8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) August 17, 2006

Interleukin Genetics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

001-32715	94-3123681
(Commission File Number)	(IRS Employer Identification No.)
135 Beaver Street Waltham, MA	02452
(Address of Principal Executive Offices)	(Zip Code)

(781) 398-0700

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01  ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

On August 17, 2006, Interleukin Genetics, Inc. (the “Company”) entered into a Stock Purchase Agreement with Pyxis Innovations Inc. (“Pyxis”) and Amendment No. 5 to the Note Purchase Agreement between the Company and Pyxis, dated October 23, 2002.  Pursuant to the Stock Purchase Agreement, the Company issued and sold to Pyxis an aggregate of 2,750,037 shares of Common Stock for an aggregate purchase price of $15,615,537, or $5.6783 per share.  Pursuant to Amendment No. 5 to the Note Purchase Agreement, Pyxis has also agreed to extend to the Company a credit line of $14,384,463 bearing interest at a variable rate equal to the prime rate.  The Company may draw against the credit line until August 17, 2008 and all borrowing is due on August 16, 2011.  The principal amount of any borrowing under this credit facility is convertible at Pyxis’s election into a maximum of 2,533,234 shares of Common Stock, reflecting a conversion price equal to $5.6783 per share.  As a condition to these transactions, the Company plans to conduct a rights offering of 2,533,234 shares of its Common Stock to existing stockholders (other than Pyxis) at a per share price of $5.6783.  Any proceeds received from the rights offering will reduce the availability under the credit facility.  The record date for the determination of stockholders entitled to participate in the rights offering is August 17, 2006.  The rights offering is expected to be conducted approximately ninety days following the closing of the acquisition described below.

On August 17, 2006, the Company entered into an Asset Purchase Agreement with the Alan James Group, LLC and certain of its affiliates, pursuant to which the Company acquired the assets and business of the Alan James Group.  The acquired business primarily develops, markets and sells “nutraceuticals” and “OTCeuticals” and related activities.  The Company has paid consideration at the closing consisting of approximately $7,000,000 in cash and 88,055 shares of Common Stock and will pay additional contingent consideration of up to $1,500,000 in cash and up to 1,628,833 shares of Common Stock over the next three years.  These contingent payments are subject to achievement of certain milestones by the acquired business.  Timothy J. Richerson and David A. Finkelstein are the sole owners of Alan James Group, LLC and will directly benefit from the transactions described in the Asset Purchase Agreement.

On August 17, 2006, we entered into a three-year employment agreement with Timothy J. Richerson, our Chief Executive Officer, which provides for a minimum annual base salary of $300,000, an immediate grant of 12,500 fully-vested shares of our Common Stock, annual grants of an additional 12,500 fully-vested shares of our Common Stock, annual discretionary bonuses of up to 40% of base salary and a $600 per month automobile allowance.  This employment agreement is terminable by Mr. Richerson upon one month prior written notice and by us for cause. The agreement also provides that if he is terminated without cause or he terminates his employment for good reason, he shall have the right to receive severance benefits in the amount of his then current base salary and health insurance benefits until the earlier to occur of the expiration of the term of the agreement or eighteen months following the date of termination.  In the event of a change of control, all unvested shares of our Common Stock held by Mr. Richerson would automatically vest.  In addition, the agreement provides that he will be prohibited, for a period of twelve months following the date of termination of the employment agreement, from accepting employment, or otherwise becoming involved, in any manner, with one of our direct competitors, or from providing services to any person or entity that might conflict with our interests or the interests of our customers or clients.

On August 17, 2006, we entered into an employment agreement with David A. Finkelstein, our Chief Strategy Officer, expiring on December 31, 2007 which provides for a

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minimum annual base salary of $300,000, an immediate grant of 12,500 fully-vested shares of our Common Stock, annual grants of an additional 12,500 fully-vested shares of our Common Stock, annual discretionary bonuses of up to 40% of base salary and a $600 per month automobile allowance.  This employment agreement is terminable by Mr. Finkelstein upon one month prior written notice and by us for cause. The agreement also provides that if he is terminated without cause or he terminates his employment for good reason, he shall have the right to receive severance benefits in the amount of his then current base salary and health insurance benefits until the earlier to occur of the expiration of the term of the agreement or twelve months following the date of termination.  In the event of a change of control, all unvested shares of our Common Stock held by Mr. Finkelstein would automatically vest.  In addition, the agreement provides that he will be prohibited, for a period of twelve months following the date of termination of the employment agreement, from accepting employment, or otherwise becoming involved, in any manner, with one of our direct competitors, or from providing services to any person or entity that might conflict with our interests or the interests of our customers or clients.

