in the business of providing genetic testing services and has indicated its willingness to act as supplier of the Services (defined in Section 1(a), below) to Access for resale to Quixtar Inc., an Affiliate of Access, which will then sell the Services to end-users, as well as kits to be used for collection of genetic material from end-users (“Collection Kits”).

The parties wish to enter into this Agreement to set forth the terms of Seller’s supply of the Services.

For purposes of this Agreement, “Affiliate” means, with respect to the applicable party, any corporation, company, partnership, trust, sole proprietorship or other entity or individual which: (a) is owned or controlled by such party, in whole or in part; (b) owns or controls such party, in whole or in part; or (c) is under common ownership or control with such party, in whole or in part; provided that for the purposes of this Agreement, Seller shall not be deemed an Affiliate of Access or its Affiliates.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and commitments set forth in this Agreement, the parties agree as follows:

1.             Definition of and Specifications for Services.

(a)           Service(s). As used in this Agreement, the term “Service” or “Services” shall mean the genetic testing services listed on Exhibit A, which is attached to and made part of this Agreement, the provision of a report prepared by Seller in accordance with CLIA requirements (a “Report”), to end-users, a sample copy of which is included in Exhibit A, as well as any genetic counseling services provided by Seller to end-users regarding such Services.

(b)           Specifications. As used in this Agreement, the term “Specifications” shall mean those specifications for the Services that are set forth in Exhibit A, which is attached to and made part of this Agreement.

(c)           Changes to Specifications. Either of the parties may from time to time request modifications or additions to the Specifications, provided, however, that such modifications or additions are approved by both parties in writing or by electronic mail. Seller shall provide Access with such information as Access may reasonably request from time to time to determine the price of the Services due to a prospective change in the Specifications. Notwithstanding the foregoing, Seller reserves the right to keep certain of its information regarding costs confidential.

2.             Purchase and Sale of Services.

(a)           General. During the term of this Agreement, Access shall purchase Services exclusively from Seller and Seller shall sell the Services to Access, all in accordance with the terms of this Agreement. Access is under no obligation to order any minimum quantity of Services.

(b)           Invoices. Seller will submit invoices for charges related to the Services on a monthly basis to the address set forth above. Each undisputed invoice shall be due and payable within thirty (30) days of the receipt of a properly payable invoice.

(c)           Location for Performing the Services. Seller shall perform the Services at Seller’s clinical laboratory located in Waltham, Massachusetts. Except as provided herein, Seller shall not subcontract part or all of the performance of the Services to any other person or entity without Access’s prior written consent, which shall not be unreasonably withheld. Access agrees and acknowledges that, at certain volumes, Seller may subcontract the Services to other laboratories (“Reference Labs”), provided that any such Reference Lab meet required certifications under the Clinical Laboratory Improvement Act of 1988, as amended (“CLIA”), and Seller provides such documentation to Access at least thirty (30) days prior to the effectiveness of any subcontract. Seller shall not change or modify part or all of the provision of the Services without Access’s prior written consent.

3.             Prices.

(a)           General. The price to be paid by Access for Services described in this Agreement are set forth in Exhibit B to this Agreement, which is attached and made part of this Agreement. Such price is exclusive of value-added, sales or other applicable taxes. Except as provided in Sections 1(c) and 3(b), the price for the Services set forth in Exhibit B is firm during the initial two year term of this Agreement and may not be increased by Seller for any reason during the initial two year term of this Agreement.

(b)           Modifications to Pricing. Notwithstanding Section 3(a), Seller may increase the price to be charged for the Services at any time to cover any additional expenses incurred by Seller as a result of modifications to the Specifications agreed upon by the parties. Seller will provide to Access reasonable documentary evidence of such changes in price on request. Seller shall give ninety (90) days’ prior written notice of any price increase allowed hereunder. Access will confirm its approval of such changed costs in writing to Seller prior to

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implementation thereof. Price changes allowed under this Section 3(b) shall not be applicable to Services that have already been performed, unless otherwise agreed in writing by the parties.

(c)           Audit. Seller shall keep accurate books, records and systems under an accounting system maintained in accordance with the Generally Accepted Accounting Principles (GAAP) consistently applied so as to ensure the capability of a proper audit of the price of the Services. Upon at least 30 days’ prior written request, and in no case more than twice per calendar year, Access or Access’ authorized auditor, such authorized auditor to be reasonably acceptable to Seller, shall have reasonable access during Seller’s customary business hours to such books, records and systems for the purpose of inspecting and examining the same to confirm compliance with the terms of this Agreement. Any audit expense will be borne by Access, except in the event that any audit reveals a discrepancy greater than 10% in Access’ favor, in which case Seller shall bear the expense of such audit.

4.             Payment.

(a)           Payment. Access shall pay Seller’s invoice for the Services within 30 days of the date of Seller’s invoice.

(b)           Services that do not comply with Specifications. If Access determines that any of the Services do not comply with the Specifications, or the other requirements of this Agreement (including the warranties set forth in Section 6) or in any respect that prevents Access from reselling such Services, then:

(i)            Access shall give Seller a notice identifying such Services, and the grounds for the noncompliance;

(ii)           (A) Notwithstanding Section 4(a) above, if payment has been made by Access for those noncomplying Services, Access shall be entitled either to be reimbursed by Seller’s payment to Access of the appropriate amount or to a credit of the appropriate amount against any amounts then or subsequently payable by Access to Seller hereunder, and/or (B) Seller shall, if required by Access after receipt of such notice, use its best efforts to deliver to Access as soon as possible, and otherwise in accordance with the provisions of this Agreement, replacement Services, requested by Access but not exceeding the number of noncomplying Services.

5.             Representations and Warranties.

(a)           General. Seller represents and warrants to Access that (a) it shall have and maintain necessary qualifications, expertise, authority, registrations, licenses, and permits to enable it to perform its obligations under and contemplated by this Agreement, including CLIA registration for its laboratory where the Services are performed; (b) the Services and Reports included in connection therewith shall be performed in a professional manner in accordance with industry standards, free from material faults and defects; (c) the Services shall conform in all material respects to all  specifications and performance criteria standards or other requirements that are set forth on Exhibit A or otherwise agreed upon by Seller and Access; (d) the Services

3

shall comply with all applicable (U.S. and Canadian) federal, state, provincial and local laws and regulations; (e) to the knowledge of Seller, (i) Seller is the owner of all right, title and interest in and to, or otherwise holds a license under, the intellectual property associated with the  Services and (ii) its performance of the Services contemplated by this Agreement does not infringe the patent rights of any third party; (f) Seller shall supervise the Reference Labs to the extent necessary to provide quality assurance of the Services  at the same level as provided at Seller’s own facility; (g) all information supplied by Seller to Access on or before the date of this Agreement was when furnished, and is as of the date of this Agreement, true, correct and complete in all material respects and that it will promptly notify Access if any such information changes materially during the term of this Agreement; (h) Seller has and will maintain sufficient capacity to satisfy Access’s requirements for the Services during the term of this Agreement based on the volume estimates provided by Access to Seller as of the Effective Date; and (i) Seller will comply with, and shall take no action which subjects Access to risk of noncompliance with, all applicable laws and regulations, including without limitation the U.S. Foreign Corrupt Practices Act and all laws and regulations regarding Seller’s working conditions for its employees during the term of this Agreement.. Seller has and follows, and will continue to have and follow, adequate quality and security procedures that will assure that the Services will comply with the foregoing representations and warranties. Upon written request, Seller shall give Access an officer’s certificate of compliance with respect to applicable laws and regulations. Access’ approval of any specification or other standards shall not relieve Seller of any of its warranties under this Section. Seller’s warranties extend to future performance of the Services and survive acceptance and payment. Seller shall extend to all end-users to which it provides Reports the warranty set forth on Exhibit C attached hereto and incorporated herein by reference (the “End-User Warranty”).

(b)           Seller’s Agreements Regarding Website. Seller will maintain a website adequate for end users to obtain Reports on a publishing server and shall take commercially reasonable security precautions to prevent unauthorized access thereto. Seller will provide reasonable and customary backups to its publishing server and maintain and store backup tapes. Seller will perform restorations to its publishing server in the event of a service failure. Seller will respond to Access’ requests for restoring files within 3 business days. Seller will provide Access with a copy of Seller’s privacy policy. Seller shall not collect, store or use any End-User Information (as defined herein) not voluntarily provided by such end-user. Seller shall not disclose any End-User Information of any kind to any third party without valid legal process and only in compliance with all applicable laws. Seller shall not send any literature or solicitation materials targeted specifically to end-users or specifically solicit end-users for any products or services not offered through this Agreement. “End-User Information” means all: (a) navigational information relating to an end-user, including but not limited to usage of other hyperlinks within or available through Seller’s Website; and (b) information relating to an end-user including, but not limited to, Internet address and/or other identifying information such as actual name or address.

6.             Access to Facilities. During the term of this Agreement, Access may designate one or more Access employees or other persons who shall be allowed to visit Seller’s laboratory during Seller’s customary business hours for the purposes of inspecting Seller’s processes for provision of the Services by Seller.  In order to prevent interference with laboratory operations, Access shall obtain written authorization from Seller prior to any such inspection.

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7.             Term and Termination.

(a)           General Term. The initial term of this Agreement shall commence on the Effective Date of this Agreement and shall continue for two years thereafter. This Agreement may be renewed from year-to-year after the initial term upon written agreement of the parties.

(b)           Termination Upon Default. At any time during the term of this Agreement, either party may terminate this Agreement by written notice to the other party if the other party is in material default in the performance of any of its obligations hereunder and fails to remedy such default within thirty (30) days after receiving written notice of such default.

(c)           Termination by Either Party for Cause. Either party may immediately terminate this Agreement by written notice to the other:

(i)            If the other party has ceased its business activities or has otherwise begun winding up its business affairs;

(ii)           If bankruptcy, reorganization, arrangement or insolvency proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, are instituted by or against the other party and are consented to or are not dismissed within sixty (60) days after such institution;

(iii)          If a custodian, liquidator, receiver or trustee is appointed for the other party or the major part of its property and is not discharged within sixty (60) days after such appointment;

(iv)          If the other party becomes insolvent or bankrupt, is generally not paying its debts as they become due, makes any assignment for the benefit of its creditors or makes any comparable arrangement with its creditors; or

(v)           Upon the occurrence of any Force Majeure Event (defined below) that delays or is anticipated to delay performance of the other party of this Agreement for more than thirty (30) days.

(d)           Additional Termination by Access for Cause. Except as set forth in Section 12, Access may immediately terminate this Agreement for Seller’s inability for any reason to meet Access’s request for Services for a period exceeding 30 days beyond receipt by Seller of a Collection Kit from an end-user or failure to meet the Specifications for the Services at any time.

(e)           Survival of Certain Provisions. The termination of this Agreement shall not affect any of the provisions of this Agreement that by their nature are intended to continue after termination, including but not limited to Section 5 (Representations and Warranties), Section 7 (Term and Termination), Section 8 (Confidential Information) and Section 10 (Indemnification).

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(f)            Liability for Termination. Access in exercising its rights to terminate this Agreement in accordance with the terms and conditions hereof shall not incur any liability whatsoever for any damage, loss or expense of any kind suffered or incurred by Seller (or for any compensation to Seller) arising from or incident to any such termination, expiration or non-renewal. Any termination hereof shall not impair any rights nor discharge any obligations which have accrued to Access as of the effective date of such termination.

