<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, 2005

[ ]      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 address: 30806 Santana Street, Hayward CA 94544
--------------------------------------------------------------------------------
              (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: 14,516,605 shares of Issuer's voting
common stock were outstanding on July 28, 2005.


                                       1
<PAGE>

                          ALLERGY RESEARCH GROUP, INC.
                            INDEX TO QUARTERLY REPORT
                                 ON FORM 10-QSB


PART I. FINANCIAL INFORMATION                                               PAGE

  ITEM 1. Condensed Consolidated Financial Statements (Unaudited):

       Consolidated Balance Sheet............................................  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...............................  9

  ITEM 3. Controls and Procedures............................................ 15

PART II. OTHER INFORMATION

  ITEM 1. Legal Proceedings.................................................. 16
  ITEM 2. Changes in Securities and Use of Proceeds.......................... 16
  ITEM 3. Defaults Upon Senior Securities.................................... 16
  ITEM 4. Submission of Matters to a Vote of Security Holders................ 16
  ITEM 5. Other Information.................................................. 16
  ITEM 6. Exhibits........................................................... 16


  SIGNATURE.................................................................. 17


                                       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.

                          ALLERGY RESEARCH GROUP, INC.
                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)


                                                                      June 30,
                                                                        2005
                                                                    -----------
ASSETS
------
Current Assets
    Cash and Cash Equivalents                                       $ 1,954,150
    Accounts Receivable                                                 896,208
    Inventories                                                       2,689,522
    Prepaid Income Taxes                                                  6,960
    Prepaid Expenses and Other Current Assets                           330,558
                                                                    -----------
Total Current Assets                                                  5,877,398
                                                                    -----------

Property and Equipment, Net                                             608,166
                                                                    -----------

Other Assets
    Due From Officer                                                     14,541
    Intangible Assets                                                    13,180
                                                                    -----------
Total Other Assets                                                       27,721
                                                                    -----------

Total Assets                                                        $ 6,513,285
                                                                    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
    Accounts Payable                                                $   292,779
    Accrued Liabilities (Note 4)                                        414,184
    Income Taxes Payable                                                 39,220
                                                                    -----------
Total Current Liabilities                                               746,183
                                                                    -----------

Commitments and Contingencies (Notes  4, 5 & 9)

Stockholders' Equity
    Preferred Stock, $.25 Par Value, Authorized 1,000,000
      Shares, Issued and Outstanding: None                                   --
    Common Stock, $.001 Par Value, Authorized 100,000,000 Shares
      Issued: 15,105,355, Outstanding: 14,516,605                        15,105
    Additional Paid In Capital                                        1,149,705
    Retained Earnings                                                 4,881,893
    Less: Treasury Stock, at cost (588,750 shares)                     (279,601)
                                                                    -----------
Total Stockholders' Equity                                            5,767,102
                                                                    -----------
Total Liabilities and Stockholders' Equity                          $ 6,513,285
                                                                    ===========

           See Notes to Condensed Consolidated Financial Statements.


                                       3
<PAGE>

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


                                                            Three Months Ended             Six Months Ended
                                                                  June 30,                      June 30,
                                                            2005           2004           2005           2004
                                                         ----------     ----------     ----------     ----------
<S>                                                      <C>            <C>            <C>            <C>
Revenues                                                 $3,981,676     $3,832,360     $8,092,849     $7,557,259
Cost of Sales                                             2,379,625      2,167,845      4,803,008      4,302,465
                                                         ----------     ----------     ----------     ----------
Gross Profit                                              1,602,051      1,664,515      3,289,841      3,254,794
                                                         ----------     ----------     ----------     ----------

Operating Expenses
      Selling, General and Administrative                 1,017,822        974,321      2,126,844      1,906,313
      Research and Development                               75,485         61,157        148,299        122,338
                                                         ----------     ----------     ----------     ----------
Operating Expenses                                        1,093,307      1,035,478      2,275,143      2,028,651
                                                         ----------     ----------     ----------     ----------

Earnings from Operations                                    508,744        629,037      1,014,698      1,226,143
                                                         ----------     ----------     ----------     ----------

Other Income
      Interest Income                                        11,566          4,609         17,346          7,210
                                                         ----------     ----------     ----------     ----------
Other Income                                                 11,566          4,609         17,346          7,210
                                                         ----------     ----------     ----------     ----------

Net Earnings Before Tax                                     520,310        633,646      1,032,044      1,233,353

Provision for Income Taxes                                  195,600        288,684        387,800        504,328
                                                         ----------     ----------     ----------     ----------

Net Earnings Available to Common Stockholders            $  324,710     $  344,962     $  644,244     $  729,025
                                                         ==========     ==========     ==========     ==========

Basic and Diluted Earnings Per Common Share (Note 2)     $     0.02     $     0.02     $     0.04     $     0.05
                                                         ==========     ==========     ==========     ==========


                            See Notes to Condensed Consolidated Financial Statements.


