<PAGE>

                                   FORM 10-QSB

                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20429


(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2006

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

For the transition period from ______________________  to _____________________

Commission File Number     0-27227
                        -------------

                          ALLERGY RESEARCH GROUP, INC.
             (Exact name of registrant as specified in its charter)


                  Florida                                  13-3940486

      (State or other jurisdiction of                     (IRS Employer
       incorporation or organization)                  Identification No.)


                 2300 North Loop Road, Alameda, California 94502

                    (Address of principal executive offices)

(Issuer's telephone number) (800) 545-9960.
                            --------------

--------------------------------------------------------------------------------
            (Former name, former address and former fiscal year, if
                           changed since last report)

Checkmark  whether the issuer (1) has filed all reports  required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes   X   No
             -----    -----

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 14,521,605 shares of Issuer's voting
common stock were outstanding on July 28, 2006.

<PAGE>

                          ALLERGY RESEARCH GROUP, INC.
                            INDEX TO QUARTERLY REPORT
                                 ON FORM 10-QSB
                                  JUNE 30, 2006
================================================================================


PART I. FINANCIAL INFORMATION                                               PAGE

     ITEM 1. Condensed Consolidated Financial Statements (Unaudited):

             Consolidated Balance Sheets.......................................3

             Consolidated Income Statements....................................4

             Consolidated Statements of Cash Flows.............................5

             Notes to Condensed Consolidated Financial Statements..............6

     ITEM 2. Management's Discussion and Analysis.............................10

     ITEM 3. Controls and Procedures..........................................17

PART II. OTHER INFORMATION

     ITEM 1. Legal Proceedings................................................18
     ITEM 2. Changes in Securities and Use of Proceeds........................18
     ITEM 3. Defaults Upon Senior Securities..................................18
     ITEM 4. Submission of Matters to a Vote of Security Holders..............18
     ITEM 5. Other Information................................................18
     ITEM 6. Exhibits.........................................................18


SIGNATURE.....................................................................19


                                       2
<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

In the opinion of management, the accompanying unaudited financial statements
included in this Form 10-QSB reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results of
operations for the periods presented. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year.

<TABLE>

                                ALLERGY RESEARCH GROUP, INC.
                                 CONSOLIDATED BALANCE SHEETS


                                                            June 30,     December 31,
                                                              2006           2005
                                                          (Unaudited)     (Audited)
                                                          -----------    -----------
<S>                                                       <C>            <C>
ASSETS
------
Current Assets
 Cash and Cash Equivalents                                $ 2,618,878    $ 2,487,824
 Accounts Receivable                                          931,986        954,943
 Inventories (Note 4)                                       3,440,533      2,573,612
 Prepaid Income Taxes                                          58,693        107,193
 Prepaid Expenses and Other Current Assets                    265,467        169,479
                                                          --------------------------
Total Current Assets                                        7,315,557      6,293,051
                                                          --------------------------

Property and Equipment, Net                                   528,942        562,928
                                                          --------------------------

Intangible Assets, Net                                         13,180         13,180
                                                          --------------------------

Total Assets                                              $ 7,857,679    $ 6,869,159
                                                          ==========================

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
 Accounts Payable                                         $   481,629    $   274,642
 Accrued Expenses (Note 5)                                    365,760        207,824
 Deferred Tax Liability                                        28,545         18,704
 Income Taxes Payable                                          64,480         34,262
                                                          --------------------------
Total Current Liabilities                                     940,414        535,432
                                                          --------------------------

Commitments and Contingencies (Notes  6 & 9)

Stockholders' Equity
 Preferred Stock, $.25 Par Value, Authorized 1,000,000
    Shares, Issued and Outstanding: None                         None           None
 Common Stock, $.001 Par Value, Authorized 100,000,000
   Shares Issued: 15,105,355, Outstanding: 14,521,605          15,105         15,105
 Additional Paid In Capital                                 1,150,641      1,150,641
 Retained Earnings                                          6,030,056      5,446,518
 Less: Treasury Stock, at cost (583,750 shares)              (278,537)      (278,537)
                                                          --------------------------
Total Stockholders' Equity                                  6,917,265      6,333,727
                                                          --------------------------
Total Liabilities and Stockholders' Equity                $ 7,857,679    $ 6,869,159
                                                          ==========================

See Notes to Condensed Consolidated Financial Statements.


                                       3
<PAGE>

                                  ALLERGY RESEARCH GROUP, INC.
                                 CONSOLIDATED INCOME STATEMENTS
                                           (UNAUDITED)

                                                         Three Months Ended        Six Months Ended
                                                               June 30,                 June 30,
                                                          2006         2005         2006         2005
                                                       ----------   ----------   ----------   ----------

Revenues                                               $3,996,496   $3,981,676   $8,262,023   $8,092,849
Cost of Sales                                           2,467,028    2,379,625    5,097,538    4,803,008
                                                       ----------   ----------   ----------   ----------
Gross Profit                                            1,529,468    1,602,051    3,164,485    3,289,841
                                                       ----------   ----------   ----------   ----------

Operating Expenses
      Selling, General and Administrative               1,049,475    1,017,822    2,088,699    2,126,844
      Research and Development                             73,917       75,485      146,691      148,299
                                                       ----------   ----------   ----------   ----------
Operating Expenses                                      1,123,392    1,093,307    2,235,390    2,275,143
                                                       ----------   ----------   ----------   ----------

Earnings from Operations                                  406,076      508,744      929,095    1,014,698
                                                       ----------   ----------   ----------   ----------

Other Income
      Interest Income                                      30,671       11,566       56,884       17,346
                                                       ----------   ----------   ----------   ----------
Other Income                                               30,671       11,566       56,884       17,346
                                                       ----------   ----------   ----------   ----------

Net Earnings Before Tax                                   436,747      520,310      985,979    1,032,044

Provision for Income Taxes                                178,891      195,600      402,441      387,800
                                                       ----------   ----------   ----------   ----------

Net Earnings Available to Common Stockholders          $  257,856      324,710   $  583,538   $  644,244
                                                       ==========   ==========   ==========   ==========

Basic and Diluted Earnings Per Common Share (Note 2)   $     0.02   $     0.02   $     0.04   $     0.04
                                                       ==========   ==========   ==========   ==========


See Notes to Condensed Consolidated Financial Statements.


