UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC  20549





FORM
10-Q


x
            Quarterly
      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934.


For the
quarterly period ended March 31, 2010





o
            Transition
      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934.


For the
transition period from________ to ________





Commission
File Number:  0-19266





ALLIED
HEALTHCARE PRODUCTS, INC.


(Exact
name of registrant as specified in its charter)


Delaware
              
              25-1370721(State
      or other jurisdiction of
              
              (I.R.S.
      EmployerIncorporation
      or organization)
              
              Identification
      No.)





1720
Sublette Avenue, St. Louis, Missouri 63110


(Address
of principal executive offices, including zip code)





(314)
771-2400


(Registrant’s
telephone number, including area code)





N/A


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





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   o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).  Yes   o   No   o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definitions of "large accelerated filer,” “accelerated
filer" and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.





Large
      accelerated filer
                      o
                      
                      Accelerated
      filer
                      oNon-accelerated
      filer
                      o  (Do
      not check if smaller reporting company)
                      
                      Smaller
      reporting company
                      x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes    ̈   No   x





The
number of shares of common stock outstanding at April 30, 2010 is 8,093,386
shares.










INDEX





PageNumberPart
      I –
                                              Financial
      InformationItem
      1.
                                              Financial
      StatementsConsolidated
      Statement of Operations -
                                              3Three
      and nine months ended March 31,2010
      and 2009 (Unaudited)Consolidated
      Balance Sheet -
                                              4 -
      5March
      31, 2010 (Unaudited) andJune
      30, 2009Consolidated
      Statement of Cash Flows -
                                              6Nine
      months ended March 31, 2010 and 2009(Unaudited)Notes
      to Consolidated Financial Statements
                                              7 –
      11Item
      2.
                                              Management’s
      Discussion and Analysis of
                                              11
      – 15Financial
      Condition and Results of OperationsItem
      3.
                                              Quantitative
      and Qualitative Disclosure
                                              16about
      Market RiskItem
      4T.
                                              Controls
      and Procedures
                                              16Part
      II -
                                              Other
      InformationItem
      6.
                                              Exhibits
                                              16Signature
                                              18





SAFE
HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995





Statements
contained in this Report, which are not historical facts or information, are
"forward-looking statements." Words such as "believe," "expect," "intend,"
"will," "should," and other expressions that indicate future events and trends
identify such forward-looking statements. These forward-looking statements
involve risks and uncertainties, which could cause the outcome and future
results of operations, and financial condition to be materially different than
stated or anticipated based on the forward-looking statements. Such risks and
uncertainties include both general economic risks and uncertainties, risks and
uncertainties affecting the demand for and economic factors affecting the
delivery of health care services, and specific matters which relate directly to
the Company's operations and properties as discussed in the Company’s annual
report on Form 10-K for the year ended June 30, 2009.  The Company
cautions that any forward-looking statements contained in this report reflect
only the belief of the Company or its management at the time the statement was
made. Although the Company believes such forward-looking statements are based
upon reasonable assumptions, such assumptions may ultimately prove inaccurate or
incomplete. The Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which the
statement was made.


2


PART
I.   FINANCIAL INFORMATION





Item
1.     Financial Statements





ALLIED
HEALTHCARE PRODUCTS, INC.


CONSOLIDATED
STATEMENT OF OPERATIONS


(UNAUDITED)





Three months ended
                                    
                                    
                                    Nine months endedMarch 31,
                                    
                                    
                                    March 31,2010
                                    
                                    
                                    2009
                                    
                                    
                                    2010
                                    
                                    
                                    2009Net
      sales
                                    
                                    $
                                    11,627,418
                                    
                                    
                                    $
                                    12,389,640
                                    
                                    
                                    $
                                    34,366,002
                                    
                                    
                                    $
                                    39,361,993Cost
      of sales
                                    
                                    
                                    8,781,739
                                    
                                    
                                    
                                    9,915,884
                                    
                                    
                                    
                                    26,172,709
                                    
                                    
                                    
                                    30,677,586Gross
      profit
                                    
                                    
                                    2,845,679
                                    
                                    
                                    
                                    2,473,756
                                    
                                    
                                    
                                    8,193,293
                                    
                                    
                                    
                                    8,684,407Selling,
      general and administrative expenses
                                    
                                    
                                    2,705,644
                                    
                                    
                                    
                                    3,198,135
                                    
                                    
                                    
                                    9,197,535
                                    
                                    
                                    
                                    9,782,064Income
      (loss) from operations
                                    
                                    
                                    140,035
                                    
                                    
                                    
                                    (724,379
                                    )
                                    
                                    
                                    (1,004,242
                                    )
                                    
                                    
                                    (1,097,657
                                    )Interest
      income
                                    
                                    
                                    (2,956
                                    )
                                    
