Allergy Research Group Reports Profits in Second Quarter.

Business Editors/Health & Medical Writers

HAYWARD, Calif.--(BW HealthWire)--Aug. 6, 2001

Allergy Research Group, Inc. (Allergy Research) (OTCBB:ALRG) today announced financial results for its second quarter of fiscal 2001 which ended June 30, 2001.

Allergy Research recorded total revenues of $3,028,728 for the quarter, up 5.9% from first quarter 2001 results. Revenue increased $161,681 compared to the second quarter 2000. The increase in revenue is primarily due to the performance of two new products, VascuStatin and Imm-Kine, and to the continued success of Eurocel, which was introduced in the fourth quarter of 2000. VascuStatin and Imm-Kine were introduced late in the first quarter 2001. Revenues over the six-month period ended June 30, 2001 were down $155,836 from the same period for 2000, primarily due to a general downturn of sales in the industry and the continued financial difficulties of two of the company's customers.

"The second quarter shows that we continue to progress toward reaching our financial goals," said Chief Executive Officer and Chairman Dr. Stephen A. Levine, Ph.D., who, over the past two years, has struggled to implement a strategy that includes both comprehensive cost controls and the expansion of the company's sales and marketing efforts.

The company incurred an increase in cost of sales of $95,252 from second quarter 2000, but a decrease of $170,057 over the six month period ended June 30, 2001 as compared to the first six months of 2000. Increased costs during the second quarter are related to increased sales and reflect an increase in the cost of materials as the company has begun including a larger number of capsules in each container of selected products without passing the cost on to customers. This change is part of an effort to increase the value of the product and generate increased sales. Gross profit margins increased .2% for the second quarter and 1.3% for the six-month period.

Allergy Research recorded net income of $144,115 during the second quarter, and $321,889 during the six-month period, compared to a loss of $4,544 and net income of $78,919 for the same periods in 2000. The increase in net income is primarily attributable to a reduction in expenses, including general and administrative and research and development expenses, offset by increased occupancy and interest expenses and the settlement of litigation. The increase is also partially attributable to the fact that a benefit for income taxes recorded during 2000 was not recorded until the third quarter of last year.

Due to expansion of its sales force, Allergy Research experienced an increase in payroll and related costs of approximately $22,000. The company announced that it intends to continue expansion of its sales and marketing personnel with the addition of at least one more person during the year 2001. During the second quarter, the company realigned its sales staff, appointing Judy Loring, N.C., a certified clinical nutrition consultant, as the Director of Marketing.

Interest expense for the company increased by approximately $37,000 during the six month period, as compared to 2000, but was significantly reduced during June 2001 as the result of the refinancing of the company's line of credit. As of August 1, 2001, the principal balance on the outstanding line of credit has been reduced to approximately $622,000 from $980,477 at December 31, 2000. On June 28, 2001, the interest rate on the line of credit was reduced to 8.75% from 9%.

BUSINESS UPDATE

During 2001, Allergy Research has added four new products to its existing product line, including Imm-Kine (a bacterial cell-wall immunostimulant used for immune support), VascuStatin (a product designed to block new blood vessel growth), Lutein (a product designed to support eye health) and Glucosol (a blood sugar regulating formula). The Company announced that it intends to add an additional product, designed to reduce stress and anxiety, during the third quarter of 2001.

The company also continues to expand into the field of research on pharmaceuticals and nutraceuticals under the leadership of Dr. Levine and Dr. Ba Hoang, M.D., Ph.D., and will continue to work with Dr. Hoang during 2001 to develop additional research on his proprietary herbal formulas and patent applications.

Complete copies of the company's financial statements, including notes to the financials, can be found on its Web site at www.nutricology.com.

About Allergy Research Group, Inc.

Allergy Research Group, Inc. is an innovative leader in nutraceutical research and product formulation. Since its inception in 1979, the company has been noted for quality, hypoallergenic nutritional supplements and supplies products to over 6,000 physicians and healthcare practitioners worldwide.

The information contained in this news release, other than historical information, consists of forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. Such statements regarding the timing of acquiring and developing new products, of bringing them on line and of deriving revenues and profits from them, as well as the effects of those revenues and profits on the company's margins and financial position, is uncertain because many of the factors affecting the timing of those items are beyond the company's control.