A copy of the Company’s press release, dated August 17, 2006, titled “INTERLEUKIN GENETICS ACQUIRES ALAN JAMES GROUP AND SECURES $30 MILLION IN NEW FINANCING” is attached hereto as Exhibit 99.1 and incorporated herein by reference.

ITEM 2.01  COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.

As noted in the response to Item 1.01 above, pursuant to the terms of the Asset Purchase Agreement, the Company acquired substantially all of the assets and business of the Alan James Group, LLC and certain of its affiliates.  The shares of Common Stock issued in connection with the completion of the asset purchase were issued pursuant to an exemption from registration provided by Regulation D under the Securities Act of 1933, as amended.

ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.

On August 17, 2006, the Company issued 2,750,037 shares of Common Stock for cash in the amount of $5.6783 per share.  The Company also entered into a convertible credit facility that could result in the issuance of an additional 2,533,234 shares of Common Stock upon the conversion of convertible notes issuable under such credit facility.  All of these shares of Common Stock will be issued pursuant to the exemption from registration provided by Regulation D under the Securities Act.

On August 17, 2006, the Company became obligated to issue 88,055 shares of Common Stock as partial consideration for the acquisition of assets of Alan James Group, LLC and certain of its affiliates.  The Company may become obligated to issue up to an additional 1,628,833 shares of Common Stock upon the achievement of certain milestones by the acquired business.  All of these shares of Common Stock will be issued pursuant to the exemption from registration provided by Regulation D under the Securities Act.

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ITEM 5.02  DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.

Effective August 17, 2006, Philip R. Reilly resigned as a Class I director of the Registrant and Kenneth S. Kornman was elected to replace Dr. Reilly in that capacity.  Dr. Kornman was elected pursuant to the provisions of the Registrant’s Restated Certificate of Incorporation by the directors remaining in office to serve until our 2007 Annual Meeting of Stockholders or until his successor is elected and qualified.

Effective August 17, 2006, Kenneth S. Kornman resigned as Chief Executive Officer of the Company.  Dr. Kornman will remain as President and Chief Science Officer of the Company.

Effective August 17, 2006, the Company’s Board of Directors appointed Timothy J. Richerson (age 45) as Chief Executive Officer of the Company.  Prior to joining the Company, Mr. Richerson was President, Manager and Member of the Alan James Group, LLC since 2002 when he and Mr. Finkelstein founded that company.  Prior to founding the Alan James Group, Mr. Richerson was employed by Rexall Sundown Inc., a marketer of vitamin, sports nutrition and diet products, as President from 2000 through 2002 and as General Manager from 1997 through 2000. Mr. Richerson holds a BA in Communications from the University of Missouri.

Effective August 17, 2006, the Company’s Board of Directors appointed David A. Finkelstein (age 46) as Chief Strategy Officer of the Company.  Prior to joining the Company, Mr. Finkelstein was Chief Operating Officer of the Alan James Group, LLC since 2002 when he and Mr. Richerson founded that company.  Prior to founding Alan James Group, Mr. Finkelstein was the founder of Fusive.com Corp., a company that developed advanced customer care products combining the Web, voice and data communications.  Mr. Finkelstein holds a BSME from the University of Vermont and an MBA from York University, Toronto, Canada.

Timothy J. Richerson and David A. Finkelstein have interests in the Asset Purchase Agreement and the employment agreements described in Section 1.01 above, which interests would be required to be disclosed pursuant to Item 404(a) of Regulation S-K promulgated under the Securities Act of 1933.

ITEM 9.01  FINANCIAL STATEMENTS AND EXHIBITS.

(a)           Financial Statements of Businesses Acquired.

The financial statements required by this item will be filed by amendment to this Current Report on Form 8-K as soon as practicable, but not later than 71 days after the date this Current Report on Form 8-K is required to be filed.