                                    
                                    (5,041
                                    )
                                    
                                    
                                    (4,403
                                    )
                                    
                                    
                                    (54,155
                                    )Interest
      expense
                                    
                                    
                                    190
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    2,764
                                    
                                    
                                    
                                    5,849Other,
      net
                                    
                                    
                                    80,791
                                    
                                    
                                    
                                    13,403
                                    
                                    
                                    
                                    103,588
                                    
                                    
                                    
                                    36,58378,025
                                    
                                    
                                    
                                    8,362
                                    
                                    
                                    
                                    101,949
                                    
                                    
                                    
                                    (11,723
                                    )Income
      (loss) before provision for (benefit from) income taxes
                                    
                                    
                                    62,010
                                    
                                    
                                    
                                    (732,741
                                    )
                                    
                                    
                                    (1,106,191
                                    )
                                    
                                    
                                    (1,085,934
                                    )Provision
      for (benefit from) income taxes
                                    
                                    
                                    24,480
                                    
                                    
                                    
                                    (282,469
                                    )
                                    
                                    
                                    (420,353
                                    )
                                    
                                    
                                    (407,925
                                    )Net
      income (loss)
                                    
                                    $
                                    37,530
                                    
                                    
                                    $
                                    (450,272
                                    )
                                    
                                    $
                                    (685,838
                                    )
                                    
                                    $
                                    (678,009
                                    )Basic
      earnings (loss) per share
                                    
                                    $
                                    0.00
                                    
                                    
                                    $
                                    (0.06
                                    )
                                    
                                    $
                                    (0.09
                                    )
                                    
                                    $
                                    (0.09
                                    )Diluted
      earnings (loss) per share
                                    
                                    $
                                    0.00
                                    
                                    
                                    $
                                    (0.06
                                    )
                                    
                                    $
                                    (0.09
                                    )
                                    
                                    $
                                    (0.09
                                    )Weighted
      average shares outstanding - basic
                                    
                                    
                                    8,093,386
                                    
                                    
                                    
                                    7,901,327
                                    
                                    
                                    
                                    8,057,890
                                    
                                    
                                    
                                    7,897,937Weighted
      average shares outstanding - diluted
                                    
                                    
                                    8,183,907
                                    
                                    
                                    
                                    7,901,327
                                    
                                    
                                    
                                    8,057,890
                                    
                                    
                                    
                                    7,897,937





See
accompanying Notes to Consolidated Financial Statements.


3


ALLIED
HEALTHCARE PRODUCTS, INC.


CONSOLIDATED
BALANCE SHEET


ASSETS





(Unaudited)March
      31,
                  
                  
                  June
      30,2010
                  
                  
                  2009Current
      assets:Cash
      and cash equivalents
                  
                  $
                  3,273,496
                  
                  
                  $
                  1,943,364Accounts
      receivable, net of allowances of $300,000
                  
                  
                  5,371,848
                  
                  
                  
                  6,172,437Inventories,
      net
                  
                  
                  11,968,396
                  
                  
                  
                  12,663,938Income
      tax receivable
                  
                  
                  1,634,370
                  
                  
                  
                  937,273Other
      current assets
                  
                  
                  270,340
                  
                  
                  
                  327,203Total
      current assets
                  
                  
                  22,518,450
                  
                  
                  
                  22,044,215Property,
      plant and equipment, net
                  
                  
                  10,040,867
                  
                  
                  
                  10,799,089Other
      assets, net
                  
                  
                  186,069
                  
                  
                  
                  390,627Total
      assets
                  
                  $
                  32,745,386
                  
                  
                  $
                  33,233,931





See
accompanying Notes to Consolidated Financial Statements.





(CONTINUED)


4


ALLIED
HEALTHCARE PRODUCTS, INC.


CONSOLIDATED
BALANCE SHEET


(CONTINUED)


LIABILITIES
AND STOCKHOLDERS' EQUITY





(Unaudited)March
      31,
                                      
                                      
                                      June
      30,2010
                                      
                                      
                                      2009Current
      liabilities:Accounts
      payable
                                      
                                      $
                                      2,140,610
                                      
                                      
                                      $
                                      1,633,568Other
      accrued liabilities
                                      
                                      
                                      2,055,459
                                      
                                      
                                      
                                      2,316,558Deferred
      income taxes
                                      
                                      
                                      164,125
                                      
                                      
                                      
                                      419,213Deferred
      revenue
                                      
                                      
                                      688,200
                                      
                                      
                                      
                                      688,200Total
      current liabilities
                                      
                                      
                                      5,048,394
                                      
                                      
                                      
                                      5,057,539Deferred
      revenue
                                      
                                      
                                      974,950
                                      
                                      
                                      
