SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                  For the eleven months ended December 31, 1999
                                              -----------------

                                       OR
          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number:0-17821

                             ALLION HEALTHCARE, INC.
                             -----------------------
             (Exact name of registrant as specified in its charter)

                   Delaware                                 11-2962027
                   --------                                 ----------
          (State or other jurisdiction of                (I.R.S.  Employer
          incorporation or organization                Identification No.)

          33 Walt Whitman Road, Suite 200A  Huntington Station, NY 11746
          --------------------------------------------------------------
          (Address of principal executive offices)             (Zip Code)

          Registrant's telephone number, including area code...(631) 547-6520
                                                               --------------
           Securities Registered Pursuant to Section 12(b) of the Act:
                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:
                     Common Stock, $.01 Par Value per Share
                                (Title of Class)

          Indicate by check mark whether the registrant (1) has filed all
          reports required to be filed by Section 13 or 15(d) of the Securities
          and Exchange Act of 1934 during the preceding 12 months (or for such
          shorter period that the registrant was required to file such reports),
          and (2) has been subject to such filing requirements for the past 90
          days.

                                                              YES  X      NO

          Transitional small business disclosure format (check one):

                                                              YES         NO  X


<PAGE>






                                TABLE OF CONTENTS


     PART I.

     ITEM 1.     BUSINESS..................................................    3
     ITEM 2.     PROPERTIES................................................    8

     ITEM 3.     LITIGATION................................................    9
     ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......    9

     PART II

     ITEM 5.     MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
                 STOCKHOLDER MATTERS.......................................    9
     ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED RESULTS
                 OF OPERATIONS AND CONSOLIDATED FINANCIAL CONDITION........    9
     ITEM 7.     FINANCIAL STATEMENTS......................................   11
     ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                 AND FINANCIAL DISCLOSURE..................................   23

     PART III

     ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                 PERSONS...................................................   23
     ITEM 10.    EXECUTIVE COMPENSATION ...................................   24
     ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                 MANAGEMENT...... ................                            24
     ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............   26
     ITEM 13.    COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT........   26
     ITEM 14.    EXHIBITS AND REPORTS ON FORM 8-K..........................   26





The  Statements  in this Report on Form 10-KSB that are not based on  historical
information  are  considered  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange  Act of 1934,  including  statements  regarding  the  Company's  hopes,
intentions, beliefs or strategies regarding the future.




<PAGE>




                                     PART I

ITEM 1.  BUSINESS

OVERVIEW

         Allion  Healthcare,   Inc.,  controls  three  wholly  owned  subsidiary
companies,  MOMSPharmacy.com,  Mail Order Meds, Inc., and Mail Order Meds of New
York, Inc. The Company provides specialty  prescription  medication  services to
all 50 U.S. States and provides a convenient,  private and informative  shopping
experience  for health and personal  care  products  through the  Internet.  The
Company  believes it can focus on select niche markets such as  Fertility,  HIV,
Liver and Solid Organ Transplant, Diabetes and Asthma and provide those patients
medications directly from either of its two licensed pharmacies.

The Company has expanded  its  services to include  more than 20,000  health and
beauty products that are available through the  MOMSPharmacy.com  Internet site.
The Company has established a strategic  partnership with a leading distribution
facility  for  fulfillment  services of orders for health and beauty items taken
over the Internet. In addition, the Company plans to provide medical information
content  selection  and healthy  living and  nutritional  information  direct to
customers from the site.

INDUSTRY BACKGROUND

THE GROWTH OF THE INTERNET AND ONLINE  COMMERCE.  The Internet is a  significant
medium for  communication  and  commerce,  enabling  millions of people to share
information and conduct business electronically.  International Data Corporation
estimates the following:
     -    142 million users worldwide  accessed the Internet at the end of 1998,
          and this number is expected to increase to  approximately  502 million
          users by the end of 2002; and
     -    worldwide  business-to-consumer  sales over the Internet will increase
          from  approximately $15 billion in 1998 to approximately  $115 billion
          by 2002.
The unique  characteristics  of the Internet  provide a number of advantages for
online  retailers.   Without  the  physical  constraints  faced  by  traditional
retailers,  online  retailers are able to carry a larger number of products at a
lower cost and with greater merchandising  flexibility.  Additionally,  they can
assist the consumer's  purchase decision by providing  relevant  information and
enabling  consumers to shop at their  convenience  by remaining  open 24 hours a
day, seven days a week.

THE   MARKET.   The   Company's   market   consists   of   prescription   drugs,
non-prescription drugs, personal care products,  beauty and spa, vitamins, herbs
and  nutrition.  Based on  estimates  from  the  National  Association  of Chain
Drugstores and Information Resources, Inc., the Company believes the U.S. market
for health and personal care products will exceed $170 billion in 1999, of which
prescription  drugs comprised over $120 billion.  The Company  believes that the
aging of the U.S.  population will continue to drive increased  demand for these
products.
         To  date,  these  products  have  been  sold  primarily  through  chain
drugstores such as CVS,  Eckerd,  Rite Aid and Walgreens,  mass market retailers
such as Kmart,  Target and Wal-Mart,  supermarkets,  warehouse clubs, mail order
companies and  independent  drugstores and  pharmacies.  However,  a significant
number of consumers  are  beginning  to use the Internet to shop for  healthcare
products.

PRESCRIPTION  DRUGS. This segment includes  prescription  medication for chronic
illnesses, such as diabetes, depression and arthritis. The Company believes that
online  demand  for  these  chronic  illness   products  will  increase  as  the
Internet-enabled  baby boomer  generation ages and as new and improved drugs are
introduced to the market.

NON-PRESCRIPTION DRUGS. This segment includes over the counter remedies (such as
cough, cold, allergy and pain relief medications),  first aid and other products
relate to the body's health needs.

PERSONAL CARE.  This segment  includes  products  related to hair,  body and eye
care, shaving, oral hygiene and feminine needs.

BEAUTY AND SPA. This segment  includes  cosmetics;  fragrances  and a variety of
skin care products.  Some of the factors driving  consumer demand for beauty and
spa products include regular and seasonal new product introductions,  as well as
changing fashion trends.

VITAMINS,  HERBS  AND  NUTRITION.  This  segment  includes  vitamins,  herbs and
nutritional supplements, homeopathy and other natural
products.

LIMITATIONS ON TRADITIONAL CHANNELS OF DISTRIBUTION

         The Company  believes  that the use of the  Internet  to  research  and
purchase  healthcare-related  products is growing as a result of the limitations
of  traditional  channels  for  prescriptions  drugs,   non-prescription  drugs,
personal  care  products and medical  supplies.  These  limitations  include the
following:

<PAGE>

INCONVENIENCE.  The Company  believes that many consumers find the experience of
shopping at  traditional  drugstores  and  pharmacies to be  time-consuming  and
inconvenient due to factors such as store location and layout,  as well as hours
of operation, lack of privacy and level of customer service.

LIMITED SELECTION. Consumers appreciate the opportunity to select from a variety
of products to meet their particular needs. At most traditional stores,  though,
the number of SKUs and the amount of product  inventory is limited.  Traditional
store-based  retailers are  constrained by the physical  space  available in the
store;  inventory  carrying costs and the need to allocate  inventory dollars to
popular products, thereby limiting selection for consumers.

