ALLERGY RESEARCH GROUP, INC.
2300 North Loop Road
Alameda, California 94502
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 21, 2006
TO THE SHAREHOLDERS OF ALLERGY RESEARCH GROUP, INC.:
The annual meeting of the shareholders of Allergy Research Group, Inc.
(the "Company") will be held at 2300 North Loop Road, Alameda, California 94502,
on December 21, 2006 at 10:00 A.M. local time for the following purposes:
1. To elect a Board of Directors for the Company.
2. To set the compensation for independent directors.
3. To approve the continuation of Clancy and Co., P.L.L.C. as the
Company's independent registered public accounting firm for the
fiscal year ending December 31, 2006.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR EACH OF
THE NOMINEES TO THE BOARD OF DIRECTORS AND RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF EACH OTHER ITEM LISTED ON THIS NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS.
Shareholders of record at the close of business on November 16, 2006, are
the only persons entitled to notice of and to vote at the meeting.
Your attention is directed to the attached Proxy Statement. WHETHER OR NOT
YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE FILL IN, SIGN, DATE AND
MAIL THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO SAVE THE COMPANY
FURTHER SOLICITATION EXPENSE. If you are present at the meeting, you may then
revoke your proxy and vote in person, as explained in the Proxy Statement in the
section entitled "ANNUAL MEETING OF SHAREHOLDERS - December 21, 2006." A return
envelope is enclosed for your convenience.
/s/ Susan D. Levine
-----------------------------
Susan D. Levine
Secretary
Dated: November 22, 2006
----------------------------------------
PROXY STATEMENT
----------------------------------------
ALLERGY RESEARCH GROUP, INC.
2300 North Loop Road
Alameda, California 94502
ANNUAL MEETING OF SHAREHOLDERS - DECEMBER 21, 2006
The enclosed Proxy is solicited by the Board of Directors of Allergy
Research Group, Inc. (the "Board") in connection with the annual meeting of
shareholders of Allergy Research Group, Inc. (the "Company") to be held on
December 21, 2006 at 10:00 A.M. local time at 2300 North Loop Road, Alameda,
California 94502, and at any adjournments thereof. The cost of solicitation,
including the cost of preparing and mailing the Notice of Shareholders' Meeting
and this Proxy Statement, will be paid by the Company. Such mailing took place
on approximately November 22, 2006. Representatives of the Company may, without
cost to the Company, solicit Proxies for the management of the Company by means
of mail, telephone or personal calls.
A Proxy with respect to the Company may be revoked before the meeting by
giving written notice of revocation to the Secretary of the Company, or may be
revoked at the meeting, prior to voting. Unless revoked, properly executed
Proxies with respect to the Company will be voted as indicated in this Proxy
Statement. In instances where choices are specified by the shareholders in the
Proxy, those Proxies will be voted or the vote will be withheld in accordance
with each shareholder's choice. An "abstention" on any proposal will be counted
as present for purposes of determining whether a quorum of shares is present at
the meeting with respect to the proposal on which the abstention is noted, but
will be counted as a vote "against" such proposal. Should any other matters come
before the meeting, it is the intention of the persons named as Proxies in the
enclosed Proxy to act upon them according to their best judgment.
Only shareholders of record at the close of business on November 16, 2006
may vote at the meeting or any adjournments thereof. As of that date there were
approximately 14,521,605 outstanding common shares of all classes, $.001 par
value, of the Company. Each shareholder of the Company is entitled to one vote
for each share of the Company held. Voting for the election of directors is not
cumulative, which means that the holders of a majority of the Company's
outstanding shares have the power to elect the entire Board of the Company. None
of the matters to be presented at the meeting will entitle any shareholder of
the Company to appraisal rights. In the event that Proxies which are sufficient
in number to constitute a quorum are not received by December 18, 2006, the
persons named as Proxies may propose one or more adjournments of the meeting to
permit further solicitation of Proxies. Such adjournments will require the
affirmative vote of the holders of a majority of the shares present in person or
by Proxy at the meeting. The persons named as Proxies will vote in favor of such
adjournment. At the annual meeting, the shareholders of the Company will be
asked to re-elect the current members of the Board and to approve the selection
of the independent public accountant for the Company.
