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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[ X ]    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT
         OF 1934

                  For the Fiscal Year Ended December 31, 2002

[   ]    TRANSITION REPORT UNDER 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.
                 (Name of small business issuer in its charter)

          Florida                                              13-3940486
 (State or other jurisdiction                               (I.R.S. Employer
 of incorporation or organization)                        Identification number)

30806 Santana Street, Hayward, California                         94544
 (Address of principal executive offices)                       (Zip Code)

Issuer's telephone number, including area code: (800) 545-9960

Securities registered under Section 12(b) of the Act:


 Title of each class                            Name of each exchange on which
                                                   Each class is registered

         None.                                              None.

Securities to be registered under Section 12(g) of the Act:

                          Common Stock, $.001 par value
                                (Title of Class)

Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.

         Yes [ x]          No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year: $12,684,413

The aggregate market value of the voting stock held by non affiliates computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock as of March 14, 2003 was $0.26, based on the last
sale price of $0.30 as reported by the NASD Over-The-Counter Bulletin Board.

As of March 14, 2003, Registrant had outstanding 14,722,105 shares of common
stock, its only class of common equity outstanding.

Transitional Small Business Disclosure Format  (Check one):  Yes [   ]  No [ X ]

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                                TABLE OF CONTENTS

PART I.........................................................................1
   ITEM 1.     DESCRIPTION OF BUSINESS.........................................1
     FORWARD-LOOKING STATEMENTS................................................1
     BACKGROUND................................................................1
     THE COMPANY...............................................................1
     BUSINESS PLAN.............................................................2
     PRODUCTS AND SERVICES.....................................................4
     INDUSTRY OVERVIEW........................................................11
     COMPETITION..............................................................13
     MARKET STRATEGIES........................................................15
     REGULATION...............................................................15
     EMPLOYEES................................................................18
     INTELLECTUAL PROPERTY....................................................18
   ITEM 2.     DESCRIPTION OF PROPERTY........................................18
   ITEM 3.     LEGAL PROCEEDINGS..............................................18
   ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............19
PART II.......................................................................20
   ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..........20
     MARKET INFORMATION.......................................................20
     HOLDERS..................................................................20
     DIVIDENDS................................................................20
   ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION......20
     INTRODUCTION.............................................................20
     CAUTION CONCERNING FORWARD-LOOKING STATEMENTS/RISK FACTORS...............21
     FACTORS THAT COULD AFFECT FUTURE RESULTS.................................21
     OVERVIEW.................................................................22
     RESULTS OF OPERATIONS....................................................23
     LIQUIDITY AND CAPITAL RESOURCES..........................................23
     CRITICAL ACCOUNTING POLICIES.............................................26
     RECENT ACCOUNTING PRONOUNCEMENTS.........................................27
   ITEM 7.     FINANCIAL STATEMENTS...........................................28
   ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS..................28
PART III......................................................................29
   ITEM 9.     DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
               PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.....29
     OFFICERS AND DIRECTORS...................................................29
     KEY EMPLOYEES............................................................30
     MEDICAL ADVISORY BOARD...................................................31
     SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..................32
   ITEM 10.       EXECUTIVE COMPENSATION......................................32
     REMUNERATION PAID TO EXECUTIVES..........................................32
     REMUNERATION PAID TO DIRECTORS...........................................33
     EMPLOYMENT AGREEMENTS....................................................33
     EMPLOYEE BENEFITS........................................................34
   ITEM 11.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
   AND MANAGEMENT............................................................ 35
   ITEM 12.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............35
   ITEM 13.       EXHIBITS AND REPORTS ON FORM 8-K............................36
     EXHIBITS.................................................................36
     FORM 8-K REPORTS.........................................................37
   ITEM 14. CONTROLS AND PROCEDURES...........................................37
CONSOLIDATED FINANCIAL STATEMENTS.............................................F1
SIGNATURES....................................................................35
CERTIFICATION.................................................................36

                                       ii
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                                     PART I
ITEM 1. DESCRIPTION OF BUSINESS

FORWARD-LOOKING STATEMENTS

      This Annual Report on Form 10-KSB, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Item 7, contains
forward-looking statements that involve risks and uncertainties, as well as
assumptions that, if they never materialize or prove incorrect, could cause the
results of Allergy Research Group, Inc. and its consolidated subsidiary ("the
Company") to differ materially from those expressed or implied by such
forward-looking statements. All statements other than statements of historical
fact are statements that could be deemed forward-looking statements, including
any projections of revenue, costs or other financial items; any statements of
the plans, strategies and objectives of management for future operations; any
statement concerning proposed new products, services, developments or industry
rankings; any statements regarding future economic conditions or performance;
any statements of belief; and any statements of assumptions underlying any of
the foregoing. The risks, uncertainties and assumptions referred to above
include but are not limited to the items discussed in "Factors that Could Affect
Future Results" set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Item 7 of this report. The Company
assumes no obligation and does not intend to update these forward-looking
statements.

BACKGROUND

      Allergy Research Group, Inc. (SYMBOL: ALRG) (the "Company" or "Allergy
Research Group(R)"), through its wholly owned subsidiary, Nutricology, Inc.,
strives to be an innovative leader in nutraceutical research and product
formulation. Through Nutricology, Inc.(R), the Company has produced quality,
hypoallergenic nutritional supplements and supplies products to approximately
4,000 physicians and health care practitioners worldwide since 1980. For
instance, the Company was the first in the U.S. to introduce numerous specialty
products including melatonin, a neurohormone, germanium sesquioxide (a trace
mineral), AntiOx(TM), a broad-spectrum antioxidant and Buffered Vitamin C.
Buffered Vitamin C was tested at the Haight Ashbury Clinic in San Francisco as a
nutritional supplement for its value (associated with medical treatment) for
opiate and stimulate abusers. Overall, the tests indicate that Buffered Vitamin
C is beneficial in detoxification and aftercare programs, including
discouragement of resumption of drug abuse.

THE COMPANY

      Allergy Research Group(R), then Scottsdale Scientific, Inc., was
incorporated under the laws of the state of Florida on April 8, 1997 for the
purpose of wholesale distribution of health and nutritional supplements. On
February 3, 1998, the Company entered into an agreement to acquire Nutricology,
Inc., a California corporation formed on March 11, 1980 ("Nutricology").
Nutricology was engaged in the distribution of hypoallergenic nutritional
supplements under the guidance of Dr. Stephen Levine.

      Nutricology, Inc. now operates as a wholly owned subsidiary of Allergy
Research Group(R). As used herein, the "Company" means Allergy Research
Group(R)and its subsidiaries, except where indicated otherwise.

      We sell our products to healthcare professionals worldwide, who 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 world-wide, including accounts in the United
States, Japan, China, Taiwan, the United Kingdom, South Korea, Jamaica, New
Zealand, Mexico, Turkey, Norway, Denmark, Switzerland, Italy, Ireland,
Philippines, Russia, South Africa and Singapore.

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      We develop, contract manufacture, market and sell branded and private
label products, including vitamins and nutritional supplements, throughout the
world under the NutriCology and Allergy Research Group(R) labels. Our products
are distributed through distributors to medical and professional accounts and to
retailers. See "Market Strategies" below. We offer a line 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.

      The Company's principal executive offices are located at 30806 Santana
Street, Hayward, California 94544 and its telephone number is (800) 545-9960.

BUSINESS PLAN

      COMPANY GROWTH STRATEGY

      We intend to expand the Company's 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)
implement a comprehensive e-commerce plan. We believe that the Company's history
and reputation in the field, multiple distribution channels, broad portfolio of
products and packaging and distribution capabilities position it to be a
long-term competitor in the vitamin and nutritional supplements industries.

      In addition, the Company is expanding into the field of research on
pharmaceuticals and nutraceuticals under the leadership and guidance of Dr.
Stephen Levine and Dr. Ba Hoang, MD, PhD. This process will be 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(R)
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
additional uses for existing herbal products, that can be added to our current
line of products as health food or dietary supplements.

      PRODUCT RESEARCH AND DEVELOPMENT

      We strive to make the Company a leader in vitamin and nutritional
supplement product development and intend to continue our commitment to research
and development to create new products and existing product line extensions. In
2002 and 2001, we spent $260,749 and $195,471, respectively, on research and
development. The nutritional supplement industry is influenced by products that
become popular due to changing consumer interests in health, appearance and
longevity, new research coming out on existing compounds or new compounds being
discovered along with public and media attention to these same interests. We
believe it is important to develop new products in these industries in order to
capitalize on new market opportunities, to strengthen relationships with
customers by meeting demand and to increase market share. In addition, we
believe that continually introducing new products is important to preserving and
enhancing gross margins due to the relatively short life cycle of some products.
Our involvement in the research and development of pharmaceuticals and
nutraceuticals should enable us to expand our nutritional supplement product
line and open a new potential revenue stream through joint ownership of patents.

                                       2
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      As a result of the Company's product development history, we believe that
it has built a reputation in the nutritional supplement industry for innovation
in both branded and private label products. The Company is in various stages of
development with respect to new product concepts that we anticipate will augment
both our existing domestic and international product lines. Recently, through
Dr. Levine, the Company has become more focused on researching and developing
broad-spectrum immune products. (A broad-spectrum immune product is one that is
varied in its ability to enhance a wide range of protective mechanisms of immune
function against pathogens, bacteria, virus, fungus, protozoan and cancer.)
Building from this focus on broad-spectrum immune products the Company has
expanded the market created for anti-angiogenics, specifically with a
bindweed-based product called VascuStatin.

      Our work with Dr. Ba Hoang, one of our Medical Advisors, has lead to
research into a number of herbal products that we plan to sell as supplements
and which may also be developed into strict pharmaceutical products with patent
protection. We have submitted one patent application, for the treatment of ITP,
idiopathic thrombocytopenia, which is a common bleeding disease.

      MANUFACTURING AND PRODUCT QUALITY

      Our purpose is to improve the quality of life for our customers through
scientifically based innovation, purity of ingredients, education and
outstanding service. Our products are designed to be the purest and highest
quality obtainable and are generally made without yeast, corn, wheat, soy, dairy
products, flavorings, colors, salt, sugar, starch, common preservatives, binders
and excipients. To ensure optimal stability, our products are stored in a
humidity and temperature-controlled environment. We rely on scientific research
and collaboration with other experts in the biomedical field to insure state of
the art, hypoallergenic, when possible, formulations containing the purest,
highest quality ingredients.

      The Company currently does not have facilities for the manufacture of
encapsulated and liquid products, and we are using outside vendors for this
purpose. As of December 31, 2002, a concentration of approximately 54% of our
manufacturing was distributed among four separate vendors. The largest
manufacturer and supplier of raw materials supplies 31% of our needs, with the
next largest at 9%, and both the third and fourth largest vendors at 7%. We are
committed to providing the highest quality products, and require our
manufacturers to provide evidence that they have met our standards. Our outside
vendors are required to manufacture our products in accordance with the
applicable Current Good Manufacturing Practices ("CGMPs") of the United States
Food and Drug Administration ("FDA") applicable to food and other applicable
regulatory and compendial manufacturing standards, such as United States
Pharmacopoeia ("USP"). Raw materials and finished products undergo random sample
quality testing procedures, including weight, purity, heavy metals and
microbiological testing. In order to assure that our products meet the high
standards we require, we randomly take raw materials and samples from our
manufacturers to independent laboratories for testing.

      Approximately 75% of our products, consisting of capsules and tablets, are
packaged at and distributed from our 25,440 square foot warehousing and
packaging facility located in Hayward, California (the "Hayward Facility"). The
Hayward Facility was leased by the Company for five years commencing June 1,
1998, and consists of approximately 5,500 square feet of office space. The lease
allows for an increase of 5% every 15 months. In 2002, we paid on the average
$30,692 per month for these facilities. The original lease was scheduled to
expire on June 30, 2003; however, it has been amended to extend the term of the
lease one year and to exclude the rental of the warehouse facility that is
currently being subleased on a monthly basis through June 30, 2003, which can be
terminated by either party with 30 days written notice. The rental expense in
2002 was offset by sublease income of $8,320 per month. In 2003, the sublease
income is reduced to $1,900 per month due to the loss of a tenant who leased the
whole space to one that leases only part of the space. Our current facility and
equipment are sufficient to meet the demands of our customers. Our outside
manufacturers package our liquid products and encapsulate our powder products.

                                       3
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PRODUCTS AND SERVICES

      Our vitamin and nutritional supplement line consists of more than 200
products. The Company's product catalog includes the following categories: Amino
Acids, Antioxidant Formulas, Bioenergetic Nutrients, Bioflavonoids, Brain
Support Products, B Vitamins, Comprehensive Nutrient Formulas, Essential Fatty
Acids, Gastrointestinal Health Products, Immune Support, Liver Support Products,
Multiple Vitamin / Mineral Products, Musculoskeletal Products, Organic
Glandulars, Selenium Products, Specialty Products and Vitamin C products. A
brief description of each of these categories appears below, including
descriptions of some of our most popular products in each category.

      Approximately 75% of the products discussed below were formulated by
Allergy Research Group/NutriCology and are manufactured and distributed by the
Company. Another 25% of the products are produced by other companies in the
industry and distributed by the Company through licensing agreements. Most
notably, we license the distribution rights for ProGreens(R), a fresh,
nutrient-rich whole food concentrate, which is gluten-free and contains no egg,
dairy or animal products, no yeast, malto-dextrin, barley malt or simple sugar,
no preservatives, and no artificial flavoring or coloring; OralMat, a product
based on an extract of the rye plant; Eurocel(R), a product made from Korean and
Chinese herbs that have been used historically in Oriental medicine,
VascuStatin, a product made from bindweed, shown to potentially assist in
supporting the inhabitation of angiogenisis; and Nattokinase, an enzyme derived
from boiled soybeans and BACILLUS NATTO, which may support healthy blood flow.

      The trademark to ProGreens(R) is owned by Jim Cassidy and is licensed to
Nutricology under an exclusive, worldwide license pursuant to which Mr. Cassidy
receives royalties based on the amount of ProGreens(R) products sold by the
Company. Mr. Cassidy acts as a consultant to the Company in relation to the
ProGreens(R) products and receives a fee for attending tradeshows on our behalf
as well as commissions based on sales of our products made by him.

      AMINO ACIDS

      Amino acids exist in all living cells and chains of amino acids make up
protein. They make up a great portion of our skin, hair, nails, muscle tissue
and internal organs. Our brain and heart are especially high in protein. The
body uses amino acids in the production of neurotransmitters in the brain,
several hormones, a variety of enzyme and metabolic processes, the formation of
antibodies, as well as for the production of non-essential amino acids.
Essential amino acids are the amino acids the body does not produce and it is
necessary to get them from the diet or a supplement. Non-essential and
semi-essential amino acids are produced by the body; however, higher amounts may
be necessary during times of increased physical or emotional stress, illness or
imbalance. Our amino acid products are easily absorbed into the system.

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      ANTIOXIDANT FORMULAS

      Through Nutricology, we have pioneered hypoallergenic, broad spectrum,
mixed antioxidant formulations. Though essential, oxygen has the potential to
create metabolic toxicity. Antioxidant nutrients are utilized in conjunction
with antioxidant enzymes to help quench oxygen free radical generation. Acting
to impede free radical damage to cells and tissues, the body's antioxidant
defense system amounts to a metabolic cooling and lubrication system. The
antioxidant nutrients are the body's natural antitoxins and are crucial to
homeostasis, having regulatory roles in a diversity of tissue functions. A
variety of stressful environmental, genetic and behavioral factors have been
linked to increased free radical production in the tissues. Good dietary habits
help conserve the body's antioxidant stores, but under the conditions of modern
living it can be good "nutritional insurance" to supplement the diet with
natural antioxidants.

      BIOENERGETIC NUTRIENTS

      The production of energy begins in a particular organ inside of our cells.
That organ is known as the mitochondria. Inside the mitochondria, with
assistance of enzymes from the Krebs cycle, carbohydrates and fatty acids are
metabolized into Adenosine Triphosphate (ATP). ATP is considered a cofactor and
a modulator of activity of some enzymes and can be thought of as cellular
currency. Included in this category is the product ProGreens(R), which is
formulated with the highest quality green foods, premium adaptogenic herbs and
antioxidant bioflavonoids, to provide a broad-spectrum nutritional support from
natural food factors not found in isolated vitamins or mineral concentrates.
ProGreens(R) is marketed in a variety of forums under our NutriCology(R) label.

      We also produce a hypoallergenic product using germanium, which is a
semimetallic element in the same family as carbon, silicon, tin and lead.
Germanium sesquioxide may be used in the treatment of anemia, a blood condition
involving abnormal oxygen carrying potential. Allergy Research Group(R) was the
first company in the United States to introduce germanium sesquioxide. We
currently produce germanium in both powder and capsule form.

