UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      DC 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, 2007





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











Commission
      File Number 0-19266





**ALLIED
      HEALTHCARE PRODUCTS, INC.**





1720
      Sublette Avenue


St.
      Louis, Missouri 63110


314/771-2400


IRS
      Employment ID 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
o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of "accelerated
      filer” and “large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
      one):




Large
      accelerated filer o  Accelerated
      filer
o  Non-accelerated
      filer
x





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





Yes
o  No
x





The
      number of shares of common stock outstanding at May 2, 2007 is 7,883,577
      shares.








**INDEX**PagePart
                I -
            Financial
                Information
            NumberItem
                1.
            Financial
                StatementsConsolidated
                Statement of Operations -
            3three
                months and nine months ended March 31,2007
                and 2006 (Unaudited)Consolidated
                Balance Sheet -
            4
                -
                5March
                31, 2007 (Unaudited) andJune
                30, 2006Consolidated
                Statement of Cash Flows -
            6Nine
                months ended March 31, 2007 and 2006(Unaudited)Notes
                to Consolidated Financial Statements
            7
                -
                10Item
                2.
            Management’s
                Discussion and Analysis of
            10
                - 16Financial
                Condition and Results of OperationsItem
                3.
            Quantitative
                and Qualitative Disclosure
            16about
                Market Risk****
            Item
                4.
            Controls
                and Procedures
            16Part
                II -
            Other
                InformationItem
                6.
            Exhibits
            17Signature
            17





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, 2006. The Company cautions
      that
      any forward-looking statements contained in this report reflects 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
                  31,2007
              
              2006
              
              2007
              
              2006Net
                  sales
              
              $
              13,703,784
              
              $
              14,756,600
              
              $
              42,455,176
              
              $
              43,082,670Cost
                  of sales
              
              
              10,251,494
              
              
              11,352,190
              
              
              31,966,606
              
              
              32,130,802Gross
                  profit
              
              
              3,452,290
              
              
              3,404,410
              
              
              10,488,570
              
              
              10,951,868Selling,
                  general andadministrative
                  expenses
              
              
              3,003,928
              
              
              2,992,446
              
              
              9,286,343
              
              
              9,194,558Income
                  from operations
              
              
              448,362
              
              
              411,964
              
              
              1,202,227
              
              
              1,757,310Interest
                  income
              
              
              (25,844
              )
              
              (9,311
              )
              
              (82,071
              )
              
              (35,986
              )Other,
                  net
              
              
              9,328
              
              
              8,861
              
              
              (34,551
              )
              
              28,854(16,516
              )
              
              (450
              )
              
              (116,622
              )
              
              (7,132
              )Income
                  before provisionfor
                  income taxes
              
              
              464,878
              
              
              412,414
              
              
              1,318,849
              
              
              1,764,442Provision
                  for income taxes
              
              
              187,198
              
              
              176,257
              
              
              546,381
              
              
              745,190Net
                  income
              
              $
              277,680
              
              $
              236,157
              
              $
              772,468
              
              $
              1,019,252Basic
                  earnings per share
              
              $
              0.04
              
              $
              0.03
              
              $
              0.10
              
              $
              0.13Diluted
                  earnings per share
              
              $
              0.03
              
              $
              0.03
              
              $
              0.10
              
              $
              0.13Weighted
                  average shares
              
              
              7,883,577
              
              
              7,849,910
              
              
              7,873,460
              
              
              7,837,132outstanding
                  - basicWeighted
                  average sharesoutstanding
                  - diluted
              
              
              8,077,696
              
              
              8,068,817
              
              
              8,071,832
              
              
              8,057,166





See
      accompanying Notes to Consolidated Financial Statements.