SHARE OWNERSHIP
The following table provides information as of November 16, 2006
concerning the beneficial ownership of the Company's 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 5% 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.
- ------------------------------ ---------------------------- ---------------------------- --------------------
Name and Address of Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class(1)(4)
- ------------------------------ ---------------------------- ---------------------------- --------------------
$.001 par value common stock Stephen Levine, Ph.D. 10,113,250 (2) 70%
Susan Levine
2300 North Loop Road
Alameda, California 94502
$.001 par value common stock Manfred Salomon 99,750 .7%(3)
2300 North Loop Road
Alameda, CA 94502
$.001 par value common stock Officers and Directors as a 10,114,750 70%
group
$.001 par value common stock Steven N. Bronson 743,733 5.1%(5)
100 Mill Plain Road
Danbury. CT 06811
(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 sixty (60) days
from November 16, 2006, 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) Represents shares held jointly by Stephen and Susan Levine as community
property.
(3) Included in this table is a fully vested option held by Manfred Salomon to
purchase 98,250 shares of common stock at an exercise price of $.40 per
share.
(4) Percentages are based on 14,521,605 shares outstanding on November 16, 2006.
(5) The number of shares held and percentage of ownership for Mr. Bronson is
based solely on reports filed by him with the SEC and our list of record
holders.
ANNUAL REPORT OF THE COMPANY
The annual report of the Company containing audited financial statements
for the twelve months ended December 31, 2005 was mailed to the shareholders on
or about November 22, 2006.
PROPOSAL 1
ELECTION OF DIRECTORS
It is intended that the enclosed Proxy will be voted for the election of
the three (3) persons named below as directors for the Company unless such
authority has been withheld in the respective Proxy. The term of office of each
person elected to be a director of the Company will be until the next regular or
annual meeting of the shareholders at which election of directors is an agenda
item and until his or her successor is duly elected and shall qualify. Pertinent
information regarding each nominee for the past five years is set forth
following his or her name below.
- ------------------- ------------------------------------------------------------ -------------------------
NAME AND AGE POSITION WITH THE COMPANY AND PRINCIPAL OCCUPATIONS ADDRESS
- ------------------- ------------------------------------------------------------ -------------------------
Stephen Levine, Dr. Levine has served as the Company's Chief Executive 2300 North Loop Road
Ph.D. Officer from December 1997 to January 1999 and Alameda, California
(56) recommenced service to the Company in that capacity in 94502
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, Dr.
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, Inc. 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 the Chief Executive Officer.
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 Vice President,
Secretary and a Director for the Company.
- ------------------- ------------------------------------------------------------ -------------------------
Susan Levine Ms. Levine has served as the Secretary and 2300 North Loop Road
(52) Vice-President of the Company since December 1997, and Alameda, California
was elected to the Board at that time. Ms. Levine 94502
resigned her board membership temporarily between
January 1999 and January 2000. Since 1980, Ms. Levine
has worked with her husband, Dr. Stephen Levine, in the
creation and development of Nutricology. Ms. Levine
currently works on marketing concerns. Prior to working
for the Company, Ms. 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.
- ------------------- ------------------------------------------------------------ -------------------------
Ed Kane Mr. Kane has served as a Director of the Company since 2300 North Loop Road
(79) November 8, 2000. From 1955 to present, Mr. Kane has Alameda, California
acted as the sole owner and Chairman of the Board of 94502
Kane Steel. 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, 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 ABB 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 Temple University. Mr.
Kane's particular focus has been on fatty acid
metabolism. Mr. Kane presently sits on the Advisory
Board of UMDNJ- School of Osteopathic Medicine. 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.
- ------------------- ------------------------------------------------------------ -------------------------
None of the persons named as nominees for the Company are directors of any
other Reporting Companies. "Reporting Companies" include companies with a class
of securities registered pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), or subject to the requirements of Section
15(d) of the 1934 Act, or any company registered as an investment company under
the Investment Company Act of 1940, as amended (the "1940 Act").
In voting for directors, you must vote all of your shares noncumulatively.
