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FORM 10-QSB

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20429

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

For the quarterly period ended March 31, 2007

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

For the transition period from _____________________ to _______________________
Commission File Number 0-27227 .
---------------

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

Florida 13-3940486

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

2300 North Loop Road, Alameda, California 94502

(Address of principal executive offices)

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

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

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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 14,561,605 shares of Issuer's voting
common stock were outstanding on May 8, 2007.

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ALLERGY RESEARCH GROUP, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
MARCH 31, 2007
================================================================================

PART I. FINANCIAL INFORMATION PAGE

ITEM 1. Condensed Consolidated Financial Statements (Unaudited):

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

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

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

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

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

ITEM 3. Controls and Procedures..........................................18

PART II. OTHER INFORMATION

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

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

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

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

ALLERGY RESEARCH GROUP, INC.
CONSOLIDATED BALANCE SHEETS

March 31, December 31,
2007 2006
(Unaudited) (Audited)
---------------------------

ASSETS
- ------
Current Assets
Cash and Cash Equivalents $3,832,697 $3,159,403
Accounts Receivable 1,008,436 818,738
Inventories (Note 4) 2,765,120 3,077,124
Prepaid Income Taxes - 90,923
Prepaid Expenses and Other Current Assets 328,813 204,342
---------------------------
Total Current Assets 7,935,066 7,350,530
---------------------------

Property and Equipment, Net 521,774 504,050
---------------------------

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

Total Assets $8,470,020 $7,867,760
===========================

LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts Payable $237,104 $148,805
Accrued Expenses (Note 5) 370,791 236,907
Deferred Tax Liability 38,378 40,387
Income Taxes Payable 112,135 11,958
---------------------------
Total Current Liabilities 758,408 438,057
---------------------------

Commitments and Contingencies (Note 6)

Stockholders' Equity
Preferred Stock, $.25 Par Value, Authorized 1,000,000
Shares, Issued and Outstanding: None None None
Common Stock, $.001 Par Value, Authorized 100,000,000 Shares
Issued: 15,105,355, Outstanding: 14,521,605 15,105 15,105
Additional Paid In Capital 1,150,641 1,150,641
Retained Earnings 6,824,403 6,542,494
Less: Treasury Stock, at cost (583,750 shares) (278,537) (278,537)
---------------------------
Total Stockholders' Equity 7,711,612 7,429,703
---------------------------
Total Liabilities and Stockholders' Equity $8,470,020 $7,867,760
===========================

See Notes to Condensed Consolidated Financial Statements.

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

Three Months Ended
March 31,
2007 2006
---- ----

Revenues $4,086,717 $4,265,527
Cost of Sales 2,505,786 2,630,510
---------- ----------
Gross Profit 1,580,931 1,635,017
---------- ----------

Operating Expenses
Selling, General and Administrative 1,084,309 1,039,223
Research and Development 65,980 72,774
---------- ----------
Operating Expenses 1,150,289 1,111,997
---------- ----------

Earnings from Operations 430,642 523,020
---------- ----------

Other Income
Interest Income 40,357 26,213
---------- ----------

Net Earnings Before Tax 470,999 549,233

Provision for Income Taxes 189,091 223,550
---------- ----------

Net Earnings Available to Common Stockholders $ 281,908 $ 325,683
========== ==========

Basic and Diluted Earnings Per Common Share (Note 3) $ 0.02 $ 0.02
========== ==========

See Notes to Condensed Consolidated Financial Statements.

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ALLERGY RESEARCH GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
2007 2006
Cash Flows From Operating Activities
Net Earnings $ 281,908 $ 325,683
----------- -----------
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities
Depreciation 16,979 17,843
Change in Deferred Taxes (2,009) 4,850
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable (189,698) (231,519)
(Increase) Decrease in Inventory 312,004 (177,537)
(Increase) Decrease in Prepaid Expenses and Other Current Assets (33,548) (98,082)
Increase (Decrease) in Accounts Payable and Accrued Expenses 222,183 243,676
Increase (Decrease) in Income Taxes Payable 100,177 135,938
----------- -----------
Net Cash Flows Provided By Operating Activities 707,996 220,852
----------- -----------
Cash Flows From Investing Activities

Acquisition of Property and Equipment (34,702) --
----------- -----------
Net Cash Flows Used In Investing Activities (34,702) --
----------- -----------

Cash Flows From Financing Activities -- --

Increase in Cash and Cash Equivalents 673,294 220,852

Cash and Cash Equivalents, Beginning of Period 3,159,403 2,487,824
----------- -----------
Cash and Cash Equivalents, End of Period $ 3,832,697 $ 2,708,676
=========== ===========

See Notes to Condensed Consolidated Financial Statements.