8.             Confidential Information.

(a)           Confidentiality Obligations. During the term of this Agreement and at all times thereafter, Seller agrees to hold in confidence and not otherwise use or disclose the information of Access and its Affiliates, including without limitation, any information relating to Access’ and its Affiliates’ business operations, price lists, manufacturing data, marketing information strategies, customer or product lists, research and development information and all other information disclosed by Access or its Affiliates to Seller (“Confidential Information”), in confidence and not to use any of the foregoing commercially for its own benefit or that of any other party, nor for the purpose of developing or improving a product or method for any other party except Access. Seller agrees to limit dissemination of and access to the Services and/or Specifications or such information only to the persons within Seller’s organization, performing Services under this Agreement, and then only to those persons who have a need for access thereto, and who have entered into a restrictive agreement prohibiting such personnel from doing anything with respect to the Services and/or Specifications and such information that Seller would itself be prohibited from doing under this Agreement. Notwithstanding the foregoing, should Seller wish to disclose to third parties such as agents or subcontractors Confidential Information, Seller must, before making such disclosure, obtain the prior written approval of Access and, if such approval is provided, obtain from the third party to whom the disclosure will be made a confidentiality agreement that is at least as restrictive as the provisions of this Section 8. The confidentiality obligations within this Section 8 shall survive termination or expiration of this Agreement for a period of three (3) years from the date of termination of this Agreement and deemed to cover all Confidential Information provided pursuant to this transaction. Should either Seller or Access disclose to third parties such as agents or subcontractors confidential information belonging to the other party to this Agreement, the disclosing party must, before making such disclosure, notify the other party of this Agreement that the disclosure will be made and obtain from the third party to whom the disclosure will be made a confidentiality agreement similar to the terms hereof. The parties acknowledge that all confidential information of the other party shall be owned solely by the other party, and each party agrees to return all items containing confidential information to the other party as requested upon termination of this Agreement. Seller and Access recognize and agree that nothing contained in this Agreement shall be construed as granting any rights, by license or otherwise, to any confidential information disclosed pursuant to this Agreement.

(b)           Limitation on Obligations. The obligations specified in Section 8(a) above shall not apply with respect to any information, which Seller can establish by written records:

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i.was already in Seller’s possession prior to disclosure hereunder and is not protected by confidentiality provisions of any other agreement between Access and Seller;

ii.is or becomes available to the public through no wrongful act of Seller;

iii.is disclosed, without restriction on further disclosure, to Seller by a third party having no duty of confidentiality with respect to such information whether to Seller or to another party, and having the legal right to disclose such information; or,

iv.has been developed by or for Seller independently by person(s) having no access to the Confidential Information.

(c)           Legally Required Disclosures. If Seller is required under applicable law to disclose the Specifications for the Services, or any other Confidential Information, to any governmental or regulatory agency or pursuant to any court order or subpoena, it shall do so only after giving prompt notice to that effect to Access so that Access may review the scope of any such disclosure and, in the case of any legal or regulatory proceeding, Access may seek to prevent such disclosure or production or, if that cannot be achieved, the entry of a protective order or other appropriate device or procedure. If Seller is unsuccessful in seeking a protective order or other remedy satisfactory to Access, Seller shall disclose only that portion of the Confidential Information as to which Seller is advised by independent legal counsel is legally required to be disclosed or furnished (with a copy of a written opinion of such counsel to that effect to be simultaneously furnished to Access).

10.           Indemnification.

(a)           Indemnification by Seller. Seller shall defend, indemnify and hold Access (including its Affiliates, members, managers, directors, officers, employees, and agents) harmless from and against any damages, claims, costs and expenses (including actual attorneys’ fees and recall costs and expenses) arising from or relating to (i) any breach or misrepresentation by Seller under this Agreement, or (ii) any claim by an end-user of the Services, including any breach of the End-User Warranty that is a result of Seller’s performance of the Services described herein.

(b)           Indemnification by Access. Access shall defend, indemnify and hold Seller (including its members, managers, directors, officers, employees, agents and end-users) harmless from and against any damages, claims, costs and expenses (including actual attorneys’ fees and recall expenses) arising from or relating to (i) any breach or misrepresentation by Access under this Agreement, or (ii) the manufacture, use or sale by Access, or the use by an end-user, of any collection kit necessary for the performance of the Services.

(c)           Procedures. If any action, suit, proceeding or claim shall be commenced in respect of which a party may demand indemnification, the indemnified party shall notify the

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indemnifying party to that effect with reasonable promptness. The indemnifying party shall have the opportunity to defend against such action, suit, proceeding or claim. The indemnified party shall have the right to employ its own counsel and participate in the defense of any matter at its own expense. If the indemnifying party fails to defend as required hereunder, the indemnified party may defend itself at the indemnifying party’s expense. Each party shall render to the other assistance as may be reasonably required in connection with the defense of any such matter.

(d)           Recall of Collection Kits. If the Collection Kits constitute a health or safety hazard or risk, or if the Collection Kits or their distribution becomes the subject of heightened governmental regulation, then Access shall have the right to recall such Collection Kits at its sole expense; provided, that, if the reason for the recall is the inability to perform the Services, as currently anticipated, without violating applicable law, then Seller shall pay the reasonable costs of such recall.

11.           Insurance. Seller shall maintain in effect at all times during the term of this Agreement insurance, from an insurance company reasonably acceptable to Access, of the types and in the amounts set forth below protecting against losses, claims, demands, proceedings, damages, costs, charges and expenses for injuries (including death) or damage to person or property arising out of the sale of the Services to the extent such injuries or damage are due to the fault or negligence of Seller or its agents or subcontractors:

Professional Liability                                           U.S.       $ 1,000,000 (per occurrence)

Seller further agrees to furnish to Access, concurrently with the execution of this Agreement, insurance certificates which will confirm its insurance coverage in the amounts referenced above, to arrange for its liability insurance carriers to include Access and its Affiliates as additional insureds under its standard vendor’s product liability insurance policy and to arrange for its insurance carriers to include as part of all such certificates the requirement to furnish thirty (30) days advance written notice to Access of any material change in, or cancellation or termination of, such insurance policies.

12.             Force Majeure. Subject to the other provisions of this Agreement, in the event that either party is unable to perform any of its obligations under this Agreement because of natural disaster, actions or decrees of governmental bodies or events or causes beyond the control of the affected party (a “Force Majeure Event”) all obligations of the affected party under this Agreement shall be immediately suspended, provided that such affected party promptly gives the other party notice of the occurrence of the Force Majeure Event. The affected party shall make its best efforts to eliminate the obstacles preventing its performance and to resume its performance under the Agreement as soon as possible. Under no circumstances shall any delay or failure to perform as a result of a labor dispute or strike be interpreted to be a Force Majeure Event.

13.           Miscellaneous Provisions.

(a)           Assignment. Neither party shall assign, transfer or subcontract this Agreement or any part of this Agreement, directly or indirectly, without the other party’s prior

8

written consent; provided, however, that Access may assign its rights and obligations under this Agreement to any Affiliate of Access without the prior written consent of Seller, in which case Access shall not be released from any of its obligations, financial or otherwise, under this Agreement and Seller may assign its rights and obligations hereunder to any person or entity that succeeds to all or substantially all of Seller’s business or that aspect of Seller’s business that is the subject of this Agreement. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against the respective successors and permitted assigns of each of the parties to this Agreement. The Affiliates of Access shall have the right to specifically enforce this Agreement and are intended third parties beneficiaries of this Agreement.

(b)           Notices. All notices and other communications under this Agreement shall be in the English language, in writing and shall be deemed to have been duly given when either personally delivered, or sent by facsimile or sent by express delivery service with charges prepaid and receipt requested, or, when mailed (postage prepaid) by certified mail with return receipt requested, to the parties at their respective addresses set forth below. Any party may change its address by written notice to the other party.

Access Business Group International LLC
7575 Fulton Street East
Ada, Michigan 49355
Attn:  Strategic Procurement

Interleukin Genetics, Inc.
135 Beaver Street — 2nd floor
Waltham, Massachusetts 03452
Attn: Chief Financial Officer

(c)           Entire Agreement; Amendments. This Agreement contains the entire agreement of the parties and replaces all prior agreements and understandings. This Agreement may be amended, modified, superseded, or canceled and any of the terms or conditions in this Agreement may be waived, only by a written instrument signed by each party to this Agreement or, in the case of a waiver, by or on behalf of the party waiving compliance. The failure of any party at any time to require performance of any provision in this Agreement shall not affect the right at a later time to enforce that or any other provision. No waiver by any party of any condition, or of any breach of any term contained in this Agreement, in any one or more instances, shall be deemed to be a further or continuing waiver of that or any other condition or breach. No course of dealing between the parties or usage of trade shall be effective to amend, supplement, modify, or otherwise alter, in whole or in part, the express terms of this Agreement.

(d)           Severability. This Agreement shall be interpreted in all respects as if any invalid or unenforceable provision were omitted from this Agreement. All provisions of this Agreement shall be enforced to the full extent permitted by law.

(e)No Agency. This Agreement does not in any way create the relationship of principal and agent, employer and employee, partner or joint venture between Seller and Access. Under no circumstances shall Seller or its employees be considered to be the agents or

9

employees of Access, or vice versa. Neither Seller nor Access shall (a) act or attempt to act or represent itself directly or by implication, as agent or employee of the other or in any manner, (b) assume or create or attempt to assume or create, any obligation on behalf of or in the name of the other, or (c) make any representations, guarantees, or warranties on behalf of or in the name of the other with respect to any matter.

(f)            Governing Law; Venue. This Agreement shall be governed by and shall be construed in accordance with the internal laws of the State of Michigan, without regard to conflicts of law principles and without regard to the United Nations Convention on Contracts for the International Sale of Goods (the “CISG”). The parties agree that the CISG shall not apply to this Agreement. Each party (i) agrees that any litigation arising out of this Agreement may be brought only in the state or federal courts whose jurisdiction includes Kent County, Michigan, (ii) consents to the jurisdiction of such courts, and (iii) waives any argument that any such court is an inconvenient forum.

(g)           Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same Agreement. A facsimile copy of the signed Agreement will be deemed to be an original of this Agreement for purposes of execution by counterparts.

(h)           Headings. The section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement.

IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first set forth above.

ACCESS BUSINESS GROUP					INTERLEUKIN GENETICS, INC.
INTERNATIONAL LLC, acting as agent
for ACCESS BUSINESS GROUP LLC
By:		/s/ Jay G. Ertl			By:		/s/ Philip R. Reilly
Print Name:			Jay G. Ertl		Print Name:				Philip R. Reilly, MD, JD
Its:	Vice President - Product Supply				Its:	Chief Executive Officer
				“Access”				“Seller”

10

Exhibit A

*****

11

Exhibit B

*****

12

Exhibit C

 End-User Warranty:  Seller expressly warrants to end-users of the Services that (a) the Services and Reports included in connection therewith shall be performed in a professional manner in accordance with industry standards, free from material faults and defects; (b) the Services shall conform in all material respects to all  specifications and performance criteria standards or other requirements that are set forth on Exhibit A or otherwise agreed upon by Seller and Access; and (c) the Services shall comply with all applicable (U.S. and Canadian) federal, state, provincial and local laws and regulations.

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EX-10.3

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMISSION. ASTERISKS DENOTE OMISSIONS.

Exhibit 10.3

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT (the “Agreement”) is made effective as of March 23, 2006, between ACCESS BUSINESS GROUP INTERNATIONAL LLC, acting as agent for ACCESS BUSINESS GROUP LLC (“Access”), a Michigan limited liability company, having its principal office at 7575 East Fulton Road, Ada, Michigan 49355, United States; and INTERLEUKIN GENETICS, INC., a Delaware corporation having its principal office at 135 Beaver Street, Waltham, MA 02453 (“Seller”). Access and Seller may also be referred to separately as a “party” and collectively as “parties.”

RECITALS

Seller is engaged in the business of providing genetic testing services and has indicated its willingness to act as supplier of the Services (defined in Section 1(a), below) to Access for resale to Quixtar Inc., an Affiliate of Access, which will then sell the Services and kits to be used for collection of genetic material from end-users (“Collection Kits”).

Seller and Access were parties to that certain Distribution Agreement dated February 26, 2004, as amended on February 28, 2005, whereby Seller agreed to sell to Access, and Access agreed to purchase, at least 20,000 Genetic Tests (as defined in the Distribution Agreement) during the term of such agreement, at a price of $70 per test.

