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| x   | ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---------------|------------------------------------------------------------------------------------------------|

|                                                                    |                                          |
|-------------------------------------------------------------------------|-----------------------------------------------|
| Delaware                                                                | 11-2962027                                    |
| (State      or other jurisdiction ofincorporation      or organization) | (I.R.S.      EmployerIdentification      No.) |

|                                |                                           |
|-------------------------------------|------------------------------------------------|
| Title      of each class            | Name      of each exchange on which registered |
| Common      Stock, $0.001 par value | The      NASDAQ Global Market                  |
|                                |                                           |

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TAB

|                      |                                                                                                                    |   |   |   |
|---------------------------|-------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| PART      I               |                                                                                                                    |   |   |
|   Item 1.  | Business                                                                                                                |   |   | 4      |   |
|   Item 1A. | Risk Factors                                                                                                            |   |   | 16     |   |
|   Item 1B. | Unresolved Staff Comments                                                                                               |   |   | 25     |   |
|   Item      2.  | Properties                                                                                                              |   |   | 25     |   |
|   Item      3.  | Legal Proceedings                                                                                                       |   |   | 25     |   |
|   Item      4.  | Submission of Matters to a Vote of Security      Holders                                                                |   |   | 26     |   |
|                      |                                                                                                                    |   |   |   |
| PART II              |                                                                                                                    |   |   |   |
|   Item      5.  | Market For Registrant’s Common Equity, Related Stockholder      Matters and Issuer Purchases of Equity Securities |   |   | 26     |   |
|   Item      6.  | Selected Financial Data                                                                                                 |   |   | 29     |   |
|   Item      7.  | Management’s Discussion and Analysis of Financial Condition      and Results of Operation                         |   |   | 30     |   |
|   Item      7A. | Quantitative and Qualitative Disclosures About Market      Risk                                                         |   |   | 39     |   |
|   Item      8.  | Financial Statements and Supplementary    Data                                                                          |   |   | 40     |   |
|   Item      9.  | Changes in and Disagreements With Accountants on Accounting      and Financial Disclosure                               |   |   | 60     |   |
|   Item      9A. | Controls and Procedures                                                                                                 |   |   | 60     |   |
|   Item      9B. | Other Information                                                                                                       |   |   | 63     |   |
|                      |                                                                                                                    |   |   |   |
| PART III             |                                                                                                                    |   |   |   |
|   Item 10. | Directors, Executive Officers and Corporate      Governance                                                             |   |   | 63     |   |
|   Item      11. | Executive Compensation                                                                                                  |   |   | 63     |   |
|   Item      12. | Security Ownership of Certain Beneficial Owners and      Management and Related Stockholder Matters                     |   |   | 63     |   |
|   Item 13. | Certain Relationships and Related Transactions, and      Director Independence                                          |   |   | 63     |   |
|   Item 14. | Principal Accounting Fees and Services                                                                                  |   |   | 63     |   |
|                      |                                                                                                                    |   |   |   |
| PART IV              |                                                                                                                    |   |   |   |
|   Item 15. | Exhibits and Financial Statement    Schedules                                                                           |   |   | 64     |   |
|                      | Signatures                                                                                                              |   |   | 66     |   |
|                      | Schedule II—Valuation and Qualifying      Accounts                                                                |   |   | 71     |   |
|                      |                                                                                                                    |   |   |   |   |

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|   | • | The      impact of litigation on our financial condition and results of operations      and our ability to defend against and prosecute such      litigation; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | The      impact of recent accounting pronouncements on our results of operations or      financial position; |
|--------|---------|--------------------------------------------------------------------------------------------------------------|

|   | • | The      timing of our receipt of third-party  reimbursement; |
|--------|---------|---------------------------------------------------------------|

|   | • | The      types of instruments in which we invest and the extent of interest rate      risks we face; |
|--------|---------|------------------------------------------------------------------------------------------------------|

|   | • | Our      ability to satisfy our capital requirements needs with our      revenues; |
|--------|---------|------------------------------------------------------------------------------------|

|   | • | The      continuation of premium reimbursement in California and New      York; |
|--------|---------|---------------------------------------------------------------------------------|

|   | • | Our      ability to sell our auction-rate securities;and |
|--------|---------|----------------------------------------------------------|

|   | • | Our      ability to operate profitably and grow our company, including through      acquisition opportunities and satellite  locations. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | • | The      effect of regulatory changes, including the Medicare Prescription Drug      Improvement and Modernization Act of2003; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------|

|   | • | The      reduction of reimbursement rates by government and other third-party      payors; |
|--------|---------|--------------------------------------------------------------------------------------------|

|   | • | Changes      in reimbursement policies and other potential reductions in reimbursements      by other state agencies, including our certification for premium      reimbursement in New York; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Our      ability to market our customized packaging system and the acceptance of      such system by healthcare providers and  patients; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Our      ability to manage our growth with a limited management team;      and |
|--------|---------|--------------------------------------------------------------------------------|

|   | • | The      availability of appropriate acquisition candidates and our ability to      successfully complete and integrate  acquisitions; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------|

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Item 1.  Business

|   | • | Specialized      MOMSPak prescription packaging that helps reduce patient error associated      with complex multi-drug regimens, which require multiple drugs to be taken      at varying doses and schedules; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Reimbursement      experience which assists patients and healthcare providers with complex      reimbursement processes and optimizes collection of    payment; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Arrangement      for the timely delivery of medications in a discreet and convenient manner      as directed by our patients or theirphysicians; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Specialized      pharmacists who consult with patients, physicians, nurses and ASOs to      provide education, counseling, treatment coordination, clinical      information and compliance monitoring;and |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Information      systems and prescription automation solutions that make the provision of      clinical data and the transmission of prescriptions more efficient and      accurate. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | • | Programs      to monitor dosage compliance andoutcomes; |
|--------|---------|---------------------------------------------------------|

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|   | • | Clinical      information and consultation regarding the patient’s illness, medications      being used and treatment regimens; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Educational      information on the patient’s illness, including advancements in research,      technology and combinationtherapies; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Assistance      in setting realistic expectations for a patient’s therapy, including      challenges with adherence, and with anticipated outcomes and side      effects; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Systems      for inventory management and record keeping;and |
|--------|---------|--------------------------------------------------------------|

|   | • | Assistance      in coordinating treatment outside of the home or hospital      setting. |
|--------|---------|-----------------------------------------------------------------------------------------|

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|   | • | Specialty      pharmacy distributors such as Medco Health Solutions, Inc., BioScrip, Inc.      and Express Scripts, Inc.; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------|

|   | • | Pharmacy      benefit management companies such as Medco Health Solutions, Inc., Express      Scripts, Inc. and CVS/Caremark Rx,Inc.; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Specialty      pharmacy divisions of national wholesale drug  distributors; |
|--------|---------|-----------------------------------------------------------------------------|

|   | • | Hospital-based      pharmacies; |
|--------|---------|---------------------------------|

|   | • | Retail      pharmacies; |
|--------|---------|-------------------------|

|   | • | Manufacturers      that sell their products both to distributors and directly to clinics and      physician offices; and |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------|

|   | • | Hospital-based      care centers and other alternate-site healthcare  providers. |
|--------|---------|----------------------------------------------------------------------------------|

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|   | • | Inducements      for patient referrals; |
|--------|---------|-----------------------------------------|

|   | • | Manufacturer-calculated      and -reported AWP and ASP amounts; |
|--------|---------|-----------------------------------------------------------------|

|   | • | Joint      ventures and management agreements; |
|--------|---------|------------------------------------------------|

|   | • | Referrals      from physicians with whom we have a financial  relationship; |
|--------|---------|-----------------------------------------------------------------------------|

|   | • | Professional      licensure; |
|--------|---------|------------------------------|

|   | • | Repackaging,      storing, and distributing prescription  pharmaceuticals; |
|--------|---------|----------------------------------------------------------------------------|

|   | • | Incentives      to patients; and |
|--------|---------|----------------------------------|

|   | • | Product      discounts. |
|--------|---------|-------------------------|

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|   | • | Knowingly      and willfully attempting to defraud any healthcare benefit program      (including government and private commercial plans);  and |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Knowingly      and willfully falsifying, concealing, or covering up a material fact or      making any materially false or fraudulent statements in connection with      claims and payment for healthcare services by a healthcare benefit plan      (including government and private commercial  plans). |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Item 1A.  Risk Factors

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|   | • | A      cure or vaccine for HIV/AIDS; |
|--------|---------|--------------------------------------|

|   | • | The      emergence of a new strain of HIV that is resistant to available HIV/AIDS      medications; |
|--------|---------|-----------------------------------------------------------------------------------------------------|

|   | • | Shifts      to treatment regimens other than those weoffer; |
|--------|---------|-------------------------------------------------------------|

|   | • | New      methods of delivery of existing HIV/AIDS medications that do not require      our specialty pharmacy and disease management  services; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Recalls      of HIV/AIDS medications we sell; |
|--------|---------|-----------------------------------------------|

|   | • | Adverse      reactions caused by the HIV/AIDS medications we  sell; |
|--------|---------|---------------------------------------------------------------------|

|   | • | The      expiration of or challenge to the drug patents on the HIV/AIDS medications      we sell; or |
|--------|---------|------------------------------------------------------------------------------------------------------|

|   | • | Competing      treatment from a new HIV/AIDS medication or a new use of an existing      HIV/AIDS medication. |
|--------|---------|---------------------------------------------------------------------------------------------------------------|

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| ·   | The      reimbursement rates we currently receive from the PDPs for our services      could be reduced; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | Regulations      that strictly limit our ability to market to our current and new patients      may limit our ability to maintain and grow our current patient      base; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Part      D may not continue to cover all the medications needed for persons with      HIV/AIDS, including our patients;and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

| ·   | Our      contracts with PDPs could terminate if we fail to comply with the terms      and conditions of such contracts. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------|

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| ·   | Other      specialty pharmacy distributors; |
|--------------------|---------------------------------------------|

| ·   | Specialty      pharmacy divisions of wholesale drug  distributors; |
|--------------------|--------------------------------------------------------------------|

| ·   | Pharmacy      benefit-management companies; |
|--------------------|---------------------------------------------|

| ·   | Hospital-based      pharmacies; |
|--------------------|---------------------------------|

| ·   | Other      retail pharmacies; |
|--------------------|-------------------------------|

| ·   | Manufacturers      that sell their products both to distributors and directly to clinics and      physicians’ offices; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | Hospital-based      care centers and other alternate-site healthcare  providers. |
|--------------------|----------------------------------------------------------------------------------|

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Item 1B

Item 2

|                        |                                          |                                         |
|-----------------------------|-----------------------------------------------|----------------------------------------------|
| Location                    | Principal Use                            | Property      Interest                       |
| Melville,      NY           | Pharmacy and Executive Offices | Leased—expiring      August 31, 2009   |
| Brooklyn,      NY           | Pharmacy                                      | Leased—expiring      June 30, 2008     |
| Gardena,      CA            | Pharmacy                                      | Leased—expiring      March 31, 2011    |
| Van Nuys, CA      | Pharmacy                                      | Leased—expiring      December 31, 2008 |
| Los      Angeles, CA        | Pharmacy                                      | Leased—expiring      December 31, 2010 |
| La      Jolla, CA           | Billing      Center                           | Leased—expiring      June 30, 2008     |
| Oakland,      CA            | Pharmacy                                      | Leased—expiring      June 30, 2010     |
| San Francisco, CA | Pharmacy                                      | Leased—expiring      March 31, 2008    |
| San      Francisco, CA      | Pharmacy                                      | Leased—expiring      February 28, 2009 |
| San      Diego, CA          | Pharmacy                                      | Leased—expiring      January 31, 2009  |
| Miami,      FL              | Pharmacy                                      | Leased—expiring      November 30, 2008 |
| Seattle,      WA            | Pharmacy                                      | Leased—month-to-month                  |

