================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
================================================================================

                                   FORM 10-KSB

  [X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
               OF 1934 for the fiscal year ended DECEMBER 31, 2003
                                       OR
  [  ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                         Commission File Number:0-17821

                             ALLION HEALTHCARE, INC.
                 (Name of small business issuer in its charter)

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


           1660 WALT WHITMAN ROAD, SUITE 105, MELVILLE, NEW YORK 11747
                    (Address of principal executive offices)


                    Issuer's telephone number: (631) 547-6520

    Securities Registered Pursuant to Section 12(b) of the Exchange Act: None

      Securities Registered Pursuant to Section 12(g) of the Exchange Act:

                     COMMON STOCK, $.001 PAR VALUE PER SHARE
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this Form, and no disclosure will be contained, to
the best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB exists or any
amendment to this Form 10-KSB. [ ]

Issuer's revenues for the year ended December 31, 2003 were $48,222,993.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Issuer on April 14, 2004, based on assumed price of $6.00
per share of Common Stock (as there is no trading market for the Common Stock),
was approximately $6,525,000.



<PAGE>


                    ISSUER INVOLVED IN BANKRUPTCY PROCEEDINGS
                           DURING THE PAST FIVE YEARS

Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.

                                                     YES [X]    NO


                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

As of April 14, 2004, the Issuer had outstanding 3,100,000 shares of Common
Stock.



                       DOCUMENTS INCORPORATED BY REFERENCE


Part III of this Annual Report on Form 10-KSB incorporates information by
reference from the Registrant's Proxy Statement for its 2004 Annual Meeting of
Stockholders, which Proxy Statement will be filed no later than 120 days after
the end of the Registrant's fiscal year.


Transitional Small Business Disclosure Format (check one):

                                                     YES      NO [X]






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                             ALLION HEALTHCARE, INC.

        ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2003

                                      INDEX

================================================================================

FORWARD-LOOKING STATEMENTS:___________________________________________________4


PART I.

ITEM 1.     DESCRIPTION OF BUSINESS___________________________________________5

ITEM 2.     DESCRIPTION OF PROPERTY__________________________________________25

ITEM 3.     LEGAL PROCEEDINGS________________________________________________25

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS______________26


PART II.

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS_________26

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS____________________________________________27

ITEM 7.     FINANCIAL STATEMENTS_____________________________________________34

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE_____________________________________________34

ITEM 8A.    CONTROLS AND PROCEDURES__________________________________________34


PART III.

ITEM 9.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT_______________34

ITEM 10.    EXECUTIVE COMPENSATION___________________________________________35

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,
            AND RELATED STOCKHOLDER MATTERS__________________________________35

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS___________________35

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K_________________________________35

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES___________________________37




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FORWARD-LOOKING STATEMENTS:

         This Annual Report on Form 10-KSB and certain information incorporated
herein by reference contain 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. All statements included or incorporated by reference in
this Annual Report on Form 10-KSB, other than statements that are purely
historical are forward looking statements. Words such as "expects,"
"anticipates," "plans," "believes," "seeks," "estimates," and other similar
expressions or variations of such words are intended to identify these
forward-looking statements.

         These forward-looking statements, which include statements about the
Company's effort, its pharmacy acquisitions, its capital structure, its market
size, share and demand, and management's expectations and objectives regarding
future expected operating results, revenues and earnings are not guarantees of
future performance and are subject to risks and uncertainties that could cause
actual results to differ materially from the results contemplated by the
forward-looking statements.

         All forward-looking statements included or incorporated by reference in
this Annual Report on Form 10-KSB are based on information available to the
Company as of the date hereof, and the Company assumes no obligation to update
any such forward-looking statements. Stockholders are cautioned not to place
undue reliance on such statements.

         The forward-looking statements and any expectations based on such
forward-looking statements are subject to risks and uncertainties and other
important factors, including, without limitation, changes in reimbursement
rates, the Company's compliance with Medicare and Medicaid reimbursement
regulations, its ability to successfully implement its marketing programs, its
ability to successfully integrate acquisitions and other factors discussed under
the heading "Risk Factors" and elsewhere in this Annual Report on Form 10-KSB.
The reader should also consult the cautionary statements and risk factors listed
from time to time in the reports the Company files with the Securities and
Exchange Commission.










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                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

OVERVIEW

         Allion Healthcare, Inc. provides specialty oral and injectable
prescription medications to chronically ill patients. These prescriptions are
filled at licensed pharmacies operating under the MOMS Pharmacy name, which are
located in New York, California, Texas and Florida. The Company is licensed to
dispense prescription medication in all 50 U.S. states. The Company focuses on
delivering its specialty pharmacy services primarily to HIV/AIDS patients.

         The Company's objective is to enhance its market position as a leading
specialty pharmacy provider of HIV/AIDS services by focusing on its core
strengths and further penetrating its targeted disease market. In addition, the
Company may enter select new markets, which might include product distribution
of additional medication. The Company may also consider possible acquisitions of
other specialty pharmacies to compliment existing product offerings and broaden
the Company's geographic reach.

         The specialty pharmacy market is fragmented with many companies
focusing on different product or customer niches. Historically, HIV oral and
injectable medications, were administered within a hospital or physician office
setting. Since the 1990's, the frequency with which these treatments have been
administered outside these settings has increased dramatically in response to
cost containment efforts and the introduction of new and more effective
medications. The Company believes that the shift from hospital-based or
office-based drug administration, to home or self-administration has created a
significant opportunity for the Company across the country.

         COMPANY HISTORY. On September 15, 1998, the Company, formally known as
The Care Group, Inc., filed for protection under Chapter 11 of the Bankruptcy
Code. Prior to September 15, 1998, The Care Group's principal business was to
provide home health care, including therapy, to patients with HIV, AIDS, cancer,
and other diseases requiring high technology intermittent therapies. During the
period September 15, 1998 to February 1, 1999, the Care Group, Inc. focused on
filling specialty oral and injectable prescription medications and
biopharmaceuticals. 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 pursuant to which certain creditors received
newly issued shares of common stock and the Company received additional
infusions of equity capital. Holders of capital stock that the Company issued
prior to its bankruptcy filing did not receive any value when the Company
emerged from bankruptcy. 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
of the reorganization.

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



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         Since 1999, the Company's New York and Texas offices focused on
developing relationships with clinics to increase its customer base. The
increased customer base resulted in steady growth of sales since the Company
emerged from bankruptcy.

         On July 27, 2001, the Company purchased certain assets of
Prescripticare, L.L.C. - Specialty Care Pharmacy Division ("SCPD"). The results
of SCPD's operations have been included in the consolidated financial statements
since that date. SCPD is a provider that fills individual patient specialty oral
and injectable prescription medications as well as biopharmaceuticals.

         During the fourth quarter of 2002, the Company opened a new office in
Miami, Florida, to better establish its presence in the Florida market and to
develop stronger relationships with clinics in that area.

         On May 1, 2003, the Company acquired Medicine Made Easy ("MME"). The
results of MME's operations have been included in the consolidated financial
statements since that date. MME is a California company that fills specialty
oral and injectable prescription medications and biopharmaceuticals.

CURRENT BUSINESS OPERATIONS

         COMPANY PHARMACIES. The Company owns and operates four pharmacies
located in New York, California, Texas and Florida. The Company accepts only
prescriptions that it can verify as being written by licensed healthcare
providers. The Company does not prescribe medications or give medical advice.

         Any customer can initiate the prescription process. The customer can
direct their physicians to call or fax their prescriptions to the Company 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.

         MARKETING AND PROMOTION. The Company's sales personnel are responsible
for promoting the capabilities and services of the Company to potential
customers and potential referral sources. There are sales personnel who are
based out of each of the Company's offices. The sales personnel report to the
vice president of HIV sales.

         CUSTOMERS. The Company provided medications to approximately 3,600
individual patients in December 2003, who choose the Company as their pharmacy
provider, and no single customer accounts for more than a negligible amount of
revenue.

         PAYMENT AND REIMBURSEMENT. The majority of the Company's customers rely
on governmental programs, such as Medicaid, Medicare and the AIDS Drug
Assistance Program ("ADAP") to pay for their medications. Customers may also pay
for their prescriptions by credit card, check, through a private insurance plan,
or a pharmacy benefit manager with which the Company has a contract.

         The primary trend in the United States health care industry is toward
cost containment. The increasing prevalence of managed care, centralized
purchasing decisions, consolidation among and integration of health care
providers, and competition for patients affects pricing, purchasing, and usage
patterns in health care. Decisions regarding the use of a particular drug





                                      -6-
<PAGE>

treatment are increasingly influenced by payors, including managed care
organizations, pharmacy benefit managers, group purchasing organizations,
regional integrated delivery systems, and similar organizations. Increasingly,
these decisions are based on economic considerations including product cost and
whether a product reduces the overall cost of treatment. Continued efforts by
payors to eliminate, contain or reduce costs through coverage exclusions, lower
reimbursement rates, greater claims scrutiny, closed provider panels,
restrictions on required formularies, claim delays or denials and other similar
measures could have a material adverse effect on the Company's business,
financial condition and results of operations.

         Some payors set lifetime limits on the amount reimbursable to patients
for medical costs. Some of the Company's patients may reach these limits because
of the high cost of their medical treatment and associated pharmaceutical
regimens. Some payors may attempt to further control costs by selecting some
firms to be their exclusive providers of pharmaceutical or other medical product
benefits. If any of such arrangements were with the Company's competitors, the
Company would lose its customers.

         As noted above, the Company derives a significant portion of its
revenue from governmental programs. Such programs are highly regulated and
subject to frequent and substantial changes and cost containment measures. In
recent years, changes in these programs have limited and reduced reimbursement
to providers, and also replaced and relaxed the federal Medicaid payment
standard, thereby increasing state discretion over administration of Medicaid
programs.

         Federal and state proposals are pending that would impose further
limitations on governmental payments and that could increase patient co-payments
and deductibles. Co-Payments are often difficult to collect and an increase in
reimbursement through co-payments relative to state payment may result in
additional costs to the Company. Federal and state agencies are examining
perceived discrepancies between reported average wholesale prices ("AWP") of
drugs and the actual manufacturers selling price. These agencies are in
discussions with large drug manufacturers to revise reporting methods.

         In February 2000, First DataBank, Inc., which reports AWP to Medicaid
programs, announced that it will report based on market prices rather than
prices submitted by manufacturers. As a result, a number of state Medicaid
agencies lowered the amount of reimbursement they pay for certain drugs. The
Company believes federal and state agencies will continue to pursue price
reductions for some of the drugs it sells which may result in lower revenues and
margins.

         In September 2001, the Office of Inspector General ("OIG") for the U.S.
Department of Health and Human Services issued a report titled "Medicaid's Use
of Revised Average Wholesale Prices," which in part summarized the results of a
joint investigation conducted by the United States Department of Justice and the
National Association of Medicaid Control Fraud Units. This report looked at
actual wholesale pricing data for 51 drugs. The report concluded the current
method of determining AWP was "fundamentally flawed." In response to this
report, the Centers for Medicare and Medicaid Services ("CMS") indicated it
would continue to look for administrative and legislative solutions to the
problem of accurately determining AWP. On September 16, 2002, the OIG published
a revised report that estimated that pharmacies receive an average 17% discount
on drugs purchased from wholesalers.

         There has been an increase in the number of suits instituted by private
consumer groups and state attorney generals against drug manufacturers over
prescription drug pricing. Some of these suits allege fraud through manipulating
the AWP. The eventual effect of such suits, if any, on the AWP is unknown.



                                      -7-
<PAGE>


         A number of states are considering legislation designed to reduce their
Medicaid expenditures and provide universal coverage and additional care for
some populations, including proposals to impose additional taxes on providers to
help finance or expand such programs. Some states may require the Company to
maintain a licensed pharmacy in their states in order to qualify for
reimbursement under state-administered reimbursement plans. Any of these changes
could result in significant reductions in payment levels for drugs handled and
services provided by the Company, which would have a material adverse effect on
the Company's business, financial condition and results of operations.

         In October of 2003, the OIG published a report titled "State Strategies
to Contain Medicaid Drug Costs." This report outlines three key strategies for
states to pursue in reducing the amount of money spent on drug reimbursement.
Many of these strategies are currently being used by some states. These
strategies look to contain costs by (1) limiting Medicaid reimbursement for some
drugs, (2) shifting from higher to lower cost drugs, and (3) limiting the amount
of prescription drugs a beneficiary can obtain within a given time period. The
Company expects that many states will pursue these strategies.

         At least 13 states (including California, Florida, and Texas) have
implemented "preferred drug list" programs, under which drugs would not appear
on an approved and reimbursable Medicaid formulary unless the Medicaid programs
receive significant discounts or other concessions. New York has proposed
legislation to establish a "preferred drug list" program. The drug manufacturers
have instituted litigation to halt these programs but the outcome of this
litigation is unknown. In Florida, the program has withstood judicial challenge.
If the states prevail in these lawsuits, this could result in reductions in the
reimbursement the Company receives from Medicaid programs for its services and
could materially and adversely affect its business, financial condition and
results of operations.

         In December 2003, federal legislation was enacted that, among other
things, establishes broader Medicare benefits for prescription drugs, and alters
the amount and manner in which the Medicare program will pay for prescription
drugs. As a result, Medicare may become a more substantial payor for drugs
purchased by Company customers. Additionally, some customers who presently have
Medicaid prescription drug benefits may instead receive prescription drug
benefits through the Medicare program. Medicare benefits may be less generous
than Medicaid benefits or benefits presently provided by private insurance
plans, which could impose greater financial responsibility for prescription drug
purchases on Company customers. Moreover, drugs furnished by the Company may not
be covered by Medicare or approved for Medicare formularies. Some of these
changes will be implemented in 2006. Others have already been implemented, or
will by implemented soon.

         As of January 1, 2004, Medicare adopted new reimbursement methodologies
for covered prescription drugs, which reduced reimbursement for many drugs. In
2005, CMS will change the reimbursement methodology to be based on average sales
price rather than AWP. This change in pricing may result in reductions in
reimbursement amounts for drugs that the Company dispenses. Medicare will again
change the reimbursement methodology in 2006 to be based on pricing established
by competitive bid. This change in pricing also may result in reductions in
reimbursement amounts for drugs the Company dispenses.

         The federal legislation enacted in December 2003 also authorizes the
U.S. Food and Drug Administration to permit pharmacies and individuals to import
pharmaceuticals from Canadian pharmacies. If implemented, this change could
create substantial new supplier and price competition for the Company.
Legislation has been introduced in the U.S. Congress that would explicitly
permit reimportation of prescription drugs from Canada and other countries.



                                      -8-
<PAGE>


         SUPPLIERS. The Company purchases its inventory from various drug
wholesalers, and not directly from the drug manufacturer. The Company selects
wholesalers based on a number of factors, including price, credit terms and
customer service. While the number of wholesalers who carry the drugs dispensed
by the Company may be limited, the Company believes sufficient supply of drugs
is available. There can be no assurance that the Company will be able to
purchase drugs on credit terms acceptable to it. If a wholesaler does not extend
credit and no other wholesaler is available, the Company's cash requirements may
increase significantly which might result in a decrease in the Company's
liquidity. See "Risk factors - If the Company is not able to negotiate credit
terms for its inventory with its suppliers, the Company may have to rely
disproportionately on other financing to increase its volume."

         During the year ended December 31, 2003, the Company purchased
approximately $40,268,000 of pharmaceuticals from its three major drug suppliers
including, AmeriSource Bergen, McKesson and Walsh Southwest, LLC. During the
year ended December 31, 2002, the Company purchased approximately $22,459,000 of
pharmaceuticals, from its two major drug suppliers including McKesson, and Walsh
Southwest, LLC.

         COMPETITION. The specialty pharmacy industry is highly competitive and
is undergoing consolidation. It is a fragmented industry with many large and
small, public and private companies focusing on different product or customer
niches. Some of the Company's competitors include:

     o   specialty pharmacy distributors such as Caremark Therapeutic Services,
         Curative Health Services, Inc., Priority Healthcare Corporation,
         Accredo Health, Inc. and Chronimed, Inc.;

     o   specialty pharmacy divisions of national wholesale drug distributors;

     o   pharmacy benefit management companies;

     o   hospital based pharmacies;

     o   retail pharmacies;

     o   home infusion therapy companies;

     o   manufacturers that sell their products both to distributors and
         directly to users, including clinics and physician offices; and

     o   hospital based care centers and other alternate site health care
         providers.

         Some of the Company's competitors have greater financial, technical,
marketing and managerial resources than the Company.