The Distribution Agreement terminated on March 22, 2006.

Access paid Seller $2,000,000 in April, 2005, as an advance payment for Genetic Tests (the “Prepayment”) under the Distribution Agreement and the parties have agreed that $600,000 of the Prepayment shall be applied to purchases under this Agreement through December 31, 2006.

The parties wish to enter into this Agreement to set forth the terms of Seller’s supply of the Services.

For purposes of this Agreement, “Affiliate” means, with respect to the applicable party, any corporation, company, partnership, trust, sole proprietorship or other entity or individual which: (a) is owned or controlled by such party, in whole or in part; (b) owns or controls such party, in whole or in part; or (c) is under common ownership or control with such party, in whole or in part; provided that for the purposes of this Agreement, Seller shall not be deemed an Affiliate of Access or its Affiliates.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and commitments set forth in this Agreement, the parties agree as follows:

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1.             Definition of and Specifications for Services.

(a)           Service(s). As used in this Agreement, the term “Service” or “Services” shall mean the genetic testing services listed on Exhibit A, which is attached to and made part of this Agreement, the provision of a report prepared by Seller in accordance with CLIA requirements (a “Report”), to end-users, a sample copy of which is included in Exhibit A, as well as any genetic counseling services provided by Seller to end-users regarding such Services.

(b)           Specifications. As used in this Agreement, the term “Specifications” shall mean those specifications for the Services that are set forth in Exhibit A, which is attached to and made part of this Agreement.

(c)           Changes to Specifications. Access may from time to time request modifications or additions to the Specifications. If Seller believes that Access’s modifications or additions to the Specifications will result in an increase in the price of [materials, parts, or] labor paid or incurred by Seller in providing the Services, Seller will promptly notify Access and the parties shall in good faith negotiate an appropriate adjustment to the purchase price. Seller shall provide Access with such information as Access may request from time to time to determine the cost of a prospective change in the Specifications.

2.             Purchase and Sale of Services.

(a)           General. During the term of this Agreement, Access shall purchase Services from Seller and Seller shall sell the Services to Access, all in accordance with the terms of this Agreement. Access is under no obligation to order any minimum quantity of Services or to use Seller as its exclusive supplier for the Services.

(b)           Invoices. Seller will submit invoices for charges related to the Services on a monthly basis to the address set forth above. Except as provided herein, each undisputed invoice shall be due and payable within thirty (30) days of the receipt of a properly payable invoice. Seller shall credit invoices for purchases of Services on or before December 31, 2006 against the $600,000 remaining of the Prepayment described above.

(c)           Location for Performing the Services. Seller shall perform the Services at Seller’s clinical laboratory located in Waltham, Massachusetts. Except as provided herein, Seller shall not subcontract part or all of the performance of the Services to any other person or entity without Access’s prior written consent, which shall not be unreasonably withheld. Access agrees and acknowledges that, at certain volumes, Seller may subcontract the Services to other laboratories (“Reference Labs”), provided that any such Reference Lab meet required certifications under the Clinical Laboratory Improvement Act of 1988, as amended (“CLIA”), and Seller provides such documentation to Access at least thirty (30) days prior to the effectiveness of any subcontract. Seller shall not change or modify part or all of the provision of the Services without Access’s prior written consent.

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3.             Prices.

(a)           General. The price to be paid by Access for Services described in this Agreement are set forth in Exhibit B to this Agreement, which is attached and made part of this Agreement. Such prices are exclusive of value-added, sales or other applicable taxes. The prices for the Services set forth in Exhibit B are firm during the initial two year term of this Agreement and may not be increased by Seller for any reason during the initial two year term of this Agreement.

(b)           Modifications to Specifications. Notwithstanding Section 3(a), Seller may increase the price to be charged for the Services at any time to cover any additional expenses incurred by Seller as a result of modifications to the Specifications requested by Access and agreed upon by the parties. Seller will provide to Access reasonable documentary evidence of such changes in costs on request. Seller shall give ninety (90) days’ prior written notice of any price increase allowed hereunder. Access will confirm its approval of such changed costs in writing to Seller prior to implementation thereof. Price changes allowed under this Section 3(b) shall not be applicable to Services that have already been performed, unless otherwise agreed in writing by the parties.

(d)           Most Favorable Prices. Prices charged by Seller are not and will not be in excess of the prices permitted by any applicable government price regulations and are not and will not be in excess of Seller’s current or future selling prices of the same or substantially similar items, taking into account the quantities so sold. In the event it is subsequently determined that the prices charged are in excess of such prices, Seller will promptly refund such excess to Access or Access will be entitled an appropriate credit against invoices submitted by Seller to Access, at Access’s option.

(e)           Audit. Seller shall keep accurate books and records of all of its costs under an accounting system maintained in accordance with the Generally Accepted Accounting Principles (GAAP) consistently applied so as to ensure the capability of a proper audit of such costs by Access. Upon prior request, Access or Access’ authorized auditor shall have access during Seller’s business hours to such books, records and systems for the purpose of inspecting and examining the same to confirm the costs and compliance with other terms of this Agreement. Any audit expense will be borne by Access, except in the event that any audit reveals a discrepancy greater than five (5%) percent, in which case Seller shall bear the expense of such audit.

4.             Payment.

(a)           Payment. Except as provided in Section 2(b) above, Access shall pay Seller’s invoice for the Services within 30 days of the date of Seller’s invoice.

(b)           Services that do not comply with Specifications. If Access determines that any of the Services do not comply with the Specifications, or the other requirements of this Agreement (including the warranties set forth in Section 6) or in any respect that prevents Access from reselling such Services, then:

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(i)            Access shall give Seller a notice identifying such Services, and the grounds for the noncompliance;

(ii)           (A) Notwithstanding Section 4(a) above, if payment has been made by Access for those noncomplying Services, Access shall be entitled either to be reimbursed by Seller’s payment to Access of the appropriate amount or to a credit of the appropriate amount against any amounts then or subsequently payable by Access to Seller hereunder, and/or (B) Seller shall, if required by Access after receipt of such notice, use its best efforts to deliver to Access as soon as possible, and otherwise in accordance with the provisions of this Agreement, replacement Services, requested by Access but not exceeding the number of noncomplying Services.

5.             Exclusivity. Unless the parties agree otherwise in writing, Seller shall not make available the Services to any party other than Access or Access’ Affiliates.

6.             Representations and Warranties.

(a)           General. Seller represents and warrants to Access that (a) it shall have and maintain necessary qualifications, expertise, authority, registrations, licenses, and permits to enable it to perform its obligations under and contemplated by this Agreement, including CLIA registration for its laboratory where the Services are performed; (b) the Services and Reports included in connection therewith shall be performed in a professional manner in accordance with industry standards, free from material faults and defects; (c) the Services shall conform in all material respects to all  specifications and performance criteria standards or other requirements that are set forth on Exhibit A or otherwise agreed upon by Seller and Access; (d) the Services shall comply with all applicable (U.S. and Canadian) federal, state, provincial and local laws and regulations; (e) to the knowledge of Seller, (i) Seller is the owner of all right, title and interest in and to, or otherwise holds a license under, the intellectual property associated with the  Services and (ii) its performance of the Services contemplated by this Agreement does not infringe the patent rights of any third party; (f) Seller shall supervise the Reference Labs to the extent necessary to provide quality assurance of the Services  at the same level as provided at Seller’s own facility; (g) all information supplied by Seller to Access on or before the date of this Agreement was when furnished, and is as of the date of this Agreement, true, correct and complete in all material respects and that it will promptly notify Access if any such information changes materially during the term of this Agreement; (h) Seller has and will maintain sufficient capacity to satisfy Access’s requirements for the Services during the term of this Agreement; and (i) Seller will comply with, and shall take no action which subjects Access to risk of noncompliance with, all applicable laws and regulations, including without limitation the U.S. Foreign Corrupt Practices Act and all laws and regulations regarding Seller’s working conditions for its employees during the term of this Agreement.. Seller has and follows, and will continue to have and follow, adequate quality and security procedures that will assure that the Services will comply with the foregoing representations and warranties. Upon written request, Seller shall give Access certificates of compliance with respect to applicable laws and regulations. Access’ approval of any specification or other standards shall not relieve Seller of any of its warranties under this Section. Seller’s warranties extend to future performance of the services

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and survive inspection, tests, acceptance and payment. Seller shall extend to all end-users to which it provides Reports the warranty set forth on Exhibit C attached hereto and incorporated herein by reference (the “End-User Warranty”).

(b)           Seller’s Agreements Regarding Website. Seller will maintain Seller’s website on its own server and shall take commercially reasonable security precautions to prevent unauthorized access thereto. Seller will provide reasonable and customary backups to its publishing server and maintain and store backup tapes. Seller will perform restorations to its publishing server in the event of a service failure. Seller will respond to Access’ requests for restoring files within one (1) business day. Seller will provide Access with a copy of Seller’s privacy policy. Seller shall not collect, store or use any End-User Information (as defined herein) not voluntarily provided by such end-user. Seller shall not disclose any End-User Information of any kind to any third party without valid legal process and only in compliance with all applicable laws. Seller shall not send any literature or solicitation materials targeted specifically to end-users or specifically solicit end-users for any products or services not offered through this Agreement. “End-User Information” means all: (a) navigational information relating to an end-user, including but not limited to usage of other hyperlinks within or available through Seller’s Website; and (b) information relating to an end-user including, but not limited to, Internet address and/or other identifying information such as actual name or address.

7.             Access to Facilities. During the term of this Agreement, Access may designate one or more Access employees or other persons who shall be allowed to visit Seller’s laboratory during business hours for the purposes of inspecting Seller’s processes for provision of the Services by Seller.

8.             Term and Termination.

(a)           General Term. The initial term of this Agreement shall commence on the date of this Agreement and shall continue for two years thereafter. This Agreement may be renewed from year-to-year after the initial term upon written agreement of the parties.

(b)           Termination Upon Default. At any time during the term of this Agreement, either party may terminate this Agreement by written notice to the other party if the other party is in material default in the performance of any of its obligations hereunder and fails to remedy such default within thirty (30) days after receiving written notice of such default.

(c)           Termination by Either Party for Cause. Either party may immediately terminate this Agreement by written notice to the other:

(i)            If the other party has ceased its business activities or has otherwise begun winding up its business affairs;

(ii)           If bankruptcy, reorganization, arrangement or insolvency proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, are instituted by or against the other party and are consented to or are not dismissed within sixty (60) days after such institution;

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(iii)          If a custodian, liquidator, receiver or trustee is appointed for the other party or the major part of its property and is not discharged within sixty (60) days after such appointment;

(iv)          If the other party becomes insolvent or bankrupt, is generally not paying its debts as they become due, makes any assignment for the benefit of its creditors or makes any comparable arrangement with its creditors; or

(v)           Upon the occurrence of any Force Majeure Event (defined below) that delays or is anticipated to delay performance of the other party of this Agreement for more than thirty (30) days.

(d)           Additional Termination by Access for Cause. Access may immediately terminate this Agreement for Seller’s inability for any reason to meet Access’s request for Services for a period exceeding 30 days beyond receipt by Seller of a testing kit from an end-user or failure to meet the Specifications for the Services at any time.

(e)           Survival of Certain Provisions. The termination of this Agreement shall not affect any of the provisions of this Agreement that by their nature are intended to continue after termination, including but not limited to Section 6 (Representations and Warranties), Section 8 (Term and Termination), Section 9 (Confidential Information) and Section 10 (Indemnification).

(f)            Liability for Termination. Access in exercising its rights to terminate this Agreement in accordance with the terms and conditions hereof shall not incur any liability whatsoever for any damage, loss or expense of any kind suffered or incurred by Seller (or for any compensation to Seller) arising from or incident to any such termination, expiration or non-renewal. Any termination hereof shall not impair any rights nor discharge any obligations which have accrued to Access as of the effective date of such termination.

