SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

(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, 1997

--- Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
    Action of 1934

    For the transition period from __________________ to ___________________



                         Commission File Number 0-19266

                        ALLIED HEALTHCARE PRODUCTS, INC.

                              1720 Sublette Avenue

                            St. Louis, Missouri 63110
                                  314/771-2400

                        I.R.S. Employment I.D. 25-1370721

             Indicate  by check mark  whether the  registrant  (1) has filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding twelve months (or for such shorter periods that
the  registrant  was required to file such reports,  and (2) has been subject to
such filing requirements for the past ninety days.

                             Yes    X               No
                                ---------             ---------
        The  number of shares of common  stock  outstanding  at May 15,  1997 is
7,796,682 shares.


<PAGE>


                                      INDEX


                                                                          Page
                                                                          Number
Part I - Financial Information

               Item 1.       Financial Statements

                             Consolidated Statement
                             of Operations - three months and nine months      3
                             ended March 31,
                             1997 and 1996 (Unaudited)

                             Consolidated  Balance Sheets -
                             March 31, 1997 (Unaudited) and                  4-5
                             June 30, 1996

                             Consolidated Statements of Cash
                             Flow - nine months ended                        6-7
                             March 31, 1997 and 1996 (Unaudited)

                             Consolidated Statement of Changes
                             in Stockholders' Equity for nine months           8
                             ended March 31, 1997 (Unaudited)

                             Notes to Consolidated
                             Financial Statements                           9-10

               Item 2.       Management's Discussion and
                             Analysis of Financial Condition               11-18
                             and Results of Operations

Part II - Other Information                                                   19

               Item 6.       Exhibits and Reports on Form 8-K                 19

Signature                                                                     20

<PAGE>
PART I.   FINANCIAL INFORMATION
          Item 1.   Financial Statements



<TABLE>



                                  ALLIED HEALTHCARE PRODUCTS, INC.
                               CONSOLIDATED STATEMENT OF OPERATIONS
                                           (UNAUDITED)
<S>                                    <C>            <C>            <C>              <C>    

                                       Three months ended           Nine months ended
                                        March 31,                     March 31,
                                       --------------------------   ----------------------------
                                           1997          1996           1997           1996
                                       --------------------------   ----------------------------

Net sales                              $30,465,975   $30,334,242     $87,988,350    $89,962,188
Cost of sales                           20,740,804    20,561,905      60,298,361     57,962,667
                                       ------------  ------------   -------------  -------------
Gross profit                             9,725,171     9,772,337      27,689,989     31,999,521

Selling, general and                                                 
  administrative expenses                8,143,489     7,311,241      24,754,757     22,134,712
                                       ------------  ------------   -------------  -------------

Income from operations                   1,581,682     2,461,096       2,935,232      9,864,809

Other expenses:                                                      
  Interest expense                       1,731,777       988,103       4,255,952      3,346,904
  Other, net                                71,387        29,557         126,323         62,196
                                       ------------  ------------   -------------  -------------
                                         1,803,164     1,017,660       4,382,275      3,409,100
                                       ------------  ------------   -------------  -------------
Income/(loss) before provision/                                      
  (benefit) for income taxes              (221,482)    1,443,436      (1,447,043)     6,455,709

Provision/(benefit) for income taxes        80,800       465,600        (411,050)     2,470,352
                                       ------------  ------------   -------------  -------------

Net income/(loss)                        ($302,282)     $977,836     ($1,035,993)    $3,985,357
                                       ============  ============   =============  =============
                                                                     
Earnings/(loss) per share                   ($0.04)        $0.12           (0.13)          0.55
                                       ============  ============   =============  =============

Weighted average shares                  7,796,682     7,796,671       7,796,682      7,240,091
                                       ============  ============   =============  =============

See Accompanying Notes to Consolidated Financial Statements.
</TABLE>


<PAGE>
<TABLE>

                                  ALLIED HEALTHCARE PRODUCTS, INC.
                                    CONSOLIDATED BALANCE SHEET
                                              ASSETS
<S>                                                       <C>                <C>   

                                                           March 31,       June 30,
                                                             1997            1996
                                                         -------------   -------------
                                                          (Unaudited)
Current Assets:
   Cash                                                      $964,462      $1,489,133
   Accounts receivable, net of allowance for doubtful
      accounts of $469,764 and $422,517, respectively      26,324,255      25,964,658
   Inventories                                             27,484,839      28,046,490
   Income taxes receivable                                    930,543       2,285,224
   Other current assets                                     2,749,858       2,713,497
                                                         -------------   -------------
      Total current assets                                 58,453,957      60,499,002
                                                         -------------   -------------
   Property, plant and equipment, net                      21,337,196      21,968,504
   Goodwill, net                                           51,695,716      52,821,411
   Other assets, net                                        1,599,643       1,471,541
                                                         -------------   -------------
      Total assets                                       $133,086,512    $136,760,458
                                                         =============   =============
</TABLE>
 

See Accompanying Notes To Consolidated Financial Statements.

<PAGE>
<TABLE>

                                  ALLIED HEALTHCARE PRODUCTS, INC.
                                     CONSOLIDATED BALANCE SHEET
                                            (CONTINUED)
                                LIABILITIES AND STOCKHOLDERS' EQUITY

<S>                                                      <C>                <C>   

                                                           March 31,       June 30,
                                                             1997            1996
                                                         -------------   -------------
                                                          (Unaudited)
Current liabilities:
   Accounts payable                                       $12,459,266     $13,104,299
   Current portion of long-term debt                        3,881,107       3,848,780
   Other current liabilities                                4,241,434       5,516,045
                                                         -------------   -------------
      Total current liabilities                            20,581,807      22,469,124
                                                         -------------   -------------
Long-term debt                                             48,282,909      49,033,545
                                                          
Deferred income tax liability-noncurrent                    1,371,649       1,371,649

Commitments and contingencies

Stockholders' equity:
   Preferred stock; $.01 par value; 1,500,000 shares
    authorized; no shares issued and outstanding
   Series A preferred stock; $.01 par value; 200,000
    shares authorized; no shares issued and outstanding
   Common stock; $.01 par value; 30,000,000 shares
    authorized; 7,796,682 shares issued and
    outstanding at March 31, 1997 and June 30, 1996           101,002         101,002
   Additional paid-in capital                              46,945,971      46,945,971
   Common stock in treasury, at cost                      (20,731,428)    (20,731,428)
   Retained earnings                                       36,534,602      37,570,595
                                                         -------------   -------------
                                                           62,850,147      63,886,140
      Total stockholders' equity                         -------------   -------------
                                                         $133,086,512    $136,760,458
      Total liabilities and stockholders' equity         =============   =============