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ALLERGY RESEARCH GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)

Note 1 - Basis of Presentation
- ------------------------------

The accompanying unaudited Consolidated Financial Statements of Allergy
Research Group, Inc. ("the Company") have been prepared in accordance
with generally accepted accounting principles in the United States for
interim financial information and the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows for all periods presented have
been made. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses. Examples include provisions for
returns, accounting for income taxes, bad debts, length of product life
cycles, and property, plant and equipment lives for depreciation
purposes. Actual results may differ from these estimates. The results
of operations for the period ended March 31, 2007 are not necessarily
indicative of the operating results that may be expected for the entire
year ending December 31, 2007. These financial statements should be
read in conjunction with the financial statements included in the
Company's Annual Report on Form 10-KSB as of and for the year ended
December 31, 2006, filed with the Securities and Exchange Commission
("SEC") on March 29, 2007.

The consolidated financial statements include the accounts of Allergy
Research Group, Inc. and its subsidiary. All significant intercompany
transactions and balances have been eliminated.

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

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities -- Including an
Amendment of FASB Statement No. 115 ("SFAS No. 159"). SFAS No. 159
permits entities to choose to measure many financial instruments and
certain other items at fair value. Unrealized gains and losses on items
for which the fair value option has been elected will be recognized in
earnings at each subsequent reporting date. SFAS No. 159 is effective
for financial statements issued for fiscal years beginning after
November 15, 2007. The Company does not anticipate SFAS No. 159 will
have a material impact on its results of operations and financial
condition.

Other recent accounting pronouncements issued by the FASB (including
its Emerging Issues Task Force ("EITF")), the American Institute of
Certified Public Accountants ("AICPA"), and the SEC did not or are not
believed by management to have a material impact on the Company's
present or future financial statements.

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

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

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

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Three Months Three Months
Ended Ended
3/31/07 3/31/06
------- -------

Numerator-Net Earnings Available to Common Stockholders $ 281,908 $ 325,683
============ ============
Denominator:
Weighted average shares used in computing basic EPS 14,521,605 14,521,605
Net effect of dilutive common shares 172,922 184,383
------------ ------------
Weighted average shares used in computing diluted EPS 14,694,527 14,705,988

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

Diluted Earnings Per Share $ 0.02 $ 0.02
============ ============

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

Inventories consist of the following:
March 31, 2007 December 31, 2006
-------------- -----------------
Raw materials $ 1,703,370 $ 1,993,200
Finished goods 999,116 1,002,162
Supplies 112,634 131,762
Reserve for obsolescence (50,000) (50,000)
------------ ------------
Total $ 2,765,120 $ 3,077,124
============ ============

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

Accrued expenses consist of the following:
March 31, 2007 December 31, 2006
-------------- -----------------
Operating expenses 151,355 157,928
Vacation and bonus 145,000 46,000
Payroll 67,745 26,849
Sales tax 6,691 6,130
------------ ------------
$ 370,791 $ 236,907
============ ============

Note 6 - Commitments and Contingencies
- --------------------------------------

Line of Credit

The Company has a Merrill Lynch Working Capital Management Account
(WCMA) which provides for a line of credit up to $1,500,000 bearing
interest at the London Interbank Offered Rate (LIBOR) plus 2.75%, due
monthly. The LIBOR plus 2.75% at March 31, 2007 was 8.07%. The note is
secured by substantially all of the assets of the Company. The WCMA
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 pays
interest on deposits at Merrill Lynch's money market rate, which as of
March 31, 2007 was 4.63%. The entire line was available for use as of
March 31, 2007.

