ALLERGY RESEARCH GROUP, INC.
2300 North Loop Road
Alameda, California 94502
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 6, 2007
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 6, 2007 at 10:00 A.M. local time for the following purposes:
1. To elect a Board of Directors for the Company.
2. 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, 2007.
3. 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 October 25, 2007, 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 6, 2007." A return
envelope is enclosed for your convenience.
/s/ Susan D. Levine
------------------------------
Susan D. Levine
Secretary
Dated: November 8, 2007
---------------------------------
PROXY STATEMENT
---------------------------------
ALLERGY RESEARCH GROUP, INC.
2300 North Loop Road
Alameda, California 94502
ANNUAL MEETING OF SHAREHOLDERS - DECEMBER 6, 2007
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 6, 2007 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 8, 2007. 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.
VOTING
VOTING PROCEDURES
A Proxy with respect to the Company may be revoked at any time 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.
SHAREHOLDERS HOLDING IN NAME OF NOMINEE
You may vote all of your shares held in your name as a shareholder of
record, as well as those held by you as a beneficial owner through your
stockbroker, bank or other nominee. With respect to shares held in street name,
or as a beneficial owner, you may direct your broker or other nominee who is
considered the shareholder of record as to how you want those shares to be
voted. If you plan to attend the Annual Meeting and vote those shares in person,
you will require a proxy, executed in your favor, from the shareholder of record
in order to vote the shares. Only proxy holders and shareholders of record will
be allowed to vote at the Annual Meeting.
SHARES OUTSTANDING AND VOTING RIGHTS
Only shareholders of record at the close of business on October 25, 2007
may vote at the meeting or any adjournments thereof. As of that date there were
approximately 14,463,805 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.
ADJOURNMENTS
In the event that Proxies which are sufficient in number to constitute a
quorum are not received by December 3, 2007, 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.
PROPOSALS
At the annual meeting, you 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 October 25, 2007 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 Stephen Levine, Ph.D. 10,113,250 (2) 70%
common stock Susan Levine
2300 North Loop Road
Alameda, California 94502
$.001 par value Manfred Salomon 99,750 .7%(3)
common stock 2300 North Loop Road
Alameda, CA 94502
$.001 par value Officers and Directors as a group 10,114,750 70%
common stock
(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 October 25, 2007, 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 14,463,805 shares outstanding on October 25, 2007.
ANNUAL REPORT OF THE COMPANY
The annual report of the Company containing audited financial statements
for the twelve months ended December 31, 2006 was mailed to the shareholders on
or about November 8, 2007.
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 Rd.
Ph.D. Officer from December 1997 to January 1999 and recommenced Alameda, CA 94502
(57) 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 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 Mrs. Levine has served as the Secretary and Vice-President 2300 North Loop Rd.
(53) of the Company since December 1997, and was elected to the Alameda, CA 94502
Board at that time. Mrs. Levine resigned her board
membership temporarily between January 1999 and January
2000. Since 1980, Mrs. Levine has worked with her husband,
Dr. Stephen Levine, in the creation and development of
Nutricology. Mrs. Levine currently works on marketing
concerns. Prior to working for the Company, Mrs. Levine was
the Director of Senior Housing ECHO, a non-profit
organization located in Hayward, California, where her
duties included grant writing and coordination of workers
for social programs.
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Ed Kane Mr. Kane has served as a Director of the Company since 2300 North Loop Rd.
(80) November 8, 2000. From 1955 to present, Mr. Kane has acted Alameda, CA 94502
as the sole owner and Chairman of the Board of 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 in 1995, 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.
DIRECTOR INDEPENDENCE
The Board of Directors has determined that only Ed Kane qualifies as
"independent" within the meaning of Rule 4200(a)(15) of the listing standards of
The Nasdaq Stock Market and Securities Exchange Act Rule 10A-3
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 2006 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.
CODE OF BUSINESS CONDUCT AND ETHICS
The board has adopted a Code of Business Conduct and Ethics that applies to
the Company's directors, officers and employees; a copy of this policy is
available via our website at www.allergyresearchgroup.com. We have also filed a
copy of the Code of Conduct and Ethics with the SEC as an exhibit to our Annual
Report on Form 10-KSB for fiscal year 2002, filed on March 31, 2003.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors currently does not have separate audit, nominating
and compensation committees. The functions which would ordinarily be performed
by each of these committees are performed by the full board. Although we
currently are not obligated to establish such committees, our Board of Directors
may, in the future, elect to establish separate committees to perform these
functions provided independent directors are available and willing to serve on
such committees.
AUDIT COMMITTEE FUNCTIONS
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.
NOMINATING COMMITTEE FUNCTIONS
We do not currently have a separate nominating committee. 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 2007 meeting.
COMPENSATION COMMITTEE FUNCTIONS
As indicated above, since the Company does not currently have a
compensation committee. 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 reviews and compensation for all officers of the
Company and determines the amount of compensation, including bonus compensation,
based on employee performance and qualifications, market conditions and the
Company's financial performance, among other criteria. In determining
compensation, including equity compensation, the Board receives recommendations
from the Company's senior management, which are typically presented to the
Committee by its Chief Executive Officer and Chief Financial Officer, Dr.