                                               4
<PAGE>

                                  ALLERGY RESEARCH GROUP, INC.
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           (UNAUDITED)
                                                                                  Six Months Ended
                                                                                      June 30,
                                                                                2006            2005
                                                                             -----------    -----------
Cash Flows From Operating Activities
       Net Earnings                                                          $   583,538    $   644,244
                                                                             -----------    -----------
       Adjustments to Reconcile Net Earnings to Net Cash
       Provided by Operating Activities
           Depreciation and Amortization                                          35,686         44,854
           Change in Deferred Taxes                                                9,841             --
       Changes in Assets and Liabilities
           (Increase) Decrease in Accounts Receivable                             22,957       (138,140)
           (Increase) Decrease in Inventory                                     (866,921)      (139,207)
           (Increase) Decrease in Prepaid Expenses and Other Assets              (47,488)       (78,385)
           Increase (Decrease) in Accounts Payable and Accrued Liabilities       364,923         59,046
           Increase (Decrease) in Income Taxes Payable                            30,218        (65,740)
                                                                             -----------    -----------
Net Cash Flows Provided By Operating Activities                                  132,754        326,672
                                                                             -----------    -----------

Cash Flows From Investing Activities
       Acquisition of Property and Equipment                                      (1,700)      (532,437)
       Repayments From Officers                                                       --         14,277
                                                                             -----------    -----------
Net Cash Flows Used In Investing Activities                                       (1,700)      (518,160)
                                                                             -----------    -----------

Cash Flows From Financing Activities                                                  --             --

Increase (Decrease) in Cash and Cash Equivalents                                 131,054       (191,488)
Cash and Cash Equivalents, Beginning of Period                                 2,487,824      2,145,638
                                                                             -----------    -----------
Cash and Cash Equivalents, End of Period                                     $ 2,618,878    $ 1,954,150
                                                                             ===========    ===========


See Notes to Condensed Consolidated Financial Statements.

                                               5
</TABLE>
<PAGE>

                          ALLERGY RESEARCH GROUP, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006
                                   (UNAUDITED)

Note 1 - Statement of Information Furnished
-------------------------------------------

         The accompanying unaudited Consolidated Financial Statements of Allergy
         Research Group, Inc. ("the Company") have been prepared in accordance
         with generally accepted accounting principles for interim financial
         information and the instructions to Form 10-QSB. Accordingly, they do
         not include all the information and footnotes required by generally
         accepted accounting principles for complete financial statements. In
         the opinion of management, all adjustments (which include only normal
         recurring adjustments) necessary to present fairly the financial
         position, results of operations and cash flows for all periods
         presented have been made. Preparing financial statements requires
         management to make estimates and assumptions that affect the reported
         amounts of assets, liabilities, revenue and expenses. Examples include
         provisions for returns, accounting for income taxes, bad debts, length
         of product life cycles, and property, plant and equipment lives for
         depreciation purposes. Actual results may differ from these estimates.
         The results of operations for the period ended June 30, 2006 are not
         necessarily indicative of the operating results that may be expected
         for the entire year ending December 31, 2006. These financial
         statements should be read in conjunction with the Management's
         Discussion and Analysis included in the Company's financial statements
         and accompanying notes thereto as of and for the year ended December
         31, 2005, filed with the Company's Annual Report on Form 10-KSB.

Note 2 - Recent Accounting Pronouncements
-----------------------------------------

         In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing
         of Financial Assets--an amendment of FASB Statement No. 140." SFAS No.
         156 addresses the accounting for separately recognized servicing assets
         and servicing liabilities. SFAS 156 is effective as of the beginning of
         an entity's first fiscal year that begins after September 15, 2006. The
         adoption of SFAS No. 156 is not expected to have any impact on the
         Company's financial statements.

         In June 2006, the FASB issued Interpretation No. 48, "Accounting for
         Uncertainty in Income Taxes - an interpretation of FASB Statement No.
         109," (FIN 48). FIN 48 clarifies the accounting for uncertainty in tax
         positions and requires that a Company recognize in its financial
         statements the impact of a tax position, if that position is more
         likely than not of being sustained on audit, based on the technical
         merits of the position. The provisions of FIN 48 are effective for
         fiscal years beginning after December 15, 2006. The adoption of FIN 48
         is not expected to have any impact on the Company's financial
         statements.

Note 3 - Earnings Per Share
---------------------------

         Basic earnings per share ("EPS") is based on the weighted average
         number of common shares outstanding. Diluted EPS is based on the
         weighted average number of common shares outstanding and dilutive
         common stock equivalents.


                                       6
<PAGE>

          The computation of basic and diluted earnings per share is as follows:

<TABLE>
                                                                   Three Months    Three Months    Six Months     Six Months
                                                                       Ended          Ended           Ended          Ended
                                                                      6/30/06        6/30/05         6/30/06        6/30/05
                                                                  -------------------------------------------------------------

<S>                                                                   <C>             <C>            <C>            <C>
         Numerator-Net Earnings Available to Common Stockholders      $  644,244      $  324,710     $  583,538     $  644,244
                                                                      ==========      ==========     ==========     ==========

         Denominator:

         Weighted average shares used in computing basic EPS          14,521,605      14,516,605     14,521,605     14,516,605
         Net effect of dilutive common shares                            183,164         193,800        183,164        193,800
                                                                      ----------      ----------     ----------     ----------
         Weighted average shares used in computing diluted EPS        14,704,769      14,710,405     14,704,769     14,710,405

         Basic Earnings Per Share                                      $    0.02       $    0.02      $    0.04      $    0.04
                                                                      ==========      ==========     ==========     ==========

         Diluted Earnings Per Share                                    $    0.02       $    0.02      $    0.04      $    0.04
                                                                      ==========      ==========     ==========     ==========
</TABLE>

Note 4 - Inventories
--------------------

         Inventories consist of the following:

         Raw materials                                            $ 2,137,170
         Finished goods                                             1,248,422
         Supplies                                                     104,941
         Reserve for obsolescence                                     (50,000)
                                                                   ----------
         Total                                                    $ 3,440,533

Note 5 - Accrued Expenses
-------------------------

         Accrued expenses consist of the following:

         Operating expenses                                            92,198
         Vacation and bonus                                           247,000
         Payroll                                                       23,068
         Sales tax                                                      3,494
                                                                   ----------
                                                                   $  365,760
                                                                   ==========

Note 6 - Line of Credit
-----------------------

         The Company has a Merrill Lynch Working Capital Management Account
         (WCMA) which provides for a line of credit up to $1,500,000 bearing
         interest at the London Interbank Offered Rate (LIBOR) plus 2.75%, due
         monthly. The LIBOR plus 2.75% at June 30, 2006 was 8.09%. The note is
         secured by substantially all of the assets of the Company and is
         personally guaranteed by the CEO of the Company. The WCMA account
         immediately pays down the line of credit when deposits are received.
         When checks are issued, the line of credit is utilized if no cash is
         available. If the line of credit has a zero balance, the WCMA account
         pays interest on deposits at Merrill Lynch's money market rate, which
         as of June 30, 2006 was 4.53%. The entire line was available for use as
         of June 30, 2006.