         While competition is often based primarily on price and quality of
service, it can also be affected by the ability to develop and maintain
relationships with patients and referral sources, depth of product line,
technical support systems, specific patient requirements and reputation. The
Company has a specialized packaging system that it believes increases patient
adherence to a medical treatment plan and therefore gives the Company an
advantage over its competitors. There can be no assurance that competitive
pressures will not have a material adverse affect on the Company's business,
financial condition and results of operations.



                                      -9-
<PAGE>


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.

         REFERRAL RESTRICTIons. 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.

         Guidelines posted by CMS prohibit 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.

         Violations of these laws may result in fines, imprisonment and
exclusion from the Medicare and Medicaid programs or other state funded
programs. Federal and state court decisions interpreting these statutes are
limited, but have generally construed the statutes to apply if "one purpose"
remuneration is to induce referrals or other conduct within the statute.

         CONFIDENTIALITY AND HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT
(HIPAA). Federal and state laws protect confidentiality of medical records and
information. The Company maintains medical records for each patient to whom it
dispenses drugs. The Company is thus subject to some of these medical record and
patient confidentiality laws, including HIPAA.

         HIPAA created new health care crimes, and granted authority to the
Secretary of Department of Health and Human Services (DHHS) to impose certain
civil penalties. Particularly, the Secretary may now exclude from Medicare any
individual with a direct or indirect ownership interest in an entity convicted
of health care fraud or excluded from the program. HIPAA encourages the
reporting of health care fraud by allowing reporting individuals to share in any
recovery made by the government. HIPAA also requires new programs to control
fraud and abuse, and new investigations, audits and inspections.



                                      -10-
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         On December 28, 2000, DHHS published final regulations with a
compliance date of April 14, 2003 implementing HIPAA that adopted standards for
the privacy of individually identifiable health information (Privacy Rules). The
regulations cover health care providers, health care clearinghouses and health
plans (Covered Entities). The Privacy Rules impose significant administrative
and financial obligations on companies that use or disclose individually
identifiable information relating to the health of a patient. The Company has
developed and implemented a program to obtain compliance with these regulations.

         The HIPAA regulations impose criminal penalties on wrongful disclosure
of protected health information. The Company maintains procedures and provides
training to employees in an effort to comply with all of the medical record and
patient confidentiality laws to which it is subject. The Company intends to
comply with the privacy provisions of HIPAA. While the Company attempts to
comply with all confidentiality requirements, a violation of any confidentiality
law could subject it to sanctions that could reduce revenues or profits.

         In 2003, DHHS published final regulations implementing that portion of
HIPAA governing the security of health information. Most Covered Entities will
be required to comply with these regulations by April 21, 2005. The Company is
reviewing these regulations and may be required to change some practices to
comply with them.

         As part of the Administrative Simplification provision of HIPAA, DHHS
published final regulations governing electronic transactions involving health
information on August 17, 2000 with a compliance date of October 16, 2002 for
those covered entities which submit a plan before October 16, 2002 as to how
they will comply. These regulations are commonly referred to as the Transaction
Standards Rule. The Transaction Standards Rule establishes standards for the
most common health care transactions. Under the new standards, any party
transmitting or receiving health transactions electronically must send and
receive data in a single format, rather than the large number of different data
formats currently used. The Transaction Standards Rule applies to the Company in
connection with submitting and processing health claims. The Transaction
Standards Rule also applies to many of the Company's payors and to the Company's
relationships with those payors.

         In addition to its provisions regarding the confidentiality of
protected health information described above, HIPAA also imposes criminal
penalties for fraud against any health care benefit program, for theft or
embezzlement involving health care and for false statements in connection with
the payment of any health benefits. These HIPAA fraud and abuse provisions apply
not only to federal programs, but also to private health benefit programs. HIPPA
also broadened the authority of the OIG to exclude participants from federal
health care programs. Although the Company does not know of any current
violations of the fraud and abuse provisions of HIPAA, if it were found to be in
violation of these provisions, the government could seek penalties against the
Company including exclusion from participation in government payor programs.
Significant fines could cause liquidity problems and adversely affect the
results of operations.

         OIG FRAUD ALERTS AND ADVISORY OPINIONS. The Office of Inspector General
(OIG) of DHHS periodically issues Fraud Alerts and Advisory Opinions identifying
practices it believes may violate federal fraud and abuse laws. The Company



                                      -11-
<PAGE>

tries to structure its business arrangements to comply with federal fraud and
abuse laws. However, if the Company is found to have violated any of these laws,
the Company could suffer penalties, fines or possible exclusion from the
Medicare, Medicaid or other governmental programs, which could adversely affect
the Company's results of operations.

         STATE CONSUMER PROTECTION LAWS. A number of states are involved in
enforcement actions involving pharmaceutical marketing programs, including
programs offering incentives for pharmacists to dispense one product rather than
another. State consumer protection laws generally prohibit false advertising,
deceptive trade practices and the like. A number of the states have requested
that the Food and Drug Administration (FDA) exercise greater regulatory
oversight in the area of pharmaceutical promotion activities by pharmacists. It
is not possible to determine whether the FDA will act in this regard or what
effect, if any, FDA involvement would have on the Company's operations.

         THE STARK LAW. Federal law prohibits physicians from making a referral
for certain health items or services if they, or their family members, have a
financial relationship with the entity receiving the referral. No bill may be
submitted in connection with a prohibited referral. Violations are punishable by
civil monetary penalties upon both the person making the referral and the
provider rendering the service. Such persons or entities are also subject to
exclusion from Medicare and Medicaid. The Stark Law applies to the Company's
products and services, and the Company tries to structure its relationships to
comply with the law. However, if the Company's practices are found to violate
the Stark Law, the Company may be subject to sanctions or be required to alter
or discontinue some of its practices. This could reduce the Company's revenues
or profits.

         BENEFICIARY INDUCEMENT. HIPAA penalizes the offering of remuneration or
other inducements to beneficiaries of federal health care programs to influence
the beneficiaries' decision to seek specific governmentally reimbursable items
or services, or to choose a particular provider. HIPAA excludes items provided
to promote the delivery of preventive care. The statutory exception would apply
where "such care is provided or directly supervised by the medical provider that
has provided the incentive."

         The OIG has issued regulations on permissible incentives which are
those given in connection with preventive care, including pre and post natal
care, and services described in the U.S. Preventive Service Task Force's Guide
to Preventive Care. OIG also believes that items of nominal value given to
beneficiaries are permissible even if not related to preventive care. However,
permissible incentives would not include cash or cash equivalents. The Company
from time to time provides some items at no charge to its patients in connection
with their drug therapies, not all of which are included on the list of items
specifically stated not to violate the new regulations. The Company nevertheless
believes that those items are allowed by the underlying statute. A determination
that the Company violated the regulations or the statute, however, could result
in sanctions that reduce its revenue or profits.

         THE FALSE CLAIMS ACT. The Company is also subject to federal and state
laws prohibiting individuals or entities from knowingly and willfully making
claims for payment to Medicare, Medicaid, or other third party payors that
contain false or fraudulent information. These laws provide for both criminal
and civil penalties. Health care providers who submit claims which they knew or
should have known were false, fraudulent, or for items or services that were not
provided as claimed, may be excluded from Medicare and Medicaid participation,
required to repay previously collected amounts, and subject to substantial civil
monetary penalties.



                                      -12-
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         GOVERNMENT INVESTIGATIONS. The government increasingly examines
arrangements between health care providers and potential referral sources to
ensure that they are not designed to exchange remuneration for patient care
referrals. Investigators are increasingly willing to look behind formalities of
business transactions to determine the underlying purpose of payments.
Enforcement actions have increased and are highly publicized. To the Company's
knowledge, the Company is not currently the subject of any investigation. Any
future investigation may cause publicity that would cause potential customers to
avoid the Company, reducing potential revenues and profits.

         In addition to investigations and enforcement actions initiated by
governmental agencies, the Company could be the subject of an action brought
under the False Claims Act by a private individual on behalf of the government.
Actions under the False Claims Act, commonly know as "whistleblower" lawsuits
are generally filed under seal to allow the government adequate time to
investigate and determine whether it will intervene in the action, and defendant
health care providers are often without knowledge of such actions until the
government has completed its investigation and the seal is lifted.

         HEALTHCARE REFORM. Each state operates a Medicaid program funded in
part by the Federal government. The states may customize their programs within
federal limitations. Each state program has its own payment formula and
recipient eligibility criteria. In recent years, changes in Medicare and
Medicaid programs have resulted in limitations on, and reduced levels of,
payment and reimbursement for a substantial portion of health care goods and
services. The federal Balanced Budget Act of 1997 (even after the restoration of
some funding in 1999) caused significant reductions in spending levels for the
Medicare and Medicaid programs. In recent years a number of state Medicaid
agencies have reduced their reimbursement rates in response to the new AWP
published by First DataBank.

         Laws governing Medicare, Medicaid, CHAMPUS and other governmental
programs may change, and various administrative rulings, interpretations and
determinations make compliance difficult. Any changes may materially increase or
decrease program payments or the cost of providing services. Final
determinations of government program reimbursement often require years, because
of audits, providers' right of appeal and numerous technical requirements. The
Company believes it makes adequate provisions for adjustments. However, future
reductions in reimbursement could reduce the Company's revenues and profits.

         The U.S. health care industry continues to undergo significant change.
The Company anticipates that Congress and state legislatures will continue to
review and assess alternative health care delivery systems and payment methods
and that public debate of these issues will likely continue in the future. The
Company cannot predict which, if any, reform proposals will be adopted. Future
changes in the nature of the health system could reduce revenues and profits.

LICENSING AND REGISTRATION

         State laws require the Company be licensed as an in-state pharmacy in
New York, California, Texas and Florida. The Company currently ships
prescription drugs to many other states that require it to be licensed as an out
of state pharmacy. The Company believes that it substantially complies with all
state licensing laws applicable to its business.

         Laws enforced by the federal Drug Enforcement Agency, as well as some
similar state agencies; require the Company's pharmacy locations to individually
register in order to handle controlled substances, including prescription drugs.
A separate registration is required at each principal place of business where
the applicant manufactures, distributes, or dispenses controlled substances.



                                      -13-
<PAGE>

Federal and state laws require that the Company follow specific labeling and
record-keeping requirements for controlled substances. The Company maintains
federal and state controlled substance registrations for each of its facilities
that require it, and follow procedures intended to comply with all such
record-keeping requirements.

         PHARMACISTS. The Company's pharmacists must obtain state licenses to
dispense drugs. The Company's pharmacists are licensed in those states where
their activity requires it. Pharmacists must also comply with professional
practice rules. The Company monitors its pharmacists' practices for compliance
with such state laws and rules. The Company does not believe that the activities
undertaken by its pharmacists violate rules governing the practice of pharmacy
or medicine.

         PHARMACY COUNSELING. Federal law requires that states offering Medicaid
prescription drug benefits implement a drug use review program. The program
requires "before and after" drug use reviews, the use of predetermined
standards, and patient education. Its purpose is to improve the quality of care
by ensuring drug prescriptions are medically necessary, and not likely to cause
adverse effects. Participating states must develop standards for pharmacy
counseling. These standards apply as well to non-resident pharmacies like the
Company. The Company believes its pharmacists monitor these requirements, and
provides necessary counseling.

         FEDERAL MAIL ORDER.  Federal law imposes standards for:

     o   the labeling, packaging and repackaging, advertising and adulteration
         of prescription drugs; and
     o   the dispensing of controlled substances and prescription drugs.

The Federal Trade Commission and the United States Postal Service regulate mail
order drug sellers. The law requires truth in advertising, a reasonable supply
of drugs to fill orders, and a right to a refund if an order cannot be filled
within thirty days. To the extent applicable, the Company believes that it
substantially complies with all of these requirements.

         PRESCRIPTION DRUG MARKETING ACT. This federal law exempts many drug and
medical devices from federal labeling and packaging requirements, as long as
they are not adulterated or misbranded and were prescribed by a physician. The
law also prohibits the sale, purchase or trade of drug samples that are not
intended for sale or intended to promote the sale of the drug. Records must be
kept of drug sample distribution, and proper storage and maintenance methods
used. To the extent that this law applies to the Company, the Company believes
that it complies with the documentation, record keeping and storage
requirements.

         LIABILITY INSURANCES. Providing health care services and products
entails an inherent risk of liability. In recent years, participants in the
health care industry have become subject to an increasing number of lawsuits,
many of which involve large claims and significant defense costs. The Company
may from time to time be subject to such suits as a result of the nature of its
business. The Company maintains general liability insurance, including
professional and product liability, in an amount deemed adequate by its
management. There can be no assurance, however, that claims in excess of, or
beyond the scope of, its insurance coverage will not arise. In addition, the
Company's insurance policies must be renewed annually. Although, the Company has
not experienced difficulty in obtaining insurance coverage in the past, there
can be no assurance that it will be able to do so in the future on acceptable
terms or at all.



                                      -14-
<PAGE>


         EMPLOYEES. As of December 31, 2003, the Company had 68 full-time
employees. None of its employees are represented by a labor union. The Company
has not experienced any work stoppages and considers its employee relations to
be good.

                                  RISK FACTORS

THE RISKS AND UNCERTANTIES DESCRIBED BELOW ARE NOT THE ONLY RISKS AND
UNCERTANTIES THAT COULD DEVELOP. OTHER RISKS AND UNCERTANTIES THAT THE COMPANY
HAS NOT PREDICTED OR EVALUATED COULD ALSO AFFECT THE COMPANY. IF ANY OF THE
FOLLOWING RISKS OCCUR, THE COMPANY'S EARNINGS, FINANCIAL CONDITION OR BUSINESS
COULD BE MATERIALLY HARMED. THE COMPANY'S BUSINESS WOULD BE HARMED IF DEMAND FOR
ITS PRODUCTS AND SERVICES IS REDUCED.

THE COMPANY HAS A HISTORY OF LOSSES AND IT MAY NEVER ACHIEVE OR MAINTAIN
PROFITABILITY.

The Company has generated operating losses of approximately $3.0 million for the
year ended December 31, 2003, $1.0 million for the year ended December 31, 2002
and $1.1 million for the year ended December 31, 2001. The Company's operations
to date have been funded in part by private placements of its common and
preferred stock and the sale of certain operations. The Company may never
achieve or maintain profitability.

THE COMPANY HAS A LIMITED OPERATING HISTORY AND IT MAY BE UNABLE TO EXECUTE ITS
BUSINESS PLAN EFFECTIVELY.

The Company emerged from bankruptcy on February 1, 1999. After it emerged from
bankruptcy the Company discontinued its home health care business in order to
focus on its specialty pharmacy business. The Company's operating history and
financial data only date back to that date. Accordingly, the Company has a
limited operating history and may not be able to successfully implement its
business plan. Investors must consider the likelihood of the Company's success
in light of the problems, delays and expenses frequently encountered in
connection with the development of a new business or a business that has
recently emerged from bankruptcy.

THE COMPANY WILL NEED SUBSTANTIAL ADDITIONAL CAPITAL RESOURCES, WHICH COULD
PREVENT IT FROM FULLY PURSUING ITS GROWTH STRATEGY.

In order to implement the Company's business strategy, it will need substantial
capital resources and will incur, from time to time, additional short-and
long-term indebtedness, the terms of which depend on market and other
conditions. The Company cannot be certain that existing or additional financing
will be available to it on acceptable terms, if at all, especially in light of
the Company's bankruptcy in 1999. As a result, the Company could be unable to
fully pursue its growth strategy. Further, additional financing may involve the
issuance of equity securities that would reduce the percentage ownership of the
Company to then current stockholders.

THE TERMINATION OF THE COMPANY'S RELATIONSHIP WITH BRISTOL-MYERS SQUIBB MAY
CAUSE THE COMPANY'S BUSINESS TO SUFFER.

In 2002, the Company entered into a cross promotion agreement with Bristol-Myers
Squibb. The agreement with Bristol-Myers Squibb provided it with national sales
support from Bristol-Myers Squibb's virology sales team that focuses primarily



                                      -15-
<PAGE>

on HIV/AIDS and promoted the Company's specialty pharmacy services, including
its MOMSPak packaging system, in connection with the promotion of Bristol-Myers
Squibb's once-daily based HIV regimens and other HIV regimens.

In March of 2004, the Company and Bristol-Myers mutually agreed to terminate the
relationship as of March 31, 2004. The termination of this relationship could
cause the Company's revenues to decrease and harm its business.