INSUFFICIENT  INFORMATION.  Traditional  drugstores  and  pharmacies  often lack
readily available and detailed  information  useful to consumers in making their
purchase decisions. Moreover, consumers' access to physicians and pharmacists to
meet these information needs is increasingly limited.

         Due to these  limitations,  the Company believes there is a significant
market  opportunity  for an  online  store  that  offers  convenient  access  to
prescription drugs, non-prescription drugs, and personal care products.

THE MOMSPHARMACY.COM SOLUTION

CONVENIENT  SHOPPING   EXPERIENCE.   The  Company  provides  consumers  with  an
intuitive,  easy to use  shopping  interface  that is  available 24 hours a day,
seven  days a week.  The  Company  will  allow  consumers  to shop  quickly  and
conveniently from anywhere Internet access is available. For example, a customer
can create personalized shopping lists for quick and easy reordering.

EXTENSIVE   SELECTION.   The  Company  will  offer  an  extensive  selection  of
healthcare-related   products  that  would  be  impractical  to  stock  in  most
traditional  stores. The Company will offer both traditional  drugstore items as
well as a broad  selection of health,  beauty and wellness  products,  including
alternative-care products.

MOMSPHARMACY.COM STRATEGY

         The Company's  objective is to become a leading Internet  commerce site
providing confidentiality,  convenience and a competitively priced and extensive
selection of products. The Company believes that customers will benefit from and
patronize our site because of its selection, simplicity and ease of use.

CONTINUE TO BUILD OUR BRAND.  Through  existing  customers  and current  patient
referral  sources the Company  will market the launch of its  expanded  Internet
Pharmacy.  The Company has plans to advertise in select markets in areas such as
California,  New York, Washington,  Virginia, Florida and Texas with print media
and radio.  Since 80% of the  purchases  made for products  used in the home are
made by women, the Company believes the name  MOMSPharmacy.com  conveys security
will be easily  remembered.  In addition,  the Company has  reserved  additional
names  including  MOMRX.com  and  WECOSTLESS.com,  which will be directed to the
site. The Company has also reserved the LAPHARMACIA.com  domain name, which will
initially direct visitors to the site. In the near future,  the Company hopes to
expand  its  business  line  to a  Spanish  pharmacy,  and  capitalize  on  this
undeveloped market of five million Spanish speaking Internet users.

MAINTAIN OUR OWN INDEPENDENT PHARMACY LICENSES.  The Company maintains necessary
licenses  to ship  prescription  medications  to all 50  United  States  and has
licensed  pharmacies  located  in New  York  and  Texas.  The  Company  owns the
pharmacies  and provides  confidential  services and  consultation  to patients.
Since it may not be possible for certain of our  competitors to obtain  licenses
in all 50 states, the Company believes these licenses may have significant value
to the Company.

OUTSOURCING OF WAREHOUSING AND DISTRIBUTION FUNCTIONS. The Company believes that
by outsourcing these functions, it will be able to maintain its prices at levels
at or below other leading  Internet  pharmacies.  In addition,  the Company will
have minimal carrying costs for products, as it does not order until a confirmed
Internet order has been placed.  The Company  believes that its  competitors who
are spending  millions to lease  warehouse  space,  bring in inventory and build
computer  systems and delivery  mechanisms to deliver  products to consumers are
missing out on the  opportunities  of the Internet for Business 2 Business  cost
saving opportunities.


<PAGE>

AFFILIATE  PROGRAMS WITH IPA'S AND GROUPS.  The Company  believes that IPA's and
other  insurance  groups are looking to build  identity and  communication  with
their  members.  The Company hopes to be able to offer these groups an affiliate
program  that will  accomplish  these  goals.  The  Company is  planning to give
selected  groups  an  individual  code to pass on to  their  members  when  they
register at the online  pharmacy.  While other affiliate  programs offer 15% and
more in commissions,  the fees are only paid if the customer arrives at the site
through the affiliate's  portal.  Affiliates of the Company will receive smaller
fees; however, the customer will be assigned to the affiliate for all subsequent
purchases.  This should encourage  support from such desired sources as students
at large universities, mothers and small civic and business groups.


COMMERCE

CONVENIENCE AND PERSONALIZATION. The Company will strive to offer a personalized
and convenient shopping  experience for its customers.  Advantages of its online
store include:
     -    access 24 hours a day, seven days a week from anywhere Internet access
          is available
     -    direct shipping to the customer,  with a choice of carrier and time of
          delivery;
     -    the ability to create preferred shopping lists and favorite items;
     -    the ability to track orders online;
     -    instant e-mail confirmation and in stock status.

SELECTION.  Because the Company does not have the same inventory and shelf space
limitations  as  traditional  retail  stores,  it believes it is able to offer a
significantly  greater  number  of  SKUs  than  are  generally  available  in  a
traditional drugstore.

OUR PHARMACIES.  The Company owns and operates pharmacies in New York and Texas.
The Company will only accept  prescriptions  that it can verify as being written
by licensed healthcare providers.  The Company does not prescribe medications or
give medical advice.  The focus of the Company  pharmacies will be on dispensing
medications and providing information to its customers.

ACCEPTING  PRESCRIPTIONS.  Any customer can initiate the prescription process by
ordering  online  from one of the  pharmacies.  The  customer  can direct  their
physicians to call or fax their  prescriptions  or a pharmacist  can contact the
physician directly to obtain prescription  information.  The Company pharmacists
are  required  to  validate  and verify the  completeness  of each  prescription
utilizing  the same  methodology  as a traditional  drugstore.  This may include
contacting the physician or another retail pharmacist.  Once the prescription is
verified, the order is usually filled and shipped the same day.

PAYMENT.  Customers  may pay for their  prescriptions  either by credit  card or
check or by  entering  insurance  information  that shows they are  covered by a
managed care organization,  insurance plan or pharmacy benefit manager with whom
we have a contract.

MARKETING AND PROMOTION.  The marketing and promotion strategy of the Company is
designed  to build  branch  recognition,  drive  customer  traffic to our online
store,  add new  customers,  build strong  customer  loyalty,  encourage  repeat
business and develop additional revenue opportunities.

         The Company  will employ niche  market  development  tactics to capture
additional market share. Since the Company has serviced thousand of patients, it
has  existing  customers to target for its expanded  product  availability.  The
Company has been  including  pre-launch  information  in shipments  for the past
several  months to its customers and this has resulted in thousands of visits to
the MOSPharmacy.com web site.

         The Company may  advertise  in print media and radio in select  markets
where  research  indicates  high Internet  usage and purchases such as New York,
California,  Virginia,  Washington,  Florida  and Texas.  The  Company  does not
currently plan to utilize the expensive branding agreements with AOL or Yahoo at
this time.

The Company may plan to roll out its affiliate program to IPA's, HMOs,  colleges
and Universities and small business groups, by mid-2000.  The Company also plans
to target "MOMS", who actually make more than 80% of the household purchases for
the  products  the  Company  plans to offer  online.  The  Company  believes  an
aggressive  affiliate  program that generates  profits for the  affiliates  will
allow it to expand name recognition and generate sales from across the country.