                                      1,491,100Commitments
      and contingenciesStockholders'
      equity:Preferred
      stock; $0.01 par value; 1,500,000 sharesauthorized;
      no shares issued and outstanding
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Series
      A preferred stock; $0.01 par value; 200,000 sharesauthorized;
      no shares issued and outstanding
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Common
      stock; $0.01 par value; 30,000,000 sharesauthorized;
      10,396,878 and 10,204,819 shares issuedat
      March 31, 2010 and June 30, 2009, respectively;8,093,386
      and 7,901,327 shares outstanding atMarch
      31, 2009 and June 30, 2009, respectively
                                      
                                      
                                      103,969
                                      
                                      
                                      
                                      102,048Additional
      paid-in capital
                                      
                                      
                                      48,352,716
                                      
                                      
                                      
                                      47,632,049Accumulated
      deficit
                                      
                                      
                                      (1,003,215
                                      )
                                      
                                      
                                      (317,377
                                      )Less
      treasury stock, at cost; 2,303,492 shares atMarch
      31, 2010 and June 30, 2009
                                      
                                      
                                      (20,731,428
                                      )
                                      
                                      
                                      (20,731,428
                                      )Total
      stockholders' equity
                                      
                                      
                                      26,722,042
                                      
                                      
                                      
                                      26,685,292Total
      liabilities and stockholders' equity
                                      
                                      $
                                      32,745,386
                                      
                                      
                                      $
                                      33,233,931





See
accompanying Notes to Consolidated Financial Statements.


5





ALLIED
HEALTHCARE PRODUCTS, INC.


CONSOLIDATED
STATEMENT OF CASH FLOWS


(UNAUDITED)





Nine months endedMarch 31,2010
                                          
                                          
                                          2009Cash
      flows from operating activities:Net
      loss
                                          
                                          $
                                          (685,838
                                          )
                                          
                                          $
                                          (678,009
                                          )Adjustments
      to reconcile net loss to netcash
      provided by (used in) operating activities:Depreciation
      and amortization
                                          
                                          
                                          948,607
                                          
                                          
                                          
                                          1,074,119Stock
      based compensation
                                          
                                          
                                          637,720
                                          
                                          
                                          
                                          17,392Provision
      for doubtful accounts and salesreturns
      and allowances
                                          
                                          
                                          (9,832
                                          )
                                          
                                          
                                          2,886Deferred
      taxes
                                          
                                          
                                          (59,713
                                          )
                                          
                                          
                                          14,223Loss
      on disposition of equipment
                                          
                                          
                                          67,848
                                          
                                          
                                          
                                          3,056Changes
      in operating assets and liabilities:Accounts
      receivable
                                          
                                          
                                          810,421
                                          
                                          
                                          
                                          680,519Inventories
                                          
                                          
                                          695,542
                                          
                                          
                                          
                                          (1,611,991
                                          )Income
      tax receivable
                                          
                                          
                                          (697,097
                                          )
                                          
                                          
                                          -Other
      current assets
                                          
                                          
                                          56,863
                                          
                                          
                                          
                                          (59,655
                                          )Accounts
      payable
                                          
                                          
                                          507,042
                                          
                                          
                                          
                                          (287,444
                                          )Deferred
      revenue
                                          
                                          
                                          (516,150
                                          )
                                          
                                          
                                          (516,150
                                          )Other
      accrued liabilities
                                          
                                          
                                          (261,099
                                          )
                                          
                                          
                                          (1,429,952
                                          )Net
      cash provided by (used in) operating activities
                                          
                                          
                                          1,494,314
                                          
                                          
                                          
                                          (2,791,006
                                          )Cash
      flows from investing activities:Capital
      expenditures
                                          
                                          
                                          (303,680
                                          )
                                          
                                          
                                          (1,403,665
                                          )Proceeds
      from disposal of fixed assets
                                          
                                          
                                          54,630
                                          
                                          
                                          
                                          -Net
      cash used in investing activities
                                          
                                          
                                          (249,050
                                          )
                                          
                                          
                                          (1,403,665
                                          )Cash
      flows from financing activities:Stock
      options exercised
                                          
                                          
                                          3,469
                                          
                                          
                                          
                                          81,094Minimum
      tax withholdings on stock options exercised
                                          
                                          
                                          (406,110
                                          )
                                          
                                          
                                          -Excess
      tax benefit from exercise of stock options
                                          
                                          
                                          487,509
                                          
                                          
                                          
                                          619Net
      cash provided by financing activities
                                          
                                          
                                          84,868
                                          
                                          
                                          
                                          81,713Net
      increase (decrease) in cash and cash equivalents
                                          
                                          
                                          1,330,132
                                          
                                          
                                          
                                          (4,112,958
                                          )Cash
      and cash equivalents at beginning of period
                                          
                                          
                                          1,943,364
                                          
                                          
                                          
                                          6,149,015Cash
      and cash equivalents at end of period
                                          
                                          $
                                          3,273,496
                                          
                                          
                                          $
                                          2,036,057





See accompanying Notes to Consolidated
Financial Statements.