                                                        4
</TABLE>
<PAGE>

<TABLE>
                                                ALLERGY RESEARCH GROUP, INC.
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                        (UNAUDITED)


                                                                                                  Six Months Ended
                                                                                                       June 30,
                                                                                                 2005             2004
                                                                                              -----------      -----------
<S>                                                                                           <C>              <C>
Cash  Flows From Operating Activities
       Net Earnings                                                                           $   644,244      $   729,025
                                                                                              -----------      -----------
       Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities
           Depreciation and Amortization                                                           44,854           64,005
       Changes in Assets and Liabilities
           (Increase) Decrease in Accounts Receivable                                            (138,140)        (179,894)
           (Increase) Decrease in Inventory                                                      (139,207)        (406,474)
           (Increase) Decrease in Prepaid Expenses and Other Assets                               (78,385)        (221,654)
           (Increase) Decrease in Deferred Tax Assets                                                  --          270,253
           Increase (Decrease) in Accounts Payable and Accrued Liabilities                         59,046          (67,899)
           Increase (Decrease) in Income Taxes Payable                                            (65,740)        (115,468)
                                                                                              -----------      -----------
       Total Adjustments                                                                         (317,572)        (657,131)
                                                                                              -----------      -----------
Net Cash Flows Provided By Operating Activities                                                   326,672           71,894
                                                                                              -----------      -----------

Cash Flows From Investing Activities
       Acquisition of Property and Equipment                                                     (532,437)          (8,036)
       Repayments From Officers                                                                    14,277           13,189
                                                                                              -----------      -----------
Net Cash Flows Provided by (Used In) Investing Activities                                        (518,160)           5,153
                                                                                              -----------      -----------

Cash Flows From Financing Activities
       Exercise of Employee Stock Options                                                              --            9,800
                                                                                              -----------      -----------
Net Cash Flows Provided By Financing Activities                                                        --            9,800
                                                                                              -----------      -----------

Increase (Decrease) in Cash and Cash Equivalents                                                 (191,488)          86,847
Cash and Cash Equivalents, Beginning of Period                                                  2,145,638        1,704,529
                                                                                              -----------      -----------
Cash and Cash Equivalents, End of Period                                                      $ 1,954,150      $ 1,791,376
                                                                                              ===========      ===========


                                 See Notes to Condensed Consolidated Financial Statements.


                                                             5
</TABLE>
<PAGE>

                          ALLERGY RESEARCH GROUP, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (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, and plant and equipment lives for
         depreciation purposes. Actual results may differ from these estimates.
         The results of operations for the period ended June 30, 2005 are not
         necessarily indicative of the operating results that may be expected
         for the entire year ending December 31, 2005. 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, 2004, filed with the Company's Annual Report on Form 10-KSB.

         Certain accounts from prior years have been reclassified to conform to
         the current year's presentation. These changes had no effect on
         previously reported results of operations or total stockholders'
         equity.

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

         In December 2004, the FASB issued SFAS No. 123 (Revised 2004)
         "Share-Based Payment" ("SFAS No. 123R"). SFAS No. 123R addresses all
         forms of share-based payment ("SBP") awards, including shares issued
         under employee stock purchase plans, stock options, restricted stock
         and stock appreciation rights. SFAS No. 123R will require the Company
         to expense SBP awards with compensation cost for SBP transactions
         measured at fair value. On March 29, 2005, the SEC issued Staff
         Accounting Bulletin (SAB) 107 which expresses the views of the SEC
         regarding the interaction between SFAS No. 123R and certain SEC rules
         and regulations and provides the SEC's views regarding the valuation of
         share-based payment arrangements for public companies. In April 2005,
         the SEC issued a release which amends the compliance dates for SFAS No.
         123R. We do not expect the adoption of SFAS No. 123R and SAB 107 to
         have a material impact on the Company's financial statements.