THE COMPANY DISTINGUISHES ITS SERVICES FROM ITS COMPETITORS, IN PART, BY
PROMOTING THE COMPANY'S MOMSPAK PACKAGING SYSTEM, BUT PATIENTS AND HEALTH CARE
PROVIDERS MAY NOT ACCEPT IT, IT MAY NOT BE PERMITTED UNDER CERTAIN STATE LAWS OR
ITS COMPETITORS MAY OFFER SIMILAR OR SUPERIOR PACKAGING.

In February 2002, the Company started to offer its customized packaging, known
as the MOMSPak packaging system, to a limited number of its HIV/AIDS patients.
The promotion of the Company's MOMSPak packaging system is a key element in its
marketing program that the Company believes distinguishes it from its
competition and has facilitated its access to many clinics that focus on serving
HIV/AIDS patients. There can be no assurance that the medical community and
patients will accept the Company's MOMSPak packaging system or that various
state statutes and regulations governing the practice of pharmacy will permit
its MOMSPak packaging system. Moreover, if the Company's MOMSPak packaging
system is accepted, its competitors may offer similar or superior packaging.
MOMSPak is not patented and the system is not proprietary, nor are there any
plans to obtain any such intellectual property protection.

THE COMPANY'S GROSS PROFIT MARGINS ARE DETERMINED BY REIMBURSEMENT RATES AND
SUPPLIER PRICES, AND DECREASES IN THE REIMBURSEMENT THE COMPANY RECEIVES FOR ITS
PRODUCTS OR INCREASES IN ITS EXPENSES COULD HAVE A MEANINGFUL IMPACT ON ITS
ABILITY TO ACHIEVE PROFITABILITY.

The Company's gross profit margins are determined by reimbursement rates from
third-party payors and supplier prices. A reduction in the reimbursement the
Company receives for its products or an increase in its expenses could have a
meaningful impact on the Company's ability to achieve profitability. The prices
the Company receives for its products depend primarily on the reimbursement
rates paid by its payors due to the fact that approximately 99% of the Company's
sales are subject to reimbursement by third party payors. The prices the Company
pays for its products are dictated by the manufacturers and wholesalers of the
products. The Company generally has very limited, if any, ability to negotiate
the reimbursement rates it receives or the prices it pays and payment terms for
its products. A relatively small percentage reduction in the reimbursement rates
of the Company's payors or increase in the cost of its products would result in
much larger reductions in the Company's gross profits.

THE COMPANY'S ABILITY TO GROW COULD BE LIMITED, IF IT DOES NOT EXPAND THE
COMPANY'S EXISTING BASE OF CLINICS IT SERVES OR IF IT LOSES PATIENTS.

Developing and maintaining relationships with clinics that focus on serving
HIV/AIDS patients and health care providers affiliated with these clinics is an
important part of the Company's growth strategy. The Company believes that
developing and maintaining these relationships will allow it to rapidly expand
the number of patients the Company serves. If the Company is unable to
effectively market its services to these clinics and health care providers, or
if its existing relationships with clinics are terminated, the Company's ability
to grow will be harmed. If the Company is successful in marketing its services
the Company may not be able to manage the rapid expansion of its business. For
example, the Company may not be able to successfully hire, train and manage



                                      -16-
<PAGE>

additional sales marketing, customer support, pharmacy and delivery personnel
quickly enough to support its growth. Alternatively, the Company's systems,
procedures and controls may not be adequate to support the Company's operations
growth. The Company's inability to develop and manage new relationships with
additional clinics or the termination of existing relationships with clinics
could dramatically reduce its revenues and its ability to achieve profitability.

IF THE COMPANY IS NOT ABLE TO NEGOTIATE CREDIT TERMS FOR ITS INVENTORY WITH ITS
SUPPLIERS, THE COMPANY MAY HAVE TO RELY DISPROPORTIONATELY ON OTHER FINANCING TO
INCREASE ITS VOLUME.

The Company's business plan assumes that it will be able to increase its number
of customers substantially. The Company's ability to grow has been limited in
part by its inability to negotiate favorable credit terms from its suppliers.
The Company may become limited in its ability to continue to increase its volume
if the Company is unable to maintain credit terms from its suppliers or obtain
financing from third party lenders to support the Company's inventory needs in
the future.

In September 2003, the Company signed a five-year agreement with Amerisource
Bergen that requires minimum purchases per the agreement. If the Company has not
met the minimum purchase commitments as set forth in the agreement, the Company
will be charged a prorated amount of 0.20% of the projected volume remaining on
the Term of the Agreement. The agreement also states that the Company's minimum
purchases during the term of the agreement will be no less than $400,000,000.

IF DEMAND FOR THE COMPANY'S PRODUCTS AND SERVICES IS REDUCED, ITS BUSINESS AND
ABILITY TO GROW WOULD BE HARMED.

Reduced demand for the Company's products and services could be caused by a
number of circumstances, including:

     o   patient shifts to treatment regimens other than those the Company
         offers;

     o   new treatments or methods of delivery of existing medications that do
         not require the Company's specialty products and services;

     o   recalls of certain medications;

     o   adverse reactions caused by medications the Company sells;

     o   the expiration or challenge of a drug patent;

     o   competing treatment from a new medication or a new use of an existing
         medication;

     o   changes in relationships with pharmaceutical manufacturers which allow
         only an exclusive or a limited number of specialty pharmacies, of which
         the Company is not included, to dispense their medications; or

     o   the cure or a vaccine related to a chronic illness the Company
         services.

THE COMPANY'S SECURED LOAN AGREEMENT SIGNIFICANTLY RESTRICTS ITS ABILITY TO
UNDERTAKE CERTAIN BUSINESS ACTIVITIES THAT THE COMPANY'S MANAGEMENT MAY BELIEVE
ARE IMPORTANT FOR ITS SUCCESS.

The Company is party to a loan agreement with GE Capital Healthcare Financial
Services ("GE Capital"), dated April 21, 1999, and most recently amended as of
September 2003 that is secured by substantially all of its assets (the "Credit



                                      -17-
<PAGE>

Facility"). This agreement contains restrictive covenants that limit and, in
some cases, prohibits the Company from undertaking certain business activities
without such lender's prior consent. For example, except for limited exceptions,
waivers and conditions, the Company is not permitted to take any of the
following actions without the prior consent of its lender:


     o   incur or permit to exist any mortgage, pledge, assignment, security
         interest or other encumbrance of any nature;

     o   the Company will not at any time allow its consolidated net worth, as
         computed in accordance with GAAP, to fall below -$1,000,000;

     o   the indebtedness of the Company in respect of the Subordinated
         Obligations in an aggregate principal amount not to exceed $3,000,000
         (in the case of such Subordinated Obligations to a director of the
         Company) or $2,400,000 (in the case of such Subordinated Obligations
         issued to the previous owners of MME).

     o   incur, create, assume, permit to exist or become liable with respect to
         any indebtedness for borrowed money;

     o   guarantee any indebtedness or obligations of any person;

     o   sell, lease or otherwise dispose of any assets in excess of $100,000 in
         any calendar year;

     o   merge or consolidate with or acquire all or substantially all of the
         assets or any capital stock of any other entity;

     o   make any loans or advances; or

     o   enter into any sale and leaseback transaction.

As of December 31, 2003, the Company was in compliance with all of these
covenants.

THERE IS SUBSTANTIAL COMPETITION IN THE COMPANY'S INDUSTRY, AND IT MAY NOT BE
ABLE TO COMPETE SUCCESSFULLY.

The specialty pharmacy industry is highly competitive and is continuing to
become more competitive. All of the medications, supplies and services that the
Company provides are also available from its competitors. The Company's current
and potential competitors may include:

     o   other specialty pharmacy distributors;

     o   specialty pharmacy divisions of wholesale drug distributors;

     o   pharmacy benefit management companies;

     o   hospital-based pharmacies;

     o   other retail pharmacies; and

     o   other alternate site health care providers.

Many of the Company's competitors have substantially greater resources and more
established operations and infrastructure than the Company. A significant factor



                                      -18-
<PAGE>

in effective competition will be the Company's ability to maintain and expand
relationships with third-party payors who can effectively determine the pharmacy
source for their enrollees.

THE COMPANY RELIES ON A FEW KEY EMPLOYEES WHOSE ABSENCE OR LOSS COULD ADVERSELY
AFFECT ITS BUSINESS.

Many key responsibilities within the Company's business have been assigned to a
small number of employees. The loss of their services could adversely affect the
Company's business. In particular, the loss of the services of Michael P. Moran,
the Company's Chairman, President, Chief Executive Officer, Secretary, and
Acting Chief Financial Officer, or Mikelynn Salthouse, its Vice President, HIV
Sales, could disrupt the Company's operations. The Company does not maintain
"key person" life insurance policies on any of its employees. As a result, the
Company is not insured against any losses resulting from the death of its key
employees.

A PROLONGED MALFUNCTION OF THE COMPANY'S MOMSPAK AUTOMATED PACKAGING SYSTEM
COULD HURT THE COMPANY'S RELATIONS WITH THE PATIENTS IT SERVES AND THE COMPANY'S
ABILITY TO GROW.

A majority of the prescriptions for the patients the Company serves require
taking multiple combinations of medications many times a day. The Company relies
on its MOMSPak packaging system to fill a significant portion of the
prescriptions that it receives and expects this percentage to continue to
increase in the future. Many of the patients the Company serves prefer receiving
their medication in the Company's MOMSPak. In addition, health care providers
have expressed interest in this packaging system and they believe the Company's
MOMSPak packaging system increases the likelihood of patient adherence to their
medication protocols. The Company currently owns only two MOMSPak machines. If
one or both of these machines fail to function properly for a prolonged period,
the Company will have to fill prescriptions using the other machine, if
possible, by hand using pill boxes or by otherwise sorting the various drug
combinations into individual doses. One machine would likely not be able to take
over all the prescriptions of the other and hand sorting is more time consuming
and costly. Delays or failure to package medications by the Company's MOMSPak
packaging system caused by such a failure could result in its loss of a
substantial portion of its MOMSPak patients.

A DISRUPTION IN THE COMPANY'S TELEPHONE SYSTEM OR ITS COMPUTER SYSTEM COULD HARM
THE COMPANY'S BUSINESS.

The Company receives and takes prescription orders primarily over the phone and
by facsimile. The Company uses its computer system to confirm payor information,
medication interactions and patient medication history as well as to facilitate
filling and labeling prescriptions for delivery and billing. The Company's
success depends, in part, upon its telephone sales and direct marketing efforts
and its ability to promptly fill and deliver complex prescription orders. Any
continuing disruption in the Company's telephone, facsimile or computer systems
could adversely affect its ability to receive and process prescription orders
and make deliveries on a timely basis. This could adversely affect the Company's
relations with the patients it serves and potentially result in a partial
reduction in orders from or a complete loss of these patients.



                                      -19-
<PAGE>


THE COMPANY RELIES ON THIRD-PARTY SHIPPING SERVICES TO DELIVER ITS PRODUCTS TO
THE PATIENTS IT SERVES. PRICE INCREASES OR SERVICE INTERRUPTIONS IN THE
COMPANY'S SHIPPING SERVICES COULD ADVERSELY AFFECT ITS RESULTS OF OPERATIONS AND
ITS ABILITY TO MAKE DELIVERIES ON A TIMELY BASIS.

Shipping is essential to the Company's operations and represents a significant
expense that it does not pass on to its customer because governmental programs
will not provide additional reimbursement for shipping costs. As a result, any
significant increase in shipping rates could have an adverse effect on the
Company's results of operations. Similarly, strikes or other service
interruptions by these shipping services would adversely affect the Company's
ability to deliver its products on a timely basis.

THE COMPANY'S SUCCESS IN IDENTIFYING AND INTEGRATING ACQUISITIONS MAY IMPACT ITS
BUSINESS.

The Company may make acquisitions to grow its patient base, which involves
risks. For example:

     o   the Company may be unable to locate specialty pharmacies available for
         purchase at acceptable prices or may lose acquisitions to its
         competitors who may be willing to pay higher prices;

     o   the Company may not be able to successfully integrate acquired
         specialty pharmacies into its operations, or acquired specialty
         pharmacies could be disruptive to its current operations;

     o   diversion of the Company's management's attention from existing
         operations;

     o   dilutive issuances of equity securities that may negatively impact the
         market price of the Company's stock;

     o   increased debt;

     o   increased amortization expense related to intangible assets that would
         decrease the Company's earnings; and

     o   the specialty pharmacies the Company acquires may bring with them
         contingent liabilities such as liability for failure of the
         pre-acquisition operations to comply with health care or reimbursement
         laws.

           ADDITIONAL RISKS RELATED TO THE SPECIALTY PHARMACY INDUSTRY

CHANGES IN REIMBURSEMENT BY THIRD PARTY PAYORS COULD HARM THE COMPANY'S
BUSINESS.

The Company's profitability depends on payment from governmental and
non-governmental payors, and it could be harmed by cost containment trends in
the health care industry or by financial difficulties suffered by
non-governmental payors. Cost containment measures affect pricing, purchasing
and usage patterns in health care. Payors also influence decisions regarding the
use of a particular medication treatment and focus on product cost in light of
how the product may impact the overall cost of treatment.

The Company is primarily dependent on reimbursement from governmental payors,
such as the state ADAP and Medicaid programs. Changes in these programs or the
amounts paid, or coverage limitations established, by these programs for the
medications the Company sells may reduce its earnings. For example, these
programs could revise their pricing methodology for medications it sells, or
decide not to cover certain medications or cover only a certain number of units
prescribed within a specified time period. The Company is likely to experience
some form of revised drug pricing as ADAP and Medicaid HIV/AIDS medication



                                      -20-
<PAGE>

expenditures have garnered significant attention from governmental agencies
during the past few years. For example, as recently as July 2001 and September
2000, the OIG issued the latest in a number of reports evaluating ADAP cost
containment strategies and Medicaid HIV/AIDS medication expenditures. As a
result of the OIG's findings that Medicaid and ADAP pay more for antiretroviral
medications than other Federal purchasers, the OIG has recommended that the CMS
and the Health Resources and Services Administration revisit the rules governing
Medicaid and ADAP payment and rebates for antiretrovirals.

The Company estimates that approximately 85% of its gross patient revenues for
the fiscal year ended December 31, 2003 consisted of reimbursement from Federal
and state programs. Any reductions in amounts reimbursable by government
programs for its services or changes in regulations governing such
reimbursements could harm the Company's business, financial condition and
results of operations. The Company's disqualification from participating in the
state Medicaid programs of New York, California, Texas, New Jersey, and/or
Florida would dramatically reduce the Company's revenues and its ability to
achieve profitability.

The Company is dependent on reimbursement from non-governmental payors. Many
payors seek to limit the number of providers that supply drugs to their
enrollees. From time to time, payors with whom the Company has relationships
require that it and its competitors bid to keep their business, and there can be
no assurance that the Company will be retained or that its margins will not be
adversely affected when that happens. The loss of a payor relationship could
result in the loss of a significant number of patients and have a material
adverse effect on the Company's business, financial condition and results of
operations.

In October of 2003, the OIG published a report titled "State Strategies to
Contain Medicaid Drug Costs." This report outlines three key strategies for
states to pursue in reducing the amount of money spent on drug reimbursement.
Many of these strategies are currently being used by some states. These
strategies look to contain costs by (1) limiting Medicaid reimbursement for some
drugs, (2) shifting from higher to lower cost drugs, and (3) limiting the amount
of prescription drugs a beneficiary can obtain within a given time period. The
Company expects that many states will to pursue these strategies and that these
strategies may result in reduced revenues to the Company.

IF THE COMPANY IS FOUND TO BE IN VIOLATION OF MEDICARE AND MEDICAID
REIMBURSEMENT REGULATIONS, IT COULD BECOME SUBJECT TO RETROACTIVE ADJUSTMENTS
AND RECOUPMENTS.

The Company, as a Medicare and Medicaid provider, is subject to retroactive
adjustments due to prior year audits, reviews and investigations, government
fraud and abuse initiatives and other similar actions. Federal regulations also
provide for withholding payments to recoup amounts payable under the programs.
While the Company believes it is in material compliance with applicable Medicare
and Medicaid reimbursement regulations, there can be no assurance that the
Company, pursuant to such audits, reviews and investigations, among other
things, will be found to be in compliance in all respects with such
reimbursement regulations. A determination that the Company is in violation of
any such reimbursement regulations could result in retroactive adjustments and
recoupments and have a material adverse effect on the Company. As a Medicaid
provider, the Company is also subject to routine, unscheduled audits. The
extrapolative methodology, which applies to all applicable Medicaid revenues an
adjustment factor derived from a statistical sampling, used in such audits may
have an adverse impact on the Company's results of operations. There can be no
assurance at this time as to the impact on the Company of future Medicaid rate
changes or audits.