      BIOFLAVONOIDS

      The bioflavonoids are the biologically active flavonoids. (A flavonoid is
any of a large group of plant substances that includes the anthocypanins, a
class of flower pigments.) Bioflavonoids are important nutritional factors, and
are part and parcel of just about every plant on Earth. They are important
protective and regulatory factors in plant metabolism, and from their widespread
distribution are likely to have been an integral part of the human diet ever
since humans appeared. We believe that this co-relationship with humans over the
course of evolution is consistent with the many benefits to homeostasis that
they seem to offer, although scientific research on this relationship is still
in development stages. Certainly, they are complex chemically, and can play a
variety of roles in human metabolism. They are potent antioxidants, and many
also display metal binding activity, a property that may contribute to their
antioxidant effects. Bioflavonoids are required for the proper absorption of
Vitamin C, and increase Vitamin C's effectiveness. They are also thought to
improve immunity, fight cancer, reduce inflammation and strengthen capillaries.

      BRAIN SUPPORT PRODUCTS

      The "brain support" formulas produced by the Company are designed to
enhance brain function, improving memory, support the central nervous system and
aid in the production of neurotransmitters in the brain. Included in this group
of products is Melatonin, which was first introduced into the U.S. health food
and professional market by Allergy Research Group(R). Melatonin has many
nutritional benefits. However, its main function in the body is to support the
aspects of brain chemistry involved in sleep.

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      Our newest "brain support" product, 200 mg of Zen, contains a significant
quantity of both gamma-aminobutyric acid (GABA) and theanine (glutamic acid
gamma-ethylamide), an amino acid derivative found naturally in green tea
(Camellia sinensis). 200 mg of Zen provides a source of dietary ingredients that
may provide stabilization of mood and a feeling of alert relaxation.

      B VITAMINS

      B vitamins are water-soluble and not stored in the body very effectively,
therefore they need to be replenished daily. Insufficiencies may occur easily
during dieting for weight loss, fasting or consuming the Standard American Diet
(SAD), which usually includes too many processed foods and excess sugar. Alcohol
and drugs, including antibiotics, also deplete levels of B vitamins.

      The B vitamins function as co-enzymes: they assist the enzymes, our
biological catalysts, in implementing the tens of thousands of biochemical
reactions and metabolic pathways that make life possible. Some of those enzyme
functions include energy production, conversion of carbohydrates to glucose and
assisting other nutrients in the metabolism of fat and protein. In addition, B
vitamins are essential to optimal functioning of the central nervous system, as
the body uses B vitamins during physiological response to stress and fatigue.
Adequate levels of B vitamins are also especially important for the formation of
healthy hair and skin, and optimal functioning of the eyes and liver. The B
vitamins, potentially promoting efficient bowel functions, support the general
muscle tone of gastrointestinal tract.

      Included in the B vitamin group are the following: B1 (thiamin), B2
(riboflavin), B3 (niacin), B5 (pantothenic acid), B6 (pyridoxine), B12
(cyanocobalamin), chlorine, inositol, PABA, orotic acid, pangameic acid, and B17
(laetrile). Biotin and folic acid are intimately involved in many of the same
pathways, and are commonly regarded as quasi-B vitamins.

      COMPREHENSIVE NUTRIENT FORMULAS

      We produce a family of products that it refers to as "comprehensive"
nutrient formulas. These products include: Complete Immune, Complete Heart,
Complete Heart II, and Complete Nerve. (These products are sold as Wholly
Immune, Take Heart, and Steady On under the Allergy Research Group(R) label,
which is marketed to professionals). Complete Immune is a blend of herbs and
nutrients designed to work synergistically to enhance the body's natural immune
system, decrease oxidative damage, promote liver detoxification, and to regulate
cell division. Complete Heart and Complete Heart II are comprehensive
cardiovascular support formulas and are prepared with or without hormones DHEA
and Pregnenolone (Complete Heart II does not contain these hormones). Both
formulas support general nutrition, ATP (adenosine triphosphate) production,
catabolism and homocysteine metabolism, anti-oxidant function and maintenance of
serum viscosity and cardiovascular health. Complete Nerve is a comprehensive
neurovasular support formula that provides nutrients that have been shown to
improve blood and oxygen supply to the brain, potentially improving brain
function. This formula provides general nutrition, precursors for the formation
of L-dopa and dopamine, support for the generation of neurotransmitters, support
of healthy emotional response, increased neuromuscular control and support
against oxidative degeneration of central neurons.

                                       6
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      ESSENTIAL FATTY ACIDS

      It has been clear for some time that many individuals in western society
consume far too many of their calories as fats. However, portions of the fats we
take in actually are important nutrients. These are the "essential fatty acids."
This group includes two fatty acids, namely--linoleic acid and alpha-linolenic
acid--which appear to have vitamin-like activity: they are essential for
metabolism and cannot be produced in the body from simpler molecules. In
addition, gamma-linolenic acid (GLA) is a fatty acid intermediate which may help
some individuals bypass a "weak-link" in fatty acid metabolism
(delta-6-desaturase), so can be classified as "semi-essential."

      High intakes of cholesterol, saturated fats and hydrogenated fats
("trans-fats") may be undesirable, but essential fatty acids are positive
factors in a personal program for good health. Our essential fatty acids are
derived from the highest quality sources available and every batch of each of
the fish oil products is tested for mercury and other potential contaminants.

      GASTROINTESTINAL HEALTH PRODUCTS

      The health and integrity of the epithelial lining of the gastrointestinal
tract is important for proper absorption of nutrients, for maintaining healthy
microbial balance in the gut, and a state of homeostasis throughout the body.
When increased intestinal permeability (also known as "leaky gut") exists within
the gastrointestinal tract, an environment conducive to inadequate absorption of
nutrients and increased absorption of toxins, pathogenic bacteria and
inflammatory substances exists, potentially leading to weakened immunity and
compromised health. Dietary supplementation with nutrients the body uses to
produce healthy epithelial tissue, regulate transit time and balance
microbiology which may support gastrointestinal health. Digestive support may
also benefit individuals with increased intestinal permeability.

      Increased intestinal permeability is common among individuals with chronic
stress, allergies, and microbial infestations. Weakened immunity, including
conditions of hypo-immunity and auto-immunity, may involve "leaky gut."
Consumption of foods processed with chemical additives and preservatives, having
low levels of nutritional value, as well as caffeine and alcohol consumption may
lead to an increase in intestinal permeability. The overuse of drugs, both
prescription and over the counter, environmental contaminants such as car
exhaust, perfumes and cleaning chemicals are also potential avenues to
developing increased intestinal permeability.

      Our gastrointestinal (GI) health products include a variety of products to
support digestion and elimination, intestinal permeability and microbiology.
Perm A vite is a formula designed specifically to support the body's production
of healthy gastrointestinal lining, necessary in conditions of "leaky gut."
Several unique and potent probiotic formulas, as well as a variety of microbial
balancing formulas, such as Tricycline, containing artemesinin, black walnut
hulls, citrus seed extract, and berberine sulfate which have been shown to
reduce unwanted microbes. Probiotic is the term used collectively to describe
friendly intestinal bacteria, necessary for GI health.

      Another of our gastrointestinal health products is Earth Dragon, an herbal
combination product developed by Dr. Ba Hoang and his family of three
generations of Vietnamese doctors. The product includes dried earthworms (Earth
Dragons), which are used traditionally in the Vietnamese diet to aid the human
digestive system. Recent studies by Professor Joel Weinstock, University of
Iowa, support the theory that certain microorganisms may play a key role in
modulating intestinal immunity. Weinstock believes that ingesting a very
specific species of parasitic worm may be highly effective in the treatment of
inflammatory bowel diseases such as ulcerative colitis and Crohn's disease,
which are believed to be caused by an overactive immune response to normal
intestinal bacteria. Earth Dragon is a proprietary product of Dr. Hoang and is
unique to the Company.

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      IMMUNE SUPPORT

      The immune system is a complex system involving communication between
organs, tissues and chemicals. Its main purpose is to protect the body against
foreign invaders, infection, and disease processes. The primary functions of the
immune system have been understood for a relatively short period of time. As far
as is understood at this time it is thought that the thymus gland (master gland
of immunity) grows rapidly for the first two years of life. It continues to grow
at a slower rate until puberty. At that time the amount and strength of the
T-cells determines the strength of one's immune system. The thymus gland then
slowly shrinks with age, lessening the strength of one's immune system.
Shrinkage of the thymus (decreasing immunity) can be caused by stress,
infection, radiation, and drugs such as cortisone, malnutrition, chronic illness
and free-radical damage. Specific nutrients that support the thymus and immune
system as a whole may potentially increase one's immunity.

      We have some of the most unique products for immune support available
today. Lactoferrin, a specific component of bovine colostrum, having a somewhat
stimulating effect on the immune system, was introduced to the market by Allergy
Research Group(R). Cytolog(R) is a unique complex of peptides selected from
bovine colostrum for their molecular weight. These peptides are referred to as
"info-peptides" and rather than having direct biological activity on the immune
system they seem to inform the body as to what it needs to regulate the immune
system. Cytolog(R) is supportive for down regulating auto-immunity as well as
supporting conditions of lowered immunity.

      LIVER SUPPORT PRODUCTS

      The liver is a complex organ with a variety of functions. It plays a major
role in the detoxification of both endotoxins (metabolically produced toxins)
and xenobiotics (environmental toxins). Detoxification is a process involving
several different organs and occurs primarily in the liver where toxins,
chemicals, cholesterol and fat-soluble toxins are filtered from the blood, using
enzymes and the synthesis and secretion of bile. These products generally
support the phase I and phase II functions of liver detoxification. In phase I,
toxins are neutralized or transformed into intermediates which are then
neutralized by the phase II enzymes. In phase II, metabolic chemicals are
enzymatically attached (conjugation) to the toxins that are then either
neutralized or more easily excreted in the bile and urine. The liver's ability
to detoxify potentially harmful substances is directly related to optimal
health.

      We have exclusive U.S. distribution rights for Eurocel, a product made
from Korean and Chinese herbs that have been used historically in Oriental
medicine. Testing done on Eurocel indicates positive results in patients with
Hepatitis C, indicating a significant decrease in viral titers.

      MULTIPLE VITAMIN / MINERAL PRODUCTS

      We produce a multi-Vitamin complex, Multi-Vi-Min(R), formulated by Dr.
Levine. Multi-Vi-Min(R) was designed to be a hypoallergenic, and many people who
cannot tolerate a complex nutrient formula do well with the formula. The formula
comes in three varieties, one containing copper and iron, one without those
ingredients, and a formula especially for children. In addition, we produce and
market a number of other multi-Vitamin and mineral products on the premise that
a quality multiple vitamin/mineral supplement is a must for everyone. These
products include calcium, magnesium, zinc and potassium based products, as well
as two forms of OcuDyne, a formula created exclusively for Allergy Research
Group(R) by Jonathan Wright, M.D. and Alan R. Gaby, M.D. OcuDyne is a formula
designed to support the structure and various functions of the eye.

                                       8
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      MUSCULOSKELETAL PRODUCTS

      We produce a variety of musculoskeletal products designed to support
connective/joint tissue. Connective tissue is present in varying degrees in all
organs of the body. The term "connective tissue" refers to the various types of
tissue that make up the joints, tendons, ligaments, and even the web that holds
all cells together. As a part of this group of products, we also produce a
calcium product designed to support the production of healthy bone tissue.

      We have developed a new product, InflaMed, which aims to helps maintain
healthy joint tissue by supporting the reduction of pain associated with
inflammation, proinflammatory mediators (e.g. prostaglandins, thromboxanes,
etc.) and reduction of inflammatory response by maintain detoxification systems
as well as reducing oxidative stress damage induced by inflammation.

      ORGANIC GLANDULARS

      Glandular tissues can be rich sources of nutrients, enzymes and other
factors that support specific gland-related metabolism and physiological
function. When prepared with sufficient technical sophistication and sensitivity
to their delicate nature, some of these glandulars can retain a significant
portion of their biological activity. Our glandular products are produced from
government inspected, range-grazed animals raised in New Zealand, without the
use of pesticides, hormones and antibiotics, and are BSE free. Our glandulars
are lyophilized (freeze-dried), which means the material is frozen, then
subjected to a high vacuum that vaporizes moisture directly from the solid
state, thereby maintaining its biological activity. They are highly potent but
are generally well tolerated.

      SELENIUM PRODUCTS

      We produce Selenium-based products. Selenium is an essential trace element
that is "redoxactive," (i.e., highly active in electron exchange reactions.)
Antioxidant enzymes specialize in electron exchange reactions that help protect
the cells and tissues from free radicals and other oxidative "electron
stealers." Selenium is an essential component of glutathione peroxidase, being
located at the "active site" of this major antioxidant enzyme. Selenium products
include a liquid sodium selenite and are encapsulated selenium from kelp.

      SPECIALTY PRODUCTS

      We also produce and/or distribute a number of "specialty items" which do
not fall into our general product categories. These products include a
HomoCysteine Metabolism Formula, which provides a good source of folic acid and
B vitamins to facilitate the breakdown of homocysteine (a toxic amino acid that
can cause vascular disease, playing a role in stroke, myocardial infarction
(heart attack), and carotid artery damage among others) back into methionine and
other metabolites. Methionine is one of the sulfur-containing amino acids
(cysteine and cystine are others) and is important for many bodily functions.
Through its supply of sulfur, it helps prevent problems of the skin and nails.
It acts as a lipotropic agent to prevent excess fat buildup in the liver and the
body, is helpful in relieving or preventing fatigue, and may be useful in some
cases of allergy because it reduces histamine release. It also may help lower an
elevated serum copper level. Methionine is of concern mainly because it is the
limiting, or the least abundant, amino acid in most foods.

      We produce and distribute Mastica, an encapsulated product which contains
Mastic gum, a resinous exudate obtained from the stem and the main leaves of the
PISTACIA LENTISCUS tree indigenous to the Mediterranean (most notably the Greek
Island of Chios). The gum has been reported in the New England Journal of
Medicine to be effective against several strains of Helicobacter pylori. Mastica
has become one of our most popular products and we are aware of only one other
distributor in the United States.

                                       9
<PAGE>

      We also have a product developed by SoftGel Technologies called
Glucosol(TM). Glucosol(TM) is a unique standardized leaf extract of
Lagerstroemia speciosa L., a traditional herb from Asia. Processed by water
extraction and standardized to 1% corosolic acid per softgel, Glucosol(TM)
offers superior potency. Corosolic acid, the active triterpenoid, has been
studied for its blood sugar-lowering effects since the 1930's. Recent Japanese
and American Studies have shown that Glucosol(TM) regulates blood sugar by
supporting the body in improving glucose metabolism and activating glucose
transport and uptake. Our unique, all natural softgel formulation provides
optimum efficacy and enhanced absorption. Maximum effects occur within the first
15 days of supplementation, and blood glucose levels remain low for a period of
time after supplementation is discontinued. In addition, Glucosol(TM) has been
shown to support the body in improving carbohydrate metabolism, thereby
potentially being valuable in weight reduction programs.

      Other "specialty products" include three hypoallergenic products known as
NAC (N-Acetyl-L-Cysteine), an antioxidant closely related to L-cysteine but more
stable, Saw Palmetto Complex, which provides the highest quality standardized
Saw Palmetto extract available together with other active nutrients that
complement its action, and Super Immuno Complex(TM), a daily high-potency
nutritional supplement package designed to boost the body's immune system,
antioxidant and essential fatty acid status, and benefiting overall nutritional
intake. NAC, when taken orally, will raise blood and tissue cysteine levels.
Cysteine is important for homeostasis, being a key antioxidant, a glutathione
pre-cursor and a natural source of sulfur for metabolism. Saw Palmetto extract
is a lipophilic extract of saw palmetto berries, which act as an
anti-inflammatory in the treatment of benign prostate enlargement.

      Nattokinase, an enzyme derived from boiled soybeans and BACILLUS NATO, was
added to the product line in 2002. Research has shown nattokinase to support the
body in breaking up and dissolving the unhealthy coagulation of blood and to
support fibrinolytic activity.

      VITAMIN C PRODUCTS

      Vitamin C is the body's most important water-soluble antioxidant nutrient
and is involved in a wide variety of biochemical reactions throughout the body.
Included in its functions is the synthesis of collagen, the basis of connective
tissues, found in virtually every cell of the body. Vitamin C possesses
antioxidant properties and because of its molecular structure, is able to donate
hydrogen atoms from two hydroxyl positions to neutralize free radicals. In
addition, the body uses Vitamin C during detoxification and inflammation
processes, as well as immune system functions including: the production of white
blood cells, histamine release and degradation, the reduction of glutathione and
the metabolism and protection of several other nutrients. In combination with
other nutrients, Vitamin C also supports the production of some
neurotransmitters.

