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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
      þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission file number: 0-17821
      ALLION HEALTHCARE,
    INC.
 (Name of registrant as specified
    in its charter)
      Delaware(State or other jurisdiction
    of
    incorporation or organization)

11-2962027(I.R.S. Employer
    Identification No.)   1660 Walt Whitman Road, Suite 105, Melville, New York
    11747
 (Address of principal executive offices)
  Registrants telephone number:
    (631) 547-6520
  Securities Registered Pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value

The NASDAQ Global Market   Securities Registered Pursuant to Section 12(g) of the
    Act: None
      o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      Form 10-K.




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##### 





TABLE OF
    CONTENTS
   
 PART IItem 1.


Business


4Item 1A.


Risk Factors


23Item 1B.


Unresolved Staff Comments


36Item 2.


Properties


36Item 3.


Legal Proceedings


36Item 4.


Submission of Matters to a Vote of Security
    Holders


37PART IIItem 5.


Market For Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


37Item 6.


Selected Financial Data


40Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operation


41Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


53Item 8.


Financial Statements and Supplementary Data


55Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


86Item 9A.


Controls and Procedures


86Item 9B.


Other Information


88PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


88Item 11.


Executive Compensation


88Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


88Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


88Item 14.


Principal Accountant Fees and Services


88PART IVItem 15.


Exhibits and Financial Statement Schedules


89Signatures


90Schedule II  Valuation and
    Qualifying Accounts


95EX-10.32EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1   2




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INFORMATION
    RELATED TO FORWARD-LOOKING STATEMENTS
  Form 10-K
  Form 10-K
  
    The impact of changes in reimbursement rates on our results of
    operations, including the impact of the California Medi-Cal
    reductions;
    The impact of any repayment obligations resulting from the New
    York State Medicaid audit;
    Our repayment obligations from the denial of our Medi-Cal change
    of ownership application and our ability to obtain contribution
    for any such repayment obligations from the former owners of
    Biomed America, Inc., or Biomed;
    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;
    Growth opportunities from our merger with Biomed;
    The sufficiency of the supply of drugs and inventory on hand to
    meet the demand for our business;
    The satisfaction of our minimum purchase obligations under our
    agreement with AmerisourceBergen Drug Corporation;
    Our ability to sell auction-rate securities; and
    Our ability to operate profitably and grow our company,
    including through acquisition opportunities.    
    The effect of regulatory changes, including the Medicare
    Prescription Drug Improvement and Modernization Act of 2003;
    The reduction of reimbursement rates and changes in
    reimbursement policies and standards by government and other
    third-party payors;
    Declining general economic conditions and restrictions in the
    credit markets;
    Our ability to manage our growth with a limited management team;
    Compliance with our financial covenants under the Credit and
    Guaranty Agreement with CIT Healthcare LLC; 3




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##### Table of Contents




    Successful integration of the Biomed business; and
    The availability of appropriate acquisition candidates and our
    ability to successfully complete and integrate acquisitions;  Form 10-K Form 10-K. Form 10-K,
 PART I  Item 1.
    Business.  OVERVIEW
      Form 10-K
    
    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 that assists patients and healthcare
    providers with the complex reimbursement processes of Medicaid
    and other state-administered programs, such as the AIDS Drug
    Assistance Program, or ADAP, that many of our HIV/AIDS patients
    rely on for payment;
    Arrangement for the timely delivery of medications in a discreet
    and convenient manner as directed by our patients or their
    physicians;
    Specialized pharmacists who consult with patients, physicians,
    nurses and ASOs to provide education, counseling, treatment
    coordination, clinical information and compliance
    monitoring; and 4




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
    Information systems that make the provision of clinical data and
    the transmission of prescriptions more efficient and accurate.      
    Specialized nursing for the timely administration of medications
    as directed by physicians;
    Specialized pharmacists who consult with patients, physicians,
    and nurses to provide education, counseling, treatment
    coordination, and clinical information; and
    Reimbursement experience that assists patients and healthcare
    providers with the complex reimbursement processes.    Therapy Products

Therapy Mix(2)Blood Clotting Factor


60.0
%IVIG(1)


34.0
%Other


6.0
%Total


100.0
%     (1)
    
    Intravenous immunoglobulin.(2)
    
    Based on revenue for the nine months ended December 31,
    2008, after we acquired the Specialty Infusion business on
    April 4, 2008.  GEOGRAPHIC
    FOOTPRINT
     5




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SPECIALTY
    HIV DIVISION
    HIV/AIDS
      HIV/AIDS
     6




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Products
    and Services
      Adherence
  Packaging. dose-by-dose
    Delivery.
  Reimbursement
    Management
      out-of-pocket
   7




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Disease
    Management
      
    Programs to monitor dosage compliance and outcomes;
    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 combination therapies;
    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 for
    patients; and
    Assistance in coordinating treatment outside of the home or
    hospital setting.      Information
    Systems
  OPUS-ISM
  Relationships
    with Pharmaceutical Companies
   8




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FUZEON Form 10-K
    SPECIALTY
    INFUSION DIVISION
    Hemophilia
      Autoimmune
    Disorders and Primary Immunodeficiency Diseases
    
    CIPD, which is a neurological disorder characterized by
    progressive weakness and impaired sensory function in the legs
    and arms. CIPD may be treated with corticosteroids such as
    prednisone, through plasmapheresis (plasma exchange) or through
    immunoglobulin, or IVIG, therapy.
    Myasthenia Gravis, or MG, which is a chronic autoimmune
    neuromuscular disorder that is characterized by fluctuating
    weakness of the voluntary muscle groups. There is no known cure
    for MG but it may be treated through medications, including IVIG
    therapy, corticosteroids and anticholinesterase agents, through
    a thymectomy (surgical removal of the thymus gland) or through
    plasmapheresis.
    Guillain-Barre syndrome is an uncommon inflammatory disorder in
    which a persons own immune system attacks his or her
    nerves, typically causing severe weakness and numbness in the
    legs and arms. Eventually a persons whole body may become
    paralyzed, including the muscles used for breathing. No cure
    exists for this disorder, but several treatments can ease the
    symptoms and reduce the duration of the illness. The two main
    treatments for Guillain-Barre syndrome are IVIG therapy and
    plasmapheresis. 9




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
    Multiple Sclerosis, or MS, is a chronic, often disabling disease
    that attacks the central nervous system. Symptoms of MS may be
    mild, such as numbness in the limbs, or severe, such as
    paralysis or loss of vision. A person with MS will have symptoms
    of the disease that range from relapsing remitting, where
    symptoms fade and then return off and on for years, to
    progressive relapsing, where symptoms steadily worsen throughout
    a persons life. MS is generally treated with interferon
    beta drugs.
    Primary Immunodeficiency Diseases, or PID, are a group of
    disorders caused by an absence or malfunction of a component of
    the immune system (such as common variable immune deficiency, or
    CVID). The component most often missing or malfunctioning is
    antibodies or immunoglobulins. Due to the lack of antibodies
    these patients have an increased susceptibility to
    life-threatening infections and chronic lung disease. IVIG
    treatment replaces the antibodies missing or malfunctioning.
    Currently, there is no available alternative therapy.  RSV
  ® ® ®
  Products
    and Services
    Disease
    Management and Adherence
    
    Developing clinical protocols to safely administer drug therapy;
    Monitoring compliance and outcomes;
    Educating and consulting with patients on their disease, drugs
    being used and treatment regimen;
    Assisting patients in setting realistic expectations of their
    disease management;
    Supporting patients families in coordinating
    back-up care
    in the event of an acute episode;
    Providing inventory management and recordkeeping system for
    patients; and
    Coordinating treatments outside of patient settings, such as
    when a patient is traveling.    Reimbursement
    Management
   10