Purchase Obligations

As of March 31, 2007, the Company had inventory purchase obligations
and a two-year distribution agreement with a vendor for the exclusive
distribution of their product approximating $2,066,000, which were
incurred as part of the normal course of business.

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Operating Lease (A Related Party Transaction)

On January 4, 2005, the Company entered into a lease with AriBen
Corporation, a related party 100% owned by Susan and Stephen Levine,
the Company's Vice President and CEO/CFO and collectively, as husband
and wife, the majority stockholders of the Company, respectively, for
approximately 29,821 square feet of office and industrial space. The
lease, which has a term of ten years with options to renew for two
subsequent periods of ten and five years, respectively, has a base
monthly rent of $24,000 for the initial period, $30,000 for the first
option period and $35,000 for the second option period. Rent will be
adjusted annually during the second five years of each 10-year lease
period based on the consumer price index, with a minimum increase of
three percent. No security deposit was required under the lease. Rent
expense charged to operations during the first quarter of 2007 was
$72,000 (2006: $72,000). Future minimum rental commitments under
non-cancelable leases for the next five years are $288,000 per year.

Asserted and Unasserted Claims

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

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

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

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

SALES. Approximately 13% of the Company's total sales in 2007
and 11% in 2006 were attributable to the same single distributor. In
the event the Company were to lose that account, management anticipates
that it would be able to convert the business to sales directly to the
customers of that distributor. As converted sales would be at a higher
margin, management does not believe the loss of the account would have
a material negative impact on sales. However, no assurance can be given
that, if the Company were to lose this distributor, all or any of the
customers would transfer directly to the Company or that current sales
from this group would be maintained.

PURCHASES. The Company purchases raw materials and uses
outside vendors for the manufacture of its products. For the three
months ended March 31, 2007, the Company had a concentration of
approximately 66% of manufacturing with four separate vendors, who
individually account for more than ten percent of our purchases. For
the three months ended March 31, 2006, the Company had a concentration
of approximately 29% of manufacturing with two separate vendors, who
individually accounted for more than ten percent of our purchases. The
Company does not currently have written contracts with any of its
manufacturers, but relies on long-term personal and professional
relationships. Management believes that, due to the large number of
businesses performing this type of service in the industry, it would
have little difficulty in finding viable alternatives in the event any
one of these vendors became unable or determined not to continue
manufacturing the Company's products. However, there can be no
assurance that suitable, alternative manufacturers would be available
to the Company when needed or that such alternative manufacturers would
not result in an increase in costs or a change in the quality of the
Company's products.

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PRODUCT. None of the Company's products in 2007 accounted for
more than 10% of its sales dollars. In 2006, one of the Company's
products was in excess of 10% of its sales dollars.

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

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

Options outstanding and exercisable at March 31, 2007 were 333,750
exercisable at $0.40 per share with an aggregate intrinsic value of
$143,513. The weighted-average exercise price of options outstanding
and exercisable at March 31, 2007 was $0.40 per share and the
weighted-average remaining contractual life was 1.1 years. The options
vested upon issue on May 12, 2003 and expire five years after said
date. There were no options granted or exercised during any of the
periods presented or compensation expense recognized. When options are
exercised the Company issues treasury shares of which there are 583,750
on hand.

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

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

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

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

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

o RESULTS OF OPERATIONS. This section provides an analysis of our
results of operations for the three-month period ended March 31, 2007
compared to the same period in 2006. A brief description is provided
of transactions and events that impact the comparability of the
results being analyzed.

o LIQUIDITY AND CAPITAL RESOURCES. This section provides an analysis of
our financial condition and cash flows as of and for the three months
ended March 31, 2007, including related party transactions.

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

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

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

In July 2005, the Codex Alimentarius Commission adopted Guidelines for Vitamin
and Mineral Food Supplements (the "Guidelines"). The Guidelines only apply to
supplements that contain vitamins and minerals that are regulated as foods. The
Guidelines provide criteria for establishing maximum amounts of vitamins and
minerals per daily portion of the supplement as recommended by the manufacturer.
They also address the packaging and labeling of supplements. The restrictions
are expected to lower the dosage of U.S.-manufactured products to standards set
by foreign jurisdictions. The FDA has stated that the Codex Guidelines will not
affect the availability of supplement products to U.S. consumers.