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Item 3

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Item 4. 

| Director                   |   | FOR    |       |   | Withheld |   |
|----------------------------|--------|--------|------------|--------|----------|--------|
| Gary      P. Carpenter     |   |   | 12,272,931 |   |     |   | 30,421 |   |
| Russell      J. Fichera    |   |   | 12,272,931 |   |     |   | 30,421 |   |
| Michael      P. Moran      |   |   | 12,259,031 |   |     |   | 44,321 |   |
| John      Pappajohn        |   |   | 12,257,831 |   |     |   | 45,521 |   |
| Derace      Schaffer, M.D. |   |   | 11,995,188 |   |     |   | 308,164 |   |
| Harvey      Z. Werblowsky  |   |   | 12,273,181 |   |     |   | 30,171 |   |

Item 5. 

|                |   | High   |   |   | Low    |   |
|---------------------|--------|--------|--------|--------|--------|--------|
| 2006:               |   |   |   |   |   |   |
| First      quarter  |   | $      | 16.95  |   |   | $      | 11.20 |   |
| Second      quarter |   | $      | 13.51  |   |   | $      | 7.24 |   |
| Third      quarter  |   | $      | 8.93   |   |   | $      | 3.29 |   |
| Fourth      quarter |   | $      | 7.31   |   |   | $      | 4.21 |   |
| 2007:               |   |   |   |   |   |   |   |   |
| First      quarter  |   | $      | 6.99   |   |   | $      | 3.95 |   |
| Second      quarter |   | $      | 6.00   |   |   | $      | 3.99 |   |
| Third      quarter  |   | $      | 7.27   |   |   | $      | 5.01 |   |
| Fourth      quarter |   | $      | 7.50   |   |   | $      | 5.48 |   |

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|                                                                |   |  Number      of securities to be issued upon exercise of outstanding options, warrants      and rights(a) |                      |   |  Weighted-average      exercise price of outstanding options, warrants and rights(b) |   |   | Number      of securities remaining available for future issuance under equity      compensation plans (excluding securities reflected in column      (a))(c) |   |
|---------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------|---------------------------|--------|-------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Equity      compensation plans approved by security holders (1)     |   |                                                                                                           | 1,218,200                 |   |                                                                                      |   | 4.39   |                                                                                                                                                          |   |   | 798,383 |   |
| Equity      compensation plans not approved by security holders (2) |   |                                                                                                           |         703,828 |   |                                                                                      |   | 4.34   |                                                                                                                                                          |   |   | — |   |
|  Total                                                         |   |                                                                                                           | 1,922,028                 |   |                                                                                      |   | 4.37   |                                                                                                                                                          |   |   | 798,383 |   |

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| (1)   | Includes      options granted pursuant to our 1998 Stock Option Plan and 2002 Stock      Option Plan. |
|-----------------|-------------------------------------------------------------------------------------------------------|

|         (2) | Includes      warrants granted to individuals and corporations as consideration for      services provided within the meaning of FAS 123R and for purchase      consideration for acquisitions. The warrants were granted by us upon      authorization of our Board of Directors and were not issued pursuant to a      single equity compensation plan that exists to grant warrants in exchange      for goods and services. The terms of the warrants vary from grant to grant      and are disclosed in Note 16 to the Consolidated Financial      Statements. |
|-----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                | 06/22/05 | 06/30/05 | 09/30/05 | 12/31/05 | 03/30/06 | 06/30/06 | 09/30/06 | 12/31/06 | 03/30/07   | 06/30/07 | 09/30/07 | 12/31/07 |
|-----------------------------------------------------|----------|----------|----------|----------|----------|----------|----------|----------|------------|----------|----------|----------|
| Allion      Healthcare, Inc                         | 100.0    | 126.2    | 138.5    | 89.6     | 104.3    | 66.8     | 32.2     | 55.1     |  31.5 | 45.4     | 54.0     | 42.2     |
| NASDAQ      Stock Market (U.S.      Companies) | 100.0    | 98.4     | 103.1    | 105.8    | 112.2    | 104.6    | 108.7    | 116.2    | 116.4      | 124.7    | 128.7    | 126.0    |
| NASDAQ      - HC Services                           | 100.0    | 99.4     | 105.3    | 114.7    | 120.3    | 114.1    | 110.4    | 114.6    | 120.5      | 133.8    | 140.2    | 149.7    |

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Item 6

|                                                                            |   | Years      Ended December 31, |    |
|---------------------------------------------------------------------------------|--------|------------------------------------|---------|
|  (in thousands, except per      share)                                     |   | 2003                               |    |   | 2004 |   |   | 2005 |   |   | 2006 |   |   | 2007 |   |
| Statement      of Operations Data:                                              |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales                                                                  |   | $                                  | 42,502  |   |   | $ | 60,080 |   |   | $ | 123,108 |   |   | $ | 209,503 |   |   | $ | 246,661 |   |
| Cost      of goods sold                                                         |   |                               | 37,036  |   |   |   | 53,162 |   |   |   | 103,246 |   |   |   | 178,862 |   |   |   | 211,387 |   |
| Gross      profit                                                               |   |                               | 5,466   |   |   |   | 6,918 |   |   |   | 19,862 |   |   |   | 30,641 |   |   |   | 35,274 |   |
| Operating      expenses:                                                        |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Selling,      general and administrative expenses |   |                               | 7,699   |   |   |   | 9,163 |   |   |   | 18,350 |   |   |   | 27,698 |   |   |   | 30,302 |   |
|      Legal      settlement expense                     |   |                               | 200     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
|      Impairment      of long-lived assets         |   |                               | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 599 |   |
|      Operating      income (loss)                      |   |                               | (2,433  | ) |   |   | (2,245 | ) |   |   | 1,512 |   |   |   | 2,943 |   |   |   | 4,373 |   |
| Other      income (expense):                                                    |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Interest      income (expense)                    |   |                               | (244    | ) |   |   | (229 | ) |   |   | (1,059 | ) |   |   | 1,254 |   |   |   | 804 |   |
|      Other      expense                                |   |                               | — |   |   |   | — |   |   |   | (1,133 | ) |   |   | — |   |   |   | — |   |
| Income      (loss) before income taxes and discontinued operations              |   |                               | (2,677  | ) |   |   | (2,474 | ) |   |   | (680 | ) |   |   | 4,197 |   |   |   | 5,177 |   |
| Provision      for taxes                                                        |   |                               | 20      |   |   |   | 76 |   |   |   | 329 |   |   |   | 1,007 |   |   |   | 1,917 |   |
| Income      (loss) from continuing operations                                   |   |                               | (2,697  | ) |   |   | (2,550 | ) |   |   | (1,009 | ) |   |   | 3,190 |   |   |   | 3,260 |   |
| Discontinued      operations                                                    |   |                               | (258    | ) |   |   | (130 | ) |   |   | (36 | ) |   |   | — |   |   |   | — |   |
| Net      income (loss)                                                          |   |                               | (2,955  | ) |   |   | (2,680 | ) |   |   | (1,045 | ) |   |   | 3,190 |   |   |   | 3,260 |   |
| Deemed      dividend on preferred stock                                         |   |                               | — |   |   |   | — |   |   |   | (1,338 | ) |   |   | — |   |   |   | — |   |
| Net      income (loss) available to common stockholders                         |   |                               | (2,955  | ) |   |   | (2,680 | ) |   | $ | (2,383 | ) |   | $ | 3,190 |   |   | $ | 3,260 |   |
|                                                                            |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      income (loss) per common share                                       |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Income      (loss) before discontinued operations |   | $                                  | (0.87   | ) |   | $ | (0.82 | ) |   | $ | (0.29 | ) |   | $ | 0.20 |   |   | $ | 0.20 |   |
|      Loss      from discontinued operations            |   |                               | (0.08   | ) |   |   | (0.04 | ) |   |   | 0.00 |   |   |   | 0.00 |   |   |   | 0.00 |   |
|      Net      income (loss) per share                  |   | $                                  | (0.95   | ) |   | $ | (0.86 | ) |   | $ | (0.29 | ) |   | $ | 0.20 |   |   | $ | 0.20 |   |
|                                                                            |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      income (loss) per common share                                     |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Income(loss)      before discontinued operations  |   | $                                  | (0.87   | ) |   | $ | (0.82 | ) |   | $ | (0.29 | ) |   | $ | 0.19 |   |   | $ | 0.19 |   |
|      Loss      from discontinued operations            |   |                               | (0.08   | ) |   |   | (0.04 | ) |   |   | 0.00 |   |   |   | 0.00 |   |   |   | 0.00 |   |
|      Net      income (loss) per share                  |   | $                                  | (0.95   | ) |   | $ | (0.86 | ) |   | $ | (0.29 | ) |   | $ | 0.19 |   |   | $ | 0.19 |   |
|                                                                            |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      weighted average of common shares outstanding                        |   |                               | 3,100   |   |   |   | 3,100 |   |   |   | 8,202 |   |   |   | 15,951 |   |   |   | 16,204 |   |
|                                                                            |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      weighted average of common shares outstanding                      |   |                               | 3,100   |   |   |   | 3,100 |   |   |   | 8,202 |   |   |   | 16,967 |   |   |   | 17,017 |   |

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|                                           |   | As      of December 31, |    |
|------------------------------------------------|--------|------------------------------|---------|
|  (in      thousands)                      |   | 2003                         |    |   | 2004 |   |   | 2005 |   |   | 2006 |   |   | 2007 |   |
| Balance      Sheet Data:                       |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents                 |   | $                            | 641     |   |   | $ | 6,980 |   |   | $ | 3,845 |   |   | $ | 17,062 |   |   | $ | 19,557 |   |
| Investments      in short-term securities      |   | $                            | — |   |   | $ | — |   |   | $ | 23,001 |   |   | $ | 6,450 |   |   | $ | 9,283 |   |
| Total      assets                              |   | $                            | 12,415  |   |   | $ | 19,996 |   |   | $ | 86,289 |   |   | $ | 121,603 |   |   | $ | 126,616 |   |
| Notes      payable-subordinated                |   | $                            | 1,150   |   |   | $ | 1,250 |   |   | $ | 1,358 |   |   | $ | 700 |   |   | $ | — |   |
| Capital      lease obligations – current |   | $                            | 89      |   |   | $ | 131 |   |   | $ | 107 |   |   | $ | 46 |   |   | $ | 47 |   |
| Notes      payable – long term           |   | $                            | 2,750   |   |   | $ | — |   |   | $ | 683 |   |   | $ | — |   |   | $ | — |   |
| Capital      lease obligations - long term     |   | $                            | 162     |   |   | $ | 193 |   |   | $ | 93 |   |   | $ | 47 |   |   | $ | — |   |
| Total      liabilities                         |   | $                            | 10,022  |   |   | $ | 8,481 |   |   | $ | 18,946 |   |   | $ | 19,796 |   |   | $ | 20,454 |   |
| Total      stockholders’ equity          |   | $                            | 2,393   |   |   | $ | 11,514 |   |   | $ | 67,343 |   |   | $ | 101,807 |   |   | $ | 106,162 |   |
| Working      Capital                           |   | $                            | (1,884  | ) |   | $ | 4,848 |   |   | $ | 27,488 |   |   | $ | 29,535 |   |   | $ | 38,424 |   |

Item 7.

