##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No.: 1-11570
 ALLIED HEALTHCARE INTERNATIONAL INC.
  New York
    
    13-3098275(State or Other Jurisdiction of Incorporation
    
    (I.R.S. Employer Identification Number)or Organization)
 245 Park AvenueNew York, New York
    
    10167
    
    (212) 750-0064(Address of Principal Executive
    
    (Zip Code)
    
    (Registrants telephone number,Offices)
    
    
    
    including area code)
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, $.01 par value
    
    The NASDAQ Stock Market LLC
  
  
  Yes o No þ
 o þ
 þ o
 o o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE:




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##### 



ALLIED HEALTHCARE INTERNATIONAL INC.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended September 30, 2009
 TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    2Item 1A. Risk Factors
    
    
    14Item 1B. Unresolved Staff Comments
    
    
    24Item 2. Properties
    
    
    24Item 3. Legal Proceedings
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    25Item 6. Selected Financial Data
    
    
    27Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 8. Financial Statements and Supplementary Data
    
    
    44Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    44Item 9A. Controls and Procedures
    
    
    44Item 9B. Other Information
    
    
    46PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    46Item 11. Executive Compensation
    
    
    52Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    72Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    74Item 14. Principal Accountant Fees and Services
    
    
    76PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    77Exhibit 14.2Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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FORWARD-LOOKING STATEMENTS
    
    
    general economic and market conditions;
    
    our ability to continue to recruit and retain flexible healthcare staff;
    
    the H1N1 influenza virus may result in staff being unable to perform services due to
their own illness or due to the illness of patients and may reduce our revenues;
    
    our ability to enter into contracts with local governmental social service
departments, National Health Service Trusts, hospitals, other healthcare facility
clients and private clients on terms attractive to us;
    
    the general level of demand for healthcare and social care;
    
    our dependence on the proper functioning of our information systems;
    
    the effect of existing or future government regulation of the healthcare and social
care industry, and our ability to comply with these regulations;
    
    the impact of medical malpractice and other claims asserted against us;
    
    the effect of regulatory change that may apply to us and that may increase our costs
and reduce our revenue and profitability;
    
    our ability to use our net operating loss carryforward to offset net income;
    
    the effect that fluctuations in foreign currency exchange rates may have on our
dollar-denominated results of operations; and
    
    the impairment of our goodwill, of which we have a substantial amount on our balance
sheet, may have the effect of decreasing our earnings or increasing our losses.




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Preliminary Notes
   
 PART I
 
 Item 1. Business.
 Our Company
   Our Philosophy
  
    
    Assisting individuals in maintaining and improving their
quality of life by addressing a broad range of health and care needs.
    
    Expanding our range of healthcare staffing services over the long-term.
    
    Enhancing our service and quality levels to build upon our reputation for patient
satisfaction by concentrating on service and the professional development of our
employees.
 Our Business and Market
   - 2 -




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
    
    Local governmental social service departments, which oversee social care.
 
    
    The government-funded National Health Service (the NHS). The NHS oversees
healthcare in the local community through its Primary Care Trusts (PCTs). The NHS
operates its hospitals mainly through NHS Acute Trusts and Foundation Trusts (NHS
Hospitals).
    
    Private individuals.
 
    
    Independent hospitals and nursing and care homes in the United Kingdom.
   
    
    an aging population;
 
    
    shift from residential care services to homecare services;
 
    
    further tightening of the local governmental social service departments and the
NHS budgets over the next few years as the government addresses its financial
deficit. We anticipate this will provide an opportunity for us as private
sector-provided homecare is a lower-cost option than government-provided homecare;
 
    
    local authorities reducing the number of suppliers; and
 
    
    more specialist care services being provided in the home environment.
    - 3 -




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Our Business Strategy
  
    
    Increase revenues on a per branch basis.We believe the increasing demand for
quality healthcare staffing with national coverage and diversity of services will
support organic growth in our branches and the development of new services. We intend
to foster continued same-branch revenue growth by leveraging our nationally recognized
brand name, competitive benefits package and leadership in providing temporary
healthcare staffing services.
 
    
    Recruit and retain healthcare staff.We intend to continue to recruit and retain
high-quality staff to take advantage of the opportunities in the market place. We
intend to continue our recruitment efforts and to encourage loyalty from our healthcare
staff by matching their flexible working preferences (both with regards to scheduling
preferences and types of assignments desired) with our customers needs, maintaining
regular contact and promoting opportunities for training and development. In general,
the U.K. population is becoming increasingly diverse in its composition. We seek to
reflect that diversity and to attract, retain and develop staff that will put the
patient needs first and recognize the difference each staff member can make.
 
    
    Expand our homecare service line.We intend to focus our marketing efforts on (1)
securing new contracts with local governmental social service departments to provide
homecare services to the elderly and to individuals with learning disabilities, (2)
growing our business from NHS Primary Care Trusts, especially services for individuals
requiring continuing healthcare at home, and (3) developing our business in response to
the government introduction of the personalization agenda and the right of the
individual to choose their supplier of choice via individual budgets and direct
payment. Under the personalization agenda, individual budgets and direct payment
service users become the commissioners of their own individual service requirements.
 
    
    Provide a higher standard of quality care.We intend to continue our efforts to
enhance our service and quality levels as we believe that the achievement of these is
essential to our future business growth.
  - 4 -




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
    
    Provide a higher standard of training.We continue to make significant investments
in the area of training. All our carers are required to take a training
course that lasts at least five days, as well as annual refresher courses. We also
encourage our carers to enhance their qualifications by attaining National
Vocational Qualifications.
 
    
    Continue our investment and market penetration into specialist service lines.With
the appointment of our Clinical Services Director and a Head of Learning Disabilities,
we plan to expand our continuing care services and our learning disabilities services
across our branch network where demand exists and where we have the staff expertise to
provide these services.
 
    
    Invest in technology and improved business processes.We are investing in a new
branch operating system, which is currently being rolled out across our branch network,
and improved business processes. Our aim is to find solutions to improve our business
flows and to eliminate paperwork from our business once we have a common information
systems platform in place. We believe this will contribute to our aim of maintaining
increases in selling, general and administrative expenses in our business below revenue
growth.
 
    
    Further expand our strong presence in the U.K. healthcare staffing industry through
the strategic acquisition of other companies.In addition to organic growth, we intend
to grow our presence in the U.K. healthcare staffing services market through the
acquisition of other companies.
  Our Operations
     - 5 -




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Recruitment of Flexible Staff
    Training and Retention of Flexible Staff
  Quality Assurance
    - 6 -




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Customers
  
    
    Local governmental social service departments.Local governmental social service
departments retain us to provide social care staffing services, generally homecare
aides, to individuals in their homes.
 
    
    Nursing homes, care homes and independent hospitals.We provide nurses and homecare
aides to nursing homes and homecare aides to care homes. Care homes, like nursing
homes, generally provide shelter and food for their residents, but, unlike nursing
homes, generally do not provide medical services to their residents. We also provide
nurses and nurses aides to independent hospitals in the private sector.
 
    
    The NHS.We provide nurses, nurses aides and homecare aides to the NHS. We provide
staff or nursing and care services both to NHS Hospitals and NHS Primary Care Trusts.
 
    
    Private patients.We provide both nurses and homecare aides to private patient
customers. These patients may include incapacitated individuals who require daily
attention or patients with long-term illnesses living at home.
 Types of Customer Contracts
  
    
    Spot and framework contracts.These contracts, which are the most common type of
contracts in the U.K. healthcare staffing industry, are price-per-contract arrangements
for the provision of flexible staffing services, usually with local governmental social
services departments, NHS Primary Care Trusts and nursing and care homes. Spot and
framework contracts have the price and other terms agreed on a contract-by-contract
basis with no obligation to commit to any set volume of business.
 
    
    Block contracts.These contracts are usually with local governmental social
services departments and involve the purchase of a quantity (or block) of flexible
staffing care services over a period of time. A block contract usually commits the
customer to purchase an agreed-upon volume of staffing services
over a specified period. These contracts may enable customers to negotiate lower
prices in return for agreeing to minimum volumes of business.
  - 7 -




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
    
    NHS Framework Agreement and Service Level Agreements. The NHS requires any
healthcare staffing company that provides temporary staff to certain NHS bodies to
enter into their Framework Agreement. The Framework Agreement sets out one national
pay structure for the supply of nurses of all specifications. The intent of these
agreements was that only those staffing companies that successfully tendered for
inclusion on the Framework Agreement (including meeting all of the specified quality
standards) would be eligible to provide temporary staff to NHS bodies in the region
covered by the Framework Agreement. Pursuant to the last Framework Agreement, which
expired in September 2009, we could supply all types of staff throughout the United
Kingdom, except in London, where the Framework Agreement authorized us to supply all
categories of staff other than mental health staff and midwives.In fiscal 2009, the old Framework Agreements between the NHS and healthcare staffing
companies entered the formal re-tender stage. In July 2009, we were notified that
we had been successfully awarded, subject to contract completion, a new Framework
Agreement. Our new Framework Agreement, which came into operation in October 2009,
is at higher margins than our old Framework Agreement. We believe that the higher
charges under our new Framework Agreement will give us opportunities going forward
and we currently have plans to re-launch this service to provide healthcare staffing
services to hospitals in a few of our regional offices as well as our existing
London operation starting in fiscal 2010. However, we currently cannot determine
the impact of our new Framework Agreement on our consolidated financial position and
results of operations.
     - 8 -




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Marketing Activities
  Competition
     Payment for Staffing Services
   - 9 -




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Trade Names
  Employees
   Government Regulation
 General
  Healthcare Laws and Regulations
    - 10 -




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- 11 -




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Healthcare Reform
  U.K. rules affecting our staff
   Health and Social Care Act 2008
 NHS Initiatives
   - 12 -




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Insurance
   - 13 -




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Available Information
   
 Item 1A. Risk Factors.
  Risks Relating To Our Business And Strategy
 If we are unable to attract and retain healthcare staff at reasonable costs, it could increase our
operating costs and negatively impact our business.
   - 14 -




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We operate in a highly competitive market and our success depends on our ability to obtain and
retain customers.
   A change in treatment of flexible staff for U.K. tax, employment and benefits purposes could result
in increased costs.
    - 15 -




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Our branch structure could result in unforeseen costs and could adversely impact our business.
  The loss of key senior management personnel could adversely affect our ability to remain
competitive.
  We are dependent on the proper functioning of our information systems.
    - 16 -




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Our business is subject to certain risks inherent to international operations.
  
    
    fluctuations in currency exchange rates;
 
    
    varying laws relating to, among other things, employment and employment termination;
 
    
    changes in regulatory requirements; and
 
    
    potentially adverse tax consequences.
  Our business may be adversely affected by the current economic recession.
  Risks Relating To The Flexible Healthcare Staffing Market
 Our ability to compete in the homecare services market depends on our ability to obtain assignments
from local governmental social service departments and NHS Primary Care Trusts.
   - 17 -




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Local governmental social service departments continue to outsource the majority of their homecare
service requirements.
  NHS Primary Care Trusts continue to use homecare as an alternative to residential or NHS Hospitals.
  The introduction of the personalization agenda, individual budgets and direct payments could result
in the service user utilizing companies other than us to provide healthcare services.
  Demand for flexible staffing may fail to rise, remain at current levels or may decline for a
variety of reasons, including general economic conditions.
    - 18 -




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Fluctuations in patient occupancy at the hospitals, nursing homes and care homes of our customers
may adversely affect the demand for our services and therefore our financial performance.
  We operate in a regulated industry and violations of laws or regulations may result in increased
costs or sanctions that could impact our financial performance. Moreover, recent and proposed
changes in U.K. regulations affecting flexible staffing companies may result in increased costs
that reduce our revenue and profitability.
     - 19 -




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NHS reforms may have a substantial negative impact upon us.
   Recently-enacted changes in VAT could affect our revenues or profit margins.
   - 20 -




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Significant legal actions could subject us to substantial uninsured liabilities.
   Our insurance may not be adequate to protect us from claims for which we may become liable.
   - 21 -




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Risks Relating To Our Financial Condition
 We have incurred substantial amounts of goodwill from our acquisitions, some or all of which we may
be required to write off, which could adversely affect our financial condition or results of
operations.
    Our ability to use our net operating loss carryforward in the future is limited.
  Risks Relating To Our Common Stock
 Future sales of our common stock by existing shareholders may lower the price of our common stock.
   - 22 -




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If provisions in our corporate documents and New York law delay or prevent a change in control of
our company, we may be unable to consummate a transaction that our shareholders consider favorable.
   Our shareholder rights plan may make it more difficult for a third-party to acquire us.
   - 23 -




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Our stock price may be volatile.
  
    
    our operating performance and the performance of other similar companies;
 
    
    news announcements relating to us, our industry or our competitors;
 
    
    changes in earnings estimates or recommendations by research analysts;
 
    
    changes in general economic conditions;
 
    
    the number of shares that are publicly traded;
 
    
    actions of our current shareholders; and
 
    
    other developments affecting us, our industry or our competitors.
 