Note 7 - Concentration of Credit Risk
-------------------------------------

         The Company is subject to a wide variety of risks in the ordinary
         course of its business, some of which are as follows:


                                       7
<PAGE>

                  SALES. Approximately 12% in 2006 and 11% in 2005 of the
         Company's total sales were attributable to the same single distributor.
         In the event the Company were to lose that account, management
         anticipates that it would be able to convert the business to sales
         directly to the customers of that distributor. As converted sales would
         be at a higher margin, management does not believe the loss of the
         account would have a material negative impact on sales. However, no
         assurance can be given that, if the Company were to lose this
         distributor, all or any of the customers would transfer directly to the
         Company or that current sales from this group would be maintained.

                  PURCHASES. The Company purchases raw materials and uses
         outside vendors for the manufacture of its products. For the six months
         ended June 30, 2006, the Company had a concentration of approximately
         21% of manufacturing with one separate vendor, who individually
         accounts for more than ten percent of our purchases. For the six months
         ended June 30, 2005, the Company had a concentration of approximately
         32% of manufacturing with two separate vendors who individually
         accounted for more than ten percent of purchases. The Company does not
         currently have written contracts with any of its manufacturers, but
         relies on long-term personal and professional relationships. Management
         believes that, due to the large number of businesses performing this
         type of service in the industry, it would have little difficulty in
         finding viable alternatives in the event any one of these vendors
         became unable or determined not to continue manufacturing the Company's
         products. However, there can be no assurance that suitable, alternative
         manufacturers would be available to the Company when needed or that
         such alternative manufacturers would not result in an increase in
         costs.

                  Increases in the cost of raw materials have had an impact, and
         may have a future impact, on profit margins for the Company's products.
         The Company has purchased additional inventory to offset the increased
         cost of raw materials through pricing deals. However, there can be no
         assurance that such costs will not fluctuate in the future or that
         pricing deals will be available to help offset those fluctuations.
         Failure to raise prices to accommodate the increased cost could
         negatively impact the Company's profitability, while the raising of
         prices for related products may impact the Company's ability to compete
         with better-established competitors.

                  PRODUCT. The Company had one product in 2005 and none in 2006
         that individually accounted for more than 10% of its sales dollars.

Note 8 - Related Party Transactions
-----------------------------------

         On January 4, 2005, the Company entered into a lease with AriBen
         Corporation, a related party 100% owned by Susan and Stephen Levine,
         the Company's Vice President and CEO/CFO, respectively, and
         collectively, as husband and wife, the majority stockholders of the
         Company. The lease is for approximately 29,821 square feet of office
         and industrial space. The lease, which has a term of ten years with
         options to renew for two subsequent periods of ten and five years,
         respectively, has a base monthly rent of $24,000 for the initial
         period, $30,000 for the first option period and $35,000 for the second
         option period. Rent will be adjusted annually during the second five
         years of each 10-year lease period based on the consumer price index,
         with a minimum increase of three percent. Over the course of the
         initial ten-year lease, the Company will be obligated to pay
         $2,880,000.

Note 9 - Stock-Based Compensation
---------------------------------

         The Company has authorized 1,000,000 shares of common stock for
         issuance to key employees under the 1998 Stock Option Plan (the
         "plan"). The objectives of the plan include attracting and retaining
         the best personnel, providing for additional performance incentives,
         and promoting the success of the Company by providing key employees the
         opportunity to acquire common stock.

                                       8
<PAGE>

         Options outstanding and exercisable at June 30, 2006 were 333,750
         exercisable at $0.40 per share with an aggregate intrinsic value of
         $168,875. The weighted-average exercise price of options outstanding
         and exercisable at June 30, 2006 was $0.40 per share and the
         weighted-average remaining contractual life was 1.9 years. The options
         vested upon issue on May 12, 2003 and expire five years after said
         date. There were no options granted or exercised during any of the
         periods presented or compensation expense recognized. When options are
         exercised, the Company issues treasury shares of which there are
         583,750 on hand.


Note 10 - Asserted and Unasserted Claims
----------------------------------------

         From time to time the Company is subject to certain asserted and
         unasserted claims encountered in the normal course of business. It is
         the Company's belief that the resolution of these matters will not have
         a material adverse effect on our financial position or results of
         operations, however, we cannot provide assurance that damages that
         result in a material adverse effect on our financial position or
         results of operations will not be imposed in these matters. The Company
         accounts for contingent liabilities when it is probable that future
         expenditures will be made and such expenditures can be reasonably
         estimated.

         On July 28, 2005, the Company was served with a 60-day Notice of
         Violation of the California Safe Drinking Water and Toxic Enforcement
         Act of 1986 (the "Enforcement Act"), claiming that certain of its
         products were required to bear California-specific labels regarding the
         health risks of certain ingredients. The California Women's Law Center
         of Los Angeles, California ("CWLC") served the notice. Notice was also
         served on the California Attorney General's Office, the attorney
         generals of the various California counties, the district attorneys and
         the city attorneys of various cities, which had 60 days in which to
         bring a civil action to enjoin the further distribution of any product
         found to be in violation of the Enforcement Act and to request that a
         civil penalty of up to $2,500 per day for each violation be levied
         against the Company. Since no civil action was brought by one of these
         government authorities within the 60-day period following the notice,
         CWLC was able to file a civil action of its own. We reached an
         agreement with CWLC to settle the claim for $18,000. The settlement was
         paid during the second quarter 2006. We have ceased all sales of the
         products and no longer offer the products associated with the notice.