      Allergy Research Group(R) has pioneered the development of Buffered
Vitamin C products, and continues to offer the purest and least allergenic
Vitamin C products available anywhere. In addition to its hefty content of
ascorbic acid, our Buffered Vitamin C also supplies potassium and the
macrominerals calcium and magnesium at approximately one half of the RDI per
level teaspoon. Due to its generous complement of calcium (350 mg per teaspoon),
supplementation with our Buffered Vitamin C may be desirable for individuals who
do not regularly consume dairy products. Developed by Dr. Levine, the unique
beet source makes Buffered Vitamin C well tolerated by individuals unable to
tolerate other sources of Vitamin C. The latest addition to our Buffered Vitamin
C products is a unique cassava root (of the potato family) source Buffered
Vitamin C. Both the beet and cassava root sources are formulated with carbonates
of potassium, calcium and magnesium, giving it an acid-alkaline buffering action
(pH 7.0 in water), potentially improving bowel tolerance and minimizing
hyperacidity.

                                       10
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INDUSTRY OVERVIEW

      The market for vitamins, minerals and other dietary supplements (excluding
sports nutrition, food bars, diet products and functional foods) (the "VMS
Products") grew rapidly between 1994 and 1998, following the passage of the
Dietary Supplement Health and Education Act ("DSHEA") in October 1994. Prior to
DSHEA, dietary supplements were subject to the same regulatory requirements as
were other foods. The new law created a new regulatory framework for the safety
and labeling of nutritional supplements. See "Regulation" below.

      Packaged Facts, an independent research firm, reported that the market for
VMS Products grew at a compound rate of 15.4% from $5.0 billion in 1994 to $8.9
billion in 1998. A large portion of that growth was attributable to an increase
in sales of supplements (primarily herbal), which grew from $1.3 billion in 1994
to $3.9 billion in 1998. Growth in this category was fueled by the widespread
publicity surrounding such herbs as echinacea, garlic, ginseng, gingko, Saw
Palmetto and St. John's Wort.

      Nutritional Outlook reported in March 2003 that market growth had
decreased significantly to 36% from 1999 to 2002, with the expectation that
during the next few years the growth rate would reach a mature level of 56%.
According to Nutritional Outlook, the U.S. nutrition industry is currently worth
approximately $53 billion, divided into the following, primary segments:

      -   Natural and organic foods ($12.6 billion)
      -   Supplements ($17.7 billion)
      -   Functional foods ($18.5 billion)
      -   Natural personal-care and household items ($4.1 billion)

      A report published by Key Note, Ltd. in January 2003 indicates that,
during 2002, retail sales of functional foods grew by an estimated 9.2%, while
the retail sale of VMS Products fell by 3.6%. The Key Note report estimated that
the nutraceuticals market, as a whole, increased in value by 37.7% between 1998
and 2002. The report stated that positive factors included an increase in
consumer interest in a healthy diet and lifestyle, and taking charge of health
issues, in an aging population where health awareness has increased in
importance. Consumer health concerns are coupled with concerns over taking
multiple prescription drugs. According to Nutritional Outlook, the market for
condition-specific supplements will increase as consumers look for optimal
solutions to their specific health conditions.

      Key Note reported that negative factors affecting the industry included
consumer skepticism over the need for VMS Products and possible adverse effects
of taking overly large doses of some vitamins. In addition, the report indicated
that new legislation from multiple regulatory bodies was expected to slow the
launch of new products. The report concluded that growth in the nutraceuticals
industry between 2003 and 2007 will be driven by the increasingly popular
functional foods sector, with almost flat growth predicted in the VMS Products
sector.

      Despite the prediction for flat growth in the VMS Products industry, Key
Note did conclude that multivitamins continue to represent one of the only
growth sectors in the VMS Products market, primarily due to children's and
"complete" products. In a study published by Joseph Marra, Director of Marketing
at The Natural Marketing Institute in Harleysville, Pennsylvania, in the
November 2002 issue of Nutraceuticals World, indicated that the 52-week period
ended September 15, 2002 showed multivitamins as the top selling supplement. The
study indicated that multivitamins, which have led the category for several
years, continue to lead, with a growth rate of 4.7% for the period in 2002. At
the same time, the market showed a significant decrease for herbal supplements,
with an overall decrease of 9%. The period showed an increase in sales of
supplements packaged as "antioxidants." Overall, the study indicated an increase
of 1.3% of total category sales of vitamins and minerals, compared to the
preceding 52-week period.

                                       11
<PAGE>

      The Natural Marketing Institute concluded that there were multiple causes
for the market changes reflected in its study, including, but not limited to,
the following:

         - As consumer knowledge of a product increases, they grow weary of the
         supplement and seek to move on to a younger, more attractive
         supplement. For example, the study reflected a decrease in sales of
         vitamins C and E (well known antioxidants) but an increase in sales of
         other supplements actually packaged as "antioxidants."

         - Publicity surrounding the efficacy, potency and possible herb and
         drug interactions resulted in a decline in sales of herbal supplements.
         Herbs and botanicals have been the most effected by negative publicity.

         - Conflicting information regarding the value of natural foods and the
         effect of modern production methods on actual nutritional value cause
         some consumers to opt for more natural foods as opposed to supplements,
         while other seek to supplement their diets with necessary vitamins and
         minerals in order to replace nutrients which may have been eliminated
         in the production process.

         - Consumers tend to develop unreasonable expectations as to the
         benefits of supplements. 42% of the consumers surveyed indicated that
         they had ceased using vitamins and/or minerals due to lack of
         recognizable benefits, while the number for herbal supplements exceeded
         50%. Despite this, the study still indicated that "overall credibility"
         was cited by only 6 to 7% of consumers as the reason for cessation of
         use. This trend indicates that consumers may believe in the products,
         but are still unsatisfied with the speed and noticeability of results.

      Vitamins and nutritional supplements are sold through seven primary
distribution channels: natural food and specialty retail (including health food
stores and supplement/chain stores such as General Nutrition Centers and Great
Earth), mass-market retailers (drug store chains, supermarkets and other mass
merchandisers), direct sales channels (including multilevel marketing and
catalog distribution), e-commerce via the Internet, mail order, direct TV (for
example, infomercials), and professionals. According to Nutritional Outlook,
roughly 70% of all products are sold in retail outlets, including health food
stores, supplement and/or chain stores, supermarkets, grocers and drug stores.
The other 30% is sold either directly to consumers through catalogs, the
Internet or television and radio advertising, as well as multilevel marketers.
Although the Nutritional Outlook study showed only a small amount of product
being sold through medical professionals and alternative-healthcare providers,
practitioners were considered the highest-growth category "with potential as an
untapped source of consumer access, especially with physicians." E-commerce was
also listed as having high growth potential; however, the study states that this
growth should cap out at about 4% of the industry by 2010.

      Over the past several years, public awareness of the positive effects of
vitamins and nutritional supplements on health has been heightened by widely
publicized reports of scientific findings supporting such claims. Many studies
have indicated a correlation between the regular consumption of selected
vitamins and nutritional supplements and reduced incidences of a wide range of
conditions, including cancer, heart disease, stroke, arthritis, osteoporosis,
mental fatigue, depression, declining immune function, macular degeneration,
memory loss and neural tube birth defects. Reports have indicated that the
United States government and universities have generally increased sponsorship
of research relating to vitamins and nutritional supplements. In addition,
Congress has established the Office of Alternative Medicine in the National
Institutes of Health to foster research into alternative medical treatments that
may include natural remedies and has also directed the Office of Dietary
Supplements in the National Institutes of Health to conduct and coordinate
research into the role of dietary supplements in maintaining health and
preventing disease.

                                       12
<PAGE>

      We expect that the aging of the United States population, together with a
corresponding increased focus on preventative health measures, to continue to
influence the demand for vitamins and nutritional supplement products. According
to the United States Census Bureau, through 2010, the 35-and-older age group of
consumers, which represents a substantial majority of regular users of vitamin
and nutritional supplements, is expected to grow significantly faster than the
general United States population. In marketing our products, we will need to
focus on understanding consumer needs, introducing new products to meet those
needs and winning the trust of consumers through the quality and efficacy of our
products.

      While the retail channel of distribution for vitamins and nutritional
supplements has been consolidating, there has not yet been any significant
consolidation among the companies that manufacture and sell these products. The
vitamin and nutritional supplement industry remains fragmented, and we believe
that no company controls a significant share of the market.

COMPETITION

      Strong interest in nutritional supplements has resulted in a large number
of competitors in the marketplace. The market has many growth companies with
strong marketing and sales abilities, quality products and sound management. In
addition to competition from other companies in the VMS Product sector, we
experience competition from other sectors of the nutrition industry, including
from the functional food sector, where retail sales grew by approximately 9.2%
in 2002 as compared to a decrease in retail sales of VMS Products of 3.6% for
the same period according to the Key Note study. Functional foods include
breakfast cereals, fortified breads, cholesterol-lowering margarines, and yogurt
drinks, among others.

      A few of our competitors in the VMS Product sector are listed below:

      THORNE RESEARCH. Thorne manufactures hypo-allergenic products similar to
those of the Company, in approximately the same price range, and markets its
products only to health care professionals. In fact, in marketing to
professionals, Thorne is probably our biggest competitor. However, Thorne tends
to cater to Naturopathic Doctors, while the Company markets to a broader range
of professionals in the medical field. In addition, our products are more
generally available than those of Thorne since they can be purchased directly or
in stores.

      METAGENICS, INC. Metagenics produces some products which are similar to
ours; however, as the practitioner provider division of Health World Limited, it
limits access to its products to healthcare practitioners and patients referred
by healthcare practitioners registered with Metagenics.

      DOUGLAS LABS. This company manufactures some products that are similar to
ours and does a lot of private labeling for members of the health care
profession. Although we feel that our products are as good or better than those
of Douglas, we are not yet equipped to compete with their products in the
private labeling market.

      JARROW FORMULAS. Jarrow manufactures high quality products that are
marketed in the retail market. We believe their products are of a higher quality
than those of either TwinLab or KAL, and their products are generally priced a
little lower than ours. The retail market for Jarrow products seems to be
growing; while 37% of our sales are still concentrated in the professional
market.

                                       13
<PAGE>

      TWINLAB. TwinLab is a mass market-focused company, whereas Allergy
Research Group(R) concentrates on sales to medical professionals. The Company
has plans to enter the mass market in the next few years, and believes that
scientifically-based products such as the Company's will be sought after. There
may be some overlap with the TwinLab customer base at this time, but it is not
expected to adversely impact our current revenue stream.

      NATURE'S WAY. This company focuses on the private label business segment,
not on sales to medical professionals. We plan to increase our focus on the
private label segment. We received a favorable response to our products in the
EU marketplace at the European Private Label Exhibit. As the private label
customer looks to add products into its line, we believe scientifically-based
products will be sought-after. There will be some overlap with Nature's Way
customer-base, but this is not expected to adversely impact our current revenue
stream.

      KAL. This company produces herbal products. Currently we do not carry many
herbal products and do not view KAL as a direct competitor. Should we begin
producing and marketing herbal products as a result of our research on
nutraceuticals, there is a chance that we will be in direct competition with
products produced by KAL.

      SOLGAR VITAMIN AND HERB COMPANY. Solgar (acquired by American Home
Products, Inc. during 1998) has made in-roads into the international
marketplace, which is an arena we feel will be a viable growth avenue for the
Company. While competition with Solgar may cause some overlap, it is not
expected to adversely impact our current revenue stream.

      REXALL SUNDOWN, INC. develops, manufactures, markets and sells vitamins,
nutritional supplements and consumer health products through sales to retailers,
direct sales through independent distributors and mail order. It offers a line
of approximately 800 products, including vitamins in both multivitamin and
single-entity formulas, minerals, herbals, weight management products,
homeopathic remedies, sports nutrition products and personal care products.
Although some of Rexall's products are in direct competition with some of the
our vitamin and nutritional supplement products, we believe that our products
are of higher quality. In addition, we continue to concentrate a significant
portion of our sales in the professional sector, while Rexall concentrates on
mass-market retail sales.

      WEIDER NUTRITION INTERNATIONAL, INC. develops, manufactures, markets,
distributes and sells branded and private label vitamins, nutritional
supplements and sports nutrition products in the United States and throughout
the world. It offers a broad range of capsules and tablets, powdered drink
mixes, bottled beverages and nutrition bars. Its portfolio of recognized brands,
including Schiff, Weider Sports Nutrition, MetaForm and American Body Building,
are primarily marketed in four principal categories, sports nutrition, vitamins,
minerals and herbs, weight management and healthy snacks. Weider carries a
broader range of products than the Company, a few of which are in direct
competition with some of our products. However, Weider appears to focus its
marketing efforts on the sports sector.

      PURE ENCAPSULATIONS manufactures a line of hypo-allergenic nutritional
supplements (vitamins, minerals, standardized herbal extracts, amino acids,
protein powders, and other nutrients), which are marketed directly to
individuals in the health care industry. Some of these products are similar to
ours, and we will experience competition from Pure Encapsulations to varying
degrees.

      Some of the companies listed above, and many other corporations in the
health and nutritional supplement business, are better funded and possess
superior managerial and marketing resources. We plan to compete primarily on the
basis of superior service and differentiate the Company by marketing its high
quality products directly to professionals, allowing a greater percentage of
products to be distributed under private labeling, and producing products which
address needs that have not been met by our competitors' products.

                                       14
<PAGE>

      The Company is also expanding into the field of research on
pharmaceuticals and nutraceuticals. While we hope that this research will lead
to discovery of new uses for herbs that may be incorporated into our existing
products or used to develop new products, we will also market our research
results to pharmaceutical companies for further research and clinical trials. It
is our intention to obtain patents for our research, and to sell these patents
to interested pharmaceutical companies. Due to the limited nature of our
activities in the field of pharmaceutical and nutraceutical research - the
Company will not perform clinical trials - the identity and nature of our
competitors is uncertain. However, we anticipate competition from pharmaceutical
companies conducting internal research on new products as well as outside
research groups, such as ClinTrials, that are hired by pharmaceutical companies
to conduct research on their behalf.

MARKET STRATEGIES

      We have divided sales into multiple market channels:

            o Professional accounts - Physicians, nutritionists, chiropractors
            and health care professionals (37%).

            o Distributor accounts - Sales to distributors (to be resold to the
            professional or retail markets) (46%).

            o Retail accounts - Healthfood stores and direct sales to consumers
            (17%).

      The Company markets its products under both broadline brands
NutriCology(R) and Allergy Research Group(R), and private labeling. Broadline
brands offer a complete range of products under one brand name, including
multivitamins, single-entity vitamins, minerals and nutritional supplements,
including herbal products. Private label products which are usually marketed
under the retailer's store brand name also offer a wide product assortment,
albeit typically somewhat narrower in scope than broadline brands, including
national brand equivalent formulas positioned as lower-priced "compare and save"
products. We currently provide private labeling to a number of our physician
accounts.

      The Company markets its products through the use of trade shows, direct
marketing to physicians, nutritionists, chiropractors and health care
professionals, contractual arrangements with distributors (who market the
products themselves), advertising in trade magazines, radio shows in which Dr.
Levine participates, direct sales to health food stores and pharmacies, and
direct catalog sales to consumers. Our direct sales team currently consists of
one primary representative and three contracted sales representatives covering
critical territories and markets. These four sales representatives, combined
with internal support staff, are focused on informing existing customers of our
newest products. Through a combination of direct telemarketing, e-mail "blasts,"
the Company's newsletter "Focus," and extensive market specific mailings, we
anticipate increased sales over the next year.

REGULATION

      The manufacturing, processing, formulating, packaging, labeling and
advertising of the Company's products are subject to regulation by one or more
federal agencies, including the United States Food and Drug Administration (the
"FDA"), the Federal Trade Commission (the "FTC"), the United States Department
of Agriculture and the Environmental Protection Agency ("EPA"). These activities
are also regulated by various agencies of the states, localities and foreign
countries in which the Company's products are manufactured, distributed and
sold. The FDA, in particular, regulates the formulation, manufacture and
labeling of vitamin and other nutritional supplements in the United States.

                                       15
<PAGE>

      The Dietary Supplement Health and Education Act of 1994 ("DSHEA") was
enacted in October 1994. DSHEA revised the provisions of the Federal Food, Drug
and Cosmetic Act (the "FFDC Act") concerning the composition and labeling of
dietary supplements. The legislation created a new statutory class of "dietary
supplements," including vitamins, minerals, herbs, amino acids and other dietary
substances for human use to supplement the diet.

      Prior to the enactment of DSHEA, dietary supplements were subject to the
same regulatory requirements as other foods. Under DSHEA, manufacturers of
dietary supplements became responsible for determining that the dietary
supplements it manufactured are safe and that any representations or claims made
about them are substantiated by adequate evidence to show that they are not
false or misleading. As a result, dietary supplements do not require approval
from the FDA before they are marketed. Except where the manufacturer is
introducing a new dietary ingredient, where pre-market review for safety data
and other information is required, a manufacturer does not have to provide the
FDA with this evidence either before or after it markets it products. In
addition, dietary supplements do not require FDA registration prior to
production or sale. As indicated above, the manufacturer does, however, have to
notify the FDA if it intends to market a dietary supplement in the U.S. that
includes a new dietary ingredient. In that case, the manufacturer must
demonstrate why the ingredient is reasonably expected to be safe for use in
dietary supplements unless the ingredient has already been recognized as a food
substance and is present in the U.S. food supply.