                                      -21-
<PAGE>



RECENT INVESTIGATIONS INTO REPORTING OF AVERAGE WHOLESALE PRICES COULD REDUCE
THE COMPANY'S PRICING AND MARGINS.

Many government payors, including the state ADAP and Medicaid programs, which
comprise most of the Company's business, pay it directly or indirectly for the
medications the Company handles at average wholesale price ("AWP"), or at a
percentage of AWP. Private payors with whom the Company may contract also sell
medications at AWP or at a percentage of AWP. The Company is aware of several
whistleblower lawsuits against, and settlements entered into by, various drug
manufacturers relating to the alleged reporting of artificially inflated AWPs to
independent price reporting services. Various Federal and state governmental
agencies, including the Department of Justice, the OIG and the National
Association of Medicaid Fraud Control Units, have conducted investigations into
whether the reported AWP of many medications is an appropriate or accurate
measure of their market price. Based on figures that fraud investigators
determined to be closer to what medical providers actually pay, in May 2000, one
of the independent price reporting services began reporting revised AWPs for
approximately 400 national drug codes (comprising 48 medications). Most state
Medicaid programs have incorporated these revised prices into their medication
payment methodology in some manner. Although none of these 48 medications are
HIV/AIDS antiretrovirals, Federal and state governmental attention continues to
focus on the validity of using AWP and the resulting Medicaid medication
payments (including payments for HIV/AIDS antiretrovirals).

As of January 1, 2004 Medicare adopted new pricing which reduced reimbursement
for many drugs. In 2005 the CMS will change reimbursement to be based off of
average sales price ("ASP") rather than AWP. This will be based on a calculation
of total unit revenue that the pharmaceutical manufactures receive. This change
in pricing may result in reimbursement amounts for drugs that the Company
dispenses.

The Company cannot predict the eventual results of any payment reforms, future
government investigations or recommended strategies for states to employ to
lower drug costs. Modifications to reimbursement payments, if adopted could have
a significant impact to the Company's financial condition and results of
operation.

THE COMPANY'S BUSINESS COULD BE HARMED IF PAYORS DELAY THEIR PAYMENTS TO IT.

The timing of payments and the Company's ability to collect from payors also
affects its revenues and profitability. If the Company is unable to collect from
payors or if payors fail to pay the Company in a timely manner, its business and
financial condition could be harmed.

THE COMPANY'S INDUSTRY IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND
NONCOMPLIANCE BY IT OR ITS SUPPLIERS COULD HARM THE COMPANY'S BUSINESS.

The marketing, sale and purchase of medications are extensively regulated by
Federal and state governments. If the Company fails or is accused of failing to
comply with laws and regulations, its business, financial condition and results
of operations could be harmed. Many of the most often dispensed medications
distributed by the Company receive greater attention from law enforcement
officials than those of a traditional pharmacy due to the high cost of the
medications and the potential illegal use. The Company's business could also be
harmed if the entities with which the Company contracts or has business
relationships, such as pharmaceutical manufacturers or distributors or
physicians or AIDS clinics, is accused of violating laws or regulations. The
applicable regulatory framework is complex and evolving, and the laws are very
broad in scope. There are significant uncertainties involving the application of




                                      -22-
<PAGE>

many of these legal requirements to the Company's business. Many of the laws
remain open to interpretation, and have not been addressed by substantive court
decisions that clarify their meaning. The Company is unable to predict what
additional Federal or state legislation or regulatory initiatives may be enacted
in the future relating to its business or the health care industry in general,
or what effect any such legislation or regulation might have on it. The Company
cannot provide any assurance that Federal or state governments will not impose
additional restrictions or adopt interpretations of existing laws that could
increase its cost of compliance with such laws or reduce its ability to become
profitable. The health care laws and regulations that especially apply to its
activities include the following:

     o   The Federal "Anti-Kickback Law" prohibits offer, solicitation, payment
         or receipt of anything of value in return for the referral of patients
         covered by Federally funded health care programs, including Medicare,
         Medicaid, ADAP and CHAMPUS, or for the arrangement or recommendation of
         the purchase of any item, facility or service covered by those
         programs. Several states also have similar laws proscribing kickbacks
         that are not limited to services for which Medicare and Medicaid
         payment may be made.

     o   The Department of Health and Human Services has promulgated regulations
         implementing what are commonly referred to as the Administrative
         Simplification provisions of the Health Insurance Portability and
         Accountability Act of 1996 (HIPAA) concerning the maintenance,
         transmission, privacy and security of electronic health information,
         particularly individually identifiable information. Each state may also
         have similar statutes and regulations governing the maintenance,
         transmission, privacy and security of electronic health information,
         including individually identifiable information. In addition, if the
         Company chooses to distribute medications through new distribution
         channels such as the Internet, the Company will have to comply with
         government regulations which exist now and which may be promulgated in
         the future. Compliance with these regulations could cause the Company
         to incur additional, and possibly costly, expenses.

o        The Ethics in Patient Referrals Act of 1989, as amended, commonly
         referred to as the "Stark Law," prohibits physician referrals to
         entities with which the physician or his or her immediate family
         members have a "financial relationship." A violation of the Stark Law
         is punishable by civil sanctions, including significant fines and
         exclusion from participation in Medicare and Medicaid. Many states have
         also enacted similar prohibitions, which may cover financial
         relationships between entities and health care practitioners, other
         than physicians, as well.

o        HIPAA created new violations for fraudulent activity applicable to both
         public and private health care benefit programs and which prohibit
         providing inducements to Medicare or Medicaid eligible patients which
         are likely to influence such patients to order or receive items or
         services from a particular health care provider.

     o   State laws prohibit the practice of medicine, pharmacy and nursing
         without a license. To the extent that the Company assists patients and
         providers with prescribed treatment programs, a state could consider
         its activities to constitute the practice of medicine. If the Company
         is found to have violated those laws, it could face civil and criminal
         penalties and be required to reduce, restructure, or even cease its
         business in that state. Pharmacies and pharmacists must obtain state
         licenses to operate and dispense medications. Pharmacies must also
         obtain licenses in some states to operate and provide goods and
         services to residents of those states. If the Company is unable to
         maintain its licenses (or obtain new licenses, if required) or if
         states place burdensome restrictions or limitations on non-resident
         pharmacies, this could limit or affect its ability to operate in some
         states which could adversely impact the Company's business and results
         of operations.

     o   There are a number of Federal statutory provisions which prohibit a
         person from submitting, or causing the submission, of a claim to the
         Federal or a state government for a item or service when the persons



                                      -23-
<PAGE>

         knows or should know that the claim is false or fraudulent. The Federal
         False Claims Act contains such a prohibition, as well as a provision
         encouraging private individuals to file suits on behalf of the
         government against health care providers such as the Company. A
         violation of these provisions could result in criminal penalties,
         significant financial sanctions or exclusion from participation in the
         Medicare and Medicaid programs. Federal false claims actions may be
         based on underlying violations of the kickback and/or self-referral
         prohibitions, as well. State law also proscribes fraudulent acts
         against third-party payors, including the ADAP and Medicaid programs.

     o   State consumer protection laws generally prohibit false advertising and
         unfair, deceptive trade practices. These state consumer protection laws
         have been the basis for investigations and multi-state settlements
         relating to prescription medication promotional practices of drug
         manufacturers involving pharmacies and/or physicians.

     o   Federal and state investigations and enforcement actions continue to
         focus on the health care industry, scrutinizing a wide range of items
         such as referral and billing practices, product discount arrangements,
         dissemination of confidential patient information, clinical drug
         research trials, pharmaceutical marketing programs and gifts for
         patients. It is difficult to predict how any of the laws implicated in
         these investigations and enforcement actions may be interpreted to
         apply to the Company's business. The pharmaceutical industry continues
         to garner much attention from Federal and state governmental agencies.
         In its Fiscal Year 2002 Work Plan, the OIG identified "pharmaceutical
         fraud" as one of its "special focus areas" and committed itself to
         conduct further assessments relating to Medicaid medication
         reimbursement issues. In the OIG'S 2003 and 2004 Work Plans, the OIG
         emphasized its continuing focus on pharmaceutical fraud. James G.
         Sheehan, Assistant U.S. Attorney, Chief, Civil Division, Eastern
         District of Pennsylvania, Department of Justice has "identified
         prescription drug issues" (including product substitution without
         authorization, controlled substances controls, free goods/diversion,
         medication errors, sale of samples, and contracting with pharmacy
         benefit management companies) as being among the "top 10" areas in the
         health care industry meriting his office's attention.

IF THE SUPPLY OF ANY OF THE PRODUCTS THAT THE COMPANY SELLS BECOMES SCARCE, THE
COMPANY'S ABILITY TO GROW AND BECOME PROFITABLE COULD BE HARMED.

As of December 31, 2003, the Company derived approximately 85% of its revenue
from medications prescribed to treat HIV/AIDS. The medications available for
this purpose are limited. Because these medications are generally subject to
patents, they are available from limited sources. The Company's business could
suffer substantially if any of these medications becomes scarce or unavailable
or is recalled. In addition, the Company's future prospects could be adversely
affected by unfavorable developments within the biotechnology or pharmaceutical
industries, including but not limited to, product shortages, adverse drug
reactions, drug recalls, increased competition, changes in the FDA approval
process, restrictions by pharmaceutical manufacturers on the pharmacies that
they allow to sell their products and the inability of pharmaceutical companies
to obtain capital to develop products.

IF THE COMPANY BECOMES SUBJECT TO LIABILITY CLAIMS THAT ARE NOT ADEQUATELY
COVERED BY ITS INSURANCE POLICIES, THE COMPANY MAY HAVE TO PAY DAMAGES AND OTHER
EXPENSES WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON IT.

The Company's business exposes it to risks that are inherent in the distribution
of medication and the provision of ancillary services. A successful claim not
covered by the Company's professional liability and products liability insurance
or in excess of its coverage could have a material adverse effect on its
business, financial condition or results of operations. In addition, the Company
cannot guarantee that it will be able to maintain professional liability and
products liability insurance in the future on acceptable terms or with adequate
coverage against potential liabilities.




                                      -24-
<PAGE>


ITEM 2.           DESCRIPTION OF PROPERTY

The Company occupies approximately 8,215 square feet of space in Melville, New
York, which is leased to the Company through June 30, 2009. Both the executive
offices and the New York pharmacy are located at this site. The Company leases
three facilities in California of 7,876, 1,094 and 3,750 square feet in
Torrance, San Diego and San Francisco, respectively. The leases in Torrance, San
Diego and San Francisco expire on December 31, 2005, October 31, 2004 and April
30, 2005, respectively. The Company leases approximately 3,600 square feet of
space in Austin, Texas for its licensed pharmacy. This lease expires June 30,
2004. The Company leases approximately 2,700 square feet of space in Miami,
Florida for its licensed pharmacy. This lease expires on September 30, 2005. At
this time, the Company believes it has adequate space for its current
operations. The Company plans on renewing the leases prior to expiration or
moving to a comparable space.

                                                 Square
    Location              Principal Use          Footage      Property Interest
--------------------   --------------------    -----------   -------------------
--------------------   --------------------    -----------   -------------------
  Melville, NY              Pharmacy and          8,215      Leased - expiring
                         Executive Offices                   June 30, 2009
  Torrance, CA              Pharmacy              7,876      Leased - expiring
                                                             December 31, 2005
  San Diego, CA             Pharmacy              1,094      Leased - expiring
                                                             October 31, 2004
San Francisco, CA           Pharmacy              3,750      Leased - expiring
                                                             April 30, 2005
   Austin, TX               Pharmacy              3,600      Leased - expiring
                                                             June 30, 2004
    Miami, FL               Pharmacy              2,700      Leased - expiring
                                                             September 30, 2005

Pursuant to the Credit Facility, all of the Company's assets are subject to a
first lien in favor of GE Capital.

ITEM 3.           LEGAL PROCEEDINGS


NEW JERSEY MEDICAID AUDIT. During the first quarter of 2003, Medicaid commenced
a review of the Company's billing practices in New Jersey. In particular,
Medicaid reviewed whether the appropriate procedures were followed by the
Company and whether the requisite patient consents were obtained by the Company
at the time of delivery. During 2003 the Company accrued an estimated cost of
$200,000 for the New Jersey Medicaid Audit. The Company has reached an agreement
in principle with Medicaid of New Jersey. The Company believes that accrued
expenses will be adequate for the final settlement.

CALIFORNIA AIDS DRUG ASSISTANCE PROGRAM (ADAP) AUDIT. In 2003, prior to the
acquisition of MME by the Company, ADAP commenced a review of billing by MME in
California. In particular, ADAP reviewed whether the appropriate procedures were
followed and whether the requisite consents were obtained. The Company met with
ADAP and agreed to a settlement. The settlement amount was within the agreed



                                      -25-
<PAGE>

upon post closing price adjustment as agreed to between the Company and the
sellers of MME at the closing of the transaction. As a result, the Company will
not suffer any adverse financial effects.


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 2003.

                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         None of the Company's securities are listed on any exchange, nor are
the securities traded in any market. The Company is unable to provide any
information as to if and when its securities will be publicly traded.

         As of April 14, 2004, there were approximately 105 holders of record of
its common stock.

         The Company has never paid cash dividends on its capital stock and it
has no intention of paying any cash dividends in the foreseeable future.

         There were no unregistered sales of Registrant's equity securities
during last fiscal year.

         In April 2003, the Company raised $6,175,000 in a private placement
with several private and previous investors. The Company sold 1,235,000 shares
of Series C convertible preferred stock at $5.00 per share. There will be no
dividends payable on the shares, unless the Company, in its sole discretion
declares a dividend with respect to the common stock. In the event of any
liquidation, the shares shall share on a pari passu basis in liquidation with
the Series A and B preferred stock outstanding. A portion of the proceeds of the
sale of the Series C convertible preferred stock was used in connection with the
Company's $1,475,000 settlement of its lawsuit with Morris and Dickson. The
Series C and Series D (see - Note 19. Subsequent Events) shares were sold
pursuant to Regulation D of the Securities Act of 1933, as amended.






                                      -26-
<PAGE>




                      EQUITY COMPENSATION PLAN INFORMATION

                                                                  (c) Number of
                              (a) Number of                       securities
                              securities to   (b) Weighted-       remaining
                              be issued upon  average exercise    available
                              exercise of     price of            under equity
                              outstanding     outstanding         compensation
                              options,        options,            plans
                              warrants and    warrants and        [excluding
                              rights          rights              securities
                                                                  reflected in
Plan Category                                                     column (a)]
--------------------------    ------------    ---------           ----------
Equity compensation plans       1,515,200      $ 1.89               134,800
approved by security
holders (1)

Equity compensation plans
not approved by security
holders (2)                      844,773        4.20                   --
                              ------------    ---------           ----------

TOTAL                           2,359,973      $ 2.72               134,800
                              ============    =========           ==========

     (1) INCLUDES OPTIONS GRANTED PURSUANT TO THE COMPANY'S 1998 STOCK OPTION
         PLAN AND 2002 STOCK OPTION PLAN.
     (2) INCLUDES WARRANTS GRANTED TO VARIOUS INDIVIDUALS AND CORPORATIONS.

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

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.

OVERVIEW

         The Company provides specialized pharmacy services to treat patients
with certain chronic diseases primarily related to HIV/AIDS. According to the
Centers for Disease Control (the "CDC"), 850,000 to 950,000 people in the United
States are living with the HIV infection. The Company estimates that the average
annual cost of oral drug medications is $10,000 to $15,000 per HIV patient per
year. The Company is licensed to provide pharmacy services in all 50 states and
operates four distribution centers, located in Melville, New York, Miami,
Florida, Austin, Texas, and Los Angeles, California.

         The Company receives reimbursement for the largest portion of its
patients from state Medicaid programs and other governmental payors, such as
ADAP. The Company estimates that, as of December 31, 2003, 85% of its gross
billings are from these governmental payor sources. The Company is also
reimbursed by private insurance companies. The Company does not fill or deliver
prescriptions until it has confirmed that the patient is eligible for
reimbursement of the cost of the medications by a third-party payor. The Company
purchases its drugs from pharmaceutical distributors. In 2003, the Company
entered into an agreement with AmeriSource Bergen that will provide the majority
of drugs sold by the Company. As part of this agreement the Company agreed to
purchase certain minimum amounts in the future. The agreement also provides for
certain penalties if the minimum purchase requirements are not met. The Company
has received improved payment terms relative to its agreements with other
pharmaceutical distributors.


