The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this document.

General Overview and Trends

We are a genetics-focused personalized health company that develops preventive consumer products and genetic tests for sale to the emerging personalized health market. Our vision is to build a leading personalized health and wellness company using the science of applied genetics to empower people to understand the genetic components of their health, to provide physicians guidance on patient care and to provide drug developers the tools necessary to create new, innovative therapeutic products.

During the three months ended June 30, 2009, we initiated a product launch and closed two significant transactions and that have impacted or we expect will impact our business.

First, on June 8, 2009, we announced the launch of our new Inherent Health™ brand of genetic tests and related programs including the first-of-its-kind test for weight management that identifies an individual's genetic tendencies for weight gain and metabolism. In addition, the brand launch offers customers a full suite of affordable, easy-to-use and meaningful genetic tests in heart health, bone health, and nutritional needs, as well as PST®, the periodontal disease risk assessment test. To support the launch, we implemented a fully functional web presence with e-commerce capabilities. Genetic tests may be purchased through the website. A nationwide advertising campaign consisting of television, print and internet media is planned for the third quarter of 2009, which we anticipate will allow us to understand the proper media mix for this brand. A third party support and call center has been put in place in advance of the advertising campaign. We expect the initial phase of advertising to cost approximately $1.0 million and spending may continue into the foreseeable future. In addition to the web presence, we continue to look for other opportunities to increase sales, including partnerships.

Second, prior to the opening of business on July 1, 2009 we sold substantially all of the Alan James Group business and assets of our wholly-owned subsidiary AJG Brands, Inc. to Pep Products, Inc., a subsidiary of Nutraceutical Corporation, for approximately $4.6 million in cash. The proceeds consist of a $0.2 million holdback reflected in other assets and $4.4 million cash due which is reflected in current assets until received on July 1, 2009. The assets sold consisted primarily of accounts receivable, inventories, property and equipment and other assets related to the business. The buyer did not assume accounts payable and accrued liabilities. Subsequent to the closing, AJG Brands, Inc.'s name was changed to Interleukin Brands, Inc. ("IBI"). The assets remaining in IBI consist primarily of certain remaining accounts receivable and inventory. IBI will remain as a wholly-owned subsidiary of Interleukin until all remaining accounts receivable and inventory is settled or liquidated at which time we will determine whether to keep the subsidiary active. We expect this to occur in the next twelve months. We have fully reserved for all non-acquired inventory and accounts receivable assets in our financial statements. As a requirement of the transaction, we are prohibited from continuing to operate in a business competitive to the one previously conducted by AJG Brands, Inc., which primarily developed, marketed and sold nutritional supplements and related products into retail consumer channels. The sale of substantially all of the Alan James Group business and assets, which previously comprised the Consumer Products segment of our business, will allow us to focus our resources and attention exclusively on our Personalized Health business by developing new and selling our existing genetics tests to the growing personalized health market.

Third, on April 6, 2009, we entered into a licensing agreement with LABEC Pharma, S.L. to market and sell our Heart Health genetic test throughout Spain and Portugal. As part of the agreement, the test will be marketed by LABEC Pharma and the tests will be processed at our Clinical Laboratory Improvement Act of 1988 (CLIA) certified laboratory at our Corporate Headquarters in Waltham, Massachusetts. We will receive royalties and commercial milestone payments. As of June 30, 2009, no revenue has been recognized from the agreement. We expect to work with LABEC to obtain a CE mark by the end of 2009.

Up to and including June 30, 2009, we had two primary business segments that include:

† Personalized Health Segment - this segment conducts, researches, develops, markets and sells genetic test panels primarily in inflammatory and metabolic areas to provide better insight into health, wellness and disease. Following the sale of substantially all of the Alan James Group business and assets prior to the opening of business on July 1, 2009, the Personalized Health segment became our only business segment.

† Consumer Products Segment - this segment was comprised of the Alan James Group business assets, which we sold prior to the opening of business on July 1, 2009, and was focused on developing, selling and marketing nutritional supplements and products into retail consumer channels. Following the sale of substantially all of the Alan James Group business and assets, the Consumer Products segment ceased to exist.

The Personalized Health Segment contributes toward our overall mission of developing tests and products that can help individuals improve and maintain their health through preventive measures. We plan to pursue this by:

† developing genetic risk assessment tests for use in multiple indications, countries and various demographics; and

† processing genetic risk assessment tests in our CLIA-certified lab or in those of sublicensees.