|   | • | Specialized      MOMSPak prescription packaging that helps reduce patient error associated      with complex multi-drug regimens, which require multiple drugs to be taken      at varying doses and schedules; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Reimbursement      experience which assists patients and healthcare providers with the      complex reimbursement processes and optimizes collection of      payment; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Arrangement      for the timely delivery of medications in a discreet and convenient manner      as directed by our patients or theirphysicians; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Specialized      pharmacists who consult with patients, physicians, nurses and ASOs to      provide education, counseling, treatment coordination, clinical      information and compliance monitoring;and |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Information      systems and prescription automation solutions that make the provision of      clinical data and the transmission of prescriptions more efficient and      accurate. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | • | significant      underperformance relative to expected historical or projected future      operating results; |
|--------|---------|---------------------------------------------------------------------------------------------------------------|

|   | • | significant      changes in the manner of our use of the acquired assets or the strategy      for our overall business; and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------|

|   | • | significant      negative industry or economictrends. |
|--------|---------|-------------------------------------------------------|

|                     |   | Year      Ended December 31, |    |
|--------------------------|--------|-----------------------------------|---------|
|                     |   | 2007                              |    |   | 2006 |   |
| Distribution Region |   | Net      Sales                    |    |   | Prescriptions |   |   | PatientMonths |   |   | Net      Sales |   |   | Prescriptions |   |   | PatientMonths |   |
| California      (1)      |   | $                                 | 160,324 |   |   |   | 654,521 |   |   |   | 138,716 |   |   | $ | 138,291 |   |   |   | 589,419 |   |   |   | 124,891 |   |
| New      York (2)        |   |                              | 79,871  |   |   |   | 298,464 |   |   |   | 44,734 |   |   |   | 65,250 |   |   |   | 249,427 |   |   |   | 37,858 |   |
| Seattle                  |   |                              | 4,278   |   |   |   | 21,753 |   |   |   | 3,907 |   |   |   | 3,864 |   |   |   | 20,440 |   |   |   | 3,642 |   |
| Florida                  |   |                              | 2,188   |   |   |   | 9,768 |   |   |   | 1,451 |   |   |   | 2,098 |   |   |   | 10,861 |   |   |   | 1,527 |   |
| Total                    |   | $                                 | 246,661 |   |   |   | 984,506 |   |   |   | 188,808 |   |   | $ | 209,503 |   |   |   | 870,147 |   |   |   | 167,918 |   |

----

| (1) | California      operations for the 12 months ended December 31, 2006 include $858 of      retroactive premium reimbursement for prior periods in 2005 and      2004.   California operations for the 12 months ended      December 31, 2006 also include partial period contributions from the      acquisitions of H&H Drug Stores, Inc., or H&H, and Whittier      Goodrich Pharmacy, Inc., or Whittier.  We acquired H&H on      April 6, 2006 and Whittier on May 1, 2006.  California      operations for the 12 months ended December 31, 2007 include a reduction      of $640 of premium reimbursement for prior periods in 2006, 2005 and 2004      related to the DHS audit.  In the second quarter of 2007, we      identified an error in the reporting of Gardena prescriptions and      corrected the previously reported number of prescriptions of 595,208 in      California for the 12- month period ended December 31,    2006. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | New      York operations for the 12 months ended December 31, 2006 include $59 of      retroactive premium reimbursement for prior periods in      2005.  New York operations for the 12 months ended December 31,      2006 include partial period contributions from the acquisitions of H.S.      Maiman Rx, Inc., or Maiman, and St. Jude Pharmacy & Surgical Supply      Corp., or St. Jude.  We acquired Maiman on March 13, 2006 and      St. Jude on July 14, 2006. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Components      of Selling, General and Administrative Expense |   | Change ($) |   |
|----------------------------------------------------------------|--------|-----------------|--------|
| Legal      expenses                                            |   | $               | 1,345  |   |
| Labor      Expenses                                            |   |            | 1,092  |   |
| Shipping      and postage                                      |   |            | 457    |   |

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|                     |   | Year      Ended December 31, |    |
|--------------------------|--------|-----------------------------------|---------|
|                     |   | 2006                              |    |   | 2005 |   |
| Distribution Region |   | Net      Sales                    |    |   | Prescriptions |   |   | PatientMonths |   |   | Net      Sales |   |   | Prescriptions |   |   | PatientMonths |   |
| California      (1)(2)   |   | $                                 | 138,291 |   |   |   | 589,419 |   |   |   | 124,891 |   |   | $ | 75,396 |   |   |   | 354,072 |   |   |   | 75,603 |   |
| New      York (3)        |   |                              | 65,250  |   |   |   | 249,427 |   |   |   | 37,858 |   |   |   | 42,905 |   |   |   | 162,108 |   |   |   | 22,995 |   |
| Seattle      (4)         |   |                              | 3,864   |   |   |   | 20,440 |   |   |   | 3,642 |   |   |   | 2,778 |   |   |   | 16,617 |   |   |   | 2,867 |   |
| Florida                  |   |                              | 2,098   |   |   |   | 10,861 |   |   |   | 1,527 |   |   |   | 2,029 |   |   |   | 12,488 |   |   |   | 1,486 |   |
| Total                    |   | $                                 | 209,503 |   |   |   | 870,147 |   |   |   | 167,918 |   |   | $ | 123,108 |   |   |   | 545,285 |   |   |   | 102,951 |   |

----

| (1) | California      operations for the 12 months ended December 31, 2006 includes $858 of      retroactive premium reimbursement for prior periods in 2005 and 2004. For      the 12 months ended December 31, 2005, California operations include      retroactive premium reimbursement of $185 for prior periods in      2004.  California operations for the 12 months ended December      31, 2006 also includes 12 months of contribution from the acquisitions of      Specialty Pharmacies, Inc, or SPI, Frontier Pharmacy & Nutrition, or      PMW and Priority Pharmacy, or Priority. Additionally, it includes 8.5      months of contribution from H&H and eight months of contribution from      Whittier.   In the second      quarter of 2007, we identified an error in the reporting of Gardena      prescriptions and corrected the previously reported number of      prescriptions of 595,208 in California for the 12- month period ended      December 31, 2006. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | California      operations for the 12 months ended December 31, 2005 includes ten      months of contribution from SPI, five months of contribution from PMW and      one month of contribution fromPriority. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | New      York operations for the 12 months ended December 31, 2006 includes $59 of      retroactive premium reimbursement for prior periods in 2005. For the 12      months ended December 31, 2005, New York operations include retroactive      premium reimbursement of $99 for prior periods in 2004.  New      York operations for the 12 months ended December 31, 2006 also includes      9.5 months of contribution from Maiman and 5.5 months of contribution from      St. Jude. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Seattle      operations for the 12 months ended December 31, 2005 includes ten      months of contribution from SPI. |
|-----|---------------------------------------------------------------------------------------------------------------------------|

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| Components      of Selling, General and Administrative Expense |   | Change ($) |   |
|----------------------------------------------------------------|--------|-----------------|--------|
| Labor      expenses                                            |   | $               | 3,961  |   |
| Depreciation      and amortization                             |   |            | 1,607  |   |
| Bad      debt                                                  |   |            | 949    |   |
| Shipping      and postage                                      |   |            | 598    |   |
| Rent      and facilities                                       |   |            | 383    |   |
| Legal      expenses                                            |   |            | 370    |   |
| Stock      compensation expense                                |   |            | 310    |   |
| Pharmacy      supplies                                         |   |            | 198    |   |

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|                               |   | Payments      due by Period |   |
|------------------------------------|--------|-----------------------------|--------|
|                               |   | Total                       |   |   | Less      than 1year |   |   | 1-3      years |   |   | 4-5      years |   |   | More than5      years |   |
| Capital      Lease Obligations (1) |   |                        | 47     |   |   |   | 47 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Operating      Leases              |   |                        | 1,304  |   |   |   | 681 |   |   |   | 582 |   |   |   | 41 |   |   |   | — |   |
| Total                              |   | $                           | 1,351  |   |   | $ | 728 |   |   | $ | 582 |   |   | $ | 41 |   |   | $ | — |   |

----

| (1) | Interest      payments on these amounts will be approximately $3 over the next three      years. |
|-----|--------------------------------------------------------------------------------------------------|

Item 7A

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Item 8.

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| Board      of Directors and Stockholders |
|------------------------------------------|

| Allion      Healthcare, Inc. |
|------------------------------|

| Melville,      New York |
|-------------------------|

| /s/ BDO      Seidman, LLP |
|--------------------------------|

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| (      in thousands )                                                                                                                    |   | 2007   |    |   | 2006   |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Assets                                                                                                                                   |   |   |    |   |   |   |
| Current      Assets:                                                                                                                     |   |   |    |   |   |   |
| Cash      and cash equivalents                                                                                                           |   | $      | 19,557  |   |   | $      | 17,062 |   |
| Short      term investments and securities held for sale                                                                                 |   |   | 9,283   |   |   |   | 6,450 |   |
| Accounts      receivable, (net of allowance for doubtful accounts of $149 in 2007      and $425 in 2006)                            |   |   | 18,492  |   |   |   | 18,297 |   |
| Inventories                                                                                                                              |   |   | 8,179   |   |   |   | 5,037 |   |
| Prepaid      expenses and other current assets                                                                                           |   |   | 767     |   |   |   | 634 |   |
| Deferred      tax asset                                                                                                                  |   |   | 344     |   |   |   | 402 |   |
| Total      Current Assets                                                                                                                |   |   | 56,622  |   |   |   | 47,882 |   |
|                                                                                                                                     |   |   |    |   |   |   |   |   |
| Property      and equipment, net                                                                                                         |   |   | 790     |   |   |   | 890 |   |
| Goodwill                                                                                                                                 |   |   | 41,893  |   |   |   | 42,067 |   |
| Intangible      assets, net                                                                                                              |   |   | 27,228  |   |   |   | 30,683 |   |
| Other      assets                                                                                                                        |   |   | 83      |   |   |   | 81 |   |
| Total      Assets                                                                                                                        |   | $      | 126,616 |   |   | $      | 121,603 |   |
|                                                                                                                                     |   |   |    |   |   |   |   |   |
| Liabilities      And Stockholders’ Equity                                                                                          |   |   |    |   |   |   |   |   |
| Current      Liabilities:                                                                                                                |   |   |    |   |   |   |   |   |
| Accounts      payable                                                                                                                    |   | $      | 15,832  |   |   | $      | 16,339 |   |
| Accrued      expenses                                                                                                                    |   |   | 2,319   |   |   |   | 1,262 |   |
| Notes      payable-subordinated                                                                                                          |   |   | — |   |   |   | 700 |   |
| Current      portion of capital lease obligations                                                                                        |   |   | 47      |   |   |   | 46 |   |
| Total      Current Liabilities                                                                                                           |   |   | 18,198  |   |   |   | 18,347 |   |
|                                                                                                                                     |   |   |    |   |   |   |   |   |
| Long      Term Liabilities:                                                                                                              |   |   |    |   |   |   |   |   |
| Capital      lease obligations                                                                                                           |   |   | — |   |   |   | 47 |   |
| Deferred      tax liability                                                                                                              |   |   | 2,212   |   |   |   | 1,343 |   |
| Other                                                                                                                                    |   |   | 44      |   |   |   | 59 |   |
| Total      Liabilities                                                                                                                   |   |   | 20,454  |   |   |   | 19,796 |   |
|                                                                                                                                     |   |   |    |   |   |   |   |   |
| Commitments      And Contingencies                                                                                                       |   |   |    |   |   |   |   |   |
| Stockholders’      Equity                                                                                                          |   |   |    |   |   |   |   |   |
| Convertible      preferred stock, $.001 par value; shares authorized 20,000; issued and      outstanding -0- in 2007 and  2006 |   |   | — |   |   |   | — |   |
| Common      stock, $.001 par value; shares authorized 80,000; issued and outstanding      16,204 in 2007 and  2006             |   |   | 16      |   |   |   | 16 |   |
| Additional      paid-in capital                                                                                                          |   |   | 112,636 |   |   |   | 111,549 |   |
| Accumulated      deficit                                                                                                                 |   |   | (6,487  | )      |   |   | (9,747 | ) |
| Accumulated      other comprehensive loss                                                                                                |   |   | (3      | )      |   |   | (11 | ) |
| Total      stockholders’ equity                                                                                                    |   |   | 106,162 |   |   |   | 101,807 |   |
| Total      Liabilities And Stockholders’ Equity                                                                                    |   | $      | 126,616 |   |   | $      | 121,603 |   |