This means that the owners of a majority of the Company's outstanding shares
have the power to elect the Company's entire Board. The vote of a majority of
shares of the Company represented at the meeting, provided at least a quorum (a
majority of the outstanding shares) is represented in person or by proxy, is
sufficient for the election of the above nominees to the Board. By completing
the Proxy, you give the Proxy the right to vote for the persons named in the
table above. If you elect to withhold authority for any individual nominee or
nominees, you may do so by making an "X" in the box marked "VOTE FOR NOMINEE(S)
NOT LINED OUT," and by striking a line through the nominees' name or names on
the Proxy for which you do not vote.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Company currently has a medical advisory board. The Company is not a
"listed company" under SEC rules and is therefore not required to have an audit
committee comprised of independent directors. We do not currently have an audit
committee, however, for certain purposes of the rules and regulations of the
SEC, our Board of Directors is deemed to be the Company's audit committee. Our
Board of Directors has determined that its members do not include a person who
is an "audit committee financial expert" within the meaning of the rules and
regulations of the SEC. The Board of Directors has determined that each of its
members is able to read and understand fundamental financial statements and has
substantial business experience that results in that member's financial
sophistication. Accordingly, the Board of Directors believes that each of its
members has the sufficient knowledge and experience necessary to fulfill the
duties and obligations ordinarily fulfilled by an audit committee. It is the
practice of our Board of Directors to review the Company's audited annual
financial statements and unaudited quarterly financial statements with the
Company's independent auditors.
Management is responsible for the Company's financial statements and the
financial reporting process, including internal controls. The independent
auditors' are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards in the United States of America and for issuing a report thereon. The
Board's responsibility is to monitor and oversee these processes.
In this context, the Board has held discussions with management and the
independent auditors regarding the matters required to be discussed by Statement
on Auditing Standards ("SAS") No. 61, "COMMUNICATION WITH AUDIT COMMITTEES" and
SAS No. 90, "AUDIT COMMITTEE COMMUNICATIONS." These matters included a
discussion of the independent auditors' judgments about the quality (not just
the acceptability) of the Company's accounting principles as applied to
financial reporting. Management represented to the Board that the Company's
consolidated financial statements were prepared in accordance with generally
accepted accounting principles in the United States of America, and the Board
has reviewed and discussed the consolidated financial statements with management
and the independent auditors. The independent auditors also provided the Board
with the written disclosures and letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the Board
discussed with the independent auditors that firm's independence.
The Company is not a "listed company" under SEC rules and is therefore not
required to have a compensation committee or a nominating committee. We do not
currently have a compensation committee. Our Board of Directors is currently
comprised of only three members, two of whom are executive officers of the
Company, including our Chief Executive Officer and Chief Financial Officer. Any
compensation for officers must be approved by the Board of Directors.
Compensation for Directors must be approved by the shareholders under the
Company's Bylaws.
The Board of Directors is responsible for considering and making
recommendations to the shareholders concerning nominees for election as director
at the Company's meetings of shareholders, and nominees for appointments to fill
any vacancy on the Board. Because of the practical necessity that a candidate
for director must be acceptable to Dr. Levine, in his capacity as holder of a
majority of the Company's voting stock, in order to be elected, the Board
believes it is desirable for the nomination function to be fulfilled by the full
Board, including Dr. Levine, rather than by a nominating committee that does not
include him. When the need for a new director arises (whether because of a newly
created Board seat or vacancy), the Board will proceed by whatever means it
deems appropriate to identify a qualified candidate or candidates. The Board
will evaluate the qualifications of each candidate.
The Board has no established policy with regard to the consideration of
any director or candidate recommended by shareholders of the Company. Because of
the practical necessity that a candidate for director must be acceptable to Dr.
Levine, in his capacity as holder of a majority of the Company's voting stock,
in order to be elected, the Board does not believe that such a policy is
necessary at this time. However, the Board will consider including in its slate
of director nominees for an annual shareholders' meeting a nominee submitted to
the Company by a shareholder. In order for the Board to consider such nominees,
the nominating shareholder should submit the information about the nominee and
nominating shareholder to the President at the Company's principal executive
offices at least 120 days before the first anniversary of the date that the
Company's Proxy Statement was released to shareholders in connection with the
previous year's annual meeting of shareholders. The nominating shareholder
should expressly indicate that such shareholder desires that the Board consider
such shareholder's nominee for inclusion with the Board's slate of nominees for
the meeting. The nominating shareholder and shareholder's nominee should
undertake to provide, or consent to the Company obtaining, all other information
the Board requests in connection with its evaluation of the nominee. The Board
did not receive any nominations for director from any of the Company's common
stock within the prescribed time period for presentation at the 2006 meeting.