<PAGE>

COMPETITION.  The online commerce market is new,  rapidly evolving and intensely
competitive.  In  particular,  the  health  and  personal  care  categories  are
intensely competitive and are highly fragmented with no clear dominant leader in
any of the market segments.  The competition can be divided into several groups:
     -    chain drugstores, such as Walgreen's, RiteAid, CVS and Eckerd;
     -    mass market retailers such as Wal-mart, Kmart and Target;
     -    supermarkets, such as Safeway, Albertson's and Kroger;
     -    warehouse clubs
     -    online  retailers of health,  beauty,  wellness,  personal care and/or
          pharmaceutical  products,  such  as  drugstore.com,  Planetrx.com  and
          CVS/Soma.com;
     -    mail order pharmacies, such as Express Scripts and Merck-Medco
     -    Internet-portals  and online service  providers that feature  shopping
          services such as AOL, Yahoo!, Excite and Lycos; and
     -    Cosmetics  departments at major departments stores, such as Nordstrom,
          Macy's and Bloomingdale's and hair salons.

         Many current and potential competitors have longer operating histories,
larger  customer bases,  greater brand  recognition  and  significantly  greater
financial, marketing and other resources than the Company. Many of these current
and  potential  competitors  can devote  substantially  more  resources to their
website  and  systems  development  than  the  Company.  In  addition,   larger,
well-established and well-financed entities may acquire, invest in or form joint
ventures  with  online  competitors  or  drugstore  retailers  as the use of the
Internet and other online services increases.  Some of the Company's competitors
may be able to secure  products from vendors on more  favorable  terms,  fulfill
customer orders more efficiently and adopt more aggressive  pricing or inventory
availability policies than the Company. These retailers also enable customers to
see and  feel  products  in a manner  that is not  possible  over the  Internet.
Traditional  store based retailers can also sell products to address  immediate,
acute care needs, which the Company and other online sites cannot address.

GOVERNMENT  REGULATION.  The Company's business is subject to extensive federal,
state and local  regulations,  many of which are specific to pharmacies  and the
sale  of  over  the  counter  drugs.  For  example,  under  the  Omnibus  Budget
Reconciliation Act of 1990 and related state and local regulations,  pharmacists
are required to offer counseling to customers about medication, dosage, delivery
systems,  common side effects,  adverse effects or interactions  and therapeutic
contraindications,  proper storage,  prescription  refill and other  information
deemed  significant by the pharmacists.  The Company is also subject to federal,
state and local licensing and  registration  regulations  with respect to, among
other things, pharmacy operations and the pharmacists employed.

         The   federal   kickback   law   prohibits   the  knowing  and  willful
solicitation,  offer,  payment or receipt of "any  remuneration  (including  any
kickback, bribe or rebate) directly or indirectly,  overtly or covertly, in cash
or in kind" in return for referring an  individual  for  healthcare  services or
supplies for which  payment may be made in whole or in part under any  federally
funded  healthcare   program.   The  statute  extends  to  both  physicians  and
non-physicians alike. At the state level, laws and regulations that prohibit the
offer,  payment,  solicitation,  or receipt of kickbacks in exchange for patient
referral  may  use  terms  such  as  "bribes",   "rebates",   "commissions"   or
"fee-splitting" to describe the same prohibited conduct. Similarly,  federal and
state  self-referral laws exist, which are aimed at curtailing  over-utilization
of health care  services and supplies by generally  prohibiting  a physician who
(or whose  family)  has a financial  relationship  with a facility or entity for
health care services or supplies from  referring  patients to such a facility or
entity for healthcare services or supplies.

         Until  recently,   Health  Care  Financing  Administration   guidelines
prohibited  transmission of Medicare eligibility  information over the Internet.
The  Company  is  also   subject  to  extensive   regulation   relating  to  the
confidentiality and release of patient records. Additional legislation governing
the  distribution  of medical  records  exists or has been  proposed at both the
state and federal level.  As Congress and State  reimbursement  entities  assess
alternative health care delivery systems and payment methodologies,  the Company
cannot predict which  additional  reforms may be adopted or what impact they may
have on the Company.

CUSTOMERS. The Company provides medications to thousands of individual patients,
who choose the Company as their  pharmacy  provider,  and no single  customer is
significant enough to adversely impact revenue or income if lost.

THIRD PARTY  REIMBURSEMENT  AND MANAGED CARE.  Because the Company is reimbursed
for  its  services  primarily  by  the  Medicare/Medicaid  programs,   insurance
companies,  managed care companies and other third party payors,  in addition to
private pay patients,  the implementation of alternative  payment  methodologies
for any of these  payors  could have an impact on revenues  and profit  margins.
Generally,  managed  care  companies  have  sought to contain  costs by reducing
payments  to  providers.  Continued  cost  reduction  efforts  by  managed  care
companies could  adversely  affect the Company's  results of operations.  If the
Company  were to lose its ability to secure  payment from a third party payor or
the  Medicare/Medicaid  programs, it could have a material and adverse effect on
the Company's operating results.


<PAGE>


EMPLOYEES. As of December 31, 1999, the Company had 19 full-time employees. None
of  our  employees  is  represented  by a  labor  union.  The  Company  has  not
experienced any work stoppages and considers our employee relations to be good.

FORWARD-LOOKING STATEMENTS

In  addition  to   historical   information,   this   Annual   Report   contains
forward-looking  statements.  These  forward-looking  statements  are subject to
certain  risks and  uncertainties  that  could  cause  actual  results to differ
materially from those  reflected in these  forward-looking  statements.  Factors
that might  cause such a  difference  include,  but are not  limited  to;  those
discussed  in the section  entitled  "Management's  Discussion  and  Analysis of
Consolidated  Results of Operations and  Consolidated  Financial  Condition," as
well as the Company's ability to attract customers to its online pharmacy, build
brand  recognition  and obtain the necessary  capital to effectively  launch and
market its online pharmacy. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's opinions only as of
the date hereof.  The Company  undertakes  no  obligation  to revise or publicly
release the results of any revision to these forward-looking statements. Readers
should  carefully  review the risk  factors  described  in other  documents  the
Company  files from time to time with the  Securities  and Exchange  Commission,
including  the  Quarterly  Reports  on Form 10-Q to be filed by the  Company  in
fiscal year 2000.

ITEM 2.  PROPERTIES

         The  Company  occupies  approximately  2,700  square  feet of  space in
Huntington  Station,  New York,  which is leased to the Company through December
31, 2003.  Both the  executive  offices and the New York Pharmacy are located at
this site. The Company also leases  approximately  3,600 square feet of space in
Austin,  Texas for its  nationally  licensed  mail  order  pharmacy.  This lease
expires May 30,  2003.  The Company  also  sublets  space on an annual  basis in
Wilmington, Delaware for MOMSPharmacy.com.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not a party to any material pending legal proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters  were  submitted  to a vote of the  security  holders of the
Company during the fourth quarter of 1999.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
         STOCKHOLDERS

DESCRIPTION OF SECURITIES

         The  authorized  capital  stock of the Company  consists  of  5,000,000
shares of Common Stock, par value of $.01 per share. There were 3,000,000 shares
of Common Stock  outstanding at December 31, 1999. The Company's  Certificate of
Incorporation is available for review upon request.

COMMON  STOCK.  The  holders of Common  Stock are  entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders. Holders
of Common  Stock are  entitled  to  receive  ratably  such  dividends  as may be
declared by the Board of Directors out of funds legally available therefore.  In
the event of a liquidations,  dissolution, or winding-up of the Company, holders
of Common  Stock are  entitled to share  ratably in all assets  remaining  after
payment of  liabilities.  Holders of Common Stock have no preemptive  rights and
have no rights to convert their common Stock into any other  securities.  All of
the outstanding shares of common Stock are fully paid and non-assessable.