See Accompanying Notes To Consolidated Financial Statements.
</TABLE>

<PAGE>
<TABLE>

                                  ALLIED HEALTHCARE PRODUCTS, INC.
                               CONSOLIDATED STATEMENT OF CASH FLOWS
                                           (UNAUDITED)
<S>                                                          <C>                <C>     

                                                                    Nine Months ended
                                                                         March 31,
                                                             -----------------------------
                                                                 1997            1996
Cash flows from operating activities:                        -------------   -------------
   Net income (loss)                                          ($1,035,993)     $3,985,357
   Adjustments to reconcile net income (loss)
       to net cash provided by (used in)
       operating activities:
      Depreciation and amortization                             4,088,674       2,851,026
      Increase in accounts receivable, net                       (359,597)       (116,460)
      Decrease (increase) in inventories                          561,651      (6,402,898)
      Decrease in income taxes receivable                       1,354,681               0
      Decrease (increase) in other current assets                 (36,361)        246,670
      Increase (decrease) in accounts payable                    (645,033)      2,934,576
      Increase in accrued income taxes                                  0          24,410
      Decrease in other current liabilities                      (728,843)     (4,293,213)
                                                             -------------   -------------
       Net cash provided by (used in) operating activities      3,199,179        (770,532)
                                                             -------------   -------------
                                                              
Cash flows from investing activities:
   Capital expenditures                                        (1,790,106)     (2,628,390)
   Acquisition of Omni-Tech                                             0      (1,557,000)
                                                             -------------   -------------
       Net cash used in investing activities                   (1,790,106)     (4,185,390)
                                                             -------------   -------------




</TABLE>


                                   (CONTINUED)
<PAGE>
<TABLE>


                                  ALLIED HEALTHCARE PRODUCTS, INC.
                                CONSOLIDATED STATEMENT OF CASH FLOWS
                                            (UNAUDITED)
<S>                                                            <C>              <C>

                                                                   Nine Months ended
                                                                         March 31,
                                                             -----------------------------
                                                                 1997            1996
                                                             -------------   -------------
Cash flows from financing activities:
   Proceeds from issuance of long-term debt                     5,000,000      43,600,000
   Payments of long-term debt                                  (1,652,664)    (61,928,430)
   Borrowings under revolving credit agreement                 19,499,516      24,100,000
   Payments under revolving credit agreement                  (23,565,161)    (23,100,000)
   Issuance of common stock                                             0      25,631,149
   Debt issuance costs                                           (669,667)     (1,010,945)
   Dividends paid on common stock                                (545,768)     (1,411,809)
                                                             -------------   -------------
       Net cash provided by (used in) financing activities     (1,933,744)      5,879,965
                                                             -------------   -------------

   Net increase (decrease) in cash and equivalents               (524,671)        924,043
   Cash and equivalents at beginning of period                  1,489,133         174,952
                                                             -------------   -------------
   Cash and equivalents at end of period                         $964,462      $1,098,995
                                                             =============   =============


See Accompanying Notes To Consolidated Financial Statements.
</TABLE>


<PAGE>
<TABLE>


                                  ALLIED HEALTHCARE PRODUCTS, INC.
                               CONSOLIDATED STATEMENT OF CHANGES IN
                                       STOCKHOLDERS' EQUITY
                                            (UNAUDITED)


<S>                      <C>          <C>        <C>          <C>           <C>    


                                                Additional
                         Preferred    Common     paid-in      Treasury      Retained
                           stock      stock      capital        stock       earnings
                         ---------- ---------- ------------ ------------- ------------
Balance, June 30, 1996          $0   $101,002  $46,945,971  ($20,731,428) $37,570,595

Net loss for the
   Nine Months ended
   March 31, 1997                                                          (1,035,993)
                         ---------- ---------- ------------ ------------- ------------
Balance,
March 31, 1997                  $0   $101,002  $46,945,971  ($20,731,428) $36,534,602
                         ========== ========== ============ ============= ============

See Accompanying Notes To Consolidated Financial Statements.

</TABLE>


<PAGE>

                        ALLIED HEALTHCARE PRODUCTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)




1.      Unaudited Financial Statements

               The  accompanying   unaudited  financial   statements  have  been
prepared in accordance  with the  instructions  for Form 10-Q and do not include
all of the information and footnotes required by generally  accepted  accounting
principles for complete financial statements. In the opinion of management,  all
adjustments,   consisting  only  of  normal  recurring  adjustments   considered
necessary for a fair presentation, have been included. Operating results for any
quarter are not  necessarily  indicative of the results for any other quarter or
for the full  year.  These  statements  should be read in  conjunction  with the
financial statements and notes to the consolidated  financial statements thereto
included in the Company's Form 10-K for the year ended June 30, 1996.

2.      Inventories

               Inventories are comprised as follows:

<TABLE>
               <S>                                               <C>                    <C>  

                                                                 March 31,               June 30,
                                                                    1997                   1996
                                                                (Unaudited)

               Raw Material                                      $  330,960           $   179,042
               Work-in-progress                                   3,147,385             2,563,773
               Component Parts                                   17,427,839            18,428,851
               Finished Goods                                     6,579,105             6,874,824
                                                                -----------           -----------
                                                                $27,484,839           $28,046,490
                                                                ===========           ===========
</TABLE>


        The above amounts are net of a reserve for obsolete and excess inventory
of  approximately  $1.7  million and $1.8 million at March 31, 1997 and June 30,
1996, respectively.