      During March 2003, the FDA issued proposed regulations that would require
supplement-makers to list their ingredients, ensuring they are not adulterated
with contaminants or impurities and that the dosages promised on the label are
indeed correct. Dietary supplements would also need to be labeled accurately to
reflect active and other ingredients. If adopted as proposed, the new rule would
establish new standards or "current good manufacturing practices" ("CGMPs") to
prevent such adulteration or mislabeling, as well as establish industry-wide
standards necessary to ensure that dietary supplements are manufactured
consistently as to identify purity, quality, strength and composition. The
proposed rule also contains requirements for the design and construction of
physical plans, and establishes quality control procedures and procedures for
testing manufactured dietary ingredients and dietary supplements. Finally, the
rule includes requirements for maintenance of records and handling of consumer
complaints related to the CGMPs.

      The proposed rule is designed to cover all types of dietary supplements.
However, recognizing that the new rule, if adopted, would have a greater
economic impact on small businesses, the FDA included a three-year phase-in
period for small businesses. As a result, businesses with fewer than 500
employees would not be required to be in complete compliance with the new
regulations until three years after they become effective. The proposed rule
will be available for public comment for three months with implementation of
final regulations expected next year.

      Products marketed by the Company are classified as dietary supplements
under the FFDC Act, and are therefore subject to DSHEA and, if adopted, the
proposed regulations. In addition to these regulations, advertising and label
claims for dietary supplements have been regulated by state and federal
authorities under a number of disparate regulatory schemes. There can be no
assurance that a state will not interpret claims presumptively valid under
federal law as illegal under that state's regulations, or that future FDA or FTC
regulations or decisions will not restrict the permissible scope of such claims
even beyond the current proposals.

                                       16
<PAGE>

      Both foods and dietary supplements are subject to the Nutrition Labeling
and Education Act of 1990 (the "NLEA"), which prohibits the use of any health
claim for foods, including dietary supplements, unless the health claim is
supported by significant scientific agreement and is either pre-approved by the
FDA or the subject of substantial government scientific publications and a
notification to the FDA. To date, the FDA has approved the use of only a limited
number of health claims for dietary supplements. However, among other things,
the DSHEA amended, for dietary supplements, the NLEA by providing that
"statements of nutritional support" may be used in labeling for dietary
supplements without FDA preapproval if certain requirements, including prominent
disclosure on the label of the lack of FDA review of the relevant statement,
possession by the marketer of substantiating evidence for the statement and
post- use notification to the FDA, are met. Such statements, commonly referred
to as "structure function" claims, may describe how particular nutritional
supplements affect the structure, function or general well being of the body
(e.g. "promotes your cardiovascular health").

      On November 18, 1998, the FTC published "Dietary Supplements: An
Advertising Guide for Industry," a guide describing FTC policy governing dietary
supplement advertising. The guide provides additional explanation but does not
substantively change the FTC's policy requiring that product claims be truthful
and supported by adequate substantiation as to the truthfulness of the claim.

      On March 19, 2003, the FDA issued new security guidance documents to
ensure the safety and security of the U.S. food supply. The new guidance
documents are designed to reduce the risk of tampering or other malicious,
criminal or terrorist acts. The FDA also announced increased surveillance of
domestic and imported foods. The guidance documents were issued in response to
the increased risk of bioterrorism as a result of the "War on Terrorism" and the
current U.S. invasion of Iraq. The new guidance documents and heightened
surveillance are part of Operation Liberty Shield, a comprehensive national plan
designed to increase protections for U.S. citizens and infrastructure while
maintaining the free flow of goods with minimal disruption to the economy or
American way of life. The FDA guidance documents are not regulations and are not
mandatory, but they do provide FDA recommendations, which are generally followed
throughout the industry. It is unclear what, if any, impact compliance with the
guidance documents by firms that produce, process, distribute, pack or transport
food ingredients will have on the dietary supplement industry.

      Governmental regulations in foreign countries where the Company plans to
commence or expand sales may prevent or delay entry into the market or prevent
or delay the introduction, or require the reformulation, of certain of our
products. Compliance with such foreign governmental regulations is generally the
responsibility of our distributors for those countries. These distributors are
independent contractors over whom we have limited control.

      We cannot predict the nature of any future laws, regulations,
interpretations or applications, nor can we determine what effect additional
governmental regulations or administrative orders, when and if promulgated,
would have on the Company's business in the future. They could, however, require
the reformulation of certain products to meet new standards, the recall or
discontinuance of certain products not capable of reformulation, additional
record keeping, expanded documentation of the properties of certain products,
expanded or different labeling, and/or scientific substantiation. Any or all of
such requirements could have a material adverse effect on our results of
operations and financial condition. Compliance with the provisions of national,
state and local environmental laws and regulations has not had a material
adverse effect upon the capital expenditures, earnings, financial position,
liquidity or competitive position of the Company.

      Because we do not intend to manufacture pharmaceuticals and nutraceutical
products itself, but will only conduct literature work and patent applications
for potential products, we do not anticipate application of regulations
governing our activities in those fields. With respect to the manufacture of our
vitamin and nutritional supplement products, our outside vendors are required to
manufacture our products in accordance with all applicable governmental
regulations, including Current Good Manufacturing Practices of the FDA.

                                       17
<PAGE>

EMPLOYEES

      As of the date of this report, the Company employs approximately 30
full-time and four part-time employees. The Company does not have any collective
bargaining agreements with its employees and we believe our employee relations
are good.

INTELLECTUAL PROPERTY

      Our trademarks are valuable assets that are very important to the
marketing of our products. Our policy is to pursue registrations for all of the
trademarks associated with our key products. The Company has approximately 13
trademark registrations with the United States Patent and Trademark Office,
including for Allergy Research Group(R) and NutriCology(R). We rely on common
law trademark rights to protect our unregistered trademarks. Common law
trademark rights do not provide the Company with the same level of protection as
would U.S. federal registered trademarks. In addition, common law trademark
rights extend only to the geographic area in which the trademark is actually
used, while U.S. federal registration prohibits the use of the trademark by any
third party anywhere in the United States. Currently, we have obtained no
patents for its vitamin and nutritional supplement products.

ITEM 2. DESCRIPTION OF PROPERTY

      Our main administrative office and warehouse, located in Hayward,
California, is under a five-year lease, which commenced June 1, 1998. The lease
contains a provision allowing for an increase in rent of 5% every 15 months. The
property consists of approximately 25,440 square feet of office and warehouse
space, of which approximately 5,500 square feet is office space and 19,940
square feet consists of warehouse space. The Company previously maintained a
second warehouse for warehousing and packaging purposes, which was sublet during
the period ended December 31, 2002, for $8,320 per month. This sublease was
terminated as of December 31 2002 and a new tenant was found beginning January
20, 2003 on a month-to-month basis for $1,900 per month. The new tenant leases
substantially less space than the prior tenant. During fiscal years ended 2002
and 2001, the Company paid rent on its facilities of $368,300 and $354,576,
respectively. For the period ended December 31, 2002, the Company paid total
rent of $368,300 on both facilities, offset by sublease income of $91,520 for a
total rent expense of $276,780.

ITEM 3. 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 the 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 is 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


                                       18
<PAGE>

NutriCology had been Dr. Gonzales' supplier. Dr. Gonzales has 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 had requested reimbursement of
attorneys' fees, which were denied. NutriCology appealed that decision, and won.
The court ordered the payment of attorneys' fees of approximately $120,000, as
well as costs (expected to be approximately $10,000) to Nutricology.
NutriSupplies has filed an appeal.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None.







                                       19
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

      The Company's Common Stock is traded on the Over-the-Counter Bulletin
Board under the symbol "ALRG." The following table sets forth the trading
history of the Common Stock on the Over the Counter Bulletin Board and the Pink
Sheets for each quarter of fiscal years end December 31, 2001 and 2002 as
reported by Dow Jones Interactive. The quotations reflect inter-dealer prices,
without retail mark-up, markdown or commission and may not represent actual
transactions.

                Quarter          Quarter         Quarter
                Ending             High            Low
               3/31/2001          $0.22           $0.06
               6/30/2001          $0.23           $0.10
               9/30/2001          $0.20           $0.115
               12/31/2001         $0.21           $0.10
               3/31/2002          $0.18           $0.091
               6/30/2002          $0.18           $0.10
               9/30/2002          $0.38           $0.15
               12/31/2002         $0.345          $0.19
               3/14/2003*         $0.32           $0.17

*Reflects partial period.

HOLDERS

      As of March 14, 2002, there were approximately 105 holders of record of
the Company's Common Stock. The Board of Directors believes that the number of
beneficial owners is substantially greater than the number of record holders
because a significant portion of our outstanding Common Stock is held in broker
"street names" for the benefit of individual investors.

DIVIDENDS

      We have never paid a cash dividend on our common stock. Payment of
dividends is at the discretion of the Board of Directors. The Board of Directors
plans to retain earnings, if any, for operations and does not intend to pay
dividends in the foreseeable future.

ITEM 6. 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 our financial condition, changes in financial condition and results of
operations. The MD&A is organized as follows:

                                       20
<PAGE>

      - 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.

      - FACTORS THAT COULD AFFECT FUTURE RESULTS. This section discusses factors
      and other variables affecting our operating results and cautions readers
      that past financial performance should not be considered a reliable
      indicator of future performance and investors should not use historical
      trends to anticipate results or trends in future periods.

      - OVERVIEW. This section provides a general description of the our
      business, as well as recent developments that we believe are important in
      understanding the results of operations, as well as to anticipate future
      trends in those operations.

      - RESULTS OF OPERATIONS. This section provides an analysis of our results
      of operations for the years ended December 31, 2002 compared to 2001. A
      brief description is provided of transactions and events, including
      related party transactions, that impact the comparability of the results
      being analyzed.

      - LIQUIDITY AND CAPITAL RESOURCES. This section provides an analysis of
      our financial condition and cash flows as of and for the year ended
      December 31, 2002.

      - 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.

      - RECENT ACCOUNTING PRONOUNCEMENTS. Summarizes accounting pronouncements
      issued throughout the year and indicates any potential impact on the
      Company.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS/RISK FACTORS

      The following discussion should be read in conjunction with the 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. We do not undertake to publicly
update or revise any of our 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
which affect our business, included in this section and elsewhere in this
report.

FACTORS THAT COULD AFFECT FUTURE RESULTS

      Factors that might cause actual results, performance or achievements to
differ materially from those projected or implied in such forward-looking
statements include, among other things: (i) the impact of competitive products;
(ii) changes in law and regulations; (iii) adequacy and availability of


                                       21
<PAGE>

insurance coverage; (iv) limitations on future financing; (v) increases in the
cost of borrowings and unavailability of debt or equity capital; (vi) the effect
of adverse publicity regarding nutritional supplements; (vii) the inability of
the Company to gain and/or hold market share; (viii) exposure to and expense of
resolving and defending product liability claims and other litigation; (ix)
consumer acceptance of the Company's products; (x) managing and maintaining
growth; (xi) customer demands; (xii) market and industry conditions including
pricing, demand for products, levels of trade inventories and availability of
raw materials; (xiii) the success of product development and new product
introductions into the marketplace; (xiv) slow or negative growth in the
nutritional supplement industry; (xv) the departure of key members of
management; (xvi) the ability of the Company to efficiently manufacture its
products; (xvii) the effect of proposed legislation regarding the labeling,
facilities and quality control of our products; (xviii) the effect of FDA
guidance documents for increased inspections of food ingredients on the dietary
supplement industry; (xix) the effect of the U.S. War on Terrorism and
activities in Afghanistan and Iraq; as well as other risks and uncertainties
that are described from time to time in the Company's filings with the
Securities and Exchange Commission, and elsewhere in this report.

OVERVIEW

      BUSINESS DESCRIPTION. We strive to be an innovative leader in
nutraceutical research and product formulation. Since 1980, we have produced
quality, hypoallergenic nutritional supplements and supplies products to
physicians and health care practitioners worldwide. We develop, contract
manufacture, market and sell branded and private label products, including
vitamins and nutritional supplements, throughout the world under the
NutriCology(R) and Allergy Research Group(R) labels. Our products are
distributed through distributors to medical and professional accounts and to
retailers. We offer a line 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 30806 Santana Street, Hayward, California 94544 and the 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)
implement a comprehensive e-commerce plan. We believe that our history and
reputation in the field, multiple distribution channels, broad portfolio of
products and packaging and distribution capabilities position it to be a
long-term competitor in the vitamin and nutritional supplements industries.

      We will continue to work with Dr. Hoang 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 the Company whereby the


                                       22
<PAGE>

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 additional uses
for existing herbal products, that can be added to our current line of products
as health food or dietary supplements.

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.

      FISCAL YEAR ENDED DECEMBER 31, 2002 COMPARED TO DECEMBER 31, 2001

      REVENUES. During the fiscal year ended December 31, 2002, we had net sales
of $12,684,413, representing an increase of $935,214 from net sales of
$11,749,199 during fiscal year ended December 31, 2001. The overall increase of
8% was driven by an increase in retail sales of approximately 78%, an increase
in sales to distributors of approximately 7%, an increase in sales to health
food stores of approximately 10%, while sales directly to professionals showed
modest increases. The increase in sales is the result of the introduction of new
products and increased marketing efforts.

      COST OF SALES. Cost of sales increased $480,016 to $7,587,795 for the year
ended December 31, 2002, compared to $7,107,779 for the year ended December 31,
2001. The increase in cost of sales corresponds with the increase in sales.
Gross profit margins increased approximately .7%, approximating 40.2% for 2002
as a result of the higher margins associated with retail sales.

      OPERATING EXPENSES. Total operating expenses decreased by approximately
$79,183 or 2% to $4,184,829 for the year ended December 31, 2002 from $4,266,445
for the year ended December 31, 2001, primarily attributable to reduced bad debt
expense and because an expense associated with a legal settlement was recorded
in 2001 where no corresponding expense existed for 2002.

      INTEREST EXPENSE. Interest expense decreased approximately $122,393 for
the year ended December 31, 2002, as compared to December 31, 2001, as a result
of declining interest rates and because the line of credit outstanding was
reduced to zero during the fourth quarter of 2002.

      INCOME TAXES. As of December 31, 2002, we recorded a deferred tax asset of
$404,085 to be realized as a result of future taxable income offset by net
operating loss carryforwards. As of fiscal year ended December 31, 2002, we had
approximately $2,200,000 and $1,400,000, respectively, available in federal and
state net operating loss carryforwards to offset future taxable income, which
expire principally in the year 2021 (federal) and 2013 (state).

      NET INCOME. During the period ended December 31, 2002, we experienced net
income of $997,862, as compared to net income of $326,557 for the period ended
December 31, 2001. The increase is a reflection of the increase in sales, higher
profit margins, a reduction in selling and general and administrative expenses,
from $4,070,974 in 2001 to $3,924,080 in 2002, and the reduction of interest
expense.

      EARNINGS PER SHARE. Earnings per share have increased to $0.07 per share
for the year ended December 31, 2002, versus $0.02 per share for the same period
in 2001.

LIQUIDITY AND CAPITAL RESOURCES

      FISCAL YEAR ENDED DECEMBER 31, 2002 COMPARED TO DECEMBER 31, 2001

      Cash Flows

      OPERATING ACTIVITIES. Net cash flow provided by operating activities was
$882,997 for the year ended December 31, 2002 resulting primarily from net
income of $997,862 increased by depreciation expense of $224,295. Reducing the
cash flow generated from net income plus depreciation expense were increases in


                                       23
<PAGE>

deferred tax assets of $183,625, accounts receivable of $20,344, inventory of
$42,486, and deposits of $8,320 and decreases in accounts payable of $272,258
and the allowance for doubtful accounts of $36,329. Cash flow from operations
was increased by increases in prepaid expenses and other assets of $47,898 and
decreases in accrued liabilities of $106,451. Net cash flow provided by
operating activities was $485,410 for the year ended December 31, 2001. This was
primarily the result of net income of $326,557, increased by deprecation expense
of $225,002, a decrease in accounts receivable of $363,098, a decrease in the
cash surrender value of life insurance of $45,290, and an increase in accounts
payable of $167,840. These figures were primarily offset by a decrease in the
allowance for doubtful accounts of $100,190, a decrease in the inventory reserve
account of $64,685, an increase in deferred tax assets of $96,910, an increase
in inventory of $260,756, an increase in prepaid expenses and other assets of
$61,968 and a decrease in accrued liabilities of $42,855.

      INVESTING ACTIVITIES. For the year ended December 31, 2002, net cash flow
used in investing activities was $35,767, resulting primarily from the
acquisition of property and equipment of $46,227 reduced by repayments from
officers of $11,110. Net cash flow used in investing activities was $16,400 for
the year ended December 31, 2001, resulting primarily from the purchase fixed
assets of $34,499 and offset by repayments on officer loans of $18,749.