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 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

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could have a material adverse effect on our results of operations and financial
condition. Currently, we do not believe that 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 currently manufacture pharmaceuticals and nutraceutical
products through the Company, but only conduct literature work and patent
applications for potential products, we do not currently 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.

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

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

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

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

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OVERVIEW
- --------

BUSINESS DESCRIPTION. Allergy Research Group, Inc. (SYMBOL: ALRG) (the "Company"
or "ARG"), together with its wholly-owned subsidiary, Nutricology, Inc., strives
to be an innovative leader in nutraceutical research and product formulation.
Our shares are traded on the Over-The-Counter Bulletin Board. Since 1980, we
have produced quality, hypoallergenic nutritional supplements and supplied
products to physicians and health care practitioners worldwide. We develop,
contract manufacture, market and sell vitamins and nutritional supplements
throughout the world under the NutriCology(R) and Allergy Research Group(R)
labels. Our products are distributed through distributors to medical and
professional accounts, retail stores, and consumers directly. We offer a line of
approximately 280 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. We also distribute certain third-party manufactured products under our
labels. These products account for approximately 20% of all products offered by
the Company. Our principal executive offices are located at 2300 North Loop
Road, Alameda, California 94502 and our telephone number is (800) 545-9960.

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

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

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

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.

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PERIOD ENDED MARCH 31, 2007 COMPARED TO MARCH 31, 2006
------------------------------------------------------

RESULTS OF OPERATIONS

The following table summarizes certain aspects of our results of operations:

2007 2006 $ CHANGE % CHANGE
------------- ------------- -------------- --------------

Net sales $ 4,086,717 $4,265,527 ($178,810) (4%)
Cost of sales 2,505,786 2,630,510 ($124,724) (5%)
Gross margin 1,580,931 1,635,017 ($54,086) (3%)
As a percentage of sales 39% 38% - 1%
General and administrative expense 1,084,309 1,039,223 45,086 4%
Research and development expense 65,980 72,774 (6,794) (9%)
Interest income 40,357 26,213 14,144 54%
Provision for income taxes 189,091 223,550 34,459 15%
Net earnings 281,908 325,683 43,775 (13%)

REVENUES. Our revenues have decreased 4% during the first quarter of 2007
resulting from decreased sales to our distributors and retail customers. Sales
to professional accounts also decreased but to a lesser degree. The decrease in
sales is affected by the ordering patterns of our customers, as evidenced by an
8% increase in orders placed during April 2007 when compared to 2006. We cannot
predict yet what the effect of those increased orders will be on our overall
financial results for the second quarter, as orders may continue to fluctuate
throughout the period. We are currently attempting to increase sales through the
efforts of our National Accounts Manager, attendance at trade shows and market
specific mailings. We expect to continue to benefit from increased consumer
awareness of the importance of nutritional supplements in one's diet. We are
planning additional promotional activities with selected major accounts in 2007,
featuring selected new products.

COSTS OF SALES. Cost of sales decreased as a direct result of a decrease in
sales. We continue to make a concerted effort to determine that our
manufacturers are maintaining the high standards we and our customers expect. We
expect our cost of sales as a percentage of net sales to fluctuate somewhat as
our product mix fluctuates. Our average selling price and related material cost
used to manufacture our product has been relatively consistent and we expect
this trend to continue for the foreseeable future. Gross profit margins
increased approximately 1% for the period over period comparison primarily as a
result of increased prices on 50 items during February 2007.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by 4% due to an increase in payroll expense associated with the
addition of a National Accounts Manager, increased attendance at trade shows,
and sales promotions utilizing samples. These increases in expenditures were
partially offset by the repayment of a bad debt written off in a prior year. We
anticipate that general and administrative expenses will continue to increase
over the long term as our business continues to grow and the costs associated
with being a public company continue to increase as a result of our required
reporting requirements, including but not limited to expenses incurred to comply
with the Sarbanes-Oxley Act of 2002.

RESEARCH AND DEVELOPMENT EXPENSES. Although research and development expenses
decreased during the first quarter of 2007 versus the comparative prior period,
we anticipate that research and development expense will continue to increase
over the long term as a result of the growth of the products we offer, new
product opportunities and our continued efforts to invest in the future and
strengthen our position within the nutritional and supplement market.