MARKET FOR COMMON  EQUITY.  The Company is working with its Counsel and a market
maker to obtain approval from the National  Association of Securities Dealers to
trade on the Over The Counter Bulletin Board.

DIVIDENDS AND DIVIDEND POLICY.  The Company has never paid cash dividends on its
capital  stock  and  has no


<PAGE>

intention of paying any cash dividends in the foreseeable future.

ITEM 6.  MANAGEMENT'S  DISCUSSION   AND  ANALYSIS   OF CONSOLIDATED  RESULTS  OF
         OPERATIONS AND CONSOLIDATED FINANCIAL CONDITION

The following discussion and analysis provides information,  which the Company's
management  believes is  relevant  to an  assessment  and  understanding  of the
Company's results of operations and financial condition.  This discussion should
be read in  conjunction  with the  consolidated  financial  statements and notes
thereto appearing elsewhere herein.

This discussion contains forward-looking statements that are subject to a number
of known and unknown  risks that, in addition to general  economic,  competitive
and other  business  conditions,  could cause actual  results,  performance  and
achievements  to differ  materially  from  those  described  or  implied  in the
forward-looking statements (See Forward-Looking Statements).

The Company is subject to significant  external factors that could significantly
impact its business,  including changes in Medicare and Medicaid  reimbursement,
government  fraud and abuse  initiatives  and other  factors that are beyond the
control  of  the  Company.   These  factors,   as  well  as  future  changes  in
reimbursement   methodologies   and  new  or  changes  in   interpretations   of
regulations, including Pharmacy Laws and regulations, could cause future results
to differ materially from historical trends.

RESULTS OF OPERATIONS
---------------------

The  Company's  fiscal  year end is December  31st.  The  Company  emerged  from
bankruptcy  on February  1, 1999,  and will  report on the eleven  months  ended
December 31, 1999.  In 2000,  the Company will report on the twelve months ended
December 31, 2000.

ELEVEN MONTHS ENDED DECEMBER 31, 1999

NET SALES.  Net sales of the Company's  mail order  medications  divisions  were
$6,937,625  for the eleven months ended  December 31, 1999. The Company was able
to promote its services  through the Internet and was  successful  in developing
retail  sales in Austin,  TX and Long  Island,  NY. The Company was also able to
generate Internet sales for both prescription  medications and health and beauty
products during 1999.

GROSS  PROFIT.  Gross  profit was 23.43% of sales for the  eleven  months  ended
December 31, 1999.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative expenses were $2,638,367 for the eleven months ended December 31,
1999,  and  represented  38.03 % of net sales.  In an effort to  implement  cost
savings and improve  profitability,  the Company's  management team aggressively
updated systems in both Retail Pharmacy Operations.

INTEREST  EXPENSE.  Interest expense during the eleven months ended December 31,
1999 was $965,235.

INCOME  TAXES.  There was no  provision  due to the fact that the Company had an
operating loss for the eleven months ended December 31, 1999.

     LIQUIDITY AND CAPITAL  RESOURCES.  At December 31, 1999,  the Company had a
     cash balance of $316,871. Inventories at December 31, 1999 were $94,718 and
     accounts  receivable  net  of  the  allowance  for  doubtful  accounts  was
     $1,137,469. In addition, the Company has a revolving credit facility in the
     amount of $4.0 million available to the Company for short-term  borrowings.
     Borrowings  under the facility bear interest at Prime + two percent and are
     collateralized  by a perfected and primary security interest in all assets,
     accounts receivable,  trademarks,  licenses,  and values of any kind of the
     Company.  At  December  31,  1999,  borrowings  under  this  facility  were
     $727,804.  In  addition,  The  Company  secured  a loan  from  a  bank  for
     $1,500,000  that bears  interest at 8.5%,  payable  monthly,  with the full
     principle payable in March of 2001.

     The Company believes that its existing capital  resources will enable it to
     maintain its current and planned operations for at least 12 months from the
     date hereof.

     YEAR 2000  COMPLIANCE:  The Company  utilizes  and is  dependent  upon data
     processing  systems  and  software  to  conduct  its  business.   The  data
     processing  systems and software  include those developed and


<PAGE>



maintained by the Company's  third-party  data processing  vendors and software,
which is run on in-house computer  networks.  During the first quarter of fiscal
1999, the Company initiated a review and assessment of all hardware and software
to confirm that it will function properly in the year 2000.

With respect to internal  systems,  the results of that  evaluation to date have
not revealed  any year 2000 issues that,  in the  Company's  opinion,  cannot be
remedied in a timely manner; and therefore are not expected to create a material
risk of  disruption  of  operations.  With  respect  to outside  vendors,  those
vendors, which have responded, have indicated that their hardware or software is
or will be year 2000 compliant in time frames that meet regulatory requirements.
Evaluations  of these issues is  continuing  and there can be no assurance  that
additional  issues,  not presently known to the Company,  will not be discovered
which could present a material risk of disruption to the Company's operations.


ITEM 7. FINANCIAL STATEMENTS

                                                                            Page

        Independent Auditors' Report                                         F-1

        Consolidated Balance Sheet as of
        December 31, 1999                                                    F-2

        Consolidated Statement of Operations for the
        Period from February 1, 1999 to December 31, 1999                    F-3

        Consolidated Statement of Cash Flows for the Period
        From February 1, 1999 to December 31, 1999                           F-4

        Consolidated Statement of Stockholders' Equity
        For the Eleven Months Ended December 31, 1999                        F-5

        Notes to Consolidated Financial Statements                         F-6 -
                                                                            F-12
















<PAGE>


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Allion Healthcare, Inc. and Subsidiaries
Huntington Station, New York

We  have  audited  the  accompanying   consolidated   balance  sheet  of  Allion
Healthcare,  Inc. and  Subsidiaries,  as of December  31, 1999,  and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
the  period  from  February  1,  1999 to  December  31,  1999.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes  examining on a test basis evidence  supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management as well as evaluating the overall financial  statement  presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Allion Healthcare,
Inc. and  Subsidiaries as of December 31, 1999 and the results of its operations
and its cash flows for the period from  February 1, 1999 to December 31, 1999 in
conformity with generally accepted accounting principles.

                                                 HOLTZ RUBENSTEIN & CO., LLP

Melville, New York
March 18, 2000














                                       F-1

<PAGE>

<TABLE>

                    ALLION HEALTHCARE, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31,1999
<CAPTION>

    ASSETS   (Note 6)
    ------
<S>                                                        <C>                          <C>
CURRENT:
  Cash and cash equivalents                                                             $   316,871
  Accounts receivable, net of allowance
    for doubtful accounts of  $ 235,000                                                   1,137,469
  Inventories                                                                                94,718
  Note receivable (Note 4)                                                                  326,393
  Prepaid expenses and other current assets                                                 177,593
                                                                                         ----------
                               Total current assets                                       2,053,044

PROPERTY AND EQUIPMENT, at cost,                            $ 20,659
  less accumulated depreciation and
  amortization of                                           ($  2,134)

TOTAL PROPERTY AND EQUIPMENT                                                                 18,525
OTHER ASSETS                                                                                 20,219
                                                                                        -----------
                                                                                        $ 2,091,788

    LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                                                        $ 284,792
  Accrued expenses and other current liabilities                                            518,799
  Revolving credit line (Note 6)                                                            727,804
                                                                                         ----------
                 Total current liabilities                                                1,531,395

LONG TERM LIABILITIES:
  Note Payable (Note 7)                                                                   1,500,000
                                                                                          ---------
                   Total long term liabilities                                            1,500,000

COMMITMENTS (Note 9)

STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value; shares authorized
   5,000,000; issued and outstanding 3,000,000 (Notes 3,7,10 and 12)                         30,000
  Additional paid-in capital                                                              1,080,000
  Unearned compensation                                                                     (33,000)
  Accumulated deficit                                                                    (2,016,607)
                                                                                        ------------
 TOTAL STOCKHOLDERS' DEFICIT                                                               (939,607)
                                                                                        $ 2,091,788

                 See notes to consolidated financial statements.