3





**ALLIED
      HEALTHCARE PRODUCTS, INC.**


**CONSOLIDATED
      BALANCE SHEET**


**ASSETS**


(Unaudited)March
                  31,
              
              June
                  30,2007
              
              2006Current
                  assets:Cash
                  and cash equivalents
              
              $
              2,714,275
              
              $
              2,696,324Accounts
                  receivable, net of allowances of$415,000 and $430,000, respectively
              
              
              6,781,064
              
              
              7,429,355Inventories,
                  net
              
              
              12,786,333
              
              
              11,491,305Other
                  current assets
              
              
              369,753
              
              
              224,853Total
                  current assets
              
              
              22,651,425
              
              
              21,841,837Property,
                  plant and equipment, net
              
              
              10,805,016
              
              
              11,252,934Goodwill
              
              
              15,979,830
              
              
              15,979,830Other
                  assets, net
              
              
              251,911
              
              
              255,845Total
                  assets
              
              $
              49,688,182
              
              $
              49,330,446





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
                  30,2007
              
              2006Current
                  liabilities:Accounts
                  payable
              
              $
              3,394,054
              
              $
              3,208,699Deferred
                  income taxes
              
              
              670,705
              
              
              689,942Deferred
                  revenue
              
              
              465,000
              
              
              465,000Other
                  accrued liabilities
              
              
              2,437,638
              
              
              2,834,495Total
                  current liabilities
              
              
              6,967,397
              
              
              7,198,136Deferred
                  revenue
              
              
              1,123,750
              
              
              1,472,500Commitments
                  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;
                  10,187,069 shares issued at March 31, 2007and
                  10,155,569 shares issued at June 30, 2006: 7,883,577shares
                  outstanding at March 31, 2007 and 7,852,077shares
                  outstanding June 30, 2006, respectively
              
              
              101,871
              
              
              101,556Additional
                  paid-in capital
              
              
              47,422,624
              
              
              47,258,182Retained
                  earnings
              
              
              14,803,968
              
              
              14,031,500Less
                  treasury stock, at cost; 2,303,492 shares atMarch
                  31, 2007 and June 30, 2006, respectively
              
              
              (20,731,428
              )
              
              (20,731,428
              )Total
                  stockholders' equity
              
              
              41,597,035
              
              
              40,659,810Total
                  liabilities and stockholders' equity
              
              $
              49,688,182
              
              $
              49,330,446





See
      accompanying Notes to Consolidated Financial Statements.


5





**ALLIED
      HEALTHCARE PRODUCTS, INC.**


**CONSOLIDATED
      STATEMENT OF CASH FLOWS**


**(UNAUDITED)**


Nine
                  months endedMarch
                  31,2007
              
              2006Cash
                  flows from operating activities:Net
                  income
              
              $
              772,468
              
              $
              1,019,252Adjustments
                  to reconcile net income to netcash
                  provided by operating activities:Depreciation
                  and amortization
              
              
              922,901
              
              
              865,386Stock
                  based compensation
              
              
              55,243
              
              
              55,064Provision
                  for (benefit from) doubtful accounts
              
              
              (31,882
              )
              
              95,164Deferred
                  income taxes
              
              
              (19,237
              )
              
              (22,408
              )Changes
                  in operating assets and liabilities:Short-term
                  investments
              
              
              -
              
              
              (350,000
              )Accounts
                  receivable
              
              
              680,173
              
              
              (676,682
              )Inventories
              
              
              (1,295,028
              )
              
              (946,423
              )Other
                  current assets
              
              
              (144,900
              )
              
              (163,113
              )Accounts
                  payable
              
              
              185,355
              
              
              1,255,775Deferred
                  revenue
              
              
              (348,750
              )
              
              (348,750
              )Other
                  accrued liabilities
              
              
              (396,857
              )
              
              291,361Net
                  cash provided by operating activities
              
              
              379,486
              
              
              1,074,626Cash
                  flows from investing activities:Capital
                  expenditures
              
              
              (471,049
              )
              
              (843,341
              )Net
                  cash used in investing activities
              
              
              (471,049
              )
              
              (843,341
              )Cash
                  flows from financing activities:Borrowings
                  under revolving credit agreement
              
              
              -
              
              
              346,000Payments
                  under revolving credit agreement
              
              
              -
              
              
              (265,000
              )Stock
                  options exercised
              
              
              81,090
              
              
              64,125Excess
                  tax benefit from exercise of stock options
              
              
              28,424
              
              
              26,340Net
                  cash provided by financing activities
              
              
              109,514
              
              
              171,465Net
                  increase in cash and equivalents
              
              
              17,951
              
              
              402,750Cash
                  and cash equivalents at beginning of period
              
              
              2,696,324
              
              
              317,775Cash
                  and cash equivalents at end of period
              
              $
              2,714,275
              
              $
              720,525


See
      accompanying Notes to Consolidated Financial Statements.