         In March 2006, the Company received a summons from the United States
         District Court for the District of Colorado in an action filed by Pure
         Research Products, LLC, a division of J.A. Sichel & Associates. The
         complaint alleges that the Company violated certain trademarks and
         exclusive license rights held by Pure Research Products, LLC during
         negotiations between the parties and following the dissolution of those
         negotiations. The plaintiff in the action is seeking various forms of
         injunctive relief against the Company as well as damages to be proven
         at trial. The complaint includes a request for treble damages in the
         event the plaintiff is successful. The Company intends to vigorously
         defend itself against the allegations. The consolidated financial
         statements do not include any adjustments that might result from the
         outcome of this uncertainty.

                                       9
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

INTRODUCTION
------------

Management's discussion and analysis of results of operations and financial
condition (''MD&A'') is provided as a supplement to the accompanying
consolidated financial statements and footnotes to help provide an understanding
of Allergy Research Group, Inc.'s (the ''Company'') financial condition, changes
in financial condition and results of operations. The MD&A is organized as
follows:

         o    CAUTION CONCERNING FORWARD-LOOKING STATEMENTS AND RISK FACTORS.
              This section discusses how certain forward-looking statements made
              by the Company throughout the MD&A and in the consolidated
              financial statements are based on our present expectations about
              future events and are inherently susceptible to uncertainty and
              changes in circumstances.

         o    OVERVIEW. This section provides a general description of the
              Company's business, as well as recent developments that we believe
              are important in understanding the results of operations for the
              periods presented and anticipated future trends in those
              operations.

         o    RESULTS OF OPERATIONS. This section provides an analysis of our
              results of operations for the three and six-month periods ended
              June 30, 2006 compared to the same periods in 2005. A brief
              description is provided of transactions and events that impact the
              comparability of the results being analyzed.

         o    LIQUIDITY AND CAPITAL RESOURCES. This section provides an analysis
              of our financial condition and cash flows as of and for the six
              months ended June 30, 2006, including related party transactions.

         o    CRITICAL ACCOUNTING POLICIES. This section provides an analysis of
              the significant estimates and judgments that affect the reported
              amounts of assets, liabilities, revenues and expenses, and related
              disclosure of contingent assets and liabilities.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS/RISK FACTORS
----------------------------------------------------------

The following discussion should be read in conjunction with the Company's
financial statements and the notes thereto and the other financial information
appearing elsewhere in this document. In addition to historical information, the
following discussion and other parts of this document contain certain
forward-looking information. When used in this discussion, the words "believes,"
"anticipates," "expects," and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected due to a number of factors beyond our control. The Company does not
undertake to publicly update or revise any of its forward-looking statements
even if experience or future changes show that the indicated results or events
will not be realized. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. You are also
urged to carefully review and consider our discussions regarding the various
factors that affect our business, included in this section and elsewhere in this
report.

The manufacturing, processing, formulation, packaging, labeling and advertising
of vitamins and other nutritional products are subject to regulation by one or
more federal agencies, including but not limited to the Food and Drug
Administration, the Federal Trade Commission, the United States Environmental
Protection Agency and the Occupational Safety and Health Administration. In July
2005, the international Codex Alimentarius Commission approved guidelines for
the trade of dietary supplements that are more restrictive than U.S. law. We are
unlikely to see any immediate major effect of the Codex guidelines on our
domestic supply of vitamins, herbs, and minerals; however, these restrictions
are expected to lower the dosage of U.S.-manufactured products to standards set
by foreign jurisdictions, enabling foreign manufacturers to better compete with
U.S. companies in those jurisdictions. We are unable to predict the impact of
the proposed or any final Codex guidelines on our sales to foreign markets. In
addition, we are unable to predict how guidelines adopted by Codex would affect
the United States market. Although the FDA has stated that the Codex guidelines
will not affect the availability of supplement products to U.S. consumers, the
United States is a member of the World Trade Organization ("WTO") and a refusal
to harmonize U.S. laws to the guidelines could result in a finding by the WTO
dispute resolution panel that the U.S. is engaging in unfair trade practices. In
the event of such a finding, the United States could become subject to sanctions
in the form of tariffs and pressure will be on Congress to harmonize U.S.

                                       10
<PAGE>

standards with those adopted by the WTO. We are also subject to governmental
regulation in the jurisdictions in which we operate, including certain foreign
jurisdictions, such as New Zealand and the European Economic Community, both of
which have adopted more restrictive regulations on nutritional supplements.
These activities are also regulated by various agencies of the states and
localities in which our products may be sold. We may incur significant costs in
complying with these regulations. In the event we cannot comply with government
regulations affecting our business and products, we may be forced to curtail or
cease our business operations.

We face an inherent risk of exposure to product liability claims in the event
that the use of our products results in injury. Such claims may include, among
others, that our products contain contaminants or include inadequate
instructions as to use or inadequate warnings concerning side effects and
interactions with other substances. We do not anticipate obtaining contractual
indemnification from parties supplying raw materials or marketing our products.
In any event, any such indemnification if obtained would be limited by our terms
and, as a practical matter, to the creditworthiness of the indemnifying party.
In the event that we do not have adequate insurance or contractual
indemnification, product liabilities relating to defective products could have a
material adverse effect on our operations and financial condition.

Because of our dependence upon consumer perceptions, adverse publicity
associated with illness or other adverse effects resulting from the consumption
of our products or any similar products distributed by other companies could
have a material adverse effect on our operations. Such adverse publicity could
arise even if the adverse effects associated with such products resulted from
consumers' failure to consume such products as directed. In addition, we may not
be able to counter the effects of negative publicity concerning the efficacy of
our products. Any such occurrence could have a negative effect on our
operations.