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Amber Rx,
    MARKETING
    www.momspharmacy.com, Form 10-K, Form 10-K.
    SUPPLIERS
  month-to-month
 11




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COMPETITION
    
    Specialty pharmacy distributors such as Medco Health Solutions,
    Inc., BioScrip, Inc. and Express Scripts, Inc.;
    Pharmacy benefit management companies such as Medco, Express
    Scripts and CVS/Caremark Rx, Inc.;
    Specialty pharmacy divisions of national wholesale drug
    distributors;
    Hospital-based pharmacies;
    Retail pharmacies;
    Small local infusion providers;
    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.    THIRD
    PARTY REIMBURSEMENT, COST CONTAINMENT AND
    LEGISLATION
    Medicaid and ADAP.
   12




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13




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over-the-counter fee-for-service
  Medicare. fee-for-service
   14




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notice-and-comment
        GOVERNMENT
    REGULATION
    
    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; 15




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
    Repackaging, storing, and distributing prescription
    pharmaceuticals;
    Incentives to patients; and
    Product discounts.      Prescription Drug Marketing Act.
  Federal Food, Drug, and Cosmetic Act.
  Controlled Substances Act.
  Federal Mail Order Provisions.
 16




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Pharmacy Drug Use Review Law.
  Federal Anti-Kickback Law and State Anti-Kickback
    Laws.
    Health Insurance Portability and Accountability Act of 1996,
    or HIPAA, and its implementing regulations.
  
    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). 17




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Office of the Inspector General, or OIG, Fraud Alerts and
    Advisory Opinions.
  State Unfair and Deceptive Trade Practices and Consumer
    Protection Laws.
  The Stark Law.
    Beneficiary Inducement Prohibition.
 18




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False Claims; Insurance Fraud Provisions.
    Reform.
  Government Investigations.
 19




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qui tam
  Privacy and Confidentiality; Security and Electronic
    Transactions.
 20




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Developments in Health Information
    Technology. e-prescribing, E-prescribing
 21




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e-prescribing
  e-prescribing
  Regulation of the Practice of Pharmacy.
  out-of-state out-of-state
   22




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THE
    COMPANY
  (631) 547-6520.
  www.allionhealthcare.com, www.momspharmacy.com www.biomed-rx.com Form 10-K, Form 10-Q, Form 8-K, www.sec.gov
  EMPLOYEES
    Item 1A.
    Risk
    Factors.  The occurrence of any of the following risks could materially
    harm our business, financial condition and results of
    operations.
  Risks
    Related to Our Company
  Changes
    in reimbursement or coverage limitations by third-party payors,
    including Medicaid and Medicare, could harm our
    business.
   23




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over-the-counter fee-for-service
    notice-and-comment
   24




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If we
    do not continue to qualify for preferred reimbursement programs
    in California and New York, our net sales could
    decline.
        The
    denial of our Medi-Cal change of ownership application could
    have a material adverse impact on our financial
    condition.
      Downturns
    in the general economy and restrictions in the credit markets
    may result in reduced reimbursement rates and negatively impact
    our access to financing sources.
    If
    demand for our products and services is reduced, our business
    and ability to grow would be harmed.
   25




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
    A cure or vaccine for HIV/AIDS, Hemophilia, auto-immune
    disorders, or PID;
    The emergence of a new strain of HIV that is resistant to
    available HIV/AIDS medications;
    Shifts to treatment regimens other than those we offer;
    New methods of delivery of existing HIV/AIDS medications or of
    injectible or infusible medications that do not require our
    specialty pharmacy and disease management services;
    Recalls of the medications we sell;
    Adverse reactions caused by the medications we sell;
    The expiration of or challenge to the drug patents on the
    medications we sell; or
    Competing treatment from a new HIV/AIDS medication or from a new
    injectible or infusible medication or a new use of an existing
    HIV/AIDS, injectible, or infusible medication.  Our
    revenues could be adversely affected if new drugs or combination
    therapies are developed and prescribed to our patients that have
    a reimbursement rate less than that of the current drug
    therapies our patients receive.
  tm tm tm ® ® tm tm tm tm
  We
    have an ongoing informal inquiry by the SECs Enforcement
    Division, and depending on the length, scope and results of the
    informal inquiry, our business, financial condition and results
    of operations could experience a material adverse
    impact.
     26




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We
    have granted CIT Healthcare LLC a security interest in
    substantially all of our assets, and if we default under our
    Credit Agreement, CIT may foreclose on our assets.
    Our
    debt may limit our operating flexibility.
    
    We must dedicate a portion of our cash flow from operations to
    the repayment of our debt, which restricts the cash flow
    available to us for other purposes;
    Our debt covenants may limit our flexibility in planning for and
    reacting to changes in our business and our industry, including
    acquisition opportunities, which may place us at a competitive
    disadvantage;
    We are limited by our debt covenants in our ability to obtain
    additional financing, which we may need for working capital,
    capital expenditures, potential acquisitions, or other general
    corporate purposes;
    We are more vulnerable to adverse economic and industry
    conditions.  We may
    be unable to integrate successfully the Specialty Infusion
    business of Biomed and realize the anticipated benefits of the
    merger.
    
    coordinating geographically separated organizations, systems and
    facilities, including complexities associated with managing the
    combined businesses at separate locations;
    integrating specialty pharmaceutical operations that are
    different from our core specialty pharmaceutical services;
    combining the sales force territories and competencies
    associated with the sale of products presently sold by Biomed;
    integrating personnel from different companies while maintaining
    focus on providing consistent, high-quality products and
    customer service;
    unforeseen expenses or delays associated with the
    integration; and
    performance shortfalls as a result of the diversion of
    managements attention to the integration.   27




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We do
    not have a contractual relationship with private third-party
    payors for a significant portion of our Biomed business. As a
    result, we have no continuing right to receive reimbursement and
    we are subject to reductions in reimbursement rates, which could
    have a material adverse effect on revenues.
  out-of-network, out-of-network out-of-network out-of-network.
  We
    rely on a limited number of suppliers for the prescriptions
    dispensed by our pharmacies, and we could have difficulty
    obtaining sufficient supply of the drugs to fill those
    prescriptions.
    If our
    credit terms with AmerisourceBergen become unfavorable or our
    relationship with AmerisourceBergen is terminated, our business
    could be adversely affected.
  month-to-month
   28




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We
    have a history of losses and may not be able to sustain
    profitability.
    If we
    are not able to market our services effectively to HIV/AIDS
    clinics, their affiliated healthcare providers and PDPs, we may
    not be able to grow our patient base as rapidly as we have
    anticipated.
    If we
    fail to manage our growth or implement changes to our reporting
    systems effectively, our business could be harmed.
    Our
    success in identifying and integrating acquisitions may impact
    our business and our ability to have effective disclosure
    controls.
   29




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We
    rely on third-party delivery services to deliver our products to
    the patients we serve. Price increases or service interruptions
    in our delivery services could adversely affect our results of
    operations and our ability to make deliveries on a timely
    basis.
    We
    rely on a few key employees whose absence or loss could
    adversely affect our business.
    Failure
    to attract and retain experienced and qualified personnel could
    adversely affect our business.
   30




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A
    prolonged malfunction of our MOMSPak automated packaging system
    could hurt our relationships with the patients we serve and our
    ability to grow.
    Our
    financial results may suffer if we have to write off intangible
    assets or goodwill.
    We do
    not have patent or trademark protection for our MOMSPak, our
    automated prescription packaging system or for our trade name,
    MOMS Pharmacy.
      A
    disruption in our telephone system or our computer system could
    harm our business.
   31




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Our
    investment portfolio may be adversely affected by volatile and
    illiquid market conditions.
    Risks
    Related to the Specialty Pharmacy Industry
  There
    is substantial competition in our industry, and we may not be
    able to compete successfully.
    