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
  
 Item 3. Legal Proceedings.
   - 24 -




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Item 4. Submission of Matters to a Vote of Security Holders.
  
 PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
  PERIOD
    
    HIGH
    
    
    LOWYear Ended September 30, 2008:First Quarter
    
    $
    3.20
    
    
    $
    1.86Second Quarter
    
    
    2.49
    
    
    
    1.36Third Quarter
    
    
    2.20
    
    
    
    1.36Fourth Quarter
    
    
    2.90
    
    
    
    1.68Year Ended September 30, 2009:First Quarter
    
    $
    2.15
    
    
    $
    1.00Second Quarter
    
    
    1.50
    
    
    
    .94Third Quarter
    
    
    2.48
    
    
    
    1.21Fourth Quarter
    
    
    2.90
    
    
    
    1.92Year Ended September 30, 2010:First Quarter (through
November 30, 2009)
    
    $
    3.40
    
    
    $
    2.27
    - 25 -




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Equity Compensation Plan Information
  Recent Repurchases of Equity Securities
  Our Comparative Performance
     - 26 -




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Notes
 A.
    
    The lines represent monthly index levels derived from compounded daily returns that include all dividends.B.
    
    The indexes are reweighted daily, using the market capitalization on the previous trading day.C.
    
    If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.D.
    
    The index level for all series was set to $100 on September 30, 2004. 
 Item 6. Selected Financial Data.
    - 27 -




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Year Ended September 30,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Financial Data:Total revenues
    
    
    249,810
    
    
    $
    298,577
    
    
    $
    277,795
    
    
    $
    280,205
    
    
    $
    342,031Gross profit
    
    
    76,348
    
    
    
    90,385
    
    
    
    83,956
    
    
    
    85,730
    
    
    
    98,727Selling, general and administrative expenses
    
    
    63,234
    
    
    
    77,655
    
    
    
    75,284
    (2)
    
    
    71,103
    
    
    
    73,050
    (6)Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,004
    (4)
    
    
    Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,038
    (5)
    
    
    Operating income (loss)
    
    
    13,114
    
    
    
    12,730
    
    
    
    8,672
    
    
    
    (105,415
    )
    
    
    25,677Interest and other income (expense), net
    
    
    427
    
    
    
    393
    
    
    
    (3,273
    )(3)
    
    
    (2,698
    )
    
    
    (4,164
    )Foreign exchange (loss) income
    
    
    (197
    )
    
    
    (586
    )
    
    
    285
    
    
    
    73
    
    
    
    (98
    )Provision for (benefit from) income taxes
    
    
    3,408
    
    
    
    3,751
    
    
    
    2,068
    
    
    
    (1,887
    )
    
    
    6,446Income (loss) from continuing operations
    
    
    9,936
    
    
    
    8,786
    
    
    
    3,616
    
    
    
    (106,153
    )
    
    
    14,969Income (loss) from discontinued operations, net of
taxes(1)
    
    
    367
    
    
    
    
    
    
    
    6,266
    
    
    
    (17,618
    )
    
    
    3,767Gain on disposal of subsidiaries, net of taxes
    
    
    
    
    
    
    
    
    
    
    56,471
    
    
    
    
    
    
    
    Net income (loss)
    
    
    10,303
    
    
    
    8,786
    
    
    
    66,353
    
    
    
    (123,771
    )
    
    
    18,736Basic income (loss) per share of common stock
from:Continuing operations
    
    $
    0.22
    
    
    $
    0.20
    
    
    $
    0.08
    
    
    $
    (2.36
    )
    
    $
    0.34Discontinued operations
    
    
    0.01
    
    
    
    
    
    
    
    1.40
    
    
    
    (0.39
    )
    
    
    0.08$
    0.23
    
    
    $
    0.20
    
    
    $
    1.48
    
    
    $
    (2.75
    )
    
    $
    0.42Diluted income (loss) per share of common stock
from:Continuing operations
    
    $
    0.22
    
    
    $
    0.19
    
    
    $
    0.08
    
    
    $
    (2.36
    )
    
    $
    0.33Discontinued operations
    
    
    0.01
    
    
    
    
    
    
    
    1.39
    
    
    
    (0.39
    )
    
    
    0.08$
    0.23
    
    
    $
    0.19
    
    
    $
    1.47
    
    
    $
    (2.75
    )
    
    $
    0.41Weighted average number of common
shares outstanding:Basic
    
    
    44,986
    
    
    
    44,986
    
    
    
    44,962
    
    
    
    44,930
    
    
    
    44,684Diluted
    
    
    45,011
    
    
    
    45,078
    
    
    
    45,147
    
    
    
    44,930
    
    
    
    45,169
 September 30,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Balance Sheet Data:Working capital
    
    $
    42,325
    
    
    $
    31,550
    
    
    $
    20,380
    
    
    $
    (1,165
    )
    
    $
    11,369Accounts receivable, net
    
    
    19,594
    
    
    
    17,774
    
    
    
    21,490
    
    
    
    26,813
    
    
    
    31,382Goodwill
    
    
    95,649
    
    
    
    109,292
    
    
    
    122,843
    
    
    
    112,538
    
    
    
    205,177Total assets
    
    
    173,067
    
    
    
    183,262
    
    
    
    252,779
    
    
    
    195,683
    
    
    
    303,439Total debt
    
    
    
    
    
    
    
    
    
    
    54,795
    
    
    
    71,159
    
    
    
    64,342Total shareholders equity
    
    
    147,273
    
    
    
    152,670
    
    
    
    158,759
    
    
    
    86,383
    
    
    
    201,859
 (1)
    
    See Note 3 of Notes to Consolidated Financial Statements for our fiscal year ended September
30, 2009 for a discussion and details of discontinued operations.(2)
    
    Includes $1.2 million of severance costs and related professional fees incurred upon the
resignation of our chairman and chief executive officer and $0.4 million related to the
issuance of new warrants and the extension of the expiration date on previously-issued
warrants.(3)
    
    Includes a $1.0 million charge related to the write-off and costs incurred on financing fees
and other income of $0.8 million related to interest rate swaps no longer being effective.(4)
    
    During our annual review of goodwill for impairment in the fourth quarter of fiscal 2006, we
determined there was an impairment of $110.0 million to our recorded goodwill balance by using
a combination of the market multiple, comparable transaction and discounted cash flow methods.
Based on a combination of factors, contributing to the impairment loss were the decrease in
profits due to the decline of revenues from the NHS, our companys market capitalization at
the time of testing as well as current and projected operating results.(5)
    
    Includes a charge of $9.0 million of software costs related to certain aspects of our
information system that were based on the Oracle platform that was too slow for the nature of
our business and therefore was not achieving full functionality. Also includes a charge of
$1.0 million relate to the write-off of other intangible assets. We reviewed the carrying
amount of our other intangibles and deemed certain assets to be impaired as of September 30,
2006 as a result of the decline in revenues from the NHS.(6)
    
    Includes a $1.1 million charge related to the reorganization of our U.K. subsidiaries, as
well as $1.0 million of costs associated with the launch of our new corporate logo.  - 28 -




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 General
        - 29 -




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Critical Accounting Policies
  Accounts Receivable
   
    
    to maintain average days sales outstanding (including unbilled accounts receivable)
to below 45 days;
 
    
    to limit our overdues (greater than 90 days) within agreed targets; and
 
    
    to limit bad debt write off in the year within agreed targets.
  - 30 -




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Goodwill and Other Intangible Assets
  Income Taxes
    - 31 -




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Contingencies
  Revenue Recognition
   Purchase Accounting
  Results of Operations
 Overview
   - 32 -




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Year Ended September 30, 2009 vs. Year Ended September 30, 2008
  Year ended September 30, 2009
    
    
    Year ended September 30, 2008Gross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    Gross(Amounts in thousands)
    
    Revenue
    
    
    %
    
    
    Profit
    
    
    %
    
    
    Profit %
    
    
    Revenue
    
    
    %
    
    
    Profit
    
    
    %
    
    
    Profit %Homecare
    
    $
    259,271
    
    
    
    81.6
    %
    
    $
    80,337
    
    
    
    82.7
    %
    
    
    31.0
    %
    
    $
    225,460
    
    
    
    75.5
    %
    
    $
    70,458
    
    
    
    78.0
    %
    
    
    31.3
    %Nursing Homes
    
    
    32,890
    
    
    
    10.4
    %
    
    
    10,298
    
    
    
    10.6
    %
    
    
    31.3
    %
    
    
    41,853
    
    
    
    14.0
    %
    
    
    12,602
    
    
    
    13.9
    %
    
    
    30.1
    %Hospitals
    
    
    25,512
    
    
    
    8.0
    %
    
    
    6,454
    
    
    
    6.7
    %
    
    
    25.3
    %
    
    
    31,264
    
    
    
    10.5
    %
    
    
    7,325
    
    
    
    8.1
    %
    
    
    23.4
    %Total, at constant exchange
rates
    
    
    317,673
    
    
    
    
    
    
    
    97,089
    
    
    
    
    
    
    
    30.6
    %
    
    
    298,577
    
    
    
    
    
    
    
    90,385
    
    
    
    
    
    
    
    30.3
    %Effect of foreign exchange
    
    
    (67,863
    )
    
    
    
    
    
    
    (20,741
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total, as reported
    
    $
    249,810
    
    
    
    
    
    
    $
    76,348
    
    
    
    
    
    
    
    
    
    
    $
    298,577
    
    
    
    
    
    
    $
    90,385SG&A, at constant exchange
rates
    
    
    
    
    
    
    
    
    
    $
    79,587
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    77,655Effect of foreign exchange
    
    
    
    
    
    
    
    
    
    
    (16,353
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    SG&A, as reported
    
    
    
    
    
    
    
    
    
    $
    63,234
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    77,655Operating Income, at constant
exchange rates
    
    
    
    
    
    
    
    
    
    $
    17,502
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,730Effect of foreign exchange
    
    
    
    
    
    
    
    
    
    
    (4,388
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating Income, as reported
    
    
    
    
    
    
    
    
    
    $
    13,114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,730
  Revenues
  Gross Profit
   - 34 -




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##### Table of Contents



Selling, General and Administrative Expenses
  Interest Income
  Provision for Income Taxes
  Discontinued Operations
    - 35 -




---



##### Table of Contents



Net Income
  Year Ended September 30, 2008 vs. Year Ended September 30, 2007
 Year Ended September 30, 2008
    
    
    Year Ended September 30, 2007Gross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    Gross(Dollars in thousands)
    
    Revenue
    
    
    %
    
    
    Profit
    
    
    %
    
    
    Profit %
    
    
    Revenue
    
    
    %
    
    
    Profit
    
    
    %
    
    
    Profit %Homecare
    
    $
    225,014
    
    
    
    75.5
    %
    
    $
    70,317
    
    
    
    78.0
    %
    
    
    31.2
    %
    
    $
    199,622
    
    
    
    71.9
    %
    
    $
    64,008
    
    
    
    76.3
    %
    
    
    32.1
    %Nursing Homes
    
    
    41,771
    
    
    
    14.0
    %
    
    
    12,577
    
    
    
    13.9
    %
    
    
    30.1
    %
    
    
    40,347
    
    
    
    14.5
    %
    
    
    11,784
    
    
    
    14.0
    %
    
    
    29.2
    %Hospital Staffing
    
    
    31,202
    
    
    
    10.5
    %
    
    
    7,312
    
    
    
    8.1
    %
    
    
    23.4
    %
    
    
    37,826
    
    
    
    13.6
    %
    
    
    8,164
    
    
    
    9.7
    %
    
    
    21.6
    %$
    297,987
    
    
    
    
    
    
    $
    90,206
    
    
    
    
    
    
    
    30.3
    %
    
    $
    277,795
    
    
    
    
    
    
    $
    83,956
    
    
    
    
    
    
    
    30.2
    %Effect of foreign
exchange
    
    
    590
    
    
    
    
    
    
    
    179
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    298,577
    
    
    
    
    
    
    $
    90,385
    
    
    
    
    
    
    
    
    
    
    $
    277,795
    
    
    
    
    
    
    $
    83,956
  Revenues
  Gross Profit
   - 36 -




---



##### Table of Contents



Selling, General and Administrative Expenses
  Interest Income
  Interest Expense
  Provision for Income Taxes
   - 37 -




---



##### Table of Contents



Discontinued Operations
    Year EndedSeptember 30,2007Revenues:Net respiratory, medical equipment and supplies
    
    $
    28,699Cost of revenues:Respiratory, medical equipment and supplies
    
    
    13,024Gross profit
    
    
    15,675Selling, general and administrative expenses
    
    
    6,091Operating income from discontinued operations
    
    
    9,584Interest income
    
    
    2Interest expense
    
    
    (1,570
    )(a)Income from discontinued operations before income tax
    
    
    8,016Gain on disposal of subsidiaries, net of tax
    
    
    56,471
    (b)Provision for income taxes
    
    
    1,750
    (c)Income from discontinued operations
    
    $
    62,737
 (a)
    