<PAGE>


3.      Debt Amendment

On  September  20, 1996  the  Company   amended  its   existing  $125.0  million
credit facilities with its commercial bank syndicate. The credit facilities were
amended  such  that the  $68.4  million  unused  portion  of the  $70.0  million
acquisition  term loan facility is no longer  available and the remaning  credit
facilities  maturity  dates  were  reset  to July 31,  1998.  In  addition,  the
amendments  were made to reset  certain  convenants  and to increase the advance
rates on the revolving credit facility  borrowing base.  Further,  in connection
with the amended credit  facilities,  the Company  entered in an additional $5.0
million term loan,  also  maturing  July 31, 1998.  The  amendment  provides the
Company with credit  facilities  totaling $60.0 million which can be utilized to
finance  operations and future growth.  At March 31, 1997, the Company had total
borrowing of $47.8 million on these credit facilities and was in compliance with
all  convenants or had received  waivers of all covenants in which it was not in
compliance.  In connection with the receipt of the convenant waivers at December
31,  1997 the  Company  agreed to pay its  commercial  bank  syndicate  a fee of
$450,000 in cash,  plus $85,000 per month on a payment in kind ("PIK") basis. In
addition,  the Company agreeed that if it did not reduce its aggregate borrowing
with the  commerical  bank syndicate by $20 million by May 15, 1997 or otherwise
obtain a  Commitment  which would  result in proceeds to the Compayn of at least
$20 million by May 15,  `997,  it would pay the  commercial  bank  syndicate  an
additional  fee of $450,000 on May 15, 1997.  The Company was unable to complete
an alternative  financing  agreement or otherwise  obtain a commitment to reduce
its debt with the  commerical  bank  syndicate by $20 million and,  accordingly,
paid the $450,0000 fee on May 15, 1997. The $85,0000 per month PIK fee continues
to remain in effect. In connection with the receipt of covenant waivers at March
31,  1997,  the Company  agreed to pay its  commerical  bank  syndicate a fee of
$150,000,  payable in cash in threee monthly installments of $50,000 each, and a
fee of  $300,0000  on a PIK  basis.  Commencing  August  15,  1997,  if the loan
obligation has not been repaid in full and continuing  through the loan maturity
date the bank syndicate,  at its option may convert the $300,000 fee into 90,000
shares of Allied  common  stock.  The Company  continues to  negotiate  with the
commercial bank syndicate for a long term agreement and in addition, the Company
continues to pursue alternative financing arrangements.

The  notes   payable   and   the   revolving    credit   agreement   contains  a
restrictions  on  the  pledging  of  assets  and  various  convenants  regarding
financial  ratios and are secured by  property,  plant and  equipment,  accounts
receivable and inventory.

<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

GENERAL

The  following  discussion  summarizes  the  significant  factors  affecting the
consolidated  operating  results and  financial  condition of Allied  Healthcare
Products,  Inc.  ("Allied" or the  "Company") for the three month and nine month
periods  ended March 31, 1997 compared to the three month and nine month periods
ended March 31, 1996.  This  discussion  should be read in conjunction  with the
March 31, 1997 consolidated  financial statements and accompanying notes thereto
included in this  Quarterly  Report on Form 10-Q for the quarter ended March 31,
1997.

Certain  statements  contained  herein are  forward-looking  statements.  Actual
results could differ  materially  from those  anticipated as a result of various
factors, including cyclical and other industry downturns, the effects of federal
and state  legislation  on health care reform,  including  Medicare and Medicaid
financing,  the inability to achieve cost reductions through  rationalization of
acquired  companies or to increase prices of certain  products,  difficulties or
delays in the  introduction  of new products or  disruptions  in selling  and/or
shipping efforts.

From  December  1993  through   November  1995,  the  Company   completed  seven
acquisitions which significantly  expanded its product lines. These acquisitions
were each  accounted  for  under the  purchase  method  of  accounting  and were
financed primarily through bank borrowings, resulting in a large increase in the
Company's debt and interest  expense.  One  acquisition  was partially  financed
through the issuance of common  stock.  Results of  operations  of each acquired
company have been included in Allied's consolidated statement of operations from
the date of acquisition. The purchase price of each acquisition was allocated to
the assets acquired and liabilities assumed, based on their estimated fair value
at the date of acquisition. The excess of purchase price over the estimated fair
value of net assets acquired was, in each instance,  recorded as goodwill and is
amortized over 20- or 40-year periods from the date of acquisition. Primarily as
a result of these  acquisitions,  the  Company  will  incur  approximately  $1.5
million in annual goodwill  amortization expense. The following table summarizes
the seven acquisitions:

<TABLE>

<S>                 <C>                                        <C>                                                  <C>            
DATE               BUSINESS                                   PRODUCTS                                           PURCHASE PRICE
                                                                                                              (DOLLARS IN MILLIONS)


December 1993      Life Support Products, Inc. ("LSP")        Emergency medical equipment . . . . . . . . . . . . . . . . . .  $15.7
March 1994         Hospital Systems, Inc. ("HSI")             Headwall products . . . . . . . . . . . . . . . . . . . . . . .    2.2
September 1994     B&F Medical Products, Inc. ("B&F")         Home health care and respiratory therapy products . . . . . . .   21.5
February 1995      Bear Medical Systems, Inc. ("Bear")        Critical care ventilators . . . . . . . . . . . . . . . . . . .   15.4
May 1995           BiCore Monitoring Systems, Inc. ("BiCore") Monitoring systems and equipment for ventilators  . . . . . . .    4.7
June 1995          Design Principles, Inc. ("DPI")            Emergency medical equipment . . . . . . . . . . . . . . . . . .    0.6
November 1995      Omni-Tech Medical, Inc. ("Omni-Tech")      Transport ventilators . . . . . . . . . . . . . . . . . . . . .    1.6

</TABLE>

These  seven  acquisitions  have  strategically  placed the Company in the high
growth areas of home health care and extended care markets, expanded the breadth
of  products  offered and are  expected to provide a source of future  growth in
sales and  earnings.  The Company  believes  that the  expansion of product line
offerings  is  particularly  important in  international  markets as the Company
continues to increase its worldwide sales force in an effort to be positioned to
reach the growth potential of these emerging  international  markets.  While the
Company  continues  to  believe  that  these  acquisitions  will  have  positive
implications for the future, the integration and rationalization of the acquired
businesses  are  still  in  progress.  Accordingly,  the  Company  continued  to
undertake  numerous  activities  towards the implementation of these integration
and rationalization objectives during the third quarter of fiscal 1997. Included
in these activities are a shift

<PAGE>

in   homecare    field   sales  to  inside   telemarketing   from  field  sales
representatives,  as well  as  continued  information  system  enhancements  and
capital expenditure project activities.  Progress made by the Company during the
third quarter of fiscal 1997 is as follows:

HOMECARE SALES

During the third quarter of fiscal 1997 the Company completed the refocus of its
sales efforts for the homecare product line to Durable Medical Equipment Dealers
("DME's").  Allied  increased  its inside  telemarketing  sales group by six and
reduced the field sales force for homecare products by ten. The homecare product
line requires minimal or no demonstration  activities and requires no in-service
activities,  thus  eliminating  the  requirement  for  an  outside  sales  call.
Expanding the inside  telemarketing  sales efforts  increases the penetration to
the DME's and provides greater coverage and improved  customer  response time as
each telemarketer,  on average,  makes approximately sixty customer contacts per
day compared to an outside sales  representative  average of  approximately  six
customer  contacts per day. Allied invested in updated  catalogues,  literature,
and  other   mailings   during  the  third  quarter  to  augment  its  increased
telemarketing focus. Contracts with and sales to the national homecare chains of
these  products  continue to be made by the  Company's  national  account  sales
force.