</TABLE>

                                       F-2
<PAGE>

                    ALLION HEALTHCARE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      ELEVEN MONTHS ENDED DECEMBER 31, 1999


NET SALES                                                            $6,937,625
COST OF GOODS SOLD                                                    5,312,546
       Gross profit                                                   1,625,079


OPERATING EXPENSES: (Note 9)
      Selling, general and administrative expenses                    2,638,367

      Operating loss                                                 (1,013,288)

INTEREST EXPENSE:                                                     ( 965,235)
                                                                      ----------

LOSS FROM CONTINUING OPERATIONS                                      (1,978,523)

DISCONTINUED OPERATIONS: (Note 4)
   Loss from discontinued operations, net of tax benefit             (1,497,155)
     of $ 820,000.
   Gain on disposal, net of income taxes of $ 820,000                  1,459,071
                                                                       ---------

LOSS FROM DISCONTINUED OPERATIONS                                       (38,084)

NET LOSS                                                            $(2,016,607)

BASIC AND DILUTED LOSS PER COMMON SHARE:
   Continuing operations                                            $      (.66)
   Discontinued operations                                                 (.50)
   Gain on disposal                                                         .49
                                                                          ------
         Net loss                                                   $      (.67)
                                                                    ============

BASIC AND DILUTED WEIGHTED AVERAGE
OF COMMON SHARES OUTSTANDING:                                         3,000,000







                 See notes to consolidated financial statements






                                       F-3

<PAGE>


                    ALLION HEALTHCARE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                      ELEVEN MONTHS ENDED DECEMBER 31, 1999

  OPERATING ACTIVITIES:
Net loss                                                          $  (2,016,607)
Adjustments to reconcile net loss to net cash used
  by operating activities:
     Loss from discontinued operations                               (1,497,155)
     Gain on sale of discontinued operations                          1,459,071
     Non-cash compensation                                               28,000
     Depreciation and amortization                                        2,134
     Provision for doubtful accounts                                    554,798
  Changes in operating assets and liabilities:
     Accounts receivable                                                522,537
     Inventory                                                           97,454
     Note receivable                                                   (326,393)
     Prepaid expenses and other assets                                  176,224
     Accounts payable and accrued expenses                               54,023
                                                                     -----------
        Net cash used by operating activities                          (945,914)
                                                                      ----------

  INVESTING ACTIVITIES:
    Proceeds from dispositions of businesses
      and sales of property and equipment                             3,188,524
    Purchase of property and equipment                                  (18,630)
        Net cash provided by investing activities                     3,169,894
                                                                      ---------

  FINANCING ACTIVITIES:
  Proceeds from sale of Common Stock                                  1,000,000
   Proceeds from draws of line of credit                              9,265,000
   Proc eeds from note payable                                        1,500,000
   Repayment of line of credit                                      (13,672,109)
       Net cash used in financing activities                         (1,907,109)

  NET INCREASE IN CASH AND CASH EQUIVALENTS                             316,871

  CASH, BEGINNING OF PERIOD                                                -
                                                                       ---------
  CASH, END OF PERIOD                                                $  316,871
                                                                      =========

 SUPPLEMENTAL DISCLOSURE:
  Income taxes paid                                                  $        -
                                                                      ==========

  Interest paid                                                      $1,039,894
  Non-cash compensation                                            $     28,000

                 See notes to consolidated financial statements.

                                       F-4

<PAGE>

<TABLE>

                    ALLION HEALTHCARE, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                              (NOTES 3,7,10 AND 12)
<CAPTION>

                             Common Stock
                            5,000,000 Shares
                              $ .01 par value           Additional
                           -------------------
                                                     Par           Paid-In         Unearned
                                     Shares         Value          Capital        Compensation        Deficit          Total
                                     ------         -----          -------        ------------        -------          -----

<S>                                <C>           <C>             <C>             <C>              <C>              <C>
February 1, 1999                        --       $      --       $      --       $      --        $      --        $      --

Issuance of stock                  2,500,000          25,000         975,000            --               --          1,000,000

Stock options issued
for services                            --              --            61,000         (61,000)            --               --

Amortization of
unearned compensation                   --              --              --            28,000             --             28,000

Warrants issued                         --              --            44,000            --               --             44,000

Stock issued to
unsecured creditors                  500,000           5,000            --              --               --              5,000

Net loss                                --              --              --              --         (2,016,607)      (2,016,607)

Balance,
December 31,1999                   3,000,000     $    30,000     $ 1,080,000     $   (33,000)     $(2,016,607)     $  (939,607)
                                 ===========     ===========     ===========     ===========      ===========      ===========






</TABLE>










                                       F-5


<PAGE>


                    ALLION HEALTHCARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  THE COMPANY

         Allion Healthcare,  Inc. and Subsidiaries (the "Company") is the parent
corporation  of three wholly owned  subsidiaries;  MOMSPharmacy.com,  Mail Order
Meds, Inc. and Mail Order Meds of New York, Inc. The Company provides  specialty
prescription   medication  services  to  all  50  U.S.  States  and  provides  a
convenient,  private and informative shopping experience for health and personal
care products through the Internet.
         On September 15, 1998,  the Company,  formally known as The Care Group,
Inc.,  filed for protection under Chapter 11 of the Bankruptcy Code. On February
1, 1999, the United States  Bankruptcy  Court for the Western  District of Texas
entered an order confirming the Company's First Amended Plan of Reorganization.
         In  accordance  with  generally  accepted  accounting  principles,  the
Company was required to adopt "fresh start"  reporting,  which valued all assets
and  liabilities  at their fair values as of the effective  date.  The financial
statements are not comparable with those prepared prior to confirmation  because
they are, in effect,  those of a new company.  See Note 3 regarding  the plan of
reorganization.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS  OF  PRESENTATION.  The  consolidated  financial  statements  include  the
accounts of the Company and its three wholly owned subsidiaries. All significant
inter-company accounts and transactions have been eliminated in consolidation.

INVENTORIES.  Inventories consist entirely of  pharmaceuticals.  Inventories are
recorded  at lower of cost or  market,  cost  being  determined  on a  first-in,
first-out ("FIFO") basis.

USE OF ESTIMATES BY  MANAGEMENT.  The  preparation  of the  Company's  financial
statements in conformity with generally accepted  accounting  principles require
the Company's  management to make certain  estimates and assumptions that affect
the amounts reported in these financial  statements and accompanying notes. Such
estimates  primarily relate to accounts  receivable,  inventory and deferred tax
valuation. Actual results could differ from those estimates.