    In fiscal 2007, interest expense was allocated to discontinued operations based on debt
that we specifically identified as being attributable to discontinued operations, as an allocation
based on net assets would not provide a meaningful result. We based our allocation on the amount
of capital expenditures directly related to our discontinued operations and then considered cash
borrowings necessary to maintain the operations of our then respiratory therapy division.  - 38 -




---



##### Table of Contents



(b)
    
    Translation adjustments that result when a foreign entitys financial statements are
translated into a parent companys or an investors reporting currency are separately reported in
the parent companys other comprehensive income. Foreign currency translation adjustments that are
accumulated in other comprehensive income are reclassified to income only when they are realized,
if the investment in the foreign entity is sold or is substantially or completed liquidated.
Accordingly, the foreign currency translation adjustments of the balance sheet related to the
respiratory therapy segment in the amount of approximately $1.6 million were reclassified into the
gain on disposal of subsidiaries.(c)
    
    Included in the provision for income taxes for the year end September 30, 2007 was the
reversal of $0.7 million of certain tax contingencies related to our fiscal 2003 discontinued
operations on the sale of two of our U.S. subsidiaries as the statute of limitations has expired. Net Income
  Liquidity and Capital Resources
 General
   Accounts Receivable
 ,
   - 39 -




---



##### Table of Contents



0-30
    
    
    31-60
    
    
    61-90
    
    
    91-120
    
    
    121 Days
    
    
    AR AtAt September 30, 2009
    
    Days
    
    
    Days
    
    
    Days
    
    
    Days
    
    
    And Over
    
    
    9/30/2009SSD
    
    $
    9,138
    
    
    $
    769
    
    
    $
    484
    
    
    $
    181
    
    
    $
    359
    
    
    $
    10,931NHS
    
    
    4,670
    
    
    
    554
    
    
    
    241
    
    
    
    90
    
    
    
    161
    
    
    
    5,716Commercial Payors
    
    
    2,200
    
    
    
    262
    
    
    
    64
    
    
    
    33
    
    
    
    32
    
    
    
    2,591Private Payors
    
    
    1,994
    
    
    
    157
    
    
    
    104
    
    
    
    60
    
    
    
    275
    
    
    
    2,590Gross AR at 9/30/09
    
    $
    18,002
    
    
    $
    1,742
    
    
    $
    893
    
    
    $
    364
    
    
    $
    827
    
    
    $
    21,828Less: Unapplied Cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,124
    )Less: Surcharges(A)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (271
    )Less: Allowance For Doubtful
Accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (839
    )Accounts Receivable, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    19,594
 0-30
    
    
    31-60
    
    
    61-90
    
    
    91-120
    
    
    121 Days
    
    
    AR AtAt September 30, 2008
    
    Days
    
    
    Days
    
    
    Days
    
    
    Days
    
    
    And Over
    
    
    9/30/2008SSD
    
    $
    6,504
    
    
    $
    1,135
    
    
    $
    399
    
    
    $
    209
    
    
    $
    392
    
    
    $
    8,639NHS
    
    
    4,732
    
    
    
    774
    
    
    
    505
    
    
    
    186
    
    
    
    387
    
    
    
    6,584Commercial Payors
    
    
    3,046
    
    
    
    613
    
    
    
    157
    
    
    
    51
    
    
    
    104
    
    
    
    3,971Private Payors
    
    
    1,396
    
    
    
    261
    
    
    
    158
    
    
    
    67
    
    
    
    466
    
    
    
    2,348Gross AR at 9/30/08
    
    $
    15,678
    
    
    $
    2,783
    
    
    $
    1,219
    
    
    $
    513
    
    
    $
    1,349
    
    
    $
    21,542Less: Unapplied Cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,392
    )Less: Surcharges(A)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (553
    )Less: Allowance For Doubtful
Accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (823
    )Accounts Receivable, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,774
 (A)
    
    Surcharges represent interest charges to customers on overdue accounts. The
surcharges are recognized in income only upon receipt of payment.   - 40 -




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##### Table of Contents



Borrowings
 General
   Guarantees
   - 41 -




---



##### Table of Contents



Financial Instrument
  Commitments
 Employment Agreements
  Operating Leases
  Contractual Cash Obligations
  Total Lease
    
    
    Total Other
    
    
    TotalFiscal
    
    Obligations
    
    
    Obligations
    
    
    Obligations2010
    
    $
    2,378
    
    
    $
    721
    
    
    $
    3,0992011
    
    
    1,472
    
    
    
    958
    
    
    
    2,4302012
    
    
    858
    
    
    
    718
    
    
    
    1,5762013
    
    
    300
    
    
    
    207
    
    
    
    5072014
    
    
    120
    
    
    
    
    
    
    
    120Thereafter
    
    
    69
    
    
    
    
    
    
    
    69$
    5,197
    
    
    $
    2,604
    
    
    $
    7,801
   - 42 -




---



##### Table of Contents



Miscellaneous
 Treasury Shares
  Disposition
    Litigation
  Contingencies
  Impact of Recent Accounting Standards
   - 43 -




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 Foreign Currency Exchange
   Interest Rate Risk
  
 Item 8. Financial Statements and Supplementary Data.
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures.
    - 44 -




---



##### Table of Contents



Report of Management on Internal Control over Financial Reporting.
   Internal ControlIntegrated Framework
  Changes in Internal Control Over Financial Reporting.
   - 45 -




---



##### Table of Contents



Item 9B. Other Information.
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
 Our Directors and Officers
  Name
    
    Age
    
    Positions with our CompanyAlexander (Sandy) Young
    
    
    55
    
    
    Chief Executive Officer and DirectorPaul Weston
    
    
    45
    
    
    Chief Financial OfficerLeslie J. Levinson
    
    
    54
    
    
    SecretarySophia Corona
    
    
    46
    
    
    DirectorG. Richard Green
    
    
    70
    
    
    DirectorMark Hanley
    
    
    48
    
    
    DirectorWayne Palladino
    
    
    51
    
    
    DirectorJeffrey S. Peris
    
    
    63
    
    
    Non-Executive Chairman of the BoardAnn Thornburg
    
    
    60
    
    
    Director
  Alexander (Sandy) Young
 Paul Weston
  - 46 -




---



##### Table of Contents



Leslie J. Levinson
 Sophia Corona
 G. Richard Green
 Mark Hanley
 Wayne Palladino
  - 47 -




---



##### Table of Contents



Jeffrey S. Peris
 Ann Thornburg
  Section 16(a) Beneficial Ownership Reporting Compliance
   - 48 -




---



##### Table of Contents



Code of Conduct
         Board Committees
  Audit Committee
  - 49 -




---



##### Table of Contents



Compensation Committee
 Nominating and Corporate Governance Committee
  Strategic Investment Committee
   - 50 -




---



##### Table of Contents



Director Nominations
     - 51 -




---



##### Table of Contents



Communications with the Board
  
 Item 11. Executive Compensation.
 Compensation Discussion and Analysis
 General
  Name
    
    TitleAlexander (Sandy) Young
    
    Chief Executive Officer(1)Paul Weston
    
    Chief Financial Officer(2)
 (1)
    
    Mr. Young became our chief executive office in January 2008.(2)
    
    From 2004 until September 2008, Mr. Weston was our companys financial director
in the United Kingdom. In May 2008, Mr. Weston was appointed the chief financial
officer designate of our company and in October 2008 he became the chief financial
officer of our company.  - 52 -




---



##### Table of Contents



The Compensation Committee
     Policy
    - 53 -




---



##### Table of Contents



Base Salary
 Bonus
 Long-Term Incentives
   - 54 -




---



##### Table of Contents



- 55 -




---



##### Table of Contents



Process
 .
    - 56 -




---



##### Table of Contents



Compensation of our Named Executive Officers
  Base Salary
 Bonus
   - 57 -




---



##### Table of Contents



Long-Term Incentives2008 Stock Option Grants
   
 
 
 
  Long-Term Incentives2009 Stock Option Grants
  - 58 -




---



##### Table of Contents




 
 
 
  
 
 
 Long-Term IncentivesStock Appreciation Rights
  - 59 -




---



##### Table of Contents



Personal Benefits and Perquisites ,
 Potential Payments upon Termination or Change-in-Control
     Tax and Accounting Implications of Executive Compensation
    - 60 -




---



##### Table of Contents



Stock Ownership Guidelines
  Compensation Committee Report
   - 61 -




---



##### Table of Contents



Executive Compensation
 Summary Compensation Table
  OptionAwards(includingStockName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Appreciation
    
    
    All OtherPrincipal
    
    Fiscal
    
    
    Salary
    
    
    Bonus
    
    
    Rights)
    
    
    Compensation
    
    
    TotalPosition(s)
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)(3)
    
    
    ($)
    
    
    ($)Alexander (Sandy) Young,
    
    
    2009
    
    
    $
    333,167
    
    
    $
    134,244
    
    
    $
    
    (4)
    
    $
    68,350
    (6)(7)
    
    $
    535,761Chief Executive
Officer(1)
    
    
    2008
    
    
    $
    298,545
    
    
    $
    128,252
    
    
        
    (5)

    
    $
    61,842
    (6)(7)
    
    $
    488,639Paul Weston,
    
    
    2009
    
    
    $
    245,909
    
    
    $
    86,700
    
    
    $
    36,340
    
    
    $
    47,664
    (7)(8)
    
    $
    416,613Chief Financial Officer(2)
    
    
    2008
    
    
    $
    127,429
    
    
    $
    86,816
    
    
    $
    93,185
    
    
    $
    26,514
    (7)(8)
    
    $
    333,944
 (1)
    
    Mr. Young became our chief executive office in January 2008.(2)
    
    From 2004 until September 2008, Mr. Weston was our companys financial director in the United
Kingdom. In May 2008, Mr. Weston was appointed the chief financial officer designate of our
company and in October 2008 he became the chief financial officer of our company.(3)
    
    The amounts in this column show the amount of compensation cost recognized for financial
statement reporting purposes (disregarding any estimate of forfeitures related to
service-based vesting conditions). They do not reflect compensation actually received by the
named executive officers. The amounts shown in this column have been calculated in accordance
with the accounting guidance for option awards. See Note 9 of Notes to Consolidated Financial
Statements for our fiscal year ended September 30, 2009 for a discussion of the assumptions
made in determining the grant-date fair value. The actual value, if any, that an executive
officer will realize upon the exercise of the stock options or stock appreciation rights
issued to him will be equal to the excess of the trading price of shares of our common stock
on the date that the shares underlying the options or the stock appreciation rights are sold
over the exercise price of the options or the base price of the stock appreciation rights,
less any transaction costs. The grant date fair market value of the stock options granted in
fiscal 2009 is shown in the Grant of Plan-Based Awards table below.  - 62 -




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##### Table of Contents



(4)
    
    We did not recognize a compensation cost associated with the 200,000 options awarded during
fiscal 2008 and the 566,135 stock appreciation rights awarded during fiscal 2009 to Mr. Young
pursuant to his employment agreement, as we estimated that none of the performance measures
will be achieved. A change in the estimate of the performance measures vesting could result in the company
incurring stock compensation cost over a period through September 30, 2011.(5)
    
    We did not recognize a compensation cost associated with the 200,000 options awarded during
fiscal 2008 to Mr. Young pursuant to his employment agreement. Because the criteria for a
grant date for these options had not been established as of the end of our 2008 fiscal year,
they were not considered granted for accounting purposes.(6)
    
    In fiscal 2009, represents payment for a car allowance of $18,619 and payments of $49,731
toward Mr. Youngs U.K.-based private pension fund. In fiscal 2008, represents payment for a
car allowance of $17,060 and payments of $44,782 towards Mr. Youngs U.K.- based private
pension fund.(7)
    
    Our company pays for a group life insurance policy that covers certain of our employees,
including the named executive officer, and is payable to the beneficiaries of the covered
employees in the event of their death. Our company also pays for a group health insurance
policy that covers certain of our employees, including the named executive officers. The
amount listed in the All Other Compensation column does not include premiums in a de minimus
amount that are attributable to the coverage of the named executive officer under such group
life insurance policy or such group health insurance policy.(8)
    
    In fiscal 2009, represents payment for a car allowance of $13,964 and payments of $33,700
towards Mr. Westons U.K.- based private pension fund. In fiscal 2008, represents payment for
a car allowance of $7,399 and payments of $19,115 towards Mr. Westons U.K.- based private
pension fund. Grants of Plan-Based Awards
  ExerciseEstimated Future Payouts
    
    
    or Base
    
    
    Grant Dateunder Equity
    
    
    Price of
    
    
    Fair ValueIncentive Plan Awards
    
    
    Option
    
    
    of StockGrant
    
    
    Threshold
    
    
    Target
    
    
    Maximum
    
    
    Awards
    
    
    and OptionName
    
    Date
    
    
    (#)
    
    
    (#)
    
    
    (#)
    
    
    ($/Sh)
    
    
    Awards(4)Alexander (Sandy) Young
    
    
    
    (1)

    
    
    0
    (1)
    
    
    
    (1)

    
    
    200,000
    (1)
    
    $
    2.11
    
    
    $
    119,980
    (1)4/21/09
    
    
    