INFORMATION SYSTEMS ENHANCEMENTS

The Company  continued to make advances in upgrading its information  technology
capabilities.  In October 1996 the Company  converted its Corporate  Offices and
its St.  Louis  manufacturing  operations  to a  new  fully-integrated  software
system.  This computer  conversion,  which should provide a strategic  long-term
benefit  to  the  Company,   caused  short-term   disruptions  in  manufacturing
scheduling and shipping of products and, accordingly,  the Company was unable to
meet the challenges of this  disruption  during the fiscal 1997 second  quarter,
ending the second quarter with past due  shipments.  During the third quarter of
fiscal 1997, the Company  addressed  the  temporary  disruptions  caused by this
computer conversion in St. Louis during the second quarter.  Further,  the tools
and  capabilities  of the  new  system  have  enabled  the  Company  to  improve
manufacturing  planning  and  scheduling,   enhance  forecasting  and  inventory
control, and has enhanced customer service by improving the quantity and quality
of customer  and  product  information.  The  Company  also plans to convert its
Toledo, Ohio and Riverside, California operations. Preliminary work has begun in
these other  operations  but the  conversion at these  locations will take place
only after the St. Louis systems are process proven. When fully implemented, the
information  technology systems enhancement should enable the Company to realize
potential synergies of acquisitions  through an efficient  integrated data base,
enhanced  management  reporting  systems  and through  consolidation  of certain
operational functions.

CAPITAL EXPENDITURE PROJECTS

The  Company   continued  its  progress  in  modernizing   two  of  its  primary
manufacturing  facilities during the fiscal 1997 third quarter.  In May and June
of 1996, the Company purchased five computer  controlled  machining centers and,
in the third quarter of fiscal 1997 completed the programming  and  installation
process  for this  machinery  in its St.  Louis,  Missouri  facility.  This $1.5
million  investment  modernized the Company's metal machining  capabilities  and
provides  significant  opportunities to reduce product costs from shorter set-up
times, and elimination of secondary operations in component manufacturing and in
the future  this  project is expected  to provide  the  opportunity  for reduced
inventory levels, reductions in scrap and improvements in quality.

<PAGE>

In  addition,  the Company is in the process of  investing up to $2.0 million in
molds and injection molding machinery to expand the production capacity and gain
efficiencies  at its Toledo,  Ohio facility.  Manufacturing  inefficiencies  and
capacity  constraints  caused by old,  outdated  injection  mold  machinery  has
prevented the Company from shipping to the level of demand for certain products.
This investment in enhanced  injection  molding  capabilities is expected,  when
complete,  to  increase  annual  production,  and to  provide  significant  cost
reduction  opportunities,  including reduced product material content, labor and
utility costs,  while improving overall quality.  Six injection molding machines
and eleven molds have been  installed as of March 31, 1997.  An  additional  six
molds are  scheduled  for  delivery  through  June,  while  plans to order  four
additional molding machines and four additional molds are under evaluation.  The
installation  of  equipment  delivered  to  date  has  been in  accordance  with
management's expectations.

While the  Company has  expended  both  monetary  and human  resources  on these
projects in the third quarter of fiscal 1997 and intends to continue emphasizing
these and other internally  controlled projects,  there can be no assurance that
the Company will be  successful  in  implementing  these  projects and realizing
these potential synergies.


FINANCIAL INFORMATION:

The following table sets forth, for the fiscal period indicated,  the percentage
of  net  sales   represented  by  certain  items   reflected  in  the  Company's
consolidated statement of operations.

<TABLE>
<S>                                 <C>            <C>                          <C>             <C>  

                                    Three Months Ended                          Nine Months Ended
                                         March 31,                                   March 31,
                                    1997           1996                         1997          1996
                                    ----           ----                         ----          ----

Net Sales                           100.0%         100.0%                       100.0%        100.0%
Cost of sales                         68.1          67.8                         68.5          64.4
                                    ------        ------                        -----         -----
Gross profit                          31.9          32.2                         31.5          35.6
Total SG&A expenses                   26.7          24.1                         28.1          24.6
                                     -----         ----                        ------        -----
Income from operations                 5.2           8.1                          3.4          11.0
Interest expense                       5.9           3.3                          5.0           3.8
                                    -------        -------                      -------      ------
Income (loss) before provision
     (benefit) for income taxes       (0.7)          4.8                         (1.6)          7.2
Provision (benefit) for income taxes   0.3           1.6                         (0.4)
                                    -------       -------                      --------         2.8
Net income (loss)                     (1.0)%        3.2%                         (1.2)%         4.4%
                                    =======        =======                      =======       ======




</TABLE>
<PAGE>

RESULTS OF OPERATIONS

Allied  manufactures  and markets  respiratory  therapy  equipment,  medical gas
equipment and emergency medical products. Set forth below is certain information
with respect to amounts  (dollars in  thousands)  and  percentages  of net sales
attributable  to  respiratory  therapy  equipment,  medical  gas  equipment  and
emergency  medical products for the three months and nine months ended March 31,
1997 compared to the three months and nine months ended March 31, 1996.

<TABLE>
<S>                                 <C>          <C>                <C>         <C>  


                                                       Three Months Ended
                                    March 31, 1997                  March 31, 1996
                                                 % of                            % of
                                                 total                           total
                                    Net          net                Net          net
                                    sales        sales              sales        sales
                                    _____        _____              _____        _____

Respiratory Therapy  Equipment      $16,073      52.7%              $16,587      54.7%
Medical Gas Equipment                11,384      37.4%               10,276      33.9%

Emergency Medical Products            3,009       9.9%                3,471      11.4%
                                    -------      -----              -------      -----
Total                               $30,466     100.0%              $30,334     100.0%
                                    =======     =====                ======     =====


                                                       Nine Months Ended
                                    March 31, 1997                 March 31, 1996
                                                 %of                            %of
                                                 total                          total
                                    Net          net               Net          net
                                    sales        sales             sales        sales
                                    _____        _____             _____        _____