                                      -27-
<PAGE>


         In recent years, payors have increasingly focused on reducing
prescription drug costs. The industry's historical pricing method, based on AWP,
has been challenged by state and federal governments. Many of the proposed
changes to pricing are based on average sales price, which is considered by
government to be more representative of actual market prices. A change in
pricing will most likely result in an overall reduction in reimbursement.
Additionally, in response to continued budget problems, many states have
prepared or are preparing budgets that will legislate reimbursement rate cuts.
Reimbursement rate reductions have a negative effect on the Company's gross
margin and net income as a percent of revenue.

         The Company has developed a packaging system named MOMSPak. MOMSPaks
are filled by an automated specialty packaging system. This packaging system is
not proprietary and the Company does not intend to pursue intellectual property
protection for the system. The MOMSPak was developed to assist patients in
dealing with complicated prescription therapy regimes and to increase adherence
to these regimes.

         The Company has pursued acquisitions as a means of growth and the
Company intends to continue to pursue acquisitions as a part of its growth
strategy. The specialty pharmacy market is highly fragmented and there is
significant competition for acquisitions. The Company may not be able to achieve
its growth objectives if it has to compete for acquisitions with better
capitalized companies.

SIGNIFICANT ACCOUNTING POLICIES

                         CRITICAL ACCOUNTING POLICIES.

GENERAL: Management's discussion and analysis of its financial condition and
results of operations are based upon its consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. On an on-going basis,
management evaluates its estimates and judgments, including those related to bad
debts and intangible assets. Management bases its estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The Company's significant accounting policies are described in Note 2 to the
consolidated financial statements included herein. The Company believes certain
accounting policies related to revenue recognition, the allowance for doubtful
accounts and the carrying value of intangible assets to be critical policies due
to the estimation processes involved in each.

REVENUE RECOGNITION. The Company recognizes revenue when drug delivery is
completed. Any customer can initiate the filling of prescriptions via having a
doctor call in prescriptions to the Company's pharmacists, faxing over a
prescription, or mailing prescriptions to one of the Company's facilities. Once
the Company has verified that the prescriptions are valid and has received
authorization from a customer's insurance company, the pharmacist then fills the
prescriptions and ships the medications to the customers via the Company's
outside delivery service, an express courier service, or postal mail. Only when
the delivery has been completed does the Company recognize revenue.



                                      -28-
<PAGE>


ALLOWANCE FOR DOUBTFUL ACCOUNTS. Management regularly reviews the collectibility
of accounts receivable by tracking collection and write-off activity. Estimated
write-off percentages are then applied to each aging category by payor
classification to determine the allowance for estimated uncollectible accounts.
The allowance for estimated uncollectible accounts is adjusted as needed to
reflect current collection, write-off and other trends, including changes in
assessment of realizable value. While management believes the resulting net
carrying amounts for accounts receivable are fairly stated at each quarter-end
and that the Company has made adequate provision for uncollectible accounts
based on all available information, no assurance can be given as to the level of
future provisions for uncollectible accounts, or how they will compare to the
levels experienced in the past. Under Medicaid, Medicare and other reimbursement
programs, the Company is reimbursed for services rendered to covered program
patients as determined by reimbursement formulas and regulations. Laws and
regulations governing these programs are complex and subject to interpretation.
As a result, it is possible that recorded estimates will change. The Company's
ability to successfully collect its accounts receivable depends, in part, on its
ability to supervise and train personnel in billing and collection, and minimize
losses related to system changes.

INTANGIBLE ASSET IMPAIRMENT: In assessing the recoverability of its intangible
assets, the Company must make assumptions regarding estimated future cash flows
and other factors to determine the fair value of the respective assets. If it is
determined that impairment indicators are present and that the assets will not
be fully recoverable, their carrying values are reduced to estimated fair value.
Impairment indicators include, among other conditions, cash flow deficits, a
historic or anticipated decline in revenue or operating profit, adverse legal or
regulatory developments, accumulation of costs significantly in excess of
amounts originally expected to acquire the asset, and a material decrease in the
fair value of some or all of the assets. Changes in strategy and/or market
conditions could significantly impact these assumptions, and thus the Company
may be required to record impairment charges for these assets. The Company
adopted Statement of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144") effective January
1, 2002, and the adoption of the Statement had no impact on the Company's
consolidated financial position or results of operations.

GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS:In accordance with
Statement of Financial Accounting Standard ("FAS") No. 141, "Business
Combinations", and No. 142, "Goodwill and Other Intangible Assets", goodwill and
intangible assets associated with the MME acquisition that are deemed to have
indefinite lives are no longer amortized but are subject to annual impairment
tests. Such impairment tests require the comparison of the fair value and
carrying value of reporting units. Measuring fair value of a reporting unit is
generally based on valuation techniques using multiples of sales or earnings,
unless supportable information is available for using a present value technique,
such as estimates of future cash flows. The Company assesses the potential
impairment of goodwill and other indefinite-lived intangible assets annually and
on an interim basis whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. Some factors we consider important
which could trigger an interim impairment review include the following:

     o   Significant underperformance relative to expected historical or
         projected future operating results;
     o   Significant changes in the manner of our use of the acquired assets or
         the strategy for our overall business; and
     o   Significant negative industry or economic trends.



                                      -29-
<PAGE>


         If we determine through the impairment review process that goodwill has
been impaired, we record an impairment charge in our consolidated statement of
income. Based on our 2003 impairment review process, we have not recorded any
impairments during the year ended December 31, 2003.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2003 AND 2002

NET SALES. Net sales for the year ended December 31, 2003 increased to
$48,222,993 from $27,457,438 for the year ended December 31, 2002, an increase
of 75.63%.

The increase in net sales for the year ended December 31, 2003 as compared to
the same period in 2002 is attributable to volume growth with the addition of
new patients in the New York and Florida divisions. Net sales in New York
increased by approximately $6,392,000 for the year ended December 31, 2003 as
compared to the same period in 2002. Net sales in Florida increased by
approximately $902,000 for the year ended December 31, 2003 as compared to the
same period in 2002. However, Florida did not begin to generate sales until
December 2002. Net sales in Texas decreased by approximately $296,000 as
compared with the same period in 2002. This decline resulted primarily from the
New Jersey Medicaid audit, which negatively affected the Company's Texas
division. The Texas division has historically serviced the Company's New Jersey
customers, and while the New Jersey Medicaid audit was ongoing, the Company
restricted service to New Jersey patients.

The acquisition of Medicine Made Easy ("MME") on May 1, 2003 resulted in
increased sales of approximately $13,768,000 for the period commencing May 1,
2003 through December 31, 2003. MME's payor mix is comprised primarily of
California Medi-Cal.

GROSS PROFIT. Gross profit was $6,253,487 and $4,185,502 for the years ended
December 31, 2003 and 2002 respectively, and represents 12.97% and 15.24% of net
sales, respectively. The Company's gross margin for the year ended December 31,
2003 decreased by approximately 2.27% as compared with the gross margins for the
year ended December 31, 2002, due to the Company devoting more of its efforts to
servicing the HIV/AIDS market, as well as, a 2% prescription reimbursement rate
decrease by New York Medicaid and ADAP (AIDS Drugs Assistance Program) in July
2003. In April 2003, the Company settled its lawsuit with Morris and Dickson for
$1,475,000. As of December 31, 2002, the Company adjusted its amount owed to
Morris and Dickson from approximately $1,780,000 to $1,475,000, which minimized
the decrease in gross profit. Without the Morris Dickson settlement, the gross
profit would have been $3,876,818, which represented 14.12% of net revenue for
2002.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $8,744,127 and $4,756,037 for the year ended
December 31, 2003 and 2002, respectively, and represented 18.13% and 17.32% of
net sales, respectively.

The increase in selling, general and administrative expenses of $3,988,090 for
the year ended December 31, 2003 as compared to the same period in 2002 was
primarily due to the following factors:

     -   increases in clinical, administrative and sales personnel costs related
         to the MME acquisition of approximately $1,470,000;

     -   increase in general operating expenses related to the MME acquisition
         of approximately $819,000;

     -   increase in depreciation and amortization expenses related to the MME
         acquisition of approximately $275,000;

     -   increase in clinical, administrative and sales personnel costs in the
         New York and Florida divisions of approximately $153,000;

-        a bonus paid to an executive in the amount of $100,000;

     -   increase in professional fees of approximately $569,000. Approximately
         $206,000 for professional fees related to the NJ Audit, approximately
         $70,000 for compliance with HIPPA, approximately $193,000 for
         consulting expense and approximately $100,000 increase in general
         accounting and legal costs;

     -   increase in bad debt expense of approximately $188,000;

     -   increase in shipping costs in the New York and Florida divisions of
         approximately $138,000; and

     -   increase in the Company's general and umbrella insurance policies of
         approximately $133,000.

OPERATING LOSS. Operating losses were $2,490,640 and $570,535 for the years
ended December 31, 2003 and 2002, respectively and represents 5.16% and 2.08% of
net sales, respectively. The increase in operating loss is attributable to an
increase in selling, general and administrative expenses, lower gross margin
reflecting a 2% prescription reimbursement rate decrease by New York Medicaid
and ADAP in July 2003, and the acquisition of MME, which contributed
approximately $894,000 in operating loss for the period commencing May 1, 2003
through December 31, 2003.

OTHER INCOME (EXPENSE). Other income (expense) for the years ended December 31,
2003 and 2002 were $(443,882) and $(433,223), respectively. For the year ended
December 31, 2003, other income (expense) is comprised of interest expense of
$(243,882) and a settlement expense with New Jersey Medicaid of $(200,000).
Interest expense for the year ended December 31, 2002 was $(104,358). The
increase in interest expense is primarily attributable to the Company's
increased short-term borrowing from its revolving credit facility and interest
on the secured promissory notes payable to the sellers of MME.

For the year ended December 31, 2002, other income (expense) is also comprised
of a settlement of a lawsuit with New Geri Care of Brooklyn for $150,000. The
settlement represented the amount New Geri Care of Brooklyn failed to pay for
inventory it acquired in connection with the purchase of certain assets from the
Company in September 2001. In December 2002, the Company ceased its efforts to
conduct a public offering of its equity securities. As a result, the Company
wrote off $413,757 of deferred offering costs relating to the terminated
offering. In addition, the Company wrote off $65,108 of expenses related to
acquisitions that were not consummated.

PROVISION FOR INCOME TAXES. For the year ended December 31, 2003, the Company
recorded an income tax provision for $19,646, as compared to an income tax
provision of $35,002 for the comparable period in the prior year. The provision



                                      -30-
<PAGE>

for income taxes relates primarily to franchise tax payments. Deferred tax
assets related to net operating loss carry-forward from the acquisition of
Medicine Made Easy have been fully reserved by a valuation allowance. As a
result of the change in ownership, certain limitations may apply to their
utilization.

LIQUIDITY AND CAPITAL RESOURCES. The Company purchases the medications it needs
to fill prescriptions from wholesalers, who require that almost all purchases be
made in cash. The Company is normally reimbursed by third party payors within 30
days after a prescription is filled and a claim is submitted in the appropriate
format. Accordingly, the Company needs significant cash resources to operate. At
December 31, 2003, the Company had cash balances of $640,790. In addition, the
Company has a revolving credit facility with GE Capital for an amount up to a
maximum of $6.0 million available to the Company for short-term borrowings.
Borrowings under the facility are based on accounts receivable and bear interest
at the Prime Rate plus two percent. The Company's borrowings are collateralized
by a perfected and primary security interest in all of the Company's assets,
accounts receivable, trademarks, licenses, and values of any kind of the Company
and requires compliance with certain financial covenants. As of December 31,
2003, the Company was in compliance with all of these covenants. At December 31,
2003, the Company's borrowing capacity was approximately $1,900,000 and its
borrowings under this facility were $0.

In addition to the revolving credit line, the Company has a $1,500,000 bank loan
from a bank that accrues interest at Prime Rate per annum, with the full
principal payable in March of 2005. The Prime Rate at December 31, 2003 was
4.00%. If the Company is unable to pay off this loan when due, the Company will
enter into discussion with the bank that issued the loan to extend the loan for
another year. In the past, the bank has agreed to extend the term of the loan,
but there can be no assurance that it will be willing to do so on terms
acceptable to the Company. This bank loan has been guaranteed by one of the
Company's principal investors.

At December 31, 2003, the Company's cash and cash equivalents increased by
$427,863 or 200.94%, to $640,790 from $212,927 at December 31, 2002.

Net cash used in operating activities was ($2,694,845) in 2003 as compared with
($442,111) in 2002. The net cash used in 2003 was primarily due to a usage of
cash to fund the increase in selling, general and administrative expenses,
accounts receivable and inventory, offset by cash provided by adjusting the
timing of its accounts payable payments.

Investing activities in 2003 used cash of ($2,374,329) as compared to cash used
of ($67,917). The net cash used in 2003 consisted primarily of the payments for
the acquisition of Medicine Made Easy. The net cash used in 2002 consisted only
of purchase of equipment.

Financing activities in 2003 provided net cash of $5,497,037 as compared to cash
used of ($836,505) in 2002. In 2003, the cash was provided primarily by the
proceeds from the sale of Preferred Stock. In 2002, the usage of cash reflected
the pay down of the line of credit, long term debt and deferred financing costs.

The Company's principal sources of liquidity have been from the net proceeds of
external financing transactions. The Company has financed operating losses
through the private placement of securities. The Company expects to continue to
fund operations through external financing transactions until it achieves
positive cash flow. In April 2004, the Company raised additional funds through a
private placement. See "Note 19 - Subsequent Event" in the notes to the
consolidated financial statements. Based on the Company's current financial



                                      -31-
<PAGE>

position and expected financial performance in 2004, it does not believe that
its liquidity would be adversely impacted in 2004 if it is unable to complete
additional financings.

In April 2003, the Company raised $6,175,000 in a private placement with several
investors. The Company sold 1,235,000 shares of Series C convertible preferred
stock at $5.00 per share. There will be no dividends payable on the shares,
unless the Company, in its sole discretion declares a dividend with respect to
the common stock. In the event of any liquidation, the shares shall share on a
pari passu basis in liquidation with the Series A and B preferred stock
outstanding. A portion of the proceeds of the sale of the Series C convertible
preferred stock was used in connection with the Company's $1,475,000 settlement
of its lawsuit with Morris and Dickson.

On May 1, 2003, the Company acquired MME. The aggregate consideration for the
acquisition was $4,950,000, subject to post-closing adjustments, and warrants to
purchase 227,273 shares of the Company's common stock for $11.00 per share.
$300,000 of the purchase price was paid in cash prior to closing as a lock-up
fee. $2,250,000 of the purchase price was paid in cash at closing. $1,150,000 of
the purchase price was paid by subordinated secured promissory notes payable on
May 1, 2004. The remaining $1,250,000 was paid by subordinated secured
promissory notes payable on May 1, 2005. These notes payable accrue interest at
a rate of Prime Rate plus 2% per annum. The Prime Rate at December 31, 2003 was
4.00%. The notes payable are secured by cash, cash equivalents, accounts
receivable, inventory, fixed and other assets of the Company and are
subordinated to GE Capital and Amerisource Bergen.

Through the acquisition of MME, the Company expects its patient base to increase
and potentially generate profits during 2004. Prior to the acquisition, the
Company's management was aware of the losses that were being generated by MME's
operations. Management plans to implement its methods and strategies to provide
a lower cost of operations, while also increasing its patient base and profits.
There can be no assurance, however, the Company will be successful in these
endeavors.

Management completed an independent appraisal of MME's assets as of December
31,2003, and concluded that no impairment charge was necessary.

At December 31, 2003, the Company's contractual cash obligations and commitments
(including those related to the MME transaction) during the next five years are
as follows:

Contractual Obligations         1 - 3 Years       4 - 5 Years         Total
---------------------------  ----------------   ---------------  --------------

Operating leases                 $ 1,034,646         $ 475,274     $ 1,509,920
Capital leases                       282,793             --            282,793
Note payable                       3,900,000             --          3,900,000
Revolving credit line                 --                 --             --
Long term debt                       119,636             --            119,636
Purchase Commitments             230,821,446       156,479,167     387,300,613
                             ----------------   ---------------  --------------
                   Total        $236,158,521     $ 156,954,441    $393,112,962
                             ================   ===============  ==============

In September 2003, the Company expanded its relationship with one of the drug
wholesalers, Amerisource Bergen, which improved the Company's payment terms from
approximately 13 days to 31 days. The Company signed a five-year purchase
agreement with that drug wholesaler that requires certain minimum purchase
commitments over the term of the agreement. If the Company has not met the
minimum purchase commitments as set forth in the agreement, the Company will be



                                      -32-
<PAGE>

charged a prorated amount of 0.20% of the projected volume remaining on the Term
of the Agreement. Pursuant to the terms of the arrangement between the Company
and the drug wholesaler, the drug wholesaler has a security interest in the
Company's personal property that is subordinated to GE Capital.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any Off-Balance Sheet arrangements.