Stephen Levine, and its President, Fred Salomon.
The following discussion sets forth the types of compensation, objectives
and policies considered by our Board of Directors in establishing compensation
for our executive officers, including Dr. Levine, Susan Levine and Fred Salomon,
who are each listed on the Summary Compensation table below.
The Company's compensation policies are designed to attract and retain
experienced and highly competent individuals and to provide incentives which
reward contributions by such individuals to the success and implementation of
the Company's business strategies, while enhancing long-term shareholder value.
At the same time, the Company's executive compensation structure is relatively
straightforward and simple in design, and is scaled in accordance with both the
size and scope of the Company's operations and the economies of the communities
in which the Company operates and in which its executives are based.
Compensation of the Company's executive officers consists primarily of a
base salary, representing a "not-at-risk" component intended to provide market
rate compensation to our officers for fulfilling the responsibilities of their
respective positions, plus an "at-risk" component consisting of an opportunity
for each of the Company's key officers to receive a discretionary bonus at the
end of the year. Discretionary bonuses are generally determined as an aggregate
percentage of the Company's annual net income before taxes to be distributed to
all employees as determined by the Board of Directors.
Our officers also participate in the 401(k) retirement plan that the
Company makes available to substantially all of its employees, and a portion of
any annual, discretionary contributions made by the Company to this plan is
allocated to the account of each participating employee (including each
participating executive officer). The Company's compensation programs do not
include extensive fringe benefits for either officer or non-officer employees.
The opportunity to participate in group insurance benefits is made available to
all full-time Company employees, including our officers. Our employee benefit
plans are discussed in more detail below.
From time to time, our Board of Directors may determine to grant options to
purchase shares of our common stock to our executive officers and other
employees as bonus or incentive compensation under our 1998 Incentive Stock
Option Plan (discussed below). No options have been granted by our Board of
Directors to any of our employees since 2003. Since 2004, the Board has granted
incentive compensation in the form of annual cash bonuses as based on overall
Company performance.
There is no predetermined target allocation or mix of the elements of
compensation listed above. However, as described above and indicated by the
Summary Compensation Table presented below, our Board of Directors intends that
each executive officer's compensation will consist primarily of the base salary
plus any annual bonus earned.
Our executive salaries are set at a level believed by the Board of
Directors to be appropriate to the size and scope of the Company's operations,
its reputation and position in the marketplace. Accordingly, the Board of
Directors does not engage in any "benchmarking" or similar comparisons to a peer
group of nutritional supplement companies in setting the compensation of our
officers, since those companies vary widely in size, market position, quality
and location.
The Board believes that providing each of our key executives with the
opportunity to earn a bonus that can represent a significant portion of such
officer's total compensation for any year in which the Company achieves
significant pre-tax income, despite the difficult competitive conditions we have
faced over the past two fiscal years provides the most direct and effective
means of rewarding our officers for managing the Company in a manner that seeks
to preserve and enhance shareholder value. Accordingly, for each of the last
three years, the Board has provided the Company's executive officers with the
opportunity to earn annual bonuses as reflected on the Summary Compensation
Table. The Board of Directors retains the discretion to make changes or
eliminate a bonus payment to any officer in accordance with its ultimate
evaluation of such officer's performance during the year. In the usual case, if
the Company is profitable bonuses will be paid accordingly. Reflecting the lower
net earnings of the Company in 2005 and 2006, the Board decreased annual bonuses
awarded to executive officers in 2005 by approximately 20% from bonuses awarded
in 2004, and by approximately 10% in 2006 from 2005.
Our Board of Directors makes every reasonable effort to ensure that all
compensation paid to our executive officers is fully deductible, provided it
determines that application of applicable limits are consistent with our needs
and executive compensation philosophy. Our income tax deduction for executive
compensation is limited by Section 162(m) of the Internal Revenue Code to $1
million per executive per year, unless compensation above that amount is
"performance-based." This limit applies to our Chief Executive Officer and the
other executive officers that are most highly compensated. They are identified
in the Summary Compensation Table below. We have not had any deductions limited
by Section 162(m) of the Internal Revenue Code to date.
DIRECTOR COMPENSATION
---------------------
The Company does not maintain any separate pension, retirement or other
arrangement for compensating its officers who also act as Directors. Beginning
in 2007, independent directors will receive $1,500 per meeting attended. No
compensation was paid to Directors during the fiscal year ended December 31,
2006. Directors who also act as officers of the Company receive compensation for
services rendered to the Company in those other capacities.