    Other specialty pharmacy distributors;
    Specialty pharmacy divisions of wholesale drug distributors;
    Pharmacy benefit-management companies;
    Hospital-based pharmacies;
    Local infusion providers;
    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.    If we
    are found to be in violation of Medicaid and Medicare
    reimbursement regulations, we could become subject to
    retroactive adjustments and recoupments, or exclusion from the
    Medicaid and Medicare programs.
   32




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Our
    industry is subject to extensive government regulation, and
    noncompliance by us or our suppliers could harm our
    business.
       33




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Changes
    in industry pricing benchmarks could adversely affect the
    reimbursement we receive for drugs we dispense and, as a result,
    negatively impact our financial condition and results of
    operations.
             34




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Our
    revenues may continue to be adversely affected in connection
    with reduced reimbursement rates for patients who are
    dual-eligible under the Medicare Part D
    program.
    Our
    business could be affected by reforms in the healthcare
    industry.
    We may
    not be able to obtain insurance that is sufficient to protect
    our business from liability.
   35




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Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.    Location

Principal Use

Segment

Property InterestMelville, NY

Pharmacy and Executive Offices

Specialty HIV

Leased  expiring August 31, 2009Gardena, CA

Pharmacy

Specialty HIV

Leased  expiring March 31, 2011Inglewood, CA

Pharmacy

Specialty Infusion

Leased  expiring September 30, 2010La Jolla, CA

Billing Center

Specialty HIV

Leased  expiring July 31, 2011Los Angeles, CA

Pharmacy

Specialty HIV

Leased  expiring December 31, 2010Oakland, CA

Pharmacy

Specialty HIV

Leased  expiring June 30, 2010San Diego, CA

Pharmacy

Specialty HIV

Leased  expiring January 31, 2012San Francisco, CA

Pharmacy

Specialty HIV

Leased  expiring November 30, 2011San Francisco, CA

Pharmacy

Specialty HIV

Leased  expiring February 28, 2009(1)Van Nuys, CA

Pharmacy

Specialty HIV

Leased  expiring December 31, 2010Ft. Lauderdale, FL

Pharmacy

Specialty Infusion

Leased  expiring October 31, 2010Miami, FL

Pharmacy

Specialty HIV

Leased  expiring November 30, 2013Derby, KS

Pharmacy

Specialty Infusion

Leased  expiring January 13, 2010Lenexa, KS

Pharmacy

Specialty Infusion

Leased  expiring July 31, 2010Omaha, NE

Pharmacy

Specialty Infusion

Leased  expiring March 31, 2009Brooklyn, NY

Pharmacy

Specialty HIV

Leased  expiring June 30, 2013Elmsford, NY

Pharmacy

Specialty Infusion

Leased  expiring June 30, 2012Sharon Hill, PA

Pharmacy and Divisional Headquarters

Specialty Infusion

Leased  expiring March 31, 2011Seattle, WA

Pharmacy

Specialty HIV

Leased  expiring October 31, 2012Fort Worth, TX

Pharmacy

Specialty Infusion

Leased  month-to-monthSeattle, WA

Pharmacy

Specialty HIV

Leased  month-to-month     (1)
    
    We are currently in discussion with the landlord at this site
    for renewal of the lease.    Item 3.
    Legal
    Proceedings.   36




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Oris Medical Systems, Inc. v. Allion Healthcare, Inc.,
    et al.,
    Item 4.
    Submission
    of Matters to a Vote of Security Holders.   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  Market
    Information and Holders
    High


Low2007:First quarter

$
6.99


$
3.95Second quarter

$
6.00


$
3.99Third quarter

$
7.27


$
5.01Fourth quarter

$
7.50


$
5.482008:First quarter

$
6.27


$
4.07Second quarter

$
6.12


$
3.87Third quarter

$
7.30


$
5.13Fourth quarter

$
5.58


$
2.83  37




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Dividends
    Recent
    Sales of Unregistered Securities
  Series A-1 Series A-1 one-to-one Form 10-Q
  Securities
    Authorized for Issuance under Equity Compensation
    Plans
    Equity
    Compensation Plan Information
  Number of SecuritiesRemaining Availablefor Future IssuanceNumber of Securities to be


Weighted-Average


Under EquityIssued upon Exercise of


Exercise Price of


Compensation PlansOutstanding Options,


Outstanding Options,


(Excluding SecuritiesWarrants and Rights


Warrants and Rights


Reflected in ColumnPlan Category

(a)


(b)


(a))(c)Equity compensation plans approved by security holders(1)


827,750



5.37



796,788Equity compensation plans not approved by security holders(2)


703,828



4.34



Total


1,531,578



4.90



796,788     (1)
    
    Includes options granted pursuant to our 1998 Stock Option
    Plan and 2002 Stock Incentive Plan and restricted stock awards
    granted pursuant to our 2002 Stock Incentive 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.   38




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Performance
    Graph
  The following performance graph and related information shall
    not be deemed soliciting material or to be
    filed with the Securities and Exchange Commission,
    nor shall such information be incorporated by reference into any
    future filing under the Securities Act of 1933 or Securities
    Exchange Act of 1934, each as amended, except to the extent that
    we specifically incorporate it by reference into such filing.
        
  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


03/30/08


06/30/08


09/30/08


12/31/08Allion 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




31.8




43.7




45.8




31.7NASDAQ Stock Market (U.S. Companies)



100.0




98.5




103.2




105.9




112.3




104.7




108.8




116.3




116.5




124.8




128.8




126.1




108.7




109.1




101.5




60.8NASDAQ  HC Services



100.0




99.5




105.3




114.8




120.4




114.1




110.5




114.6




120.6




133.9




140.3




149.8




125.8




122.8




134.8




109.4  39




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Item 6.
    Selected
    Financial Data.  Form 10-K. Form 10-K. Form 10-K.
  Years Ended December 31,2004


2005


2006


2007


2008(1)(In thousands, except per share)Statement of Operations Data:Net sales

$
60,080


$
123,108


$
209,503


$
246,661


$
340,674Cost of goods sold


53,162



103,246



178,862



211,387



279,895Gross profit


6,918



19,862



30,641



35,274



60,779Operating expenses:Selling, general and administrative expenses


8,446



16,415



24,158



26,728



35,523Depreciation and amortization


717



1,935



3,540



3,574



5,519Litigation settlement


















3,950Impairment of long-lived assets














599



519Operating income (loss)


(2,245
)


1,512



2,943



4,373



15,268Other (income) expense:Interest (income) expense


229



1,059



(1,254
)


(804
)


2,509Other expense






1,133











Income (loss) before income taxes and discontinued operations


(2,474
)


(680
)


4,197



5,177



12,759Provision for taxes


76



329



1,007



1,917



5,239Income (loss) from continuing operations


(2,550
)


(1,009
)


3,190



3,260



7,520Discontinued operations


(130
)


(36
)










Net income (loss)


(2,680
)


(1,045
)


3,190



3,260



7,520Deemed dividend on preferred stock






(1,338
)










Net income (loss) available to common stockholders

$
(2,680
)

$
(2,383
)

$
3,190


$
3,260


$
7,520Basic income (loss) per common shareIncome (loss) before discontinued operations

$
(0.82
)

$
(0.29
)

$
0.20


$
0.20


$
0.38Loss from discontinued operations


(0.04
)














Net income (loss) per share

$
(0.86
)