ITEM 7.  FINANCIAL STATEMENTS

         The Company's audited consolidated financial statements for the years
ended December 31, 2003 and 2002 begin on page F-1 of this Annual Report on Form
10-KSB and are incorporated herein by reference.

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

         None.

ITEM 8A.          CONTROLS AND PROCEDURES

         EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Under the supervision
and with the participation of management, including our principal executive
officer who is also acting as the principal financial officer, the Company
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures, as such term is defined in Rule 13a-15(e) promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of
the end of the period covered by this annual report. Based on this evaluation,
such executive concluded that the Company's disclosure controls and procedures
were effective in ensuring that all material information required to be filed in
this report has been made known to him in a timely manner.

         CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. There have been
no significant changes in our internal controls over financial reporting that
occurred during our last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.

                                    PART III

ITEM 9.           DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          The information required by this item is included under "Proposal No
1.: Election of Directors," "Other Information - Executive Officers" and
"Compliance with Section 16(a) of the Exchange Act" in the Company's Definitive
Proxy Statement to be filed in connection with its 2004 Annual Meeting of
Stockholders and is incorporated herein by reference.

         The Company will adopt a Code of Ethics that will apply to Senior
Financial Officers including the Company's principal executive officer,
principal financial officer and controller. The information required by this
item is included under "Other Information - Executive Compensation" in the
Company's Definitive Proxy Statement to be filed in connection with its 2004
Annual Meeting of Stockholders and is incorporated herein by reference.






                                      -33-
<PAGE>


ITEM 10.    EXECUTIVE COMPENSATION

         The information required by this item is included under "Other
Information - Executive Compensation" in the Company's Definitive Proxy
Statement to be filed in connection with its 2004 Annual Meeting of Stockholders
and is incorporated herein by reference.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND
            RELATED STOCKHOLDER MATTERS

         The information required by this item is included under "Other
Information - Security Ownership of Certain Beneficial Owners and Management" in
the Company's Definitive Proxy Statement to be filed in connection with its 2004
Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this item is included under "Transactions
with Related Parties" in the Company's Definitive Proxy Statement to be filed in
connection with its 2004 Annual Meeting of Stockholders and is incorporated
herein by reference.

ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

     (a)       Index of Exhibits

     2.1       Confirmation Order dated February 1, 1999. (Filed as an exhibit
               to the Registrant's Current Report on Form 8-K filed on October
               10, 1999.)

     2.2       First Amended Plan of Reorganization of The Care Group, Inc., et
               al dated January 2, 1998. (Filed as an exhibit to the
               Registrant's Current Report on Form 8-K filed on October 10,
               1999.)

     2.3       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.)

     3.1       Restated Certificate of Incorporation of the Registrant, filed
               with the Secretary of State of Delaware on October 7, 1999.
               (Filed as an exhibit to the Registrant's Current Report on Form
               8-K filed on October 10, 1999.)

     3.1A      Amendment to Restated Certificate of Incorporation, filed with
               the Secretary of State of Delaware on June 7, 2002. (Filed as an
               exhibit to the Registrant's proxy statement filed on June 7,
               2002.)

     3.1B      Amended and Restated Certificate of Incorporation of the
               Registrant (Incorporated by reference to Exhibit A to the
               Registrant's proxy statement filed on June 4, 2003.)

     3.2       Second Amended and Restated By-laws of the Registrant. (Filed as
               an exhibit to the Registrant's 10-KSB filed on April 15, 2003.)

     4.1       Warrant to Purchase Common Stock of Allion Healthcare, Inc.
               issued to Darin A. Peterson, as of May 1, 2003 (Incorporate by
               reference to Exhibit 4.1 to the Registrant's Current Report on
               Form 8-K filed on May 16, 2003.)



                                      -34-
<PAGE>


     4.2       Warrant to Purchase Common Stock of Allion Healthcare, Inc.
               issued to Allan H. Peterson, as of May 1, 2003 (Incorporated by
               reference to Exhibit 4.2 to the Registrant's Current Report of
               Form 8-K filed on May 16, 2003.)

     4.3       Subordinated Secured Promissory Note of Allion Healthcare, Inc.
               dated as of May 1, 2003, in the principal amount of $1,187,500,
               issued to Darin A. Peterson (Incorporated by reference to Exhibit
               10.2 to the Registrant's Current Report on Form 8-K filed on May
               16, 2003.)

     4.4       Subordinated Secured Promissory Note of Allion Healthcare, Inc.,
               dated as of May 1, 2003, in the principal amount of $62,500,
               issued to Allan H. Peterson (Incorporated by reference to Exhibit
               10.3 to the Registrant's Current Report on Form 8-K filed on May
               16, 2003.)

     4.5       Subordinated Secured Promissory Note of Allion Healthcare, Inc.,
               dated as of May 1, 2003, in the principal amount of $1,092,500,
               issued to Darin A. Peterson (Incorporated by reference to Exhibit
               10.4 to the Registrant's Current Report on Form 8-K filed on May
               16, 2003.)

     4.6       Subordinated Secured Promissory Note of Allion Healthcare, Inc.,
               dated as of May 1, 2003, in the principal amount of $57,500,
               issued to Allan H. Peterson (Incorporate by reference to Exhibit
               10.5 to the Registrant's Current Report on Form 8-K filed on May
               16, 2003.)

     4.7       Continuing Guaranty of Allion Healthcare, Inc. Indebtedness to
               West Des Moines State Bank by Guarantor John Pappajohn dated as
               of December 16, 1999. *

     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. (Filed as an exhibit to the
               Registrant's Current Report on Form 8-K filed on October 10,
               1999.)

     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
               Registrant's Current Report on Form 8-K filed on October 10,
               1999.)

     10.3      Asset Purchase Agreement, dated as of July 27, 2001, between
               Allion Healthcare, Inc. and Prescripticare, L.L.C. (Filed as an
               exhibit to the Registrant's Form 8-K filed on August 10, 2001.)

     10.4      2002 Stock Incentive Plan (Incorporate by reference to Exhibit
               10.4 to the Registrant's annual report on Form 10KSB filed on
               April 15, 2003.)

     10.5      Subordinated Security Agreement, dated as of May 1, 2003, among
               Allion Healthcare, Inc., as borrower, Darin A. Peterson and Allan
               H. Peterson, collectively, as lenders, and Darin A. Peterson, as
               collateral agent (Incorporated by reference to Exhibit 10.1 to
               the Registrant's Current Report on Form 8-K filed on May 16,
               2003.)

     10.6      Loan and Security Agreement, dated as of April 21, 1999, by and
               among the Registrant, The Care Group of Texas Inc., Care Line of
               Houston, Inc., Mail Order Meds, Inc., Care Line of New York,
               Inc., Commonwealth Certified Home Care, Inc. and HCFP Funding,
               Inc.*




                                      -35-
<PAGE>


     10.7      Amendment No. 1 to Loan and Security Agreement, executed as of
               July 27, 2001 and effective as of April 21, 2001, by and among
               the Registrant, The Care Group of Texas Inc., Care Line of
               Houston, Inc., Mail Order Meds, Inc., Care Line of New York,
               Inc., Commonwealth Certified Home Care, Inc. and Heller
               Healthcare Finance, Inc. (f/k/a HCFP Funding, Inc.)*

     10.8      Amendment No. 2 to Loan and Security Agreement, dated as of April
               2002, by and among the Registrant, The Care Group of Texas, Inc.,
               Care Line of Houston, Inc., Mail Order Meds, Inc., Care Line of
               New York, Inc., Commonwealth Certified Home Care, Inc. and Heller
               Healthcare Finance, Inc. (f/k/a HCFP Funding, Inc.)*

     10.9      Amendment No. 3 and Consent to Loan and Security Agreement, dated
               as of May 28, 2003, by and among the Registrant, The Care Group
               of Texas, Inc., Care Line of Houston, Inc., Mail Order Meds,
               Inc., Care Line of New York, Inc., Commonwealth Certified Home
               Care, Inc. and Heller Healthcare Finance, Inc. (f/k/a HCFP
               Funding, Inc.)*

     10.10     Amendment No. 4 to Loan and Security Agreement, dated as of
               September 2003, by and among the Registrant, The Care Group of
               Texas, Inc., Care Line of Houston, Inc., Mail Order Meds, Inc.,
               Care Line of New York, Inc., Commonwealth Certified Home Care,
               Inc. and Heller Healthcare Finance, Inc. (f/k/a HCFP Funding,
               Inc.)*

     10.11     Agreement of Lease Between Reckson Operating Partnership, L.P and
               Allion Healthcare, Inc.*

     16.4      Letter on Change in Certifying Accountant, dated May 20, 2002,
               from Holtz Rubenstein & Co., LLP to the Securities and Exchange
               Commission. (Filed as an exhibit to the Registrant's Current
               Report on Form 8-K filed on May 21, 2002.)

     21.1      Subsidiaries of the Registrant.*

     31.1      Certification of the Chief Executive Officer and Acting Chief
               Financial Officer pursuant to Rule 13a-14(a) Section 302 of the
               Sarbanes-Oxley Act of 2002)*

     32.1      Certificate by the Chief Executive Officer and Acting Chief
               Financial Officer pursuant to 18 U.S.C.ss. 1350 (Section 906 of
               the Sarbanes-Oxley Act of 2002)*

         *        Filed herewith.

ITEM 14.          PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The information required by this item is included under "Other
Information Audit Fees and All Other Fees" in the Company's Definitive Proxy
Statement to be filed in connection with the 2004 Annual Meeting of Stockholders
and is incorporated herein by reference.



                                      -36-
<PAGE>





                          INDEX TO FINANCIAL STATEMENTS


                                                                      PAGE
                                                                      ----

           Independent Auditors Report                                 F-1

           Consolidated Balance Sheet as of December 31, 2003          F-2

           Consolidated Statements of Operations for the Years
           Ended December 31, 2003 and 2002                            F-3

           Consolidated Statement of Stockholders Equity (Deficit)
           for the Years Ended December 31, 2003 and 2002              F-4

           Consolidated Statements of Cash Flows for the Years
           Ended December 31, 2003 and 2002                            F-5

           Notes to Consolidated Financial Statements for
           the Years Ended December 31, 2003 and 2002             F-6 - F-18





<PAGE>



                           INDEPENDENT AUDITORS REPORT

         To the Stockholders and Board of Directors of
         Allion Healthcare, Inc. Melville, New York

         We have audited the accompanying consolidated balance sheet of Allion
         Healthcare, Inc. and Subsidiaries, as of December 31, 2003, and the
         related consolidated statements of operations, stockholders equity
         (deficit) and cash flows for each of the two years ended December 31,
         2003 and 2002. 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 audits.

         We conducted our audits in accordance with auditing standards generally
         accepted in the United States of America. 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 audits provide 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, 2003 and
         the results of their operations and their cash flows for each of the
         two years ended December 31, 2003 and 2002 in conformity with
         accounting principles generally accepted in the United States of
         America.

                                                    /s/ BDO Seidman, LLP


         Melville, New York
         February 18, 2004, except for Note 19 which is as of April 13, 2004

















                                       F-1


<PAGE>


<TABLE>
<CAPTION>




                    ALLION HEALTHCARE, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                             AS OF DECEMBER 31, 2003



         ASSETS
         ------
         CURRENT ASSETS:
       <S>                                                                       <C>
         Cash and cash equivalents                                                    $  640,790
         Accounts receivable, (net of allowance for doubtful accounts of $437,032)     3,074,488
         Inventories                                                                   1,296,655
         Prepaid expenses and other current assets                                       107,399
                                                                                   --------------
         Total current assets                                                          5,119,332

         Property and equipment, net                                                     527,667
         Goodwill                                                                      4,472,068
         Intangible assets, net                                                        2,117,601
         Other assets                                                                    178,777
                                                                                   --------------
         TOTAL ASSETS                                                               $ 12,415,445
                                                                                   ==============

         LIABILTIES AND STOCKHOLDERS' EQUITY
         -----------------------------------
         CURRENT LIABILITIES:
         Accounts payable and accrued expenses                                       $ 5,750,909
         Notes payable-subordinated                                                    1,150,000
         Current portion of capital lease obligations                                     89,460
         Current portion of other long-term debt                                          12,685
                                                                                   --------------
         Total current liabilities                                                     7,003,054

         LONG TERM LIABILITIES:
         Notes payable                                                                 2,750,000
         Capital lease obligations                                                       162,160
         Other                                                                           106,951
                                                                                   --------------
         Total liabilities                                                            10,022,165
                                                                                   --------------
         COMMITMENTS AND CONTINGENCIES

         STOCKHOLDERS' EQUITY
         Convertible preferred stock, $.001 par value, shares
           authorized 20,000,000; issued and outstanding 2,414,168                         2,414
         Common stock, $.001 par value; shares authorized
          80,000,000; issued and outstanding 3,100,000                                     3,100
         Additional paid-in capital                                                   10,261,526
         Accumulated deficit                                                          (7,873,760)
                                                                                  ---------------
         Total stockholders' equity                                                    2,393,280
                                                                                  ---------------
         Total liabilities and stockholders' equity                                  $ 12,415,445
                                                                                  ===============

</TABLE>


                     See accompanying notes to consolidated
                             financial statements.





                                      F-2
<PAGE>



<TABLE>
<CAPTION>


                    ALLION HEALTHCARE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



                                                                       2003                 2002
                                                                 --------------      ----------------
<S>                                                             <C>                   <C>
NET SALES                                                          $48,222,993           $27,457,438
COST OF GOODS SOLD                                                  41,969,506            23,271,936
                                                                 --------------      ----------------
   Gross profit                                                      6,253,487             4,185,502

OPERATING EXPENSES:
    Selling, general and administrative expenses                     8,744,127             4,756,037
                                                                 --------------      ----------------

      Operating loss                                                 (2,490,640)           (570,535)
                                                                 --------------      ----------------

OTHER INCOME (EXPENSE):
  Interest expense                                                     (243,882)           (104,358)
  Costs of withdrawn public offering and other                      -                      (478,865)
  Legal settlement (expense) income                                    (200,000)             150,000
                                                                 --------------      ----------------
   Total other income (expense)                                        (443,882)           (433,223)

LOSS BEFORE INCOME TAXES                                             (2,934,522)         (1,003,758)

PROVISION FOR INCOME TAXES                                              19,646                35,002
                                                                 --------------      ----------------

NET LOSS                                                           $ (2,954,168)       $ (1,038,760)
                                                                 ==============      ================

BASIC AND DILUTED LOSS PER COMMON SHARE                               $  (.95)              $  (.34)
                                                                 ==============      ================

BASIC AND DILUTED WEIGHTED AVERAGE OF COMMON SHARES
OUTSTANDING                                                          3,100,000             3,100,000
                                                                 ==============      ================

</TABLE>


           See accompanying notes to consolidated financial statements




                                      F-3

<PAGE>

<TABLE>
<CAPTION>


                    ALLION HEALTHCARE, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
                     YEARS ENDED DECEMBER 31, 2003 AND 2002




                               Preferred Stk.                Common Stk.
                              $.001 par value              $.001 par value
                          -------------------------   --------------------------
                                                                                   Additional
                                                                                     Paid-In        Accumulated
                           Shares       Par Value       Shares       Par Value       Capital          Deficit           Total
                          ----------    -----------                                ------------    --------------    ------------
    Balance,
<S>                     <C>              <C>         <C>              <C>        <C>              <C>                 <C>
    January 1, 2002       1,179,168        $ 1,179     3,100,000        $ 3,100    $ 4,171,725      $(3,880,832)        $295,172

    Net Loss                  -             -             -              -              -            (1,038,760)     (1,038,760)
                          ----------    -----------   -----------    -----------   ------------    --------------    ------------

    Balance,              1,179,168          1,179     3,100,000          3,100      4,171,725       (4,919,592)        (743,588)
    December 31, 2002

    Issuance of Stock     1,235,000          1,235        -              -           6,062,447           -             6,063,682

    Issuance of Warrants      -             -             -              -              27,354           -                27,354

    Net Loss                  -             -             -              -              -            (2,954,168)     (2,954,168)
                          ----------    -----------   -----------    -----------   ------------    --------------    ------------

    Balance,
    December 31, 2003     2,414,168        $ 2,414     3,100,000        $ 3,100    $10,261,526      $(7,873,760)      $2,393,280
                          ==========    ===========   ===========    ===========   ============    ==============    ============


</TABLE>


          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.