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|                                                               |   |   |    |   |   |   |    |   |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| (in      thousands except per share data)                          |   | 2007   |    |   | 2006   |   |    | 2005   |   |
|                                                               |   |   |    |   |   |   |    |   |   |
| Statement      of Operations Data:                                 |   |   |    |   |   |   |    |   |   |
| Net      sales                                                     |   | $      | 246,661 |   |   | $      | 209,503 |   |   | $ | 123,108 |   |
| Cost      of goods sold                                            |   |   | 211,387 |   |   |   | 178,862 |   |   |   | 103,246 |   |
| Gross      profit                                                  |   |   | 35,274  |   |   |   | 30,641  |   |   |   | 19,862 |   |
|                                                               |   |   |    |   |   |   |    |   |   |   |   |   |
| Operating      expenses:                                           |   |   |    |   |   |   |    |   |   |   |   |   |
| Selling,      general and administrative expenses                  |   |   | 30,302  |   |   |   | 27,698  |   |   |   | 18,350 |   |
| Impairment      of long-lived assets                               |   |   | 599     |   |   |   | — |   |   |   | — |   |
| Operating      income                                              |   |   | 4,373   |   |   |   | 2,943   |   |   |   | 1,512 |   |
| Other      income (expense):                                       |   |   |    |   |   |   |    |   |   |   |   |   |
| Interest      income (expense)                                     |   |   | 804     |   |   |   | 1,254   |   |   |   | (1,059 | ) |
| Other      expense                                                 |   |   | — |   |   |   | — |   |   |   | (1,133 | ) |
| Income      (loss) before income taxes and discontinued operations |   |   | 5,177   |   |   |   | 4,197   |   |   |   | (680 | ) |
|                                                               |   |   |    |   |   |   |    |   |   |   |   |   |
| Provision      for taxes                                           |   |   | 1,917   |   |   |   | 1,007   |   |   |   | 329 |   |
| Income      (loss) from continuing operations                      |   |   | 3,260   |   |   |   | 3,190   |   |   |   | (1,009 | ) |
|                                                               |   |   |    |   |   |   |    |   |   |   |   |   |
| Loss      from discontinued operations                             |   |   | — |   |   |   | — |   |   |   | (36 | ) |
| Net      income (loss)                                             |   |   | 3,260   |   |   |   | 3,190   |   |   |   | (1,045 | ) |
|                                                               |   |   |    |   |   |   |    |   |   |   |   |   |
| Deemed      dividend on preferred stock                            |   |   | — |   |   |   | — |   |   |   | 1,338 |   |
| Net      income (loss) available to common stockholders            |   | $      | 3,260   |   |   | $      | 3,190   |   |   | $ | (2,383 | ) |
| Basic      income (loss) per common share:                         |   |   |    |   |   |   |    |   |   |   |   |   |
| Income      (loss) before discontinued operations                  |   | $      | 0.20    |   |   | $      | 0.20    |   |   | $ | (0.29 | ) |
| Loss      from discontinued operations                             |   | $      | 0.00    |   |   | $      | 0.00    |   |   | $ | 0.00 |   |
| Net      income (loss) per share                                   |   | $      | 0.20    |   |   | $      | 0.20    |   |   | $ | (0.29 | ) |
|                                                               |   |   |    |   |   |   |    |   |   |   |   |   |
| Diluted      income (loss) per common share                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Income      (loss) before discontinued operations                  |   | $      | 0.19    |   |   | $      | 0.19    |   |   | $ | (0.29 | ) |
| Loss      from discontinued operations                             |   | $      | 0.00    |   |   | $      | 0.00    |   |   | $ | 0.00 |   |
| Net      income (loss) per share                                   |   | $      | 0.19    |   |   | $      | 0.19    |   |   | $ | (0.29 | ) |
|                                                               |   |   |    |   |   |   |    |   |   |   |   |   |
| Basic      weighted average of common shares outstanding           |   |   | 16,204  |   |   |   | 15,951  |   |   |   | 8,202 |   |
| Diluted      weighted average of common shares outstanding         |   |   | 17,017  |   |   |   | 16,967  |   |   |   | 8,202 |   |

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| (in    thousands)                                                          |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |
|----------------------------------------------------------------------------|--------|-----------------------------------------|---------|--------|----------------------------------------------------|--------|---------|---------------------------------------------------------------|--------|--------|-----------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|
|                                                                       |   | Preferred      Stk.$.001      par value |    |   | Common      Stk.$.001      par value               |   |    | AdditionalPaid-In         Capital    |   |   | AccumulatedDeficit                    |   |   | AccumulatedOther            ComprehensiveIncome      (Loss) |    |   | Total  |   |
|                                                                       |   |         Shares                |    |   |         Par         Value |   |    | Shares                                              |   |   | Par           Value         |   |
| Balance,      December 31, 2004                                       |   |                                    | 4,570   |   |                                               | $      | 5       |                                                          |   |   | 3,100                                                     |   |   | $                                                                                    | 3       |   |   | $      | 22,060  |   |   | $      | (10,554 | )      |   | $ | — |   |   | $ | 11,514 |   |
| Comprehensive      income:                                                 |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Unrealized      gain on investments                                        |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | — |   |   |   | — |   |   |   | 39 |   |   |   | 39 |   |
| Net      loss                                                              |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | — |   |   |   | (1,045  | )      |   |   | — |   |   |   | (1,045 | ) |
| Total      comprehensive loss                                              |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   | (1,006 | ) |
| Issuance      of warrants for:                                             |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Acquisition                                                                |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | 559     |   |   |   | — |   |   |   | — |   |   |   | 559 |   |
| Services                                                                   |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | 966     |   |   |   | — |   |   |   | — |   |   |   | 966 |   |
| Issuance      of Common Stock:                                             |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Public      Offering                                                       |   |                                    | — |   |                                               |   | — |                                                          |   |   | 4,600                                                     |   |   |                                                                                 | 5       |   |   |   | 53,549  |   |   |   | — |   |   |   | — |   |   |   | 53,554 |   |
| Conversion      of Preferred to Common Stock                               |   |                                    | (4,570  | )      |                                               |   | (5      | )                                                             |   |   | 4,795                                                     |   |   |                                                                                 | 5       |   |   |   | 1,338   |   |   |   | — |   |   |   | — |   |   |   | 1,338 |   |
| Exercise      of options                                                   |   |                                    | — |   |                                               |   | — |                                                          |   |   | 213                                                       |   |   |                                                                                 |    |   |   |   | 448     |   |   |   | — |   |   |   | — |   |   |   | 448 |   |
| Exercise      of warrants                                                  |   |                                    | — |   |                                               |   | — |                                                          |   |   | 248                                                       |   |   |                                                                                 |    |   |   |   | 1       |   |   |   | — |   |   |   | — |   |   |   | 1 |   |
|                                                                       |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Additional      cost for prior year issuance of preferred shares           |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | (2      | )      |   |   | — |   |   |   | — |   |   |   | (2 | ) |
| Mandatory      redeemable warrants                                         |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | 1,133   |   |   |   | — |   |   |   | — |   |   |   | 1,133 |   |
|                                                                       |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Deemed      Dividend                                                       |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | — |   |   |   | (1,338  | )      |   |   | — |   |   |   | (1,338 | ) |
|                                                                       |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Tax      benefit from exercise of employee stock options                   |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | 176     |   |   |   | — |   |   |   | — |   |   |   | 176 |   |
| Balance, December 31,      2005                                  |   |                                    | — |   |                                               |   | — |                                                          |   |   | 12,956                                                    |   |   | $                                                                                    | 13      |   |   | $      | 80,228  |   |   | $      | (12,937 | )      |   | $ | 39 |   |   | $ | 67,343 |   |
|                                                                       |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Comprehensive      income:                                                 |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Unrealized      loss on investments                                        |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | — |   |   |   | — |   |   |   | (50 | )  |   |   | (50 | ) |
| Net      income                                                            |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | — |   |   |   | 3,190   |   |   |   | — |   |   |   | 3,190 |   |
| Total      comprehensive income                                            |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   | 3,140 |   |
| Issuance      of Common Stock:                                             |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Public      offering                                                       |   |                                    | — |   |                                               |   | — |                                                          |   |   | 2,465                                                     |   |   |                                                                                 | 2       |   |   |   | 28,850  |   |   |   | — |   |   |   | — |   |   |   | 28,852 |   |
| Exercise      of options                                                   |   |                                    | — |   |                                               |   | — |                                                          |   |   | 421                                                       |   |   |                                                                                 | 1       |   |   |   | 1,248   |   |   |   | — |   |   |   | — |   |   |   | 1,249 |   |
| Exercise      of warrants                                                  |   |                                    | — |   |                                               |   | — |                                                          |   |   | 362                                                       |   |   |                                                                                 |    |   |   |   | 904     |   |   |   | — |   |   |   | — |   |   |   | 904 |   |
|                                                                       |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Cost      of secondary offering                                            |   |                                    | — |   |                                               |   | — |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   | (203    | )      |   |   | — |   |   |   | — |   |   |   | (203 | ) |
| Stock      based compensation                                              |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   | 310     |   |   |   |    |   |   |   |   |   |   |   | 310 |   |
| Tax      benefit from exercise of employee stock options                   |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | 212     |   |   |   | — |   |   |   | — |   |   |   | 212 |   |
| Balance, December 31,      2006                                  |   |                                    | — |   |                                               |   | — |                                                          |   |   | 16,204                                                    |   |   | $                                                                                    | 16      |   |   | $      | 111,549 |   |   | $      | (9,747  | )      |   | $ | (11 | ) |   | $ | 101,807 |   |
|                                                                       |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Comprehensive      income:                                                 |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Unrealized      gain on investments                                        |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | — |   |   |   | — |   |   |   | 8 |   |   |   | 8 |   |
| Net      income                                                            |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | — |   |   |   | 3,260   |   |   |   | — |   |   |   | 3,260 |   |
| Total      comprehensive income                                            |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   | 3,268 |   |
| Stock      based compensation                                              |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   | 354     |   |   |   |    |   |   |   |   |   |   |   | 354 |   |
| Tax      benefit from exercise in prior years of employee stock    options |   |                                    | — |   |                                               |   | — |                                                          |   |   | —                                                   |   |   |                                                                                 | — |   |   |   | 733     |   |   |   | — |   |   |   | — |   |   |   | 733 |   |
|                                                                       |   |                                    |    |   |                                               |   |    |                                                          |   |   |                                                      |   |   |                                                                                 |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Balance, December 31,      2007                                  |   |                                    | — |   |                                               |   | — |                                                          |   |   | 16,204                                                    |   |   | $                                                                                    | 16      |   |   | $      | 112,636 |   |   | $      | (6,487  | )      |   | $ | (3 | ) |   | $ | 106,162 |   |