6


**ALLIED
      HEALTHCARE PRODUCTS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**








1.  Unaudited
      Consolidated Financial Statements





The
      accompanying unaudited consolidated financial statements 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 Form 10-K
      for the year ended June 30, 2006.





Recent
      Accounting Pronouncements





In
      June
      2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes -
      an interpretation of FASB Statement No. 109” which clarifies the accounting for
      uncertainty in income taxes recognized in an enterprise’s financial statements
      in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” The
      interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. FIN No. 48 requires recognition of tax
      benefits that satisfy a greater than 50% probability threshold. FIN No. 48
      also
      provides guidance on derecognition, classification, interest and penalties,
      accounting in the interim periods, disclosures, and transition. FIN No. 48
      is
      effective for us beginning July 1, 2007. We are currently assessing the
      potential impact that adoption of FIN No. 48 will have on our financial
      statements.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS No. 157 does not require any new fair value
      measurements, but provides guidance on how to measure fair value by providing
      a
      fair value hierarchy used to classify the source of the information. This
      statement is effective for us beginning July 1, 2008. We are currently assessing
      the potential impact that adoption of SFAS No. 157 will have on our financial
      statements.


7


2.  Inventories





Inventories
      are comprised as follows:


March
                  31, 2007
              
              June
                  30, 2006Work-in
                  progress
              
              $
              1,059,385
              
              $
              715,643Raw
                  materials and component parts
              
              
              8,057,186
              
              
              8,820,622Finished
                  goods
              
              
              4,679,272
              
              
              3,123,435Reserve
                  for obsolete and excessinventory
              
              
              (1,009,510
              )
              
              (1,168,395
              )$
              12,786,333
              
              $
              11,491,305




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 year. The number of basic shares
      outstanding for the three months ended March 31, 2007 and 2006 was 7,883,577
      and
      7,849,910 respectively. The number of diluted shares outstanding for the three
      months ended March 31, 2007 and 2006 was 8,077,696 and 8,068,817 respectively.
      The number of basic shares outstanding for the nine months ended March 31,
      2007
      and 2006 was 7,873,460 and 7,837,132 respectively. The number of diluted shares
      outstanding for the nine months ended March 31, 2007 and 2006 was 8,071,832
      and
      8,057,166 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.


8


5.
      Financing





On
      September 1, 2005, the Bank and the Company agreed to an amendment of the credit
      facility. In conjunction with the amendment to the Company’s credit facility,
      the Bank extended the maturity on the Company’s revolving credit facility from
      April 24, 2007 to September 1, 2008. Based on the Company’s current level of
      debt, and performance, debt would bear interest at the Bank’s prime rate. The
      prime rate was 8.25% on March 31, 2007. The interest rate on prime rate loans
      may increase from prime to prime plus 0.75% if the ratio of the Company’s funded
      debt to EBITDA exceeds 2.5. The amended credit facility also provides the
      Company with a rate of LIBOR plus 1.75%, at the Company’s option. The optional
      LIBOR rate may increase from LIBOR plus 1.75% to LIBOR plus 2.75% based on
      the
      Company’s fixed charge coverage ratio. The 90-day LIBOR rate was 5.35% at March
      31, 2007.





At
      March
      31, 2007 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
      its credit facility at March 31, 2007.





6.
      Stock
      Repurchase Arrangement





On
      August
      25, 2005, the Board of Directors authorized repurchases of shares of the
      Company’s common stock pursuant to open market transactions in accordance with
      Rule 10b-18 under the Securities Exchange Act or in privately negotiated block
      transactions. The authorization permits repurchases from time to time until
      June
      30, 2007 at the discretion of the Chairman of the Board or the President and
      Chief Executive Officer. The authorization permits up to $1.0 million to be
      applied to such repurchases. No specific number of shares are sought in
      connection with the authorization. The Company received the consent of the
      Bank
      for this authorized repurchase. As of March 31, 2007 no shares have been
      repurchased under this arrangement.