Respiratory Therapy Equipment       $47,632       54.1%            $48,298       53.7%
Medical Gas Equipment               $31,624       36.0%             31,756       35.3%
Emergency Medical Products            8,732        9.9%              9,908       11.0%
                                    -------       -----            -------       -----
Total                               $87,988      100.0%            $89,962      100.0%
                                    =======      =====             =======      ======

</TABLE>


THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996

        Net sales for the three  months  ended March 31,  1997 of $30.5  million
were $0.2  million,  or 0.4% over sales of $30.3  million  for the three  months
ended March 31, 1996.  The Company  noted  progress  during the third quarter in
both  internal  and  external  issues that have impacted operations. It however,
improvements are still required and the process is not yet complete. The Company
has experienced  sequential  improvements in operations in the fiscal 1997 third
quarter  compared to the three  prior  quarters  in orders,  sales,  margins and
margin  percent to net sales,  and in  operating  profit.  Included  in internal
operating   issues  that  have   impacted   the  Company  are   disruptions   to
manufacturing, scheduling and shipping created by the computer conversion in the
St. Louis, Missouri facility, capacity constraints of the Toledo, Ohio facility,
and changes in the field salesforce. During the third quarter of fiscal 1997 the
Company  addressed the disruptions  created by the computer  conversion  through
training  and  programming  enhancements.  
<PAGE>

In  addition,  beginning in the third
quarter  the  capital  expenditure  project in  Toledo,  resulted  in  increased
capacity and  improvements  in product quality and  manufacturing  efficiencies.
Finally,  the shift to inside  telemarketing  sales for  homecare  products  was
completed.  Each of these  activities  has been  previously  discussed.  Certain
external issues continued to impact the Company's third quarter  operations.  In
the home health care  market,  consolidation  of dealers  has  continued  to put
pressure on prices and corresponding margins. In addition,  Congress has not yet
set policy on reimbursement  guidelines for oxygen therapy  reimbursements.  The
impact of consolidation  of acute health care providers  appears to be improving
as the orders from and sales to these  markets have both  increased in the third
quarter of fiscal 1997 over the same period in the prior  year.  Orders,  or the
pace of incoming business,  for the three months ended March 31, 1997, are $32.8
million,  an increase of $1.2 million,  or 4.0%, over orders of $31.6 million in
the prior year  comparable  period.  While the Company can not predict  when the
full  ramifications  of its internal and external  issues will be resolved,  the
Company believes that over a long term horizon it is positioned  through a broad
product  offering and continued  internal  operational  improvements to meet the
demands of respiratory health care caused by an aging population, an increase in
the occurrence and treatment of lung disease,  and other  respiratory  illnesses
treated in the home, hospital, and sub-acute care facilities.

Respiratory therapy equipment sales in the third quarter of fiscal 1997 of $16.1
million were $0.5  million,  or 3.1%,  under prior year third  quarter  sales of
$16.6 million.  Sales of  ventilation  products have increased due to the strong
world wide  acceptance of the Smart Trigger  technology for the Company's  adult
critical care ventilator and the new infant ventilator,  the Bear Cub 750R . The
Company has hired and trained  field  salesforce  personnel  to address the high
turnover  rates  experienced  during fiscal 1996,  and in the second  quarter of
fiscal 1997, completed the combination of its ventilation and patient care sales
forces to increase sales coverage for this demonstration-based,  sales-intensive
product line.  Offsetting the increase in ventilation product sales is a decline
in sales of home  health  care  products.  This  decline  is a result of pricing
pressures  caused by the  ongoing  consolidation  of home  health  care  dealers
combined  with  concerns  over  potential  reductions  in  home  oxygen  therapy
reimbursement  rates.  While the Company is unable to predict when these factors
will be resolved and the impact of potential  reimbursement policy decisions, it
believes that until there is a resolution,  current customer  purchase  patterns
are likely to  continue.  To enhance  homecare  product  sales the  Company  has
shifted  its sales  emphasis  to  inside  telemarketing  sales,  in an effort to
increase  sales coverage and  penetration  to DME's.  The home health care sales
were additionally  impacted by capacity  constraints for certain products at the
Company's Toledo,  Ohio facility.  While the installation of equipment and molds
previously  delivered have been in accordance  with  management's  expectations,
there can be no assurance that remaining  installations will fully alleviate the
Company's  capacity  issues or that  demand  will  remain at  current  levels or
improve with the telemarketing efforts.

Medical gas equipment sales in the third quarter of fiscal 1997 of $11.4 million
were $1.1  million,  or 10.8% over prior  year sales of $10.3  million.  Medical
construction  sales,  headwall  sales,  and medical  gas suction and  regulation
device  sales all were  above  prior year sales  levels.  The market  demand for
Medical Gas Equipment has been strong as the pace of this business,  as measured
by  incoming  orders,  has  increased  compared to the prior year orders in each
quarter  this fiscal  year.  New orders for the third  quarter of fiscal 1997 of
$14.4  million  are $3.1  million or 27.3% over  orders of $11.3  million in the
prior year comparable  quarter.  It appears the impact of the  consolidation  of
health care providers is slowing and their rationalization  process for facility
protocol and inventory consolidation is nearing completion,  although management
is unable to predict when the full ramification of such  consolidations  will be
complete.

Emergency  medical  product sales in the third quarter of $3.0 million were $0.5
million,  or 13.3%  under  sales of $3.5  million in the prior  year  comparable
period.  This  sales  trend is a  continuation  of fiscal  1997 first and second
quarter issues and is attributable to problems the Company had in the relocation
of production of 

<PAGE>

emergency products to the St. Louis facility and the absence of
a large stocking  order that occurred in the prior year. The emergency  business
has two  elements.  One is steady  replacement  sales and the other  element  is
driven by events,  such as a natural disaster or change in emergency protocol in
a particular country.  Management expects sales for the remainder of fiscal 1997
to  primarily  consist  of  demand  driven  by the  replacement  segment  of the
business.


The Company  continued to increase its presence in world wide markets during the
third  quarter of fiscal 1997.  International  sales,  which are included in the
product line sales discussion  above,  increased $0.1 million,  or 1.5%, to $8.7
million in the third quarter of fiscal 1997 compared to sales of $8.6 million in
the second quarter of fiscal 1996. The world wide market acceptance of the Smart
TriggerR  technology for the Company's adult critical care  ventilator  combined
with the recent  introduction  of the new Bear Cub 750R  infant  ventilator  has
fueled the growth of international  sales.  Partially offsetting the increase in
international ventilator product sales is a decline in medical gas equipment and
head wall sales which was attributable to a large order in the prior year.