6




ALLIED
HEALTHCARE PRODUCTS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





1.  Summary
of Significant Accounting and Reporting Policies





Basis
of Presentation





The accompanying unaudited consolidated
financial statements of Allied Healthcare Products, Inc. (the “Company”) have
been prepared in accordance with the instructions for Form 10-Q and do not
include all of the information and disclosures required by accounting principles
generally accepted in the United States of America 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
consolidated financial statements and notes to the consolidated financial
statements thereto included in the Company’s Annual Report on Form 10-K for the
year ended June 30, 2009.





Codification
of Accounting Standards





On
September 30, 2009, the Company adopted SFAS No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles(the Codification). The Codification combines the previous U.S. GAAP
hierarchy which included four levels of authoritative accounting literature
distributed among a number of different sources. The Codification does not by
itself create new accounting standards but instead reorganizes thousands of
pages of existing U.S. GAAP accounting rules into approximately 90 accounting
topics. All existing accounting standards documents are superseded by the
Codification and all other accounting literature not included in the
Codification is now considered non-authoritative. The Codification explicitly
recognizes the rules and interpretive releases of the Securities and Exchange
Commission (“SEC”) under federal securities laws as authoritative GAAP for SEC
registrants. The Codification is now the single source of authoritative
nongovernmental accounting standards in the U.S.





As a
result of the Codification, the references to authoritative accounting
pronouncements included herein in this Quarterly Report on Form 10-Q now refer
to the Codification topic section rather than a specific accounting rule as was
past practice.


7


Recently
Issued Accounting Guidance




In April
2009, the FASB issued guidance (“Fair Value Determination Guidance”) in the Fair
Value Measurements and Disclosures Topic of the ASC regarding the determination
of fair value in instances where market conditions result in either inactive
markets for assets and liabilities or disorderly transactions within markets.
The Fair Value Determination Guidance affirms that the objective of fair value
when the market for an asset is not active is the price that would be received
to sell the asset in an orderly transaction, and clarifies and includes
additional factors for determining whether there has been a significant decrease
in market activity for an asset when the market for that asset is not active.
The Fair Value Determination Guidance requires an entity to base its conclusion
about whether a transaction was not orderly on the weight of the evidence and
expands certain disclosure requirements. The Fair Value Determination Guidance
became effective for Allied Healthcare Products, Inc. in the quarter ended
September 30, 2009, and its adoption did not have a significant effect on
the Company’s financial position, results of operations, or cash
flows.




In
December 2007, the FASB issued the Business Combinations Topic of the ASC. The
Business Combinations Topic replaces previously issued guidance regarding
business combinations, and applies to all transactions and other events in which
one entity obtains control over one or more other
businesses.  Departing from the cost-allocation process of previous
guidance, the Business Combinations Topic requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquired entity at the acquisition date, measured at their fair values as of
that date.  Contingent consideration is recognized and measured at
fair value at the acquisition date, and acquisition related costs are expensed
as incurred. The Business Combinations Topic also distinguishes between assets
acquired and liabilities assumed arising from contractual contingencies as of
the acquisition date and assets or liabilities arising from all other
contingencies, requiring different treatment for each type of
contingency.  The Business Combinations Topic is effective for Allied
Healthcare Products, Inc. on July 1, 2009. To the extent business
combinations occur on or after the effective date, the Company’s accounting for
those transactions will be significantly affected by the provisions of the
Business Combinations Topic.





The
Company has determined that all other recently issued accounting guidance will
not have a material impact on its consolidated financial position, results of
operations and cash flows, or do not apply to its operations.





Fair
Value of Financial Instruments





The Company’s financial instruments
consist of cash, accounts receivable and accounts payable.  The
carrying amounts for cash, accounts receivable and accounts payable approximate
their fair value due to the short maturity of these instruments.




2.  Inventories





Inventories
are comprised as follows:


8





March
      31, 2010
                  
                  
                  June
      30, 2009Work-in
      progress
                  
                  $
                  744,409
                  
                  
                  $
                  718,711Raw
      materials and component parts
                  
                  
                  8,591,912
                  
                  
                  
                  8,981,435Finished
      goods
                  
                  
                  3,929,250
                  
                  
                  
                  4,311,440Reserve
      for obsolete and excess inventory
                  
                  
                  (1,297,175
                  )
                  
                  
                  (1,347,648
                  )$
                  11,968,396
                  
                  
                  $
                  12,663,938





3.  Earnings
per share





Basic earnings per share are based on
the weighted average number of shares of all common stock outstanding during the
period.  Diluted earnings per share are based on the sum of the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period. The number of basic shares outstanding for the
three months ended March 31, 2010 and 2009 were 8,093,386 and 7,901,327
respectively.  The number of diluted shares outstanding for the three
months ended March 31, 2010 and 2009 were 8,183,907 and 7,901,327 respectively.
The number of basic and diluted shares outstanding for the nine months ended
March 31, 2010 and 2009 were 8,057,890 and 7,897,937 respectively.