7.
      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:




9


Three
                  Months ended
              
              Nine
                  Months endedMarch
                  31,
              
              March
                  31,2007
              
              2006
              
              2007
              
              2006Beginning
                  balance
              
              $
              1,705,000
              
              $
              1,240,000
              
              $
              1,937,500
              
              $
              1,472,500Payment
                  Received fromAbbott
                  Laboratories
              
              
              -
              
              
              -
              
              
              -
              
              
              -Revenue
                  recognizedas
                  net sales
              
              
              (116,250
              )
              
              (116,250
              )
              
              (348,750
              )
              
              (348,750
              )1,588,750
              
              
              1,123,750
              
              
              1,588,750
              
              
              1,123,750Less
                  - Current portionof
                  deferred revenue
              
              
              (465,000
              )
              
              (465,000
              )
              
              (465,000
              )
              
              (465,000
              )$
              1,123,750
              
              $
              658,750
              
              $
              1,123,750
              
              $
              658,750





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, 2007; $610,000 has been
      received, and $110,000 is receivable, as a result of product development
      activities. For the three and nine months ended March 31, 2007, $110,000 and
      $450,000 have been included in Net Sales, respectively. For the three and nine
      months ended March 31, 2007; $110,000 and $450,000 have been included in Cost
      of
      Sales, respectively.





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





**RESULTS
      OF OPERATIONS**





**Three
      Months ended March 31, 2007 compared to three months ended March 31,
      2006.**





Allied
      had net sales of $13.7 million for the three months ended March 31, 2007, down
      $1.1 million, or 7.4%, from net sales of $14.8 million in the prior year same
      quarter, as a result of lower customer purchase order releases. Customer
      purchase order releases were $1.1 million lower than in fiscal 2006. Purchase
      order release times depend on the scheduling practices of individual customers.





Sales
      for
      the three months ended March 31, 2007 include $116,250 for the recognition
      into
      income of payments resulting from the agreement with Abbott Laboratories to
      cease the production and distribution of Baralyme®. Sales for the three months
      ended March 31, 2007 also include $110,000 as a result of product development
      activities to pursue development of a new carbon dioxide absorption product.
      The
      agreement with Abbott provides for Abbott to pay Allied up to $2,150,000 in
      product development cost 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.




10


The
      Company ceased the sale of Baralyme® on August 27 th ,
      2004.
      Sales for the three months ended March 31, 2006 include $116,250 for the
      recognition into income of payments resulting from the agreement with Abbott
      Laboratories to cease the production and distribution of Baralyme®. Sales for
      the three months ended March 31, 2006 also include $87,000 as a result of
      product development activities to pursue development of a new carbon dioxide
      absorption product. Income from the agreement will continue to be recognized
      over eight years, the term of the agreement, at $38,750 per month. Allied
      continues to sell Carbolime®, a carbon dioxide absorbent with a different
      formulation than Baralyme®.





Domestic
      sales were down 11.1% from the prior year same quarter, while international
      business, which represented 19.7% of third quarter sales, was up 13.7%. Orders
      for the Company’s products for the three months ended March 31, 2007 of $13.3
      million were $1.0 million or 8.1% higher than orders for the prior year same
      quarter of $12.3 million. Domestic orders are down 2.2% over the prior year
      same
      quarter while international orders are up 61.9%.





Gross
      profit for the three months ended March 31, 2007 was $3.5 million, or 25.5%
      of
      net sales, compared to $3.4 million, or 23.0% of net sales, for the three months
      ended March 31, 2006. The improvement in gross margins from the prior year
      period is the result of improved experience for employee benefits, principally
      medical benefits. Fringe benefits, including medical insurance were $0.2 million
      lower than in the prior year. Increases in material cost which began to occur
      during fiscal 2006 continue to negatively impact gross margins during fiscal
      2007. Material cost during the third quarter was approximately 6.2% higher
      than
      in the third quarter of the prior year. Cost of sales for the three months
      ended
      March 31, 2007 also included $110,000 as a result of product development of
      a
      new carbon dioxide absorption product.