$
(0.29
)

$
0.20


$
0.20


$
0.38Diluted income (loss) per common shareIncome (loss) before discontinued operations

$
(0.82
)

$
(0.29
)

$
0.19


$
0.19


$
0.34Loss from discontinued operations


(0.04
)














Net income (loss) per share

$
(0.86
)

$
(0.29
)

$
0.19


$
0.19


$
0.34Basic weighted average of common shares outstanding


3,100



8,202



15,951



16,204



19,807Diluted weighted average of common shares outstanding


3,100



8,202



16,967



17,017



22,275  40




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##### Table of Contents



As of December 31,2004


2005


2006


2007


2008(1)(In thousands)Balance Sheet Data:Cash and cash equivalents

$
6,980


$
3,845


$
17,062


$
19,557


$
18,385Investments in short-term securities

$



$
23,001


$
6,450


$
9,283


$
259Total assets

$
19,996


$
86,289


$
121,603


$
126,616


$
270,989Current maturities of long term debt

$



$



$



$



$
1,698Notes payable-subordinated

$
1,250


$
1,358


$
700


$



$
Capital lease obligations  current

$
131


$
107


$
46


$
47


$
3Long term debt

$



$



$



$



$
32,204Revolving credit facility

$



$



$



$



$
17,821Notes payable  affiliate

$



$



$



$



$
3,644Notes payable  long term

$



$
683


$



$



$
Capital lease obligations  long term

$
193


$
93


$
47


$



$
4Total liabilities

$
8,481


$
18,946


$
19,796


$
20,454


$
101,580Total stockholders equity

$
11,515


$
67,343


$
101,807


$
106,162


$
169,409Working Capital

$
4,848


$
27,488


$
29,535


$
38,424


$
47,422     (1)
    
    Reflects the acquisition of the Biomed business on
    April 4, 2008. For a more detailed discussion of the Biomed
    merger, see Note 4 to our Consolidated Financial Statements
    included in Item 8. Financial Statements and Supplementary
    Data of this Annual Report on
    Form 10-K.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.
    (in thousands, except share, per share and patient
    data)  The following discussion and analysis of our financial
    condition and results of operations should be read in
    conjunction with our Consolidated Financial Statements and Notes
    thereto, which appear in Item 8 of this Annual Report on
    Form 10-K.
    Some of the information contained in this discussion and
    analysis or set forth elsewhere in this Annual Report on
    Form 10-K,
    including information with respect to our plans and strategy for
    our business, includes forward-looking statements that involve
    risks and uncertainties. You should review Item 1A. Risk
    Factors of this Annual Report for a discussion of important
    factors that could cause our actual results to differ materially
    from the results described in or implied by the forward-looking
    statements contained in the following discussion and
    analysis.
  Overview
     41




---



##### Table of Contents




    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 that assists patients and healthcare
    providers with the complex reimbursement processes of Medicaid
    and other state-administered programs, such as ADAP, that many
    of our HIV/AIDS patients rely on for payment;
    Arrangement for the timely delivery of medications in a discreet
    and convenient manner as directed by our patients or their
    physicians;
    Specialized pharmacists who consult with patients, physicians,
    nurses and ASOs to provide education, counseling, treatment
    coordination, clinical information and compliance
    monitoring; and
    Information systems that make the provision of clinical data and
    the transmission of prescriptions more efficient and accurate.      
    Specialized nursing for the timely administration of medications
    as directed by physicians;
    Specialized pharmacists who consult with patients, physicians,
    and nurses to provide education, counseling, treatment
    coordination, and clinical information; and
    Reimbursement experience that assists patients and healthcare
    providers with the complex reimbursement processes.  HIV/AIDS.
  Therapy Products

Therapy Mix(2)Blood Clotting Factor


60.0
%IVIG(1)


34.0
%Other


6.0
%Total


100.0
%     (1)
    
    Intravenous immunoglobulin.(2)
    
    Based on revenue for the nine months ended December 31,
    2008, after we acquired the Specialty Infusion business on
    April 4, 2008.  Geographic Footprint.
 42




---



##### Table of Contents



Net Sales.
    Specialty


SpecialtyHIV


Infusion


TotalNon governmental


36.8
%


63.5
%


41.7
%GovernmentalMedicaid/ADAP


63.1
%


34.0
%


57.7
%Medicare


0.1
%


2.5
%


0.6
%Total


100.0
%


100.0
%


100.0
%   Gross Profit.
     43




---



##### Table of Contents



Operating Expenses.
  Form 10-K.
  Critical
    Accounting Policies
    Form 10-K.
  Revenue Recognition.
     44




---



##### Table of Contents



Allowance for Doubtful Accounts.
  Long-Lived Asset Impairment. Labtracker-HIV
  Goodwill and Other Intangible Assets.
   45




---



##### Table of Contents




    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 economic trends, including
    sustained declines in market capitalization.    Recently
    Issued Accounting Pronouncements
  Form 10-K.
  Results
    of Operations
  Years
    Ended December 31, 2008 and 2007
  Net Sales.
   46




---



##### Table of Contents



Years Ended December 31,2008


2007Patient








PatientDistribution Region

Net Sales


Prescriptions


Months


Net Sales


Prescriptions


Months(In thousands, except patient months and prescription
    data)California

$
184,131



719,002



147,482


$
160,324



654,521



138,716New York


85,924



301,672



44,779



79,871



298,464



44,734Washington


4,930



22,607



4,083



4,278



21,753



3,907Florida


1,962



8,895



1,192



2,188



9,768



1,451Total

$
276,947



1,052,176



197,536


$
246,661



984,506



188,808   30-day
  Gross Profit.
      Selling, General and Administrative
    Expenses.
 47




---



##### Table of Contents



Depreciation and Amortization.
  Litigation Settlement. Form 10-K,
  Impairment of Long-Lived Assets.
  LabTracker LabTracker
  Operating Income.
  Interest Expense.
  Interest Income.
  Provision for Taxes.
  Net Income.
  Years
    Ended December 31, 2007 and 2006
   48




---



##### Table of Contents



Form 10-K.
  Net Sales.
      Years Ended December 31,2007


2006Patient








PatientDistribution Region

Net Sales


Prescriptions


Months


Net Sales


Prescriptions


Months(In thousands, except patient months and prescription
    data)California(1)

$
160,324



654,521



138,716


$
138,291



589,419



124,891New York(2)


79,871



298,464



44,734



65,250



249,427



37,858Washington


4,278



21,753



3,907



3,864



20,440



3,642Florida


2,188



9,768



1,451



2,098



10,861



1,527Total

$
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 DHCS 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.  30-day
 49




---



##### Table of Contents



Gross Profit.
  Selling, General and Administrative
    Expenses.
  Depreciation and Amortization.
  Impairment of Long-Lived Assets. LabTracker LabTracker
  Operating Income.
  Interest Income.
  Provision for Taxes.
    Net Income.
 50




---



##### Table of Contents



Liquidity
    and Capital Resources
           51




---



##### Table of Contents



Credit Agreement.
        Operating Requirements.
    Long-Term Requirements.
 52




---



##### Table of Contents



Contractual Obligations.
  Payments Due by Period(1)Less than 1








More than 5Total


Year


1-3 Years


4-5 Years


Years(In thousands)Capital Leases

$
7


$
3


$
4


$



$
Operating Leases


2,717



1,110



1,341



266



CIT Term Loan


33,902



1,698



6,720



25,484



CIT Revolving Loan


17,821











17,821



Notes Payable  affiliate


3,644











3,644



Total

$
58,091


$
2,811


$
8,065


$
47,215


$
     (1)
    