(b)           Pro Forma Financial Information.

The pro forma financial information required by this item will be filed by amendment to this Current Report on Form 8-K as soon as practicable, but no later than 71 days after the date this Current Report on Form 8-K is required to be filed.

(d)           Exhibit.

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99.1                Press Release dated August 17, 2006.

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SIGNATURE

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 hereunto duly authorized.

	Interleukin Genetics, Inc.
	(Registrant)
Date: August 21, 2006	/s/ KENNETH S. KORNMAN
	Kenneth S. Kornman
	President and Chief Scientific Officer
	(Signature)

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EX-99.1

Exhibit 99.1

For Immediate Release

INTERLEUKIN GENETICS ACQUIRES ALAN JAMES GROUP AND SECURES
$30 MILLION IN NEW FINANCING

Combination Creates Fully Integrated Personalized Healthcare Solutions Company

Conference Call Scheduled for 5:00 PM EDT Today

Waltham, MA, August 17, 2006 – Interleukin Genetics, Inc. (AMEX: ILI) today announced that it has acquired the assets and business of Alan James Group, LLC., a privately held, healthcare-focused consumer products company, in a cash and stock transaction.

The combination will create a diversified, fully integrated provider of products and services in the consumer and professional healthcare marketplace.  Interleukin and Alan James have complementary capabilities in genetic testing services and preventive healthcare products distribution.  By combining these capabilities, the company will be well positioned to expand its science-based solutions portfolio, rapidly commercialize its products and services and offer a broad selection of innovative, preventive, and personalized therapeutics to its customers.

Under the terms of the purchase agreement, Interleukin made an upfront payment to Alan James of $7 million in cash and $0.5 million in newly issued stock, based on the volume-weighted average closing stock price for the 20 consecutive trading days ending August 15, 2006 of $5.68 per share.  In addition, if certain earnings milestones are achieved by the Alan James subsidiary from 2007 through 2009, up to $1.5 million in cash and up to approximately 1.6 million shares of stock representing a value of $9.25 million based on the same volume-weighted average price of $5.68 per share, will be paid as additional consideration.

In connection with the transaction, Alticor, Inc., which owns a majority interest in Interleukin, will provide $30 million in financing in the form of a $15.6 million private placement with Alticor, Inc., and a new $14.4 million credit facility.  The amount available under the credit facility will be reduced by the amount of any proceeds received by Interleukin from a planned rights offering of $14.4 million of common stock to existing Interleukin common stockholders at a price of $5.68 per share, to be commenced as soon as practicable.

With the close of the transaction today, Tim Richerson, previously president of Alan James Group, LLC. has been named chief executive officer of Interleukin Genetics, Inc.  Dr. Kenneth Kornman, previously president and chief executive officer of Interleukin, maintains the roles of president and chief scientific officer, and has been appointed as a director on the Interleukin board.  Dr. Philip Reilly has stepped down as director and chairman of the Interleukin board and will continue to serve as a strategic advisor to the company.  Current Interleukin director Thomas Curran has been named chairman of the Interleukin board.

“This acquisition provides Interleukin with new products and sales and marketing leadership in the rapidly expanding consumer health segment,” said Dr. Kenneth Kornman, president and chief scientific officer of Interleukin Genetics.  “Alan James has a strong track record of innovation and marketing in the area of preventive therapeutics.  With Alan James’ experienced product commercialization team and the strong financial support provided by Alticor, Interleukin is well positioned to effectively commercialize our science-based products and services.  By creating a diversified, fully integrated provider of products and genetics tests, we believe this combination will create significant business growth opportunities to the benefit of our shareholders, customers, employees and partners.”

“The combination of Interleukin and Alan James will create an innovative company with leading genetics research that is able to deliver science-based products and services in a rapidly expanding marketplace,” said Tim Richerson, chief executive officer of Interleukin Genetics.  “The complementary combination of Alan James’ existing brands, product pipeline and channel development capabilities with Interleukin’s genetics expertise and scientific capabilities positions the company to realize its vision to be a leading genetics-focused, personalized health company.  We anticipate integrating our companies to realize the strategic, scientific and financial benefits of this transaction quickly and efficiently.”