         In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
         Error Corrections". SFAS No. 154 replaces APB Opinion No. 20
         "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in
         Interim Financial Statements". SFAS No. 154 requires retrospective
         application to prior periods' financial statements of changes in
         accounting principle, unless it is impracticable to determine either
         the period-specific effects or the cumulative effect of the change. We
         do not expect the adoption of SFAS No. 154 to have any impact on the
         Company's financial statements.

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

         Basic earnings per share is based on the weighted average number of
         common shares outstanding. Diluted earnings per share is based on the
         weighted average number of common shares outstanding and dilutive
         common stock equivalents. All earnings per share amounts in these
         financial statements are basic earnings per share as defined by SFAS
         No. 128, "Earnings Per Share." Total potential common shares not
         included in the computation of dilutive EPS for all periods presented
         was 150,000 options to purchase common shares, which expired in January
         2004, because their impact would be antidilutive based on current
         market prices.


                                       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
                                                                       6/30/05         6/30/04         6/30/05         6/30/04
                                                                     -----------     -----------     -----------     -----------
<S>                                                                  <C>             <C>             <C>             <C>
         Numerator-Net Earnings Available to Common Stockholders     $   324,710     $   344,962     $   644,244     $   729,025
                                                                     ===========     ===========     ===========     ===========

         Denominator:

         Weighted average shares used in computing basic EPS          14,516,605      14,510,336      14,516,605      14,501,220
         Net effect of dilutive common shares                            193,800         205,686         193,800         220,813
                                                                     -----------     -----------     -----------     -----------
         Weighted average shares used in computed diluted EPS         14,710,405      14,716,022      14,714,292      14,722,033

         Basic Earnings Per Share                                    $      0.02     $      0.02     $      0.04     $      0.05
                                                                     ===========     ===========     ===========     ===========

         Diluted Earnings Per Share                                  $      0.02     $      0.02     $      0.04     $      0.05
                                                                     ===========     ===========     ===========     ===========

Note 4 - Accrued Expenses And Contingencies
-------------------------------------------


         Accrued expenses as of June 30, 2005 consist of the following:

         Potential settlement/legal fees                                    $     --
         Operating expense                                                   120,660
         Vacation and bonus                                                  273,131
         Payroll                                                              15,991
         Sales Tax                                                             4,402
                                                                            --------
                                                                            $414,184
                                                                            --------

</TABLE>

         The potential settlement above refers to a loss provision associated
         with a lawsuit that was settled during 2003. The Company was 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. Included in trade payables is $49,171 payable to the
         attorney who defended the Company during the appeal. Another party
         associated with the lawsuit has agreed to pay the attorney's fees
         associated with the lien. As the other party pays the fees, the expense
         recognized will be reversed.

Note 5 - 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, 2005 was 6.09%. 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, 2005 was 2.76%. The entire line was available for use as
         of June 30, 2005.

Note 6 - Concentration of Credit Risk
-------------------------------------

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

                  SALES. Approximately 11% of the Company's total sales in 2004
         were attributable to a single distributor. In 2005, this distributor
         continued to account for approximately 11% of sales. 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.


                                       7
<PAGE>

                  PURCHASES. The Company purchases raw materials and uses
         outside vendors for the manufacture of its products. For the six months
         ended June 30, 2005, the Company had a concentration of approximately
         58% of manufacturing with five separate vendors. Two of these vendors
         individually account for more than ten percent, two of the vendors
         account for nine percent each, and one vendor accounts for eight
         percent. 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.

                  PRODUCT. The Company has one product that individually
         accounts for more than 10% of its sales dollars. One other product that
         has historically accounted for more than 10% of its sales dropped to 9%
         during the third quarter 2004 and to 8% for the six months ended June
         30, 2005.

Note 7 - Related Party Transactions
-----------------------------------

         The following significant related party transactions occurred in 2005:

         On January 4, 2005, the Company 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 is for a ten-year term with the option to renew for an
         additional fifteen years. The monthly obligation for the base rent on
         the lease is $24,000. Over the course of the initial ten-year lease the
         Company will be obligated to pay $2,880,000. During the first quarter
         the Company reimbursed AriBen Corporation for some of the tenant
         improvements which were built out to our specifications in the amount
         of $350,000. The Company paid approximately $21,000 for liability and
         earthquake insurance for the building, of which approximately $8,000
         has been expensed. Property tax associated with the building is
         estimated to be approximately $35,000 from the beginning of the lease
         through June 30, 2005 and is included in accrued liabilities.

Note 8 - Stock-Based Compensation
---------------------------------

         The Company has authorized 1,000,000 shares of common stock for
         issuance to directors and 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
         directors and key employees the opportunity to acquire common stock.
         The options vest immediately and expire five years after the date
         issued.