4.  Commitments
and Contingencies





The
Company is subject to various investigations, claims and legal proceedings
covering a wide range of matters that arise in the ordinary course of its
business activities.  The Company has recognized the costs and
associated liabilities only for those investigations, claims and legal
proceedings for which, in its view, it is probable that liabilities have been
incurred and the related amounts are estimable.  Based upon
information currently available, management believes that existing accrued
liabilities are sufficient and that it is not reasonably possible at this time
to believe that any additional liabilities will result from the resolution of
these matters that would have a material adverse effect on the Company’s
consolidated results of operations, financial position or cash
flows.





5.  Financing





Effective as of November 13, 2009,
Allied Healthcare Products, Inc. (the “Company”) terminated its revolving credit
facility arrangement with Bank of America, N.A., as successor to LaSalle Bank
National Association (the “Old Credit Agreement”). The Old Credit Agreement
provided for borrowings of up to $10,000,000 and was available through
September 1, 2010. No loans were outstanding under the Old Credit Agreement
as of November 13, 2009.





On
November 17, 2009, in order to obtain replacement financing, the Company
entered into a Loan and Security Agreement by and between Enterprise Bank &
Trust and the Company (the “New Credit Agreement”) pursuant to which the Company
obtained a secured revolving credit facility with borrowing availability of up
to $7,500,000 (the “New Credit Facility”). The Company’s obligations under the
New Credit Facility are secured by certain assets of the Company pursuant to the
terms and subject to the conditions set forth in the New Credit
Agreement.


9


The New
Credit Facility will be available on a revolving basis until it expires on
November 15, 2010, at which time all amounts outstanding under the New Credit
Facility will be due and payable. Advances under the New Credit Facility will be
made pursuant to a Revolving Credit Note (the “Promissory Note”) executed by the
Company in favor of Enterprise Bank & Trust. Such advances will bear
interest at a rate equal to .50% in excess of Enterprise Bank & Trust’s
prime-rate based interest rate for commercial loans, subject to a minimum annual
interest rate of 4.50%.  Advances may be prepaid in whole or in part
without premium or penalty.





Under the
New Credit Agreement, advances are generally subject to customary borrowing
conditions. The New Credit Agreement also contains covenants with which the
Company must comply during the term of the New Credit Facility. Among other
things, such covenants restrict the Company’s ability to incur certain
additional debt; make specified restricted payments, dividends and capital
expenditures; authorize or issue capital stock; enter into certain transaction
with affiliates; consolidate or merge with or acquire another business; sell
certain of its assets or dissolve or wind up the Company. The New Credit
Agreement also contains certain events of default that are customary for
financings of this type including, without limitation: the failure to pay
principal, interest, fees or other amounts when due; the breach of specified
representations or warranties contained in the loan documents; cross-default
with certain other indebtedness of the Company; the entry of uninsured judgments
that are not bonded or stayed; failure to comply with the observance or
performance of specified agreements contained in the loan documents;
commencement of bankruptcy or other insolvency proceedings; and the failure of
any of the loan documents entered into in connection with the New Credit
Facility to be in full force and effect. After an event of default, and upon the
continuation thereof, the principal amount of all loans made under the New
Credit Facility would bear interest at a rate per annum equal to 4.00% above the
otherwise applicable interest rate (provided, that the interest rate may not
exceed the highest rate permissible under law), and the lender would have the
option to accelerate maturity and payment of the Company’s obligations under the
New Credit Facility.





The prime
rate was 3.25% on March 31, 2010.





At March
31, 2010 the Company had no aggregate indebtedness, including capital lease
obligations, short-term debt and long term debt.





The
Company was in compliance with all of the financial covenants associated with
the New Credit Facility at March 31, 2010.