    0
    (2)
    
    
    
    (2)

    
    
    566,135
    (2)
    
    $
    1.51
    
    
    $
    274,695
    (2)Paul Weston
    
    
    6/17/09
    
    
    
    32,000
    (3)
    
    
    
    (3)

    
    
    80,000
    (3)
    
    $
    2.12
    
    
    $
    88,016
 (1)
    
    In February 2008, Mr. Young was awarded options to purchase up to 200,000 shares of our common
stock. The terms of these options were finalized in April 2009. See Employment Agreements;
Potential Payments Upon Termination or Change-in-Control below for a description of the options
granted to Mr. Young. Since, under the accounting guidance, the criteria for a grant date for the
stock options issued to Mr. Young had not been established as of the completion of our 2008 fiscal
year, the grant date fair value of these awards was not determined as of September 30, 2008. The
grant date fair market value of these awards that is provided in the table is the value determined
as of April 21, 2009.  - 63 -




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##### Table of Contents



(2)
    
    In our employment agreement with Mr. Young, we agreed to grant to him (in addition to stock
options) a long-term incentive award. In April 2009, our board of directors, upon the
recommendation of the Compensation
Committee, made a grant of 566,135 stock appreciation rights to Mr. Young. See Employment
Agreements; Potential Payments Upon Termination or Change-in-Control below for a description of
the stock appreciation rights granted to Mr. Young.(3)
    
    Of the 80,000 shares underlying the options granted to Mr. Weston in fiscal 2009, 48,000 are
denominated Performance Based Shares and 32,000 are denominated Non-Performance Based Shares.
Twenty five percent (25%) of the Performance Based Shares will vest on the date that our company
files its Annual Report on Form 10-K for its fiscal year ending September 30, 2010 with the
Securities and Exchange Commission, 25% of the Performance Based Shares will vest on June 17, 2011
and 50% of the Performance Based Shares will vest on June 17, 2012. In addition to, and not in
lieu of these time-based vesting requirements, the Performance Based Shares are subject to
performance-based vesting requirements as follows: 
 
 
 
  
 
 
 (4)
    
    The amounts shown in this column represent the full grant date value of each equity award
computed in accordance with the accounting guidance for stock compensation. See Note 9 of Notes to
Consolidated Financial Statements for our fiscal year ended September 30, 2009 for a discussion of
the assumptions made in determining the grant-date fair value. The actual value, if any, that an
executive officer will realize upon the exercise of the stock options or stock appreciation rights
issued to him will be equal to the excess of the trading price of shares of our common stock on the
date that the shares underlying the options or stock appreciation rights are sold over the exercise
price of the options or the base price of the stock appreciation rights, less any transaction
costs.  - 64 -




---



##### Table of Contents



Outstanding Equity Awards at Fiscal Year End
  Option AwardsEquityIncentivePlanAwards:Number of
    
    
    Number of
    
    
    Number ofSecurities
    
    
    Securities
    
    
    SecuritiesUnderlying
    
    
    Underlying
    
    
    UnderlyingUnexercised
    
    
    Unexercised
    
    
    Unexercised
    
    
    OptionOptions
    
    
    Options
    
    
    Unearned
    
    
    Exercise
    
    
    Option(#)
    
    
    (#)
    
    
    Options
    
    
    Price
    
    
    ExpirationName
    
    Exercisable
    
    
    Unexercisable
    
    
    (#)
    
    
    ($)
    
    
    DateAlexander (Sandy) Young
    
    
    
    
    
    
    
    
    
    
    200,000
    (1)
    
    $
    2.11
    
    
    
    2/6/2015
    (5)
    
    
    
    
    
    
    
    566,135
    (2)
    
    
    1.51Paul Weston
    
    
    12,000
    
    
    
    
    
    
    
    
    
    
    $
    6.20
    
    
    
    3/23/201510,000
    
    
    
    
    
    
    
    
    
    
    
    5.65
    
    
    
    9/30/201560,000
    
    
    
    
    
    
    
    
    
    
    
    1.92
    
    
    
    10/16/2016
    
    
    
    20,000
    (3)
    
    
    60,000
    (3)
    
    
    2.01
    
    
    
    5/14/2018
    
    
    
    32,000
    
    
    
    48,000
    (4)
    
    
    2.12
    
    
    
    6/17/2019
 (1)
    
    Represents options to purchase 200,000 shares of our common stock. See Employment Agreements;
Potential Payments Upon Termination or Change-in-Control for a description of these options.(2)
    
    Represents stock appreciation rights to purchase up to 566,135 shares of our common stock. See
Employment Agreements; Potential Payments Upon Termination or Change-in-Control for a description
of these stock appreciation rights. The potential maximum value of the stock appreciation rights
(when aggregated with the actual or, if still unexercised, expected value of the 200,000 stock
options) will be £3.0 million (approximately $4.8 million at the closing exchange rate at September
30, 2009).(3)
    
    In May 2008, Mr. Weston was granted 80,000 options. The terms of these options provide that
25% will vest on the date that our company files this Annual Report on Form 10-K with the
Securities and Exchange Commission, 25% will vest on May 14, 2010 and 50% will vest on May 14,
2011. In addition to, and not in lieu of these time-based vesting requirements, the options are
subject to the following performance-based vesting requirements: 
 
 
 
  - 65 -




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##### Table of Contents



(4)
    
    The terms of these options are described in the footnotes to the Grant of Plan Based Awards
table above.(5)
    
    If earned, the shares of common stock underlying the stock appreciation rights will be paid to
Mr. Young as soon as practicable after September 30, 2011. Exercise of Options During Fiscal 2009
  Employment Agreements; Potential Payments  Upon Termination or Change-in-Control
 Chief Executive Officer
  
    
    we awarded Mr. Young 200,000 stock options in February 2008;
 
    
    we granted Mr. Young 566,135 stock appreciation rights in April 2009, the terms of
which are described below;
 
    
    we provide Mr. Young with a car allowance; and
 
    
    we have agreed to make a payment equal to 15% of Mr. Youngs annual salary towards
his U.K.-based private pension fund.
   - 66 -




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Time Vesting
  Performance Vesting
    - 67 -




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##### Table of Contents



Severance payment in lieu of salary
    
    $
    344,400Severance payment in lieu of health insurance
    
    $
    3,463Severance payment in lieu of car allowance
    
    $
    19,106Severance payment in lieu of payment towards
U.K.-based private pension fund
    
    $
    51,659Total:
    
    $
    418,628
    (1)
 (1)
    
    Represents a single payment. Chief Financial Officer
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##### Table of Contents



Director Compensation
  Director Compensation Table for Fiscal 2009
 Fees Earnedor Paid in
    
    
    OptionCash
    
    
    Awards
    
    
    TotalName (1)(2)
    
    ($)
    
    
    ($)(5)(6)
    
    
    ($)Sophia Corona
    
    $
    53,083
    
    
    $
    64,071
    
    
    $
    117,154G. Richard Green
    
    $
    45,000
    
    
    $
    60,541
    
    
    $
    105,541Mark Hanley(3)
    
    $
    31,542
    
    
    $
    21,180
    
    
    $
    52,722Wayne Palladino
    
    $
    48,083
    
    
    $
    64,071
    
    
    $
    112,154Jeffrey S. Peris
    
    $
    76,500
    
    
    $
    79,913
    
    
    $
    156,413Ann Thornburg
    
    $
    60,000
    
    
    $
    78,148
    
    
    $
    138,148Mark Tompkins(4)
    
    $
    59,750
    
    
    $
    28,201
    
    
    $
    87,951
 (1)
    
    Alexander (Sandy) Young, who has served as a director of our company since January 2008,
is not included in this table because he is an employee of our company who received no additional
compensation for services as a director. The compensation received by Mr. Young as an employee of
our company during fiscal 2009 is reflected in the Summary Compensation Table.(2)
    
    Except as otherwise indicated, each individual named below served as a director of our
company for all of fiscal 2009.(3)
    
    Mark Hanley joined our board of directors on January 29, 2009.(4)
    
    Mark Tompkins resigned from our board of directors effective as of June 8, 2009.(5)
    
    The amounts in this column show the amount of compensation cost recognized for financial
statement reporting purposes (disregarding any estimate of forfeitures related to service-based
vesting conditions). The amounts shown represent the grant date fair value of the option, computed
in accordance with the accounting guidance for stock compensation. The amounts shown do not
reflect compensation actually received by the named directors. See Note 9 of Notes to Consolidated
Financial Statements for our fiscal year ended September 30, 2009 for a discussion of the
assumptions made in determining the grant-date fair value. The actual value, if any, that a
director will realize upon the exercise of the stock options issued to him or her will be equal to
the excess of the trading price of shares of our common stock on the date that the shares
underlying the options are sold over the exercise price of the options, less any transaction costs.  - 69 -




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##### Table of Contents



(6)
    
    As of September 30, 2009, each director listed in the table above had the option awards
outstanding set forth below: 
    
    Sophia Corona: 220,000
    
    G. Richard Green: 222,000
    
    Mark Hanley: 60,000
    
    Wayne Palladino: 241,000
    
    Jeffrey S. Peris: 299,000
    
    Ann Thornburg: 275,000
    
    Mark Tompkins: 100,000
 Director Compensation  General
  Cash Compensation
  
    
    each non-employee director is entitled to an annual retainer of $30,000 per
year;
 
    
    each non-employee director who is a member of our Audit Committee, our
Compensation Committee or our Nominating and Corporate Governance Committee (other
than the chairpersons) is entitled to receive an additional $5,000 per year for
service on those committees;
 
    
    the chairperson of our Audit Committee and our Nominating and Corporate
Governance Committee, is entitled to receive $20,000 per year for serving as such,
which amount is in addition to the $30,000 annual retainer paid to non-employee
directors;
 
    
    the co-chairpersons of the Strategic Investment Committee are each entitled to
receive $10,000 per year for serving as such, which amounts are in addition to the
$30,000 annual retainer paid to all non-employee directors;
 
    
    the non-executive chairman of the board is entitled to receive $100,000 per year
(which amount includes the $30,000 annual retainer paid to all non-employee
directors) Our non-executive chairman of the board also serves as the chairperson
of our Compensation Committee, but he does not receive additional remuneration for
serving as such.
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Equity-Based Compensation
    Compensation Committee Interlocks and Insider Participation
 .
  - 71 -




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
  Number ofShares of
    
    
    Percentage ofCommon Stock
    
    
    Common StockBeneficially
    
    
    BeneficiallyName
    
    Owned
    
    
    Owned(1)Alexander (Sandy) Young
    
    
    116,839
    (2)
    
    
    *Paul Weston
    
    
    102,000
    (3)
    
    
    *Sophia Corona
    
    
    105,000
    (4)
    
    
    *G. Richard Green
    
    
    197,354
    (5)
    
    
    *Mark Hanley
    
    
    15,000
    (6)
    
    
    *Wayne Palladino
    
    
    132,164
    (7)
    
    
    *Jeffrey S. Peris
    
    
    153,500
    (8)
    
    
    *Ann Thornburg
    
    
    131,250
    (9)
    
    
    *All current executive
officers and directors as
a group (8 persons)
    
    
    953,107
    (10)
    
    
    2.1
    %
 
 *
    
    Less than 1%.(1)
    
    As of the Determination Date, there were 45,136,229 shares of our
common stock outstanding. The percentage given for each shareholder
assumes that such shareholder has exercised the options held by such
shareholder that are exercisable within 60 days of the Determination
Date, but that no other shareholders have exercised the options held
by them.  - 72 -




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##### Table of Contents



(2)
    
    Does not include 200,000 shares subject to options and 566,135 stock
appreciation rights held by Mr. Young that are not exercisable within
60 days of the Determination Date.(3)
    
    Consists of 102,000 shares subject to options held by Mr. Weston that
are exercisable within 60 days of the Determination Date. Does not
include 140,000 shares subject to options held by Mr. Weston that are
not exercisable within 60 days of the Determination Date.(4)
    
    Consists of 105,000 shares subject to options held by Ms. Corona that
are exercisable within 60 days of the Determination Date. Does not
include 115,000 shares subject to options held by Ms. Corona that are
not exercisable within 60 days of the Determination Date.(5)
    
    Consists of 3,000 shares of common stock held by Mr. Green, 57,995
shares of common stock held jointly by Mr. Green and his wife, 19,259
shares of common stock held by Orion Nominees Limited, an affiliate
of Mr. Green, 114,500 shares subject to options held by Mr. Green
that are exercisable within 60 days of the Determination Date and
2,600 shares owned of record by Mr. Greens wife, as to which Mr.
Green disclaims beneficial ownership. Mr. Green has shared voting
and shared dispositive power over the shares of common stock held
jointly by him and his wife and sole voting and sole dispositive
power over the shares of common stock held by Orion Nominees Limited.
Does not include an additional 107,500 shares subject to options
held by Mr. Green that are not exercisable within 60 days of the
Determination Date.(6)
    
    Consists of 15,000 shares subject to options held by Mr. Hanley that
are exercisable within 60 days of the Determination Date. Does not
include 45,000 shares subject to options held by Mr. Hanley that are
not exercisable within 60 days of the Determination Date.(7)
    