      FINANCING ACTIVITIES. For the year ended December 31, 2002, net cash used
in financing activities was $706,727 resulting from the purchase of treasury
shares for $81,573, and the repayment on the line of credit and capital lease
obligation of $570,064 and $55,090, respectively. Net cash flow used in
financing activities was $458,159 for the year ended December 31, 2001,
representing advances drawn on the line of credit of $77,604 and repayments
under the line of credit and capital lease obligations of $535,763.

      COMMON STOCK REPURCHASE PROGRAM. On May 3, 2002, we announced a stock
repurchase plan, whereby the Company may repurchase between 1,000,000 and
2,500,000 shares of its common stock in open market transactions, from time to
time, during the succeeding two years in compliance with Rule 10b-18 of the
Securities Exchange Act of 1934 and all other applicable securities regulations.
Since the inception of the plan through December 31, 2002, the Company
repurchased 383,250 shares of common stock for $81,573.

      Current Financial Condition/Risk Analysis

      At December 31, 2002, the Company had a positive working capital of
$1,873,215, compared to working capital at December 31, 2001 of $825,365. We
have been successful in paying down its outstanding debt as a result of overall
decreased operating expenses and increased revenues, and as evidenced by a
decrease in the outstanding line of credit to zero at December 31, 2002 from
$570,064 at December 31, 2001. We finance our inventory and accounts receivable
under a line of credit and through income from operations. If customer demand
should drop off due to such factors as pricing pressures imposed by competitors,
customer bankruptcies or some other unforeseen circumstances, our access to
funds may be restricted.

      During the next twelve months, we will continue to work with Dr. Hoang on
his proprietary herbal formulas with a view to developing additional research
that can be marketed to the pharmaceutical and nutraceutical industries. In
addition to our work in the pharmaceutical and nutraceutical fields of research,
we will continue to add new products to our existing product line.

                                       24
<PAGE>

      During 2002, we experienced a concentration of approximately 54% of our
manufacturing with four separate vendors. We do not currently have written
contracts with any of its manufacturers, but relies on long-term personal and
professional relationships with its four largest vendors - Horizon Laboratories
(31%), M&L Pharmaceuticals (9%), ABCO Laboratories, Inc. (7%) and Softgel
Technologies (7%). We believe that the Company has good relations with all of
its current manufacturers and suppliers. However, 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.

      Approximately 11% of our total sales in 2002 were attributable to a single
distributor. In the event we were to lose that account, we anticipate that we
would be able to convert the business to sell 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.

      Our future funding requirements will depend on numerous factors, some of
which are beyond our control. These factors include the Company's ability to
operate profitably, to recruit and train management and personnel, and 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. Our capital
resources and liquidity are expected to be provided by the Company's cash flow
from operations, and in addition, we have available net operating loss
carryforwards of approximately $2,200,000 (federal) and $1,400,000 (state) to
offset future taxable income.

      The U.S. economy in general is being adversely affected by the terrorist
activities and potential activities, the War on Terrorism and current military
actions in Iraq and Afghanistan. Any economic downturn resulting from such
activities could adversely impact our results of operations, impair our ability
to raise capital, or otherwise adversely affect our ability to grow our
business. In addition, in response to these activities and potential activities,
on March 19, 2003, the FDA issued four new security guidance documents designed
to step-up the inspection of foods and food ingredients entering or present
within the U.S. Although these guidance documents are not mandatory, they
represent the recommendations of the FDA, which are generally followed in the
food industry. As yet, it is unclear what effect, if any, the compliance with
these guidance documents by members of the food industry will have on the
dietary supplement industry. Certain dietary ingredients may also represent food
ingredients that are subject to these types of inspections. Although the
guidance documents are part of Operation Liberty Shield, which is designed to
minimize impact to the economy, the increased surveillance of domestic and
imported foods may result in delays and/or increased expenses in the food
industry and indirectly affect our business operations.

      In addition, during March 2003, the FDA issued proposed regulations that
would require supplement-makers to list their ingredients, ensuring they are not
adulterated with contaminants or impurities and that the dosages promised on the
label are indeed correct. Dietary supplements would also need to be labeled
accurately to reflect active and other ingredients. If adopted as proposed, the
new rule would establish new standards or "current good manufacturing practices"
("CGMPs") to prevent such adulteration or mislabeling, as well as establish
industry-wide standards necessary to ensure that dietary supplements are
manufactured consistently as to identify purity, quality, strength and
composition. The proposed rule also contains requirements for the design and
construction of physical plans, and establishes quality control procedures and
procedures for testing manufactured dietary ingredients and dietary supplements.
Finally, the rule includes requirements for maintenance of records and handling
of consumer complaints related to the CGMPs.

                                       25
<PAGE>

      The proposed rule is designed to cover all types of dietary supplements.
However, recognizing that the new rule, if adopted, would have a greater
economic impact on small businesses, the FDA included a three-year phase-in
period for small businesses. As a result, businesses with fewer than 500
employees would not be required to be in complete compliance with the new
regulations until three years after they become effective. If the proposed rule
is adopted as proposed, we will attempt to spread the implementation expenses
across the three-year phase-in period and may incur some of these expenses
during the next twelve months of operations.

      CONTRACTUAL OBLIGATIONS. Our Contractual Obligations and Commercial
Commitments are detailed below:

<TABLE>
<CAPTION>
                                                     Payments Due by Period
--------------------------- -------------------------------------------------------------------------------------
                                                    Less
    Contractual                                     Than 1              1-3             4 - 5         After 5
    Obligations                   Total             Year               Years            Years          Years
--------------------------- ---------------- ------------------ ------------------- ------------- ---------------
Line of Credit (1)
--------------------------- ---------------- ------------------ ------------------- ------------- ---------------
<S>                                <C>                <C>                 <C>        <C>          <C>
Capital Lease
Obligations                         $48,771            $48,771
--------------------------- ---------------- ------------------ ------------------- ------------- ---------------

Operating Leases                   $479,187           $322,812            $156,375
--------------------------- ---------------- ------------------ ------------------- ------------- ---------------
Total Cash Contractual
Obligations                        $527,958           $371,583            $156,375
--------------------------- ---------------- ------------------ ------------------- ------------- ---------------
</TABLE>

      (1)   This represents our borrowings under the line of credit with Merrill
            Lynch, which had a zero balance as December 31, 2002 and through the
            date of this filing. The Merrill Lynch line of credit was activated
            on August 19, 2002 and provides for maximum financing of $500,000,
            bearing interest at the London Interbank Offered Rate (LIBOR) plus
            3.15%, computed on a monthly basis. As of December 31, 2002, the
            interest rate on the line of credit was 4.53% per annum. Because the
            line of credit is secured by substantially all of the assets of the
            Company, if we 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 officers of the Company
            have personally guaranteed the line of credit.

CRITICAL ACCOUNTING POLICIES

      Our discussion and analysis or plan of operations are 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.

      We believe the following critical accounting policies reflect its more
significant estimates and assumptions used in the preparation of its
consolidated financial statements.

                                       26
<PAGE>

      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. Fluctuations in the actual outcome of these future
tax consequences could materially impact our financial position or our results
of operations. Our deferred tax asset on the consolidated balance sheet is
recognized primarily as a result of net operating loss carryforwards. In the
event that the Company did not generate any taxable income within the next year,
the asset would be overstated. We record a valuation allowance to reduce our
deferred tax assets to the amount that is more likely than not to be realized.
We have considered future market growth, forecasted earnings, and future taxable
income in determining the need for a valuation allowance. In the event we were
to determine that we would not be able to realize all or part of our net
deferred tax assets in the future, an adjustment to the deferred tax assets
would be charged to earnings in the period such determination is made. Likewise,
if we later determine that it is more likely than not that the net deferred tax
assets would be realized, the previously provided valuation allowance would be
reversed. This asset represents approximately 11.32% of total assets at December
31, 2002.

      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.

      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.

RECENT ACCOUNTING PRONOUNCEMENTS

      The Financial Accounting Standards Board has issued the following
accounting pronouncements, none of which are expected to have a significant
effect, if any, on the our financial statements:

      APRIL 2002 - SFAS NO. 145 - "RESCISSION OF FASB STATEMENTS NO. 4, 44, AND
64, AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL CORRECTIONS." This
statement is effective for fiscal years beginning after May 15, 2002.

      JUNE 2002 - SFAS NO. 146 - "ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR
DISPOSAL ACTIVITIES," which applies to costs associated with an exit activity
that does not involve an entity newly acquired in a business combination or with
a disposal activity covered by FASB Statement No. 144, "ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS." Effective for exit or disposal
activities initiated after December 31, 2002.

                                       27
<PAGE>

      OCTOBER 2002 - SFAS NO. 147 - "ACQUISITIONS OF CERTAIN FINANCIAL
INSTITUTIONS, AN AMENDMENT OF FASB STATEMENTS NO. 72 AND 144 AND FASB
INTERPRETATION NO. 9, " which applies to the acquisition of all or part of a
financial institution, except for a transaction between two or more mutual
enterprises. Effective for acquisitions for which the date of acquisition is on
or after October 1, 2002.

      DECEMBER 2002 - SFAS No. 148, "ACCOUNTING FOR STOCK BASED
COMPENSATION-TRANSITION AND DISCLOSURE." was issued to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, it amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. Effective for financial statements with fiscal years ending after
December 15, 2002.

      PENDING ACCOUNTING PRONOUNCEMENTS - It is anticipated that current pending
accounting pronouncements will not have an adverse impact on the financial
statements of the Company.

ITEM 7. FINANCIAL STATEMENTS

      Please see our audited consolidated financial statements for the period
ended December 31, 2002, as compared to the period ended December 31, 2001,
attached hereto.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

      During our last fiscal year and as of the date of this report, we have had
no changes in or disagreements with our principal independent accountant
regarding any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, nor has our principal accounting firm
resigned or declined to stand for re-election.

                                       28
<PAGE>

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

OFFICERS AND DIRECTORS

      The management and directors of the Company's business activities are
under the control of its Board of Directors. Our Chief Executive Officer,
Stephen Levine, Ph.D., manages the Company's daily operations. The Company
currently has three directors. The following table provides information
regarding each of our officers and directors, including positions held.

NAME                                  POSITION HELD(1)
----                                  -------------

Stephen Levine, Ph.D.                 Chief Executive Officer, Chief Financial
30806 Santana Street                  Officer, President, and  Chairman of the
Hayward, California 94544             Board

Susan Levine                          Chief Conventions Oversight, Secretary,
30806 Santana Street                  Director
Hayward, California 94544

Ed Kane (1)                           Director
45 Reese Road
Millville, NJ 08332

      (1) Mr. Kane acts as an independent director for the Company.

      The following is a summary of the business experience of the officers and
directors of the Company as well as other key employees.

      STEPHEN LEVINE, PH.D. (51) has served as the Company's Chief Executive
Officer from December 1997 to January 1999 and recommenced service to the
Company in that capacity in January 2000, upon resignation of the interim CEO.
Dr. Levine has been Chairman of the Board and a Director of the Company since
December 1997. In January 2001, Levine was appointed Chief Financial Officer of
the Company. Dr. Levine graduated cum laude from the State University College in
Buffalo, New York and received his Ph.D. from the University of California,
Berkeley. In 1979, Dr. Levine founded NutriCology/Allergy Research Group and was
employed as its owner and operator from that time until 1998, when NutriCology
was acquired by the Company. He now serves as Chairman of the Board of
Directors, as well as being employed as Director of Research. Dr. Levine is the
author of AntiOxidant Adaption, Its Role in Free Radical Pathology. Dr. Levine
is the husband of Susan Levine, who acts as Chief Convention Oversight of the
Company.

      SUSAN LEVINE (47) has served as the Secretary and Chief Conventions
Oversight and Director to the Company since December 1997. Mrs. Levine resigned
her board membership temporarily between January 1999 and January 2000. In
addition, Susan Levine acts as the Company's Public Relations and Conventions
and Travel Specialist. Since 1980, Mrs. Levine has worked with her husband, Dr.
Stephen Levine, in the creation and development of the Company. Prior to working
for the Company, Mrs. Levine was the Director of Senior Housing ECHO, a
non-profit organization located in Hayward, California, where her duties
included grant writing and coordination of workers for social programs.

                                       29
<PAGE>

      ED KANE (75) was appointed to the Company's Board of Directors on November
8, 2000. From 1955 to present, Mr. Kane has acted as the sole owner and chief
executive officer of Kane Steel, a company that has current gross sales of $25
million and over 120 employees. Mr. Kane also started K-TRON International
("KTII") in 1964. KTII was the first to digitize weigh feeding, which is a
system used to continuously weigh and feed material for the process industries.
KTII is listed on the over-the-counter market and is a $120 million company
today, with plants in Switzerland and the United States. In addition, Mr. Kane
started K-FLOW International ("KFI") in 1980 to manufacture a patented mass flow
meter. KFI was merged into the instrument division of the Swiss firm Asea Braun
Bavari in 1991. Expanding into the health field ten years ago, Mr. Kane and his
wife Patricia, a Ph.D., founded BodyBio Corporation, a specialized laboratory
analysis service utilized by physicians worldwide in interpreting blood test
results. Mr. Kane is currently the chief executive officer of BodyBio
Corporation. Mr. Kane has been a student of science and medicine for most of his
adult life, and holds a degree from the Temple University. Mr. Kane's particular
focus has been on fatty acid metabolism. He has been a visiting professor at the
Wharton School of Business in Philadelphia and instructs physicians in a
biomedical course on lipid metabolism five times yearly. Mr. Kane holds several
U.S. patents on steel structures, instrumentation and biochemistry. The city of
Millville, New Jersey recognized Mr. Kane as one of the three leading
industrialists of the last half century.

KEY EMPLOYEES

      FRED SALOMON, was hired in 2002 to fill the role of Director of
Operations. Mr. Salomon brings 40 years of executive management experience. He
comes from the home-sewing and craft industry where he managed and grew several
businesses. He also founded his own company, which he sold to the McCall Pattern
Company, where he served as Chief Operating Officer of their national
distribution company, NMI, Inc. For the last 20 years, Mr. Salomon was general
manager of Lion Notions, Inc. and Fantasy Importers, Inc., both privately held
corporations.

      CLINTON ABBOTT has served as Operations Manager of the Company since
October 1999. Mr. Abbott has filled various roles for the Company: from July
1999 to September 1999, he acted as Pharmacy Market Development Manager; from
September 1998 to July 1999 he acted as Purchasing and Facilities Manager; from
April 1997 to September 1998 he acted as Purchasing/Warehouse Manager; and from
December 1996 to April 1997, he acted as Purchasing Manager. Mr. Abbott brings
20 years of experience with two of the largest pharmaceutical wholesalers in the
U.S., Cardinal Health ($240 million per year in sales) and Bergen Brunswig ($140
million per year), where he held titles of Purchasing, Operation and
Distribution Manager. Mr. Abbott holds a B.S. degree in Business Administration
from California State University, Sacramento, where he graduated in 1980.

      HORTENSE AMARANTE serves as Customer Service Manager to the Company. One
of the most senior employees at the Company, Ms. Amarante has been with the
Company since 1990 filling many roles, primarily in the accounting department.
Prior to joining the Company, Ms. Amarante worked in the Accounting Department
for First Select Visa for five years. Ms. Amarante was educated in Portugal and
holds a Bachelors of Arts degree in Education.

      LAURA JOHNSON, CPA, has been the Controller for the Company since January
2001. Prior to accepting the position with the Company she was the controller at
a small closely held company. She has also held various accounting and auditing
positions with American Stores, Inc., Ball Metal Container Group and Price
Waterhouse. Ms. Johnson holds a B.S. degree in Business Administration with a
concentration in accounting from Colorado State University, Fort Collins, where
she graduated in 1981.

                                       30
<PAGE>

      DIANE RAILE, CNC, acts as Technical Support Manager to the Company. A
Certified Nutrition Consultant, Ms. Raile was educated at the Institute for
Educational Therapy in Cotati, California. Ms. Raile acts as intermediary
between customers and ARG research and development department, as well as
coordinator of the Company's product library. Prior to joining the Company in
1998, Ms. Raile held teaching positions at IET campuses and Trinity College in
San Francisco and maintained a private nutritional practice. Ms. Raile is an
accomplished public speaker on the subject of nutrition. She taught at IET from
September 1997 to July 1998 and with Trinity from October 1997 to March 1998.

      LUBA VOLOSHKO, PH.D. has served as Director of Quality Control to the
Company since 1998. Dr. Voloshko came to the Company with a Ph.D. in chemistry
from the Moscow University of Chemical Technology. Dr. Voloshko was the Chemical
Department Chief at the Laboratory of Forensic Science in Riga Latvia for twelve
years from 1984 through 1997 before coming to the U.S. Dr. Voloshko keeps
abreast of all FDA regulations related to the nutritional supplement industry,
conducts random and specific product and material testing, oversees the receipt
and release of all raw materials and finished goods, as well as reviewing
product labeling for accuracy.