ATTENDANCE AT MEETINGS
The Board for the Company took action seven times during its last fiscal
year through meetings or by unanimous written consent. The 2005 Annual
Shareholders' Meeting was attended by all board members except Mr. Kane.
Although directors are encouraged to attend the annual meetings, the Company
does not have a policy on individual director attendance at shareholder
meetings.
COMMUNICATION WITH SHAREHOLDERS
Shareholders who wish to communicate with members of the Board of
Directors, including independent directors, individually or as a group, may send
correspondence to them in care of the Secretary of the Company directed to its
principal office at 2300 North Loop Road, Alameda, California 94502.
DIRECTOR COMPENSATION
The Company does not maintain any separate pension, retirement or other
arrangement for compensating its Directors. No compensation was paid to
Directors during the fiscal year ended December 31, 2005, and the Company does
not currently compensate directors. Included in this proxy statement is a
proposal to compensate independent directors. Directors who also act as officers
of the Company receive compensation for services rendered to the Company in
those other capacities.
EXECUTIVE OFFICERS
Certain information about the current executive officers of the Company is
set forth below. Each executive officer of the Company may be removed from
office at any time by a majority of the Company's Board of Directors with or
without cause.
STEPHEN LEVINE, PH.D. (56) 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, Dr, Levine was appointed Chief Financial Officer
of the Company. Dr. Levine graduated cum laude from State University College in
Buffalo, New York and received his Ph.D. from the University of California,
Berkeley. In 1979, Dr. Levine founded NutriCology, Inc. 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 the Chief Executive Officer. Dr. Levine is the author of
ANTIOXIDANT ADAPTATION, ITS ROLE IN FREE RADICAL PATHOLOGY.
FRED SALOMON (67) has served as President since August 12, 2003. He 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.
SUSAN LEVINE (52) has served as the Secretary, Director and Vice President
to the Company since December 1997. Ms. Levine resigned her board membership
temporarily between January 1999 and January 2000. Since 1980, Ms. Levine has
worked with her husband, Dr. Stephen Levine, in the creation and development of
Nutricology. Ms. Levine currently works on marketing concerns. Prior to working
for the Company, Ms. 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.
Susan Levine is the wife of Stephen Levine. There are no other family
relationships between the executive officers and/or the proposed directors. The
Company's address is: 2300 North Loop Road, Alameda, California 94502.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth the remuneration to the Company's executive
officers for the past three fiscal years:
SUMMARY COMPENSATION TABLE
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
------------------------------------ -------------------------- ----------
Other Securities
Annual Restricted Under- All Other
Compen- Stock lying LTIP Compen-
Name and Principal Salary Bonus sation Award(s) Options Payouts sation
Position Year ($)(8) ($)(9) ($) ($) (#) ($) ($)
- -------------------- -------- ------------- ---------- ----------- ------------ ------------- ---------- ------------
Stephen Levine, 2003 299,846 - 10,890(1)
CEO and CFO 2004 324,477 125,000 25,422(2)
2005 309,616 100,000 27,422(3)
Manfred (Fred) 2003 112,308 100,000 98,250 3,923(4)
Salomon, 2004 120,923 120,000 12,231(4)
President 2005 115,385 100,000 11,000(4)
Susan Levine, 2003 179,255 8,743(5)
Secretary and 2004 195,517 50,000 19,580(6)
Vice President 2005 186,562 40,000 18,707(7)
(1) Represents 401(k) matching funds of $6,308, long-term disability policy of
$2,427 and a life insurance policy of $2,155.
(2) Represents 401(k) matching funds of $16,000, long-term disability policy of
$2,427 and a life insurance policy of $6,995.
(3) Represents 401(k) matching funds of $18,000, long-term disability policy of
$2,427 and a life insurance policy of $6,995.
(4) Represents 401(k) matching funds.
(5) Represents 401(k) matching funds of $5,677, long-term disability policy of
$2,251 and a life insurance policy of $815.
(6) Represents 401(k) matching funds of $12,574, long-term disability of $2,251
and a life insurance policy of $4,755.