Gross profit for the third quarter of fiscal 1997 was $9.7 million,  or 31.9% of
net sales,  compared to gross profit of $9.8 million,  or 32.2% of net sales for
the third  quarter of fiscal 1996.  An  unfavorable  product line sales mix, the
increase in lower margin  international  sales, and pricing pressures brought on
by the  consolidation  of health care providers all adversely  impacted  margins
from year to year. In addition,  the gross profit margin percentage was impacted
by a planned decline in manufacturing  volume as the Company  continued to focus
on working capital  management and did not significantly  build inventory levels
as in the prior year. As a result, the decline in manufacturing volume in fiscal
1997 increased per unit costs of manufacturing  and lowered margins as a percent
of sales compared to the third quarter of fiscal 1996.  Sequentially,  the gross
margin  percentage  of 31.9% in the third quarter of fiscal 1997 is greater than
the  prior  three  quarters.  The  trend  line  improvement  in gross  margin is
attributable to the  strengthening  of the medical gas markets and strong market
acceptance of the Company's  ventilation  products.  To further improve margins,
the  Company  has  focused  resources  on two  significant  capital  expenditure
programs which are designed to reduce  manufacturing  costs and reduce inventory
levels as described above.  The Company  continues to evaluate its business with
an intent to improve productivity, reduce costs, and initiate vendor programs to
obtain price concessions.  The Company may also implement  additional  strategic
manufacturing programs in the future to improve profitability.

Selling, General and Administrative ("SG&A") expenses for the three months ended
March 31, 1997 were $8.1  million,  an increase of $0.8  million over prior year
comparable  period SG&A expenses of $7.3 million.  The Company continued to make
strategic  investments  in or incur  non-recurring  SG&A  expenses in  the third
quarter of fiscal 1997.  SG&A spending  includes  investments in advertising and
marketing  literature,  investments  in  information  technology,  and continued
investments in research and development, all expenditures that potentially could
benefit future periods.  In addition,  the Company incurred  duplicate costs for
sales efforts to the DME's in the homecare  market during the transition  period
of shifting to  telemarketing  from field sales  representatives.  Finally,  the
fiscal 1996 SG&A expenses were lowered by a research grant of $0.3 million which
did not repeat in fiscal  1997.  As a percent of net sales, SG&A  expenses  were
26.7%.  This was greater than the fiscal 1996 third quarter percent to net sales
of 24.1% due to the investment spending discussed above.  However, SG&A expenses
for the fiscal 1997 third  quarter are below the prior three  quarters as both a
percent to net sales and in actual  spending.  Management  anticipates the trend
line  reduction  in SG&A  spending to continue  through the  remainder of fiscal
1997.

<PAGE>

Income from  operations  in the third quarter of fiscal 1997 of $1.6 million was
$0.9  million,  or 35.7%,  below the third  quarter of fiscal  1996  income from
operations of $2.5 million. As a percentage of net sales, income from operations
decreased  to  5.2%  from  8.1%  for  these  same  periods.   This  decrease  is
attributable  to  reduced  gross  margins  and the  increase  in  SG&A  expenses
discussed above.  Sequentially,  income from operations of $1.6 million, or 5.2%
of net sales,  has improved from the second quarter results of $0.5 million,  or
1.7% of net  sales,  respectively  and from the first  quarter  results  of $0.9
million, or 3.0% of net sales, respectively.

Interest  expense for the third  quarter of fiscal 1997 of $1.7 million was $0.7
million  above  interest  expense of $1.0  million in the prior year  comparable
period. This increase is attributable to an additional $0.2 million amortization
of loan  origination  fees,  (caused  by the  accelerated  maturity  date of the
Company's   commercial   bank  syndicate   credit   facilities),   $0.1  million
attributable to a higher effective  interest rate and $0.4 million  attributable
to fees paid to the bank syndicate to obtain covenant waivers.  Interest expense
is expected to increase  substantially  as a result of the  modifications to the
Company's credit facilities described below.

Allied had a loss before provision for taxes in the third quarter of fiscal 1997
of $0.2 million. In addition,  the Company recorded a provision for income taxes
of $0.1 million,  resulting in a net loss after taxes of $0.3 million, or a loss
of $0.04 per share. The provision for income taxes recorded in the third quarter
relates to adjustments to the Company's  estimated effective tax rate for fiscal
1997 which is impacted by the Company's  continuing losses from operations,  the
increased  interest  expense  noted above,  the non -  deductibility  of certain
goodwill  amortization  and the  Company's  expectations  regarding  the lack of
availability of the Company's foreign sales tax credit in 1997.  Results for the
third  quarter of fiscal 1996 were income  before taxes of $1.4  million,  a tax
provision of $0.5 million,  an effective  tax rate of 32.3%,  net income of $1.0
million,  and earnings per share of $0.12. The weighted average number of common
shares  outstanding  used in the calculation of earnings per share was 7,796,682
and   7,796,671   for  the  third  quarter  of  fiscal  1997  and  fiscal  1996,
respectively.


NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO NINE MONTHS ENDED MARCH 31, 1996

Net sales for the nine  months  ended  March 31,  1997  were  $88.0  million,  a
decrease  of $2.0  million,  or 2.2%,  from  sales of $90.0  million in the same
period in the prior year.  The  decline in net sales for the nine  months  ended
March 31, 1997 compared to the same period in the prior year is  attributable to
numerous  external and internal  factors.  The sales decline for the nine months
compared to the prior year period  occurred  in the first  quarter of 1997.  The
macroeconomic  factors which  impacted the Company's  sales included the renewed
concerns over potential  reductions in home oxygen therapy  reimbursement levels
by  Medicare  and  Medicaid.   Policy  decision  on  this  home  oxygen  therapy
reimbursement  issue was deferred by Congress in April 1996 but debates  renewed
during  the first  quarter of fiscal  1997 and have  continued  to impact  sales
through the nine months ended March 31,  1997.  The Company is unable to predict
the impact of health care  reimbursement  policy  decisions,  but believes  that
until reimbursement issues are resolved,  current customer purchase patterns are
likely to continue.  The ramifications of consolidation of healthcare  providers
continued to impact certain segments of the Company's  product  offerings in the
first  quarter of fiscal  1997,  but appeared to stabilize in the second and the
third  quarters  of  fiscal  1997.  In the  acute  care  market,  the  continued
rationalization  of inventory  levels of medical gas  regulation  devices caused
first quarter softness in this market.  However,  there were improvements in the
second and third  quarter  sales of medical  gas  system  products.  In the home
health care market,  consolidation  of dealers has  continued to put pressure on
prices  and  corresponding  margins.   Internal  operational  issues  have  also
continued to impact the Company's  operations  for which the Company has devoted
considerable  time and resources  during the first nine months of fiscal 1997 to
address.  Included 