Other key factors that affect our operating results are as follows:

         o    Overall customer demand for our various products.
         o    Volume of products ordered.
         o    Mix of products purchased by our customers.
         o    Prices at which we sell our products.
         o    Our ability to manage our cost structure for capital expenditures
              and operating expenses such as salaries and benefits, freight and
              royalties.
         o    Our ability to match operating costs to shifting volume levels.
         o    Increases in the cost of raw materials and other supplies, which
              may impact pricing and our ability to compete or result in lower
              profit margins if prices are not raised on related products.
         o    The impact of competitive products.
         o    Adequacy and availability of insurance coverage.
         o    Limitations on future financing.
         o    Increases in the cost of borrowings and unavailability of debt or
              equity capital.
         o    Our inability to gain and/or hold market share.
         o    Exposure to and expense of resolving and defending product
              liability claims and other litigation.
         o    Consumer acceptance of our products.
         o    Managing and maintaining growth.
         o    Market and industry conditions including pricing, demand for
              products, levels of trade inventories and raw materials
              availability.
         o    The success of product development and new product introductions
              into the marketplace.
         o    Slow or negative growth in the nutritional supplement industry.
         o    The departure of key members of management.
         o    Our ability to efficiently manufacture our products.
         o    Unexpected customer bankruptcy.
         o    The implementation of SFAS 123R in relation to accounting for
              future stock-based compensation, as well as the impact of other
              new regulations adopted by the SEC or the governmental bodies
              under whose rules and regulations we operate.


OVERVIEW
--------

BUSINESS DESCRIPTION. Allergy Research Group, Inc. (SYMBOL: ALRG) (the "Company"
or "ARG"), together with its wholly-owned subsidiary, Nutricology, Inc., strives
to be an innovative leader in nutraceutical research and product formulation.
Our shares are traded on the Over-The-Counter Bulletin Board. Since 1980, the
Company has produced quality, hypoallergenic nutritional supplements and
currently supplies products to physicians and health care practitioners
worldwide. These professionals recognize the Company for the quality, purity and
efficacy of its targeted nutritional supplement line. Currently, we supply
products to approximately 4,000 physicians and health care practitioners,

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<PAGE>

including accounts in the United States, Japan, Taiwan, the United Kingdom,
South Korea, Jamaica, New Zealand, Mexico, Turkey, Norway, Sweden, Switzerland,
Italy, Ireland, Philippines, Russia, South Africa and Singapore. We develop,
contract manufacture, market and sell vitamins and nutritional supplements
throughout the world under the NutriCology(R) and Allergy Research Group(R)
labels. Our products are sold both through distributors and directly to medical
and professional accounts, to retailers, and directly to the consumer. We offer
two separate lines of approximately 270 products, including vitamins in both
multivitamin and single-entity formulas, minerals, and herbals. Our products are
manufactured in various forms, including capsules, tablets, softgels, powders
(drink mixes) and liquids. Our principal executive offices are located at 2300
North Loop Road, Alameda, California 94502 and our telephone number is (800)
545-9960.

FUTURE OPERATIONS. The success of our future operations will depend to a great
extent on the operations, financial condition, and management of the Company. We
intend to expand our position in the vitamin and nutritional supplements
markets. Specifically, our strategy continues to be to: (i) develop new brands
and product line extensions, as well as new products, through our commitment to
research and development; (ii) continue the growth of our balanced distribution
network; (iii) build our execution skills through new operations processes and
decision support systems; (iv) achieve cost superiority through formal
productivity benchmarking and continuous improvement programs; and (v) continue
to improve upon our comprehensive e-commerce plan, which includes a more
user-friendly and marketing-driven website that has the ability to accommodate
wholesale orders. We believe that our history and reputation in the field,
multiple distribution channels, broad portfolio of products and packaging and
distribution capabilities position us to be a long-term competitor in the
vitamin and nutritional supplements industries.

We are still collaborating with several entrepreneurs of cutting-edge
science-based products, who have limited resources to bring their products to
market. We look towards working partnerships and/or acquisition of these
businesses to broaden our product line of innovative nutraceuticals. There is
potential for real growth in sales and profit while providing products that
promote general health. The Company's distribution channel to the medical and
professional-practitioners market is key to the successful introduction of
unique products.

We believe that the Company has good relations with all of its current
manufacturers and suppliers. We do not currently have written contracts with any
of our manufacturers, but rely on long-term personal and professional
relationships with our vendors. We believe that, due to the large number of
businesses performing this type of service in the industry, the Company would
have little difficulty in finding viable alternatives in the event any one of
these vendors became unable or determined not to continue manufacturing our
products.

Increases in the cost of raw materials have had an impact, and may have a future
impact, on profit margins for our products. We have purchased additional
inventory to offset the increased cost of raw materials through pricing deals.
However, there can be no assurance that such costs will not fluctuate in the
future or that pricing deals will be available to help offset those
fluctuations. Failure to raise prices to accommodate the increased cost could
negatively impact our profitability, while the raising of prices for related
products may impact our ability to hold market share.

RESULTS OF OPERATIONS
---------------------

Please refer to the consolidated financial statements, which are a part of this
report, for further information regarding the results of operations of the
Company.

              PERIOD ENDED JUNE 30, 2006 COMPARED TO JUNE 30, 2005
              ----------------------------------------------------

REVENUES. Our revenues grew at a modest rate during the second quarter of 2006.
We had net sales of $3,996,496 for the second quarter and $8,262,023 for the six
months ended June 30, 2006, compared with $3,981,676 and $8,092,849,
respectively, for the same periods in 2005. The increase of $14,820, or 0.4%, in
the second quarter was driven by increased sales to our distributors, whereas
sales to our retail customers and professional accounts have decreased. The
increase of $169,174, or 2%, for the six-month period was driven by the same
factors as those driving the second quarter. We expect to continue to benefit
from increased consumer awareness of the importance of nutritional supplements
in one's diet.


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<PAGE>

COSTS OF SALES. Cost of sales increased $87,403 to $2,467,028 for the three
months ended June 30, 2006, compared to $2,379,625 for the three months ended
June 30, 2005. For the six months ended June 30, 2006, cost of sales increased
$294,530 from $4,803,008 in 2005 to $5,097,538 in 2006. The increase in cost of
sales corresponds with the increase in sales compounded by increased cost of
materials, which we experienced due to the demand of certain raw ingredients
exceeding the supply in the market place and because of the weakening U.S.
dollar. In addition, we have incurred approximately $40,500 in product testing
cost for the six months ending June 30, 2006 compared to approximately $20,000
for the same period last year. We are making a concerted effort to determine
that our manufacturers are maintaining the highest standards we and our
customers expect. Gross profit margins decreased from approximately 41% for the
three and six months ended June 30, 2005 to 38% for the same periods in 2006.
The decrease of 3% for the comparative periods is a result of increased cost of
materials that have not been passed on to our customers in order to preserve our
customer base and to respond to pricing pressures from competitors.
Additionally, high margin sales directly to retail customers have decreased,
whereas lower margin sales to distributors have increased. Despite these market
pressures and after careful consideration of gross margins by product line, we
felt compelled to raise the prices on several items in January 2006 in order to
remain competitive.