PROPERTY  AND  EQUIPMENT.  Property  and  equipment  are  stated at cost and are
depreciated using the straight-line  method over their estimated useful lives of
five years for office furniture and equipment.

INCOME  TAXES.  Deferred  tax assets and  liabilities  are  determined  based on
differences between financial reporting and tax basis of assets and liabilities,
and are  measured  using the  enacted  tax rates and laws that will be in effect
when the differences are expected to reverse.

STATEMENT  OF CASH FLOWS.  For  purposes  of the  statement  of cash flows,  the
Company  considers all highly liquid debt instruments  purchased with a maturity
of three months or less to be cash equivalents.

CREDIT  RISK.  Financial  instruments  that  potentially  subject the Company to
concentrations of credit risk

                                       F-6

<PAGE>

consist  principally  of cash  equivalents  and trade  receivables.  The Company
places  its cash  equivalents  with  high-quality  financial  institutions.  The
Company's customer base consists of a large number of diverse customers.

NET LOSS PER SHARE  INFORMATION.  The Company accounts for net loss per share in
accordance  with SFAS No. 128.  Basic  earnings per share is computed  using the
weighted  average  number  of  common  and  dilutive  common  equivalent  shares
outstanding  during  the  period.  Common  equivalent  shares,  consist  of  the
incremental  common  shares  issuable  upon the  exercise  of stock  options and
warrants  (using  the  Treasury  Stock  Method):  common  equivalent  shares are
excluded from the calculation if their effect is anti-dilutive. Diluted loss per
share for the eleven months ended December 31, 1999, does not include the impact
of 735,100 and 100,000  common  stock  options and  warrants  then  outstanding,
respectively, as the effect of their inclusion would be anti-dilutive.

STOCK-BASED  COMPENSATION.  The  Company  applies APB Opinion No. 25 and related
interpretations in accounting for stock-based  compensation to employees.  Stock
compensation to  non-employees is accounted for at fair value in accordance with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."

NOTE 3.  PLAN OF REORGANIZATION

         On February 1, 1999 the Bankruptcy  Court  confirmed the Company's Plan
of Reorganization. The confirmed plan provided for the following:

SECURED  DEBT.  The  Company's  $5,135,000  secured debt (secured by a first and
senior  lien on all  assets  and  intangibles),  was  reaffirmed.  This debt was
converted into a $4,000,000 line of credit, with interest accruing at prime plus
2%,  not to exceed  85% of  qualified  accounts  as  defined.  The  balance  was
converted into a three-year  note,  with quarterly  interest  payments due, at a
rate of prime  plus 4%.  The  prime  rate at  December  31,  1999 was  8.5%.  In
addition, the Company issued 750,000 warrants (See Note 10).

PRIORITY  TAX CLAIMS.  The Company is required to pay the State of Texas a claim
of approximately  $16,000 in equal quarterly payments over six years with annual
interest of 12%.

TRADE AND OTHER MISCELLANEOUS CLAIMS. The holders of approximately $7,844,000 of
trade and other  miscellaneous  claims  received  a total of  500,000  shares of
common  stock,   issued  on  a  pro-rata  basis.  The  stock  certificates  were
distributed in February 2000.

PREFERRED  STOCK.  The  holders of all shares of  preferred  stock  received  no
compensation of any kind from the Company.

COMMON STOCK. The holders of all shares of common stock received no compensation
of any kind from the Company.

NOTE 4.  DISCONTINUED OPERATIONS

         On June 25, 1999, the Company sold certain assets of its Houston, Texas
operation including all

                                       F-7

<PAGE>

licenses, inventory, customer lists and names. The Company retained all accounts
receivable  for  services  rendered  prior to June 25,  1999.  As a result,  the
Company  discontinued  its operation in Houston,  Texas as of June 25, 1999. The
proceeds of the sale were  $2,820,805,  including  $2,420,805 in cash and a note
for $400,000  payable on June 30, 2000.  The Company has recorded  $2,683,000 in
bad debt expense  representing all accounts  receivable from Houston uncollected
as of December 31, 1999.
         In addition,  the Company sold all of its records,  specified contracts
and licenses,  operating certificates and permits of Commonwealth Certified Home
Care,  Inc.,  a  certified  home  health  agency,  for  $302,000.  The  sale was
consummated in August 1999 in accordance  with the  confirmation  order from the
Bankruptcy Court.

Net revenues and loss from discontinued operations are as follows:

Revenues, net                         $ 4,024,771
                                      -----------
Cost and expenses:
Cost of revenues                        2,445,112
Selling, general and administrative     3,829,201
Depreciation and amortization              67,613
                                      -----------
                                        6,341,926
                                      -----------
Operating loss                         (2,317,155)
Income tax benefit                        820,000
                                      -----------

Net Loss                              $(1,497,155)
                                      ===========

NOTE 5.  SETTLEMENT OF CLAIM WITH THE I.R.S.

         The United  States  Bankruptcy  Court entered an order  confirming  the
settlement of the I.R.S.  claim  against the Company on September 29, 1999.  The
Company has agreed to pay $130,000 over the next six years to satisfy the I.R.S.
claim.  The Company will not carry forward any net  operating  losses or credits
available from pre-1999  periods,  into  post-1998 tax years.  Also, the Company
will not carry back any net operating  losses to pre-1999 tax years. The Company
will have no federal  income tax liability  from any periods prior to January 1,
1999. In addition, the I.R.S. will not conduct any further audits of the company
for periods prior to January 1, 1999,  provided that the terms of the Bankruptcy
Court's confirmation order of February 1, 1999 apply.

NOTE 6.  REVOLVING CREDIT LINE

         The  Company  has a  revolving  credit  facility  in the amount of $4.0
million  available for short-term  borrowings.  This credit facility  expires on
April 21,  2001.  Borrowings  under the  facility  bear  interest at Prime + two
percent and are collaterized by a perfected and primary security interest in all
assets, accounts receivable,  trademarks, licenses and values of any kind of the
Company.

NOTE 7.  NOTE PAYABLE

         The Company has a promissory  note in the amount of $1,500,000  that is
due and payable on March 31, 2001.  The note bears interest at 8.5% annually and
the Company is required to make monthly interest

                                       F-8

<PAGE>

payments.  The note was guaranteed by a Director of the Company, in exchange for
375,000 warrants to purchase common stock of the Company at a price of $1.00 per
share (See Note 13).

NOTE 8.  INCOME TAXES

         A reconciliation of the income tax (benefit)  computed at the statutory
Federal income tax rate to the reported amount follows:

                                                      December 31, 1999
                                                      -----------------

Federal Statutory Rate:                              34%
                                                     ---
Tax benefit at Federal Statutory Rates                     $ (672,693)
Loss in excess of available benefit                           670,908
Other, net                                                      1,785
                                                         ---------------
                                                           $       -

Deferred tax assets comprise the following:

                                                     December 31, 1999
                                                     -----------------

Allowance for doubtful accounts                          $     94,813
Depreciation                                                      360
Loss carryforwards                                            725,979
                                                          -----------

Gross deferred tax assets                                     821,152
Valuation allowance                                         ( 821,152)
                                                         -------------
                                                         $        -

NOTE 9.  LEASE COMMITMENTS

         The Company  leases  office space in Huntington  Station,  New York and
Austin, Texas. The lease for the New York space expires in December 2003 and the
lease for the Texas space expires in May 2003.
         At December 31, 1999, the Company's lease  commitments  provide for the
following minimum annual rentals.