10


6.  Baralyme®
Agreement





A
reconciliation of deferred revenue resulting from the agreement with Abbott
Laboratories (“Abbott”), with the amounts received under the agreement, and
amounts recognized as net sales is as follows:





Three Months ended
                          
                          
                          Nine Months endedMarch 31,
                          
                          
                          March 31,2010
                          
                          
                          2009
                          
                          
                          2010
                          
                          
                          2009Beginning
      balance
                          
                          $
                          1,835,200
                          
                          
                          $
                          2,522,950
                          
                          
                          $
                          2,179,300
                          
                          
                          $
                          2,867,500Revenue
      recognizedas
      net sales
                          
                          
                          (172,050
                          )
                          
                          
                          (171,600
                          )
                          
                          
                          (516,150
                          )
                          
                          
                          (516,150
                          )1,663,150
                          
                          
                          
                          2,351,350
                          
                          
                          
                          1,663,150
                          
                          
                          
                          2,351,350Less
      - Current portionof
      deferred revenue
                          
                          
                          (688,200
                          )
                          
                          
                          (688,200
                          )
                          
                          
                          (688,200
                          )
                          
                          
                          (688,200
                          )$
                          974,950
                          
                          
                          $
                          1,663,150
                          
                          
                          $
                          974,950
                          
                          
                          $
                          1,663,150





In
addition to the provisions of the agreement relating to the withdrawal of the
Baralyme® product, Abbott has agreed to pay Allied up to $2,150,000 in product
development costs to pursue development of a new carbon dioxide absorption
product for use in connection with inhalation anesthetics that does not contain
potassium hydroxide and does not produce a significant exothermic reaction with
currently available inhalation agents.  As of March 31, 2010,
$2,150,000 has been received as a result of product development
activities.





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





RESULTS OF
OPERATIONS





Three months ended March 31,
2010 compared to three months ended March 31, 2009





Allied
had net sales of $11.6 million for the three months ended March 31, 2010, down
$0.8 million, or 6.5%, from net sales of $12.4 million in the prior year same
quarter.  Customer orders of $10.6 million were $1.9 million lower
than the prior year same quarter.    Purchase order releases
were only $1.0 million lower than in the prior year same
quarter.  Purchase order release times depend on the scheduling
practices of individual customers, and do vary over time.





Sales for
the three months ended March 31, 2010 and March 31, 2009 include approximately
$172,000 for the recognition into income of payments resulting from the
agreement with Abbott Laboratories to cease the production and distribution of
Baralyme®.  Income from the agreement will continue to be recognized
at $57,350 per month until the expiration of the agreement in August
2012.  Allied continues to sell Carbolime®, a carbon dioxide absorbent
with a different formulation than Baralyme®.  The Company ceased the
sale of Baralyme® on August 27th,
2004.


11


Domestic
sales were down 4.7% from the prior year same quarter, while international
business, which represented 20.9% of third quarter sales, was down
11.3%.  Orders for the Company’s products for the three months ended
March 31, 2010 of $10.6 million were $1.9 million or 15.2% lower than orders for
the prior year same quarter of $12.5 million.  Domestic orders are
down 15.7% over the prior year same quarter while international orders, which
represented 20.5% of third quarter orders, were 14.0% lower than orders for the
prior year same quarter.  The Company believes that the decrease in
net sales is primarily the result of the worldwide recession.  The
Company believes that the purchase of equipment and durable goods by hospitals
and municipalities have continued to be reduced as a short term measure to meet
budgets and conserve cash, despite early indications of limited recovery in the
economy. By and large, the Company’s products are considered durable
goods.





Gross
profit for the three months ended March 31, 2010 was $2.8 million, or 24.1% of
net sales, compared to $2.5 million, or 20.2% of net sales, for the three months
ended March 31, 2009.  Gross profit during the third quarter was
favorably impacted by cost savings initiatives which reduced the cost of
purchased materials and manufactured finished goods.





Selling,
general and administrative expenses for the three months ended March 31, 2010
were $2.7 million compared to selling, general and administrative expenses of
$3.2 million for the three months ended March 31, 2009.  The decrease
in selling, general and administrative expenses is partially due to a decrease
of approximately $0.3 million for compensation expense as a result of a
reduction in the Company’s workforce and a decrease of approximately $71,000 for
sales commissions due to the decline in sales compared to the same quarter of
the prior year. Additionally, selling expenses for business travel decreased
approximately $74,000 and expenses for trade shows decreased approximately
$52,000 compared to the same quarter of the prior year.





Income
from operations was $140,035 for the three months ended March 31, 2010 compared
to loss from operations of $0.7 million for the three months ended March 31,
2009.  Allied had income before provision for income taxes in the
third quarter of fiscal 2010 of $62,010, compared to a loss before benefit from
income taxes in the third quarter of fiscal 2009 of $0.7 million.  The
Company recorded a tax provision of $24,480 for the three-months ended March 31,
2010 compared to a tax benefit of $0.3 million for the three months ended March
31, 2009.





Net
income for the third quarter of fiscal 2010 was $37,530 or $0.00 per basic and
diluted share compared to net loss of $0.5 million or $0.06 per basic and
diluted share for the third quarter of fiscal 2009.  The weighted
average number of common shares outstanding, used in the calculation of basic
earnings per share for the third quarters of fiscal 2010 and 2009 were 8,093,386
and 7,901,327 shares, respectively.  The weighted average number of
common shares outstanding, used in the calculation of diluted earnings per share
for the third quarters of fiscal 2010 and 2009 were 8,183,907 and 7,901,327
shares, respectively.