INTEREST INCOME. Due to our increased cash balance and because we placed excess
cash in short-term certificates of deposits, interest income increased by
approximately $14,000 during the first quarter 2007 compared to the first
quarter 2006.

PROVISION FOR INCOME TAXES. Provision for income taxes represents federal and
state income taxes based on earnings and changes to deferred taxes.

NET EARNINGS. Net earnings decreased 13% due to decreased sales compounded by
increased operating expenses.

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

As of March 31, 2007, to the best of our knowledge, no known trends or demands,
commitments, events or uncertainties, except as discussed below, have existed
which will have an effect on our liquidity.

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

Current Financial Condition

During the three-month period ended March 31, 2007, our working capital
increased by approximately $264,185 to $7,176,658, compared to a working capital
at December 31, 2006 of $6,912,473. Current assets mainly consist of
approximately $3.83 million in cash, $1.01 million in accounts receivable, and
$2.77 million in inventory. We continue to finance our inventory and accounts
receivable through cash generated by operating activities. We believe that the
Company's operating cash flow, cash and cash equivalents, and borrowing capacity
under committed bank credit agreements is sufficient to fund our capital and
liquidity needs for the next twelve months.

Off-Balance Sheet Arrangements

At March 31, 2007, we did not have any relationship with unconsolidated entities
or financial partnerships, which other companies have established for the
purpose of facilitating off-balance sheet arrangements or other contractually
narrow or limited purposes as defined in Item 303(c)(2) of SEC Regulation S-B.
Therefore, we are not materially exposed to any financing, liquidity, market or
credit risk that could arise if we had engaged in such relationships.

Cash Flows

OPERATING ACTIVITIES. Net cash flows provided by operating activities were
$707,996 and $220,852 for the three months ended March 31, 2007 and 2006,
respectively. Net cash provided by operating activities for both periods
primarily reflects net earnings and net changes in operating assets and
liabilities such as accounts receivable, inventory and accounts payable. Cash
generated by operating activities for 2007 was primarily a result of (i) a
decrease in inventory of $312,004 due to the utilization of inventory purchased
ahead to take advantage of favorably priced purchases and because a concerted
effort has been made to increase inventory turns, (ii) an increase in accounts
payable, accrued expenses, and income taxes payable totaling $322,360 because
accrued bonuses had been paid by year-end 2006 and the overall timing of
payments was varied on accounts payable and income tax expense. The net cash
generated by the change in these accounts was offset by an increase in accounts
receivable of $189,698, due to a slow down in collections. Cash generated by
operating activities for 2006 is explained by (i) an increase in accounts
receivable of $231,519 due to increased sales and a few accounts that are not
paying as quickly as they had in previous quarters, and (ii) an increase in
inventory levels of $177,537 due to rising prices and a modest increase in new
products available for sale. Increases in these asset accounts were offset
primarily by an increase in accounts payable, accrued expenses, and income taxes
payable of $379,614 because accrued bonuses had been paid by year-end 2005,
increased purchases of inventory, and an increase in income taxes based on
taxable earnings without the offset of any net operating loss carryforwards,
which were mostly utilized during 2005.

INVESTING ACTIVITIES. Net cash flows used in investing activities for the three
months ended March 31, 2007 was $34,702 and resulted from payments for a new
label printer and a new server. There were no cash flows from investing
activities in 2006.

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

CONCENTRATION OF RISK

The Company is subject to a wide variety of risks in the ordinary course of its
business. Some of the more significant of these risks include heavy
concentrations of sales with a few key customers; heavy concentrations of raw
material purchases with a few key suppliers; regulation by various federal,

<Page>

state and local agencies with regards to the manufacture, handling, storage and
safety of products; and regulation by various agencies with regards to the
labeling and certification of products. The Company is also subject to
competition from other nutritional supplement companies and is dependent on the
continued demand for nutritional supplements by consumers.