11


Selling,
      general and administrative expenses for the three months ended March 31, 2007
      and 2006 were $3.0 million, as a result of offsetting increases and decreases.
      Selling, general and administrative cost increases for the current period
      include $180,000 for legal expenses offset by a decrease in salaries and
      benefits of approximately $120,000, decreases in audit expenses of $40,000,
      and
      decreases in insurance expense of $20,000 from the same quarter in the prior
      year. This decrease in salaries and benefits is primarily due to a decrease
      in
      performance related payments resulting from lower sales over the same quarter
      of
      the prior year, as well as some employee turnover, rather than to changes in
      staffing levels from the prior year.





Income
      from operations for the three months ended March 31, 2007 and 2006 was $0.4
      million. Interest income was $25,844 for the three months ended March 31, 2007
      compared to interest income of $9,311 for the three months ended March 31,
      2006.
      Allied had income before provision for income taxes in the third quarter of
      fiscal 2007 of $0.5 million, compared to income before provision for income
      taxes in the third quarter of fiscal 2006 of $0.4 million. The Company recorded
      a tax provision of $0.2 million for the three months ended March 31, 2007 and
      2006.





Net
      income for the third quarter of fiscal 2007 was $0.3 million or $0.04 per basic
      and $0.03 per diluted share compared to net income for the third quarter of
      fiscal 2006 was $0.2 million or $0.03 per basic and diluted share. The weighted
      average number of common shares outstanding, used in the calculation of basic
      earnings per share for the third quarters of fiscal 2007 and 2006 were 7,883,577
      and 7,849,910 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 2007 and fiscal 2006 were 8,077,696 and 8,068,817 shares,
      respectively.





**Nine
      Months ended March 31, 2007 compared to nine months ended March 31,
      2006.**





Allied
      had net sales of $42.5 million for the nine months ended March 31, 2007, down
      $0.6 million, or 1.4%, from net sales of $43.1 million in the prior year same
      period. The overall sales decrease is primarily due to the timing of customer
      purchase order releases. While orders were up slightly, customer purchase order
      releases were $0.8 million lower than in fiscal 2006. Purchase order release
      times depend on the scheduling practices of individual customers.





Sales
      for
      the nine months ended March 31, 2007 include $348,750 for the recognition into
      income of payments resulting from the agreement with Abbott Laboratories to
      cease the production and distribution of Baralyme®. Sales for the nine months
      ended March 31, 2007 also include $450,000 as a result of product development
      activities to pursue development of a new carbon dioxide absorption product.
      The
      agreement with Abbott provides for Abbott to pay Allied up to $2,150,000 in
      product development cost 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.





12


The
      Company ceased the sale of Baralyme® on August 27 th ,
      2004.
      Sales for the nine months ended March 31, 2006 include $348,750 for the
      recognition into income of payments resulting from the agreement with Abbott
      Laboratories to cease the production and distribution of Baralyme®. Sales for
      the nine months ended March 31, 2006 also include $271,000 as a result of
      product development activities to pursue development of a new carbon dioxide
      absorption product. Income from the agreement will continue to be recognized
      over eight years, the term of the agreement, at $38,750 per month. Allied
      continues to sell Carbolime®, a carbon dioxide absorbent with a different
      formulation than Baralyme®.





Domestic
      sales were down 1.6% from the same period of the prior year, while international
      business, which represented 18.1% of the first nine months of sales, was down
      0.7%. Orders for the Company’s products for the nine months ended March 31, 2007
      of $40.4 million were $0.5 million or 1.3% higher than orders for the prior
      year
      same period of $39.9 million. International orders are up 9.6% over the prior
      year same period while domestic orders are down 0.8%.