    Consists of 5,914 shares of common stock held by Mr. Palladino, 250
shares held jointly by Mr. Palladino and his wife and 126,000 shares
subject to options that are exercisable within 60 days of the
Determination Date. Does not include an additional 115,000 shares
subject to options held by Mr. Palladino that are not exercisable
within 60 days of the Determination Date.(8)
    
    Consists of 2,000 shares of common stock held by Marjon Repjel, LP
and 151,500 shares subject to options held by Dr. Peris that are
exercisable within 60 days of the Determination Date. Dr. Peris has
shared voting and shared dispositive power over the shares of common
stock held by Marjon Repjel, LP with his wife. Does not include an
additional 147,500 shares subject to options held by Dr. Peris that
are not exercisable within 60 days of the Determination Date.(9)
    
    Consists of 131,250 shares subject to options held by Ms. Thornburg
that are exercisable within 60 days of the Determination Date. Does
not include 143,750 shares subject to options held by Ms. Thornburg
that are not exercisable within 60 days of the Determination Date.(10)
    
    Includes an aggregate of 745,250 shares subject to options held by
our executive officers and directors that are exercisable within 60
days of the Determination Date and 2,600 shares owned of record by
Mr. Greens wife, as to which Mr. Green disclaims beneficial
ownership.  - 73 -




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##### Table of Contents



Equity Compensation Plan Information
  Equity Compensation Plan Information
 Number of securitiesremaining available forfuture issuance underNumber of securities to
    
    
    Weighted-average
    
    
    equity compensationbe issued upon exercise
    
    
    exercise price of
    
    
    plans (excludingof outstanding options,
    
    
    outstanding options,
    
    
    securities reflected inwarrants and rights
    
    
    warrants and rights
    
    
    column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
shareholders
    
    
    2,991,334
    
    
    $
    2.22
    
    
    
    2,431,624Equity compensation
plans not approved
by shareholders
    
    
    566,135
    (1)
    
    $
    1.51
    
    
    
    Total
    
    
    3,557,469
    
    
    $
    2.11
    
    
    
    2,431,624
 (1)
    
    The securities covered by the equity compensation plan that has not been approved by our
shareholders consist of the stock appreciation rights granted in April 2009 to our chief executive
officer. For a description of the stock appreciation rights, see Item 11Executive
CompensationEmployment Agreements; Potential Payments Upon Termination or Change-in-Control. 
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
 Related Party Transactions
    - 74 -




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##### Table of Contents



Review of Related Party Transactions
    Director Independence
     - 75 -




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##### Table of Contents



Item 14. Principal Accountant Fees and Services.
 Audit and Other Fees During Fiscal 2009 and Fiscal 2008
  Fiscal 2009
    
    
    Fiscal 2008Audit fees
    
    $
    764,000
    
    
    $
    764,000Audit-related fees
    
    
    
    
    
    
    Tax fees
    
    
    
    
    
    
    All other fees
    
    
    
    
    
    
    
  Pre-Approval Policy
    - 76 -




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
  Page(1) Consolidated Financial Statements:Reports
of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated
Balance Sheets  September 30, 2009 and 2008
    
    
    F-3Consolidated Statements of Operations  for the years ended
September 30, 2009, 2008 and 2007
    
    
    F-4Consolidated
Statements of Changes in Shareholders Equity  for the
years ended September 30, 2009, 2008 and 2007
    
    
    F-5Consolidated Statements of Cash Flows  for the years ended
September 30, 2009, 2008 and 2007
    
    
    F-6Notes
to Consolidated Financial Statements
    
    
    F-7(2) Consolidated Financial Statement Schedules:Schedule I
 Condensed Financial Information
    
    
    S-1Schedule II
 Valuation and Qualifying Accounts
    
    
    S-5Schedules other than those listed above are omitted because
they are not required or are not applicable or the
information is shown in the audited consolidated financial
statements or related notes.(3) Exhibits:
 ExhibitNumber
    
    Title2.1
    
    
    Agreement, dated September 30, 2007, among Air Liquide Limited,
Omnicare Limited, Allied Healthcare Group Holdings Limited and
Air Liquide UK Limited (incorporated herein by reference to
Exhibit 2.1 of our Annual Report on Form 10-K for the fiscal year
ended September 30, 2007; File No. 001-11570).3.1
    
    
    Restated Certificate of Incorporation of United States Home
Health Care Corp. (now known as Allied Healthcare International
Inc.) filed with the Department of State of the State of New York
on December 12, 1990, as amended on August 7, 1992 (incorporated
herein by reference to Exhibit 3.1 of our Quarterly Report on
Form 10-Q for the quarter ended April 30, 1997; File No.
000-20918).3.2
    
    
    Certificate of Amendment of the Certificate of Incorporation of
Transworld Home Healthcare, Inc. (now known as Allied Healthcare
International Inc.) filed with the Department of State of the
State of New York on June 28, 1995 (incorporated herein by
reference to Exhibit 3.2 of our Quarterly Report on Form 10-Q for
the quarter ended April 30, 1997; File No. 000-20918).3.3
    
    
    Certificate of Amendment of the Certificate of Incorporation of
Transworld Home Healthcare, Inc. (now known as Allied Healthcare
International Inc.) filed with the Department of State of the
State of New York on October 9, 1996 (incorporated herein by
reference to Exhibit 3.3 of our Quarterly Report on Form 10-Q for
the quarter ended April 30, 1997; File No. 000-20918).
  - 77 -




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##### Table of Contents



ExhibitNumber
    
    Title3.4
    
    
    Certificate of Amendment of the Certificate of Incorporation of
Transworld Home Healthcare, Inc. (now known as Allied Healthcare
International Inc.) filed with the Department of State of the
State of New York on May 6, 1997 (incorporated herein by
reference to Exhibit 3.4 of our Quarterly Report on Form 10-Q for
the quarter ended April 30, 1997; File No. 000-20918).3.5
    
    
    Certificate of Amendment of the Certificate of Incorporation of
Transworld Healthcare, Inc. (now known as Allied Healthcare
International Inc.) filed with the Department of State of the
State of New York on April 16, 1998 (incorporated herein by
reference to Exhibit 3.5 of our Registration Statement on Form
S-4 (Reg. St. No. 333-87304) filed with the Securities and
Exchange Commission on May 1, 2002; File No. 333-87304).3.6
    
    
    Certificate of Amendment to Certificate of Incorporation of
Transworld Healthcare, Inc. (now known as Allied Healthcare
International Inc.) filed with the Department of State of the
State of New York on June 7, 2002 (incorporated herein by
reference to Exhibit 3.1 of our Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 10, 2002;
File No. 001-11570).3.7
    
    
    Certificate of Amendment of the Certificate of Incorporation of
Allied Healthcare International Inc. that defines the rights of
the Series A Convertible Preferred Stock, filed with the
Department of State of the State of New York on June 26, 2002
(incorporated herein by reference to Exhibit 4.1 of our Current
Report on Form 8-K filed with the Securities and Exchange
Commission on August 9, 2002; File No. 001-11570).3.8
    
    
    Certificate of Amendment of the provisions of the Certificate of
Incorporation of Allied Healthcare International Inc. that
defines the rights of the Series A Convertible Preferred Stock,
filed with the Department of State of the State of New York on
February 12, 2003 (incorporated herein by reference to Exhibit
3.8 of our Quarterly Report on Form 10-Q for the quarter ended
December 31, 2002; File No. 001-11570).3.9
    
    
    Certificate of Amendment of the Certificate of Incorporation of
Allied Healthcare International Inc. that eliminates all
references to the Series A Convertible Preferred Stock, filed
with the Department of State of the State of New York on July 20,
2004 (incorporated herein by reference to Exhibit 9 of our Form
8-A/A filed with the Securities and Exchange Commission on July
21, 2004; File No. 001-11570).3.10
    
    
    Certificate of Amendment of the Certificate of Incorporation of
Allied Healthcare International Inc. filed with the Department of
State of the State of New York on September 10, 2004
(incorporated herein by reference to Exhibit 3.1 of our Current
Report on Form 8-K filed with the Securities and Exchange
Commission on September 15, 2004; File No. 001-11570).3.11
    
    
    Certificate of Change of Allied Healthcare International Inc.
filed with the Department of State of the State of New York on
April 26, 2007 (incorporated herein by reference to Exhibit 3.11
of our Annual Report on Form 10-K for the fiscal year ended
September 30, 2007; File No. 001-11570).
  - 78 -




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##### Table of Contents



ExhibitNumber
    
    Title3.12
    
    
    Certificate of Amendment to Certificate of Incorporation of
Allied Healthcare International Inc., as filed with the
Department of State of the State of New York on April 2, 2009
(incorporated herein by reference to Exhibit 3.1 of our Current
Report on Form 8-K filed with the Securities and Exchange
Commission on April 2, 2009; File No. 001-11570).3.13
    
    
    Restated Bylaws of Transworld Home Healthcare, Inc. (now known as
Allied Healthcare International Inc.) (incorporated herein by
reference to Exhibit 3.4 of our Annual Report on Form 10-K for
the fiscal year ended October 31, 1996; File No. 000-20918).3.14
    
    
    Amendment to the Bylaws of Allied Healthcare International Inc.
effective June 7, 2002 (incorporated herein by reference to
Exhibit 3.2 of our Current Report on Form 8-K filed with the
Securities and Exchange Commission on June 10, 2002; File No.
001-11570).4.1
    
    
    Specimen Certificate of Common Stock (incorporated herein by
reference to Exhibit 4.1 of our Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 10, 2002;
File No. 001-11570).4.2
    
    
    Rights Agreement, dated as of April 2, 2009, between Allied
Healthcare International Inc. and Computershare Trust Company,
N.A., as Rights Agent (incorporated herein by reference to
Exhibit 4.1 of our Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 2, 2009; File No.
001-11570).10.1
    
    
    Form of Indemnity Agreement for officers and directors
(incorporated herein by reference to Exhibit 10.2 of our Annual
Report on Form 10-K for the fiscal year ended September 30, 2008;
File No. 001-11570).10.2A
    
    
    Amended and Restated Employment Agreement, dated October 16,
2006, between Allied Healthcare International Inc. and Sarah
Eames (incorporated herein by reference to Exhibit 10.4E of our
Annual Report on Form 10-K for the fiscal year ended September
30, 2006; File No. 001-11570).10.2B
    
    
    Transitional Services Agreement, dated January 14, 2008, between
Allied Healthcare International Inc. and Sarah L. Eames
(incorporated herein by reference to Exhibit 10.2 of our Current
Report on Form 8-K filed with the Securities and Exchange
Commission on January 14, 2008; File No. 001-11570).10.3
    
    
    Registration Rights Agreement, dated April 30, 2002, among
Transworld Healthcare, Inc. (now known as Allied Healthcare
International Inc.), Triumph Partners III, L.P. and Triumph III
Investors, L.P. (incorporated herein by reference to Exhibit
10.29 of our Registration Statement on Form S-4 (Reg. St. No.
333-87304) filed with the Securities and Exchange Commission on
May 1, 2002; File No. 333-87304).10.4
    
    
    2002 Stock Option Plan (incorporated herein by reference to Annex
D to the proxy statement/prospectus forming a part of Amendment
No. 1 to our Registration Statement on Form S-4 (Reg. St. No.
333-87304) filed with the Securities and Exchange Commission on
May 21, 2002; File No. 333-87304).
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ExhibitNumber
    
    Title10.5A
    
    
    Employment Agreement, dated July 31, 2006, between Allied
Healthcare Group Limited and David Moffatt (incorporated herein
by reference to Exhibit 10.15 of our Annual Report on Form 10-K
for the fiscal year ended September 30, 2006; File No.
001-11570).10.5B
    
    
    Leaving Agreement, executed by Allied Healthcare Group Limited on
October 1, 2008, between Allied Healthcare Group Limited and
David Moffatt (incorporated herein by reference to Exhibit 10.7B
of our Annual Report on Form 10-K for the fiscal year ended
September 30, 2008; File No. 001-11570).10.6
    
    
    Executive Service Agreement, dated December 22, 2007, between
Allied Healthcare International Inc. and Alexander Young, but
executed by Allied Healthcare International Inc. on January 8,
2008 (incorporated herein by reference to Exhibit 10.1 of our
Current Report on Form 8-K filed with the Securities and Exchange
Commission on January 14, 2008; File No. 001-11570).10.7
    
    
    Employment Agreement, dated May 1, 2008, between Allied
Healthcare Group Limited and Paul Weston (incorporated herein by
reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q
for the quarter ended June 30, 2008; File No. 001-11570).10.8
    
    
    Stock Appreciation Rights Agreement, entered into effective as of
April 21, 2009, between Allied Healthcare International Inc. and
Alexander Young (incorporated by reference to Exhibit 10.1 of our
Quarterly Report on Form 10-Q for the quarter ended March 31,
2009; File No. 001-11570).11
    
    
    Statement re: computation of earnings per share (computation can
be determined clearly from the material contained in this Annual
Report on Form 10-K).14.1
    
    
    Allied Healthcare International Inc. Code of Conduct
(incorporated herein by reference to Exhibit 14 to our Form 10-K
for the fiscal year ended September 30, 2003; File No.
001-11570).14.2
    (1)
    
    Allied Healthcare International Inc. Supplemental Code of Conduct.
  - 80 -




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ExhibitNumber
    
    Title21
    (1)
    Subsidiaries of Allied Healthcare International Inc.23
    (1)
    Consent of Eisner LLP, independent registered public accounting
firm of Allied Healthcare International Inc.31.1
    (1)
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.31.2
    (1)
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.32.1
    (1)
    Section 1350 Certification of Chief Executive Officer.32.2
    (1)
    Section 1350 Certification of Chief Financial Officer.99.1
    
    
    AIM Schedule 1Pre-Admission Announcement filed by Allied
Healthcare International Inc. with the Alternative Investment
Market of the London Stock Exchange (incorporated herein by
reference to Exhibit 99.2 of our Current Report on Form 8-K filed
with the Securities and Exchange Commission on November 30, 2005;
File No. 001-11570).
 