In 2006, sales of our personalized health products began under marketing and other business arrangements with Alticor. Alticor is a significant customer, representing virtually all of our Personalized Health Segment revenues and over 9% of consolidated revenues in the three month ended June 30, 2009. With the launch of our Inherent Health™ brand of genetic tests and related programs in June 2009, we would expect that revenues from Alticor may represent a smaller percentage of our revenues from our Personalized Health Segment in the future, although we can provide no assurance that the launch of our own brand of genetic tests will be commercially successful.

Our Consumer Products Segment has sold branded nutritional products, including Ginsana®, Ginkoba™, and Venastat® through the nation's largest food, drug and mass retailers and contributed over 90% of the consolidated revenues to our business in the three months ended June 30, 2009. Customer concentration in our Consumer Products Segment was high and our largest customer accounted for approximately 47% of revenues in that segment and approximately 52% of our consolidated revenues for the three months ended June 30, 2009.

We have traditionally spent approximately $3-4 million annually on research and development and expect to continue spending at this level for the foreseeable future. We expect to complete our research agreements with Alticor in 2009 and dedicate more of our resources to our own product development efforts. Our current development programs focus on obesity, heart disease, osteoporosis, osteoarthritis, skin aging, sports nutrition and weight management genetic risk assessment tests. We expect that these programs will also lead to the personalized selection of nutritional and therapeutic products and provide consumers and healthcare professionals with better preventive product alternatives. As a result of the launch of our Inherent Health™ Brand of genetic tests, we expect corporate selling, general, marketing and administrative expenses associated with our genetic test products to increase in the remainder of 2009 and beyond. We currently have borrowings available under our credit line of $9.3 million, which permits borrowing any time prior to January 1, 2011. We expect to be able to fund our operations through at least the next twelve months with revenue from product sales, borrowings from our credit facility and the cash proceeds from the sale of substantially all of the Alan James Group business and assets.

On February 25, 2008, we entered into our most recent research agreement, known as RA8, with Access Business Group International LLC (ABG), a subsidiary of Alticor. RA8 encompasses four primary areas: osteoporosis, cardiovascular disease, nutrigenomics, and dermagenomics. We will be conducting various clinical studies, which shall be fully funded by ABG. On January 31, 2009, the Company entered into an amendment to RA8, which extends the term from a maximum of six months to eight months terminating on September 30, 2009. We received an additional $200,316 on March 31, 2009 per the amendment to complete ongoing research. See financial statement footnote 5 for a discussion of our strategic alliance with Alticor. Some of the clinical studies being conducted and to be conducted under RA8 aim to correlate SNP gene variations to the risk of osteoporosis or cardiovascular disease in Asian populations. Other studies conducted in North American populations will seek to identify genetic factors that influence athletic performance (nutrigenomics) and skin health, such as wrinkles, elasticity, aging (dermagenomics), for the purpose of developing products to enhance healthy aging. Under the terms of RA8, ABG paid us $1.2 million during 2008 for the research. In addition, we recognized approximately $800,000 of revenue which was unused from prior research agreements with Alticor and its subsidiaries.

In our Personalized Health Segment, competition is in flux and the markets and customer base are not well established. Adoption of new technologies by consumers requires substantial market development and customer education. Historically, we have focused on our relationship with our primary customer, Alticor, a significant direct marketing company, in order to assist us in developing the market for our products and educating our potential customers. Our challenge in 2009 and beyond will be to develop the market for our own personalized health products. We have begun to allocate considerable resources to our own brand of consumer products, including the June 2009 launch of our new Inherent Health™ Brand of genetic tests and related programs. Due to the early stage of these initiatives, we cannot predict with certainty fluctuations we may experience in our test revenues or whether revenues derived from Alticor related to the heart health and general nutrition

genetic tests will be sustained in future periods. As part of our strategy to partner with companies in the pharmaceutical and biotechnology industries, we have recently entered into a research collaboration with a biotechnology company for biomarker research for an inflammatory disease.

Liquidity and Capital Resources

As of June 30, 2009, we had cash and cash equivalents of $0.9 million and borrowings available under our credit facility of $9.3 million, which permits borrowing at any time prior to January 1, 2011. In connection with the closing of the sale of substantially all of the Alan James Group business and assets of AJG Brands, Inc., prior to the opening of business on July 1, 2009, we received $4.4 million of cash proceeds on July 1, 2009.