                                      F-4

<PAGE>

<TABLE>
<CAPTION>


                    ALLION HEALTHCARE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



   CASH FLOWS FROM OPERATING ACTIVITIES:                     2003            2002
                                                         ------------    -------------
<S>                                                 <C>             <C>
 Net loss                                               $ (2,954,168)   $ (1,038,760)
 Adjustments to reconcile net loss to net cash
   used in operating activities:
   Depreciation and amortization                             606,057         315,661
   Provision for doubtful accounts                           266,851          28,905
   Loss on sale of asset                                       5,575            --
 Changes in operating assets and liabilities:
   Accounts receivable                                      (346,869)       (598,887)
   Inventories                                              (404,292)       (277,183)
   Prepaid expenses and other assets                        (140,918)        201,941
   Accounts payable and accrued expenses                     272,919         926,212
                                                        ------------    ------------
Net cash used in operating activities                     (2,694,845)       (442,111)
                                                        ------------    ------------

 CASH FLOWS FROM INVESTING ACTIVITIES:
   Payments for acquisition of Medicine Made
      Easy net of Cash acquired of $92,854                (2,257,146)           --
   Purchase of property and equipment                       (117,183)        (67,917)
                                                        ------------    ------------
     Net cash used in investing activities                (2,374,329)        (67,917)
                                                        ------------    ------------

 CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from sale of Preferred Stock                   6,063,682            --
   Proceeds from line of credit                           20,725,000       5,250,000
   Payment of deferred financing cost                           --          (265,188)
   Repayment of line of credit                           (21,190,081)     (5,778,855)
   Repayment of long-term debt                              (101,564)        (42,462)
                                                        ------------    ------------

  Net cash provided by (used in) financing activities      5,497,037        (836,505)
                                                        ------------    ------------

 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        427,863      (1,346,533)
 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                212,927       1,559,460
                                                        ------------    ------------
 CASH AND CASH EQUIVALENTS, END OF YEAR                      640,790         212,927
                                                        ============    ============

 SUPPLEMENTAL DISCLOSURE:
   Income taxes paid                                          15,666          13,982
                                                        ------------    ------------
   Interest paid                                        $    227,216    $    106,491
                                                        ------------    ------------


</TABLE>



SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: In
connection with the acquisition of Medicine Made Easy on May 1, 2003, the
Company issued two notes payable to the seller in the amount of $2,400,000 and
issued warrants with a value of $27,354.

Equipment acquired under capital lease obligations amounted to $365,274 in 2002.


          See accompanying notes to consolidated financial statements.







                                      F-5
<PAGE>


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

NOTE 1. THE COMPANY

         Allion Healthcare, Inc. (collectively, the "Company") is the parent
corporation of four wholly owned subsidiaries, which operate under the MOMS
Pharmacy name as one reportable segment. These subsidiaries are located in New
York, California, Texas and Florida. The Company is licensed to dispense
prescription medication in all 50 U.S. States. The Company focuses on delivering
its specialty pharmacy services primarily to HIV/AIDS patients.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

INVENTORIES. Inventories consist entirely of pharmaceuticals available for sale.
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, intangibles 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
three or five years. Machinery and equipment under capital leases are amortized
over the lives of the respective leases or useful lives of the asset, whichever
is shorter, in this case four years.

REVENUE RECOGNITION. Revenue is recognized as medications or products are
delivered to customers. A substantial portion of the Company's revenue is billed
to third-party payors, including insurance companies, managed care plans and
governmental payors. Revenue is recorded net of contractual adjustments and
related discounts. Contractual adjustments represent estimated differences
between billed revenues and amounts expected to be realized from third-party
payors under contractual agreements.

INCOME TAXES. The Company recognizes deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount currently estimated to be realized.

CASH EQUIVALENTS. For purposes of the consolidated 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 consist principally of cash and cash equivalents
and trade receivables. The Company places its cash equivalents with financial



                                      F-6



<PAGE>


institutions. The Company has substantially all of its cash in four bank
accounts. The balances are insured by FDIC up to $100,000. Such cash balances,
at times, may exceed FDIC limits. The Company has not experienced any losses in
such accounts. The Company's trade receivables represent a broad customer base.
The Company routinely assesses the financial strengths of its customers. As a
consequence, concentrations of credit risk are limited.

NET LOSS PER SHARE INFORMATION. Basic earnings per share is computed using the
weighted average number of common shares outstanding during the period. Diluted
per share amounts include dilutive common equivalent shares. Common equivalent
shares, consist of the incremental common shares issuable upon the exercise of
stock options and warrants; common equivalent shares are excluded from the
calculation if their effect is anti-dilutive. Diluted loss per share for the
years ended December 31, 2003 and 2002 do not include the impact of common stock
options and warrants then outstanding of 2,359,973 and 1,984,200, respectively,
as the effect of their inclusion would be anti-dilutive.

STOCK-BASED COMPENSATION PLANS. The Company accounts for its stock option awards
to employees under the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the intrinsic value based method, compensation cost is the
excess, if any, of the fair market value of the stock at grant date or other
measurement date over the amount an employee must pay to acquire the stock. The
Company makes pro forma disclosures of net income and earnings per share as if
the fair value based method of accounting had been applied as required by
Statement of Financial Accounting Standards No. 123 ("SFAS 123", "Accounting for
Stock-Based Compensation" and SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure.") The Company has not granted options
below fair market value on the date of grant. Had compensation expenses been
determined as provided by SFAS No. 123 using the Black-Scholes option pricing
model, the pro forma effect on the Company's net loss per share would have been
the following for the years ended December 31, 2003 and 2002, respectively.

<TABLE>
<CAPTION>

                                                                                         YEAR ENDED
                                                                          --------------------------------------
                                                                             December 31,      December 31,
                                                                                 2003              2002
                                                                          ----------------    ------------------

<S>                                                                      <C>                   <C>
Net loss, as reported                                                       $ (2,954,168)         $ (1,038,760)
Deduct: Total stock-based employee compensation expense determined
under fair value method used                                                     (72,725)             (262,784)
                                                                          ----------------    ------------------
Net loss, pro forma                                                         $ (3,026,893)         $ (1,301,544)
                                                                          ================    ==================

Net loss per share; Basic and diluted, as reported                              $   (.95)             $   (.34)
                                                                          ================    ==================

Basic and diluted, as pro forma                                                 $   (.98)             $   (.42)
                                                                          ================    ==================
</TABLE>

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 years ended December 31, 2003 and
2002.

                                            2003                2002
                                      -----------------    ----------------
  Dividend yield                            0.00%               0.00%
  Volatility                                1.00%               1.00%
  Risk-free interest rate                  4.02 %               3.35%
  Expected life                          Eight Years         Eight Years







                                      F-7




<PAGE>

         The weighted average grant date fair value of options granted during
2003 and 2002 was $.38 and $.55, respectively.

         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.

ALLOWANCE FOR DOUBTFUL ACCOUNTS. Management regularly reviews the collectibility
of accounts receivable by tracking collection and write-off activity. Estimated
write-off percentages are then applied to each aging category by payor
classification to determine the allowance for estimated uncollectible accounts.
The allowance for estimated uncollectible accounts is adjusted as needed to
reflect current collection, write-off and other trends, including changes in
assessment of realizable value. While management believes the resulting net
carrying amounts for accounts receivable are fairly stated at each quarter-end
and that the Company has made adequate provisions for uncollectible accounts
based on all information available, no assurance can be given as to the level of
future provisions for uncollectible accounts, or how they will compare to the
levels experienced in the past. The Company's ability to successfully collect
its accounts receivable depends, in part, on its ability to adequately supervise
and train personnel in billing and collection, and minimize losses related to
system changes.

SHIPPING AND HANDLING COSTS. Shipping and handling costs that are incurred are
not included in cost of sales. They are included in selling, general and
administrative expenses. Shipping and handling costs were approximately $720,000
and $359,000 in 2003 and 2002, respectively. Shipping and handling costs are not
billed to customers.

LONG-LIVED ASSETS. Amortization of intangible assets is provided using the
straight-line method over the estimated useful lives of the assets of five
years. The carrying values of intangible and other long-lived assets are
periodically reviewed to determine if any impairment indicators are present. If
it is determined that such indicators are present and the review indicates that
the assets will not be fully recoverable, based on undiscounted estimated cash
flows over the remaining amortization and depreciation period, their carrying
values are reduced to estimated fair value. Impairment indicators include, among
other conditions, cash flow deficits, an historic or anticipated decline in
revenue or operating profit, adverse legal or regulatory developments,
accumulation of costs significantly in excess of amounts originally expected to
acquire the asset and a material decrease in the fair market value of some or
all of the assets. Assets are grouped at the lowest level for which there are
identifiable cash flows that are largely independent of the cash flows generated
by other asset groups. No such impairment existed at December 31, 2003.

GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS:In accordance with
Statement of Financial Accounting Standard ("FAS") No. 141, "Business
Combinations", and No. 142, "Goodwill and Other Intangible Assets", goodwill and
intangible assets associated with the MME acquisition that are deemed to have
indefinite lives are no longer amortized but are subject to annual impairment
tests. Such impairment tests require the comparison of the fair value and
carrying value of reporting units. Measuring fair value of a reporting unit is
generally based on valuation techniques using multiples of sales or earnings,
unless supportable information is available for using a present value technique,



                                      F-8




<PAGE>



such as estimates of future cash flows. The Company assesses the potential
impairment of goodwill and other indefinite-lived intangible assets annually and
on an interim basis whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. Some factors considered important
which could trigger an interim impairment review include the following:


     o    Significant underperformance relative to expected historical or
          projected future operating results;

     o    Significant changes in the manner of our use of the acquired assets or
          the strategy for our overall business; and

     o    Significant negative industry or economic trends.


         If it's determined through the impairment review process that goodwill
has been impaired, an impairment charge would be recorded in the consolidated
statement of operations. Based on the 2003 impairment review process, there was
no impairment charge.

ADVERTISING COSTS. Advertising costs are expensed as incurred. Advertising costs
were approximately $131,000 in 2003 and $29,000 in 2002 and were included in
selling, general and administrative expenses.

NEW PRONOUNCEMENTS.

In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others." In the
normal course of business, the Company does not issue guarantees to third
parties; accordingly, this interpretation has no effect on the Company's
financial statements.

In May 2003, the Emerging Issues Task Force ("EITF"), issued EITF Issue No,
00-21 "Revenue Arrangements with Multiple Deliverables" (Issue 00-21). Issue
00-21 addresses certain aspects of the accounting by a vendor for arrangements
under which it will perform multiple revenue generating activities and how to
determine whether an arrangement involving multiple deliverables contains more
than one unit of accounting. Issue 00-21 became effective for revenue
arrangements entered into in fiscal periods after June 15, 2003. The adoption of
Issue 00-21 did not have a material effect on the Company's results of
operations or financial condition.

In May 2003, the FASB issues SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity," which requires
certain financial instruments to be classified as a liability (or an asset in
some circumstances). The adoption of SFAS no. 150 had no effect on the Company's
financial statements.

In December 2003, the FASB issued FASB Interpretation No. 46 (revised),
"Consolidation of Variable Interest Entities" (FIN 46). The adoption of FIN 46
had no effect on the Company's financial statements.

NOTE 3. ACQUISITION

On May 1, 2003, the Company acquired Medicine Made Easy (MME). MME fills
specialty oral and injectable prescription medications and biopharmaceuticals.
MME began operations in January 1999 in the State of California. The aggregate
consideration for the acquisition was $4,950,000, subject to post-closing
adjustments, and warrants to purchase 227,273 shares of the Company's common
stock for $11.00 per share. $300,000 of the purchase price was paid in cash



                                      F-9



<PAGE>


prior to closing as a lock-up fee, of which $200,000 was paid as of December 31,
2002. $2,250,000 of the purchase price was paid in cash at closing. $1,150,000
of the purchase price was paid by subordinated secured promissory notes payable
on May 1, 2004. The remaining $1,250,000 was paid by subordinated secured
promissory notes payable on May 1, 2005. These notes payable accrue interest at
a rate of Prime Rate plus 2% per annum. The Prime Rate as of December 31, 2003
was 4.00%. The notes payable are secured by cash, cash equivalents, accounts
receivable, inventory, fixed and other assets of the Company, and are
subordinated to the Company's senior indebtedness.


              The purchase price consisted of:
              Cash paid to seller prior to closing                $ 300,000
              Cash paid at closing                                2,250,000
              Notes payable-subordinated                          2,400,000
              Direct acquisition costs                              496,898
              Liabilities assumed                                 2,060,551
              Fair value of warrants issued                          27,354
                                                              --------------
              Total                                             $ 7,534,803
                                                              ==============


              The purchase price was allocated as follows:
              Current assets                                    $ 1,018,906
              Property and equipment                                202,461
              Identified intangible assets                        1,841,368
              Goodwill (not deductible for tax purposes)          4,472,068
                                                              --------------
              Total                                             $ 7,534,803
                                                              ==============




The operations of MME were included in the consolidated financial statements as
of May 1, 2003.

Under SFAS 141, "Business Combinations", the Company made an adjustment to
current assets and goodwill in the amount of $235,000 as of December 31, 2003 as
a result of the Company reaching an agreement on the California AIDS Drug
Assistance Program (ADAP) Audit.

The following pro forma results were developed assuming the acquisition of
Medicine Made Easy occurred January 1, 2002. In addition, the sale of the Series
C convertible preferred stock is also presumed to have occurred on January 1,
2002.

                                          Year Ended            Year Ended
                                       December 31, 2003     December 31, 2002

(Unaudited) (Unaudited)
                                     --------------------   ------------------
                                     --------------------   ------------------
   Revenue                               $  55,865,003         $  49,203,059
   Net loss                              $  (3,654,185)        $  (2,034,752)
   Basic and diluted loss per share      $       (1.18)        $        (.66)








                                      F-10
<PAGE>


NOTE 4. INTANGIBLE ASSETS

Intangible assets as of December 31, 2003 are as follows:

                                                     December 31, 2003
                                              -------------------------------

                                     Useful                      Accumulated
                                     Life          Cost          Amortization
                                 ------------ --------------    --------------
       Intangible assets:
          Customer lists         5 Years        $ 2,030,745       $ (572,682)
          California License     Perpetual          478,616       -
          Non-Compete Covenant   3 Years            147,007          (32,668)
          Software               5 Years             50,000           (6,667)
          Other                  5 Years             45,000          (21,750)
                                              --------------    --------------
       Total                                    $ 2,751,368       $ (633,767)
                                              ==============    ==============

Amortization of intangible assets for the year ended December 31, 2003 and 2002
was approximately $377,000, and $182,000, respectively. The annual amortization
on these assets for 2004 and 2005 will be approximately $474,000 per year. The
annual amortization expense for 2006, 2007, and 2008 will be approximately
$365,000, $243,000, and $81,000, respectively.

NOTE 5.   PROPERTY AND EQUIPMENT

                                                     Useful Lives  December 31,
                                                       in Years        2003
                                                     ------------ -------------
    Machinery and equipment under capital lease            4         $ 365,274
       obligations
    Machinery and equipment                               3-5          322,126
    Leasehold Improvements                                 2           154,034
    Furniture and fixtures                                3-5            4,944
                                                                  -------------
                                                                       846,378
    Less: accumulated depreciation and amortization                  (318,711)
                                                                  -------------
                                                                     $ 527,667
                                                                  =============

         Depreciation and amortization expense relating to property and
equipment for the years ended December 31, 2003 and 2002 was approximately
$229,000 and $72,000, respectively.

NOTE 6. REVOLVING CREDIT LINE

         The Company has a revolving credit facility for an amount up to a
maximum of $6.0 million available for short-term borrowings. At December 31,
2003, the Company's borrowing capacity was approximately $1,900,000, and its
borrowings under this facility was $0. This credit facility expires on April 21,
2006. Borrowings under the facility are based on the Company's accounts
receivable, 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. The prime rate at
December 31, 2003 was 4.00%. In connection with this credit line, the Company
must comply with certain financial covenants. As of December 31, 2003, the
Company was in compliance with all of these covenants

NOTE 7. NOTES PAYABLE

The Company has a loan from a bank for $1,500,000 that accrues interest at Prime
Rate per annum, with the full principal payable in March of 2005. The Prime Rate
at December 31, 2003 was 4.00%. This bank loan has been guaranteed by one of the
Company's principal investors.