 (1)
    
    Filed herewith.  - 81 -




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ALLIED HEALTHCARE INTERNATIONAL INC.By:
    /s/ Sandy YoungName:
    Sandy YoungTitle:
    Chief Executive Officer Dated: December 4, 2009
     - 82 -




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##### Table of Contents



/s/ Sandy Young

Sandy Young
    
    Chief Executive Officer and Director
(principal executive officer)
    
    December 4, 2009/s/ Paul Weston

Paul Weston
    
    Chief Financial Officer
(principal financial and
accounting officer)
    
    December 4. 2009/s/ Sophia Corona
    
    Director
    
    December 3, 2009Sophia Corona/s/ G. Richard Green
    
    Director
    
    November 30, 2009G. Richard Green/s/ Mark Hanley
    
    Director
    
    November 30, 2009Mark Hanley/s/ Wayne Palladino
    
    Director
    
    November 30, 2009Wayne Palladino/s/ Jeffrey S. Peris
    
    Director
    
    November 28, 2009Jeffrey S. Peris/s/ Ann Thornburg
    
    Director
    
    December 3, 2009Ann Thornburg
  - 83 -




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
 PageIndex to Consolidated Financial StatementsReports of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets  September 30, 2009
and 2008
    
    
    F-3Consolidated Statements of Operations  for the
years ended September 30, 2009, 2008 and 2007
    
    
    F-4Consolidated Statements of Changes in
Shareholders Equity  for the years ended
September 30, 2009, 2008 and 2007
    
    
    F-5Consolidated Statements of Cash Flows  for the
years ended September 30, 2009, 2008 and 2007
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7Index to Consolidated Financial Statement SchedulesSchedule I  Condensed Financial Information
    
    
    S-1Schedule II  Valuation and Qualifying Accounts
    
    
    S-5
  F-i




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
  F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
         
  F-2




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except per share data)
 September 30,
    
    
    September 30,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    35,273
    
    
    $
    26,199Restricted Cash
    
    
    
    
    
    
    136Accounts receivable, less allowance for doubtful
accounts of $839 and $823, respectively
    
    
    19,594
    
    
    
    17,774Unbilled accounts receivable
    
    
    11,572
    
    
    
    15,892Deferred income taxes
    
    
    389
    
    
    
    474Prepaid expenses and other assets
    
    
    1,188
    
    
    
    1,375Assets of discontinued operations
    
    
    
    
    
    
    182Total current assets
    
    
    68,016
    
    
    
    62,032Property and equipment, net
    
    
    7,756
    
    
    
    8,574Goodwill
    
    
    95,649
    
    
    
    109,292Other intangible assets, net
    
    
    1,646
    
    
    
    3,345Taxes receivable
    
    
    
    
    
    
    19Total assets
    
    $
    173,067
    
    
    $
    183,262LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,186
    
    
    $
    1,614Accrued expenses, inclusive of payroll and related expenses
    
    
    24,304
    
    
    
    28,244Taxes payable
    
    
    201
    
    
    
    Liabilities of discontinued operations
    
    
    
    
    
    
    624Total current liabilities
    
    
    25,691
    
    
    
    30,482Deferred income taxes
    
    
    103
    
    
    
    110Total liabilities
    
    
    25,794
    
    
    
    30,592Commitments and contingencies (Note10)Shareholders equity:Preferred stock, $.01 par value; authorized 10,000 shares,
issued and outstanding   none
    
    
    
    
    
    
    Common stock, $.01 par value; authorized 80,000 shares,
issued 45,571 shares
    
    
    456
    
    
    
    456Additional paid-in capital
    
    
    241,555
    
    
    
    241,018Accumulated other comprehensive (loss) income
    
    
    (14,418
    )
    
    
    1,819Accumulated deficit
    
    
    (78,026
    )
    
    
    (88,329
    )149,567
    
    
    
    154,964Less cost of treasury stock (585 shares)
    
    
    (2,294
    )
    
    
    (2,294
    )Total shareholders equity
    
    
    147,273
    
    
    
    152,670Total liabilities and shareholders equity
    
    $
    173,067
    
    
    $
    183,262
   F-3




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2007Revenues:Net patient services
    
    $
    249,810
    
    
    $
    298,577
    
    
    $
    277,795Cost of revenues:Patient services
    
    
    173,462
    
    
    
    208,192
    
    
    
    193,839Gross profit
    
    
    76,348
    
    
    
    90,385
    
    
    
    83,956Selling, general and administrative expenses
    
    
    63,234
    
    
    
    77,655
    
    
    
    75,284Operating income
    
    
    13,114
    
    
    
    12,730
    
    
    
    8,672Interest income
    
    
    537
    
    
    
    935
    
    
    
    124Interest expense
    
    
    (110
    )
    
    
    (542
    )
    
    
    (4,156
    )Foreign exchange (loss) income
    
    
    (197
    )
    
    
    (586
    )
    
    
    285Other income
    
    
    
    
    
    
    
    
    
    
    759Income before income taxes and discontinued operations
    
    
    13,344
    
    
    
    12,537
    
    
    
    5,684Provision for income taxes
    
    
    3,408
    
    
    
    3,751
    
    
    
    2,068Income from continuing operations
    
    
    9,936
    
    
    
    8,786
    
    
    
    3,616Discontinued operations:Income from discontinued operations, net of taxes
    
    
    367
    
    
    
    
    
    
    
    6,266Gain on disposal of subsidiaries, net of taxes
    
    
    
    
    
    
    
    
    
    
    56,471Income from discontinued operations
    
    
    367
    
    
    
    
    
    
    
    62,737Net income
    
    $
    10,303
    
    
    $
    8,786
    
    
    $
    66,353Basic net income per share of common stockIncome from continuing operations
    
    $
    0.22
    
    
    $
    0.20
    
    
    $
    0.08Income from discontinued operations
    
    
    0.01
    
    
    
    
    
    
    
    1.40Net income per share of common stock
    
    $
    0.23
    
    
    $
    0.20
    
    
    $
    1.48Diluted net income per share of common stockIncome from continuing operations
    
    $
    0.22
    
    
    $
    0.19
    
    
    $
    0.08Income from discontinued operations
    
    
    0.01
    
    
    
    
    
    
    
    1.39Net income per share of common stock
    
    $
    0.23
    
    
    $
    0.19
    
    
    $
    1.47Weighted average number of common shares outstanding:Basic
    
    
    44,986
    
    
    
    44,986
    
    
    
    44,962Diluted
    
    
    45,011
    
    
    
    45,078
    
    
    
    45,147
   F-4




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 (In thousands)
 AccumulatedAdditional
    
    
    Other
    
    
    RetainedCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    (Deficit)
    
    
    TreasuryShares
    
    
    Amount
    
    
    Capital
    
    
    (Loss) Income
    
    
    Earnings
    
    
    Shares
    
    
    TotalBalance, September 30, 2006
    
    
    45,542
    
    
    $
    455
    
    
    $
    238,944
    
    
    $
    13,258
    
    
    $
    (163,980
    )
    
    $
    (2,294
    )
    
    $
    86,383Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,353
    
    
    
    
    
    
    
    66,353Foreign currency translation adjustment, net of taxes of $1,441
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,032
    
    
    
    
    
    
    
    
    
    
    
    5,032Unrealized gains from cash flow hedging activities, net of taxes
of $(117)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (272
    )
    
    
    
    
    
    
    
    
    
    
    (272
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,113Stock based compensation
    
    
    
    
    
    
    
    
    
    
    764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    764Issuance of common stock for consulting services
    
    
    29
    
    
    
    1
    
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64Issuance and modification of warrants for professional services
    
    
    
    
    
    
    
    
    
    
    435
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    435Balance, September 30, 2007
    
    
    45,571
    
    
    $
    456
    
    
    $
    240,206
    
    
    $
    18,018
    
    
    $
    (97,627
    )
    
    $
    (2,294
    )
    
    $
    158,759Comprehensive loss:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,786
    
    
    
    
    
    
    
    8,786Foreign currency translation adjustment, net of taxes of $(1,747)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,199
    )
    
    
    
    
    
    
    
    
    
    
    (16,199
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,413
    )Adoption of guidance for uncertainty in income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    512
    
    
    
    
    
    
    
    512Stock based compensation
    
    
    
    
    
    
    
    
    
    
    812
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    812Balance, September 30, 2008
    
    
    45,571
    
    
    $
    456
    
    
    $
    241,018
    
    
    $
    1,819
    
    
    $
    (88,329
    )
    
    $
    (2,294
    )
    
    $
    152,670Comprehensive loss:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,303
    
    
    
    
    
    
    
    10,303Foreign currency translation adjustment, net of taxes of $(2,057)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,237
    )
    
    
    
    
    
    
    
    
    
    
    (16,237
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,934
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    537
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    537Balance, September 30, 2009
    
    
    45,571
    
    
    $
    456
    
    
    $
    241,555
    
    
    $
    (14,418
    )
    
    $
    (78,026
    )
    
    $
    (2,294
    )
    
    $
    147,273
   F-5




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    10,303
    
    
    $
    8,786
    
    
    $
    66,353Adjustments to reconcile net income to net
cash provided by operating activities:Income from discontinued operations
    
    
    (367
    )
    
    
    
    
    
    
    (6,266
    )Gain on disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (56,471
    )Depreciation and amortization
    
    
    2,590
    
    
    
    3,231
    
    
    
    3,377Amortization of intangible assets
    
    
    1,252
    
    
    
    1,634
    
    
    
    1,743Amortization of debt issuance costs
    
    
    
    
    
    
    
    
    
    
    368Warrants issued for professional services
    
    
    
    
    
    
    
    
    
    
    499Foreign exchange loss
    
    
    7
    
    
    
    
    
    
    
    Increase (decrease) in provision for allowance for doubtful accounts
    
    
    360
    
    
    
    (167
    )
    
    
    222Loss on sale of fixed assets
    
    
    20
    
    
    
    166
    
    
    
    Stock based compensation
    
    
    537
    
    
    
    812
    
    
    
    764Write-off of deferred financing fees
    
    
    
    
    
    
    
    
    
    
    705Deferred income taxes
    
    
    117
    
    
    
    88
    
    
    
    557Changes in operating assets and liabilities, excluding
the effect of businesses acquired and sold:(Increase) decrease in accounts receivable
    
    
    (4,281
    )
    
    
    1,579
    
    
    
    7,307Decrease (increase) in prepaid expenses and other assets
    
    
    2,318
    
    
    
    (3,488
    )
    
    
    (2,017
    )Increase (decrease) in accounts payable and other liabilities
    
    
    2,867
    
    
    
    (3,779
    )
    
    
    5,044Net cash provided by continuing operations
    
    
    15,723
    
    
    
    8,862
    
    
    
    22,185Net cash (used in) provided by discontinued operations
    
    
    
    
    
    
    (561
    )
    
    
    5,870Net cash provided by operating activities
    
    
    15,723
    
    
    
    8,301
    
    
    
    28,055Cash flows from investing activities:Capital expenditures
    
    
    (2,850
    )
    
    
    (3,344
    )
    
    
    (1,275
    )Proceeds from sale of business
    
    
    
    
    
    
    
    
    
    
    70,994Proceeds from sale of business held in escrow and designated for debt repayment
    
    
    116
    
    
    
    53,638
    
    
    
    (53,679
    )Proceeds from sale of property and equipment
    
    
    1
    
    
    
    50
    
    
    
    Payments on acquisitions payable
    
    
    (1,082
    )
    
    
    
    
    
    
    (2,584
    )Net cash (used in) provided by continuing operations investing activities
    
    
    (3,815
    )
    
    
    50,344
    
    
    
    13,456Net cash used in discontinued operations investing activities
    
    
    
    
    
    
    
    
    
    
    (1,786
    )Net cash (used in) provided by investing activities
    
    
    (3,815
    )
    
    
    50,344
    
    
    
    11,670Cash flows from financing activities:Payments for financing fees
    
    
    