OPERATING EXPENSES. Total operating expenses were $1,123,392 for the second
quarter and $2,235,390 for the six months ended June 30, 2006, compared with
$1,093,307 and $2,275,143, respectively, for the same periods in 2005. Our
general and administrative expenses have generally remained stable with small
increases in credit card fees, legal fees and audit fees. Payroll expenses have
remained relatively stable as well, with moderate increases in insurance and
wages offset by a reduction in staff and a reduced bonus accrual. We hired a
National Accounts Manager during the second quarter of 2006 and we anticipate
adding additional staff during 2006. Occupancy expenses remained relatively
stable. Selling expenses decreased due to the timing of when our newsletters are
issued and when advertising is placed, and because we have not printed a new
catalog for 2006. Additionally, the cost of attending conventions has increased
slightly. The total fluctuations from year to year are affected by the
approximately $100,000 that was expensed during the first quarter of 2005 as a
result of the relocation of our corporate office, which was offset by the
reversal of a loss provision associated with a lawsuit that was settled during
2003. We were awarded a $250,000 settlement and a Florida lawyer asserted a lien
claim for 35% of the proceeds, plus costs of $64,000. The Florida lawyer did not
prevail in his assertion regarding the lien and the accrual for the settlement
of $151,500 was reversed during the second quarter ending June 30, 2005.

INTEREST INCOME. Due to our increased cash balance and because we placed some of
the excess cash in short-term certificates of deposits, interest income
increased by approximately $19,000 during the second quarter 2006 and $39,500
during the six months ended June 30, 2006 compared to same periods for 2005.

PROVISION FOR INCOME TAXES. Provision for income taxes as of June 30, 2006
represents federal and state income taxes based on earnings and changes to
deferred taxes.

NET EARNINGS. During the quarter and six-month period ended June 30, 2006, we
recorded net earnings of $257,856 and $583,538, respectively, compared to net
earnings of $324,710 and $644,244, respectively, for the same periods in 2005.
Although we showed a slight increase in sales for the quarter and 2% for the
six-month period, net earnings decreased 21% and 9%, respectively, primarily
because of the decrease in profit margins and increased operating expenses for
the second quarter.

SEASONALITY. Historically, we have experienced little seasonal fluctuation in
revenues; however, during the spring and fall we traditionally attend two trade
shows geared toward the retail market. Show discounts are offered and the retail
distributors tend to purchase higher quantities due to the discounts. We attend
trade shows geared toward the professional market throughout the year, but the
shows are smaller and tend to not have an immediate effect on sales. These shows
are useful because they provide personal contact with the professional market
and potentially increase sales in the long run.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Current Financial Condition

During the six-month period ended June 30, 2006, our working capital increased
by approximately $618,000 to $6,375,143, compared to a working capital at
December 31, 2005 of $5,757,619. Current assets mainly consist of approximately
$2.62 million in cash, $0.93 million in accounts receivable, and $3.44 million
in inventory. We continue to finance our inventory and accounts receivable
through cash generated by operating activities. We believe that the Company's
operating cash flow, cash and cash equivalents, and borrowing capacity under
committed bank credit agreements is sufficient to fund our capital and liquidity
needs for the next twelve months. Our future funding requirements will depend on

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<PAGE>

numerous factors, some of which are beyond our control. These factors include
our ability to operate profitably, our ability to maintain, recruit and train
management and personnel, our ability to accommodate increased costs and our
ability to compete with other, better-capitalized and more established
competitors who offer alternative or similar products. We believe that, given
our positive working capital position, we can satisfy our cash requirements over
the next twelve months from operations if we continue to operate at a profit.
Cash flow from operations is expected to provide us with our capital resources
and liquidity needs.

The Company expects to continue to purchase equipment and hire new employees as
is commensurate with the growth of the business. In addition, we will continue
to invest time and effort in research for product development. We know of no
current trends that are expected to affect the cost of labor or materials, and
sales are expected to be stable over the next twelve months. See "CAUTION
CONCERNING FORWARD-LOOKING STATEMENTS/RISK FACTORS" above for some of the
variables that may affect our business and financial results.

We currently do not utilize any off-balance sheet financing arrangements.

Cash Flows

OPERATING ACTIVITIES. Net cash flows provided by operating activities were
$132,754 and $326,672 for the six months ended June 30, 2006 and 2005,
respectively. Net cash provided by operating activities for both periods
primarily reflects net earnings and net changes in operating assets and
liabilities such as accounts receivable, inventory and accounts payable. Cash
generated by operating activities for 2006 is primarily explained by an increase
in inventory levels of $866,921 due to increased purchases to obtain favorable
pricing, to fulfill minimum purchase requirements of certain vendors, and to
obtain quantity discounts, offset by an increase in accounts payable and accrued
liabilities of $364,923 primarily related to increased purchases of inventory.
Cash generated by operating activities for 2005 is explained by an increase in
accounts receivable of $138,140 due to increased sales and an increase in
inventory levels of $139,207 due to rising prices and a modest increase in new
products available for sale.

INVESTING ACTIVITIES. Net cash flows used in investing activities for the six
months ended June 30, 2006 was $1,700 for an equipment upgrade. Net cash flows
used in investing activities for the six months ended June 30, 2005 was $518,160
and primarily resulted from payments for leasehold improvements for our new
facility, office furniture and computer equipment.

FINANCING ACTIVITIES. There were no cash flows from financing activities in
either period.

CONCENTRATION OF RISK

The Company is subject to a wide variety of risks in the ordinary course of its
business. Some of the more significant of these risks include heavy
concentrations of sales with a few key customers; heavy concentrations of raw
material purchases with a few key suppliers; regulation by various federal,
state and local agencies with regards to the manufacture, handling, storage and
safety of products; and regulation by various agencies with regards to the
labeling and certification of products. The Company is also subject to
competition from other nutritional supplement companies and is dependent on the
continued demand for nutritional supplements by consumers. See "CAUTION
CONCERNING FORWARD-LOOKING STATEMENTS/RISK FACTORS" above for some of the
variables that may affect our business and financial results.