                                      F-11

<PAGE>


As part of the acquisition of MME, the Company issued two notes. One note is for
$1,150,000 payable on May 1, 2004. The second note is for $1,250,000 and is due
May 1, 2005. These notes accrue interest at Prime Rate plus 2% per annum. The
Prime Rate as of December 31, 2003 was 4.00%. The notes payable are secured by
cash, cash equivalents, accounts receivable, inventory, fixed and other assets
of the Company, and are subordinated to the Company's senior indebtedness.

NOTE 8. INCOME TAXES

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

                                                 Year Ended December 31,
                                               -------------------------
                                                   2003           2002
                                               -----------    ----------
        Federal statutory rate:                    34%             34%
                                                  ---             ---
        Tax benefit at Federal statutory rates $ (997,737)     $(269,272)
        Loss in excess of available benefit       997,737        269,272
        State income taxes                         19,646         35,002
                                               -----------    ----------
                                                 $ 19,646       $ 35,002
                                               ===========    ==========


At December 31, 2003, the Company had net operating loss carryforwards for tax
purposes of approximately $6,400,000 expiring at various dates through 2023.

Deferred tax assets (liabilities) comprise the following:

                                                           December 31,
                                                              2003
                                                          -------------
            Allowance for doubtful accounts                  $ 175,000

            Benefit of net operating loss carryforward       2,406,000
                                                          -------------
            Gross deferred tax assets                        2,581,000
            Intangibles (tax basis difference)                (509,000)
                                                          -------------
                                                             2,072,000
                                                          -------------
            Valuation allowance                             (2,072,000)
                                                          -------------
              Net deferred tax assets                     $       -
                                                          =============

Deferred tax assets related to net operating loss carry-forward from the
acquisition of MME have been fully reserved by a valuation allowance. As a
result of the change in ownership, certain limitations may apply to their
utilization.






                                      F-12

<PAGE>


NOTE 9. LEASE COMMITTMENTS

         The Company leases office space in six locations. They are as follows:

    Location              Principal Use               Property Interest
------------------   ----------------------  ----------------------------------
  Melville, NY             Pharmacy and
                        Executive Offices    Leased - expiring June 30, 2009
  Torrance, CA              Pharmacy         Leased - expiring December 31, 2005
  San Diego, CA             Pharmacy         Leased - expiring October 31, 2004
San Francisco, CA           Pharmacy         Leased - expiring April 30, 2005
   Austin, TX               Pharmacy         Leased - expiring June 30, 2004
    Miami, FL               Pharmacy         Leased - expiring September 30,
                                             2005


         At December 31, 2003, the Company's lease commitments provide for the
following minimum annual rentals.

                            2004                $ 483,625
                            2005                  362,230
                            2006                  188,791
                            2007                  195,871
                            2008                  203,216
                            THEREAFTER             76,187
                                        ------------------
                                               $1,509,920
                                        ==================

During the years ended December 31, 2003 and 2002, rental expense approximated
to $330,000 and $158,000 respectively.

NOTE 10.    STOCKHOLDERS' EQUITY

         a. Common shares reserved

                  Common shares reserved at December 31, 2003, are as follows:

                  Stock Option Plans                   1,650,000
                  Warrants                               844,773
                  Convertible Preferred Stock          2,414,168

      b.   Stock Options

                  Under the terms of the Company's Stock Option Plans, 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, 1,750,000 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.




                                      F-13


<PAGE>


A summary of the status of the Company's stock option plans as of December 31,
2003 and 2002, and changes during the years then ended is presented below:



<TABLE>
<CAPTION>


                                                                     2003                                     2002
                                                     --------------------------------------    ------------------------------------
                   Stock Options                           Shares              Weighted             Shares             Weighted
                                                                                Average
                                                                               Exercise                                Average
                                                                                 Price                              Exercise Price
---------------------------------------------------- --------------------    --------------     ----------------
<S>                                                <C>                     <C>                <C>                   <C>
Outstanding, beginning of year                                 1,491,700            $ 1.80            1,001,400             $ 0.97
Granted                                                           50,000              5.00              495,000               3.50
Exercised                                                     -                    -                   -                  -
Cancelled                                                       (26,500)              2.91              (4,700)               2.24
                                                     --------------------    --------------     ----------------    ---------------
Outstanding, end of year                                       1,515,200            $ 1.89            1,491,700             $ 1.80
                                                     ====================                       ================

Options exercisable at year end                                1,151,268            $ 1.35              954,408
                                                     ====================                       ================

Weighted  average  fair value of options  under the
plan granted during the year                                                        $ 0.38                                  $ 0.55
                                                                             ==============                         ===============

</TABLE>


The following table summarizes information about stock options outstanding at
December 31, 2003:

<TABLE>
<CAPTION>


                           Options Outstanding                                             Options Exercisable
------------------------------------------------------------------------------------  -------------------------------
Range of Exercise Price                       Weighted Average         Weighted                          Weighted
                            Number of            Remaining              Average          Number          Average
                           Outstanding          Contractual Life     Exercise Price    Outstanding     Exercise Price
------------------------  --------------    --------------------    --------------    -------------   ---------------
<S>                     <C>                        <C>               <C>             <C>             <C>
       $.17 - $.66              579,700                5.11              $ 0.19          579,700         $ 0.19
      $1.00 - $2.00             265,000                 6.5              $ 1.51          265,000         $ 1.51
          $3.00                 136,500                 7.8              $ 3.00           60,400         $ 3.00
          $3.50                 484,000                8.51              $ 3.50          242,000         $ 3.50
          $5.00                  50,000                9.76              $ 5.00            4,168         $ 5.00
                          --------------                                            -------------
                              1,515,200                                                1,151,268
                          ==============                                            =============
</TABLE>

c.   Warrants

         In March 2000, the Company issued 375,000 common stock warrants to a
director of the Company, which resulted in an additional charge to interest
expense approximating $37,500. These warrants to purchase 375,000 shares of the
Company's common stock have an exercise price of $1.00 per share. These warrants
expire in March 2010. The warrants were issued as consideration for guaranteeing
the Company's note payable.

         On May 1, 2003, the Company issued warrants to the previous owners of
Medicine Made Easy. These warrants can be exercised to purchase 227,273 shares
of the Company's common stock for $11.00 a share. These warrants expire in May
2008. The fair value of the warrants was $27,354, and was included in the
purchase price of MME.

         On October 1, 2003, the Company issued 125,000 warrants, which have an
exercise price of $5.00 per share, to a director of the Company in connection
with a private placement that occurred in April 2003. These warrants expire in
October 2013.





                                      F-14


<PAGE>

         The Company has issued 117,500 warrants in prior years to various
individuals and corporations for consulting purposes. These warrants can be
exercised to purchase 117,500 shares of the Company's common stock for prices
ranging from $0.17 a share to $1.00 a share. These warrants expire at various
dates from February 1, 2009 through June 30, 2010.

d.       Convertible Preferred stock

     The Company has authorized 20,000,000 shares of preferred stock, .001 par
value, which the Board of Directors has authority to issue from time to time in
series. The Board of Directors also has the authority to fix, before the
issuance of each series, the number of shares in each series and the
designation, preferences, rights and limitations of each series.

         In March 2000, the Company sold 512,500 shares of Series A Convertible
Preferred Stock (the "Series A Preferred Stock") to a group of investors, the
net proceeds to the Company were approximately $1,025,000.

         In April 2001, the Company sold 333,334 shares of Series B convertible
preferred stock (the "Series B Preferred Stock") to a group of investors. The
net proceeds to the Company were approximately $988,000. In October 2001, the
Company sold 333,334 shares of Series B Preferred Stock to a group of investors.
The net proceeds to the Company were approximately $999,000.

         In April 2003, the Company raised $6,063,682, net of costs of $111,318
related to this issuance in a private placement with several investors. The
Company sold 1,235,000 shares of Series C convertible preferred stock at $5.00
per share. There will be no dividends payable on the shares, unless the Company,
in its sole discretion declares a dividend with respect to the common stock. In
the event of any liquidation, these shares shall share on a pari passu basis in
liquidation with the Series A and B preferred stock outstanding. A portion of
the proceeds of the sale of the Series C convertible preferred stock was used in
connection with the Company's $1,475,000 settlement of its lawsuit with Morris
and Dickson (Note 13). $2,250,000 of the proceeds was used to fund the
acquisition of Medicine Made Easy. $841,789 of the proceeds was used to repay
Company indebtedness. The Company has additional indebtedness to the sellers of
Medicine Made Easy as described more fully in Note 7.

         The series A, series B and series C preferred stock have senior
preference and priority as to dividends, distributions and payments upon the
liquidation, dissolution or winding up of affairs before any payments to holders
of the common stock. Each share of series A, series B and series C preferred
stock is convertible, at the option of the holder at any time, into one (1)
share of common stock.

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 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, 2003 approximates its fair value.




                                      F-15


<PAGE>


NOTE 12.    RELATED PARTY TRANSACTIONS

         During 2003, a director of the Company provided consulting services for
fees approximating $ 11,400.

         During 2003, two of the Company's directors purchased 115,000 shares of
Series C Convertible stock at $5.00 per share.

         During 2003, a director of the Company received 125,000 warrants from
the Company.

         During 2002, two of the Company's directors provided consulting
services for fees approximating $ 15,000.

         A Director of the Company has guaranteed a $1,500,000 loan from a bank.
This loan accrues interest at Prime Rate per annum, with the full principal
payable in March of 2005. The Prime Rate at December 31, 2003 was 4.00%.

NOTE 13.   LITIGATION

MORRIS AND DICKSON CO., LTD. V. ALLION HEALTHCARE INC. On October 18, 2002,
Morris and Dickson, the Company's former drug wholesaler, filed suit against the
Company and the Company's wholly owned subsidiaries, Mail Order Meds of New
York, Inc. and Mail Order Meds, Inc., in the District Court for the Western
District of Louisiana. Morris and Dickson alleged that the Company has failed to
pay $2,053,661 (inclusive of interest at 18% per annum through September 25,
2002) for pharmaceutical products. Morris and Dickson were seeking such amount
plus reasonable attorneys fees and court costs. On December 4, 2002, the Company
filed a motion to dismiss for lack of personal jurisdiction, and Morris and
Dickson filed a memorandum in opposition of the motion to dismiss, and the
Company responded on January 5, 2003. The suit was dismissed without prejudice
for lack of personal jurisdiction and was subsequently settled, in April 2003,
with the Company paying $1,475,000 to Morris and Dickson. As of December 31,
2002, the Company adjusted its amount owed to Morris and Dickson from
approximately $1,780,000 to $1,475,000 as an adjustment to cost of sales.

ALLION HEALTHCARE, INC. V. NEW GERI CARE OF BROOKLYN, LLC. On July 18, 2002, the
Company filed suit in the Supreme Court of Suffolk County against New Geri Care
of Brooklyn because New Geri Care of Brooklyn failed to pay for inventory it
acquired in connection with the purchase of certain assets from the Company in
September 2001. The Company was seeking payment in full for such inventory,
$220,000 plus interest and costs. On August 29, 2002, New Geri Care answered the
Company's complaint and filed a counter claim against the Company alleging fraud
in connection with the September 2001 transaction. The Company filed its answer
on September 26, 2002. On December 10, 2002, the Company and New Geri Care
settled all claims whereby New Geri Care paid the Company $150,000 which is
shown on the statement of operations in other income.

NEW JERSEY MEDICAID AUDIT. During the first quarter of 2003, Medicaid commenced
a review of the Company's billing practices in New Jersey. In particular,
Medicaid reviewed whether the appropriate procedures were followed by the
Company and whether the requisite patient consents were obtained by the Company
at the time of delivery. During 2003 the Company accrued an estimated cost of
$200,000 for the New Jersey Medicaid Audit. The Company has reached an agreement
in principle with Medicaid of New Jersey. The Company believes that accrued
expenses will be adequate for the final settlement.


                                      F-16



<PAGE>


CALIFORNIA AIDS DRUG ASSISTANCE PROGRAM (ADAP) AUDIT. In 2003, prior to the
acquisition of MME by the Company, ADAP commenced a review of billing by MME in
California. In particular, ADAP reviewed whether the appropriate procedures were
followed and whether the requisite consents were obtained. The Company met with
ADAP and agreed to a settlement. The settlement amount was within the agreed
upon post closing price adjustment as agreed to between the Company and the
sellers of MME at the closing of the transaction. As a result, the Company will
not suffer any adverse financial effects.

NOTE 14.     CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

         The Company provides prescription medications to its customers in the
United States through its four wholly owned subsidiaries. Credit losses relating
to customers historically have been minimal and within management's
expectations.

         At December 31, 2003, the Company maintained 92% of its cash and cash
equivalents with two financial institutions.

         Under certain federal and state third-party reimbursement programs, the
Company received net patient revenues of approximately $42,739,000 and
$23,081,000 for the years ended December 31, 2003, and 2002 respectively. At
December 31, 2003 and 2002, the Company had an aggregate outstanding receivable
from federal and state agencies of approximately $3,012,000, and $1,953,000,
respectively.

NOTE 15.    CAPITAL LEASE OBLIGATIONS

         Future minimum commitments under non-cancelable capital leases are as
follows:

                                                           Capital
                                                            Leases
                                                      --------------
2004...................................................   $108,072
2005...................................................    108,072
2006...................................................     66,649
                                                      --------------

Total minimum lease payments...........................    282,793

Amounts representing interest..........................    (31,173)
                                                      --------------

Present value of net minimum lease payments
(including current portion of $ 89,460)................    $251,620
                                                       =============

NOTE 16.    OTHER LONG-TERM DEBT

         The Company owes the Internal Revenue Service ("IRS") $104,500 of
long-term debt as of December 31, 2003 which is recorded in other long-term
debt. 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 had agreed to pay $130,000 over six years to satisfy the I.R.S. claim.
The Company will not carry forward any net operating losses or credit available
from pre-1999 periods, into post-1998 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 are complied with.




                                      F-17



<PAGE>


NOTE 17. MAJOR SUPPLIERS

         During the year ended December 31, 2003 the Company purchased
approximately $40,268,000 from three major suppliers, and during the year ended
December 31, 2002, the Company purchased approximately $22,459,000 from two
major suppliers.

         In September 2003, the Company signed a five-year agreement with a drug
wholesaler that requires certain minimum purchases per the agreement. If the
Company has not met the minimum purchase commitments as set forth in the
agreement, the Company will be charged a prorated amount of 0.20% of the
projected volume remaining on the Term of the Agreement. The agreement also
states that the Company's minimum purchases during the term of the agreement
will be no less than $400,000,000.

NOTE 18. COSTS OF WITHDRAWN PUBLIC OFFERING AND OTHER

         In December 2002, the Company ceased its efforts to conduct a public
offering of its equity securities. As a result, the Company wrote off $ 413,757
of deferred offering costs relating to the terminated offering. In addition, the
Company wrote off $ 65,108 related to attempts to purchase other companies,
which acquisitions were not consummated.

NOTE 19. SUBSEQUENT EVENTS

         In January 2004, Broughan Gorey, the Company's Chief Financial Officer,
resigned.

         In March of 2004, the Company and Bristol-Myers mutually agreed to
terminate their relationship as of March 31, 2004. The Company will continue to
work with Bristol-Myers sales representatives on a non-contractual basis.

         In April 2004, the Company raised $2,000,000 in a private placement
with several investors. The Company sold 333,333 shares of Series D convertible
preferred stock at $6.00 per share subject to certain modifications as defined
in the Certificate of Designation of Series D Preferred Stock of Allion
Healthcare, Inc. There will be no dividends payable on the shares, unless the
Company, in its sole discretion declares a dividend with respect to the common
stock. In the event of any liquidation, the shares shall share on a pari passu
basis in liquidation with the Series A, B and C preferred stock outstanding.

         In April 2004, the Company entered into a preferred provider
relationship with a major pharmaceutical company to provide specialty pharmacy
services and fill prescriptions for one of the pharmaceutical company's HIV
products. In exchange for providing data to the pharmaceutical company the
Company will be allowed to purchase the HIV product at a discount.











                                      F-18
<PAGE>



                                   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: April 14, 2004

 ALLION HEALTHCARE, INC., AND SUBSIDIARIES

(Registrant)



                                By: /S/ MICHAEL P. MORAN
                                ------------------------
                                Michael P. Moran
                                Chairman, President, Chief Executive Officer,
                                Secretary and Acting Chief Financial Officer


     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: APRIL 14, 2004

/s/ DERACE SCHAFFER, M.D.
    --------------
    Derace Schaffer, M.D., Director
    Date: APRIL 14, 2004

/s/ JAMES HOOVER
    --------------
    James Hoover, Director
    Date: APRIL 14, 2004