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| (in      thousands)                                                                                          |   | 2007   |    |   | 2006   |   |    | 2005   |   |
|--------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|                                                                                                         |   |   |    |   |   |   |    |   |   |
| CASH      FLOWS FROM OPERATING ACTIVITIES                                                                    |   |   |    |   |   |   |    |   |   |
| Net      income (loss)                                                                                       |   | $      | 3,260   |   |   | $      | 3,190   |   |   | $ | (1,045 | ) |
| Adjustments      to reconcile net income (loss) to net cash provided by (used in) operating      activities: |   |   |    |   |   |   |    |   |   |   |   |   |
| Depreciation      and amortization                                                                           |   |   | 3,574   |   |   |   | 3,540   |   |   |   | 1,935 |   |
| Impairment      of long-lived asset                                                                          |   |   | 599     |   |   |   | — |   |   |   | — |   |
| Deferred      rent                                                                                           |   |   | (15     | )      |   |   | 30      |   |   |   | 7 |   |
| Mandatory      redeemable warrants                                                                           |   |   | — |   |   |   | — |   |   |   | 1,133 |   |
| Non-cash      interest expense                                                                               |   |   | — |   |   |   | — |   |   |   | 966 |   |
| Amortization      of debt discount on acquisition notes                                                      |   |   | — |   |   |   | 17      |   |   |   | 34 |   |
| Provision      for doubtful accounts                                                                         |   |   | 529     |   |   |   | 1,077   |   |   |   | 128 |   |
| Non-cash      stock compensation expense                                                                     |   |   | 354     |   |   |   | 310     |   |   |   | — |   |
| Deferred      taxes                                                                                          |   |   | 922     |   |   |   | 795     |   |   |   | 153 |   |
| Changes      in operating assets and liabilities exclusive of    acquisitions:                               |   |   |    |   |   |   |    |   |   |   |   |   |
| Accounts      receivable                                                                                     |   |   | (724    | )      |   |   | (4,733  | )      |   |   | (6,161 | ) |
| Inventories                                                                                                  |   |   | (3,142  | )      |   |   | (699    | )      |   |   | (810 | ) |
| Prepaid      expenses and other assets                                                                       |   |   | 87      |   |   |   | (77     | )      |   |   | (458 | ) |
| Accounts      payable and accrued expenses                                                                   |   |   | 724     |   |   |   | 1,681   |   |   |   | 3,445 |   |
| Net      cash provided by (used in) operating activities:                                                    |   |   | 6,168   |   |   |   | 5,131   |   |   |   | (673 | ) |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| CASH      FLOWS USED IN INVESTING ACTIVITIES:                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Purchase      of property and equipment                                                                      |   |   | (321    | )      |   |   | (534    | )      |   |   | (330 | ) |
| Purchase      of short term investments                                                                      |   |   | (66,470 | )      |   |   | (90,857 | )      |   |   | (22,962 | ) |
| Sale      of short term investments                                                                          |   |   | 63,650  |   |   |   | 107,358 |   |   |   | — |   |
| Payments      for acquisition of North American                                                              |   |   | — |   |   |   | (17     | )      |   |   | (5,409 | ) |
| Payments      for acquisition of Specialty Pharmacy                                                          |   |   | — |   |   |   | (9      | )      |   |   | (5,061 | ) |
| Payments      for investment in Oris Medical’s Assets                                                  |   |   | (298    | )      |   |   | (372    | )      |   |   | (1,396 | ) |
| Payments      for acquisition of PMW                                                                         |   |   | — |   |   |   | — |   |   |   | (9,997 | ) |
| Payments      for acquisition of Priority                                                                    |   |   | — |   |   |   | (1,399  | )      |   |   | (6,918 | ) |
| Payments      for acquisition of Maiman                                                                      |   |   | — |   |   |   | (5,812  | )      |   |   | — |   |
| Payments      for acquisition of H&H                                                                     |   |   | — |   |   |   | (4,744  | )      |   |   | — |   |
| Payments      for acquisition of Whittier                                                                    |   |   | (1      | )      |   |   | (15,891 | )      |   |   | — |   |
| Payments      for acquisition of St. Jude                                                                    |   |   | — |   |   |   | (10,072 | )      |   |   | — |   |
| Payments      for deferred acquisition costs                                                                 |   |   | (220    | )      |   |   | — |   |   |   | — |   |
| Net      cash used in investing activities                                                                   |   |   | (3,660  | )      |   |   | (22,349 | )      |   |   | (52,073 | ) |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES:                                                                   |   |   |    |   |   |   |    |   |   |   |   |   |
| Net      proceeds from sale of Preferred Stock -Net of fees                                                  |   |   | — |   |   |   | — |   |   |   | 103 |   |
| Net      proceeds from line of credit                                                                        |   |   | — |   |   |   | — |   |   |   | 43,252 |   |
| Repayment      of line of credit                                                                             |   |   | — |   |   |   | — |   |   |   | (43,253 | ) |
| Net      Proceeds from IPO/ Secondary Offering                                                               |   |   | — |   |   |   | 28,852  |   |   |   | 53,554 |   |
| Net      Proceeds—Exercise of Employee Stock Options and Warrants                                      |   |   | — |   |   |   | 2,153   |   |   |   | 449 |   |
| Tax      benefit from exercise of employee stock options                                                     |   |   | 733     |   |   |   | 212     |   |   |   | 176 |   |
| Notes      Payable and Warrants from Acquisitions                                                            |   |   | — |   |   |   | — |   |   |   | (2,982 | ) |
| Repayment      of Notes & Capital Leases                                                            |   |   | (746    | )      |   |   | (782    | )      |   |   | (4,984 | ) |
| Proceeds      from Notes Payable                                                                             |   |   | — |   |   |   | — |   |   |   | 3,500 |   |
| Follow-on      offering costs                                                                                |   |   | — |   |   |   | — |   |   |   | (204 | ) |
| Net      cash (used in) provided by financing activities                                                     |   |   | (13     | )      |   |   | 30,435  |   |   |   | 49,611 |   |
| NET      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                    |   |   | 2,495   |   |   |   | 13,217  |   |   |   | (3,135 | ) |
| CASH      AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                            |   |   | 17,062  |   |   |   | 3,845   |   |   |   | 6,980 |   |
| CASH      AND CASH EQUIVALENTS, END OF YEAR                                                                  |   | $      | 19,557  |   |   | $      | 17,062  |   |   | $ | 3,845 |   |
| SUPPLEMENTAL      DISCLOSURE                                                                                 |   |   |    |   |   |   |    |   |   |   |   |   |
| Income      Taxes Paid                                                                                       |   | $      | 82      |   |   | $      | 103     |   |   | $ | — |   |
| Interest      Paid                                                                                           |   | $      | 46      |   |   | $      | 52      |   |   | $ | 537 |   |

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|                                                                            |   | For      the year ended December 31, |   |
|---------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                            |   | 2007                                      |   |   | 2006 |   | 2005 |
| Numerator:                                                                      |   |                                      |   |   |   |   |   |
|     Net      Income (loss) available to common stockholders |   | $                                         | 3,260  |   |   | $ | 3,190 |   | $ | (2,383 |
| Denominator:                                                                    |   |                                      |   |   |   |   |   |   |   |   |   |
|     Weighted      average common shares outstanding         |   |                                      | 16,204 |   |   |   | 15,951 |   |   | 8,202 |
|     Effect      of dilutive common stock options            |   |                                      | 456    |   |   |   | 597 |   |   | — |
|     Effect      of dilutive common stock warrants           |   |                                      | 357    |   |   |   | 419 |   |   | — |
| Diluted      weighted average of common shares                                  |   |                                      | 17,017 |   |   |   | 16,967 |   |   | 8,202 |
|                                                                            |   |                                      |   |   |   |   |   |   |   |   |   |
| Earnings      per common shares:                                                |   |                                      |   |   |   |   |   |   |   |   |   |
|     Basic      income (loss) per common share               |   | $                                         | 0.20   |   |   | $ | 0.20 |   | $ | (0.29 |
|     Diluted      income (loss) per common share             |   | $                                         | 0.19   |   |   | $ | 0.19 |   | $ | (0.29 |

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|                                                     |   | YEAR      ENDED       |   |
|----------------------------------------------------------|--------|-----------------------|--------|
|                                                     |   | December 31,2005 |   |
| Net      loss available to common shareholders           |   | $                     | (2,383 | ) |
| Stock-based      compensation cost                       |   |                  | (361   | ) |
| Pro-forma      net loss available to common shareholders |   | $                     | (2,744 | ) |
| Reported      basic and diluted EPS                      |   | $                     | (0.29  | ) |
| Pro-forma      basic and diluted EPS                     |   | $                     | (0.33  | ) |

|                                |   | 2006           |   |   | 2005         |   |
|-------------------------------------|--------|----------------|--------|--------|--------------|--------|
| Risk-free      interest rate        |   |           | 5.23   | %      |         |   | 3.96 | % |
| Dividend      yield                 |   |           | 0.00   | %      |         |   | 0.00 | % |
| Volatility      factor              |   |           | 44.81  | %      |         |   | 20.00 | % |
| Weighted      average expected life |   | 6.5      years |   |   | 8      years |   |

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|   | • | Significant      underperformance relative to expected historical or projected future      operating results; |
|--------|---------|---------------------------------------------------------------------------------------------------------------|

|   | • | Significant      changes in the manner of the Company’s use of the acquired assets or the      strategy for its overall business;and |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Significant      negative industry or economictrends. |
|--------|---------|-------------------------------------------------------|

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|          |   | Year      Ended December 31, |   |
|---------------|--------|------------------------------|--------|
|          |   | 2005                         |   |
| Revenue       |   | $                            | 1,512  |   |
| Net      loss |   | $                            | (36    | ) |

|                                   |   | Year      endedDecember      31, 2006 |    |
|----------------------------------------|--------|---------------------------------------|---------|
| Revenue                                |   | $                                     | 233,834 |   |
| Net      income (loss)                 |   |                                  | 3,658   |   |
| Earnings      (loss) per common share: |   |                                  |    |   |
| Basic                                  |   | $                                     | 0.23    |   |
| Diluted                                |   | $                                     | 0.22    |   |

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|                                           |   | 2007   |    |   | 2006   |   |
|------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Beginning      balance as of December 31, |   | $      | 42,067  |   |   | $      | 19,739 |   |
| Purchase      price adjustment during the year |   |   | (174    | )      |   |   | — |   |
| Goodwill      acquired during the year         |   |   | — |   |   |   | 22,328 |   |
| Ending      balance as of December 31,    |   | $      | 41,893  |   |   | $      | 42,067 |   |

|                  |   | At      December 31, 2007 |   |   | At      December 31, 2006 |   |
|-----------------------|--------|---------------------------|--------|--------|---------------------------|--------|
| Cash                  |   | $                         | 11,143 |   |                      | $      | 6,793 |   |
| Cash      equivalents |   |                      | 8,414  |   |                      |   | 10,269 |   |
| Total                 |   | $                         | 19,557 |   |                      | $      | 17,062 |   |

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|                           |   |                                                                                     |    |   |                    |   |    |   |   |    |                    |   |   |   |   |
|--------------------------------|--------|------------------------------------------------------------------------------------------|---------|--------|-------------------------|--------|---------|--------|--------|---------|-------------------------|--------|--------|--------|--------|
|                           |   | WeightedAverage      RemainingAmortization      Period as      of December 31, 2007 |    |   | December 31,       |   |
|                           |   | 2007                                                                                     |    |   | 2006                    |   |
|                           |   | Cost                                                                                |    |   | AccumulatedAmortization |   |    | Cost   |   |    | AccumulatedAmortization |   |
| Intangibles                    |   |                                                                                     |    |   |                    |   |    |   |   |    |                    |   |   |   |   |
| California      license        |   | Perpetual                                                                                |    |   | $                       | 479    |    |   | $      | — |                    |   | $      | 479    |   |   | $ | — |   |
| Customer      lists            |   | 4      Months                                                                            |    |   |                    | 2,200  |    |   |   | (2,123  | )                       |   |   | 2,200  |   |   |   | (1,885 | ) |
| Referral      list             |   | 148      Months                                                                          |    |   |                    | 29,153 |    |   |   | (4,447  | )                       |   |   | 29,153 |   |   |   | (2,444 | ) |
| Non-compete      covenant      |   | 24      Months                                                                           |    |   |                    | 3,179  |    |   |   | (1,698  | )                       |   |   | 3,179  |   |   |   | (955 | ) |
| Software                       |   | 5      Months                                                                            |    |   |                    | 136    |    |   |   | (118    | )                       |   |   | 136    |   |   |   | (80 | ) |
| Lab      tracker license  |   |                                                                                     | — |   |                    |   | — |   |   |    | —                 |   |   |   | 1,137  |   |   |   | (512 | ) |
| Clinic      List               |   | 150      Months                                                                          |    |   |                    | 522    |    |   |   | (55     | )                       |   |   | 316    |   |   |   | (41 | ) |
| Total                          |   | 107      Months                                                                          |    |   | $                       | 35,669 |    |   | $      | (8,441  | )                       |   | $      | 36,600 |   |   | $ | (5,917 | ) |

| Years |   | Amount |   |
|-------|--------|--------|--------|
| 2008  |   | $      | 2,685  |   |
| 2009  |   | $      | 2,357  |   |
| 2010  |   | $      | 2,331  |   |
| 2011  |   | $      | 2,079  |   |
| 2012  |   | $      | 1,966  |   |