SALES. Approximately 13% of our total sales in 2007 and 11% in 2006
were attributable to the same single distributor. In the event we were to lose
that account, we anticipate that we would be able to convert the business to
sales directly to the customers of that distributor. As converted sales would be
at a higher margin, we do not believe the loss of the account would have a
material negative impact on sales. However, we cannot assure you that, if we
were to lose this distributor, all or any of the customers would transfer
directly to us or that current sales from this group would be maintained.

PURCHASES. We purchase raw materials and use outside vendors for the
manufacture of our products. For the three months ended March 31, 2007, we had a
concentration of approximately 66% of our manufacturing with four separate
vendors who individually account for more than ten percent of our purchases. For
the three months ended March 31, 2006, the Company had a concentration of
approximately 29% of manufacturing with two separate vendors, who individually
accounted for more than ten percent of our purchases. We do not currently have
written contracts with any of our manufacturers, but rely on long-term personal
and professional relationships. We believe that, due to the large number of
businesses performing this type of service in the industry, we would have little
difficulty in finding viable alternatives in the event any one of these vendors
became unable or decided not to continue manufacturing our products. However, we
can give no assurance that suitable, alternative manufacturers would be
available to us when needed or that such alternative manufacturers would not
result in an increase in costs.

PRODUCT. None of our products in 2007 and one product in 2006
individually accounted for more than ten percent of our sales dollars.

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

- ------------------------------ ----------------------------------------------------------------------------------

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

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

Operating Leases (2) $2,268,000 $288,000 $864,000 $576,000 $540,000
- ------------------------------ --------------- ------------------ ------------------ -------------- -------------

Purchase Obligations (3) $2,065,705 1,858,705 207,000
- ------------------------------ --------------- ------------------ ------------------ -------------- -------------
Total Cash Contractual
Obligations $4,333,705 $2,146,705 $1,071,000 $576,000 $540,000
- ------------------------------ --------------- ------------------ ------------------ -------------- -------------

(1) This represents the Company's borrowings under its line of credit with
Merrill Lynch, which had a zero balance throughout the three months
ended March 31, 2007 and through the date of this filing. The Merrill
Lynch line of credit provides for maximum financing of $1,500,000,
bearing interest at the London Interbank Offered Rate (LIBOR) plus
2.75%, computed on a monthly basis. As of March 31, 2007, the interest
rate on the line of credit was 8.07% per annum. Because the line of
credit is secured by substantially all of the assets of the Company,
if the Company were to fall into default under the terms of our
agreement with Merrill Lynch it could have material adverse impact on
our business and financial position.

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

(3) Represents outstanding purchase orders for inventory and a two-year
distribution agreement with a vendor for the exclusive distribution of
their product.

<Page>

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

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

LIQUIDITY RESOURCES. We have approximately $3.83 million in cash and cash
equivalents as of March 31, 2007, which, based on operating cash flow remaining
constant, we believe to be sufficient to satisfy our cash requirements over the
next twelve months. Our future funding requirements will depend on numerous
factors, some of which are beyond our control. These factors include our ability
to operate profitably, our ability to maintain, recruit and train management and
personnel, and our ability to compete with other, better-capitalized and more
established competitors who offer alternative or similar products. We believe
that, given our positive working capital position, we can satisfy our cash
requirements over the next twelve months from operations if we continue to
operate at a profit. Cash flow from operations is expected to provide us with
our capital resources and liquidity needs.

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

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

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

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

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

<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. Variations in the actual outcome of these future tax consequences
could materially impact our financial position or our results of operations.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

INVENTORY

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

CONTINGENCIES

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

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

<Page>

ITEM 3. CONTROLS AND PROCEDURES

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

There were no changes in the Company's internal controls over financial
reporting that occurred during the quarter ended March 31, 2007, that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not Applicable.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

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

Not Applicable.

Item 5. OTHER INFORMATION

Not Applicable.

Item 6. EXHIBITS

(a) Exhibits

31 Certificate of Stephen A. Levine required by Rule 13a-14(a) or Rule
15d-14(a) of The Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002

32 Certificate of Stephen A. Levine Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K
None

<Page>

ALLERGY RESEARCH GROUP, INC.
SIGNATURE

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

ALLERGY RESEARCH GROUP, INC.
Registrant

Dated: May 15, 2007
By:/s/ Stephen A. Levine
--------------------------
Chief Executive Officer and
Chief Financial Officer