MEDICAL ADVISORY BOARD

      The Company has a Medical Advisory Board, currently consisting of the
following members:

      DR. JEFFRY ANDERSON. Dr. Anderson is Medical Advisory Board co-chairman
with Dr. Stephen Levine. Dr. Anderson also carries on a Marin County based
medical practice. Dr. Anderson consults with Dr. Levine to develop state of the
art designer supplements the Company is known for originating. Prior to his
consulting work with the Company, Dr. Anderson was in private practice in Marin
County for approximately 25 years. He has been working with Dr. Levine for
approximately the past ten years, at the same time acting as a consulting
physician for other companies. He is best known for his ground-breaking work in
the fields of Chronic Fatigue Syndrome and Fibro Mialgia. Dr. Anderson was one
of the first Bay Area Physicians to focus on the causes of Chronic Fatigue. His
extensive work in immune system dysfunctions make him the perfect choice to help
head up the Company's Medical Advisory Board. Dr. Anderson received his M.D.
from the Indiana University School of Medicine in 1969.

      DR. FOUAD I. GHALY, M.D. Dr. Ghaly has been consulting with the Company
for approximately two years. He specializes in cardiovascular health, using a
preventive medical approach in both his cardiovascular and anti-aging protocols.
Dr. Ghaly has appeared on several local television programs focusing on
cardiovascular health, as well as lecturing at conferences worldwide, most
notably in the Soviet Union in 1992 at the Cardiovascular Institute. Dr. Ghaly
has acted as a diplomat for the American Board of Anti-Aging Medicine (June
1999) and for the American Board of Anesthesiology (March 1975). For the past
five years, he has been engaged in private practice in Beverly Hills, CA, and
acts as President of the Rejuvenation & Longevity Medical Clinic. Dr. Ghaly
received his M.D. from the University of Alexandria Medical School in
Alexandria, Egypt in 1965, with internships and residencies in Egypt, Canada and
Johns Hopkins Hospital in Baltimore, MD.

      DR. BA HOANG. Dr. Hoang has been consulting with the Company since August
1999. He is also a scientific advisor with Get Well International, Inc., and
research consultant for the Institute of Transplant Research at the University
of California Davis. From 1996 to 1998, Dr. Hoang acted as founder and director
of the Research of the Natural Immune Supplements Corp., where he focused on
research and development of natural supplements for chronic infectious diseases,
chronic viral infections, allergy, asthma, auto-immune diseases and immune
suppressed conditions. From 1995 to present, Dr. Hoang has acted as research
collaborator of the Biochemistry Department of the Royal Holloway University of


                                       31
<PAGE>

London, where he works on the investigation of anti-HIV1 activities and the mode
of action of herbal species. He is the co-receiver of the Wellcome Trust Grant.
From 1993 to 1996, Dr. Hoang was senior research associate St. Petersburg
Pediatric medical Academy, Russia, where he conducted research for the
development of a new approach to the diagnosis and treatment of Auto-Immune
Thrombocytopenic Purpura Asthma. Dr. Hoang has received the Visa O1 for persons
with extraordinary ability in science, and has published several articles in
medical journals.

      DR. MICHAEL ROSENBAUM MD. Dr. Rosenbaum has been consulting with Dr.
Levine since inception of NutriCology. He is an original member in the
Orthomolecular medical Society under Linus Pauling. Dr. Rosenbaum previously
held the position of President of the Orthomolecular Medical Society and is an
author and lecturer in his field. Dr. Rosenbaum has also been the President of
the Huxley Society and a medical director of the Primal Therapy Center. He has
had a private practice in environmental medicine, allergy and immunology in both
Marin County and Santa Monica since 1977. Dr. Rosenbaum received his M.D. from
the Albert Einstein College of Medicine in New York City in 1968. He has
authored several books, including "the Natural Way to Energize & Revitalize Your
Life" in 1999, and has published a number of articles in medical journals.
Currently, Dr. Rosenbaum acts as a member of the review panel for The Healthy
Foundation and Vitamins for the Homeless, and as a director for the
Orthomolecular Health Medicine Organization.

      DR. DANIEL RUBIN, N.C. Dr. Rubin has been a medical and technical
consultant to the Company since 1997, and acted as our national spokesperson
during 1999. He is the Director of Clinical Research and Attending Physician at
Aidan, Incorporated, an Immunology or Oncology company in Tempe, Arizona, which
designs and manufactures state-of-the art immunological products and protocols.
He is also the Medical Director for the Being Alive Wellness Center, the medical
program of AIDS Project Arizona. He received his N.D. from Southwest College of
Naturopathic Medicine, where he also did his residency, in 1997. Dr. Rubin has
extensive teaching experience, and has delivered lectures in Asia as well as the
United States on Cancer Immunology and HIV Disease.

      Our success is substantially dependent upon the efforts of Dr. Stephen
Levine. The loss of Dr. Levine, whom we regard as the Company's visionary, could
have a material adverse effect on the Company if a suitable replacement were not
found. Our future success is likely to depend substantially on its continued
ability to attract and retain highly qualified personnel, and the competition
for such personnel is intense.

      The Company currently does not have an audit committee. Our independent
director in consultation with our outside auditing firm reviews the audited
financial statements annually.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     To our knowledge, all reports which were required to be filed by our
directors, officers or principal shareholders during 2002 under Section 16(a) of
the Securities Exchange Act of 1934, were timely filed with the exception of
Form 4s due to be filed by our Chief Executive Officer and our Secretary with
respect to shares purchased jointly by them on October 21, 2002. The filing was
inadvertently missed and filed on November 18, 2002.

ITEM 10. EXECUTIVE COMPENSATION

REMUNERATION PAID TO EXECUTIVES

     The following table sets forth the remuneration to the Company's executive
officers for the past three fiscal years:

                                       32
<PAGE>
<TABLE>
                                     SUMMARY COMPENSATION TABLE
<CAPTION>
                                                                        Long Term Compensation
                                                                ---------------------------------------
                                  Annual Compensation                    Awards              Payouts
                          ------------------------------------- -------------------------- ------------
                                                       Other      Restricted    Securities
Name and                                               Annual       Stock      Under-lying      LTIP        All Other
Principal                                           Compensation   Award(s)     Options        Payouts     Compensation
Position         Year     Salary($)    Bonus ($)       ($)           ($)           (#)           ($)          ($) (1)
----------------------------------------------------------------------------------------------------------------------
<S>              <C>       <C>          <C>            <C>          <C>          <C>           <C>           <C>
Stephen          2000      69,083                                                                            19,391
Levine, CEO      2001      25,246                                                                            17,355
                 2002      50,000       90,000                                                               16,505

Susan Levine,    2000      54,988                                                                            18,247
Secretary        2001      29,981                                                                             6,751
                 2002      41,940       50,000                                                                7,500
</TABLE>

(1)   Includes matching funds contributed under the Company's 401(K) Plan, auto
      allowances and premiums paid on Officer Life Insurance and disability
      policies.

      During the last fiscal year and as of December 31, 2002, we did not grant
any stock options to executive officers.

      The following table is intended to provide information as to the number of
stock options exercised by each of the executive officers listed above, the
value realized upon exercise of such options, and the number and value of any
unexercised options still held by such individuals.

<TABLE>
<CAPTION>
                                                               Number of
                                                               Securities
                                                               Underlying            Value of Unexercised
                                                               Unexercised           In-the-Money
                                                               Options/SARs at       Options/SARs at FY-
                                                               FY-End (#)            End ($)

                  Shares Acquired on                           Exercisable/          Exercisable/
Name              Exercise (#)           Value Realized ($)    Unexercisable         Unexercisable
----------------------------------------------------------------------------------------------------------
<S>                           <C>                   <C>        <C>                    <C>
Susan Levine                  0                     0          150,000/0              0/0(1)

</TABLE>

(1) In 1999, the Company issued options to purchase 150,000 shares of Common
Stock to Susan Levine as compensation for her services as an officer of the
Company. These options are exercisable for an exercise price of $2.00 per share
and expire on January 26, 2004.

REMUNERATION PAID TO DIRECTORS

      No remuneration was paid to the Company's directors during its fiscal year
ended December 31, 2002.

EMPLOYMENT AGREEMENTS

      The Company does not have a current employment agreement with its Chief
Executive Officer.

                                       33
<PAGE>

EMPLOYEE BENEFITS

      1998 INCENTIVE STOCK OPTION PLAN. The Company's Board of Directors and
shareholders adopted the 1998 Incentive Stock Option Plan on July 10, 1998 and
reserved an aggregate of 1,000,000 shares of Common Stock for grants of stock
options under the plan. The purposes of the 1998 Incentive Stock Option Plan are
(a) to attract and retain the best available people for positions of substantial
responsibility and (b) to provide additional incentive to the employees of the
Company and to promote the success of the Company's business.

      The 1998 Incentive Stock Option Plan is administered by the Board of
Directors, which has the authority to select individuals who are to receive
options under the Plan and to specify the terms and conditions of each option so
granted (incentive or nonqualified), the vesting provisions, the option term and
the exercise price. The 1998 Incentive Stock Option Plan includes two separate
plans: Plan A provides for the granting of options that are intended to qualify
as incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and Plan B provides for the
granting of non-qualified stock options. Each Plan will terminate on September
23, 2012, unless sooner terminated by the Board.

      An option granted under the 1998 Incentive Stock Option Plan expires five
(5) years from the date of grant or, if earlier, on the date of the optionee's
termination of employment or service, no more than six (6) months of the
optionee's death or disability. Options granted under the 1998 Incentive Stock
Option Plan are not generally transferable by the optionee except by will or the
laws of descent and distribution and generally are exercisable during the
lifetime of the optionee only by such optionee. The Board of Directors has
authority to grant options under the 1998 Incentive Stock Option Plan to
non-officer employees (including outside directors) of the Company and
consultants to the Company at an exercise price not greater than the fair market
value of the Common Stock on the date of grant.

      In the event of (i) the merger or consolidation of the Company in which it
is not the surviving corporation, or pursuant to which shares of Common Stock
are converted into cash, securities or other property (other than a merger in
which holders of Common Stock immediately before the merger have the same
proportionate ownership of the capital stock of the surviving corporation
immediately after the merger), (ii) the sale, lease, exchange or other transfer
of all or substantially all of the Company's assets (other than a transfer to a
majority-owned subsidiary), or (iii) the approval by the holders of Common Stock
of any plan or proposal for the Company's liquidation or dissolution (each,
"Corporate Transaction"), the Board of Directors will determine whether
provision will be made in connection with the Corporate Transactions for
assumption of the options under the 1998 Incentive Stock Option Plan or
substitution of appropriate new options covering the stock of the successor
corporation, or an affiliate of the successor corporation. If the Board of
Directors determines that no such assumption or substitution will be made, each
outstanding option under the 1998 Incentive Stock Option Plan shall
automatically accelerate so that it will become 100% vested and exercisable
immediately before the Corporate Transaction.

      RULE 401(K) RETIREMENT PLAN. In January 1997, the Company adopted the
NutriCology, Inc. 401(k) Retirement Plan (the "401(k) Plan"). Eligible employees
may contribute up to 15 percent of their annual compensation, subject to certain
limitations, and the Company will match 50 percent of an employee's
contribution. The Company will not match before tax contribution amounts in
excess of 6% of the employee's compensation. Total provisions with respect to
these plans approximated $34,000 and $33,000, for the years ended December 31,
2001 and 2002, respectively.

                                       34
<PAGE>

      CAFETERIA PLAN. In May 1999, the Company adopted the NutriCology,
Inc./Allergy Research Group, Inc. Cafeteria Plan pursuant to section 125 of the
Internal Revenue Code ("Cafeteria Plan"), retroactive to January 1999. Eligible
employees may contribute a portion of their upcoming pay to special funds or
accounts to pay for certain benefits under the Cafeteria Plan, including health
care reimbursement, day-care assistance and insurance premiums on health care
insurance programs. Ordinarily, these expenses would be paid with out-of-pocket,
taxable dollars. Under the Cafeteria Plan, the amounts contributed are not
subject to Federal income or Social Security taxes. Employees may submit
requests for reimbursement of these expenses to the administrator of the
Cafeteria Plan, BenefitStreet.com, at any time during a plan year. At the end of
each plan year, the employees will forfeit any unspent monies unless requests
for reimbursement are made no later than 60 days after the end of the year. We
will automatically contribute enough of the employee's compensation to pay for
insurance coverage provided under its health plan; however, it is up to the
employee to determine the amount of any additional contributions.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table provides information as of December 31, 2001
concerning the beneficial ownership of our common stock by (i) each director,
(ii) each named executive officer, (iii) each shareholder known by the Company
to be the beneficial owner of more than 10% of its outstanding Common Stock, and
(iv) the directors and officers as a group. Except as otherwise indicated, the
persons named in the table have sole voting and investing power with respect to
all shares of Common Stock owned by them.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                               Name and Address of Beneficial       Amount and Nature of
Title of Class                             Owner                    Beneficial Ownership    Percent of Class(3)
-----------------------------------------------------------------------------------------------------------------
<C>                            <C>                                         <C>                     <C>
$.001 par value common stock   Stephen A. Levine, Ph.D.                       10,183,250           70%(1)
                               30806 Santana Street
                               Hayward, California 94544

$.001 par value common stock   Susan D. Levine                             10,333,250(4)
                               30806 Santana Street
                               Hayward, California 94544


$.001 par value common stock   Officers and Directors as a group               10,183,250          69%(2)

</TABLE>

(1)   Where persons listed on this table have the right to obtain additional
      shares of Common Stock through the exercise of outstanding options or
      warrants or the conversion of convertible securities within 60 days from
      December 31, 2002, these additional shares are deemed to be outstanding
      for the purpose of computing the percentage of Common Stock owned by such
      persons, but are not deemed outstanding for the purpose of computing the
      percentage owned by any other person.
(2)   Percentages are based on 14,722,105 shares outstanding on March 7, 2003.
(3)   Represents shares held jointly with the Company's Secretary, Susan D.
      Levine, as community property. Percentage calculation includes currently
      vested options held by Susan D. Levine.
(4)   Includes 10,183,250 held jointly with our Chief Executive Officer, Stephen
      A. Levine, and options to purchase 150,000 shares of common stock at an
      exercise price of $2.00 per share which are fully vested.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Stephen Levine, the Company's Chief Executive Officer and Chairman of the
Board of Directors, and Susan Levine, the Company's Secretary, are husband and
wife.

                                       35
<PAGE>

      Stephen and Susan Levine loaned NutriCology approximately $286,000 prior
to its reverse acquisition by the Company in 1998. The loan has been offset and
exceeded by advances made to the Levines between 1997 and 1999, seventy-three
percent (73%) of which were made prior to the reverse acquisition. Each advance
has been made as a non-interest bearing, due on demand loan on the books of the
Company. Interest (8% per annum) has been accrued on these loans in the amount
of $8,723 and $9,470 for the years ended December 31 2002 and December 31, 2001,
respectively. The Company's audited financial statements indicate that as of
December 31, 2002 and 2001, the amounts due from Dr. Levine were $127,691 and
$138,801, respectively.

      In 1999 Dr. Levine stepped down from his CEO position to focus on the
development of new products. He and his wife, Susan Levine, formed Inventive
Biomedical, LLC, a California limited liability company ("IBM"), as a research
and development firm. For the year ended December 31, 2001, the Company paid
approximately $9,000 to IBM for research and development and for market testing
of new products. As of December 31, 2002, IBM owes the Company $15,750.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

ITEM                                                                    EXH. NO.
----                                                                    --------

Registrant's Articles of Incorporation*                                    3.1
Registrant's Articles of Amendment to Articles of Incorporation dated
   January 15, 1998*                                                       3.2
Registrant's Bylaws*                                                       3.3
Form of Common Stock Certificate*                                          4.1
Form of Non-Qualified Stock Option*                                        4.2
Form of Incentive Stock Option*                                            4.3
Form of Common Stock Purchase Warrant*                                     4.4
1998 Stock Option Plan*                                                    4.5
Subsidiaries of the Registrant                                             21
License Agreement between Registrant and Jim Cassidy dated
   March 21, 2000*                                                         10.1
Option Agreement between Registrant, Dr. Ba Hoang and PhytoPharm PLC*#     10.2
Loan and Security Agreement between Registrant and Aerofund
   Financial, Inc.*                                                        10.3
Code of Business Conduct and Ethics                                        10.4
Consent of Independent Auditor                                             23.1
Haight-Ashbury Free Medical Clinic Design Research Survey*                 99.1
Certificate of Stephen A. Levine Pursuant to Section
      1350 of Chapter 63 of Title 18 U.S. Code                             99.2

* Incorporated by reference to the corresponding Exhibit previously filed as an
Exhibit to Registrant's Form 10-SB (File #0-27227).

# Registrant requested confidential treatment pursuant to Rule 406 for a portion
of the referenced exhibit and separately filed such exhibit with the Commission
in conjunction with the filing of its registration statement of Form 10-SB.

                                       36
<PAGE>

(b)   Form 8-K Reports

      None.