    Interest payments related to these obligations will be
    approximately $13,698 over the next five years and are not
    included above. These interest payments assume all contractual
    payments under the CIT term loan are made and interest rates
    remain at the December 31, 2008 level.    Off-Balance Sheet Arrangements.
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk.  Interest
    Rate Sensitivity
   53




---



##### Table of Contents



Other
    Market Risk
     54




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data.     
 Report of Independent Registered Public
    Accounting FirmConsolidated Balance Sheets as of
    December 31, 2008 and 2007Consolidated Statements of Income for the years
    ended December 31, 2008, 2007, and 2006Consolidated Statements of Stockholders
    Equity for the years ended December 31, 2008, 2007, and
    2006Consolidated Statements of Cash Flows for the
    years ended December 31, 2008, 2007, and 2006Notes to Consolidated Financial Statements   55




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm                
    56




---



##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
 AS OF
    DECEMBER 31, 2008 AND 2007
  2008


2007(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
18,385


$
19,557Short term investments and securities held for sale


259



9,283Accounts receivable (net of allowance for doubtful accounts of
    $2,248 in 2008 and $149 in 2007)


44,706



18,492Inventories


12,897



8,179Prepaid expenses and other current assets


655



767Deferred tax asset


1,305



344Total current assets


78,207



56,622Property and equipment, net


1,647



790Goodwill


134,298



41,893Intangible assets, net


53,655



27,228Marketable securities, non-current


2,155



Other assets


1,027



83Total assets

$
270,989


$
126,616LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
24,617


$
15,832Accrued expenses


2,819



2,172Income taxes payable


1,648



147Current maturities of long term debt


1,698



Current portion of capital lease obligations


3



47Total current liabilities


30,785



18,198Long term liabilities:Long-term debt


32,204



Revolving credit facility


17,821



Notes payable  affiliates


3,644



Deferred tax liability


17,085



2,212Capital lease obligations


4



Other


37



44Total liabilities


101,580



20,454Commitments and ContingenciesStockholders Equity:Convertible preferred stock, $.001 par value, shares
    authorized 20,000; issued and outstanding -0- in 2008 and 2007






Common stock, $.001 par value, shares authorized 80,000;
    issued and outstanding 25,946 in 2008 and 16,204 in 2007


26



16Additional paid-in capital


168,386



112,636Accumulated earnings (deficit)


1,033



(6,487
)Accumulated other comprehensive loss


(36
)


(3
)Total stockholders equity


169,409



106,162Total liabilities and stockholders equity

$
270,989


$
126,616    57




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF INCOME
 YEARS
    ENDED DECEMBER 31, 2008, 2007 AND 2006
  2008


2007


2006(In thousands, except per share data)Net sales

$
340,674


$
246,661


$
209,503Cost of goods sold


279,895



211,387



178,862Gross profit


60,779



35,274



30,641Operating expenses:Selling, general and administrative expenses


35,523



26,728



24,158Depreciation and amortization


5,519



3,574



3,540Litigation settlement


3,950







Impairment of long-lived asset


519



599



Operating income


15,268



4,373



2,943Interest expense


2,934



7



55Interest income


(425
)


(811
)


(1,309
)Income before taxes


12,759



5,177



4,197Provision for taxes


5,239



1,917



1,007Net income

$
7,520


$
3,260


$
3,190Basic earnings per common share

$
0.38


$
0.20


$
0.20Diluted earnings per common share

$
0.34


$
0.19


$
0.19Basic weighted average of common shares outstanding


19,807



16,204



15,951Diluted weighted average of common shares outstanding


22,275



17,017



16,967    58




---



##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
 YEARS
    ENDED DECEMBER 31, 2008, 2007 AND 2006
  Preferred Stk.


Common Stk.








Accumulated$.001 par value


$.001 par value


Additional


Accumulated


OtherPar





Par


Paid-In


Earnings


ComprehensiveShares


Value


Shares


Value


Capital


(Deficit)


Income (Loss)


Total(In thousands)Balance, December 31, 2005





$




12,956


$
13


$
80,228


$
(12,937
)

$
39


$
67,343Comprehensive income:Unrealized loss on investments


























(50
)


(50
)Net income






















3,190







3,190Total comprehensive income






























3,140Issuance of Common Stock:






























Public offering










2,465



2



28,850











28,852Exercise of options










421



1



1,248











1,249Exercise of warrants










362







904











904Cost of secondary offering


















(203
)










(203
)Stock based compensation


















310











310Tax benefit from exercise of employee stock options


















212











212Balance, December 31, 2006










16,204


$
16


$
111,549


$
(9,747
)

$
(11
)

$
101,807Comprehensive income:Unrealized gain on investments


























8



8Net income






















3,260







3,260Total comprehensive income






























3,268Stock based compensation


















354











354Tax benefit from exercise in prior years of employee stock
    options


















733











733Balance, December 31, 2007










16,204


$
16


$
112,636


$
(6,487
)

$
(3
)

$
106,162Comprehensive income:Unrealized loss on investments


























(33
)


(33
)Net income






















7,520







7,520Total comprehensive income






























7,487Issuance of preferred stock for business acquisition


6,125



6











35,460











35,466Conversion of preferred stock to common stock


(6,125
)


(6
)


6,125



6















Issuance of common stockBusiness acquisition










3,225



3



16,571











16,574Exercise of options










357



1



331











332Grant of restricted stock awards










35







94











94Stock based compensation


















212











212Tax benefit from exercise of employee stock options


















3,082











3,082Balance, December 31, 2008










25,946


$
26


$
168,386


$
1,033


$
(36
)

$
169,409    59




---



##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 YEARS
    ENDED DECEMBER 31, 2008, 2007 AND 2006
  2008


2007


2006(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
7,520


$
3,260


$
3,190Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


5,519



3,574



3,540Impairment of long-lived asset


519



599



Deferred rent


(6
)


(15
)


30Amortization of deferred financing costs


136







Amortization of debt discount on acquisition notes


39







17Change in fair value of interest rate cap contract


109







Provision for doubtful accounts


1,852



529



1,077Stock based compensation expense


306



354



310Deferred taxes


(274
)


922



795Changes in operating assets and liabilities exclusive of
    acquisitions:Accounts receivable


(12,103
)


(724
)


(4,733
)Inventories


(2,804
)


(3,142
)


(699
)Prepaid expenses and other assets


216



87



(77
)Accounts payable, accrued expenses and income taxes payable


3,351



724



1,681Net cash provided by operating activities


4,380



6,168



5,131CASH FLOWS USED IN INVESTING ACTIVITIES:Purchase of property and equipment


(1,161
)


(321
)


(534
)Sale of property and equipment


26







Purchase of restricted certificate of deposit


(259
)






Purchase of short term investments


(300
)


(66,470
)


(90,857
)Sale of short term investments


7,396



63,650



107,358Payments for investment in Biomed, net of cash acquired


(50,359
)


(220
)


Payments for acquisitions






(299
)


(38,316
)Net cash used in investing activities


(44,657
)


(3,660
)


(22,349
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from CIT revolver note


17,821







Net proceeds from CIT term loan


34,738







Payment for CIT interest rate cap contract


(112
)






Payment for deferred financing costs


(907
)






Payment for Biomed loans assumed


(14,925
)






Net Proceeds from IPO/ Secondary Offering










28,852Net Proceeds  Exercise of Employee Stock Options and
    Warrants


332







2,153Tax benefit from exercise of employee stock options


3,082



733



212Repayment of CIT term loan, Notes & Capital Leases


(924
)


(746
)


(782
)Net cash provided by (used in ) financing activities


39,105



(13
)


30,435NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS


(1,172
)