    
    
    
    
    
    
    
    (533
    )Payments under revolving loan, net
    
    
    
    
    
    
    (24,664
    )
    
    
    (14,769
    )(Payments) borrowings under invoice discounting facility, net
    
    
    
    
    
    
    (4,458
    )
    
    
    4,449Principal payments on long-term debt
    
    
    
    
    
    
    (23,678
    )
    
    
    (11,815
    )Proceeds from sale of interest rate swap agreements
    
    
    
    
    
    
    617
    
    
    
    Net cash used in financing activities
    
    
    
    
    
    
    (52,183
    )
    
    
    (22,668
    )Effect of exchange rate on cash
    
    
    (2,834
    )
    
    
    (504
    )
    
    
    (754
    )Increase in cash
    
    
    9,074
    
    
    
    5,958
    
    
    
    16,303Cash and cash equivalents, beginning of year
    
    
    26,199
    
    
    
    20,241
    
    
    
    3,938Cash and cash equivalents, end of year
    
    $
    35,273
    
    
    $
    26,199
    
    
    $
    20,241Supplemental cash flow information:Cash paid for interest
    
    $
    405
    
    
    $
    1,143
    
    
    $
    4,679Cash paid for income taxes, net
    
    $
    1,102
    
    
    $
    4,872
    
    
    $
    2,570
   F-6




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
 
 Notes to Consolidated Financial Statements
 1. Business and Operations:
    2. Summary of Significant Accounting Policies:
 Basis of Accounting and Principles of Consolidation:
   F-7




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Cash and Cash Equivalents:
  Restricted Cash:
  Stock-Based Compensation:
  Accounts Receivable:
    F-8




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Property and Equipment:
  Purchase Accounting:
  Goodwill and Other Intangible Assets:
   Balance at October 1, 2007
    
    $
    122,843Foreign exchange effect
    
    
    (13,551
    )Balance at September 30, 2008
    
    
    109,292Foreign exchange effect
    
    
    (13,263
    )Acquisitions payable adjustment
    
    
    (380
    )Balance at September 30, 2009
    
    $
    95,649
   F-9




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  September 30, 2009Range
    
    
    Gross
    
    
    
    
    
    
    NetOf Lives
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(Years)
    
    
    Amount
    
    
    Amortization
    
    
    AmountCustomer relationships
    
    
    5  12
    
    
    $
    8,502
    
    
    $
    6,856
    
    
    $
    1,646Trade names
    
    
    3
    
    
    
    164
    
    
    
    164
    
    
    
    Non-compete agreements
    
    
    2  3
    
    
    
    192
    
    
    
    192
    
    
    
    Favorable leasehold interests
    
    
    2  5
    
    
    
    8
    
    
    
    8
    
    
    
    Total
    
    
    
    
    
    $
    8,866
    
    
    $
    7,220
    
    
    $
    1,646
 September 30, 2008Range
    
    
    Gross
    
    
    
    
    
    
    NetOf Lives
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(Years)
    
    
    Amount
    
    
    Amortization
    
    
    AmountCustomer relationships
    
    
    5  12
    
    
    $
    9,705
    
    
    $
    6,360
    
    
    $
    3,345Trade names
    
    
    3
    
    
    
    187
    
    
    
    187
    
    
    
    Non-compete agreements
    
    
    2  3
    
    
    
    219
    
    
    
    219
    
    
    
    Favorable leasehold interests
    
    
    2  5
    
    
    
    9
    
    
    
    9
    
    
    
    Total
    
    
    
    
    
    $
    10,120
    
    
    $
    6,775
    
    
    $
    3,345
  Deferred Financing Costs:
   F-10




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Income Taxes:
   Revenue Recognition:
  ,
 Advertising Costs:
   F-11




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Earnings Per Share:
   2009
    
    
    2008
    
    
    2007Weighted average number of common shares outstanding
as used in computation of basic EPS of common stock
    
    
    44,986
    
    
    
    44,986
    
    
    
    44,962Effect of dilutive securities  stock options and warrants
    
    
    25
    
    
    
    92
    
    
    
    185Shares used in computation of diluted EPS of common stock
    
    
    45,011
    
    
    
    45,078
    
    
    
    45,147
 Comprehensive (Loss) Income:
   F-12




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Impairment of Long-Lived Assets:
  Foreign Currency Translation:
  Fair Value of Financial Instruments:
  Concentrations of Credit Risk:
    F-13




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Use of Managements Estimates:
  Reclassifications:
  Recent Accounting Pronouncements:
 Fair Value Measurements and Disclosures.
 Fair Value Option For Certain Financial Assets and Liabilities.
 Noncontrolling Interests.
  F-14




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Business Combinations.
 Disclosures about Derivative Instruments and Hedging Activities.
 Interim Fair Value Disclosures.
 Subsequent Events.
  F-15




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Transfers of Financial Assets.
 Consolidation of Variable Interest Entities.
 FASB Codification.
  F-16




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Fair Value Measurements and Disclosures.
 3. Business Dispositions:
 Dispositions:
   F-17




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  Year EndedSeptember 30,2007Revenues:Net respiratory, medical equipment and supplies
    
    $
    28,699Cost of revenues:Respiratory, medical equipment and supplies
    
    
    13,024Gross Profit
    
    
    15,675Selling, general and administrative expenses
    
    
    6,091Operating income from discontinued operations
    
    
    9,584Interest income
    
    
    2Interest expense
    
    
    (1,570
    )Income from discontinued operations before income tax
    
    
    8,016Gain on disposal of subsidiaries, net of tax
    
    
    56,471
    (a)Provision for income taxes
    
    
    1,750
    (b)Income from discontinued operations
    
    $
    62,737
 (a)
    
    Translation adjustments that result when a foreign entitys financial statements are
translated into a parent companys or an investors reporting currency are separately reported in
the parent companys other comprehensive income. Foreign currency translation adjustments that are
accumulated in other comprehensive income are reclassified to income only when they are realized,
if the investment in the foreign entity is sold or is substantially or completely liquidated.
Accordingly, the foreign currency translation adjustments of the balance sheet related to the
respiratory therapy segment in the amount of approximately $1.6 million were reclassified into the
gain on disposal of subsidiaries.(b)
    
    Included in the provision for income taxes for the year ended September 30, 2007, is the
reversal of $0.7 million of certain tax contingencies, related to the Companys fiscal 2003
discontinued operations on the sale of two of its U.S. subsidiaries as the statute of limitation
has expired.  F-18




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
    F-19




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  Year Ended September 30, 2007Pro Forma
    
    
    ConsolidatedConsolidated
    
    
    Adjustments
    
    
    Pro FormaNet revenues
    
    $
    277,795
    
    
    $
    
    
    
    $
    277,795Cost of revenues
    
    
    193,839
    
    
    
    
    
    
    
    193,839Gross profit
    
    
    83,956
    
    
    
    
    
    
    
    83,956Selling, general and administrative expenses
    
    
    75,284
    
    
    
    
    
    
    
    75,284Operating income
    
    
    8,672
    
    
    
    
    
    
    
    8,672Interest expense, net
    
    
    (3,273
    )
    
    
    3,188
    (a)
    
    
    (85
    )Foreign exchange gain
    
    
    285
    
    
    
    
    
    
    
    285Income before income taxes and discontinued operations
    
    
    5,684
    
    
    
    3,188
    
    
    
    8,872Provision for income taxes
    
    
    2,068
    
    
    
    956
    (b)
    
    
    3,024Income from continuing operations
    
    
    3,616
    
    
    
    2,232
    
    
    
    5,848Income from discontinued operations, net of taxes
    
    
    6,266
    
    
    
    1,099
    (a)
    
    
    7,365Gain on disposal of subsidiaries, net of taxes
    
    
    56,471
    
    
    
    
    
    
    
    56,47162,737
    
    
    
    1,099
    
    
    
    63,836Net income
    
    $
    66,353
    
    
    $
    3,331
    
    
    $
    69,684Basic income per share of common stock from:Income from continuing operations
    
    $
    0.08
    
    
    
    
    
    
    $
    0.13Income from discontinued operations
    
    
    1.40
    
    
    
    
    
    
    
    1.42Net income
    
    $
    1.48
    
    
    
    
    
    
    $
    1.55Diluted income per share of common stock from:Income from continuing operations
    
    $
    0.08
    
    
    
    
    
    
    $
    0.13Income from discontinued operations
    
    
    1.39
    
    
    
    
    
    
    
    1.41Net income
    
    $
    1.47
    
    
    
    
    
    
    $
    1.54Weighted average number of common shares outstanding:Basic
    
    
    44,962
    
    
    
    
    
    
    
    44,962Diluted
    
    
    45,147
    
    
    
    
    
    
    
    45,147
 (a)
    
    To record interest savings on pay down of senior credit facility from the proceeds
from the sale of the respiratory therapy segment.(b)
    
    To record tax expense attributable to pro forma adjustments at the UK statutory rate of
30%.  F-20




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 4. Property and Equipment:
  2009
    
    
    2008Furniture, fixtures and equipment (including software)
    
    $
    16,448
    
    
    $
    26,639Leasehold improvements
    
    
    1,036
    
    
    
    1,33217,484
    
    
    
    27,971Less, accumulated depreciation and amortization
    
    
    9,728
    
    
    
    19,397$
    7,756
    
    
    $
    8,574
  5. Accrued Expenses:
  2009
    
    
    2008Payroll and related expenses
    
    $
    19,750
    
    
    $
    19,370Acquisitions payable (on earned contingent
consideration)
    
    
    
    
    
    
    1,702
    (A)Professional fees
    
    
    1,087
    
    
    
    1,327Interest payable
    
    
    
    
    
    
    390Refunds payable
    
    
    1,024
    
    
    
    1,648Other
    
    
    2,443
    
    
    
    3,807$
    24,304
    
    
    $
    28,244
 (A)
    
    At September 30, 2008 amount included $0.8 million, which was under negotiation
with the owner of the previously acquired entity. In the fourth quarter of fiscal 2009, the
Company completed negotiation which resulted in negative adjustment to goodwill of $0.4 million.
See Note 2. 6. Debt:
   F-21




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Guarantees.
 Financial Instruments.
 7. Shareholders Equity:
    F-22




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 8. Income Taxes:
  2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    26
    
    
    $
    8
    
    
    $
    10Foreign
    
    
    3,265
    
    
    
    3,655
    
    
    
    1,273Deferred:Foreign
    
    
    117
    
    
    
    88
    
    
    
    785Provision for income taxes
    
    $
    3,408
    
    
    $
    3,751
    
    
    $
    2,068
  2009
    
    
    2008Deferred tax assets:Accrued expenses
    
    $
    380
    
    
    $
    690Federal net operating loss carryforward
    
    
    24,468
    
    
    
    25,380State net operating loss carryforward
    
    
    8,532
    
    
    
    8,838Provision for doubtful accounts
    
    
    85
    
    
    
    150Depreciation
    
    
    928
    
    
    
    854Stock Options
    
    
    471
    
    
    
    563Other, net
    
    
    150
    
    
    
    29Gross deferred tax assets
    
    
    35,014
    
    
    
    36,504Valuation allowance
    
    
    (33,538
    )
    
    
    (34,826
    )Net deferred tax assets
    
    
    1,476
    
    
    
    1,678Deferred tax liabilities:Intangible assets
    
    
    (1,190
    )
    
    
    (1,132
    )Deferred tax liabilities
    
    
    (1,190
    )
    
    
    (1,132
    )Net deferred tax asset
    
    $
    286
    
    
    $
    546Classification of Deferred Taxes:Current Deferred Tax Asset
    
    $
    389
    
    
    $
    474Current Deferred Tax Asset (included in
Assets of discontinued
operations
    
    
    
    
    
    
    182Long-Term Deferred Tax Liabilities
    
    
    (103
    )
    
    
    (110
    )Net deferred tax asset
    
    $
    286
    
    
    $
    546
  F-23




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
    2009
    
    
    2008
    
    
    2007Income taxes at 34%
    
    $
    4,537
    
    
    $
    4,263
    
    
    $
    1,933Valuation allowance
    
    
    (1,288
    )
    
    
    (783
    )
    
    
    46Foreign tax, net
    
    
    (743
    )
    
    
    (592
    )
    
    
    (245
    )Enacted U.K. rate change
    
    
    
    
    
    
    (78
    )
    
    
    148Stock options
    
    
    246
    
    
    
    111
    
    
    
    Expiration of warrants unexercised
    
    
    80
    
    
    
    391
    
    
    
    Other, net
    
    
    576
    
    
    
    439
    
    
    
    186Provision for income taxes
    
    $
    3,408
    
    
    $
    3,751
    
    
    $
    2,068
     F-24




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
      9. Stock Options and Warrants:
 Stock Options:
   F-25




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  2009
    
    
    2008
    
    
    2007Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Average
    
    
    Number
    
    
    AverageOf Stock
    
    
    Exercise
    
    
    of Stock
    
    
    Exercise
    
    
    of Stock
    
    
    ExerciseOptions
    
    
    Price ($)
    
    
    Options
    
    
    Price ($)
    