ITEM 14. CONTROLS AND PROCEDURES

      The President, who is also the chief executive officer and the chief
financial officer of the Registrant, has concluded based on his evaluation as of
a date within 90 days prior to the date of the filing of this Report, that the
Registrant's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Registrant in the reports filed or
submitted by it under the Securities Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and include controls and
procedures designed to ensure that information required to be disclosed by the
Registrant in such reports is accumulated and communicated to the Registrant's
management, including the president, as appropriate to allow timely decisions
regarding required disclosure.

      There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of such evaluation.

                                       37
<PAGE>


                   ALLERGY RESEARCH GROUP, INC. AND SUBSIDIARY
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Independent Auditors' Report..................................................F2

Consolidated Balance Sheet as of December 31, 2002............................F3

Consolidated Income Statements for the years ended December 31, 2002
and 2001......................................................................F4

Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 2002 and 2001....................................................F5

Consolidated Statements of Cash Flows for years ended December 31,
2002 and 2001.................................................................F6

Notes to the Financial Statements..........................................F7-15

                                       F1
<PAGE>



                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Allergy Research Group, Inc.

We have audited the accompanying consolidated balance sheet of Allergy Research
Group, Inc., a Florida Corporation, and Subsidiary (the "Company") as of
December 31, 2002 and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for two preceding years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of the Company as of
December 31, 2002, and the consolidated results of its operations and its cash
flows for the periods indicated in conformity with generally accepted accounting
principles in the United States.



Clancy and Co., P.L.L.C.
Phoenix, Arizona

February 14, 2003


                                       F2
<PAGE>
<TABLE>

                             ALLERGY RESEARCH GROUP, INC. AND SUBSIDIARY
                                     CONSOLIDATED BALANCE SHEET
                                          DECEMBER 31, 2002
<CAPTION>

ASSETS
------
<S>                                                                            <C>
Current Assets
   Cash and Cash Equivalents                                                   $   340,002
   Accounts Receivable, net of allowance for doubtful accounts of $53,884          591,557
   Inventories (Note 2)                                                          1,601,619
   Prepaid Expenses and Other Current Assets                                       119,269
   Deferred Tax Assets (Note 8)                                                    404,085
                                                                               ------------
Total Current Assets                                                             3,056,532

Property and Equipment (Note 3)                                                    332,905

Other Assets
   Security Deposit                                                                 29,730
   Due From Officers (Note 4)                                                      127,691
   Intangible Assets, net of amortization of $18,592 (Note 10)                      22,511
                                                                               ------------
Total Other Assets                                                                 179,932
                                                                               ------------

Total Assets                                                                   $ 3,569,369
                                                                               ============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
   Accounts Payable                                                            $   743,769
   Accrued Liabilities                                                             320,062
   Income Taxes Payable (Note 8)                                                    70,715
   Capital Lease Obligation, Current Portion (Note 6)                               48,771
                                                                               ------------
Total Current Liabilities                                                        1,183,317

Commitments and Contingencies (Note 5,6 and 9 )

Stockholders' Equity
Preferred Stock:  $0.25 Par Value, Authorized: 1,000,000
     Issued and outstanding:  None                                                    None
Common Stock: $0.001 Par Value, Authorized Shares: 100,000,000;
     Issued: 15,105,355, Outstanding: 14,722,105                                    15,105
Additional Paid-In Capital                                                       1,141,377
Retained Earnings                                                                1,311,143
Less:  Treasury Stock, at cost (Note 7)                                            (81,573)
                                                                               ------------
Total Stockholders' Equity                                                       2,386,052
                                                                               ------------
Total Liabilities and Stockholders' Equity                                     $ 3,569,369
                                                                               ============

              The accompanying notes are an integral part of these financial statements
</TABLE>

                                                 F3
<PAGE>
<TABLE>

                                  ALLERGY RESEARCH GROUP, INC. AND SUBSIDIARY
                                        CONSOLIDATED INCOME STATEMENTS
                                FOR THE YEARS ENDED DECMEBER 31, 2002 AND 2001
<CAPTION>

                                                                       2002             2001
                                                                  --------------------------------
<S>                                                               <C>                <C>
Net Sales                                                         $ 12,684,413       $ 11,749,199
Costs of Sales                                                       7,587,795          7,107,779
                                                                  --------------------------------
Gross Profit                                                         5,096,618          4,641,420

Operating Expenses
   Selling, General and Administrative                               3,924,080          4,070,974
   Research and Development                                            260,749            195,471
                                                                  --------------------------------
Total Operating Expenses                                             4,184,829          4,266,445
                                                                  --------------------------------

Operating Income                                                       911,789            374,975

Other Income (Expense)
   Interest Income                                                       9,013              9,476
   Interest Expense                                                    (31,474)          (153,867)
                                                                  --------------------------------
Total Other Income (Expense)                                           (22,461)          (144,391)
                                                                  --------------------------------

Net Income Before Benefit for Income Taxes                             889,328            230,584

Benefit for Income Taxes (Note 8)                                      108,534             95,973
                                                                  --------------------------------

Net Income Available to Common Stockholders                       $    997,862       $    326,557
                                                                  ================================

Basic and Diluted Income Per Share of Common Stock                $       0.07       $       0.02
                                                                  ================================

Basic and Diluted Weighted Average Common Shares Outstanding        14,943,322         15,083,574
                                                                  ================================

                   The accompanying notes are an integral part of these financial statements
</TABLE>

                                                      F4
<PAGE>
<TABLE>

                                            ALLERGY RESEARCH GROUP, INC. AND SUBSIDIARY
                                    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                          FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
<CAPTION>


                                                 Common       Common      Additional       Retained
                                   Preferred      Stock       Stock        Paid-In         Earnings      Treasury
                                     Stock       Shares       Amount       Capital       (A Deficit)      Stock         Total
                                  ------------------------------------------------------------------------------------------------
<S>                                    <C>     <C>          <C>           <C>             <C>          <C>          <C>
Balance, December 31, 2000             -       15,055,355   $  15,055     $ 1,133,927     $  (13,276)  $       -    $1,135,706
Common stock issued for services       -           50,000          50           7,450              -           -         7,500

Net Income                             -            -               -               -        326,557           -       326,557
                                  ------------------------------------------------------------------------------------------------
Balance, December 31, 2001             -       15,105,355      15,105       1,141,377        313,281           -     1,469,763
Purchases of Treasury stock            -            -               -               -              -     (81,573)      (81,573)
Net Income                             -            -               -               -        997,862           -       997,862
                                  ------------------------------------------------------------------------------------------------
Balance, December 31, 2002             -       15,105,355   $  15,105     $ 1,141,377     $1,311,143   $ (81,573)   $2,386,052
                                  ================================================================================================

                            The accompanying notes are an integral part of these financial statements.
</TABLE>

                                                                F5
<PAGE>
<TABLE>

                             ALLERGY RESEARCH GROUP, INC. AND SUBSIDIARY
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                           FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
<CAPTION>

                                                                          2002         2001
                                                                       -----------------------
Cash Flows From Operating Activities
------------------------------------
<S>                                                                    <C>          <C>
Net Income                                                             $ 997,862    $ 326,557
Adjustments to Reconcile Net Income to Net Cash Provided By
     Operating Activities:
     Depreciation and Amortization                                       224,295      225,002
     Common Stock Issued for Services                                         --        7,500
     Decrease in the Allowance for Doubtful Accounts                     (36,329)    (100,190)
     Intangible Asset Acquired Through Forgiveness of Debt                    --      (13,180)
     Decrease in the Inventory Reserve Account                                --      (64,685)
     Increase in Deferred Taxes                                         (183,625)     (96,910)
Changes in Assets and Liabilities
    (Increase) Decrease in Accounts Receivable                           (20,344)     363,098
    (Increase) Decrease in Inventories                                   (42,486)    (260,756)
    (Increase) Decrease in Accrued Interest Receivable                        --       (9,470)
    (Increase) Decrease in Prepaid Expenses and Other Current Assets      47,898      (61,968)
    (Increase) Decrease in Security Deposits                              (8,320)          --
    (Increase) Decrease in Cash Surrender Value-Life Insurance                --       45,290
     Increase (Decrease) in Accounts Payable                            (272,258)     167,840
     Increase (Decrease) in Accrued Liabilities                          106,451      (42,855)
     Increase (Decrease) in Income Taxes Payable                          69,853          137
                                                                       -----------------------
Total Adjustments                                                       (114,865)     158,853
                                                                       -----------------------
Net Cash Flows Provided By Operating Activities                          882,997      485,410

Cash Flows From Investing Activities
   Acquisition of Property and Equipment                                 (46,227)     (34,499)
   Expenditures for Intangible Assets, Trademarks                           (650)        (650)
   Repayments from Officers                                               11,110       18,749
                                                                       -----------------------
Net Cash Flows Used In Investing Activities                              (35,767)     (16,400)

Cash Flows From Financing Activities
   Purchases of Treasury Stock                                           (81,573)          --
   Advances Under Line of Credit                                              --       77,604
   Repayments on Line of Credit                                         (570,064)    (488,017)
   Repayments on Capital Lease Obligations                               (55,090)     (47,746)
                                                                       -----------------------
Net Cash Flows Provided By (Used In) Financing Activities               (706,727)    (458,159)
                                                                       -----------------------

Increase (Decrease) in Cash and Cash Equivalents                         140,503       10,851
Cash and Cash Equivalents, Beginning of Year                             199,499      188,648
                                                                       -----------------------
Cash and Cash Equivalents, End of Year                                 $ 340,002    $ 199,499
                                                                       =======================
Cash paid for:
   Interest                                                            $  31,474    $ 151,061
                                                                       =======================
   Income Taxes                                                        $   2,462    $     800
                                                                       =======================
Supplemental noncash investing and financing activities:
   Common stock issued for services rendered                           $      --    $   7,500
                                                                       =======================

             The accompanying notes are an integral part of these financial statements.
</TABLE>

                                                 F6
<PAGE>

                   ALLERGY RESEARCH GROUP, INC. AND SUBSIDIARY
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2002

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------------------

DESCRIPTION OF BUSINESS.

Allergy Research Group, Inc. (the "Company"), together with its wholly owned
subsidiary, Nutricology, Inc., strives to be an innovative leader in
nutraceutical research and product formulation. Since 1980, Nutricology, Inc.
has produced quality, hypoallergenic nutritional supplements and supplies
products to physicians and health care practitioners worldwide. Nutricology,
Inc. was acquired by the Company in February 1998. The Company distributes its
products through distributors to medical and professional accounts and to
retailers. The Company develops, contract manufactures, markets and sells
branded and private label products, including vitamins and nutritional
supplements throughout the world under the NutriCology(R) and Allergy Research
Group(R) labels. The Company offers a line of approximately 200 products,
including vitamins in both multivitamin and single-entity formulas, minerals,
and herbals. The Company's products are manufactured in various forms, including
capsules, tablets, softgels, powders (drink mixes) and liquids. Approximately
75% of the Company's products, consisting of capsules and tablets, are packaged
in-house. The Company's liquid and powder products are packaged by outside
vendors and manufacturers. The Company is expanding into the field of research
on pharmaceuticals and nutraceuticals and continues to add new products to its
existing product line. The Company is headquartered in Hayward, California and
the Company's shares are traded on the Over The Counter Bulletin Board.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

ACCOUNTING METHOD - The Company uses the accrual method of accounting for
financial statement and tax return purposes.

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of Allergy Research Group, Inc. (a Florida corporation) and its wholly
owned subsidiary, Nutricology, Inc. (a California corporation). All significant
intercompany balances and transactions have been eliminated in consolidation.

BUSINESS SEGMENT INFORMATION - The Company operates in one industry segment,
that being developing, marketing and distributing natural nutritional
supplements. The Company's sales are primarily to distributors and health care
professionals throughout the United States. The Company has one customer that
accounts for more than 10% of its revenues, or approximately $1,500,000 in
sales.

USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Management makes its best estimate of the ultimate outcome for
these items based on historical trends and other information available when the
financial statements are prepared. Changes in estimates are recognized in
accordance with the accounting rules for the estimate, which is typically in the
period when new information becomes available to management. Actual results
could differ from those estimates.

                                       F7
<PAGE>

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid instruments
purchased with an original maturity of three months or less to be cash
equivalents.

CONCENTRATION OF CREDIT RISK - Concentration of credit risk includes cash, sales
and purchases. The Company maintains cash balances at financial institutions in
excess of $100,000, which are insured by the Federal Deposit Insurance
Corporation up to $100,000. The Company has one customer that accounts for
approximately 11% of sales and which comprises approximately 10% of its accounts
receivable balance. The Company uses outside vendors for the manufacture of its
products. Approximately 54% of the Company's manufacturing comes from four
separate outside vendors that act as manufacturers and suppliers of raw
materials.

INVENTORIES - Inventories consist of raw materials and finished goods. Raw
materials consist of bulk product that has not been mixed or encapsulated.
Finished goods consist of product that has been encapsulated or made into tablet
form and that has been packaged for sale. Inventories are stated at the lower of
cost or net realizable value, using the first-in, first-out method.

PROPERTY AND EQUIPMENT - Property and equipment, stated at cost, is depreciated
over the estimated useful lives of the assets using the straight-line method for
financial statement purposes and accelerated methods for income tax purposes.
Significant improvements and betterments are capitalized. Routine repairs and
maintenance are expensed when incurred.

IMPAIRMENT OF LONG-LIVED ASSETS - Long-lived assets are reviewed for impairment
when circumstances indicate the carrying value of an asset may not be
recoverable. For assets that are to be held and used, an impairment loss is
recognized when the estimated undiscounted cash flows associated with the asset
or group of assets is less than their carrying value. If impairment exists, an
adjustment is made to write the asset down to its fair value, and a loss is
recorded as the difference between the carrying value and fair value. Fair
values are determined based on quoted market values, discounted cash flows or
internal and external appraisals, as applicable. Assets to be disposed of are
carried at the lower of carrying value or estimated net realizable value.

REVENUE RECOGNITION - Revenue is recognized when the product is shipped, net of
an allowance for estimated returns, and the risks and rewards of ownership have
transferred to the customer. The Company recognizes shipping and handling fees
as revenue, and the related expenses as a component of cost of sales. All
internal handling charges are charged to selling, general and administrative
expenses. Revenues are presented net of returns and allowances. Sales returns
and allowances for 2002 were $1,151,289 (2001: $1,020,603).

ALLOWANCE FOR DOUBTFUL ACCOUNTS AND RETURN ALLOWANCES - The Company presents
accounts receivable, net of allowances for doubtful accounts and returns. The
allowances are calculated based on detailed review of certain individual
customer accounts, historical rates and an estimation of the overall economic
conditions affecting the Company's customer base. The Company reviews a
customer's credit history before extending credit. If the financial condition of
its customers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required.

COST RECOGNITION - Cost of sales includes all direct material and labor costs
and those indirect costs of bringing raw materials to sale condition, including
shipping and handling costs. Selling, general and administrative costs are
charged to operating expenses as incurred. Research and development costs are
charged to operations when incurred and are included in operating expenses.
Research and development costs for 2002 were $260,749 (2001: $195,471).

                                       F8
<PAGE>

ADVERTISING COSTS - Advertising costs are expensed as incurred. Total
advertising costs expensed during 2002 were $73,681 (2001: $56,623).

INCOME TAXES - The Company accounts for income taxes under the provisions of
SFAS No. 109, "ACCOUNTING FOR INCOME TAXES." Under SFAS No. 109, deferred income
tax assets and liabilities are computed for differences between the financial
statements and tax bases of assets and liabilities that will result in taxable
or deductible amounts in the future, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary, to reduce
deferred income tax assets to the amount expected to be realized.

STOCK-BASED COMPENSATION - The Company accounts for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES." Compensation cost
for stock options, if any, is measured as the excess of the quoted market price
of the Company's stock at the date of grant over the amount an employee must pay
to acquire the stock. SFAS No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION,"
established accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation plans. The Company
has elected to remain on its current method of accounting as described above,
and has adopted the disclosure requirements of SFAS No. 123.

EARNINGS PER SHARE - Basic earnings or loss per share is based on the weighted
average number of common shares outstanding. Diluted earnings or loss per share
is based on the weighted average number of common shares outstanding and
dilutive common stock equivalents. Basic earnings/loss per share is computed by
dividing net income applicable to common stockholders (numerator) by the
weighted average number of common shares outstanding (denominator) for the
period. All earnings or loss per share amounts in the financial statements are
basic earnings or loss per share, as defined by SFAS No. 128, "EARNINGS PER
SHARE." Diluted earnings or loss per share does not differ materially from basic
earnings or loss per share for all periods presented. Convertible securities
that could potentially dilute basic earnings per share in the future such as
stock options are not included in the computation of diluted earnings per share
because to do so would be antidilutive. All per share and per share information
are adjusted retroactively to reflect stock splits and changes in par value.

CAPITAL STRUCTURE - The Company discloses its capital structure in accordance
with SFAS No. 129, "Disclosure of Information about Capital Structure," which
establishes standards for disclosing information about an entity's capital
structure. Treasury stock is shown at cost and consists of 383,250 shares of
common stock.

COMPREHENSIVE INCOME - The Company includes items of other comprehensive income
by their nature in a financial statement and displays the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the balance sheet.