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|                                                         |           |   | December 31, |   |
|--------------------------------------------------------------|----------------|--------|-------------------|--------|
|                                                         | UsefulLives    |   | 2007              |   |   | 2006 |   |
| Machinery      and equipment under capital lease obligations | 4      Years   |   | $                 | 166    |   |   | $ | 166 |   |
| Machinery      and equipment                                 | 3-5      Years |   |              | 1,508  |   |   |   | 1,522 |   |
| Leasehold      Improvements                                  | 1-3      Years |   |              | 435    |   |   |   | 274 |   |
| Furniture      and fixtures                                  | 3-7      Years |   |              | 179    |   |   |   | 176 |   |
|                                                         |           |   |              | 2,288  |   |   |   | 2,138 |   |
|                                                         |           |   |              |   |   |   |   |   |   |
| Less:      accumulated depreciation and amortization    |           |   |              | (1,498 | ) |   |   | (1,248 | ) |
|                                                         |           |   | $                 | 790    |   |   | $ | 890 |   |

|                                                  |   | Year      Ended December 31, |    |
|-------------------------------------------------------|--------|-----------------------------------|---------|
|                                                  |   | 2007                              |    |   | 2006 |   |   | 2005 |   |
| Federal      statutory rate:                          |   |                              | 34      | % |   |   | 34 | % |   |   | 34 | % |
| Tax      expense (benefit) at federal statutory rates |   | $                                 | 1,760   |   |   | $ | 1,427 |   |   | $ | (243 | ) |
| Change      in valuation allowance                    |   |                              | — |   |   |   | (913 | ) |   |   | (212 | ) |
| Permanent      differences                            |   |                              | (195    | ) |   |   | 20 |   |   |   | 707 |   |
| State      income taxes                               |   |                              | 352     |   |   |   | 473 |   |   |   | 77 |   |
|                                                  |   | $                                 | 1,917   |   |   | $ | 1,007 |   |   | $ | 329 |   |

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|                                    |   | 2007   |    |   | 2006   |   |
|-----------------------------------------|--------|--------|---------|--------|--------|--------|
| Current:                                |   |   |    |   |   |   |
| Assets:                                 |   |   |    |   |   |   |
| Allowance      for doubtful accounts    |   | $      | 60      |   |   | $      | 170 |   |
| Inventory                               |   |   | 108     |   |   |   | 92 |   |
| Non      deductible accruals            |   |   | 174     |   |   |   | 132 |   |
| Investments                             |   |   | 2       |   |   |   | 8 |   |
| Current      Deferred Tax Asset         |   |   | 344     |   |   |   | 402 |   |
|                                    |   |   |    |   |   |   |   |   |
| Non-Current:                            |   |   |    |   |   |   |   |   |
| Assets:                                 |   |   |    |   |   |   |   |   |
| Tax      carry forwards                 |   |   | — |   |   |   | 769 |   |
| Fixed      assets                       |   |   | 60      |   |   |   | 65 |   |
| Stock      based compensation           |   |   | 200     |   |   |   | 75 |   |
| Subtotal      non-current assets        |   |   | 260     |   |   |   | 909 |   |
| Liabilities:                            |   |   |    |   |   |   |   |   |
| Deductible      goodwill                |   |   | (1,897  | )      |   |   | (976 | ) |
| Intangible      assets                  |   |   | (575    | )      |   |   | (1,276 | ) |
| Non-current      deferred tax liability |   |   | (2,212  | )      |   |   | (1,343 | ) |
| Overall      deferred tax liability     |   | $      | (1,868  | )      |   | $      | (941 | ) |

| Federal: |   | 2007   |   |   | 2006   |   |    | 2005   |   |
|----------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
| Current  |   | $      | 671    |   |   | $      | — |   |   | $ | 60 |   |
| Deferred |   |   | 712    |   |   |   | 693     |   |   |   | 130 |   |
| State:   |   |   |   |   |   |   |    |   |   |   |   |   |
| Current  |   |   | 324    |   |   |   | 212     |   |   |   | 116 |   |
| Deferred |   |   | 210    |   |   |   | 102     |   |   |   | 23 |   |
| Total    |   | $      | 1,917  |   |   | $      | 1,007   |   |   | $ | 329 |   |

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| Location               | Principal Use                       | Property      Interest                  |
|-----------------------------|-----------------------------------------------|----------------------------------------------|
| Melville,      NY           | Pharmacy and Executive Offices | Leased—expiring      August 31, 2009   |
| Brooklyn,      NY           | Pharmacy                                      | Leased—expiring      June 30, 2008     |
| Gardena,      CA            | Pharmacy                                      | Leased—expiring      March 31, 2011    |
| Van Nuys, CA      | Pharmacy                                      | Leased—expiring      December 31, 2008 |
| Los      Angeles, CA        | Pharmacy                                      | Leased—expiring      December 31, 2010 |
| La      Jolla, CA           | Billing      Center                           | Leased—expiring      June 30, 2008     |
| Oakland,      CA            | Pharmacy                                      | Leased—expiring      June 30, 2010     |
| San Francisco, CA | Pharmacy                                      | Leased—expiring      March 31, 2008    |
| San      Francisco, CA      | Pharmacy                                      | Leased—expired      February 28, 2009  |
| San      Diego, CA          | Pharmacy                                      | Leased—expiring      January 31, 2009  |
| Miami,      FL              | Pharmacy                                      | Leased—expiring      November 30, 2008 |
| Seattle,      WA            | Pharmacy                                      | Leased—month-to-month                  |

----

| Year  |   | MinimumRent |   |
|-------|--------|-------------|--------|
| 2008  |   | $           | 681    |   |
| 2009  |   |        | 354    |   |
| 2010  |   |        | 228    |   |
| 2011  |   |        | 41     |   |
| 2012  |   |        | 0      |   |
| Total |   | $           | 1,304  |   |

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Table of Contents

|                                                                                    |   | 2007   |    |   | 2006                         |   |          | 2005   |   |
|-----------------------------------------------------------------------------------------|--------|--------|---------|--------|------------------------------|--------|---------------|--------|--------|
| Stock      Options                                                                      |   | Shares |    |   | WeightedAverageExercisePrice |   |          | Shares |   |   | WeightedAverageExercisePrice |   |   | Shares |   |   | WeightedAverageExercisePrice |   |
| Outstanding,      beginning of year                                                     |   |   | 1,336   |   |                         | $      | 4.66          |   |   |   | 1,452 |   |   | $ | 3.21 |   |   |   | 1,683 |   |   | $ | 3.06 |   |
| Granted                                                                                 |   |   | — |   |                         |   | —       |   |   |   | 455 |   |   |   | 8.11 |   |   |   | 10 |   |   |   | 13.00 |   |
| Exercised      (1)                                                                      |   |   | — |   |                         |   | —       |   |   |   | (421 | ) |   |   | 2.97 |   |   |   | (213 | ) |   |   | 2.11 |   |
| Forfeited      or expired                                                               |   |   | (118    | )      |                         |   | 7.48          |   |   |   | (150 | ) |   |   | 5.83 |   |   |   | (28 | ) |   |   | 5.91 |   |
| Outstanding,      end of year                                                           |   |   | 1,218   |   |                         | $      | 4.39          |   |   |   | 1,336 |   |   | $ | 4.66 |   |   |   | 1,452 |   |   | $ | 3.21 |   |
| Options      exercisable at year end                                                    |   |   | 905     |   |                         | $      | 3.19          |   |   |   | 761 |   |   | $ | 2.42 |   |   |   | 1,110 |   |   | $ | 2.29 |   |
| Weighted      average fair value of options under the plan granted during the      year |   |   |    |   |                         |   | —  |   |   |   |   |   |   | $ | 4.29 |   |   |   |   |   |   | $ | 4.43 |   |

----

| (1)   | The      total intrinsic value of options exercised during the years ended      December 31, 2006 and 2005 was $4,129 and $2,109,      respectively. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|                                          |   | 2007   |    |   | 2006                               |   |    | 2005   |   |
|-----------------------------------------------|--------|--------|---------|--------|------------------------------------|--------|---------|--------|--------|
| Warrants                                      |   | Shares |    |   | WeightedAverageExercise      Price |   |    | Shares |   |   | WeightedAverageExercise      Price |   |   | Shares |   |   | WeightedAverageExercise      Price |   |
| Outstanding,      beginning of year           |   |   | 704     |   |                               | $      | 4.34    |   |   |   | 1,151 |   |   | $ | 4.60 |   |   |   | 1,163 |   |   | $ | 4.38 |   |
| Granted                                       |   |   | — |   |                               |   | — |   |   |   | — |   |   |   | — |   |   |   | 641 |   |   |   | 7.73 |   |
| Exercised      (1)                            |   |   | — |   |                               |   | — |   |   |   | (447 | ) |   |   | 4.99 |   |   |   | (477 | ) |   |   | 7.66 |   |
| Repurchased                                   |   |   | — |   |                               |   | — |   |   |   | — |   |   |   | — |   |   |   | (176 | ) |   |   | 6.26 |   |
| Outstanding      and Exercisable, end of year |   |   | 704     |   |                               | $      | 4.34    |   |   |   | 704 |   |   | $ | 4.34 |   |   |   | 1,151 |   |   | $ | 4.60 |   |

----

| (1)   | During      the fiscal year ended December 31, 2006, we issued an aggregate of 362      shares of common stock, upon the net issue exercise of 447 warrants,      with a weighted average exercise price of$4.99. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Series C | 32      shares of common stock at $5.00 per share;                                              |
|---------------|-------------------------------------------------------------------------------------------------|
| Series D | 113 shares of common stock at $6.00 per share; and |
| Series E | 80      shares of common stock at $6.25 pershare.                                               |

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Table of Contents

|                                       |   | 2007         |   |
|--------------------------------------------|--------|--------------|--------|
|                                       |   | FirstQuarter |   |   | SecondQuarter |   |   | ThirdQuarter |   |   | FourthQuarter      (1) |   |   | Total |   |
| (In      thousands, except per share data) |   |         |   |
| Net      sales                             |   | $            | 58,967 |   |   | $ | 62,286 |   |   | $ | 61,822 |   |   | $ | 63,586 |   |   | $ | 246,661 |   |
| Gross      profit                          |   | $            | 8,428  |   |   | $ | 8,881 |   |   | $ | 8,992 |   |   | $ | 8,973 |   |   | $ | 35,274 |   |
| Operating      income                      |   | $            | 139    |   |   | $ | 1,479 |   |   | $ | 1,388 |   |   | $ | 1,367 |   |   | $ | 4,373 |   |
| Net      income                            |   | $            | 185    |   |   | $ | 973 |   |   | $ | 1,033 |   |   | $ | 1,069 |   |   | $ | 3,260 |   |
| Basic      income per common share         |   | $            | 0.01   |   |   | $ | 0.06 |   |   | $ | 0.06 |   |   | $ | 0.07 |   |   | $ | 0.20 |   |
| Diluted      income per common share       |   | $            | 0.01   |   |   | $ | 0.06 |   |   | $ | 0.06 |   |   | $ | 0.06 |   |   | $ | 0.19 |   |
| Basic      weighted average shares         |   |         | 16,204 |   |   |   | 16,204 |   |   |   | 16,204 |   |   |   | 16,204 |   |   |   | 16,204 |   |
| Diluted      weighted average shares       |   |         | 17,003 |   |   |   | 16,976 |   |   |   | 17,026 |   |   |   | 17,062 |   |   |   | 17,017 |   |