Gross
      profit for the nine months ended March 31, 2007 was $10.5 million, or 24.7%
      of
      net sales, compared to $11.0 million, or 25.5% of net sales, for the nine months
      ended March 31, 2006. The reduction in gross margins from the prior year period
      is the result of increases in material cost which began to occur during fiscal
      2006 and continue to negatively impact gross margins during fiscal 2007. This
      increase in material cost over the prior year negatively impacted gross profit
      by approximately $1.0 million during the nine months ended March 31, 2007.
      Cost
      of sales for the nine months ended March 31, 2007 also included $450,000 as
      a
      result of product development of a new carbon dioxide absorption product.





Selling,
      general and administrative expenses for the nine months ended March 31, 2007
      were $9.3 million compared to $9.2 million for the nine months ended March
      31,
      2006. As explained below, the net increase of $0.1 million or 1.1% is
      attributable primarily to increases of $240,000 offset by decreases of $140,000.
      Increased costs include increases of approximately $110,000 in research and
      development expense relating to a new product line; approximately $90,000 in
      increased legal expenses and $40,000 in relocation costs. Those increases were
      partially offset by a $70,000 decrease in the provision for doubtful accounts
      and by a decrease in salaries and benefits of approximately $70,000 from the
      same period prior year. The decrease in salaries and benefits were primarily
      due
      to a decrease in performance related payments resulting from lower sales
      compared to the same period of prior year, as well as some employee turnover,
      rather than to changes in staffing levels from the prior year.





Income
      from operations was $1.2 million for the nine months ended March 31, 2007
      compared to $1.8 million for the nine months ended March 31, 2006. Interest
      income was $82,071 for the nine months ended March 31, 2007 compared to interest
      income of $35,986 for the nine months ended March 31, 2006. Allied had income
      before provision for income taxes for the first nine months of fiscal 2007
      of
      $1.3 million, compared to income before provision for income taxes for the
      first
      nine months of fiscal 2006 of $1.8 million. The Company recorded a tax provision
      of $0.5 million for the nine-month period ended March 31, 2007, versus a tax
      provision of $0.7 million for the nine-month period ended March 31,
      2006.


13


In
      fiscal
      2007, the net income for the first nine months was $0.8 million or $0.10 per
      basic and diluted share compared to net income of $1.0 million or $0.13 per
      basic and diluted share for the first nine months of fiscal 2006. The weighted
      average number of common shares outstanding, used in the calculation of basic
      earnings per share for the first nine months of fiscal 2007 and 2006 were
      7,873,460 and 7,837,132 shares, respectively. The weighted average number of
      common shares outstanding used in the calculation of diluted earnings per share
      for the first nine months of fiscal 2007 and fiscal 2006 were 8,071,832 and
      8,057,166 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 $15.7 million at March 31, 2007 compared to $14.6
      million at June 30, 2006. Inventory increased by $1.3 million as a result of
      an
      effort by the Company to increase inventory levels of key items to improve
      customer service levels. Other current assets increased $0.1 million as a result
      of an increase in prepaid insurance and accrued liabilities decreased $0.4
      million. At March 31, 2007, these increases in working capital were offset
      by an
      increase in accounts payable of $0.2 million and accounts receivable decreased
      $0.6 million to $6.8 million at March 31, 2007. Accounts receivable as measured
      in days sales outstanding (“DSO”) decreased to 43 DSO at March 31, 2007 from 46
      DSO at June 30, 2006.





On
      August
      25, 2005, the Board of Directors authorized repurchases of shares of the
      Company’s common stock pursuant to open market transactions in accordance with
      Rule 10b-18 under the Securities Exchange Act or in privately negotiated block
      transactions. The authorization permits repurchases from time to time until
      June
      30, 2007 at the discretion of the Chairman of the Board or the President and
      Chief Executive Officer. The authorization permits up to $1.0 million to be
      applied to such repurchases. No specific numbers of shares are sought in
      connection with the authorization. The Company received the consent of the
      Bank
      for this authorized repurchase. As of March 31, 2007 no shares have been
      repurchased under this arrangement.