(7) Represents 401(k) matching funds of $11,701, long-term disability policy of
$2,251 and a life insurance policy of $4,755.
(8) There has not been a salary increase for officers since 2003. The 2004 wages
are higher than 2005 due to our bi-weekly processing of payroll and the
timing of payments.
(9) Represents a decrease of approximately 20% from 2004 to 2005.
During the last fiscal year ended December 31, 2005, the Company did not
grant any stock options to executive officers. Options granted in 2003 are
included in the table below:
- ----------------- -------------- --------------- ------------------ ------------
Number of % of Total
Securities Options/SAR's
Underlying Granted to
Options/SARs Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
- ----------------- -------------- --------------- ------------------ ------------
Manfred Salomon 98,250 26% $.40 per share 05/12/2008
- ----------------- -------------- --------------- ------------------ ------------
The following table is intended to provide information as to the number of
stock options exercised by each of the executive officers listed above, the
value realized upon exercise of such options, and the number and value of any
unexercised options still held by such individuals.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ----------------- ----------------- -------------------- ------------------ ----------------------
Manfred Salomon 0 0 98,250/0 84,495/0(1)
(1) On May 12, 2003, the Company issued an option to purchase 98,250 shares of
Common Stock to Manfred Salomon under the Company's 1998 Incentive Stock
Option Plan. The option can be exercised for $.40 per share and were fully
vested on the grant date. The option expires on May 12, 2008.
EMPLOYMENT AGREEMENTS
The Company does not have a current employment agreement with its Chief
Executive Officer and Chief Financial Officer or with its President.
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, and no more than six (6) months following
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 less 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, Nutricology, Inc. adopted
the NutriCology, Inc. 401(k) Retirement Plan (the "401(k) Plan"). Eligible
employees may contribute any portion of their annual compensation, subject to
the limitations established annually by the Internal Revenue Service, and the
Company will match 100 percent of an employee's contribution, limited to 5% of
the employee's compensation. Total provisions with respect to this plan
approximated $91,000 and $94,000, for the years ended December 31, 2004 and
2005, respectively.
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 forfeit any unspent monies unless requests for
reimbursement are made no later than 90 days after the end of the year. In 2005,
the plan was amended to allow eligible expenses to include those incurred
through March 15 of the following year. We automatically contribute enough of
the employee's compensation to pay for insurance coverage provided under our
health plan; however, it is up to the employee to determine the amount of any
additional contributions.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about our common stock that may
be issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of December 31, 2005.
- ------------------------ ---------------------------- --------------------------- ------------------------------
Plan Category Number of Securities to Be Weighted-average Exercise Number of Securities
Issued Upon Exercise of Price of Outstanding Available For Future
Outstanding Options, Options, Warrants and Issuance Under Equity
Warrants And Rights Rights Compensation Plans
(Excluding Securities
Reflected in Column (a))
(a) (b) (c)
- ------------------------ ---------------------------- --------------------------- ------------------------------
Equity compensation 333,750 common shares(1) $.40 616,750 common shares
plans approved by
security holders
- ------------------------ ---------------------------- --------------------------- ------------------------------
Equity compensation None None None
plans not approved by
security holders
- ------------------------ ---------------------------- --------------------------- ------------------------------
Total 333,750 common shares $.40 616,750(2) common shares
- ------------------------ ---------------------------- --------------------------- ------------------------------
(1) Issued under Allergy Research Group, Inc.'s 1998 Incentive Stock Option Plan
1 in 2003.
(2) Represents common shares issuable under 1998 Incentive Stock Option Plan 1.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To our knowledge, all reports that were required to be filed by our
directors, officers or principal shareholders during 2005 under Section 16(a) of
the Securities Exchange Act of 1934, were timely filed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. 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.
On January 4, 2005, the Company entered into a lease for office and
warehouse space located at 2300 North Loop Road, Alameda, California with AriBen
Corporation, a single-purpose California corporation wholly-owned by Stephen and
Susan Levine. The leased premises consist of approximately 29,821 square feet of
office and industrial space. The lease, which has a term of ten years with
options to renew for two subsequent periods of ten and five years, respectively,
has a base monthly rent of $24,000 for the initial period, $30,000 for the first
option period and $35,000 for the second option period. Rent will be adjusted
annually during the second five years of each 10-year lease period based on the
consumer price index, with a minimum increase of three percent. No security
deposit is required under the lease.