9.             Confidential Information.

(a)           Confidentiality Obligations. During the term of this Agreement and at all times thereafter, Seller agrees to hold in confidence and not otherwise use or disclose the Specifications and all other information of Access and its Affiliates, including without limitation, any information relating to the Services, Access’ and its Affiliates’ business operations, price lists, manufacturing data, marketing information strategies, customer or product lists, research and development information and all other information disclosed by Access or its Affiliates to Seller, in confidence and not to use any of the foregoing commercially for its own benefit or that of any other party nor for the purpose of developing or improving a product or method for any other party except Access. Seller agrees to limit dissemination of and access to the Services and/or Specifications or such information only to the persons within Seller’s organization, performing Services under this Agreement, and then only to those persons who have a need for access thereto, and who have entered into a restrictive agreement prohibiting such personnel from doing anything with respect to the Services and/or Specifications and such information that Seller would itself be prohibited from doing under this Agreement. The confidentiality

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obligations within this Section 9 shall survive termination or expiration of this Agreement for a period of three (3) years from the date of termination of this Agreement and deemed to cover all Confidential Information provided pursuant to this transaction. Should either Seller or Access disclose to third parties such as agents or subcontractors confidential information belonging to the other party to this Agreement, the disclosing party must, before making such disclosure, notify the other party of this Agreement that the disclosure will be made and obtain from the third party to whom the disclosure will be made a confidentiality agreement similar to the Confidentiality Agreement with a term not shorter than the term of the Confidentiality Agreement as extended by this Section 9. The parties acknowledge that all confidential information of the other party shall be owned solely by the other party, and each party agrees to return all items containing confidential information to the other party as requested upon termination of this Agreement. Seller and Access recognize and agree that nothing contained in this Agreement shall be construed as granting any rights, by license or otherwise, to any confidential information disclosed pursuant to this Agreement.

(b)           Legally Required Disclosures. If either party is required under applicable law to disclose the Specifications for the Services, or any other confidential information, to any governmental or regulatory agency or pursuant to any court order or subpoena, it shall do so only after giving prompt notice to that effect to the other party so the other party may review the scope of any such disclosure and, in the case of any legal or regulatory proceeding, so that the other party may seek to prevent such disclosure or production or, if that cannot be achieved, the entry of a protective order or other appropriate device or procedure. If the party subject to the obligation to disclose is unsuccessful in seeking a protective order or other remedy satisfactory to the other party, the party shall disclose only that portion of the formula or Specifications for the Services or confidential information as to which the party is advised by independent legal counsel is legally required to be disclosed or furnished (with a copy of a written opinion of such counsel to that effect to be simultaneously furnished to the other party).

10.           Indemnification.

(a)           Indemnification by Seller. Seller shall defend, indemnify and hold Access (including its Affiliates, members, managers, directors, officers, employees, and agents) harmless from and against any damages, claims, costs and expenses (including actual attorneys’ fees and recall costs and expenses) arising from or relating to (i) any breach or misrepresentation by Seller under this Agreement, or (ii) any claim by an end-user of the Services, including any breach of the End-User Warranty.

(b)           Indemnification by Access. Access shall defend, indemnify and hold Seller (including its members, managers, directors, officers, employees, agents and end-users) harmless from and against any damages, claims, costs and expenses (including actual attorneys’ fees and recall expenses) arising from or relating to (i) any breach or misrepresentation by Access under this Agreement, or (ii) the manufacture, use or sale by Access, or the use by an end-user, of any collection kit necessary for the performance of the Services.

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(c)           Procedures. If any action, suit, proceeding or claim shall be commenced in respect of which a party may demand indemnification, the indemnified party shall notify the indemnifying party to that effect with reasonable promptness. The indemnifying party shall have the opportunity to defend against such action, suit, proceeding or claim. The indemnified party shall have the right to employ its own counsel and participate in the defense of any matter at its own expense. If the indemnifying party fails to defend as required hereunder, the indemnified party may defend itself at the indemnifying party’s expense. Each party shall render to the other assistance as may be reasonably required in connection with the defense of any such matter.

(d)           Recall of Collection Kits. If the Collection Kits constitute a health or safety hazard or risk, or if the Collection Kits or their distribution becomes the subject of heightened governmental regulation, then Access shall have the right to recall such Collection Kits at its sole expense; provided, that, if the reason for the recall is the inability to perform, as currently anticipated, the Services without violating applicable law, then Seller shall pay the reasonable costs of such recall.

11.           Insurance. Seller shall maintain in effect at all times during the term of this Agreement insurance, from an insurance company acceptable to Access, of the types and in the amounts set forth below protecting against losses, claims, demands, proceedings, damages, costs, charges and expenses for injuries (including death) or damage to person or property arising out of the sale of the Services to the extent such injuries or damage are due to the fault or negligence of Seller or its agents or subcontractors:

Product Liability	U.S. $5,000,000 (per occurrence)
General Liability	U.S. $5,000,000 (per occurrence)
Workers’ Compensation	Statutorily Required Coverage
Excess Liability (Umbrella Form)	U.S. $3,000,000

Seller further agrees to furnish to Access, concurrently with the execution of this Agreement, insurance certificates which will confirm its insurance coverage in the amounts referenced above, to arrange for its liability insurance carriers to include Access and its Affiliates as additional insureds under its standard vendor’s product liability insurance policy and to arrange for its insurance carriers to include as part of all such certificates the requirement to furnish thirty (30) days advance written notice to Access of any material change in, or cancellation or termination of, such insurance policies.

12.             Force Majeure. Subject to the other provisions of this Agreement, in the event that either party is unable to perform any of its obligations under this Agreement because of natural disaster, actions or decrees of governmental bodies or events or causes beyond the control of the affected party (a “Force Majeure Event”) all obligations of the affected party under this Agreement shall be immediately suspended, provided that such affected party promptly gives the other party notice of the occurrence of the Force Majeure Event. The affected party shall make its best efforts to eliminate the obstacles preventing its performance and to resume its performance under the Agreement as soon as possible. Under no circumstances shall any delay or failure to perform as a result of a labor dispute or strike be interpreted to be a Force Majeure Event.

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13.           Miscellaneous Provisions.

(a)           Assignment. Neither party shall assign, transfer or subcontract this Agreement or any part of this Agreement, directly or indirectly, without the other party’s prior written consent; provided, however, that Access may assign its rights and obligations under this Agreement to any Affiliate of Access without the prior written consent of Seller, in which case Access shall not be released from any of its obligations, financial or otherwise, under this Agreement. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against the respective successors and permitted assigns of each of the parties to this Agreement. The Affiliates of Access shall have the right to specifically enforce this Agreement and are intended third parties beneficiaries of this Agreement.

(b)           Notices. All notices and other communications under this Agreement shall be in the English language, in writing and shall be deemed to have been duly given when either personally delivered, or sent by facsimile or sent by express delivery service with charges prepaid and receipt requested, or, when mailed (postage prepaid) by certified mail with return receipt requested, to the parties at their respective addresses set forth below. Any party may change its address by written notice to the other party.

Access Business Group International LLC
7575 Fulton Street East
Ada, Michigan 49355
Attn:  Strategic Procurement

Interleukin Genetics, Inc.
135 Beaver Street — 2nd floor
Waltham, Massachusetts 03452
Attn: ______________________

(c)           Entire Agreement; Amendments. This Agreement contains the entire agreement of the parties and replaces all prior agreements and understandings. This Agreement may be amended, modified, superseded, or canceled and any of the terms or conditions in this Agreement may be waived, only by a written instrument signed by each party to this Agreement or, in the case of a waiver, by or on behalf of the party waiving compliance. The failure of any party at any time to require performance of any provision in this Agreement shall not affect the right at a later time to enforce that or any other provision. No waiver by any party of any condition, or of any breach of any term contained in this Agreement, in any one or more instances, shall be deemed to be a further or continuing waiver of that or any other condition or breach. No course of dealing between the parties or usage of trade shall be effective to amend, supplement, modify, or otherwise alter, in whole or in part, the express terms of this Agreement.

(d)           Severability. This Agreement shall be interpreted in all respects as if any invalid or unenforceable provision were omitted from this Agreement. All provisions of this Agreement shall be enforced to the full extent permitted by law.

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(e)No Agency. This Agreement does not in any way create the relationship of principal and agent, employer and employee, partner or joint venturer between Seller and Access. Under no circumstances shall Seller or its employees be considered to be the agents or employees of Access, or vice versa. Neither Seller nor Access shall (a) act or attempt to act or represent itself directly or by implication, as agent or employee of the other or in any manner, (b) assume or create or attempt to assume or create, any obligation on behalf of or in the name of the other, or (c) make any representations, guarantees, or warranties on behalf of or in the name of the other with respect to any matter.

(f)            Governing Law; Venue. This Agreement shall be governed by and shall be construed in accordance with the internal laws of the State of Michigan, without regard to conflicts of law principles and without regard to the United Nations Convention on Contracts for the International Sale of Goods (the “CISG”). The parties agree that the CISG shall not apply to this Agreement. Each party (i) agrees that any litigation arising out of this Agreement may be brought only in the state or federal courts whose jurisdiction includes Kent County, Michigan, (ii) consents to the jurisdiction of such courts, and (iii) waives any argument that any such court is an inconvenient forum.

(g)           Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same Agreement. A facsimile copy of the signed Agreement will be deemed to be an original of this Agreement for purposes of execution by counterparts.

(h)           Headings. The section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement.

IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first set forth above.

ACCESS BUSINESS GROUP				INTERLEUKIN GENETICS,
INTERNATIONAL LLC, acting as agent				INC.
for ACCESS BUSINESS GROUP LLC
By:	/s/ Jay G. Ertl			By:	/s/ Philip R. Reilly
Print Name:		Jay G. Ertl		Print Name:		Philip R. Reilly, MD, JD
Its:	Vice President - Product Supply			Its:	Chief Executive Officer
			“Access”				“Seller”

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Exhibit A

*****

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Exhibit B

*****

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Exhibit C

[end user warranty]

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EX-10.4

AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT

THIS AMENDMENT (the “Amendment”), dated as of March 6, 2006, is made by and between INTERLEUKIN GENETICS, INC., a Delaware corporation (“Employer”), and KENNETH S. KORNMAN., an individual (“Employee”). Employer and Employee are parties to an Employment Agreement, dated December 1, 1999 (the “Employment Agreement”). Terms not otherwise defined in this Amendment shall have the meanings given to them in the Employment Agreement.

The parties agree as follows:

1.    In Section 1 of the Employment Agreement, the Term is extended to continue until March 31, 2006.

2.    Except as amended hereby, all of the terms and conditions of the Employment Agreement shall remain in full force and effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns as permitted by the Employment Agreement.

* * *

This Amendment No. 3 to the Employment Agreement has been executed and delivered by the parties hereto as of the date first above written.

INTERLEUKIN GENETICS, INC.

By	/s/  PHILIP R. REILLY	/s/ KENNETH S. KORNMAN
	Philip R. Reilly, M.D.; J.D.	KENNETH S. KORNMAN
	Its Chief Executive Officer

EX-10.5

AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT

THIS AMENDMENT (the “Amendment”), dated as of March 6, 2006, is made by and between INTERLEUKIN GENETICS, INC., a Delaware corporation (“Employer”), and PHILIP R. REILLY, an individual (“Employee”). Employer and Employee are parties to an Employment Agreement, dated April 1, 2000 (the “Employment Agreement”). Terms not otherwise defined in this Amendment shall have the meanings given to them in the Employment Agreement.

The parties agree as follows:

1.    In Section 1 of the Employment Agreement, the Term is extended to continue until March 31, 2006.

2.    Except as amended hereby, all of the terms and conditions of the Employment Agreement shall remain in full force and effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns as permitted by the Employment Agreement.