Cash used in continuing operations was $4.5 million for the six months ended June 30, 2009, as compared to $3.9 million for the six months ended June 30, 2008. Cash used in operations is primarily impacted by operating results and changes in working capital, particularly the timing of the collection of receivables, inventory levels and the timing of payments to suppliers. A significant use of cash in the six months ended June 30, 2008 was a payment of $1.2 million, relating to the settlement of purchase obligations with the Alan James Group, $0.6 million of which had been accrued prior to 2008 and is reflected as being paid in net cash used in continuing operation activities in the six months ended June 30, 2008. The remaining $0.6 million is reflected in net cash used in investing activities of our continuing operations as described below. The increase of $0.6 million of cash used in continuing operations is primarily attributable to the increased costs related to the sale of substantially all of the Alan James Group business and assets of AJG Brands, Inc. prior to the opening of business on July 1, 2009, offset by no settlement payment being recognized in the three months ended June 30, 2009. Expenses of the sale consist of legal and closing fees of approximately $0.4 million and employee severance costs of approximately $0.5 million.

Cash used in investing activities of our continuing operations was $0.7 million for the six months ended June 30, 2009, compared to $0.7 million for the six months ended June 30, 2008. The most significant use of cash in investing activities during the six months ended June 30, 2008 was the settlement of claims related to the acquisition of the assets and business of the Alan James Group as described above. As a result of the settlement, we paid additional consideration of $0.6 million. Capital additions were $0.7 million for the six months ended June 30, 2009, compared to $23,000 for the six months ended June 30, 2008. The increase in capital additions primarily consists of new commercial laboratory equipment installed and validated in the first six months of 2009, which allows for high volume processing of genetic test samples.

Cash provided by financing activities of our continuing operations was $1.0 million for the six months ended June 30, 2009, compared to $4.0 million for the six months ended June 30, 2008. On May 29, 2009, we received proceeds from the issuance of a note payable in the amount of $1.0 million under our existing credit facility with Pyxis Innovations Inc., an affiliate of Alticor("Pyxis"). On June 10, 2008 we received $4.0 million under the same credit facility. We received $48,000 and $9,000, respectively from the exercise of stock options and stock purchases through the employee stock purchase plan for the six months ended June 30, 2009 and June 30, 2008.

On December 23, 2008, we were notified of our failure to comply with the NYSE Amex, LLC's, hereinafter referred to as the Exchange, continued listing standards under section 1003 of the Exchange's Company Guide. Specifically, the Exchange noted our failure to comply with section 1003(a)(iii) of the Company Guide because our stockholders' equity was less than $6,000,000 and we had losses from continuing operations and net losses in our five most recent fiscal years. The notice was based on a review by the Exchange of publicly available information, including our Quarterly Report on Form 10-Q for the quarter ended September 30, 2008. As of December 31, 2008, our stockholders equity was $4.5 million. On January 27, 2009, we submitted a plan to the exchange to meet the continued listing requirements. The plan consists of several elements, but is primarily focused on increasing the sales of our products and services and raising additional equity capital. On March 27, 2009, we were notified that the Exchange found our plan to regain compliance with the continued listing standards to be unacceptable. We filed an appeal for an oral hearing and submitted a revised plan to the Exchange. On May 11, 2009, the Exchange notified us that the Exchange accepted our redrafted plan of compliance, without a hearing, and granted us an extension until December 31, 2009 to regain compliance with the continued listing standards. The Exchange will periodically review our progress toward regaining compliance. Failure to make progress consistent with the plan or to regain compliance with the continued listing standards by December 31, 2009 could result in delisting from the Exchange, which could significantly impact our ability to raise additional capital.

We currently do not have any commitments for any additional material capital purchases.

Prior to June 30, 2009, we generated operating cash by sales of consumer products, genetic tests, royalties, and reimbursements for funded research. Subsequent to June 30, 2009, pursuant to the asset purchase agreement with the Alan

James Group, we are prohibited from continuing to operate in a business competitive to the one previously conducted by AJG Brands, Inc., which primarily developed, marketed and sold nutritional supplements and related products into retail consumer channel. The amount of operating cash we generate is not currently sufficient to continue to fund and grow our operations. In addition to funds generated by our operations, we have a $14.3 million credit facility with Pyxis, under which we have $9.3 million in borrowings available as of June 30, 2009. Clinical studies and other research and development activities may require cash outflows that depend on the timing of activities.