         Options outstanding and exercisable at June 30, 2005 were 338,750
         exercisable at $0.40 per share. The weighted-average exercise price of
         options outstanding and exercisable at June 30, 2005 was $0.40 per
         share and the weighted-average remaining contractual life was 2.5
         years. Since there were no options granted during any of the periods
         presented, the pro forma disclosures as required by SFAS 123 are not
         required.

Note 9 - Subsequent Event
-------------------------

         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. The Company was served with the following claim subsequent
         to June 30, 2005:

         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 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 may 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. In the event that
         no civil action is brought by one of these government authorities
         within the 60-days following notice, another party may bring a civil
         action. At this point, we are unable to estimate any loss which may be
         incurred as a result of the notice of violation. We have ceased all
         sales of the products in California while we investigate these claims
         and will offer refunds to all California purchasers of such products.
         We are also reevaluating the viability of the product line.


                                       8
<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 and to anticipate future trends in those
                  operations.

         o        RESULTS OF OPERATIONS. This section provides an analysis of
                  our results of operations for the three months and six months
                  ended June 30, 2005 compared to the same periods in 2004. 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, 2005, 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 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. 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. 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 recently 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.


                                       9
<PAGE>

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 conditions.

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        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        Customer demands.
         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.


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,
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 through distributors to medical and professional
accounts, to retailers, and directly to the consumer. We offer two separate
lines of approximately 200 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 web site 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.


                                       10
<PAGE>

We continue to work with Dr. Ba Hoang (an employee of the Company) on his
proprietary herbal formulas with a view to developing additional research that
can be marketed to the pharmaceutical and nutraceutical industries. This process
is limited to literature work, including patent submissions for potential
products. The research can be marketed to pharmaceutical companies either
through direct sell of the research to the pharmaceutical company, or through a
joint venture arrangement between the pharmaceutical company and Allergy
Research Group whereby the parties will jointly own the patent and continue
development of the products. It is our hope that, during the process of research
into possible pharmaceutical and nutraceutical products, we will test new herbal
products, or discover additional uses for existing herbal products that can be
added to our current line of products as health food or dietary supplements.

We also continue to collaborate 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, creating
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. During the six-month period ending June 30, 2005,
we experienced a concentration of approximately 58% of our manufacturing with
five separate vendors. Two of the vendors individually account for more than ten
percent of the total with the other three ranging from nine percent to eight
percent. We do not currently have written contracts with any of our
manufacturers, but rely on long-term personal and professional relationships
with our five largest vendors. However, 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.

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, 2005 COMPARED TO JUNE 30, 2004
              ----------------------------------------------------

REVENUES. In general, we continued to grow our business at a moderate rate
during the second quarter of 2005. We had net sales of $3,981,676 for the second
quarter and $8,092,849 for the six months ended June 30, 2005, compared with
$3,832,360 and $7,557,259, respectively, for the same periods in 2004. The
increase of $149,316, or 4%, in the second quarter was driven by increased sales
to our distributors and professional accounts, whereas sales to our retail
customers who account for approximately 13% of our total sales leveled off. The
increase of $535,590, or 7%, 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.

COSTS OF SALES. Cost of sales increased $211,780 to $2,379,625 for the three
months ended June 30, 2005, compared to $2,167,845 for the three months ended
June 30, 2004. For the six months ended June 30, 2005, cost of sales increased
$500,543 from $4,302,465 in 2004 to $4,803,008 in 2005. 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. During the coming months we plan to recoup some of the increased cost
through very selective price increases. Gross profit margins decreased from
approximately 43% for the six months ended June 30, 2004 to 41% for the same
period in 2005. The decrease of 2% for the period over period comparison 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.

OPERATING EXPENSES. Total operating expenses were $1,093,307 for the second
quarter and $2,275,143 for the six months ended June 30, 2005, compared with
$1,035,478 and $2,028,651, respectively, for the same periods in 2004. We
expensed approximately $100,000 as a result of the relocation of our corporate
office in mid-February 2005. We also incurred higher expenses due to increases
in wages, workers' compensation and medical insurance, employer matching
contributions to the 401(k) plan, accruals associated with anticipated year-end
bonuses, rent for our new facility and the associated insurance and property
tax, and increased mailings of promotional materials. Offsetting these increases
in expenses was 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. Included in trade payables is $49,171 payable to the
attorney who defended the Company during the appeal. Of the $49,171, $21,365 was
recognized as expense during the second quarter. Another party associated with
the lawsuit has agreed to pay the attorney's fees associated with the lien. As
the other party pays those fees, the legal expense recognized will be reversed.