                               2000     $ 117,110
                               2001       121,668
                               2002       128,841
                               2003        99,891
                                        ---------

                                        $ 467,510
                                        =========

         During the eleven  months  ended  December  31,  1999,  rental  expense
amounted to $ 106,805.

                                       F-9

<PAGE>

NOTE 10. STOCKHOLDERS' EQUITY

         a. Common stock
                  Pursuant to the Company's  Plan of  Reorganization,  2,500,000
         shares of  common  stock  were  issued  to an  investor  group led by a
         director of the Company for proceeds of $1,000,000.

         b.   Common shares reserved
                  Common shares reserved at December 31,1999, are as follows:

                  Stock Option Plan                           514,900
                  Warrants                                    100,000

            c.   Stock Options
                  (i) Under the terms of the  Company's  Stock Option Plan,  the
         Board of Directors may grant incentive and  nonqualified  stock options
         to employees,  officers, directors, agents, consultants and independent
         contractors of the Company.  In connection with the introduction of the
         Stock Option Plan,  1,250,000  shares of common stock were reserved for
         future  issuance.  Generally,  the Company  grants  stock  options with
         exercise  prices  equal to the fair market value of the common stock on
         the date of the grant, as determined by the Board of Directors. Options
         generally vest over a two to five year period and expire ten years from
         the date of the grant.

The following  table  summarizes  activity under the Company's Stock Option Plan
for the eleven months ended December 31, 1999:

                                      Number of        Weighted Average
                                       shares           Exercise Price
                                       ------           --------------
 Initial Authorization:
 Options granted                      735,100               $ .18
 Options exercised
 Options cancelled                       -                    -
                                      --------              ---------
Outstanding at
December 31, 1999                      735,100              $   .18
                                     =========              ========

The following table summarizes  information  regarding stock options outstanding
and exercisable as of December 31, 1999:

<TABLE>

                  Options Outstanding                                      Options Exercisable
------------------------------------------------------------         ------------------------------
                                   Weighted          Weighted                             Weighted
Range of                           Average            Average                              Average
Exercise           Number          Remaining         Exercise           Number            Exericse
Prices          Outstanding    Contractual Life       Price           Outstanding           Price
------          -----------    ----------------       -----           -----------           -----

<S>               <C>             <C>                  <C>                <C>               <C>
$.17-$.66         735,100         9.1 years            $.18               334,822           $ .17

</TABLE>

                                      F-10

<PAGE>

(ii) Under APB No. 25, no  compensation  expense is recognized when the exercise
price of the  Company's  employee  stock  options  equals  the fair value of the
underlying  stock  on the  date  of the  grant.  The  Company  has  elected  the
disclosure-only  provisions  of Statement of Financial  Accounting  Standard No.
123, Accounting for Stock-Based  Compensation ("FASB 123") in accounting for its
employee  stock  options.   Accordingly,   no  compensation   expense  has  been
recognized.  Had the Company recorded compensation expense for the stock options
based on the fair  value at the  grant  date  for  awards,  consistent  with the
provisions  of SFAS No. 123, the Company's net loss and net loss per share would
not have been impacted.
         The fair value of each  option  grant is  estimated  on the date of the
grant using the  Black-Scholes  option  pricing  model.  The following  range of
weighted-average assumptions were used for grants during the year ended December
31, 1999.

                           Year Ended December 31, 1999
                           ----------------------------

Dividend yield                      0.00%
Volatility                          0.00%
Risk-free interest rate             5.50%
Expected life                      Five years

         The weighted  average grant date fair value of options  granted  during
1999 was $.13.

         The  Black-Scholes  option  valuation  model was  developed  for use in
estimating the fair value of traded  options which have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.   Because  the   Company's   stock   options  have   characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion the existing models do not necessarily  provide a reliable
single measure of the fair value of its stock options.

d.   Warrants

         On June 30, 1999, the Company  repurchased  750,000 warrants previously
issued to a lender in connection with its new financing  agreement for $500,000.
The Company has recorded the payment as prepaid  interest and is amortizing  the
balance over the expected term of the credit facility.

         During  1999,  the Company  issued  100,000  common  stock  warrants to
consultants, which resulted in compensation approximating $12,000.

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS

         The methods  and  assumptions  used to  estimate  the fair value of the
following classes of financial instruments were:
         Current Assets and Current  Liabilities:  The carrying  amount of cash,
current  receivables  and  payables  and  certain  other  short-term   financial
instruments approximate their fair value.
         Long-Term  Debt:  The  fair  value of the  Company's  long  term  debt,
including the current portions, was

                                      F-11

<PAGE>

estimated using a discounted cash flow analysis,  based on the Company's assumed
incremental  borrowing  rates for similar types of borrowing  arrangements.  The
carrying   amount  of  variable  and  fixed  rate  debt  at  December  31,  1999
approximates its fair value.

NOTE 12. SUBSEQUENT EVENTS

     On January 4, 2000,  the  Company  settled a pending  lawsuit  whereby  the
Company will receive $121,580 in six monthly  installments  beginning in January
2000.

     On January 11, 2000,  The Board of Directors  finalized an agreement with a
outside  Director for his  guarantee  of the $1.5 million loan with a bank.  The
Director  was granted  warrants to purchase  375,000  shares of common  stock at
$1.00,  for his personal  guarantee on the loan,  which serves as collateral for
the loan, and to guarantee an extension for the loan until March 31, 2001.

     On February  7, 2000,  the  Company  was deemed to have  complied  with all
requirements  of the  Confirmation  order  issued on February 1, 1999 related to
issuance  of  Common  Stock  of  approved  creditors.  In  accordance  with  the
Confirmation  Order,  the  Company  issued  500,000  shares of  Common  Stock to
approved creditors.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE

         Not applicable.

ITEM 9.  MANAGEMENT OF THE COMPANY

                        EXECUTIVE OFFICERS AND DIRECTORS

         Our executive officers and Directors, their ages and the positions held
by them, as of December 31, 1999 are as follows:

NAME                                AGE   POSITION
----                                ---   --------

Michael P. Moran.................   39    President and Chief Executive Officer,
                                          Chief Financial Officer and Secretary
John Pappajohn ..................   71    Director
Derace Schaffer, M.D. ...........   52    Director

         MICHAEL P. MORAN has served as President and CEO since  September 1997.
Mr.  Moran was hired to turn  around the  financial  picture of the  Company and
refocus its core  business  units.  Mr.  Moran  managed  the  Company  through a
successful  Chapter 11  reorganization  in 4 months,  increased  business in the
Specialty  Pharmacy  divisions,  and launched the Internet Pharmacy  operations.
From 1996 to September of 1997 Mr. Moran was a Regional Vice  President at Coram
Healthcare,  Inc. From 1990 to 1996 Mr. Moran was a Regional Vice  President for
Chartwell  Home  Therapies,  Inc. From 1982 to 1990 Mr. Moran held various sales
and  management  positions at Critical Care America,  Inc. Mr. Moran  received a
B.A. in Management from

                                      F-12

<PAGE>

Assumption College, and was a second team All-American Football player.