<PAGE>

in these internal  issues are previous high turnover rates in
the ventilation field sales force for which the Company had to recruit and train
replacements.  Manufacturing  constraints  and capacity issues also impacted the
Company's   operations.   In  response  thereto,  the  Company  engaged  in  two
significant capital expenditure  projects discussed above.  Finally, the Company
is continuing the process of integrating the businesses which have recently been
acquired, including actively upgrading its information technology systems. While
the  Company  is unable  to  predict  when the  ramifications  of  macroeconomic
conditions will be resolved or unable to provide  assurance that internal issues
will be successfully resolved, the Company has noted sequential  improvements in
operations.  Specifically,  improvements in the pace of new business as measured
in orders have continued.  Total orders for the nine months ended March 31, 1997
were $94.3 million,  an increase of $4.7 million,  or 5.3%, from orders of $89.6
million in the  comparable  prior year period.  Orders for the nine months ended
March 31, 1997  compared  to the nine months  ended March 31, 1996 are up in the
respiratory   therapy  and  medical  gas  product   lines  by  2.3%  and  14.2%,
respectively, due to strengthening of the markets. Emergency orders were down by
7.9% in these same periods,  as a result of large non-recurring  stocking orders
made in the prior fiscal year and due to manufacturing disruptions noted above.


Respiratory therapy equipment sales were $47.6 million for the nine months ended
March 31,  1997  compared to sales of $48.3  million  for the nine months  ended
March 31, 1996, a decline of $0.7  million,  or 1.4%.  This decline in sales was
attributable to a 9.1% decline in homecare sales caused by pricing pressures and
operational difficulties previously discussed. Partially offsetting this decline
was a 5.8% increase  in sales to  hospital  markets.  This  increase in sales to
hospital  markets  is  primarily  attributable  to the strong  worldwide  market
acceptance of recent  technology  improvements  in the Company's  adult critical
care ventilator and the new infant ventilator.

Medical gas  equipment  sales for the nine months  ended March 31, 1997 of $31.6
million were $0.2 million , or 0.4%, below comparable period prior year sales of
$31.8 million. Although sales of medical gas products continue to be below prior
year  levels for the nine month  comparable  period,  orders for these  products
continue to outpace the prior year,  resulting in a strengthening of the backlog
and an  improvement  in third  quarter  sales in fiscal 1997, which exceeded the
prior year third  quarter  sales.  Orders for medical gas equipment for the nine
months ended March 31, 1997 of $35.6  million were $4.4 million, or 14.2%,  over
orders of $31.2  million for the nine months  ended  March 31,  1996.  While the
consolidation  of  acute  care  facilities  and  the  resultant  combination  of
consolidated  inventories  and  delays in  refurbishing  projects  appears to be
slowing,   management  cannot  predict  when  the  full  ramifications  of  such
consolidation activities will be complete.

Emergency  medical  products  sales for the nine months  ended March 31, 1997 of
$8.7 million were $1.2 million,  or 11.9%,  below  comparable  period prior year
sales of 9.9 million.  This decline was due to  difficulties  experienced in the
relocation of production of emergency  products to the St. Louis  facility and a
large non-recurring stocking order that occurred in the prior year.

International  sales,  which are  included in the above  discussion  of sales by
product lines,  increased  $1.1 million,  or 4.6%, to $24.7 million for the nine
months  ended  March 31, 1997  compared  to sales of $23.6  million for the nine
months  ended March 31,  1996.  This  increase in sales is  attributable  to the
strong worldwide acceptance of the Company's  ventilation products combined with
increased sales of the Company's medical gas equipment. International sales were
28.1% of total  sales  during the nine months  ended March 31, 1997, compared to
26.3% of total sales for the nine months ended March 31, 1996.

<PAGE>


Gross profit of $27.7  million for the nine months ended March 31, 1997 declined
by $4.3  million,  or 13.5%,  from $32.0 million for the nine months ended March
31, 1997.  The gross profit margin as a percentage  of sales  decreased to 31.5%
from 35.6% as a result of a change in product  line sales mix, the change in the
mix of  domestic  versus  international  sales,  pricing  pressures  on sales to
national   accounts,   planned  declines  in  manufacturing   volume  to  reduce
inventories,   and  manufacturing  inefficiencies  experienced  at  one  of  the
Company's plants.

SG&A expenses for the nine months ended March 31, 1997 increased $2.6 million to
$24.7 million,  or 11.8%, from $22.1 million for the nine months ended March 31,
1996. The Company has made significant investments in field sales force training
and restructuring, promotional literature and advertisements, and in information
technology  throughout  the first  nine  months of fiscal  1997.  As a result of
decreased net sales  combined  with an increase in spending,  SG&A expenses as a
percentage  of net sales  increased to 28.1% for the nine months ended March 31,
1997 compared to 24.6% for the nine months ended March 31, 1996.

Income from operations was $2.9 million for the nine months ended March 31, 1997
compared  to $9.9  million  for the prior year.  As a  percentage  of net sales,
income from  operations  decreased to 3.3% from 11.0% for the same period in the
prior year. This  percentage  decrease in income from operations is attributable
to reduced sales,  reduced gross margins,  and increased SG&A expenses discussed
above.

Interest  expense  was $4.3  million  for the nine  months  ended March 31, 1997
compared to $3.3 million for the nine months ended March 31, 1996.  The increase
in interest expense of $1.0 million is attributable to increased amortization of
prepaid  loan costs and an increase in the  effective  interest rate, which were
partially  offset by a lower  average debt balance  during the nine months ended
March 31,  1997  compared to the same  period in the prior  year.  In  addition,
interest expense has increased by  approximately  $0.4 million in the first nine
months of fiscal 1997  compared to the same period in the prior year as a result
of fees  paid to the  Company's  bank  syndicate  to  obtain  covenant  waivers.
Interest  expense  is  expected  to  increase  substantially  as a result of the
modifications to the Company's credit facilities described below.