PROVISION FOR INCOME TAXES. Provision for income taxes as of June 30, 2005
represents federal and state income taxes based on earnings.


                                       11
<PAGE>

NET EARNINGS. During the quarter and six-month period ended June 30, 2005, we
recorded net earnings of $324,710 and $644,244, respectively, compared to net
earnings of $344,962 and $729,025, respectively, for the same periods in 2004.
Although we showed increased sales of 4% for the quarter and 7% for the
six-month period, net income slipped due to the decrease in profit margins and
increased operating expenses.

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, 2005, our working capital increased
by approximately $170,938 to $5,131,215, compared to a working capital at
December 31, 2004 of $4,960,277. Current assets mainly consist of approximately
$1.95 million in cash, $.90 million in accounts receivable, and $2.69 million in
inventory. We continue to finance our inventory and accounts receivable through
cash generated by operating activities. Management believes that the Company's
operating cash flow, cash and cash equivalents, and borrowing capacity under
committed bank credit agreements, is sufficient to fund its capital and
liquidity needs for the next twelve months.

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

Cash Flows

OPERATING ACTIVITIES. Net cash flows provided by operating activities were
$326,672 and $71,894 for the six months ended June 30, 2005 and 2004,
respectively. Net cash provided by operating activities for both periods
primarily reflects net income and net changes in operating assets and
liabilities such as accounts receivable, inventory and accounts payable. Cash
generated by operating activities for 2005 is explained by (i) an increase in
accounts receivable of $138,140 due to increased sales and (ii) an increase in
inventory levels of $139,207 due to rising prices and a modest increase in new
products available for sale. Cash generated by operating activities for 2004 is
predominately explained by increases in inventory levels as we built up
inventories to respond to forecasted demand for our products from the prior
year's fourth quarter.

INVESTING ACTIVITIES. 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. Net cash flows for the comparative prior period were immaterial.

FINANCING ACTIVITIES. Net cash flows provided by financing activities for the
six months ended June 30, 2004 was $9,800 as a result of the exercise of
employee stock options. There were no corresponding cash flows from financing
activities for the same period in 2005.

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 dependant on the
continued demand for nutritional supplements by consumers.

          SALES. Approximately 11% of our total sales in 2005 were attributable
to a single distributor. In 2005, this distributor continued to account for
approximately 11% of sales. 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, 2005, we had a
concentration of approximately 58% of our manufacturing with five separate
vendors. Two of these vendors individually account for more than ten percent and
the three other vendors individually range from nine percent to eight percent.
We do not currently have written contracts 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.


                                       12
<PAGE>

          PRODUCT. We have one product that individually accounts for more than
ten percent of our sales dollars. One other product that has historically
accounted for more than ten percent of our sales dropped to nine percent during
the third quarter 2004 and slipped to eight percent during the second quarter
2005.

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

<TABLE>
                                                  Payments Due by Period
                           ----------------------------------------------------------------------
                                             Less
  Contractual                               Than 1           1-3           4 - 5         After 5
  Obligations                 Total          Year           Years          Years          Years
----------------------     ----------     ----------     ----------     ----------     ----------
<S>                        <C>            <C>            <C>            <C>            <C>
Line of Credit (1)                 --             --             --             --             --
                           ----------     ----------     ----------     ----------     ----------

Operating Leases (2)       $2,772,000     $  288,000     $  864,000     $  576,000     $1,044,000
                           ----------     ----------     ----------     ----------     ----------
Total Cash Contractual
Obligations                $2,772,000     $  288,000     $  864,000     $  576,000     $1,044,000
                           ----------     ----------     ----------     ----------     ----------

</TABLE>

         (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, 2005 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, 2005, the interest rate on the
                  line of credit was 6.09% 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 guaranteed the line of credit.

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

RELATED PARTY TRANSACTIONS. Stephen and Susan Levine, CEO and VP, respectively,
loaned Nutricology approximately $286,000 prior to its reverse acquisition with
the Company in 1998. The loan has been offset and exceeded by advances made to
the Levine's between 1997 and 1999. Each advance was made as a non-interest
bearing, due on demand, loan on the books of the Company. Interest at 8% per
annum has been accrued and paid on these loans. As of June 30, 2005, the
outstanding balance was $14,541. During the six months ended June 30, 2005, the
Levine's repaid $14,277.