* * *

This Amendment No. 2 to the Employment Agreement has been executed and delivered by the parties hereto as of the date first above written.

INTERLEUKIN GENETICS, INC.

By	/s/  KENNETH S. KORNMAN	/s/  PHILIP R. REILLY
	Kenneth S. Kornman	PHILIP R. REILLY, M.D.; J.D.
	Its President

EX-10.6

EXECUTION COPY

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”), is made and entered into as of the 31st day of March, 2006 (the “Effective Date”), by and between INTERLEUKIN GENETICS, INC., a Delaware corporation (
47;Employer”), and KENNETH S. KORNMAN, an individual (“Employee”).

RECITALS

A.   Employer desires to obtain the benefit of the services of Employee and Employee desires to render such services to Employer.

B.   The Board of Directors of Employer (the “Board”) has determined that it is in Employer’s best interest to employ Employee and to provide certain benefits to Employee.

C.   Employer and Employee desire to set forth the terms and conditions of Employee’s employment with Employer on the terms and subject to the conditions of this Agreement.

AGREEMENT

In consideration of the foregoing recitals and of the mutual covenants and conditions contained herein, the parties, intending to be legally bound, agree as follows:

1.    Term. Employer agrees to employ Employee, and Employee agrees to serve Employer, in accordance with the terms of t his Agreement, for a term (the “Term”) beginning on the Effective Date and continuing for a period of three (3) years thereafter unless earlier terminated in accordance with the provisions hereof.

2.    Employment of Employee.

(a)           Specific Positions. Employer and Employee hereby agree that, subject to the provisions of this Agreement, Employer will employ Employee and Employee will serve as an employee of Employer. Employee shall have the title and perform the duties set forth on Exhibit A hereto and such other reasonable, usual and customary duties of such office as may be delegated to Employee from time to time by the Board, subject always to the policies as reasonably determined from time to time by the Board.

(b)           Promotion of Employer’s Business. During the Term, Employee shall not engage in any business competitive with Employer. Employee agrees to devote his full business time, attention, knowledge, skill and energy to the business, affairs and interests of Employer and matters related thereto, and shall use his best efforts and abilities to promote Employer’s interests; provided, however, that Employee is not precluded from devoting reasonable periods to time required: (i) for serving as a director, committee member or scientific editor of any organization that does not compete with Employer or that does not involve a conflict of interest with Employer; (ii) for managing his personal investments; so long as in either case, such activities do not materially interfere with the regular performance of his duties under this Agreement; or (iii) for delivering scientific lectures in the area of Periodontal Disease and Treatment and such other scientific areas as shall be approved by the Board.

3.    Salary. Employer shall pay to Employee during the term of this Agreement a base salary (“Base Salary”) of $340,000 per year, payable in equal monthly installments. The Base Salary may be increased (but not decreased) annually at the Employer’s sole discretion throughout the Term on each anniversary of the Effective Date in the discretion of Employer’s Board.

4.    Bonus/Stock Grant.

(a)           < b>Bonus. In addition to the Base Salary, Employee shall also be eligible to receive a discretionary annual bonus. The bonus to be awarded, if any, shall be determined by the Board in its sole discretion.

(b)           Stock Grant. If, immediately prior to the 12-month, 24-month, and 36-month anniversary of the date of this Agreement, Employee remains employed by Employer, then on and effective as of each such date(s), Employer shall grant Employee 12,500 shares of Employer’s common stock under and subject to the terms of Employer’s 2004 Employee, Director and Consultant Stock Plan.

5.    Benefits.

(a)           Fringe Benefits. During Employee’s employment by Employer under this Agreement, Employee shall be eligible for participation in and shall be covered by any and all such medical, disability, life and other insurance plans and such other similar benefits available to other executive employees. Employer will pay life insurance premiums annually in the amount of $3,296.00 on a policy for Employee; Employee shall have the right to designate ownership and beneficiary of said policy. Employee will receive a monthly automobile allowance of $600.00.

(b)      & #160;    Reimbursements. During Employee’s employment with Employer under this Agreement, Employee shall be entitled to receive prompt reimbursement of all reasonable expenses incurred by Employee in performing services hereunder, including all expenses of travel at the request of, or in the service of, Employer provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by Employer.

(c)           Vacation. During Employee’s employment with Employer hereunder, Employee shall be entitled to an annual vacation leave of four (4) weeks at full pay, which shall be adjusted in accordance with the vacation policy generally applicable to employees of the Empl oyer.

6.    Termination.

(a)           Termination for Cause. Employer shall have the right, exercisable immediately upon written notice, to terminate Employee’s employment for “Cause.”

(i)            Definition of Cause. As used herein, “Cause” means any of the following: (A) habitual drunken ness under the influence of alcohol by Employee or illegal use of narcotics; (B) Employee is convicted by a court of competent jurisdiction, or pleads “no contest” to, a felony or any other conduct of a criminal

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nature (other than minor traffic violations) by Employee; (C) Employee engages in fraud, embezzlement, or any other illegal conduct; (D) Employee imparts confidential information relating to Employer or its business to competitors or to other third parties other than in the course of carrying out Employee’s duties; (E) Employee refuses to perform his duties hereunder or otherwise breaches any covenant, warranty or representation of this Agreement or Employee’s Non-Disclosure and Confidentiality Agreement, and, except for any conduct described in clauses (A) through (D) of this Section 6(a)(i), fails to cure such breach (if such breach is then capable of being cured) within ten (10) business days following written notice thereof specifying in reasonable detail the nature of such breach, or if such breach is not capable of being cured in such time, a cure sh all not have been diligently initiated within such ten (10) business day period.

(ii)           Effect of Termination. Upon termination in accordance with this Section 6(a), Employee shall be entitled to no further compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the effective date of such termination. Employer’s exercise of its right to terminate for Cause shall be without prejudice to any other remedy to which it may be entitled at law, in equity or under this Agreement.

(b)           V oluntary Termination. Employee may terminate his employment at any time by giving no less than thirty (30) days’ written notice to Employer.

(i)            No Reason. Upon termination in accordance with this Section 6(b), except as otherwise provided in Section 6(b)(ii), below, Employee shall be entitled to no further compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the effective date of such termination.

(ii)           Good Reason. Notwithstanding anything to t he contrary in Section 6(b)(i) above, if Employee terminates his employment under this Section 6(b) for Good Reason (as defined below), Employee shall be entitled to receive from Employer all of the compensation and benefits provided for in Section 6(e) below. As used herein, “Good Reason” means any of the following: (A) the assignment to Employee of duties materially inconsistent with those of other employees of Employer in like positions where Employee provides written notice to Employer within six (6) months of such assignment that such duties are materially inconsistent with those duties of similarly situated employees and Employer fails to release Employee from his obligation to perform such inconsistent duties within twenty (20) business days after Employer’s receipt of such notice; or (B) a failure by Employer to comply with any other material provision of Sections 3 through 5, inclusive, of this Agreement which has not been cured within fifteen (15) business days after written notice of such noncompliance has been given by Employee to Employer, or if such failure is not capable of being cured in such time, a cure shall not have been diligently initiated by Employer within such fifteen (15) business day period.

(c)           Termination Due to Death or Disability. This Agreement shall automatically terminate upon the death of Employee. In addition, if Employee is unable to perform the essential functions of his job with or without a reasonable accommodation because of a physical or mental impairment for a period of six (6) months, Employer may

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terminate Employee’s employment upon written notice to Employee. Upon termination in accordance with this Section 6(c), Employee (or Employee’s estate, as the case may be) shall be entitled to no further compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the date of death or, in the case of disability, the date of termination.

(d)           Termination Upon Cessation of Business. Employer shall have the right to immediately terminate Employee’s employment under this Agreement upon a “Cessation of Business.”  For purposes of this Agreement, a “ Cessation of Business” shall mean Employer’s ceasing to operate in the ordinary course of business, whether by dissolution, liquidation, sale of assets, consolidation, merger or otherwise, in connection with, pursuant to or arising out of a good faith determination by the Board that the continuing operation of the business in its ordinary course is reasonably likely to render Employer unable to meet its liabilities as they mature. Upon termination in accordance with the Section 6(d), Employee shall be entitled to no further compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the effective date of such termination. If Employee is so terminated by Employer pursuant to this Section 6(d) during the Term, Employer shall (i) pay to Employee the Base Salary, and (ii) provide the same health insurance benefits to which Employee was entitled hereunder, in each case (i.e., the Base Salary and health insurance b enefits), until the earlier to occur of (A) the expiration of the remaining portion of the Term, or (B) the expiration of the three (3) month period commencing on the date Employee is terminated. Employer may make such payments in accordance with its regular payroll schedule or in a single lump sum payment in its sole discretion.

(e)           Termination Without Cause. Employer shall have the right, exercisable upon 30 days’ prior written notice, to terminate Employee’s employment under this Agreement for any reason other than set forth in Sections 6(a), (c) and (d) above, at any time during the Term. If Employee is so terminated by Employer pursuant to this Section 6(e) during the Term, Employer shall (i) pay to Employee the B ase Salary, and (ii) provide the same health insurance benefits to which Employee was entitled hereunder, in each case (i.e., the Base Salary and health insurance benefits), until the earlier to occur of (A) the expiration of the remaining portion of the Term, or (B) the expiration of the twelve (12) month period commencing on the date Employee is terminated. Employer may make such payments in accordance with its regular payroll schedule or in a single lump sum payment in its sole discretion.

(f)            Options. Upon the expiration of the term of this Agreement, Employee shall be entitled to receive from Employer all of the compensation and benefits provided for in Section 6(e). In addition, in accordance with Employee’s existing stock option arrang ements, if Employee’s employment terminates pursuant to Section 6(b)(ii) or Section 6(e) or if Employee’s employment terminates as a result of the expiration of the Term, then the period during which Employee may exercise all stock options granted to him by the Company shall be extended until two years after the date Employee is terminated.

7.    Publicity. During the Term and for a period of one (1) year thereafter, Employee shall not, directly or indirectly, originate or participate in the origination of any publicity, news release or other public announcements, written or oral, whether to the public press or otherwise,

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relating to this Agreement, to any amendment hereto, to Employee’s employment hereunder or to the Company, without the prior written approval of the Company.

8.    Restrictive Covenants.

(a)           Non-Competition. In consideration of the benefits of this Agreement, including Employee’s access to and limited use of proprietary and confidential information of the Company, as well as training, education and experience provided to Employee by the Company directly and/or as a result of work pr ojects assigned by the Company with respect thereto, Employee hereby covenants and agrees that during the Term and for a period of twelve (12) months following termination of Employee’s employment, regardless of how such termination may be brought about, Employee shall not, directly or indirectly, as proprietor, partner, stockholder, director, officer, employee, consultant, joint venturer, investor or in any other capacity, engage in, or own, manage, operate or control, or participate in the ownership, management, operation or control, of any entity which engages anywhere in the world in any business activity which is competitive to current business activities in which the Company participates during Employee’s employment with the Company, or take any action in preparation to do any of the foregoing; provided, however, the foregoing shall not, in any event, prohibit Employee from purchasing and holding as an investment not more than 1% of any class of publicly traded securities of any entity which conducts a business in competition with the business of the Company, so long as Employee does not participate in any way in the management, operation or control of such entity. It is further recognized and agreed that, even though an activity may not be restricted under the foregoing provision, Employee shall not during the Term and for a period of twelve (12) months following termination of his employment, regardless of how such termination may be brought about, provide any services to any person or entity which may be used against, or is or may be in conflict with the interests of, the Company or its customers or clients.

(b)           Confidentiality. Employee agrees to execute the Non-Disclosure and Confidentiality Agreement attached hereto as Exhibit B and agrees to fulfill his obligations thereunder.