12


Nine months ended March 31,
2010 compared to nine months ended March 31, 2009





Allied
had net sales of $34.4 million for the nine months ended March 31, 2010, down
$5.0 million, or 12.7%, from net sales of $39.4 million in the prior year same
period.  Customer orders of $33.1 million were $5.0 million lower than
the prior year same period.  Purchase order releases were $5.0 million
lower than in the prior year same period.  Purchase order release
times depend on the scheduling practices of individual customers, and do vary
over time.





$99,000
of the decrease in the Company’s sales compared to the same period last year are
due to discontinuation of reimbursement from Abbott for product development
activities to pursue development of a new carbon dioxide absorption
product.  Sales for the nine months ended March 31, 2009 include
$99,000 of such reimbursements.





Sales for
the nine months ended March 31, 2010 and March 31, 2009 include $516,150 for the
recognition into income of payments resulting from the agreement with Abbott
Laboratories to cease the production and distribution of Baralyme®.





Domestic
sales were down 11.4% from the prior year same period, while international
business, which represented 18.1% of sales for the nine months of fiscal 2010,
was down 18.3%.  Orders for the Company’s products for the nine months
ended March 31, 2010 of $33.1 million were $5.0 million or 13.1% lower than
orders for the prior year same period of $38.1 million.  Domestic
orders are down 12.8% over the prior year same period while international
orders, which represented 19.8% of orders for the first nine months of fiscal
2010, were 15.1% lower than orders for the prior year same period.





Gross
profit for the nine months ended March 31, 2010 was $8.2 million, or 23.8% of
net sales, compared to $8.7 million, or 22.1% of net sales, for the nine months
ended March 31, 2009.  Gross profit during the first nine months of
fiscal 2010 was favorably impacted by cost savings initiatives which have
reduced the cost of purchased materials and manufactured finished
goods.





Selling,
general and administrative expenses for the nine months ended March 31, 2010
were $9.2 million compared to selling, general and administrative expenses of
$9.8 million for the nine months ended March 31 2009.  Stock option
expense increased approximately $0.6 million due to the grant of immediately
vested stock options to the Company’s President and CEO.  This
increase was offset by a decrease of approximately $0.6 million for compensation
expense as a result of a reduction in the Company’s workforce, a decrease of
approximately $46,000 for recruiting expenses, and a decrease of approximately
$80,000 for outside professional services compared to the same period of the
prior year.  Due to the low level of sales for the first nine months
of fiscal 2010, sales commissions decreased $154,000 compared to the same period
of the prior year.  Additionally, selling expenses for business travel
decreased approximately $210,000, vehicle expenses decreased approximately
$40,000, and expenses for trade shows decreased approximately $110,000 compared
to the same period of the prior year.


13


Loss from
operations was $1.0 million for the nine months ended March 31, 2010 compared to
loss from operations of $1.1 million for the nine months ended March 31,
2009.  Interest income was $4,403 for the nine months ended March 31,
2010 compared to interest income of $54,155 for the nine months ended March 31,
2009.   Allied had loss before benefit from income taxes in the
first nine months of fiscal 2010 and fiscal 2009 of $1.1 million.  The
Company recorded a tax benefit of $0.4 million for the nine months ended March
31, 2010 and March 31, 2009.





Net loss
for the first nine months of fiscal 2010 was $0.7 million or $0.09 per basic and
diluted share compared to net loss of $0.7 million or $0.09 per basic and
diluted share for the first nine months of fiscal 2009.  The weighted
average number of common shares outstanding, used in the calculation of basic
and diluted earnings per share for the first nine months of fiscal 2010 and 2009
were 8,057,890 and 7,897,937 shares, respectively.





LIQUIDITY AND CAPITAL
RESOURCES





The
Company believes that available resources and anticipated cash flows from
operations are sufficient to meet operating requirements in the coming
year.





The
Company’s working capital was $17.5 million at March 31, 2010 compared to $17.0
million at June 30, 2009.  Cash increased $1.3 million and income
taxes receivable increased $0.7 million.  The current deferred income
tax liability decreased $0.3 million and accrued liabilities decreased $0.3
million.  At March 31, 2010 these increases in working capital were
offset by a decrease in inventory of $0.7 million, a decrease in other current
assets of $0.1 million, a $0.5 million increase in accounts payable and a
decrease in accounts receivable of $0.8 million to $5.4 million at March 31,
2010.  Accounts receivable as measured in days of sales outstanding
(“DSO”) decreased to 42 DSO at March 31, 2010; down from 43 DSO at June 30,
2009.