Alan James has commercialized products that include recognizable consumer brands such as Ginkoba™, Ginsana™, and Venastat™, and Interleukin currently markets genetic tests for cardiovascular disease risk assessment and general nutrition assessment, both sold under the Gensona™ brand through Alticor’s Quixtar division, and PST® periodontal disease risk assessment.

Interleukin will continue to distribute products and services through Alticor’s direct sales channels.  The company anticipates new opportunities to enhance this channel in connection with the transaction.

Alan James will continue to do business under the name Alan James Group as a wholly owned subsidiary of Interleukin Genetics, Inc.

Strategic Combination

The combination is expected to allow the company to accelerate its development of a predictive and preventive product portfolio, expand its presence in the personalized health and wellness marketplace, and broaden its revenue base to include consumer, commercial and professional healthcare channels.  This strategic combination presents Interleukin with a unique opportunity to take advantage of the fast-growing $40 billion OTC and Nutraceuticals markets in the U.S., and the rapidly emerging molecular diagnostics marketplace, currently representing over $2 billion in the U.S. and growing at 15 to 20% per year.

In connection with the close of this transaction, Interleukin now expects total revenues of $5.5 million to $7 million in 2006.

Conference Call Information

Interleukin will host a conference call with investment analysts and shareholders at 5:00 PM EDT today to provide more information on this announcement and respond to questions.  The webcast of the conference call and an accompanying slide presentation will be available on the Interleukin website at www.ilgenetics.com.  An audio replay of the call will also be available at the dial-in information below.

Conference Call Dial-in:	800-289-0572	Toll-free Domestic
	913-981-5543	International
Replay Dial-in:	888-203-1112	Toll-free Domestic
	719-457-0820	International
	Passcode:	3844256

About Interleukin Genetics, Inc.

Interleukin Genetics, based in Waltham, MA, is a biotechnology company focused on developing and commercializing personalized health products.  The company uses its proprietary technology to help in the development of risk assessment tests, pharmacogenetic tests, nutritional and therapeutic products based on the genetic variations in people.  Interleukin Genetics has commercialized genetic tests for periodontal disease risk assessment, cardiovascular risk assessment and general nutrition assessment, and its current development programs focus on osteoporosis and weight management.  Interleukin expects that these programs will also lead to products that will personalize the selection of nutritional and therapeutic products and enable the managed care industry to improve patient care and better allocate resources.  For more information about Interleukin and its ongoing programs, please visit www.ilgenetics.com.

About Alan James Group, LLC.

Alan James Group, LLC., based in Boca Raton, FL, is a privately held consumer products company that develops Nutraceuticals and OTCeutical brands.  The company’s portfolio includes recognizable consumer brands such as Ginkoba™, Ginsana™, and Venastat™, and products within the Health and Beauty Care category such as vitamins, minerals, herbs and supplements.  The company’s products are sold at the nation’s largest retailers, including Wal-Mart, Target, CVS, Walgreens, Rite-Aid, Kroger and Albertson’s.  For more information about The Alan James Group please visit www.alanjamesgroup.com.

Certain statements contained herein are “forward-looking” statements including statements regarding our expectations regarding future revenues and gross profit margin, our ability to rapidly commercialize products, our ability to develop diagnostic, personalized nutritional and therapeutic products to prevent or treat diseases of inflammation and other genetic variations, our ability to screen nutritional compounds for their effects on inflammatory responses and other genetic variations, given specific genetic patterns and our ability to make progress in advancing our core technologies. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to the risk of market acceptance of our products, the risk of technology and product obsolescence, delays in product development, the performance of our partners, the availability of adequate capital, the actions of our competitors and other competitive risks, and those risks and uncertainties described in our annual report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission, our quarterly reports on Form 10-Q and in other filings made by us with the Securities and Exchange Commission. We disclaim any obligation or intention to update these forward-looking statements.

The common stock to be offered in the rights offering has not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and may not be offered or sold absent registration or an applicable exemption from registration under the Securities Act and applicable state securities laws.

Contacts

For Investors

(781) 398-0700

Gregg Mayer, Interleukin Genetics, Inc.

For Media

(212) 445-8224

J.J. Rissi, Weber Shandwick

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