On
      September 1, 2005, the Bank and the Company agreed to an amendment of the credit
      facility. In conjunction with the amendment to the Company’s credit facility,
      the Bank extended the maturity on the Company’s revolving credit facility from
      April 24, 2007 to September 1, 2008. Based on the Company’s current level of
      debt, and performance, debt would bear interest at the Bank’s prime rate. The
      prime rate was 8.25% on March 31, 2007. The interest rate on prime rate loans
      may increase from prime to prime plus 0.75% if the ratio of the Company’s funded
      debt to EBITDA exceeds 2.5. The amended credit facility also provides the
      Company with a rate of LIBOR plus 1.75%, at the Company’s option. The optional
      LIBOR rate may increase from LIBOR plus 1.75% to LIBOR plus 2.75% based on
      the
      Company’s fixed charge coverage ratio. The 90-day LIBOR rate was 5.35% at March
      31, 2007.


14


At
      March
      31, 2007 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
      its credit facility at March 31, 2007.





In
      the
      event that economic conditions were to severely worsen for a protracted period
      of time, we believe that our borrowing capacity under our credit facilities
      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 $0.8 million for the fiscal year ended
      June
      30, 2007, could be postponed. At March 31, 2007, the Company had no bank debt.
      Based on the Company’s current level of debt, and performance, debt would bear
      interest at the Bank’s prime rate. The Company’s agreement with the Bank does
      include provisions for higher interest rates at higher debt levels and different
      levels of Company performance.





During
      the nine months of fiscal 2007 increases in raw material cost, particularly
      copper, have continued to negatively impact Company earnings. Copper is a major
      component of brass, which is used in many Allied products. These increases
      have
      resulted in third quarter material cost being approximately 6.2% higher than
      in
      the third quarter of the prior year.





**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.





**Recent
      Accounting Pronouncements**





In
      June
      2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes -
      an interpretation of FASB Statement No. 109” , which clarifies the accounting
      for uncertainty in income taxes recognized in an enterprise’s financial
      statements in accordance with FASB Statement No. 109, “Accounting for Income
      Taxes.” The interpretation prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return. FIN No. 48 requires
      recognition of tax benefits that satisfy a greater than 50% probability
      threshold. FIN No. 48 also provides guidance on derecognition, classification,
      interest and penalties, accounting in the interim periods, disclosures, and
      transition. FIN No. 48 is effective for us beginning July 1, 2007. We are
      currently assessing the potential impact that adoption of FIN No. 48 will have
      on our financial statements.





15


In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS No. 157 does not require any new fair value
      measurements, but provides guidance on how to measure fair value by providing
      a
      fair value hierarchy used to classify the source of the information. This
      statement is effective for us beginning July 1, 2008. We are currently assessing
      the potential impact that adoption of SFAS No. 157 will have on our financial
      statements.





**Item
      3. Quantitative and Qualitative Disclosure about Market
      Risk**





At
      March,
      31, 2007, the Company did not have any debt outstanding. The revolving credit
      facility bears an interest rate using the commercial bank’s “floating reference
      rate” or LIBOR 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, 2007. Allied Healthcare Products has international sales; however
      these sales are denominated in U.S. dollars, mitigating foreign exchange rate
      fluctuation risk.





**Item
      4. Controls and Procedures**





Evaluation
      of Disclosure Controls and Procedures





(a)
      As of
      March 31, 2007, the Company, under the supervision, and with the participation,
      of its management, including its principal executive officer and principal
      financial officer, performed an evaluation of the Company’s disclosure controls
      and procedures, as contemplated by Securities Exchange Act Rule 13a-15. Based
      on
      that evaluation, the Company’s principal executive officer and principal
      financial officer concluded that such disclosure controls and procedures were
      effective as of March 31, 2007.




(b)
      There
      has been no change in our internal controls over financial reporting during
      the
      quarter ended March 31, 2007, that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.


16





Part
      II.  OTHER
      INFORMATION





**Item
      6.**  **Exhibits**





(a)
      Exhibits:




10.1
      Employment Agreement executed March 16, 2007 between Registrant and Earl
      Refsland (filed herewith)





10.2
      Form
      of Agreement (change of control) between Registrant and executive officers
      other
      than Earl Refsland (filed herewith)





31.1
      Certification of Chief Executive Officer (filed herewith)





31.2
      Certification of Chief Financial Officer (filed herewith)





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 2, 2007 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.








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 2, 2007


17