START-UP EXPENSES - The Company expenses start-up costs and organization costs
for financial statement purposes pursuant to AICPA Statement of Position 98-5,
"REPORTING ON THE COSTS OF START-UP ACTIVITIES." For income tax purposes, the
Company has elected to treat its organizational costs as deferred expenses and
amortize them over a period of sixty months beginning in the first month the
Company was actively in business.

FAIR VALUE OF FINANCIAL INSTRUMENTS - For certain of the Company's financial
instruments, including cash and cash equivalents, accounts receivable, prepaid
expenses, amounts due from officers, accounts payable and accrued liabilities,
the carrying amounts approximate fair value due to their short maturities.

                                       F9
<PAGE>

INTANGIBLE ASSETS - Other assets include trademarks and customer lists.
Trademarks are amortized using the straight-line method over the life of the
trademark. Customer lists are not amortized, but are tested at least annually
for impairment, in accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets." Periodically, the Company evaluates whether the estimated useful life
used to amortize an intangible asset is appropriate due to changing facts and
circumstances resulting in increases or decreases in the asset's useful life,
and records the change prospectively.

RECLASSIFICATION - Certain prior period amounts have been reclassified to
conform to the current year presentation. These changes had no effect on
previously reported results of operations or total stockholders' equity.

RECENT ACCOUNTING PRONOUNCEMENTS - The Financial Accounting Standards Board
("FASB") has issued the following additional pronouncements, none of which are
expected to have a significant affect on the financial statements:

APRIL 2002 - SFAS No. 145 - "RESCISSION OF FASB STATEMENTS NO. 4, 44, AND 64,
AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL CORRECTIONS." Under SFAS No.
4, all gains and losses from extinguishment of debt were required to be
aggregated and, if material, classified as an extraordinary item, net of related
income tax effect. This Statement eliminates SFAS No. 4 and, thus, the exception
to applying APB No. 30 to all gains and losses related to extinguishments of
debt. As a result, gains and losses from extinguishment of debt should be
classified as extraordinary items only if they meet the criteria in APB No. 30.
Applying the provisions of APB No. 30 will distinguish transactions that are
part of an entity's recurring operations from those that are unusual or
infrequent or that meet the criteria for classification as an extraordinary
item. Under SFAS No. 13, the required accounting treatment of certain lease
modifications that have economic effects similar to sale-leaseback transactions
was inconsistent with the required accounting treatment for sale-leaseback
transactions. This Statement amends SFAS No. 13 to require that those lease
modifications be accounted for in the same manner as sale-leaseback
transactions. This statement also makes technical corrections to existing
pronouncements. While those corrections are not substantive in nature, in some
instances, they may change accounting practice. The Company does not expect the
adoption of SFAS No. 145 to have a material impact on its financial position or
results of operations.

JUNE 2002 - SFAS No. 146 - "ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR
DISPOSAL ACTIVITIES." This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." The principal difference
between this Statement and EITF 94-3 relates to its requirements for recognition
of a liability for a cost associated with an exit or disposal activity. This
Statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. Under EITF 94-3,
a liability was recognized at the date of an entity's commitment to an exit
plan. This Statement is effective for exit or disposal activities that are
initiated after December 31, 2002. The Company does not expect the adoption of
SFAS No. 146 to have a material impact on its financial position or results of
operations.

OCTOBER 2002 - SFAS No. 147 - "ACQUISITIONS OF CERTAIN FINANCIAL INSTITUTIONS,
AN AMENDMENT OF FASB STATEMENTS NO. 72 AND 144 AND FASB INTERPRETATION NO. 9,"
which applies to the acquisition of all or part of a financial institution,
except for a transaction between two or more mutual enterprises. SFAS No. 147
removes the requirement in SFAS No. 72 and Interpretation 9 thereto, to
recognize and amortize any excess of the fair value of liabilities assumed over
the fair value of tangible and identifiable intangible assets acquired as an
unidentifiable intangible asset. This statement requires that those transactions
be accounted for in accordance with SFAS No. 141, "BUSINESS COMBINATIONS," and


                                      F10
<PAGE>

SFAS No. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS." In addition, this
statement amends SFAS No. 144, "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
LONG-LIVED ASSETS," to include certain financial institution-related intangible
assets. This statement is effective for acquisitions for which the date of
acquisition is on or after October 1, 2002, and is not applicable to the
Company.

DECEMBER 2002 - SFAS No. 148, "ACCOUNTING FOR STOCK BASED
COMPENSATION-TRANSITION AND DISCLOSURE." This statement was issued to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
Statement amends the disclosure requirements of Statement 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. This statement is effective for financial
statements for fiscal years ending after December 15, 2002.

PENDING ACCOUNTING PRONOUNCEMENTS - It is anticipated that current pending
accounting pronouncements will not have an adverse impact on the financial
statements of the Company.

NOTE 2 - INVENTORIES
--------------------

Inventories consist of the following at December 31:

Raw Materials                           $     867,597
Finished Goods                                724,171
Supplies                                       59,851
Reserve for Obsolescence                      (50,000)
                                        --------------
Total                                   $  1,601,619
                                        ==============

NOTE 3 - PROPERTY AND EQUIPMENT
-------------------------------

Property and equipment consist of the following at December 31:

Machinery and Equipment                 $    675,557
Office Equipment                             230,084
Vehicles                                      67,762
Furniture and Fixtures                       185,873
Computer Equipment                           211,605
Computer Software                             69,860
Leasehold Improvements                        99,204
                                        -------------
Total                                      1,539,945
Less Accumulated Depreciation             (1,207,040)
                                        -------------
Net Book Value                          $    332,905
                                        =============

Depreciation expense charged to operations for 2002 was $218,895 (2001:
$219,602).

NOTE 4 - RELATED PARTY TRANSACTIONS
-----------------------------------

Due from Officers - These loans represents a series of noninterest bearing
advances primarily during 1997 and a final advance during 1999. The advances
began accruing interest in 2000 at the rate of 8% per annum. Due from officers
at December 31, 2002 was $127,691, which included accrued interest of $19,329.
During January 2003, the officers made a payment of $55,174, thereby reducing
the outstanding balance to $72,517 as of the date of issuance of these financial
statements.

                                      F11
<PAGE>

NOTE 5 - LINE OF CREDIT
-----------------------

On May 17, 2001, Registrant entered into a revolving line of credit for up to
$1,200,000 with City National Bank maturing on July 5, 2002. The City National
Bank line of credit was used to refinance the Company's former line of credit
with Aerofund Financial, Inc. ("Aerofund"), which matured on March 1, 2001, and
had a current principal balance of $871,964. Aerofund had begun charging
interest at a default rate of 20% per annum in excess of the interest rate on
April 1, 2001. The new line of credit with City National Bank incurred interest
at a variable rate of interest equal to two (2) points over the City National
Bank Prime Rate, with an initial rate of 9% per annum. The line of credit
required the pledge of Key Man Life Insurance Policy on the Company's Chief
Executive Officer of up to $750,000 and also the personal guarantee by the
Company's Chief Executive Officer and Secretary.

On August 19, 2002, a Merrill Lynch Working Capital Management Account ("WCMA")
was activated. The WCMA replaces the line of credit with City National Bank and
provides for a line of credit up to $500,000 for twelve months bearing interest
at the London Interbank Offered Rate ("LIBOR") plus 3.15%. The LIBOR plus 3.15%
at December 31, 2002 was 4.53%. Interest is due monthly. The note is secured by
substantially all of the assets of the Company and is personally guaranteed by
the officers 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. The
entire line of credit was available for use as of the date of issuance of these
financial statements.

NOTE 6 - CAPITAL LEASE OBLIGATIONS
----------------------------------

The Company leases certain machinery and equipment under capital leases, which
contain purchase options at the end of the leases. The total minimum lease
payments under noncancelable leases for 2003 is $50,016 of which $1,370
represents interest.

Assets under capital leases are summarized as follows:

Office Equipment                   $118,005
Machinery and Equipment              53,927
Furniture and Fixtures               10,393
Computer Software                    34,050
Computer Equipment                   33,194
Leasehold Improvements               47,924
                                   ---------
Total                               297,493
Accumulated Depreciation            243,616
                                   ---------
Net Assets                         $ 53,877
                                   =========

NOTE 7 - COMMON STOCK REPURCHASE PROGRAM
----------------------------------------

On May 3, 2002, the Company announced a stock repurchase plan, whereby the
Company may repurchase between 1,000,000 and 2,500,000 shares of the Company's
common stock in open market transactions, from time to time during the next two
years in compliance with Rule 10b-18 of the Securities Exchange Act of 1934 and
all other applicable securities regulations. Repurchases of common shares in the
open market will provide shares for issuance to employees under stock option and
stock purchase plans. Since inception of the plan through December 31, 2002, the
Company repurchased 383,250 shares of common stock for $81,573.

                                      F12
<PAGE>

NOTE 8 - INCOME TAXES
---------------------

The deferred tax consequences of temporary differences in reporting items for
financial statement and income tax purposes are recognized, as appropriate.
Realization of the future tax benefits related to the deferred tax assets is
dependent on many factors, including the Company's ability to generate taxable
income within the net operating loss carryforward period. Management has
considered these factors in reaching its conclusion as to the valuation
allowance for financial reporting purposes. The income tax effect of temporary
differences comprising the deferred tax assets and deferred tax liabilities on
the accompanying consolidated balance sheet is a result of the following:

Deferred Tax Assets:                    2002           2001
--------------------                    ----           ----
Net Operating Loss Carryforwards    $   922,352    $ 1,152,744
Expenses Not Currently Deductible
    For Tax Purposes                      5,693         57,055
                                    ------------   ------------
Total                                   903,457      1,209,799
Valuation Allowance                    (406,207)      (893,969)
                                    ------------   ------------
Net Deferred Tax Asset                  497,250        315,830
----------------------              ------------   ------------
Deferred Tax Liabilities:
Depreciation                             93,165         95,370
                                    ------------   ------------
Net Deferred Tax Asset              $   404,085    $   220,460
                                    ============   ============

The net change in the valuation allowance for 2002 was a decrease of $487,762
(2001: $320,296), which is principally the result of net operating loss
carryforwards. As of December 31, 2002, the Company has available net operating
loss carryforwards for federal and state income tax purposes of approximately
$2,200,000 and $1,400,000, which expire through 2021 and 2013, respectively.
State net operating loss carryforwards are based on federal net operating
losses, which are limited to certain percentages and carryover periods based on
the year incurred. For taxable years beginning in 2002 and 2003, the State of
California has suspended the net operating loss carryover deduction for two
years for losses incurred before January 1, 2002, and for one year for losses
incurred after January 1, 2002. As a result, income taxes payable at December
31, 2002, represent 2002 California taxes based on income. Pursuant to the Tax
Reform Act of 1986, annual utilization of the Company's net operating loss
carryforwards may be limited if a cumulative change in ownership of more than
50% is deemed to occur within any three-year period.

The benefit for income taxes for the years ended December 31, 2002 and 2001 is
as follows:

                                                2002         2001
                                                ----         ----
Current income tax provision (benefit)
    State Taxes                              $  75,091    $     937
Deferred income tax
    Increase in deferred tax asset            (183,625)     (96,910)
                                             ----------   ----------
Income Tax Provision (Benefit)               $(108,534)   $ (95,973)
                                             ==========   ==========

A reconciliation of income tax at the statutory rate to the Company's effective
rate is as follows:

                                                  2002           2001
                                                  ----           ----
Computed at the statutory federal rate            (34%)          (34%)
Computed at the statutory state rate               (9%)           (9%)
Net operating loss carryforwards                   35%            33%
Valuation allowance                               (47%)          (31%)
                                                  -----          -----
Income tax expense - effective rate               (55%)          (41%)

                                      F13
<PAGE>

NOTE 9 - COMMITMENTS AND CONTINGENCIES
--------------------------------------

(1) OPERATING LEASES - The Company leases office space and equipment under
various noncancelable operating leases which expire through June 2006. Rent
expense charged to operations was approximately $417,000 for 2002 (2001:
$400,000).

Future minimum rental commitments under noncancelable leases are as follows:

         2003                        $ 322,812
         2004                        $ 146,565
         2005                        $   6,540
         2006                        $   3,270

During the years ended December 31, 2002 and 2001, the Company subleased a
portion of its space at the rate of $8,320 per month, which ended in December
2002. The total amount of minimum rentals received under noncancelable subleases
for 2002 was $91,520 (2001: $99,840.)

NOTE 10 - INTANGIBLE ASSETS
---------------------------

Intangible assets consists of the following at December 31:

Trademarks, gross carrying amount               $   27,923
Accumulated amortization                            18,592
                                                -----------
Net book value                                       9,331
Customer lists, not subject to amortization         13,180
                                                -----------
Total Intangible Assets, net                    $   22,511
                                                ===========

Amortization expense charged to operations for each period presented was $5,400.
The estimated aggregate amortization expense for each of the next two years is
$5,400 and $3,931.

NOTE 11 - PROFIT SHARING PLAN
-----------------------------

The Company has a defined contribution plan, which covers substantially all
employees. The Company's contributions to the plan are made at the sole
discretion of the Company's Board of Directors. Contributions to the plan for
2002 were approximately $33,000 (2001: $34,000).

NOTE 12 - STOCK OPTIONS
-----------------------

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 Company granted 150,000 options during January 1999,
exercisable at $2.00 per share, which expire five years from the date of grant.
As of December 31, 2002, total options outstanding and exercisable at the
beginning and end of the year were 150,000 with a weighted average exercise
price of $2.00 and weighted average remaining contractual life of 1.08 years.

The Company accounts for stock-based compensation using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," under which no compensation cost for stock options
is recognized for stock options awards granted at or above fair market value.
Had compensation expense for the Company's stock-based compensation plans been
determined under SFAS No. 123, based on the fair market value at the grant
dates, the Company's pro forma net loss and pro forma net loss per share would
have been reflected as follows at December 31:

                                      F14
<PAGE>
                                               2002              2001
Net Income                                     ----              ----
     As reported                         $    997,862      $    326,557
     Pro forma                           $    964,092      $    292,787
Net Income Per Share
     As reported                         $       0.07      $       0.02
     Pro forma                           $       0.06      $       0.02


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes Option pricing model with the following weighted-average
assumptions used for those options granted in 1999: dividend yield of 0%,
expected volatility of 95%, risk-free interest rate of 5%, and expected life of
five years.

NOTE 13 - CASH SURRENDER VALUE LIFE INSURANCE
---------------------------------------------

During May 2001, the Company canceled two insurance policies in the face amount
of $750,000 on the lives of certain key employees, who were also the
beneficiaries, and the cash surrender value of $46,645 was returned to the
Company.

                                      F15
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.


                                  ALLERGY RESEARCH GROUP, INC.



Date: March 28, 2003              By: /s/ Stephen A. Levine
                                      ------------------------------------------
                                  Stephen A.Levine, Ph.D., President and CEO



Date: March 28, 2003              By: /s/ Susan D. Levine
                                      ------------------------------------------
                                  Susan D. Levine, Secretary


                                       38

<PAGE>

                          ALLERGY RESEARCH GROUP, INC.
                              a Florida corporation
                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                           AND CHIEF FINANCIAL OFFICER


I, Stephen A. Levine, certify that:

         1.       I have reviewed this annual report on Form 10-KSB of Allergy
                  Research Group, Inc.;
         2.       Based on my knowledge, this annual report does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  annual report;
         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this annual report, fairly
                  present in all material respects the financial condition,
                  results of operations and cash flows of the registrant as of,
                  and for, the periods presented in this annual report;
         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and have:
                  a) designed such disclosure controls and procedures to ensure
                     that material information relating to the registrant,
                     including its consolidated subsidiaries, is made known to
                     us by others within those entities, particularly during the
                     period in which this annual report is being prepared;
                  b) evaluated the effectiveness of the registrant's disclosure
                     controls and procedures as of a date within 90 days prior
                     to the filing date of this quarterly report (the
                     "Evaluation Date"); and
                  c) presented in this quarterly report our conclusions about
                     the effectiveness of the disclosure controls and procedures
                     based on our evaluation as of the Evaluation Date;
         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  functions):
                  a) all significant deficiencies in the design or operation of
                     internal controls which could adversely affect the
                     registrant's ability to record, process, summarize and
                     report financial data and have identified for the
                     registrant's auditors any material weaknesses in internal
                     controls; and
                  b) any fraud, whether or not material, that involves
                     management or other employees who have a significant role
                     in the registrant's internal controls; and
         6.       The registrant's other certifying officers and I have
                  indicated in this annual report whether there were significant
                  changes in internal controls or in other factors that could
                  significantly affect internal controls subsequent to the date
                  of our most recent evaluation, including any corrective
                  actions with regard to significant deficiencies and material
                  weaknesses.


                                                     Date: March 28, 2003


                                                     /s/ Stephen A. Levine
                                                     ---------------------
                                                     Stephen A. Levine
                                                     Chief Executive Officer and
                                                     Chief Financial Officer

                                       39