(c)           Customer Lists; Non-Solicitation. In consideration of the benefits of this Agreement, including Employee’s access to and limited use of proprietary and confidential information of the Company, as well as training, education and experience provided to Employee by the Company directly and/or as a result of work projects assigned by the Company with respect thereto, Employee hereby further covenants and agrees that for a period of twelve (12) months following the termination of Employee’s employment, regardless of how such termination may be brought about, Employee shall not, directly or indirectly, (i) use or make known to any person or entity the names or addresses of any clients or customers of the Company or any othe r information pertaining to them, (ii) call on for the purpose of competing, solicit, take away or attempt to call on, solicit or take away any clients or customers of the Company on whom Employee called or with whom he became acquainted during his employment with the Company, nor (iii) recruit or attempt to recruit or hire or attempt to hire any employees of the Company.

(d)           Judicial Reformation. Employee acknowledges that, given the nature of the Company’s business, the covenants contained in Section 8 establish reasonable limitations as to time, geographic area and scope of activity to be restrained and do not impose a greater

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restraint than is reasonably necessary to protect and preserve the goodwill of the Company’s business and to protect its legitimate business interests. If, however, Section 8 is determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too long a period of time or over too large a geographic area or by reason of it being too extensive in any other respect or for any other reason, it will be interpreted to extend only over the longest period of time for which it may be enforceable and/or over the largest geographic area as to which it may be enforceable and/or to the maximum extent in all other aspects as to which it may be enforceable, all as determined by such court.

(e)        
60;  Affiliates. When used in this Section 8, the term “Company” includes Interluekin Genetics, Inc. and all affiliates, parents, and subsidiaries of Interleukin Genetics, Inc.

9.    Miscellaneous.

(a)           Withholdings. All payments to Employee hereunder shall be made after reduction for all federal, state and local withholding and payroll taxes, all as determined under applicable law and regulations, and Employer shall make all reports and similar filings required by such law and regulations with respect to such payments, withholdings and taxes.

(b)           Taxation. Employee acknowledges and agrees that Employer does not guarantee the tax treatment or tax consequences associated with any payment or benefit arising under this Agreement, including but not limited to consequences related to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). Employer and Employee agree that both will negotiate in good faith and jointly execute an amendment to modify this Agreement to the extent necessary to comply with the requirements of Code Section 409A, or any successor statute, regulation and guidance thereto; provided, that no such amendment shall increase the total financial obligation of Employer under this Agreement.

(c)           Succession. This Agreement shall inure to the benefit of and shall be binding upon Employer, its successors and assigns. The obligations and duties of Employee hereunder shall be personal and not assignable.

(d)           Notices. Any and all notices, demands, requests or other communications hereunder shall be in writing and shall be deemed duly given when personally delivered to or transmitted overnight express delivery or by facsimile to and received by the party to whom such notice is intended (provided the original thereof is s ent by mail, in the manner set forth below, on the next business day after the facsimile transmission is sent), or in lieu of such personal delivery or overnight express delivery or facsimile transmission, on receipt when deposited in the United States mail, first-class, certified or registered, postage prepaid, return receipt requested, addressed to the applicable party at the address set forth below such party’s signature to this Agreement. The parties may change their respective addresses for the purpose of this Section 9(c) by giving notice of such change to the other parties in the manner which is provided in this Section 9(c).

(e)           Entire Agreement. This Agreement contains the entire agreement of the parties relating to the subject matter hereof, a nd it replaces and supersedes any prior

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agreements between the parties relating to said subject matter, including the Employment Agreement dated December 1, 1999, as amended.

(f)            Headings. The headings of Sections herein are used for convenience only and shall not affect the meaning of contents hereof.

(g)           Waiver; Amendment. No provision hereof may be waived except by a written agreement signed by the waiving party. The waiver of any term or of any condition of t his Agreement shall not be deemed to constitute the waiver of any other term or condition. This Agreement may be amended only by a written agreement signed by the parties hereto.

(h)           Severability. If any of the provisions of this Agreement shall be held unenforceable by the final determination of a court of competent jurisdiction and all appeals therefrom shall have failed or the time for such appeals shall have expired, such provision or provisions shall be deemed eliminated from this Agreement but the remaining provisions shall nevertheless be given full effect. In the event this Agreement or any portion hereof is more restrictive than permitted by the law of the jurisdiction in which enforcement is sought, this Agreement or such portion shall be limited in that jurisdic tion only to the extent required by the law of that jurisdiction.

(i)            Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

(j)            Arbitration. Except for the provisions of Sections 7 and 8 with regard to which the Company expressly reserves the right to petition a court directly for injunctive or other relief, any dispute arising out of or relating to this Agreement, or the breach, termination or the validity hereof, shall be settled by arbitratio n in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. THE ARBITRATOR OR ARBITRATORS ARE NOT EMPOWERED TO AWARD DAMAGES IN EXCESS OF COMPENSATORY DAMAGES (INCLUDING REASONABLE ATTORNEYS FEES AND EXPERT WITNESS FEES) AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO RECOVER SUCH DAMAGES (INCLUDING, WITHOUT LIMITATION, PUNITIVE DAMAGES) IN ANY FORUM. The arbitrator or arbitrators may award equitable relief in those circumstances where monetary damages would be inadequate. The arbitrator or arbitrators shall be required to follow the applicable law as set forth in the governing law section of this Agreement. The arbitrator or arbitrators shall award reasonable attorneys fees and costs of arbitration to the prevailing party in such arbitration.

(k)           Equitable Relief. In the event of a breach or a threatened breach by Employee of any of the provisions contained in Sections 7 or 8 of this Agreement, Employee acknowledges that the Company will suffer irreparable injury not fully compensable by money damages and, therefore, will not have an adequate remedy available at law. Accordingly, the Company shall be entitled to obtain such injunctive relief or other equitable remedy from any court of competent jurisdiction as may be necessary or appropriate to prevent or curtail any such breach, threatened or actual, without having to post bond. The foregoing shall be in addition to and without prejudice to any other rights that the Company

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may have under this Agreement, at law or in equity, including, without limitation, the right to sue for damages.

(l)            Counterparts. This Agreement may be executed in two or more counterparts, and by different parties hereto on separate counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first set forth above.

INTERLEUKIN GENETICS, INC.
	By	/s/ PHILIP R. REILLY
	Its	Chief Executive Officer
		/s/ KENNETH S. KORNMAN
		Kenneth S. Kornman

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EXHIBIT A

DESCRIPTION OF JOB

Title:

Chief Executive Officer, President, and Chief Scientific Officer

Duties and Responsibilities:

1.             Plan and execute Employer’s overall corporate strategy.

2.             Lead the Employer’s business development activities.

3.Plan and oversee all research directed at discovering new technology to be commercialized by Emp loyer.

4.             Oversee Employer’s nutrigenomics product development programs.

5.             Other activities as designated by the Board of Directors.

6.             Participate in activities related to protection of intellectual property.

EX-10.7

EXECUTION

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (this “Agreement”), is made and entered into as of the 31st day of March, 2006 (the “Effective Date”), by and between INTERLEUKIN GENETICS, INC., a Delaware corporation (“Employer” or “Company”), and PHILIP R. REILLY, an individual (“Employee”), and amends the Employment Agreement between Employer and Employee originally dated April 1, 2000 and amended on March 5, 2003 and March 1, 2006.

RECITALS

A.   Employer desires to retain the benefit of the services of Employee, and Employee desires to render such services to Employer.

B.   The Board of Directors of Employer (the “Board”) has determined that it is in Employer’s best interest to continue to employ Employee and to provide certain benefits to Employee.

C.   Employer and Employee desire to set forth the terms and conditions of Employee’s employment with Employer on the terms and subject to the conditions of this Agreement.

AGREEMENT

In consideration of the foregoing recitals and of the mutual covenants and conditions contained herein, the parties, intending to be legally bound, agree as follows:

1.    Term. Pursuant to this Agreement and subject to the terms hereof, the Term set forth under the Orig inal Agreement is hereby extended for a period of twenty-four (24) months from the Effective Date of this Agreement thereafter unless earlier terminated in accordance with the provisions hereof. Employer shall have the option, with the consent of Employee, to extend the Term for one additional twelve (12) month period by giving Employee at least sixty (60) days written notice prior to the expiration of the Term.

2.    Employment of Employee.

(a)           Specific Positions. Employer and Employee hereby agree that, subject to the provisions of this Agreement, Employer will employ Employee and Emplo yee will serve as a non-officer employee of Employer. Employee shall have the title and perform the duties set forth on Exhibit A hereto and such other reasonable, usual and customary duties of such position as may be delegated to Employee from time to time by the Board, subject always to the policies as reasonably determined from time to time by the Board. Employee shall report to the Company’s headquarters, currently located in Massachusetts. The place of employment will be within a sixty mile radius of Boston, Massachusetts.

(b)           Promotion of Employer’s Business. During the Term, Employee shall not engage in any business that is competitive with that of the Employer, as described in Paragraph 8(a) below. Employee agrees to devote fifty percent (50%) of his business time, attention, knowledge, skill and energy to the business, affairs and interests of Employer and matters related thereto, and shall use his best efforts and abilities to promote Employer’s interests; provided, however, that so long as Employee performs the duties set forth hereunder and complies with his obligations relating to confidentiality, non-solicitation, non-competition, and invention, Employee is not precluded from obtaining other employment or engaging in other activities. The parties expect that Employee will keep a usual schedule of two days per week in the office, with reasonable availability by phone, and in person if necessary, the remainder of the week. Both parties recognize that Employee’s duties are of such a nature that deviations from this schedule may be necessary from time to time.

3.    Salary. Employer shall pay to Employee during the term of this Agreement a base salary (“Base Salary”) of $185,000.00 per year, payable in equal monthly installments.

4.    Bonus. In addition to the Base Salary, Employee shall also be eligible to receive a discretionary annual bonus. The bonus to be awarded, if any, shall be determined by the Board in its sole discretion.

5.    Stock Grant. If, immediately prior to the 6-month anniversary of the date of this Agreement, Employee remains employed by Employer, then on and effective as of such date, Employer shall grant Employee 3,000 shares of Employer’s common stock under and subject to the terms of Employer’s 2004 Employee, Director and Consultant Stock Plan. If, immediately prior to the 12-month anniversary of the date of this Agreement, Employee remains employed by Employer, then on and effective as of such date, Employer shall grant Employee 7,000 additional shares of Employer’s common stock (for a total of 10,000 shares) under and subject to the terms of Employer’s 2004 Employee, Director and Consultant Stock Plan.

6.    Benefits.

(a)           Fringe Benefits. During Employee’s employment by Employer under this Agreement, Employee shall be eligible for participation in and shall be covered by any and all such medical, disability, life and other insurance plans and such other similar benefits available to other executive employees. The Company agrees that it will provide coverage to Employee under one or more of its insurance plans for claims of medical malpractice relating to Employee’s performance of his duties under this Agreement. The Company further agrees that it will indemnify and defend Employee against claims by th ird parties to the same extent that it is bound to do so for officer-level executives of the Company. Employer will pay $3,296.00 to Employee each year on the annual anniversary date of this agreement so long as he is employed hereunder, as reimbursement for life insurance premiums. Employee shall receive a monthly automobile allowance of $600.00.

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(b)           Reimbursements. During Employee’s employment with Employer under this Agreement, Employee shall be entitled to receive prompt reimbursement of all reasonable expenses incurred by Employee in performing services hereunder, including all expenses of travel at the request of, or in the service of, Employer provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by Employer. In addition, Employer shall reimburse Employee, after receipt of appropriate documentation therefor, up to $6,000 for Employee’s legal expenses related to the negotiation of and advice concerning this Agreement and related equity arrangements.

(c)           Vacation. During Employee’s employment with Employer hereunder, Employee shall be entitled to an annual vacation leave of four (4) weeks at full pay, which shall be adjusted in accordance with the vacation policy generally applicable to employees of the Employer.

7.    Termination.

(a)           Termination for Cause. Employer shall have the right, exercisable immediately upon written notice, t o terminate Employee’s employment for “Cause.”