         SALES. Approximately 12% in 2006 and 11% in 2005 of our total sales
were attributable to the same single distributor. In the event we were to lose
that account, we anticipate that we would be able to convert the business to
sales directly to the customers of that distributor. As converted sales would be
at a higher margin, we do not believe the loss of the account would have a
material negative impact on sales. However, we cannot assure you that, if we
were to lose this distributor, all or any of the customers would transfer
directly to us or that current sales from this group would be maintained.

         PURCHASES. We purchase raw materials and use outside vendors for the
manufacture of our products. For the six months ended June 30, 2006, we had a
concentration of approximately 21% of our manufacturing with one separate vendor
who individually accounts for more than ten percent of our purchases. For the
six months ended June 30, 2005, the Company had a concentration of approximately
32% of manufacturing with two separate vendors who individually accounted for
more than ten percent of purchases. We do not currently have written contracts

                                       14
<PAGE>

with any of our manufacturers, but rely on long-term personal and professional
relationships. We believe that, due to the large number of businesses performing
this type of service in the industry, we would have little difficulty in finding
viable alternatives in the event any one of these vendors became unable or
determined not to continue manufacturing our products. However, we can give no
assurance that suitable, alternative manufacturers would be available to us when
needed or that such alternative manufacturers would not result in an increase in
costs.

         PRODUCT. We had one product in 2005 and none in 2006 that individually
accounted for more than ten percent of our sales dollars.

CONTRACTUAL OBLIGATIONS. The Company's Contractual Obligations and Commercial
Commitments are detailed below:

                         -------------------------------------------------------
                                          Payments Due by Period
------------------------ ----------- ----------- --------- ---------- ----------
                                        Less
     Contractual                       Than 1       1-3      4 - 5     After 5
     Obligations            Total       Year       Years     Years      Years
------------------------ ----------- ----------- --------- ---------- ----------

Line of Credit (1)                -           -         -          -          -
------------------------ ----------- ----------- --------- ---------- ----------

Operating Leases (2)     $2,484,000  $  288,000  $864,000  $ 576,000  $ 756,000
------------------------ ----------- ----------- --------- ---------- ----------
Purchase Obligations (3) $  858,072  $  858,072
------------------------ ----------- ----------- --------- ---------- ----------
Total Cash Contractual
Obligations              $3,342,072  $1,146,072  $864,000  $ 576,000  $ 756,000
------------------------ ----------- ----------- --------- ---------- ----------

(1)      This represents the Company's borrowings under its line of credit with
         Merrill Lynch, which had a zero balance throughout the six months ended
         June 30, 2006 and through the date of this filing. The Merrill Lynch
         line of credit provides for maximum financing of $1,500,000, bearing
         interest at the London Interbank Offered Rate (LIBOR) plus 2.75%,
         computed on a monthly basis. As of June 30, 2006, the interest rate on
         the line of credit was 8.9% per annum. Because the line of credit is
         secured by substantially all of the assets of the Company, if the
         Company were to fall into default under the terms of our agreement with
         Merrill Lynch it could have material adverse impact on our business and
         financial position. The CEO of the Company has personally guarantees
         the line of credit.

(2)      Represents our building lease with AriBen Corporation, a related party.
         See "Related Party Transactions" below. The current monthly obligation
         for the base rent on the lease is $24,000 for approximately 29,821
         square feet.

(3)      Represents outstanding purchase orders for inventory.


RELATED PARTY TRANSACTIONS. Dr. Stephen Levine, the Company's Chief Executive
Officer, Chief Financial Officer and Chairman of the Board of Directors, and
Susan Levine, the Company's Vice President and Secretary and a member of the
Board of Directors, are husband and wife.

On January 4, 2005, we entered into a lease with AriBen Corporation, a related
party 100% owned by Susan and Stephen Levine, for approximately 29,821 square
feet of office and industrial space. The lease, which has a term of ten years
with options to renew for two subsequent periods of ten and five years,
respectively, has a base monthly rent of $24,000 for the initial period, $30,000
for the first option period and $35,000 for the second option period. Rent will
be adjusted annually during the second five years of each 10-year lease period
based on the consumer price index, with a minimum increase of three percent.
During the first quarter 2005 we reimbursed AriBen Corporation for some of the
tenant improvements that were built out to our specifications in the amount of
$350,000. No security deposit is required under the lease.

CRITICAL ACCOUNTING POLICIES
----------------------------


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<PAGE>

Our discussion and analysis is based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related to bad debts, inventories, intangible assets, income
taxes and contingencies. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, and if different estimates that reasonably
could have been used or changes in the accounting estimate that are reasonably
likely to occur could materially change the financial statements.

We believe the following accounting policies reflect our more significant
estimates and assumptions used in the preparation of our consolidated financial
statements; however, management does not consider any of the estimates and
assumptions to be highly uncertain.

INCOME TAXES

SFAS 109, Accounting for Income Taxes, establishes financial accounting and
reporting standards for the effect of income taxes. The objectives of accounting
for income taxes are to recognize the amount of taxes payable or refundable for
the current year and deferred tax liabilities and assets for the future tax
consequences of events that have been recognized in an entity's financial
statements or tax returns. Judgment is required in assessing the future tax
consequences of events that have been recognized in our financial statements or
tax returns. Variations in the actual outcome of these future tax consequences
could materially impact our financial position or our results of operations.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

We evaluate the collectibility of our trade receivables based on a combination
of factors. We regularly analyze our significant customer accounts, and, when we
become aware of a specific customer's inability to meet its financial
obligations to us, such as in the case of bankruptcy filings or deterioration in
the customer's operating results or financial position, we record a specific
reserve for bad debt to reduce the related receivable to the amount we
reasonably believe is collectible. The allowances are calculated based on
detailed review of certain individual customer accounts, historical rates and an
estimation of the overall economic conditions affecting our customer base. We
review a customer's credit history before extending credit. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required. In the
event that our trade receivables become uncollectible, we would be forced to
record additional adjustments to receivables to reflect the amounts at net
realizable value. The accounting effect of this entry would be a charge to
earnings, thereby reducing our net earnings. Although we consider the likelihood
of this occurrence to be remote based on past history and the current status of
our accounts, there is a possibility of this occurrence.