         JOHN  PAPPAJOHN has served as a Director  since 1997.  Since 1969,  Mr.
Pappajohn  has been the sole owner of  Pappajohn  Capital  Resources,  a Venture
Capital Firm and  President  of Equity  Dynamics,  Inc., a financial  Consulting
firm,  both based in Des  Moines,  Iowa.  Mr.  Pappajohn  currently  serves as a
Director of the following public companies:  American Physician Partners,  Inc.,
Patient  InfoSystems,  Inc., and Pace Health Management  Systems.  Mr. Pappajohn
received his B.S.C. from the University of Iowa.

         DERACE SCHAFFER, M.D. has served as a Director since 1997. Dr. Schaffer
is President of the Ide Imaging Group, P.C., as well as the LAN Group, a venture
capital firm  specializing  in healthcare and high  technology  investments.  He
serves as a Director of the  following  public  companies:  Patient  Information
Systems,  Inc., American Physician Partners,  Inc., and Oncor, Inc. He is also a
Director of several private companies including:  Analytica, Inc., Card Systems,
Inc., and Logisticare,  Inc. Dr. Schaffer is a board certified  Radiologist.  He
received his post-graduate  radiology training at Harvard Medical School and The
Massachusetts General Hospital,  where he served as Chief Resident. Dr. Schaffer
is a member of Alpha Omega Alpha,  the national  medical  honor society and is a
Clinical  Professor  of  Radiology  at the  University  of  Rochester  School of
Medicine.

ITEM 10. EXECUTIVE COMPENSATION

         The following table sets forth the  compensation  received for services
rendered to Allion Healthcare, Inc., for 1999 by its Chief Executive Officer.


                                                  Long Term
                                                Compensation
                                                  Awards
     Name and                      1999          Securities
     Principal            Annual Compensation    Underlying        All Other
     Position           Salary         Bonus       Options      Compensation (1)
-------------------     ----------  ---------- ---------------  ----------------
Michael P. Moran        $140,231    $64,231 (1)    500,000          $120,000
President, Chief
Executive Officer,
Chief Financial
Officer, Secretary

(1) Represents  commission earned for sale of Houston operations,  which was not
paid out to Mr. Moran during 1999.

Mr.  Moran  holds  options to  purchase  500,000  shares of common  stock of the
Company. There is no public market for the Company's securities. Accordingly, it
is difficult to determine the value of such options.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         As of December 31,  1999,  set forth below are the number of shares and
the  percentage  of  outstanding  shares of Common  Stock of the  Company  owned
beneficially  by each director of the Company and by each  shareholder  known by
the  company  to own more than  five  percent  of the  Company's  common  stock.
(INCLUDING THOSE SHARES SUBJECT TO OUTSTANDING OPTION OR WARRANTS):




                                                          BENEFICIAL OWNERSHIP

 NAME AND ADDRESS                                 NUMBER OF
OF BENEFICIAL OWNER                               SHARES (1)      PERCENTAGE (2)
-------------------                               -----------     --------------

John Pappajohn                                    1,100,000 (3)           35.48%
2116 Financial Center
Des Moines, IA  50309

Derace Schaffer, M.D.                               300                   9.67%
3489 Elmwood Avenue
Rochester, NY  14610

Michael P. Moran                                    500,000 (5)           16.12%
33 Walt Whitman Road, Suite 200A
Huntington Station, NY 11746

Northwest Holdings, Ltd.                            250,000               8.06%
4th Floor, Bank of Nova Scotia Bldg.
P.O. Box 1068, Georgetown
Grand Cayman, Cayman Islands, B/.W.I.

Edgewater Private Equity Fund II, L.P.              562,500              18.14%
900 N. Michigan Avenue, 14th Floor
Chicago, IL  60611

Officers and Directors                            1,900,000              61.29%
As a group (3 persons)

(1) This table is based upon information supplied by the officer,  directors and
principal  shareholders  and applicable  schedules filed with the Securities and
Exchange  Commission.  Unless otherwise indicated in the footnotes to this table
and subject to community  property laws where  applicable,  the Company believes
that each of the shareholders named in this table has sole voting and investment
power with respect to the shares indicated as beneficially  owned. The number of
shares  for each  person  is  calculated  in  accordance  with the  rules of the
Securities and Exchange Commission and includes shares each person has the right
to acquire within 60 days from the exercise of stock options.

Percentages  are calculated on the basis of the amount of outstanding  shares of
stock  (2,500,000),  plus for each  person or group,  any shares  that person or
group has the right to acquire within 60 days through the exercise of options.

 Includes 475,000 shares held by Halkis,  Ltd., a sole  proprietorship  owned by
Mr. Pappajohn,  250,000 shares held by Thebes, Ltd., a sole proprietorship owned
by Mr. Pappajohn's spouse. Mr. Pappajohn disclaims  beneficial  ownership of the
shares owned by Thebes,  Ltd. Includes 50,000 Director Options granted effective
February 1, 1999.

(4) Includes 50,000 Director Options granted effective February 1, 1999.

(5) Includes 500,000 options granted effective February 1, 1999.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

             One  of  the  Company's  Directors,   John  Pappajohn,   personally
             guaranteed  a loan made by West Bank to the  Company.  The loan was
             for $ 1,500,000  and is due on June 16, 2000.  On January 11, 2000,
             Mr.  Pappajohn,   agreed  to  personally  guarantee  the  note,  as
             collateral, through March 31, 2001 in exchange for 375,000 warrants
             to purchase common stock at $1.00 per share.

ITEM 13. COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT

         The Company knows of no existing failure to file a required form.

ITEM 14. EXHIBITS AND REPORTS ON FOR 8-K
         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

         Exhibit           2.1      Confirmation Order dated February 1, 1999.*

                           2.2      First Amended Plan of Reorganization  of The
                                    Care  Group, Inc.,  et al  dated  January 2,
                                    1998.*

                           3.1      Restated Certificate of Incorporation of the
                                    Registrant,  filed  with  the  Secretary  of
                                    State of Delaware on October 7, 1999.*

                           3.2      Amended  and   Restated   By-laws   of   the
                                    Registrant.*

                           10.1     Asset  Purchase Agreement, dated as of  June
                                    25, 1999, by and  between The Care Group  of
                                    Texas, Inc.,  Care Line of Houston, Inc. and
                                    Osher Investments, Ltd.*

                           10.2     Agreement,  dated  as  of  November 1, 1999,
                                    among  The Care  Group,  Inc.,  Commonwealth
                                    Certified Home Care, Inc. and Visiting Nurse
                                    Service of New York Home Care.*


*Filed as an  exhibit  to the  Company's  Current  Report on Form 10-K  filed on
October 18, 1999 SIGNATURES


             In  accordance  with Section 13 or 15(d) of the  Exchange  Act, the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.


              Date:   March 18, 2000

                                       ALLION HEALTHCARE, INC., AND SUBSIDIARIES
                                       -----------------------------------------
                                                      (Registrant)

                                       By:  Michael P. Moran
                                            ------------------------------------
                                            Michael P. Moran, Director
                                            President, Chief Executive Officer,
                                            Chief Financial Officer, Secretary

     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

/s/  John Pappajohn
----------------------------------------
      John Pappajohn, Director
      Date: March 16, 2000

/s/    Derace Schaffer, M.D.
----------------------------------------
        Derace Schaffer, M.D., Director
        Date: March 16, 2000