Allied had a loss before  provision  /  (benefit)  for taxes for the nine months
ended March 31, 1997 of $1.4.  million.  This loss is partially  offset by a tax
benefit of $0.4  million,  resulting  in an  effective  tax rate of 28.4%.  This
effective tax rate reflects adjustments to the Company's estimated effective tax
rate for fiscal 1997 which is impacted by the Company's  continuing  losses from
operations,  the increased interest expense noted above, the non - deductibility
of certain goodwill  amortization and the Company's  expectations  regarding the
lack of availability of the Company's  foreign sales tax credit in 1997. The net
loss after  taxes was $1.0  million,  or $0.13 per share.  Results  for the nine
months  ended March 31, 1996 were income  before  taxes of $6.5  million,  a tax
provision of $2.5 million,  an effective  tax rate of 48.2%,  net income of $4.0
million,  and earnings per share of $0.55. The weighted average number of common
shares  outstanding  used in the calculation of earnings per share was 7,796,682
and  7,240,091  for the  first  nine  months  of  fiscal  1997 and  fiscal  1996
respectively.  The  increase in the  weighted  average  number of common  shares
outstanding  was  primarily  the result of the  October  1995 sale of  1,610,000
shares of common stock.

<PAGE>

FINANCIAL CONDITION

The  following  table  sets  forth  selected  information   concerning  Allied's
financial condition:

        Dollars in thousands        March 31, 1997              June 30, 1996
        --------------------        --------------              -------------
        Cash                              $ 964                     $1,489
        Working Capital                  37,872                     38,030
        Total Debt                       52,164                     52,882
        Current Ratio                      2.84 :1                    2.69 :1

The Company's  working capital was $37.9 million at March 31, 1997,  compared to
$38.0 million at June 30, 1996. Accounts  receivable  increased to $26.3 million
from $26.0 million while inventories declined to $27.5 million at March 31, 1997
from $28.0  million at June 30,  1996.  The increase in accounts  receivable  is
primarily  the result of an  increase in sales  during the most  recent  quarter
combined with a one day increase in Days Sales Outstanding ("DSO"). The decrease
in inventories is a net result of the Company's  attempt to reduce slower moving
inventories while at the same time increasing  inventory levels of higher demand
products  to have  them in stock in order to reduce  the  shipment  cycle  time.
Inventories  have  declined to 130 days on hand ("DOH") at March 31, 1997,  from
140 DOH at June 30, 1996.

Net cash used for the nine months ended March 31, 1997 was $0.5 million. The net
cash used resulted from a reduction in debt of $0.7 million, capital expenditure
of $1.8  million  dividends  of $0.5  million  and debt  issuance  costs of $0.7
million,  which were partially offset by income from operations (a net after tax
loss plus non-cash  operating  charges),  and a net reduction in working capital
accounts.  The Company  believes  that cash flow from  operations  and available
borrowings  under its amended  revolving  credit  facility will be sufficient to
finance fixed debt service and planned capital expenditures in fiscal 1997.

     At March 31, 1997, the Company had aggregate indebtedness of $52.2 million,
which  included  short-term  debt of $3.9  million and  long-term  debt of $48.3
million,  a  decrease  in total  debt of $0.7  million  from  the June 30,  1996
aggregate  indebtedness  of $52.9  million.  On  September  20, 1996 the Company
amended its existing  $125.0 million credit  facilities with its commercial bank
syndicate. The credit facilities were amended such that the $68.4 million unused
portion  of the  $70.0  million  acquisition  term  loan  facility  is no longer
available and the remaining credit facilities  maturity dates were reset to July
31, 1998. In addition,  amendments  were made to reset certain  covenants and to
increase the advance  rates on the resolving  credit  facility  borrowing  base.
Further,  in connection with the amended credit facilities,  the Company entered
into an additional  $5.0 million term loan,  also  maturing  July 31, 1998.  The
amended credit faciliites  provide the Company with credit  facilities  totaling
$60.0 million which can be utilized to finance  operations and future growth. At
March 31, 1997 the Company had total borrowings of $47.8 million on these credit
facilities and was in compliance  with all covenants or had received  waivers of
all covenants in which it was not in compliance.  In connection with the receipt
of covenant  waivers,  the Company agreed to pay its commercial bank syndicate a
fee of $450,000 plus $85,000 per month, payable in kind (PIK). In addition,  the
Company  agreed  that if it did not reduce  its  aggregate  borrowings  with the
commercial bank syndicate by $20.0 million by May 15, 1997, or otherwise  obtain
a  commitment  which  would  result in  proceeds  to the Company of at least $20
million  by May  15,  1997,  it  would  pay the  commercial  bank  syndicate  an
additional  fee of $450,000 on May 15, 1997.  The Company was unable to complete
an alternative  financing  agreement or otherwise obrtain a commitment to reduce
its debt with the commercial bank syndicate $20 million and,  accordingly,  paid
the  $450,000 fee on May 15,  1997.  The $85,000 per month PIK fee  continues to
remain in effect.  In connection  with the receipt of covenant  waivers at March
31, 1997, the Company agreed to pay its commercial bank

<PAGE>

syndicate a fee of $150,000,
payable in case in three  monthly  installments  of $50,000  each,  and a fee of
$300,000 on a PIK basis. Commencing August 15,  1997, if the loan obligation has
not been repaid in full and  continuing  through the loan maturity date the bank
syndicate,  at its option may convert  the  $300,000  fee into 90,000  shares of
Allied common stock. The Company continues to negotiate with the commercial bank
syndicate for a long term  agreement and in addition,  the Company  continues to
pursue alternative  financing  arrangements.  There can be no assurance that the
Company will be able to achieve satisfactory  long-term or alternative financing
arrangments or that any such arrangement will not contain provisions which would
have a material adverse effect on the Company.

As of March 31, 1997 the Company  had a backlog of $27.4  million  compared to a
backlog of $25.4  million at March 31,  1997.  The backlog  increase  during the
third  quarter  of  fiscal  1997  of  $2.0  million  is   attributable   to  the
strengthening  of the medical  gas  equipment  markets.  The  Company's  backlog
consists of firm customer  purchase  orders which are subject to cancellation by
the  customer  upon  notification.  The  backlog  principally  is expected to be
shipped within the next twelve months.

Inflation has not had a material effect on the Company's  business or results of
operations.

<PAGE>



PART II.       OTHER INFORMATION


Item 6.        Exhibits and Reports on Form 8-K

(a)     Exhibits:

        27     Financial Data Schedule

(b)     Reports on Form 8-K

        None.


<PAGE>


                                    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.



                                            ALLIED HEALTHCARE PRODUCTS, INC.



Date:   May 15, 1997                        /S/ BARRY F. BAKER
                                            ----------------------------------
                                            Barry F. Baker
                                            Vice President - Finance and Chief 
                                             Financial Officer