2,495



13,217CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR


19,557



17,062



3,845CASH AND CASH EQUIVALENTS, END OF YEAR

$
18,385


$
19,557


$
17,062SUPPLEMENTAL DISCLOSUREIncome Taxes Paid

$
969


$
82


$
103Interest Paid

$
2,450


$
46


$
52    60




---



##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (in
    thousands, except per share and patient data)
  Note 1.
    The
    Company        Note 2.
    Summary
    of Significant Accounting Policies  Basis of Presentation.
  Inventories. first-in,
  Use of Estimates by Management.
  Property and Equipment.
  Revenue Recognition.
     61




---



##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Income Taxes.
        Cash Equivalents.
  Investments. Form 10-K.
  Concentrations of Risk.
 62




---



##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007California State Medicaid Programs


21
%


23
%New York State Medicaid Program


11
%


20
%California ADAP


10
%


20
%         Net Earnings Per Share Information.
  For the Years Ended December 31,2008


2007


2006Numerator:Net Income

$
7,520


$
3,260


$
3,190Denominator:Weighted average common shares outstanding


19,807



16,204



15,951Effect of dilutive convertible preferred stock


1,833







Effect of dilutive common stock options


292



456



597Effect of dilutive common stock warrants


343



357



419Diluted weighted average of common shares


22,275



17,017



16,967Earnings per common shares:Basic income per common share

$
0.38


$
0.20


$
0.20Diluted income per common share

$
0.34


$
0.19


$
0.19     Stock-Based Compensation Plans.
 63




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            2008


2006Risk-free interest rate


2.92
%


5.23
%Dividend yield


0.00
%


0.00
%Volatility factor


35.8
%


44.81
%Weighted average expected life


6.5 years



6.5 years       Allowance for Doubtful Accounts.
 64




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Shipping and Handling Costs.
  Long-Lived Assets. Labtracker-HIV tm
  Goodwill and Other Intangible Assets.
   65




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      
    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 economic trends, including
    sustained declines in market capitalization.    Advertising Costs.
  Reclassifications.
  Note 3.
    Recent
    Accounting Pronouncements  No. SFAS 157-2, No. 157-3, (FSP 157-3), FSP 157-3 FSP 157-3 FSP 157-3 SFAS No. 157-2 Form 10-K
   66




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      No. 07-5, (EITF 07-5). EITF 07-5 EITF 07-5 EITF 07-5 EITF 07-5 EITF 07-5
  Note 4.
    Acquisitions    Series A-1
 67




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Series A-1
  10-day 10-day 10-day
  Series A-1 Series A-1 Series A-1
 68




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Purchase Price PaidCash paid to seller at closing

$
48,000Notes payable assumed


13,944Long-term debt assumed


4,625Fair value of common stock issued(1)


16,574Fair value of preferred stock issued(2)


35,466Direct acquisition costs(3)


2,579Total purchase price

$
121,188Allocation of Purchase PriceCustomer relationships (10 year life)

$
24,950Trade name (20 year life)


6,230Covenant not to compete (3 year life)


540Goodwill


92,405124,125Assets/liabilities assumed:Accounts receivable, net


15,963Inventories


1,914Other current assets


280Fixed assets


465Notes receivable/other assets


202Total current liabilities


(7,693
)Capital lease obligation


(4
)Deferred tax asset


525Deferred tax liability


(14,589
)$
121,188     (1)
    
    The consideration associated with the common stock was valued
    at $5.14 per share based on the average closing price of Allion
    common stock three days before and after the March 13, 2008
    announcement of the Merger.(2)
    
    The consideration associated with preferred stock was valued
    at $5.79 per share based on an independent valuation.(3)
    
    A portion of this amount was paid in 2007.   69




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Series A-1
  Years Ended December 31,2008


2007(Unaudited)Revenue

$
361,079


$
295,854Net income


8,825



4,071Earnings per common share:Basic

$
0.35


$
0.16Diluted

$
0.33


$
0.15   LabTracker 
    HIV tm
  LabTracker 
    HIV tm LabTracker LabTracker
   70




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Specialty HIV


Specialty Infusion


TotalBalance as of December 31, 2006

$
42,067


$



$
42,067Purchase price adjustment during the year


(174
)






(174
)Balance as of December 31, 2007


41,893







41,893Goodwill acquired during the year






92,405



92,405Balance as of December 31, 2008

$
41,893


$
92,405


$
134,298   Note 5.
    Cash and
    Cash Equivalents    December 31,2008


2007Cash

$
18,385


$
11,143Short-term securities






8,414Total

$
18,385


$
19,557     Note 6.
    Short
    Term Investments and Securities Held for Sale  available-for-sale Form 10-K.
  Note 7.
    Fair
    Value of Certain Financial Assets and Liabilities   71




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    Level 1 inputs are quoted market prices in active markets
    for identical assets or liabilities (these are observable market
    inputs).
    Level 2 inputs are inputs other than quoted prices included
    within Level 1 that are observable for the asset or
    liability (includes quoted market prices for similar assets or
    identical or similar assets in markets in which there are few
    transactions, prices that are not current or vary substantially).
    Level 3 inputs are unobservable inputs that reflect the
    entitys own assumptions in pricing the asset or liability
    (used when little or no market data is available).        Auction
    Rate Securities
       72




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Twelve MonthsEndedDecember 31, 2008Balance at beginning of period

$
Transfers to Level 3 investments


2,228Total gains and losses:Included in earnings  realized


(13
)Unrealized losses included in accumulated other comprehensive
    loss


(60
)Balance at December 31, 2008

$
2,155   Note 8.
    Intangible
    Assets    WeightedAverage Remaining


December 31,Amortization Period


2008


2007as of December 31,





Accumulated





Accumulated2008


Cost


Amortization


Cost


AmortizationIntangiblesSpecialty HIVCalifornia license


Perpetual


$
479


$



$
479


$
Customer lists






2,200



(2,200
)


2,200



(2,123
)Referral lists


142 Months



29,153



(6,388
)


29,153



(4,447
)Non-compete covenant


27 Months



2,979



(2,110
)


3,179



(1,698
)Software






50



(50
)


136



(118
)Clinic List(1)














522



(55
)Total Specialty HIV






34,861



(10,748
)


35,669



(8,441
)Specialty InfusionTrade name


231 Months



6,230



(234
)






Non-compete agreement


27 Months



540



(135
)






Customer relationships


115 Months



24,950



(1,809
)






Total Specialty Infusion






31,720



(2,178
)






Total Company


123 Months


$
66,581


$
(12,926
)

$
35,669


$
(8,441
)     (1)
    
    The Company recorded a charge for the year ended
    December 31, 2008 to reflect the impairment loss for the
    net value of the remaining acquired intangible asset. 73




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Years

Amount2009

$
5,2242010

$
5,1982011

$
4,8112012

$
4,1182013

$
3,940   Note 9.
    Property
    and Equipment  Useful


December 31,Lives


2008


2007Machinery and equipment under capital lease obligations


4 Years


$
166


$
166Machinery and equipment


3-5 Years



2,155



1,508Leasehold Improvements


1-3 Years



1,083



435Furniture and fixtures


3-7 Years



370



1793,774



2,288Less: accumulated depreciation and amortization






(2,127
)


(1,498
)$
1,647


$
790     Note 10.
    Financing
    Activity    Revolving
    Credit Facility
   74




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Term
    Loan
      Term loan, net of original issue discount of $223

$
33,902Less: current maturities


1,698Long term debt

$
32,204     mark-to-market
    2009

$
1,7012010


2,2262011


4,4982012


5,1982013


41,751Thereafter


Total

$
55,374   Note 11.
    Notes
    Payable  Affiliates   75




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 12.
    Income
    Taxes    Year Ended December 31,2008