(i)            Definition of Cause. As used herein, “Cause” means any of the following: (A) habitual drunkenness under the influence of alcohol by Employee or illegal use of narcotics; (B) Employee is convicted by a court of competent jurisdiction, or pleads “no contest” to, a felony or is convicted by a court of competent jurisdiction of any other conduct of a criminal nature (other than minor traffic violations) by Employee; (C) Employee engages in fraud, embezzlement, or any other illegal conduct; (D) Employee imparts confidential information relating to Employer or its business to competitors or to other third parties other than in the course of carrying out Employee’s duties; (E) Employee refuses to perform his duties hereunder or otherwise breaches any covenant, warranty or representation of this Agreement or Employee’s Non-Disclosure and Confidentiality Agreement, and, except for any conduct described in clauses (A) through (D) of this Section 7(a)(i), fails to cure such breach (if such breach is then capable of being cured) within ten (10) business days following written notice thereof specifying in reasonable detail the nature of such breach, or if such breach is not capable of being cured in such time, a cure shall not have been diligently initiated within such ten (10) business day period.

(ii)           Effect of Termination. Upon termination for Cause i n accordance with this Section 7(a), Employee shall be entitled to no further compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the effective date of such termination. Employer’s exercise of its right to terminate for Cause shall be without prejudice to any other remedy to which it may be entitled at law, in equity or under this Agreement.

(b)           Voluntary Termination. Employee may terminate his employment at any time by giving no less than thirty (30) days’ written notice to Employer.

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(i)            No Reason. Upon termination in accordance with this Section 7(b), except as otherwise provided in Section 7(b)(ii), below, Employee shall be entitled to no further compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the effective date of such termination.

(ii)           Good Reason. Notwithstanding anything to the contrary in Section 7(b)(i), above, and except as herein provided, if Employee terminates his employment under this Section 7(b) for Good Reason (as defined below), Employee shall be entitled to receive from Employer all of the compensation and benefits provided for in Section 7(e), below. As used herein, “Good Reason” means the failure by Employer to comply with any other material provision of Sections 3 through 6, inclusive, of this Agreement which has not been cured within fifteen (15) business days after written notice of such noncompliance has been given by Employee to Employer, or if such failure is not capable of being cured in such time, a cure shall not have been diligently initiated by Employer within such fifteen (15) business day period. Further, with respect to Section 7(f) only, “Good Reason” shall also mean that Employer and Employee have not executed the Trading Plan (as defined in Section 9(b) below) by May 20, 2006 despite Employee’s good faith attempts to enter into such a plan, and Employee, by no later than May 30, 2006, has notified Employer in writing of his intent to terminate his employment within thirty (30) days. Employee’s election to terminate his employment because of the non-execution of a Trading Plan, or the Company’s election to accept Employee’s resignation effective earlier than thirty (30) days from such notice of intent to terminate, shall not operate to make Employee eligible for any compensation or benefits provided for in Section 7(e).

(c)           Termination Due to Death or Disability. This Agreement shall automatically terminate upon the death of Employee. If, at the time of Employee’s death, the Company owes any form of compensation or benefit to the Employee, the Company shall promptly provide such compensation o r benefit to the Employee’s estate. In addition, if Employee is unable to perform the essential functions of his job with or without a reasonable accommodation because of a physical or mental impairment for a period of six (6) months, Employer may terminate Employee’s employment upon written notice to Employee. Upon termination in accordance with this Section 7(c), Employee (or Employee’s estate, as the case may be) shall be entitled to no further compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the date of death or, in the case of disability, the date of termination.

(d)           Termination Upon Cessation of Business. Employer shall have the right to immediately terminate Employee’s em ployment under this Agreement upon a “Cessation of Business.”  For purposes of this Agreement, a “Cessation of Business” shall mean Employer’s ceasing to operate in the ordinary course of business, whether by dissolution, liquidation, sale of assets, consolidation, merger or otherwise, in connection with, pursuant to or arising out of a good faith determination by the Board that the continuing operation of the business in its ordinary course is reasonably likely to render

4

Employer unable to meet its liabilities as they mature. Upon termination in accordance with the Section 7(d), Employee shall be entitled to no further compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the effective date of such termination. If Employee is so terminated by Employer pursuant to this Section 6(d) during the Term or any extension of the Term, Employer shall (i) pay to Employee the Base Salary, and (ii) provide the same health insurance benefits to which Employee was entitled hereunder, in each case (i.e., the Base Salary and health insurance benefits), until the earlier to occur of (A) the expiration of the remaining portion of the Term or any extension of the Term, or (B) the expiration of the six (6) month period commencing on the date Employee is terminated. Employer may make such payme nts in accordance with its regular payroll schedule or in a single lump sum payment in its sole discretion.

(e)           Termination Without Cause. Employer shall have the right, exercisable upon 30 days’ prior written notice, to terminate Employee’s employment under this Agreement for any reason other than set forth in Sections 7(a), (c) and (d), above, at any time during the Term. If Employee is so terminated by Employer pursuant to this Section 7(e) during the Term, Employer shall (i) pay to Employee the Base Salary, and (ii) provide the same health insurance benefits to which Employee was entitled hereunder, in each case (i.e., the Base Salary and health insurance benefits), until the earlier to occur of (A) the expiration of th e remaining portion of the Term, or (B) the expiration of the six (6) month period commencing on the date Employee is terminated. Employer may make such payments in accordance with its regular payroll schedule or in a single lump sum payment in its sole discretion.

(f)            Options. Upon the expiration of the term of this Agreement, Employee shall be entitled to receive from Employer all of the compensation and benefits provided for in Section 7(e). In addition, in accordance with Employee’s existing stock option arrangements, if Employee’s employment terminates pursuant to Section 7(b)(ii) or Section 7(e) or if Employee’s employment terminates as a result of the expiration of the Term or any extension of the Term, then th e period during which Employee may exercise all stock options granted to him by the Company shall be extended until the earlier of (i) two years after the date Employee is terminated or (ii) the expiration of the term of the option.

(g)           Board Membership. Upon termination of Employee’s employment for any reason, if so requested by the Chairman of the Board or a majority of the Board, Employee shall immediately resign in writing as Chairman of the Board and as a director of the Company.

8.    Restrictive Covenants.

(a)           Non-Competition. In consideration of the benefits of this Agreement, including Employee’s access to and limited use of proprietary and confidential information of the Company, as well as training, education and experience provided to Employee by the Company directly and/or as a result of work projects assigned by the Company with respect thereto, Employee hereby covenants and agrees that during the

5

Term and for a period of twelve (12) months following termination of the Employee’s employment, regardless of how such termination may be brought about, Employee shall not, directly or indirectly, as proprietor, partner, stockholder, director, officer, employee, consultant, joint venturer, investor or in any other capacity, engage in, or own, manage, operate or control, or participate in the ownership, management, operation or control, of any entity which engages anywhere in the world in any business activity which is competitive to current business activities in which the Company participates during Employee’s employment with the Company or take any action in preparation to do any of the foregoing; provided however, the foregoing shall not, in any event, (i) prohibit Employee from purchasing and holding as an investment not more than 1% of any class of publicly traded securities of any entity which conducts a business in competition with the business of the Company, so long as Employee does not participate in any way in the management, operation or control of such entity, or (ii) prohibit Employee from continuing to own an equity interest of less than 20% in GeneSage, Inc.

(b)           Non-Disparagement. Employee agrees that for twelve (12) months after the termination of Employee’s employment for any reason, he will not, directly or indirectly, deprecate, impugn or otherwise make any remarks that disparage the Employer, or its officers, directors or employees, or its or their products, services, or reputation; provided that nothing in this paragraph shall interfere with the Employee’s ability to comply with legal process or the requirements of applicable federal or state laws or regulations. Employee agrees to provide at least five (5) days advance written notice to the CEO of Employer, if practical, prior to fulfillment of any such requirement or legal process if such fulfillment shall require Employee to deprecate, impugn or disparage Employer, its officers, directors, or employees, or its or their products, services, or reputation. Employer agrees for twelve (12) months after the termination of Employee’s employment for any reason that its officers and directors shall not deprecate, impugn, or otherwise make any remarks that disparage Employee or his reputation; provided, that nothing in this paragraph shall interfere with the Company’s ability to communicate internally among the officers and directors of the Company, to comply with legal process, the requirements of applicable federal or state laws or regulations (including but not limited to applicable federal or state securities laws or regulations) or the requirements of governmental entities (including but not limited to any securities exchange, quotation system or over-the-counter market on which the Company has its securities listed or traded), or to fulfill its public disclosure obligations. Employer agrees to provide at least five (5) days advance written notice to Employee, if practical, prior to fulfillment of any such requirement or legal process if such fulfillment shall require Employer to deprecate, impugn or disparage Employee or his reputation.

(c)           Confidentiality. Employee agrees to execute the Non-Disclosure and Confidentiality Agreement attached hereto as Exhibit B and agrees to fulfill his obligations thereunder.

(d)           Customer Lists; Non-Solicitation. In consideration of the benefits of the Employment Agreement, including Employee’s access to and limited use of proprietary and confidential information of the Company, as well as training, education and experience provided to Employee by the Company directly and/or as a result of work

6

projects assigned by the Company with respect thereto, Employee hereby further covenants and agrees that for a period of twelve (12) months following the termination of Employee’s employment, regardless of how such termination may be brought about, Employee shall not, directly or indirectly, (i) use or make known to any person or entity the names or addresses of any clients or customers of the Company or any other information pertaining to them, (ii) call on for the purpose of competing, solicit, take away or attempt to call on, solicit or take away any clients or customers of the Company on whom Employee called or with whom he became acquainted during his employment with the Company, nor (iii) recruit or attempt to recruit, or hire or attempt to hire any employees of the Company.

(e)           Judicial Reformation. Employee acknowledges that, given the nature of the Company’s business, the covenants contained in Section 8 establish reasonable limitations as to time, geographic area and scope of activity to be restrained and do not impose a greater restraint than is reasonably necessary to protect and preserve the goodwill of the Company’s business and to protect its legitimate business interests. If, however, Section 8 is determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too long a period of time or over too large a geographic area or by reason of it being too extensive in any other respect or for any other reason, it will be interpreted to extend only over the longest period of time for which it may be enforceable and/or over the largest geographic area as to which it may be enforceable and/or to the maximum extent in all other aspects as to which it may be enforceable, all as determined by such court.

(f)            Affiliates. When used in Section 8, the term “Company” includes Interleukin Genetics, Inc. and all affiliates, parents, and subsidiaries of Interleukin Genetics, Inc.

9.    Miscellaneous.

(a)           Withholdings. All payments to Employee hereunder shall be made after reduction for all federal, state and local withholding and payroll taxes, all as determined under applicable law and regulations, and Employer shall make all reports and similar filings required by such law and regulations with respect to such payments, withholdings and taxes.

(b)           10b5-1 Plan. The Company has reviewed and approved the 10b5-1 trading plan in substantially the form attached hereto (and incorporated herein) as Exhibit C (the “Trading Plan”). The Company acknowledges that Employee intends to execute, with the Company, the Trading Plan at the earliest date possible, in accordance with the Company’s insider trading policy and applicable law.

(c)           Taxation. Employee acknowledges and agrees that Employer does not guarantee the tax treatment or tax consequences associated with any payment or benefit arising under this Agreement, including but not limited to consequences related to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). If so requested by Employee, Emplo yer and Employee agree that both will negotiate in good

7

faith and jointly execute an amendment to modify this Agreement to the extent necessary to comply with the requirements of Code Section 409A, or any successor statute, regulation and guidance thereto; provided, that no such amendment shall increase the total financial obligation of Employer under this Agreement. In the event that it is determined that the extension or amendment of this Agreement constitutes an extension or modification of the stock options for purposes of Code Section 409A such that the stock options held by Employee would be deemed to be subject to such Section, Employee and Company agree that for purposes of option exercise only, the original employment term shall be deemed to have terminated as of March 5, 2006 and all options held by Employee shall be exercised within the two year period commencing with such date.