We believe that our cash on hand and availability under our line of credit with Pyxis will be sufficient to fund our operations and meet our overall strategic plan for at least the next twelve months. We will need to raise additional capital, if market conditions permit, to continue investment in new product development, to improve our distribution channels, to maintain our listing on the NYSE Amex, LLC, and other aspects of our overall strategic plan. The current status of the financial markets may adversely affect our ability to raise additional capital.

We have no financial covenants as part of our credit facility with Pyxis. We currently have $5.0 million outstanding under the credit facility, which is reflected as long term debt on our balance sheet and is convertible, at the option of Pyxis into shares of our common stock at a price of $5.6783 per share. We anticipate drawing down additional funds available under our credit facility in the foreseeable future.

Results of Operations (000's)



                                      Three Months Ended June 30,        Six Months Ended June 30,
                                         2009              2008             2009             2008
Personalized health - continuing
operations
Genetic testing                     $        95,309    $     90,993    $      232,821    $    192,745
Contract research & development             119,046         402,280           322,732         939,293
Other                                         8,638          28,346            14,904          31,453
Total revenue from continuing
operations                                  222,993         521,619           570,457       1,163,491
Cost of revenue                     $       301,875    $    208,457    $      606,847    $    443,241
Gross margin                        $       (78,882 )  $    313,162    $      (36,390 )  $    720,250
Expenses:
Research & development                      874,192         708,855         1,755,748       1,522,226
Selling, general &
administrative                            1,334,472      1, 208,325         2,813,625       2,667,637
Amortization of intangibles                  28,863          22,841            57,727          44,341
Other (income) expense                       34,401          (9,946 )          58,239         (62,476 )
Total expenses                      $     2,271,928    $  1,930,075    $    4,685,339    $  4,171,728
Net loss from continuing
operations before income taxes      $    (2,350,810 )  $ (1,616,913 )  $   (4,721,729 )  $ (3,451,478 )
Provision for income taxes                   10,000              50                 0          (6,000 )
Net loss from continuing
operations                          $    (2,340,810 )  $ (1,616,863 )  $   (4,721,729 )  $ (3,457,478 )
Consumer products - discontinued
operations
Consumer product revenue            $     2,032,639    $  1,954,616    $    3,580,169    $  3,967,267
Cost of revenue                           1,155,087       1,098,018         1,892,815       2,199,206
Gross margin                        $       877,552    $    856,598    $    1,687,354    $  1,768,061
Expenses:
Selling, general &
administrative                              548,370         597,180         1,104,153       1,221,100
Amortization of intangibles                 308,687         308,687           617,375         617,373
Other expenses                            1,346,202             213         1,358,701           1,057
Total expenses                      $     2,203,259    $    906,080    $    3,080,229    $  1,839,530
Net loss from discontinued
operations before income taxes      $    (1,325,707 )  $    (49,482 )  $   (1,392,875 )  $    (71,469 )
Provision for income taxes                  (45,000 )             0           (53,000 )       (12,500 )
Net loss from discontinued
operations                          $    (1,370,707 )  $    (49,482 )  $   (1,445,875 )  $    (83,969 )
Combined continuing and
discontinued operations
Total revenue                       $     2,255,632    $  2,476,235    $    4,150,626    $  5,130,758
Cost of revenue                           1,456,962       1,306,475         2,499,662       2,642,447
Gross margin                        $       798,670    $  1,169,760    $    1,650,964    $  2,488,311
Expenses:
Research & development                      874,192         708,855         1,755,748       1,522,226
Selling, general &
administrative                            1,882,842       1,805,505         3,917,778       3,888,737
Amortization of intangibles                 337,550         331,528           675,102         661,714
Other (income) expense                    1,380,603          (9,733 )       1,416,940         (61,419 )
Total expenses                      $     4,475,187    $  2,836,155    $    7,765,568    $  6,011,258
Net loss before income taxes        $    (3,676,517 )  $ (1,666,395 )  $   (6,114,604 )  $ (3,522,947 )
Provision for income taxes                  (35,000 )            50           (53,000 )       (18,500 )
Net loss                            $    (3,711,517 )  $ (1,666,345 )  $   (6,167,604 )  $ (3,541,447 )