2007


2006Federal statutory rate:


35
%


34
%


34
%Tax expense at federal statutory rates

$
4,465


$
1,760


$
1,427Change in valuation allowance










(913
)Permanent differences


(21
)


(195
)


20State income taxes


795



352



473$
5,239


$
1,917


$
1,007     2008


2007Current:Assets:Allowance for doubtful accounts

$
916


$
60Inventory


203



108Non deductible accruals


131



174Investments


25



2Tax carry forwards


22



Stock based compensation


8



Current Deferred Tax Asset


1,305



344Non-Current:Assets:Fixed assets


(27
)


60Stock based compensation


298



200Subtotal non-current assets


271



260Liabilities:Deductible goodwill


(2,888
)


(1,897
)Intangible assets


(14,468
)


(575
)Non-Current Deferred Tax Liability


(17,085
)


(2,212
)Overall Deferred Tax Liability

$
(15,780
)

$
(1,868
)    76




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007


2006Federal:Current

$
4,294


$
671


$
Deferred


(214
)


712



693State:Current


1,219



324



212Deferred


(60
)


210



102Total

$
5,239


$
1,917


$
1,007        77




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 13.
    Lease
    Commitments    Location

Principal Use

Property InterestMelville, NY

Pharmacy and Executive Offices

Leased  expiring August 31, 2009Gardena, CA

Pharmacy

Leased  expiring March 31, 2011Inglewood, CA

Pharmacy

Leased  expiring September 30, 2010La Jolla, CA

Billing Center

Leased  expiring July 31, 2011Los Angeles, CA

Pharmacy

Leased  expiring December 31, 2010Oakland, CA

Pharmacy

Leased  expiring June 30, 2010San Diego, CA

Pharmacy

Leased  expiring January 31, 2012San Francisco, CA

Pharmacy

Leased  expiring November 30, 2011San Francisco, CA

Pharmacy

Leased  expiring February 28, 2009(1)Van Nuys, CA

Pharmacy

Leased  expiring December 31, 2010Ft. Lauderdale, FL

Pharmacy

Leased  expiring October 31, 2010Miami, FL

Pharmacy

Leased  expiring November 30, 2013Derby, KS

Pharmacy

Leased  expiring January 13, 2010Lenexa, KS

Pharmacy

Leased  expiring July 31, 2010Omaha, NE

Pharmacy

Leased  expiring March 31, 2009Brooklyn, NY

Pharmacy

Leased  expiring June 30, 2013Elmsford, NY

Pharmacy

Leased  expiring June 30, 2012Sharon Hill, PA

Pharmacy and Divisional Headquarters

Leased  expiring March 31, 2011Seattle, WA

Pharmacy

Leased  expiring October 31, 2012Fort Worth, TX

Pharmacy

Leased  month-to-monthSeattle, WA

Pharmacy

Leased  month-to-month     (1)
    
    The company is currently renegotiating the terms of this
    lease with the landlord.    MinimumYear

Rent2009

$
1,1102010


8872011


4542012


1682013


98Total

$
2,717      78




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 14.
    Contingencies 
    Legal Proceedings    Oris Medical Systems, Inc. v. Allion Healthcare, Inc.,
    et al.,
    Note 15.
    Stockholders
    Equity  A.
    Stock
    Options and Restricted Stock Awards     79




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007


2006Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseStock Options

Shares


Price


Shares


Price


Shares


PriceOutstanding, beginning of year


1,218


$
4.39



1,336


$
4.66



1,452


$
3.21Granted


124



3.50











455



8.11Exercised(1)


(357
)


0.93











(421
)


2.97Forfeited or expired


(157
)


6.35



(118
)


7.48



(150
)


5.83Outstanding, end of year


828


$
5.37



1,218


$
4.39



1,336


$
4.66Options exercisable at year end


521


$
4.82



905


$
3.19



761


$
2.42Weighted average fair value of options granted during the year





$
1.45














$
4.29     (1)
    
    The total intrinsic value of options exercised during the
    years ended December 31, 2008 and 2006 was $1,862 and
    $4,129, respectively.        2008WeightedAverageGrant DateRestricted Stock Awards

Shares


Fair ValueNonvested at beginning of year





$
Granted


35



4.28Vested


(18
)


4.28Forfeited






Nonvested at end of year


17


$
4.28      80




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  B.
    Warrants    2008


2007


2006Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseWarrants

Shares


Price


Shares


Price


Shares


PriceOutstanding, beginning of year


704


$
4.34



704


$
4.34



1,151


$
4.60Granted






















Exercised(1)


















(447
)


4.99Outstanding and Exercisable, end of year


704


$
4.34



704


$
4.34



704


$
4.34     (1)
    
    During the year ended December 31, 2006, the Company
    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.  C.
    Convertible
    Preferred Stock  Series A-1 one-for-one Series A-1
  Note 16.
    Related
    Party Transaction      Payable-Affiliates).
  Note 17.
    Major
    Suppliers    month-to-month
 81




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 18.
    Supplemental
    Disclosure of Non-cash Financing Activities  Series A-1 Form 10-K
  Note 19.
    Fair
    Value of Financial Instruments    Note 20.
    Operating
    Segments   82




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2008


2007


2006Results of OperationsNet Sales:Specialty HIV

$
276,947


$
246,661


$
209,503Specialty Infusion


63,727







Total Net Sales

$
340,674


$
246,661


$
209,503Operating Income:Specialty HIV(1)

$
4,742


$
4,373


$
2,943Specialty Infusion


10,526







Total Operating Income


15,268



4,373



2,943Interest Expense (Income), Net


2,509



(804
)


(1,254
)Provision for Taxes


5,239



1,917



1,007Net Income

$
7,520


$
3,260


$
3,190Depreciation & Amortization Expense:Specialty HIV

$
3,153


$
3,574


$
3,540Specialty Infusion


2,366







Total Depreciation & Amortization Expense

$
5,519


$
3,574


$
3,540Capital Expenditures:Specialty HIV

$
893


$
321


$
534Specialty Infusion


268







Total Capital Expenditures

$
1,161


$
321


$
534     (1)
    
    Includes a $519 impairment charge and a $3,950 charge related
    to the Companys litigation settlement with OMS for the
    year ended December 31, 2008, and a $599 impairment charge
    for the year ended December 31, 2007.  At December 31,2008


2007


2006Total Assets:Specialty HIV

$
120,458


$
126,616


$
121,603Specialty Infusion


150,531







Total Assets

$
270,989


$
126,616


$
121,603  83




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##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 21.
    Quarterly
    Financial Information (unaudited)    2008(1)First


Second


Third


FourthQuarter(2)


Quarter


Quarter


Quarter


Total(In thousands, except per share data)Net sales

$
65,258


$
86,430


$
92,136


$
96,850


$
340,674Gross profit

$
9,654


$
17,086


$
16,617


$
17,422


$
60,779Operating income (loss)

$
(2,231
)

$
5,624


$
5,618


$
6,257


$
15,268Net income (loss)

$
(1,270
)

$
2,913


$
2,812


$
3,065


$
7,520Basic income (loss) per common share

$
(0.08
)

$
0.15


$
0.11


$
0.12


$
0.38Diluted income (loss) per common share

$
(0.08
)

$
0.11


$
0.11


$
0.12


$
0.34Basic weighted average shares


16,204



19,472



25,616



25,925



19,807Diluted weighted average shares


16,204



26,333



26,128



26,379



22,275   2007First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(3)