We have reimbursed AriBen Corporation for some of the tenant improvements
that were built out to our specifications in the amount of $350,000. We believe
that the new facilities provide a more geographically beneficial location,
closer to our existing and potential workforce, and the facilities can
accommodate internal manufacturing, greater quality control and expansion better
than our prior facilities.
During 2005, Stephen and Susan Levine repaid all officer loans, including
accrued interest.
REQUIRED VOTE
Each of the nominees has agreed to serve as a director of the Company
until his or her replacement is elected and qualified. If any unforeseen event
prevents one or more of the nominees from serving as a director, your votes will
be cast for the election of a substitute or substitutes selected by the Board.
In no event, however, can the Proxies be voted for a greater number of persons
than the number of nominees named. Unless otherwise instructed, the proxies will
vote for the election of each nominee to serve as a director of the Company.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE TO ELECT EACH OF THE
NOMINEES TO THE BOARD OF DIRECTORS OF THE COMPANY.
PROPOSAL 2
INDEPENDENT DIRECTOR COMPENSATION
The Board of Directors has determined that it is in the best interests of
the Company and its shareholders to provide compensation to independent
directors serving on the Company's Board, and to provide reasonable compensation
to such independent directors for their services to the Company. In order to
attract independent directors to the Board and to provide an incentive for such
directors to continue to serve the Company in that capacity, the Board is
proposing that the shareholders adopt a compensation plan for independent
directors providing for attendance fees to each independent director of $1,500
per meeting attended by the director telephonically or in person, plus
reasonable travel costs for each meeting personally attended by the director.
It is the practice of the Board of Directors to meet at least four (4)
times annually to review the Company's annual and quarterly financial statements
and reports, and to hold additional meetings as necessary to discuss the
Company's business and financial affairs. Because we cannot predict the actual
number of meetings which will be held during the fiscal years ending December
31, 2006 or 2007, we have prepared the following table based on meetings held in
2005 to give shareholders an idea of what would have been paid to independent
directors during that year had the plan been in place for that time period.
NEW PLAN BENEFITS
INDEPENDENT DIRECTOR COMPENSATION PLAN
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF UNITS(3)
----------------- ---------------- ---------------
Stephen A. Levine, CEO and None N/A
CFO
Manfred (Fred) Salomon, None N/A
President(4)
Susan Levine, None N/A
Secretary and Vice President
Executive Group None N/A
Non-Executive Director $6,000 (2) N/A
Group(1)
Non-Executive Officer None N/A
Employee Group
(1) Ed Kane currently acts as the Company's sole independent director.
(2) Based on four meetings attended in person or by telephone during the fiscal
year ended December 31, 2005, assuming compensation under the new plan at
$1,500 per meeting. No compensation was actually paid to Mr. Kane during
2005.
(3) No non-cash compensation will be received by independent directors under the
plan.
(4) Mr. Salomon is not a nominee for director, nor has he held a position on the
Board of Directors at any time.
The affirmative vote of the holders of a majority of the shares
represented and voting at the meeting will be required to approve the
compensation for independent directors.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS OF
THE COMPANY VOTE IN FAVOR OF THE PROPOSAL. UNLESS OTHERWISE INSTRUCTED, THE
PROXIES WILL VOTE IN FAVOR OF THE PROPOSAL TO RATIFY THE SELECTION OF THE
COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
PROPOSAL 3
RATIFICATION OR REJECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors has selected Clancy and Co., P.L.L.C. as the
Company's independent registered public accounting firm for the fiscal year
ending December 31, 2006 and has directed that management submit the selection
of independent registered public accounting firm to the shareholders for
ratification at the Annual Meeting. Clancy and Co., P.L.L.C. audited the
Company's financial statements for fiscal 2005. No representative of Clancy and
Co., P.L.L.C. is expected to be present at the Annual Meeting.
Shareholders are not required to ratify the selection of Clancy and Co.,
P.L.L.C. as the Company's independent registered public accounting firm.