EXECUTIVE OFFICER COMPENSATION
------------------------------
The following table sets forth the remuneration to the Company's executive
officers for the past three fiscal years:
SUMMARY COMPENSATION TABLE
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------
Other Securities
Annual Restricted Under- All Other
Name and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options Payouts sation
Position Year ($)(6) ($) ($) ($) (#) ($) ($)
- --------------------------------------------------------------------------------------------------------
Stephen Levine, 2004 324,477 125,000 25,422(1)
CEO and CFO 2005 309,616 100,000 20,422(2)
2006 309,616 90,000 20,422(2)
Manfred (Fred) 2004 120,923 120,000 12,231(3)
Salomon, 2005 115,385 100,000 10,500(3)
President 2006 115,385 90,000 10,500(3)
Susan Levine, 2004 195,517 50,000 19,580(4)
Secretary and 2005 186,562 40,000 18,006(5)
Vice President 2006 186,562 36,000 18,006(5)
(1) Represents 401(k) matching funds of $16,000, long-term disability policy of
$2,427 and a life insurance policy of $6,995.
(2) Represents 401(k) matching funds of $11,000, long-term disability policy of
$2,427 and a life insurance policy of $6,995.
(3) Represents 401(k) matching funds.
(4) Represents 401(k) matching funds of $11,574, long-term disability of $2,251
and a life insurance policy of $4,755.
(5) Represents 401(k) matching funds of $11,000, long-term disability policy of
$2,251 and a life insurance policy of $4,755.
(6) There has not been a salary increase for officers since 2003. The 2004
wages are higher than 2005 due to our bi-weekly processing of payroll and
the timing of payments.
During the fiscal years ended December 31, 2006 and 2005, the Company did
not grant any stock options to executive officers. Options granted in 2003 are
included in the table below:
- ---------------------------------------------------------------------------------------------------
Number of Securities % of Total
Underlying Options/ Options/SAR's
SARs Granted to Employees Exercise or Base Expiration
Name Granted (#) in Fiscal Year Price ($/Sh) Date
- ---------------------------------------------------------------------------------------------------
Manfred Salomon 98,250 26% $.40 per share 05/12/2008
- ---------------------------------------------------------------------------------------------------
The following table is intended to provide information as to the number of
stock options exercised by each of the executive officers listed above, the
value realized upon exercise of such options, and the number and value of any
unexercised options still held by such individuals.
Number of
Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at FY-
FY-End (#) End ($)
Shares Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------
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.
TERMINATION AND CHANGE OF CONTROL PROVISIONS
--------------------------------------------
None of our officers, including the named executive officers listed above,
have any employment, severance or change of control agreements with the Company.
Accordingly, such officers will not receive compensation in connection with any
termination of employment due to death, disability, retirement or any other
reason, except for such benefits as are available generally to all salaried
employees under the Company's 401(k) Plan, insurance and other benefits
programs.
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 $76,000 and $94,000, for the years ended December 31, 2006 and
2005, respectively. The decrease is due to a refund of 2005 matching which was
applied to 2006 and reduced the amount the company had to pay.
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, 2006.
- -------------------------------------------------------------------------------------------------------------------
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 plans 333,750 common shares(1) $.40 616,750 common shares
approved by security holders
- -------------------------------------------------------------------------------------------------------------------
Equity compensation plans None None None
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As indicated above, the Board of Directors currently has not appointed a
separate compensation committee, primarily due to a lack of independent members
on our Board of Directors sufficient to comprise such a committee. Our Board
consists of three members, two of whom are also executive officers of the
Company. In addition to the members of the Board of Directors, our President,
Fred Salomon, was also involved in discussions with the Board of Directors
regarding compensation of our executive officers.
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. (57) 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 (68) 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. From
July 1982 through June 2002, Mr. Salomon was general manager of Lion Notions,
Inc. and Fantasy Importers, Inc., both privately held corporations.
SUSAN LEVINE (53) 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.
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 2006 under Section 16(a) of
the Securities Exchange Act of 1934, were timely filed.
FAMILY RELATIONSHIPS
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.
Our Board of Directors has not adopted a written policy or procedure for
the review, approval or ratification of related party transactions. Our Board of
Directors is currently comprised of three members, two of whom are not only
officers of the Company but are also married. As a result, a written policy
requiring independent approval of each related party transaction is not
practical in the judgment of the Board of Directors. The Board of Directors has
in each circumstance consulted independent advisors with respect to related
party transactions, including, with respect to the foregoing transaction, market
research and real estate agents in the area surrounding the Company's
facilities. Based upon its overall review of the facts and circumstances
presented, the Board makes a determination as to whether the contract or
transaction is fair and reasonable to the Company at the time it is authorized
in accordance with Florida law. The vote of our independent director, Ed Kane,
was required for approval of the above-referenced transaction.
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
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, 2007 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 2006. 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, 2006 and 2005
was $52,000 and $45,200, respectively.
TAX FEES
The aggregate fees billed for tax compliance rendered by our independent
auditors for both years ended December 31, 2006 and 2005 was $6,000.
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, 2008 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 8, 2007
PROXY PROXY
ALLERGY RESEARCH GROUP, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 6, 2007
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 6, 2007 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 8, 2007, 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 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.
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 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, 2007.
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.