Three Months Ended June 30, 2009 and June 30, 2008

Continuing operations - personalized health

Total revenue from continuing operations for the three months ended June 30, 2009 was $0.2 million, compared to $0.5 million for the three months ended June 30, 2008. The decrease of $0.3 million, or 57.2%, is primarily attributable to decreases in royalty revenue and contract research revenue, offset by a small increase in genetic test revenue. Contract research revenue was $0.1 million in the three months ended June 30, 2009, compared to $0.4 million in the three months ended June 30, 2008. The decrease is primarily attributable to timing of our reimbursable research projects. Genetic testing revenue increased to $0.1 million, or 4.7%, in the three months ended June 30, 2009, compared to $0.09 million in the three months ended June 30, 2008. The increase is primarily attributable to the launch of our Inherent Health™ Brand of genetic tests, which commenced in June 2009. Genetic testing revenue is derived from tests sold and processed, which is driven by consumer demand. Contract research revenue is recognized when Alticor sponsored research expenses are incurred.

We have one significant personalized health customer. Our significant customer, Alticor, which is our principal shareholder, represented approximately 92% and 99%, respectively, of our revenues from continuing operations in the three months ended June 30, 2009 and 2008.

Cost of revenue from continuing operations for the three months ended June 30, 2009 was $0.3 million, or 135.4% of its revenue, compared to $0.2 million, or 40.0% of its revenue, for the three months ended June 30, 2008. The significant increase in the cost of revenue as a percentage of revenue is primarily attributable to increased fixed costs associated with our genetic testing laboratory notwithstanding changes in our revenue. Fixed costs were impacted during the three months ended June 30, 2009 by the purchase and installation of new high volume genetic testing equipment, which we expect to be absorbed with changes in volume of tests performed. Increased costs associated with this equipment are recognized in the second quarter of 2009, where no such costs were recognized in the second quarter of 2008. The equipment will allow for higher volume processing.

Gross margin from continuing operations for the three months ended June 30, 2009, was a loss of $0.1 million, or 35.4%, compared to a profit of $0.3 million, or 60.0%, for the three months ended June 30, 2008. The significant decrease in gross margin is primarily attributable to increased fixed costs associated with our genetic testing laboratory.

Research and development expenses from continuing operations were $0.9 million for the three months ended June 30, 2009, compared to $0.7 million for the three months ended June 30, 2008. The increase of $0.2 million is primarily attributable to increased expenses for patent, clinical trial expenses and separation costs which were offset by lower consulting expenses as compared to the three months ended June 30, 2008.

Selling, general and administrative expenses from our continuing operations were $1.3 million for the three months ended June 30, 2009, compared to $1.2 million for the three months ended June 30, 2008. The increase of $0.1 million is primarily attributable to the product development costs associated with our new Inherent Health™ Brand of genetic tests offset by decreased expenses relating to administrative support consultants.

Interest expense from continuing operations was $35,000 for the three months ended June 30, 2009, as compared to $18,000 for the three months ended June 30, 2008. The increase in interest expense of $17,000 is primarily attributable to interest expense associated with borrowings on our credit facility with Pyxis.

Interest income from continuing operations was $900 for the three months ended June 30, 2009 as compared to $28,000 for the three months ended June 30, 2008. The decrease in interest income of $27,000 is primarily attributable to the decrease in cash balance and lower interest being earned on available cash balances. The current financial market conditions have significantly reduced the interest rate we are able to earn on our cash and cash equivalent balances.

Discontinued operations - consumer products

Total revenue from consumer products in discontinued operations was $2.0 million for the three months ended June 30, 2009 compared to $1.9 million for the three months ended June 30, 2008. The increase of $0.1 million or 4% is primarily attributable to increased consumer product sales at retailers. Even with this increase we believe retailers are stocking less inventory and consumers continued to monitor their spending patterns in these current unfavorable economic conditions.

In our Consumer Products Segment, our other significant customer represented approximately 47% and 48%, respectively, of revenues from discontinued operations in the three months ended June 30, 2009 and 2008.

Cost of revenue from discontinued operations for the three months ended June 30, 2009 was $1.2 million, or 56.8% of its revenue, compared to $1.1 million, or 56.2% of its revenue, for the three months ended June 30, 2008. The increase of . . .