However, the Board is submitting the selection of Clancy and Co., P.L.L.C. to
the shareholders for ratification as a matter of good corporate practice. If the
shareholders fail to ratify the selection, the Board will reconsider whether or
not to retain that firm. Even if the selection is ratified, the Board in its
discretion may direct the appointment of a different independent registered
public accounting firm at any time during the year it determines that such a
change would be in the best interests of the Company and its shareholders.
AUDIT FEES
The aggregate fees billed by Clancy and Co., P.L.L.C. for professional
services rendered for the audit of the Company's annual financial statements on
Form 10-KSB and the reviews of the financial statements included in the
Company's Form 10-QSB's for the fiscal years ended December 31, 2005 and 2004
was $47,700 and $42,500, respectively.
TAX FEES
The aggregate fees billed for tax compliance rendered by our independent
auditors for the years ended December 31, 2005 was $6,000 and 2004 was $5,000.
ALL OTHER FEES
None.
The affirmative vote of the holders of a majority of the shares
represented and voting at the meeting will be required to ratify the selection
of Clancy and Co., P.L.L.C.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS OF
THE COMPANY VOTE IN FAVOR OF THE PROPOSAL. UNLESS OTHERWISE INSTRUCTED, THE
PROXIES WILL VOTE IN FAVOR OF THE PROPOSAL TO RATIFY THE SELECTION OF THE
COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
OTHER MATTERS
Management does not intend to present any business at the meeting not
mentioned in this Proxy Statement, and currently knows of no other business to
be presented. If any other matters are brought before the meeting, the appointed
proxies will vote all Proxies on such matters in accordance with their judgment
of the best interests of the Company.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be
presented by such shareholders at the Company's next Annual Meeting of
Shareholders must be received by the Company no later than July 25, 2007 in
order to be considered for inclusion in the Company's proxy statement and form
of proxy relating to that meeting.
/s/ Susan D. Levine
-----------------------------
Susan D. Levine
Secretary
Dated: November 22, 2006
PROXY PROXY
ALLERGY RESEARCH GROUP, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 21, 2006
The undersigned hereby appoints Stephen Levine and Susan Levine, CEO and
Secretary, respectively, and each of them, as attorneys and Proxies of the
undersigned, with full power of substitution, to vote all of the shares of stock
of Allergy Research Group, Inc. (the "Company") which the undersigned may be
entitled to vote at the Annual Meeting of Shareholders of the Company to be held
at 2300 North Loop Road, Alameda, California 94502 on December 21, 2006 at 10:00
A.M. local time and at any and all continuations and adjournments or
postponements thereof, with all powers that the undersigned would possess if
personally present, on the following matters, in accordance with the following
instructions, and on all matters that may properly come before the meeting. With
respect to any matter not known to the Company as of November 22, 2006, such
proxies are authorized to vote in their discretion.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2 AND 3 MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
YOUR VOTE IS IMPORTANT. THEREFORE, YOU ARE URGED TO COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THIS PROXY
IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on the other side)
ALLERGY RESEARCH GROUP, INC.
PLEASE MARK VOTE IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES
FOR DIRECTOR AND FOR PROPOSAL 2 AND 3.
1. To elect three directors to hold office until the 2007 Annual Meeting of
Shareholders.
FOR WITHHELD VOTE FOR NOMINEE(S) NOT LINED OUT
[ ] [ ] [ ] Strike a line through the
nominee(s) name or names below
that you do not vote for
NOMINEES: Susan Levine, Stephen Levine and Ed Kane
2. To set the compensation for independent directors at $1,500 per meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve the continuation of Clancy and Co., P.L.L.C. as the Company's
independent registered public accounting firm for the fiscal year ending
December 31, 2006.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
__________________ ____________________ ________________________________
Date Shares Held Signature
________________________________
Print Name
__________________ ____________________ ________________________________
Date Shares Held Signature
________________________________
Print Name
Please vote, sign, date and promptly return this proxy in the enclosed return
envelope, which is postage paid if mailed in the United States.
Please sign exactly as your name appears on your stock certificate. If the stock
is registered in the names of two or more persons, each should sign. Executors,
administrators, trustees, guardians and attorneys-in-fact should add their
titles. If signer is a corporation, please give full corporate name and have a
duly authorized officer sign, stating title. If signer is a partnership or
limited liability company, please sign the company name by authorized person.