Total(In thousands, except per share data)Net sales

$
58,967


$
62,286


$
61,822


$
63,586


$
246,661Gross profit

$
8,428


$
8,881


$
8,992


$
8,973


$
35,274Operating income

$
139


$
1,479


$
1,388


$
1,367


$
4,373Net income

$
185


$
973


$
1,033


$
1,069


$
3,260Basic income per common share

$
0.01


$
0.06


$
0.06


$
0.07


$
0.20Diluted income per common share

$
0.01


$
0.06


$
0.06


$
0.06


$
0.19Basic weighted average shares


16,204



16,204



16,204



16,204



16,204Diluted weighted average shares


17,003



16,976



17,026



17,062



17,017     (1)
    
    Reflects the acquisition of Biomed on April 4, 2008. For
    a more detailed discussion of the Biomed merger, see Note 4
    Acquisitions.(2)
    
    Included in operating income (loss) and net income (loss) is
    a pre-tax charge of $3,950 related to the Companys
    litigation settlement with OMS.(3)
    
    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
    California DHCS audit of the premium reimbursement paid to us
    under the California Pilot Program for the period
    September 1, 2004 to August 2, 2007.  Note 22.
    Subsequent
    Event  one-for-one
 84




---



##### Table of Contents



ALLION
    HEALTHCARE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    In full upon a change in control of the Company;
    Upon the employees termination of employment by the
    Company without cause or by the employee for good reason (as
    such terms are defined in the award certificate), a prorata
    number of Units, calculated as if the Units had vested on a
    monthly basis; or
    Upon a change in control of the Company that occurs within six
    months following the employees termination, a full number
    of Units will vest.  gross-up
   85




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure.    Item 9A.
    Controls
    and Procedures.  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
    Managements
    Annual Report on Internal Control over Financial
    Reporting
          Changes
    in Internal Control over Financial Reporting
   86




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
                    
    87




---



##### Table of Contents



Item 9B.
    Other
    Information.   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.    Form 10-K.
    Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.    Item 14.
    Principal
    Accountant Fees and Services.    88




---



##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules.    (1)

Financial Statements.Reports of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2008 and 2007Consolidated Statements of Income for the years ended
    December 31, 2006, 2007 and 2008Consolidated Statements of Stockholders Equity for the
    years ended December 31, 2006, 2007 and 2008Consolidated Statement of Cash Flows for the years ended
    December 31, 2006, 2007 and 2008Notes to Consolidated 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.     Schedules:Schedule II  Valuation and Qualifying Accounts   (3)

Exhibits. The exhibits listed in the accompanying
    Exhibit Index are filed or incorporated by reference as
    part of this Annual Report.  89




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##### Table of Contents



SIGNATURES    ALLION HEALTHCARE, INC.Date: March 6, 2009

By:

/s/ Russell J. FicheraRussell
    J. Fichera
    Chief Financial Officer     Name

Title

Date/s/  Michael
    P. MoranMichael
    P. Moran

Chief Executive Officer and Director (principal executive
    officer)

March 6, 2009/s/  Russell
    J. FicheraRussell
    J. Fichera

Chief Financial Officer
    (principal financial and accounting officer)

March 6, 2009/s/  Gary
    P. CarpenterGary
    P. Carpenter

Director

March 6, 2009/s/  Willard
    T. DerrWillard
    T. Derr

Director

March 6, 2009/s/  William
    R. Miller, IVWilliam
    R. Miller, IV

Director

March 6, 2009/s/  Kevin
    D. StepanukKevin
    D. Stepanuk.

Director

March 6, 2009/s/  Flint
    D. BeseckerFlint
    D. Besecker

Director

March 6, 2009  90




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##### Table of Contents



Supplemental
    Information to be Furnished With Reports Filed
    Pursuant to Section 15(d) of the Act by Registrants Which
    Have Not Registered
    Securities Pursuant to Section 12 of the Act
    EXHIBIT INDEX
  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.)2
.6

Agreement and Plan of Merger, dated March 13, 2008, by and
    among Allion Healthcare, Inc., Biomed Healthcare, Inc., Biomed
    America, Inc. and Parallex LLC. (Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed on March 19, 2008.)3
.1

Third Amended and Restated Certificate of Incorporation of the
    Registrant (Incorporated by reference to Exhibit 3.1 to the
    Registrants Quarterly Report on
    Form 10-Q
    filed on August 7, 2008.)3
.2

Fourth Amended and Restated Bylaws of the Registrant.
    (Incorporated by reference to Exhibit 3.7 to the
    Registrants Annual Report on
    Form 10-K
    filed on March 17, 2008.)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.)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.) 91




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##### Table of Contents



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).4
.9

Stockholders Agreement, dated April 4, 2008, by and
    among Allion Healthcare, Inc. and the stockholders named
    therein. (Incorporated by reference to Exhibit 4.1 to the
    Registrants Current Report on
    Form 8-K
    filed on April 10, 2008.)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.)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.) 92




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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 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
.21

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
.22

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
.23

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.)10
.24

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
.25

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
.26

Amended and Restated Employment Agreement 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 January 7, 2009.)10
.27

Amended and Restated Employment Agreement between Allion
    Healthcare, Inc. and Stephen A. Maggio. (Incorporated by
    reference to Exhibit 10.3 to the Registrants Current
    Report on
    Form 8-K
    filed on January 7, 2009.)10
.28

Amended and Restated Employment Agreement between Allion
    Healthcare, Inc. and Robert E. Fleckenstein, R.Ph. (Incorporated
    by reference to Exhibit 10.4 to the Registrants
    Current Report on
    Form 8-K
    filed on January 7, 2009.)10
.29

Amended and Restated Employment Agreement between Allion
    Healthcare, Inc. and Anthony D. Luna. (Incorporated by reference
    to Exhibit 10.5 to the Registrants Current Report on
    Form 8-K
    filed on January 7, 2009.)10
.30

Amended and Restated Employment Agreement between Allion
    Healthcare, Inc. and Russell J. Fichera. (Incorporated by
    reference to Exhibit 10.2 to the Registrants Current
    Report on
    Form 8-K
    filed on January 7, 2009.)10
.31

Credit and Guaranty Agreement, dated April 4, 2008, by and
    among Allion Healthcare, Inc., certain of its subsidiaries, CIT
    Healthcare LLC, as Administrative Agent, and the other lenders
    party thereto. (Incorporated by reference to Exhibit 10.1
    to the Registrants Current Report on
    Form 8-K
    filed on April 10, 2008.)10
.32

Amendment and Waiver Agreement, dated March 6, 2009, by and
    among Allion Healthcare, Inc., certain of its subsidiaries, CIT
    Healthcare LLC, as Administrative Agent, and the other lenders
    party thereto.* 93




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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 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 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. 94




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SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS  AdditionsBalance at


Charge to


Charged





Balance atBeginning


Cost and


to Other





End ofof Period


Expense


Accounts


Deductions


periodDeducted from asset accountsYear ended December 31, 2008:Allowance for doubtful accounts

$
149


$
1,852


$
1,417
(2)

$
1,170
(1)

$
2,248Deducted from asset accountsYear ended December 31, 2007:Allowance for doubtful accounts

$
425


$
529


$



$
805
(1)

$
149Deducted from asset accountsYear ended December 31, 2006:Allowance for doubtful accounts


283



1,077







935
(1)


425Valuation allowance on net deferred tax assets


2,180



(913
)


(1,267
)






$
2,463


$
164


$
(1,267
)

$
935


$
425     (1)
    
    Consists primarily of direct write offs net of any recoveries
    of accounts previously deemed uncollectible.(2)
    
    Consists primarily of amount assumed through acquisition of
    Biomed. 95