(d)           Succession. This Agreement shall inure to the benefit of and shall be binding upon Employer, its successors and assigns. In the event that Employer merges with or is acquired by another entity that has lines of business other than those in which the Employer engages at the time of the merger or acquisition, Paragraphs 8(a) and (d) shall not be interpreted to restrain Employee from engaging in business competitive with those lines of business in which the Company does not engage immediately prior to the merger or acquisition or from soliciting business from people or entities for a purpose that is not competitive with any business activities in which the Company engaged immediately prior to the merger or acquisition, including but not limited to genetic testing. The obligations and duties of Employee hereund er shall be personal and not assignable.

(e)           Notices. Any and all notices, demands, requests or other communications hereunder shall be in writing and shall be deemed duly given when personally delivered to or transmitted overnight express delivery or by facsimile to and received by the party to whom such notice is intended (provided the original thereof is sent by mail, in the manner set forth below, on the next business day after the facsimile transmission is sent), or in lieu of such personal delivery or overnight express delivery or facsimile transmission, on receipt when deposited in the United States mail, first-class, certified or registered, postage prepaid, return receipt requested, addressed to the applicable party at the address set forth below such party’s signature to this Agreement. The parties may change their respective addresses for the purpose of this Section 9(c) by giving notice of such change to the other parties in the manner which is provided in this Section 9(c).

(f)            Entire Agreement. This Agreement contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter, including the Employment Agreement dated April 1, 2000, as amended.

(g)           Headin gs. The headings of Sections herein are used for convenience only and shall not affect the meaning of contents hereof.

(h)           Waiver; Amendment. No provision hereof may be waived except by a written agreement signed by the waiving party. The waiver of any term or of any

8

condition of this Agreement shall not be deemed to constitute the waiver of any other term or condition. This Agreement may be amended only by a written agreement signed by the parties hereto.

(i)            Severability. If any of the provisions of this Agreement shall be held unenforceable by the final determination of a court of competent jurisdiction and all appeals therefrom shall have failed or the time for such appeals shall have expired, such provision or provisions shall be deemed eliminated from this Agreement but the remaining provisions shall nevertheless be given full effect. In the event this Agreement or any portion hereof is more restrictive than permitted by the law of the jurisdiction in which enforcement is sought, this Agreement or such portion shall be limited in that jurisdiction only to the extent required by the law of that jurisdiction.

(j)            Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

(k)           Arbitration. Except for the provisions of Section 8 with regard to which the Company expressly reserves the right to petition a court directly for injunctive or other relief, any dispute arising out of or relating to this Agreement, or the breach, termination or the validity hereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. THE ARBITRATOR OR ARBITRATORS ARE NOT EMPOWERED TO AWARD DAMAGES IN EXCESS OF COMPENSATORY DAMAGES (WHICH MAY INCLUDE REASONABLE ATTORNEYS FEES AND EXPERT WITNESS FEES) AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO RECOVER SUCH DAMAGES (INCLUDING, WITHOUT LIMITATION, PUNITIVE DAMAGES) IN ANY FORUM. The arbitrator or arbitrators may award equitable relief in those circumstances where monetary damages would be inadequate. The arbitrator or arbitrators shall be required to follow the applicable law as set forth in the governing law section of this Agreement. The arbitrator or arbitrators shall award reasonable attorneys fees and costs of arbitration to the prevailing pa rty in such arbitration.

(l)            Equitable Relief. In the event of a breach or a threatened breach by Employee of any of the provisions contained in Section 8 of this Agreement, Employee acknowledges that the Company will suffer irreparable injury not fully compensable by money damages and, therefore, will not have an adequate remedy available at law. Accordingly, the Company shall be entitled to obtain such injunctive relief or other equitable remedy from any court of competent jurisdiction as may be necessary or appropriate to prevent or curtail any such breach, threatened or actual, without having to post bond. The foregoing shall be in addition to and without prejudice to any other rights that the Company may have under this Agreement, at law or in equity, inclu ding, without limitation, the right to sue for damages.

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(m)          Counterparts. This Agreement may be executed in two or more counterparts, and by different parties hereto on separate counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first set forth above.

INTERLEUKIN GENETICS, INC.
By	/s/ KENNETH S. KORNMAN
Its	President
	/s/ PHILIP R. REILLY
	Philip R. Reilly

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EXHIBIT A

DESCRIPTION OF JOB

Title:

Consultant

Duties and Responsibilities:

1.             Participate in the planning and execution of the Employer’s overall corporate strategy.

2.             Participate in the Employer’s business development activities.

3.Communicate with and provide scientific and medical information to physicians, genetic counselors and scientists regarding Employer’s products.

4.Assist with legal and regulatory compliance for Employer’s products and Employer’s genetic privacy policies and guidelines; provide legislative updates regarding such compliance.

5.Provide professional management for Employer’s genetic testing laboratory and assist Employer in retaining a full-time director for such lab; oversee Employer’s genetic counselors to ensure compliance with professional and legal requirements.

6.Other activities as designated by the Board of Directors, provided that Employee shall not have check-writing authority.

EX-10.8

May 27, 2005

Dr. Ramon Mohanlal
35 Park Drive — Apt. 18
Boston, MA  02215

Dear Ramon:

On behalf of Interleukin Genetics, I am pleased to offer you the position of Chief Medical Officer. This offer, which is contingent upon approval by the Board of Directors, will be put before the Board on June 8. This position reports to Dr. Philip Reilly, CEO. The annualized compensation for this regular, full-time position is $270,000, derived and paid monthly at the rate of $22,500.00 per month. As part of your compensation, we will recommend to the Board of Directors for approval at their next meeting that you be granted a stock option award to purchase 200,000 shares of Interleukin Genetics stock. The strike price will be set at the closing price of the stock on the date the options are issued. The options will vest as follows:

20,000 shares on December 31, 2005
3,333 shares each month from January 31, 2006 through June 30, 2006
4,167 shares each month from July 31, 2006 through June 30, 2007
5,000 shares each month from July 31, 2007 through June 30, 2008
4,167 shares each month from July 31, 2008 through May 31, 2009
4,161 shares on June 30, 2009

We will maximize the ISO portion of the award, utilizing the maximum allowable under IRS code ($100,000 per year). All remaining options will be nonqualified stock options.

As a regular full-time employee, you will be able to participate in our employee benefit plans. Interleukin Genetics currently offers group health and dental plans, short- and long-term disability, life insurance and accidental death and dismemberment insurance, as well as a 401(k) program and Employee Stock Purchase Program for our regular full-time employees. Health and dental insurance coverage is effective on your first day of work, if

you elect coverage  Interleukin Genetics also offers other benefit plans including sick and 4 weeks of vacation time, and holidays. Although there are no current plans to change or modify these benefits, the Company reserves the right to modify these plans at any time based upon business needs.

Your primary duties and responsibilities will include, but are not limited to the following areas. You will be a member of the executive management group, and in that capacity you will help chart the company’s strategic course. You will take the lead in clinical research involving nutritional genetics and pharmacogenetics. You will lead any effort to develop new therapeutic agents. You will be responsible for the design, conduct, analysis, interpretation, and reporting of all clinical trials. You will play a key role in efforts to seek and develop collaborative relationships with external partners in pursuit of new opportunities.

It is Interleukin Genetics’ policy that all employees have a three-month introductory period. During this first three months of continuous employment, your performance will be monitored and appraised to ensure that your performance meets the requirements of the position and the Company. During this three-month period, both the Company and you, the employee may terminate your employment without notice.

Interleukin Genetics’s commitments to you are as stated in this written letter. Interleukin is an “at-will employer”, and as such, it is understood that you are not being offered employment for a definite period of time and that either you or Interleukin may terminate the employment relationship at any time and for any reason without prior notice.

As a confirmation of your acceptance of this offer of employment, please sign, date, and return the copy of this letter to me by Monday, June 6, 2005. The original is for your records. We hope that you would be able to start on July 1, 2005.

Please call me to discuss any questions or concerns you might have regarding the contents of this letter or the benefits available to you.

Sincerely,

/s/ PHILIP R. REILLY

Philip R. Reilly

Chief Executive Officer

Accepted and agreed	/s/  RAMON W. MOHANLAL	Date	2 June 2005
	Signature

EX-10.9

March 23, 2006

Mr. Gregg Mayer
92 Hersey Street
Hingham, MA  02043

Dear Gregg:

On behalf of Interleukin Genetics, I am pleased to offer you the position of Chief Business Officer. This position reports to Dr. Philip Reilly, CEO. The annualized compensation for this regular, full-time position is $240,000, derived and paid monthly at the rate of $20,000.00 per month. As part of your compensation, the Board of Directors has approved that you be granted 8,000 shares of Interleukin Genetics’ restricted stock, which will vest on the first anniversary of your date of hire. Further stock awards will be granted on an annual basis at the discretion of the Board of Directors, based on your performance, and will be in line with awards made to other senior managers at the Company.

As a regular full-time employee, you will be able to participate in our employee benefit plans. Interleukin Genetics currently offers group health and dental plans, short- and long-term disability, life insurance and accidental death and dismemberment insurance, as well as a 401(k) program and Employee Stock Purchase Program for our regular full-time employees. Health and dental insurance coverage is effective on your first day of work, if you elect coverage. Interleukin Genetics also offers other benefit plans including sick time, four weeks of vacation time, and holidays. Although there are no current plans to change or modify these benefits, the Company reserves the right to modify these plans at any time based upon business needs.

Your primary duties and responsibilities will include, but are not limited to the following areas. You will be a member of the executive management group, and in that capacity you will help chart the company’s strategic course. Specifically, you will oversee the development of a commercial strategy for the Company, as well as have functional responsibility for strategic marketing, business development, and other general management responsibilities as defined by the Chief Executive Officer.

Interleukin Genetics’s commitments to you are as stated in this written letter. Interleukin is an “at-will employer”, and as such, it is understood that you are not being offered  employment for a definite period of time and that either you or Interleukin may terminate the employment relationship at any time and for any reason without prior notice.

If your employment is terminated without cause, or due to a change in control, you will be entitled to 6 months of salary and benefits continuation. Interleukin will make such payments in accordance with its regular payroll schedule or in a lump sum payment at its sole discretion.

As a confirmation of your acceptance of this offer of employment, please sign, date, and return the copy of this letter to me by 12 noon on Monday, March 27, 2006. The original is for your records. We hope that you would be able to start on or before April 10, 2006.

Please call me to discuss any questions or concerns you might have regarding the contents of this letter or the benefits available to you.

Sincerely,

/s/ PHILIP R. REILLY

Philip R. Reilly

Chief Executive Officer

Accepted and agreed	/s/  GREGG MAYER	Date	3-27-06
	Signature

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF
SARBANES-OXLEY ACT OF 2002

I, Kenneth S. Kornman, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Interleukin Genetics, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2006	/s/ KENNETH S. KORNMAN
	Kenneth S. Kornman Chief Executive Officer, President and Chief Scientific Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF
SARBANES-OXLEY ACT OF 2002

I, John J. McCabe, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Interleukin Genetics, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2006	/s/ JOHN J. MCCABE
	John J. McCabe Controller and Chief Accounting Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (A) AND (B) OF SECTION 1350, CHAPTER 63 OF TITLE 18,
UNITED STATES CODE)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18 United States Code), each of the undersigned officers of Interleukin Genetics, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report of Form 10-q for the quarter ended March 31, 2006 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2006	/s/ KENNETH S. KORNMAN
	Kenneth S. Kornman
	Chief Executive Officer, President and Chief Scientific Officer
Date: May 10, 2006	/s/ JOHN J. MCCABE
	John J. McCabe
	Controller and Chief Accounting Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission of its staff upon request.