    
    Options
    
    
    Price ($)Outstanding beginning of year
    
    
    2,576
    
    
    
    2.24
    
    
    
    2,977
    
    
    
    3.64
    
    
    
    2,633
    
    
    
    4.99Granted
    
    
    1,221
    
    
    
    2.12
    
    
    
    1,280
    
    
    
    2.01
    
    
    
    1,440
    
    
    
    2.03Forfeited or expired
    
    
    (806
    )
    
    
    2.12
    
    
    
    (1,681
    )
    
    
    4.55
    
    
    
    (1,096
    )
    
    
    4.75Outstanding end of year
    
    
    2,991
    
    
    
    2.22
    
    
    
    2,576
    
    
    
    2.24
    
    
    
    2,977
    
    
    
    3.64
  Weighted-
    
    
    Weighted-Average
    
    
    AverageExercise Price
    
    
    Remaining
    
    
    AggregateNumber
    
    
    of Options
    
    
    Contractual
    
    
    IntrinsicRange Of Exercise Price ($)
    
    Outstanding
    
    
    Outstanding ($)
    
    
    Life in Years
    
    
    Value ($)1.92  2.24
    
    
    2,856
    
    
    
    2.07
    
    
    
    8.0
    
    
    
    2,0943.83  4.70
    
    
    41
    
    
    
    4.36
    
    
    
    3.4
    
    
    
    5.41  6.20
    
    
    94
    
    
    
    6.02
    
    
    
    5.3
    
    
    
    Options outstanding
    
    
    2,991
    
    
    
    2.22
    
    
    
    7.8
    
    
    
    2,094Options vested and expect to vest
    
    
    2,546
    
    
    
    2.25
    
    
    
    7.9
    
    
    
    1,779
 Weighted-
    
    
    Weighted-Average
    
    
    AverageExercise Price
    
    
    Remaining
    
    
    AggregateNumber
    
    
    of Options
    
    
    Contractual
    
    
    IntrinsicRange Of Exercise Price ($)
    
    Exercisable
    
    
    Exercisable ($)
    
    
    Life in Years
    
    
    Value ($)1.92  2.24
    
    
    1,001
    
    
    
    2.04
    
    
    
    6.5
    
    
    
    7643.83  4.70
    
    
    41
    
    
    
    4.36
    
    
    
    3.4
    
    
    
    5.41  6.20
    
    
    94
    
    
    
    6.02
    
    
    
    5.3
    
    
    
    Options exercisable
    
    
    1,136
    
    
    
    2.45
    
    
    
    6.3
    
    
    
    764
  F-26




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
   2009
    
    
    2008
    
    
    2007Expected life (years)
    
    
    6.0
    
    
    
    5.8
    
    
    
    6Risk-free interest rate
    
    
    2.7
    %
    
    
    3.1
    %
    
    
    4.7
    %Volatility
    
    
    52.7
    %
    
    
    49.3
    %
    
    
    54.1
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
   Expected life (years)
    
    
    4.1Risk-free interest rate
    
    
    1.6
    %Volatility
    
    
    62
    %Expected dividend yield
    
    
    0
    %
  F-27




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
   Weighted-AverageStock
    
    
    Grant-DateNonvested Stock Options
    
    Options
    
    
    Fair Value ($)Nonvested at October 1, 2008
    
    
    1,295
    
    
    
    1.04Granted
    
    
    1,221
    
    
    
    1.02Vested
    
    
    (481
    )
    
    
    1.09Forfeited
    
    
    (180
    )
    
    
    1.03Nonvested at September 30, 2009
    
    
    1,855
    
    
    
    1.01
  Weighted-AverageRemainingContractual
    
    
    AggregateStock
    
    
    Weighted-Average
    
    
    Life
    
    
    IntrinsicTime and Performance Based Stock Options
    
    Options
    
    
    Exercise Price ($)
    
    
    In Years
    
    
    Value ($)Outstanding at October 1, 2008
    
    
    760
    
    
    
    1.98Granted
    
    
    564
    
    
    
    2.12Forfeited
    
    
    (225
    )
    
    
    1.97Outstanding at September 30, 2009
    
    
    1,099
    
    
    
    2.05
    
    
    
    8.2
    
    
    
    822Vested and expected to vest at
September 30, 2009
    
    
    714
    
    
    
    2.03
    
    
    
    8.7
    
    
    
    548Exercisable at September 30, 2009
    
    
    160
    
    
    
    1.92
    
    
    
    7.0
    
    
    
    141
  F-28




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  Weighted-AverageStock
    
    
    Grant-DateTime and Performance Based Stock Options
    
    Options
    
    
    Fair Value ($)Nonvested at October 1, 2008
    
    
    545
    
    
    
    1.07Granted
    
    
    564
    
    
    
    0.92Vested
    
    
    (115
    )
    
    
    1.23Forfeited
    
    
    (55
    )
    
    
    1.03Nonvested at September 30, 2009
    
    
    939
    
    
    
    0.96
  Stock Appreciation Rights:
    F-29




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Time Vesting
  Performance Vesting
    F-30




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
   Expected life (years)
    
    
    2.4Risk-free interest rate
    
    
    1.1
    %Volatility
    
    
    62
    %Expected dividend yield
    
    
    0
    %
  Warrants:
   F-31




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
   10. Commitments and Contingencies:
 Guarantees:
  Employment Agreements:
  th
 
    
    the Company awarded Mr. Young 0.2 million stock options in February 2008;
 
    
    the Company granted Mr. Young 0.6 million SARs in April 2009, the terms of which
are described above in Note 9;
 
    
    the Company provides Mr. Young with a car allowance; and
 
    
    the Company has agreed to make a payment equal to 15% of Mr. Youngs annual salary
towards his U.K.-based private pension fund.
  F-32




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
   Contractual Cash Obligations:
    F-33




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  Total Lease
    
    
    Total Other
    
    
    TotalFiscal
    
    Obligations
    
    
    Obligations
    
    
    Obligations2010
    
    $
    2,378
    
    
    $
    721
    
    
    $
    3,0992011
    
    
    1,472
    
    
    
    958
    
    
    
    2,4302012
    
    
    858
    
    
    
    718
    
    
    
    1,5762013
    
    
    300
    
    
    
    207
    
    
    
    5072014
    
    
    120
    
    
    
    
    
    
    
    120Thereafter
    
    
    69
    
    
    
    
    
    
    
    69$
    5,197
    
    
    $
    2,604
    
    
    $
    7,801
 Contingencies:
     F-34




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  11. Profit Sharing Plan:
  12. Selected Quarterly Financial Data (Unaudited):
  2009 Quarter Ended
    
    December 31,
    
    
    March 31,
    
    
    June 30,
    
    
    September 30,Total revenues
    
    $
    61,528
    
    
    $
    55,334
    
    
    $
    63,103
    
    
    $
    69,845Gross profit
    
    $
    18,813
    
    
    $
    17,166
    
    
    $
    19,173
    
    
    $
    21,196Net income from continuing operations
    
    $
    2,467
    
    
    $
    2,144
    
    
    $
    2,388
    
    
    $
    2,937Discontinued Operations
    
    $
    
    
    
    $
    367
    
    
    $
    
    
    
    $
    Net income
    
    $
    2,467
    
    
    $
    2,511
    
    
    $
    2,388
    
    
    $
    2,937Basic and diluted income per share
of common stock from:Continuing operations
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.07Discontinued operations
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    Net income per share
    
    $
    0.05
    
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.07
  F-35




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 2008 Quarter Ended
    
    December 31,
    
    
    March 31,
    
    
    June 30,
    
    
    September 30,Total revenues
    
    $
    74,770
    
    
    $
    73,815
    
    
    $
    75,024
    
    
    $
    74,968Gross profit
    
    $
    22,423
    
    
    $
    21,931
    
    
    $
    23,120
    
    
    $
    22,911Net income
    
    $
    1,678
    
    
    $
    1,764
    
    
    $
    2,453
    
    
    $
    2,891Basic and diluted
income per share of
common stock from
continuing
operations
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.05
    
    
    $
    0.06
 13. Subsequent Events:
   F-36




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
(PARENT COMPANY ONLY)
 
 SCHEDULE I  CONDENSED FINANCIAL INFORMATION
 BALANCE SHEETS  (In thousands, except per share data)
 September 30,2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    36Prepaid expenses and other assets
    
    
    69Total current assets
    
    
    105Investment in and advances to subsidiaries
    
    
    150,757Goodwill
    
    
    2,300Total assets
    
    $
    153,162LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    71Accrued expenses
    
    
    421Total liabilities
    
    
    492Commitments and contingenciesShareholders equity:Preferred stock, $.01 par value; authorized
10,000 shares,
issued and outstanding   none
    
    
    Common stock, $.01 par value; authorized 80,000
shares, issued 45,571
    
    
    456Additional paid-in capital
    
    
    241,018Accumulated other comprehensive income
    
    
    1,819Accumulated deficit
    
    
    (88,329
    )154,964Less cost of treasury stock (585 shares)
    
    
    (2,294
    )Total shareholders equity
    
    
    152,670Total liabilities and shareholders equity
    
    $
    153,162
   S-1




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
(PARENT COMPANY ONLY)
SCHEDULE I  CONDENSED FINANCIAL INFORMATION
STATEMENTS OF OPERATIONS  (In thousands)
 Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007Revenue
    
    $
    
    
    
    $
    Expenses:Selling, general and administrative expenses
    
    
    2,399
    
    
    
    4,257Total expenses
    
    
    2,399
    
    
    
    4,257Equity in income of subsidiaries
    
    
    7,478
    
    
    
    4,053Interest income
    
    
    3,762
    
    
    
    3,765Other (expense) income
    
    
    (47
    )
    
    
    65Income before income taxes and discontinued
operations
    
    
    8,794
    
    
    
    3,626Provision for income taxes
    
    
    8
    
    
    
    10Income before discontinued operations
    
    
    8,786
    
    
    
    3,616Discontinued operations:Income from discontinued operations, net of taxes
    
    
    
    
    
    
    6,266Gain on disposal of subsidiaries, net of taxes
    
    
    
    
    
    
    56,471
    
    
    
    62,737Net income
    
    $
    8,786
    
    
    $
    66,353
   S-2




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##### Table of Contents



SCHEDULE I
 ALLIED HEALTHCARE INTERNATIONAL INC.
(PARENT COMPANY ONLY)
SCHEDULE I  CONDENSED FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS  (In thousands)
 Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    8,786
    
    
    $
    66,353Adjustments to reconcile net income to net
cash provided by (used in) operating activities:Income from discontinued operations
    
    
    
    
    
    
    (6,266
    )Gain on disposal of subsidiaries
    
    
    
    
    
    
    (56,471
    )Equity interest in net income of subsidiaries
    
    
    (7,478
    )
    
    
    (4,053
    )Depreciation and amortization
    
    
    1
    
    
    
    3Issuance and amortization of warrants
    
    
    
    
    
    
    499Stock based compensation
    
    
    812
    
    
    
    764Forgiveness of intercompany debt
    
    
    
    
    
    
    (125
    )Changes in operating assets and liabilities, excluding
the effect of businesses acquired and sold:Increase in receivables from subsidiaries
    
    
    (895
    )
    
    
    (1,852
    )Decrease in prepaid expenses and other assets
    
    
    39
    
    
    
    120Increase (decrease) in accounts payable and other liabilities
    
    
    (1,237
    )
    
    
    1,018Net cash provided by (used in) operating activities
    
    
    28
    
    
    
    (10
    )Increase (decrease) in cash
    
    
    28
    
    
    
    (10
    )Cash and cash equivalents, beginning of period
    
    
    8
    
    
    
    18Cash and cash equivalents, end of period
    
    $
    36
    
    
    $
    8
   S-3




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
(PARENT COMPANY ONLY)
SCHEDULE I  CONDENSED FINANCIAL INFORMATION
NOTE TO CONDENSED FINANCIAL INFORMATION
 Basis of Presentation:
     S-4




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ALLIED HEALTHCARE INTERNATIONAL INC.  (In thousands)
 
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EBalance at
    
    
    Additions Charged to
    
    
    
    
    
    
    Balance atBeginning
    
    
    Cost and
    
    
    Other
    
    
    
    
    
    
    EndDescription
    
    of Period
    
    
    Expenses
    
    
    Accounts
    
    
    Deductions
    
    
    of PeriodAllowance for
Doubtful Accounts:Year ended
September 30, 2009
    
    $
    823
    
    
    $
    360
    
    
    $
    (93
    )(B)
    
    $
    251
    (A)
    
    $
    839Year ended
September 30, 2008
    
    $
    1,570
    
    
    $
    (167
    )
    
    $
    (163
    )(B)
    
    $
    417
    (A)
    
    $
    823Year ended
September 30, 2007
    
    $
    1,703
    
    
    $
    222
    
    
    $
    168
    (B)
    
    $
    523
    (A)
    
    $
    1,570
 (A)
    
    Doubtful accounts written off, net of recoveries.(B)
    
    Adjustments arising from translation of foreign financial statements to U.S. dollars.  S-5