----

| (1)   | Included      in net sales for the fourth quarter of 2007 is a reduction of $758 of      premium reimbursement, related to prior periods in 2007, 2006, 2005 and      2004, as a result of the DHS audit. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                       |   | 2006                  |   |
|--------------------------------------------|--------|-----------------------|--------|
|                                       |   | FirstQuarter      (1) |   |   | SecondQuarter |   |   | ThirdQuarter      (2) |   |   | FourthQuarter |   |   | Total |   |
| (In      thousands, except per share data) |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales                             |   | $                     | 41,285 |   |   | $ | 51,972 |   |   | $ | 58,349 |   |   | $ | 57,897 |   |   | $ | 209,503 |   |
| Gross      profit                          |   | $                     | 6,654  |   |   | $ | 7,306 |   |   | $ | 8,378 |   |   | $ | 8,303 |   |   | $ | 30,641 |   |
| Operating      income                      |   | $                     | 854    |   |   | $ | 553 |   |   | $ | 1,292 |   |   | $ | 244 |   |   | $ | 2,943 |   |
| Net      income                            |   | $                     | 1,133  |   |   | $ | 662 |   |   | $ | 1,015 |   |   | $ | 380 |   |   | $ | 3,190 |   |
| Basic      income per common share         |   | $                     | 0.07   |   |   | $ | 0.04 |   |   | $ | 0.06 |   |   | $ | 0.02 |   |   | $ | 0.20 |   |
| Diluted      income per common share       |   | $                     | 0.07   |   |   | $ | 0.04 |   |   | $ | 0.06 |   |   | $ | 0.02 |   |   | $ | 0.19 |   |
| Basic      weighted average shares         |   |                  | 15,192 |   |   |   | 16,190 |   |   |   | 16,204 |   |   |   | 16,204 |   |   |   | 15,951 |   |
| Diluted      weighted average shares       |   |                  | 16,649 |   |   |   | 17,236 |   |   |   | 17,024 |   |   |   | 16,999 |   |   |   | 16,967 |   |

----

| (1)   | Included      in net sales for the first quarter of 2006 is $858 of retroactive premium      reimbursement in California for prior periods in 2005 and      2004. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Included      in net sales for the third quarter of 2006 is $59 of retroactive premium      reimbursement in New York for prior periods in  2005. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

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Item 9.

Item 9A

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Table of Contents

| Board      of Directors and Stockholders |
|------------------------------------------|

| Allion      Healthcare, Inc. |
|------------------------------|

| Melville,      New York |
|-------------------------|

| /s/      BDO Seidman, LLP |
|---------------------------|

| New      York, New York |
|-------------------------|

| March 14,      2008 |
|--------------------------|

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Table of Contents

| Item 9B.  Other  Information. |
|----------------------------------------------|

Item 10

Item 11

Item 12

Item 13

Item 14

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Table of Contents

Item 15

| (1) | Financial      Statements. |
|-----|----------------------------|

| (2) | Schedules.      An index of Exhibits and Schedules follows below in this Annual Report.      Schedules other than those listed below have been omitted from this Annual      Report because they are not required, are not applicable or the required      information is included in the financial statements or the notes      thereon. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|   | Index      to Financial Statements, Supplementary Data and Financial Statement      Schedules |
|--------|-----------------------------------------------------------------------------------------------|

|                                   |   |                        |   |
|----------------------------------------|--------|-----------------------------|--------|
| Schedules:                             |   | PageNumberingForm      10-K |   |
| Valuation      and Qualifying Accounts |   |                        | 71     |   |

| (3) | Exhibits.      The exhibits listed in the accompanying Exhibit Index are filed or      incorporated by reference as part of this Annual  Report. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

SIGNATURES

|                           |                         |                                                                                      |
|--------------------------------|------------------------------|-------------------------------------------------------------------------------------------|
|                           | ALLION      HEALTHCARE, INC. |
|                           |                         |                                                                                      |
| Date: March      17, 2008 | By:                          | /s/    Stephen      A. Maggio                                         |
|                           |                         | Stephen      A. MaggioSecretary,      Treasurer and Interim Chief Financial  Officer |

| Name                                                                                                                                                                                                                                                                                                                                           | Title                                                                                       | Date                |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|---------------------|
| /s/   Michael      P. MoranMichael      P. Moran                                                                                                                                                                                                                                                                                | Chief      Executive Officer and Director(principal      executive officer)            | March      17, 2008 |
| /s/   Stephen      A.      Maggio                                           Stephen      A. Maggio  | Interim      Chief Financial Officer(principal      financial and accounting officer)  | March      17, 2008 |
| /s/   Gary      P. CarpenterGary      P. Carpenter                                                                                                                                                                                                                                                                         | Director                                                                                    | March      17, 2008 |
| /s/   Russell      J. FicheraRussell      J. Fichera                                                                                                                                                                                                                                                                       | Director                                                                                    | March      17, 2008 |
| /s/   John      PappajohnJohn      Pappajohn                                                                                                                                                                                                                                                                               | Director                                                                                    | March      17, 2008 |
|                                                   Derace      Schaffer, M.D.                                                                | Director                                                                                    |                |
| /s/   Harvey      Z. Werblowsky, Esq.Harvey      Z. Werblowsky, Esq.                                                                                                                                                                                                                                                       | Director                                                                                    | March      17, 2008 |

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Table of Contents

| 2.1    | Stock      Purchase Agreement, dated as of May 1, 2003, among MOMS Pharmacy, Inc. as      buyer, Allion Healthcare, Inc. as parent, and Darin A. Peterson and Allan      H. Peterson collectively as sellers. (Incorporated by reference to Exhibit      2.1 to the Registrant’s Current Report on Form 8-K filed on May 16,      2003.)                                                                 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 2.2    | Stock      Purchase Agreement by and among MOMS Pharmacy, Inc. as buyer and Michael      Stone and Jonathan Spanier collectively as sellers dated as of January 4,      2005. (Incorporated by reference to Exhibit 10.1 to the Registrant’s      Current Report on Form 8-K filed on January 10, 2005.)                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 2.3    | Stock      Purchase Agreement by and among MOMS Pharmacy, Inc. as buyer and Pat      Iantorno, Eric Iantorno, Jordan Iantorno, Jordan Iantorno A/C/F Max      Iantorno, Michael Winters and George Moncada collectively as sellers dated      as of February 28, 2005. (Incorporated by reference to Exhibit 10.1      to the Registrant’s Current Report on Form 8-K filed on March 4,      2005.) |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 2.4    | Asset      Purchase Agreement by and between MOMS Pharmacy, Inc. and Oris Medical      Systems, Inc. dated as of May 19, 2005. (Incorporated by reference to      Exhibit 2.6 to the Registrant’s Registration Statement on Form S-1/A filed      on May 24, 2005.)                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 2.5    | Asset      Purchase Agreement by and among Medicine Made Easy and Priority Pharmacy,      Inc., the David C. Zeiger Trust UTD 4/30/93, David C. Zeiger and Peter      Ellman dated as of December 9, 2005. (Incorporated by reference to Exhibit      10.1 to the Registrant’s Current Report on Form 8-K filed on December      12, 2005.)                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.1    | Amended      and Restated Certificate of Incorporation of the Registrant. (Incorporated      by reference to Exhibit C to the Registrant’s proxy statement filed      on June 4, 2003.)                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.2    | Certificate      of Designation of Rights and Preferences of Series D Preferred Stock of      Allion Healthcare, Inc. (Incorporated by reference to Exhibit 3.6 to the      Registrant’s Annual Report on Form 10-K filed on March 31,      2005.)                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.3    | Certificate      of Designation of Rights and Preferences of Series E Preferred Stock of      Allion Healthcare, Inc. (Incorporated by reference to Exhibit 3.1 to the      Registrant’s Current Report on Form 8-K filed on December 20,      2004.)                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.4    | Certificate      of Correction of Allion Healthcare, Inc., relating to the Certificate of      Designation of Rights and Preferences of Series D Preferred Stock.      (Incorporated by reference to Exhibit 3.9 to the Registrant’s Registration      Statement on Form S-1/A filed on May 24, 2005.)                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.5    | Certificate      of Correction of Allion Healthcare, Inc., relating to the Certificate of      Designation of Rights and Preferences of Series E Preferred Stock.      (Incorporated by reference to Exhibit 3.10 to the Registrant’s      Registration Statement on Form S-1/A filed on May 24,    2005.)                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.6    | Certificate      of Correction of Allion Healthcare, Inc., relating to the Amended and      Restated Certificate of Incorporation. (Incorporated by reference to      Exhibit 3.12 to the Registrant’s Registration Statement on Form S-1/A      filed on May 24, 2005.)                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.7    | Fourth      Amended and Restated Bylaws of the Registrant.*                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.1    | Form      of Warrant to Purchase Common Stock of Allion Healthcare, Inc. issued to      the former owners of North American Home Health Supply, Inc., as of      January 4, 2005. (Incorporated by reference to Exhibit 3.1 to the      Registrant’s Current Report of Form 8-K filed on January 10,      2005.)                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                |

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Table of Contents

| 4.2    | Form      of Warrant to Purchase Common Stock of Allion Healthcare, Inc. issued to      the former owners of Specialty Pharmacies Inc., as of February 28, 2005.      (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current      Report of Form 8-K filed on March 4, 2005.)                                                                    |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 4.3    | Form      of Subordinated Secured Promissory Notes of MOMS Pharmacy, Inc., dated as      of January 4, 2005, in the aggregate amount of $1,375,000, issued to the      former owners of North American Home Health Supply, Inc. (Incorporated by      reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K      filed on January 10, 2005.) |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 4.4    | Guaranty      given by Allion Healthcare, Inc. to and for the benefit of Michael Stone      and Jonathan Spanier dated as of January 4, 2005. (Incorporated by      reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K      filed on January 10, 2005.)                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 4.5    | Warrant      to Purchase Common Stock of Allion Healthcare, Inc. issued to John      Pappajohn on January 11, 2000. (Incorporated by reference to Exhibit      4.12 to the Registrant’s Registration Statement on Form S-1/A filed on May      24, 2005.)                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 4.6    | Warrant      to Purchase Common Stock of Allion Healthcare, Inc. issued to John      Pappajohn on April 15, 2005. (Incorporated by reference to Exhibit      99.1 to the Registrant’s Current Report on Form 8-K filed on April 21,      2005.)                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 4.7    | Warrant      to Purchase Common Stock of Allion Healthcare, Inc. issued to Crestview      Capital Master, LLC on May 13, 2005. (Incorporated by reference to Exhibit      4.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 18,      2005.)                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 4.8    | Form      of Stock Certificate. (Incorporated by reference to Exhibit 4.16 to the      Registrant’s Registration Statement on Form S-1/A filed on May 24,      2005).                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.1   | Registration      Rights Agreement, dated as of October 30, 2001, by and between Allion      Healthcare, Inc. and Gainesborough, L.L.C. (Incorporated by reference to      Exhibit 3.(I)D) to the Registrant’s Annual Report on 10-KSB/A filed April      29, 2004.)                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.2   | Registration      Rights Agreement issued to the holders of Series E convertible preferred      stock, dated as of December 17, 2004. (Incorporated by reference to      Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on      December 20, 2004.)                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.3   | 1998      Stock Option Plan. (Incorporated by reference to Exhibit 10.3 to the      Registrant’s Annual Report on Form 10-K filed on March 31,      2005.)                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.4   | Amendment      No. 1 to the 1998 Stock Option Plan. (Incorporated by reference to      Exhibit 10.1 to the Registrant’s quarterly report on Form 10-Q      filed on November 14, 2005).                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.5   | Amended      and Restated 2002 Stock Incentive Plan. (Incorporated by reference to      Exhibit 10.2 to the Registrant’s quarterly report on Form 10-Q filed      on November 14, 2005).                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.6   | Agreement      of Lease Between Reckson Operating Partnership, L.P and Allion Healthcare,      Inc. (Incorporated by reference to Exhibit 10.11 to the Registrant’s      Annual Report on Form 10-KSB filed on April 14, 2004.)                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.7   | AmerisourceBergen      Prime Vendor Agreement dated September 15, 2003. (Incorporated by      reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K      filed on March 31, 2005.)**                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.8   | Registration      Rights Agreement, dated as of January 4, 2005, by and between Allion      Healthcare, Inc. and Michael Stone and Jonathan Spanier. (Incorporated by      reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K      filed on March 31, 2005.)                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.9   | Amendment      to Registration Rights Agreement dated as of May 19, 2005, between Allion      Healthcare, Inc. and Michael Stone and Jonathan Spanier. (Incorporated by      reference to Exhibit 10.15A to the Registrant’s Registration Statement on      Form S-1/A filed on May 24, 2005.)                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                  |