Effective as of November 13, 2009,
Allied Healthcare Products, Inc. (the “Company”) terminated its revolving credit
facility arrangement with Bank of America, N.A., as successor to LaSalle Bank
National Association (the “Old Credit Agreement”). The Old Credit Agreement
provided for borrowings of up to $10,000,000 and was available through
September 1, 2010. No loans were outstanding under the Old Credit Agreement
as of November 13, 2009.





On
November 17, 2009, in order to obtain replacement financing, the Company
entered into a Loan and Security Agreement by and between Enterprise Bank &
Trust and the Company (the “New Credit Agreement”) pursuant to which the Company
obtained a secured revolving credit facility with borrowing availability of up
to $7,500,000 (the “New Credit Facility”). The Company’s obligations under the
New Credit Facility are secured by certain assets of the Company pursuant to the
terms and subject to the conditions set forth in the New Credit
Agreement.  See Note 5 – Financing to the Company’s consolidated
unaudited financial statements for more information concerning the New Credit
Facility.


14


The prime
rate was 3.25% on March 31, 2010.





At March
31, 2010 the Company had no aggregate indebtedness, including capital lease
obligations, short-term debt and long term debt.





In the
event that economic conditions were to severely worsen for a protracted period
of time, we believe that we will have borrowing capacity under credit facilities
that will provide sufficient financial flexibility.  The Company would
have options available to ensure liquidity in addition to increased
borrowing.  Capital expenditures, which are budgeted at $1.2 million
for the fiscal year ended June 30, 2010, could be postponed.





Inflation
has not had a material effect on the Company’s business or results of operations
during the first nine months of fiscal 2010.





Litigation
and Contingencies





The
Company becomes, from time to time, a party to personal injury litigation
arising out of incidents involving the use of its products. The Company believes
that any potential judgments resulting from these claims over its self-insured
retention will be covered by the Company’s product liability
insurance.





Recently
Issued Accounting Guidance




The
impact and any associated risks related to the Company’s critical accounting
policies on business operations are discussed throughout “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” where
such policies affect our reported and expected financial results. For a detailed
discussion on the application of these and other accounting policies, see the
Company’s Annual Report on Form 10-K for the year ended June 30,
2009.





See Note
1 – Summary of Significant Accounting and Reporting Policies for more
information on recent accounting pronouncements and their impact, if any, on our
consolidated financial statements. Management believes there have been no
material changes to our critical accounting policies.


15


Item
3.    Quantitative and Qualitative Disclosure about Market
Risk





At March
31, 2010, the Company did not have any debt outstanding.  The
revolving credit facility bears an interest rate using the commercial bank’s
prime-rate based interest rate for commercial loans as the basis, as defined in
the loan agreement, and therefore is subject to additional expense should there
be an increase in market interest rates.





The
Company had no holdings of derivative financial or commodity instruments at
March 31, 2010.  Allied Healthcare Products has international sales;
however these sales are denominated in U.S. dollars, mitigating foreign exchange
rate fluctuation risk.





Item
4T.     Controls and Procedures





(a)
            Disclosure
      Controls and Procedures.







The
Company maintains controls and procedures designed to ensure that information
required to be disclosed in the reports that the Company files or submits under
the Securities Exchange Act of 1934 is recorded, processed, summarized, and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission and that such information is accumulated and
communicated to the Company's management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. Based upon their evaluation of those controls and
procedures performed as of March 31, 2010, the Chief Executive Officer and Chief
Financial Officer of the Company concluded that its disclosure controls and
procedures were effective.





(b)
              Changes
      in internal control over financial
reporting





There
were no changes in the Company’s internal control over financial reporting
during the quarter ended March 31, 2010 that have materially affected, or are
reasonably likely to materially affect, the registrant’s internal control over
financial reporting.





Part
II.     OTHER INFORMATION





Item
6.    Exhibits





(a)    Exhibits:





10.1  Employment
Agreement by and between the Company and Earl Refsland, dated December 21, 2009
(filed herewith).





31.1  Certification
of Chief Executive Officer (filed herewith)





31.2  Certification
of Chief Financial Officer (filed herewith)


16


32.1  Sarbanes-Oxley
Certification of Chief Executive Officer (furnished herewith)*





32.2  Sarbanes-Oxley
Certification of Chief Financial Officer (furnished herewith)*





99.1  Press
Release dated May 7, 2010 announcing third quarter earnings*





*Notwithstanding
any incorporation of this Quarterly Report on Form 10-Q in any other filing by
the Registrant, Exhibits furnished herewith and designated with an asterisk (*)
shall not be deemed incorporated by reference to any other filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934 unless
specifically otherwise set forth therein.


17


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./s/ Daniel C.
DunnDaniel C. DunnChief Financial OfficerDate:
      May 7, 2010


18