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 is for a ten-year term with the
option to renew for an additional fifteen years. The monthly obligation for the
base rent on the lease is $24,000. During the first quarter we reimbursed AriBen
Corporation for some of the tenant improvements that were built out to our
specifications in the amount of $350,000. We paid approximately $21,000 for
liability and earthquake insurance for the building, of which approximately
$8,000 has been expensed. Property tax associated with the building is estimated
to be approximately $35,000 from the beginning of the lease through June 30,
2005 and is included in accrued liabilities.

LIQUIDITY RESOURCES. We have $1.95 million in cash and cash equivalents as of
June 30, 2005, which we believe to be sufficient to satisfy our cash
requirements over the next twelve months. Our future funding requirements will
depend on numerous factors, some of which are beyond our control. These factors
include our ability to operate profitably, our ability to recruit and train
management and personnel, 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
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.

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

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


                                       13
<PAGE>

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 critical 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
income, 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
income, 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

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 income 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.

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. Net of attorney's fees associated with the case that were recognized as
expense during the second quarter, the reversal's impact increased net income by
$130,135.


                                       14
<PAGE>

On July 28, 2005, we were 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 our 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 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 may 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. In the event that no civil action is
brought by one of these government authorities within the 60-days following
notice, another party may bring a civil action. At this point, we are unable to
estimate any loss which may be incurred as a result of the notice of violation.
We have ceased all sales of the products in California while we investigate
these claims and will offer refunds to all California purchasers of such
products. We are also reevaluating the viability of the product line.

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-14. 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 has concluded that the Company's disclosure controls and
procedures are effective 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 significant changes in the Company's internal controls or
in the other factors that could significantly affect those controls since the
most recent evaluation of such controls.


                                       15
<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         In 1993, a lawsuit was filed in the Circuit Court of the 15th Judicial
Circuit in and for Palm Beach County, Florida by NutriSupplies, Inc., successor
in interest to rights of Robert H. Harris and the Earth Harvest, Inc. against
NutriCology, Inc. (which has since become a wholly-owned subsidiary of the
Company), Stephen A. Levine (officer, director and beneficial shareholder of the
Company) and Nicholas Gonzales, M.D. This matter was a contract dispute between
Dr. Gonzales and NutriSupplies, Inc., which alleges that Dr. Gonzales violated
their contract agreement and then returned to NutriCology to supply his
patients' needs. NutriCology and Dr. Levine were named in the suit only because
NutriCology had been Dr. Gonzales' supplier. Dr. Gonzales has agreed to fully
indemnified NutriCology and Dr. Levine from any wrongdoing. A motion for summary
judgment was granted in favor of NutriCology, but was appealed. On June 6, 2001,
the appellate court affirmed the grant of that motion, and NutriSupplies filed a
Motion for Rehearing and Request for Oral Argument. That motion was denied and
no further appeals have been filed. NutriCology obtained a judgment for $250,000
for attorneys' fees on November 10, 2003. A Florida lawyer asserted a lien claim
for 35% of the proceeds, plus costs of $64,000, but did not prevail in his
assertion.

On July 28, 2005, we were 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 our products were required to bear
California-specific labels regarding the health risks of certain ingredients.
The notice was served by the California Women's Law Center of Los Angeles,
California. 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 may 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. In the event that no civil action
is brought by one of these government authorities within the 60-days following
notice, a civil action may be brought by another party. At this point, we are
unable to estimate any loss which may be incurred as a result of the notice of
violation. We have ceased all sales of the products in California while we
investigate these claims and will offer refunds to all California purchasers of
such products. We are also reevaluating the viability of the product line.

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

         On June 7, 2005, the Company held its annual meeting of shareholders at
which the shareholders voted to (1) re-elect each of the Company's directors and
(2) ratify the selection of the Company's independent auditor for the fiscal
year ending December 31, 2005. The voting totals were as follows:

                                         For                         Withheld
                                    --------------                 -----------
(1) Director - Stephen Levine         14,144,395                      20,050

(1) Director - Susan Levine           14,139,395                      25,050

(1) Director - Edward Kane            14,144,295                      20,150

                                         For           Against      Abstained
                                    --------------   -----------   -----------
(2) Independent Auditors              14,139,253        20,850        4,397

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


                                       16
<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 12, 2005
                                                 By:/s/ Stephen A. Levine
                                                    ---------------------------
                                                    Chief Executive Officer and
                                                    Chief Financial Officer