INVENTORY

Our inventory purchases and commitments are made in order to build inventory to
meet future shipment schedules based on forecasted demand for our products. We
perform a detailed assessment of inventory for each period, which includes a
review of, among other factors, demand requirements, product life cycle and
development plans, component cost trends, product pricing and quality issues.
Based on this analysis, we record adjustments to inventory for excess,
obsolescence or impairment, when appropriate, to reflect inventory at net
realizable value. Revisions to our inventory adjustments may be required if
actual demand, component costs or product life cycles differ from our estimates.
In the event we were unable to sell our products, the demand for our products
diminished, other competitors offered similar or better products, and/or the
product life cycles deteriorated causing quality issues, we would be forced to
record an adjustment to inventory for impairment or obsolescence to reflect
inventory at net realizable value. The effect of this entry would be a charge to
earnings, thereby reducing our net earnings. Although we consider the likelihood
of this occurrence to be remote based on our forecasted demand for our products,
there is a possibility of this occurrence

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CONTINGENCIES

The outcomes of potential legal proceedings and claims brought against us are
subject to significant uncertainty. SFAS 5, ACCOUNTING FOR CONTINGENCIES,
requires that an estimated loss from a loss contingency such as a legal
proceeding or claim should be accrued by a charge to earnings if it is probable
that an asset has been impaired or a liability has been incurred and the amount
of the loss can be reasonably estimated. Disclosure of a contingency is required
if there is at least a reasonable possibility that a loss has been incurred. In
determining whether a loss should be accrued we evaluate, among other factors,
the degree of probability of an unfavorable outcome and the ability to make a
reasonable estimate of the amount of loss. Changes in these factors could
materially impact our financial position or our results of operations.

 On July 28, 2005, the Company was served with a 60-day Notice of Violation of
the California Safe Drinking Water and Toxic Enforcement Act of 1986 (the
"Enforcement Act"), claiming that certain of its products were required to bear
California-specific labels regarding the health risks of certain ingredients.
The California Women's Law Center of Los Angeles, California ("CWLC") served the
notice. Notice was also served on the California Attorney General's Office, the
attorney generals of the various California counties, the district attorneys and
the city attorneys of various cities, which had 60 days in which to bring a
civil action to enjoin the further distribution of any product found to be in
violation of the Enforcement Act and to request that a civil penalty of up to
$2,500 per day for each violation be levied against the Company. Since no civil
action was brought by one of these government authorities within the 60-day
period following the notice, CWLC was able to file a civil action of its own. We
reached an agreement with CWLC to settle the claim for $18,000. The settlement
was paid during the second quarter 2006. We have ceased all sales of the
products and no longer offer the products associated with the notice.

In March 2006, the Company received a summons from the United States District
Court for the District of Colorado in an action filed by Pure Research Products,
LLC, a division of J.A. Sichel & Associates. The complaint alleges that the
Company violated certain trademarks and exclusive license rights held by Pure
Research Products, LLC during negotiations between the parties and following the
dissolution of those negotiations. The plaintiff in the action is seeking
various forms of injunctive relief against the Company as well as damages to be
proven at trial. The complaint includes a request for treble damages in the
event the plaintiff is successful. The Company intends to vigorously defend
itself against the allegations. No adjustments were made to our consolidated
financial statements for the outcome of this uncertainty.

ITEM 3. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company carried out an
evaluation of the effectiveness of the design and operation of its disclosure
controls and procedures pursuant to the Exchange Act Rule 13a-15. This
evaluation was done under the supervision and with the participation of the
Company's Chief Executive Officer and Chief Financial Officer, Stephen A.
Levine. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were
effective as of the period covered by this report to ensure that information
required to be disclosed by us in the reports that we file under the Exchange
Act is accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.

There were no changes in the Company's internal controls over financial
reporting that occurred during the period ended June 30, 2006, that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.

                                       17
<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         On July 28, 2005, the Company was served with a 60-day Notice of
Violation of the California Safe Drinking Water and Toxic Enforcement Act of
1986 (the "Enforcement Act"), claiming that certain of its products were
required to bear California-specific labels regarding the health risks of
certain ingredients. The California Women's Law Center of Los Angeles,
California ("CWLC") served the notice. Notice was also served on the California
Attorney General's Office, the attorney generals of the various California
counties, the district attorneys and the city attorneys of various cities, which
had 60 days in which to bring a civil action to enjoin the further distribution
of any product found to be in violation of the Enforcement Act and to request
that a civil penalty of up to $2,500 per day for each violation be levied
against the Company. Since no civil action was brought by one of these
government authorities within the 60-day period following the notice, CWLC was
able to file a civil action of its own. We reached an agreement with CWLC to
settle the claim for $18,000. The settlement was paid during the second quarter
2006. We have ceased all sales of the products and no longer offer the products
associated with the notice.

         In March 2006, the Company received a summons from the United States
District Court for the District of Colorado in an action filed by Pure Research
Products, LLC, a division of J.A. Sichel & Associates. The complaint alleges
that the Company violated certain trademarks and exclusive license rights held
by Pure Research Products, LLC during negotiations between the parties and
following the dissolution of those negotiations. The plaintiff in the action is
seeking various forms of injunctive relief against the Company as well as
damages to be proven at trial. The complaint includes a request for treble
damages in the event the plaintiff is successful. The Company intends to
vigorously defend itself against the allegations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         Not Applicable.

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

(a) Exhibits
31    Certificate of Stephen A. Levine required by Rule 13a-14(a) or Rule
      15d-14(a) of The Securities Exchange Act of 1934, as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002
32   Certificate of Stephen A. Levine Pursuant to 18 U.S.C. Section 1350, as
     adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
         None

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<PAGE>

                          ALLERGY RESEARCH GROUP, INC.
                                    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 thereunto duly authorized.

                                                 ALLERGY RESEARCH GROUP, INC.
                                                 Registrant



Dated:  August 10, 2006
                                                 By: /s/ Stephen A. Levine
                                                     ---------------------------
                                                     Chief Executive Officer and
                                                     Chief Financial Officer

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