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Table of Contents

| 10.10  | Registration      Rights Agreement, dated as of April 4, 2003 issued to the holders of      Series C convertible preferred stock. (Incorporated by reference to      Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1/A      filed on May 24, 2005.)                                                                                                                     |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.11  | Form      of Registration Rights Agreement, dated as of April 16, 2004 issued      to the holders of Series D convertible preferred stock. (Incorporated      by reference to Exhibit 10.18 to the Registrant’s Registration Statement      on Form S-1/A filed on May 24, 2005.)                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.12  | Form      of Registration Rights Agreement, dated as of March 30, 2001 issued to the      holders of Series A convertible preferred stock. (Incorporated by      reference to Exhibit 10.19 to the Registrant’s Registration Statement on      Form S-1/A filed on May 24, 2005.)                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.13  | Registration      Rights Agreement dated as of May 13, 2005 by and between Allion      Healthcare, Inc. and Crestview Capital Master, LLC. (Incorporated by      reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form      10-Q filed on May 18, 2005.)                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.14  | Non-competition      and non-solicitation agreement by and between Allion Healthcare, Inc. and      MikeLynn Salthouse dated as of August 27, 2002. (Incorporated by reference      to Exhibit 10.24 to the Registrant’s Registration Statement on Form S-1/A      filed on May 24, 2005.)                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.15  | Asset      Purchase Agreement by and among Medicine Made Easy and Frontier Pharmacy      & Nutrition, Inc. dated as of August 4, 2005. (Incorporated by      reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form      10-Q filed on August 15, 2005.)                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.16  | Agreement      with the California Department of Health Services dated as of August 2005.      (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly      Report on Form 10-Q filed on November 14, 2005.)                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.17  | Agreement      of Sublease for 191 Golden Gate Avenue, San Francisco, CA 94102, dated as      of February 25, 2005, by and between Tenderloin AIDS Resource Center      and Specialty Pharmacies, Inc. (Incorporated by reference to Exhibit 10.6      to the Registrant’s Quarterly Report on Form 10-Q filed on November 14,      2005.)                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.18  | Agreement      of Lease for 19300 S. Hamilton Ave, Gardena, CA 90248, dated as of August      23, 2005, by and between Kroeze Koncepts, Inc, and Medicine Made Easy.      (Incorporated by reference to Exhibit 10.29 to the Registrant’s Annual      Report on Form 10-K filed on March 16, 2006.)                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.19  | Agreement      of Lease for 3940-58 Fourth Avenue, San Diego, CA 92103, dated as of      January 9, 2006, by and between Acadia Corporation and Medicine Made Easy      DBA Priority Pharmacy. (Incorporated by reference to Exhibit 10.30 to the      Registrant’s Annual Report on Form 10-K filed on March 16,      2006.)                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.20  | Asset      Purchase Agreement among Medicine Made Easy and Priority Pharmacy, Inc.,      the David C. Zeiger Trust UTD 4/30/93, David C. Zeiger and Peter Ellman      dated as of December 9, 2005. (Incorporated by reference to Exhibit      10.31 to the Registrant’s Annual Report on Form 10-K filed on March 16,      2006.)                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.21  | Asset      Purchase Agreement Among MOMS Pharmacy of Brooklyn, Inc., H.S. Maiman Rx,      Inc. and Scott Maiman and Nancy Maiman, dated as of March 10, 2006.      (Incorporated by reference to Exhibit 10.32 to the Registrant’s Annual      Report on Form 10-K filed on March 16, 2006.)                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.22  | Warrant      to Purchase Common Stock of Allion Healthcare, Inc. issued to John      Pappajohn Revocable Trust on April 1, 2003. (Incorporated by reference to      Exhibit 10.33 to the Registrant’s Annual Report on Form 10-K/A filed on      November 17, 2006.)                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.23  | Asset      Purchase Agreement by and among Medicine Made Easy and H&H Drug      Stores, Inc., The Youredjian Family Trust, H&H Drug Stores, Inc.      Employee Stock Ownership Trust and Hagop Youredjian, dated as of April 6,      2006.   (Incorporated by reference to Exhibit 10.1 to the      Registrant’s Current Report on Form 8-K filed on April 11,      2006.) |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.24  | Asset      Purchase Agreement by and among Medicine Made Easy and Whittier Goodrich      Pharmacy, Inc., Eddie Gozini and Chen Jing, dated as of April 28,      2006.   (Incorporated by reference to Exhibit 10.1 to the      Registrant’s Current Report on Form 8-K filed on May 3,    2006.)                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                    |

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| 10.25  | Form      of Nonqualified Stock Option Agreement to the Amended and Restated 2002      Stock Incentive Plan. (Incorporated by reference to Exhibit 10.1 to the      Registrant’s Current Report on Form 8-K filed on June 30,      2006.)                                                                                                                                        |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.26  | Asset      Purchase Agreement by and among MOMS Pharmacy of Brooklyn, Inc., Allion      Healthcare, Inc., St. Jude Pharmacy & Surgical Supply Corp., Millie      Chervin and Mitchell Chervin, dated as of July 14,      2006.   (Incorporated by reference to Exhibit 10.1 to the      Registrant’s Current Report on Form 8-K filed on July 14,      2006.) |
|   |                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.27  | Employment      Agreement by and between Allion Healthcare, Inc. and Michael P. Moran.      (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current      Report on Form 8-K filed on October 5, 2006.)                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.28  | Employment      Agreement by and between Allion Healthcare, Inc. and James G. Spencer.      (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current      Report on Form 8-K filed on October 5, 2006.)                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.29  | Employment      Agreement by and between Allion Healthcare, Inc. and Stephen A. Maggio.      (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current      Report on Form 10-Q filed on November 9, 2007.)                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.30  | Employment      Agreement by and between Allion Healthcare, Inc. and Robert E.      Fleckenstein. (Incorporated by reference to Exhibit 10.2 to the      Registrant’s Current Report on Form 10-Q filed on November 9,      2007.)                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.31  | Employment      Agreement by and between Allion Healthcare, Inc. and Anthony D. Luna.      (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current      Report on Form 10-Q filed on November 9, 2007.)                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                   |
| 21.1   | Subsidiaries      of the Registrant. *                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                   |
| 23.1   | Consent      of BDO Seidman, LLP. *                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.1   | Certification      of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the      Securities Exchange Act of 1934, as amended. *                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.2   | Certification      of the Interim Chief Financial Officer pursuant to Rule      13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.      *                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.1   | Certification      by the Chief Executive Officer and Interim Chief Financial Officer      pursuant to Rule 13a-14b/13d-14(b) of the Securities Exchange Act of 1934,      as amended, and 18 U.S.C. § 1350 Section 906 of the Sarbanes-Oxley Act of      2002. *                                                                                                                 |

| * | -      Filed herewith |
|---|-----------------------|

| ** | -      Certain portions of this document have been omitted pursuant to a request      for confidential treatment. We have filed non-redacted copies of this      agreement with the Securities and Exchange  Commission. |
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SCHEDULEII

|                                                |   |                                   |   |   |                               |   |   |                         |   |   |       |   |   |                             |    |
|-----------------------------------------------------|--------|----------------------------------------|--------|--------|------------------------------------|--------|--------|------------------------------|--------|--------|------------|--------|--------|----------------------------------|---------|
|                                                |   |                                   |   |   | Additions                          |   |   |                         |   |   |       |   |
|                                                |   | Balance      atbeginningof      period |   |   | Charge toCost      andExpense |   |   | Chargedto      OtherAccounts |   |   | Deductions |   |   | Balance      atEnd      ofperiod |    |
| Deducted      from asset accounts                   |   |                                   |   |   |                               |   |   |                         |   |   |       |   |   |                             |    |
| Year      ended December 31, 2007:             |   |                                   |   |   |                               |   |   |                         |   |   |       |   |   |                             |    |
| Allowance      for doubtful accounts                |   | $                                      | 425    |   |                               | $      | 529    |                         |   | $      | —    |   |   | $                                | 805     | (1) |   | $ | 149 |   |
|                                                |   |                                   | 425    |   |                               |   | 529    |                         |   |   | —    |   |   |                             | 805     |   |   |   | 149 |   |
| Deducted      from asset accounts                   |   |                                   |   |   |                               |   |   |                         |   |   |       |   |   |                             |    |   |   |   |   |   |
| Year      ended December 31, 2006:             |   |                                   |   |   |                               |   |   |                         |   |   |       |   |   |                             |    |   |   |   |   |   |
| Allowance      for doubtful accounts                |   |                                   | 283    |   |                               |   | 1,077  |                         |   |   | —    |   |   |                             | 935     | (1) |   |   | 425 |   |
| Valuation      allowance on net deferred tax assets |   |                                   | 2,180  |   |                               |   | (913   | )                            |   |   | (1,267     | )      |   |                             | — |   |   |   | — |   |
|                                                |   |                                   | 2,463  |   |                               |   | 164    |                         |   |   | (1,267     | )      |   |                             | 935     |   |   |   | 425 |   |
| Deducted      from asset accounts                   |   |                                   |   |   |                               |   |   |                         |   |   |       |   |   |                             |    |   |   |   |   |   |
| Year      ended December 31, 2005:             |   |                                   |   |   |                               |   |   |                         |   |   |       |   |   |                             |    |   |   |   |   |   |
| Allowance      for doubtful accounts                |   |                                   | 296    |   |                               |   | 128    |                         |   |   | —    |   |   |                             | 141     | (1) |   |   | 283 |   |
| Valuation      allowance on net deferred tax assets |   |                                   | 3,802  |   |                               |   | 201    |                         |   |   | 668        |   |   |                             | 2491    |   |   |   | 2,180 |   |
|                                                |   | $                                      | 4,098  |   |                               | $      | 329    |                         |   | $      | 668        |   |   | $                                | 2,632   |   |   | $ | 2,463 |   |

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| (1) | Consists primarily      of direct write offs net of any recoveries of accounts previously deemed      uncollectible. |
|-----|---------------------------------------------------------------------------------------------------------------------------|

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