##### 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, 2010
 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 
or Organization)
    
    
    
    (I.R.S. Employer Identification Number)245 Park Avenue 
New York, New York
    
    10167
    
    (212) 750-0064(Address of Principal Executive Offices)
    
    (Zip Code)
    
    (Registrants telephone number,
including area code)
  Title of Each Class
    
    
    
    Name of Each Exchange on Which RegisteredCommon Stock, $.01 par value
    
    
    
    The NASDAQ Stock Market LLC
  
  
  o þ
 Yes o No þ
 þ o
 o o
 þ
  Large accelerated filer o   
    Accelerated filer þ
    Non-accelerated filer o
    Smaller reporting company o(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, 2010
 TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    2Item 1A. Risk Factors
    
    
    18Item 1B. Unresolved Staff Comments
    
    
    29Item 2. Properties
    
    
    29Item 3. Legal Proceedings
    
    
    29Item 4. [Removed and Reserved]
    
    
    30PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    30Item 6. Selected Financial Data
    
    
    32Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    34Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    50Item 8. Financial Statements and Supplementary Data
    
    
    51Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    51Item 9A. Controls and Procedures
    
    
    51Item 9B. Other Information
    
    
    52PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    53Item 11. Executive Compensation
    
    
    60Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    82Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    85Item 14. Principal Accountant Fees and Services
    
    
    87PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    88Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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FORWARD-LOOKING STATEMENTS
    
    
    general economic and market conditions;
 
    
    the effect of the recent change in the U.K. government and the impact of proposed
changes in recent policy making related to health and social care that may reduce
revenue and profitability;
 
    
    the impact of the recent HM Treasury Comprehensive Spending Review setting out the
U.K. governments plans to reduce spending;
 
    
    the introduction by the U.K. government of individualized budgets and direct
payments for service users (the personalization agenda), which could lead our
hospital, healthcare facility and other customers to bypass our services and which
might decrease our revenues and margins;
 
    
    our ability to continue to recruit and retain flexible healthcare staff;
 
    
    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;
 
    
    the effect of existing or future governmental regulation in relation to employment
and agency workers rights and benefits, including changes to National Insurance rates
and pension provisions;




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
    
    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
     - 2 -




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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
   
    
    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. 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.
   - 3 -




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
    
    an aging population;
 
    
    shift from residential care services to homecare services;
 
    
    the potential outsourcing of more work by local governmental social
service departments and the NHS 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.
 .
   - 4 -




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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 and enhancing our brand
name, competitive benefits package and leadership position 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 patients 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 and in the
future from the General Practitioner Commissioning Consortia (which is an organization
intended to replace the NHS Primary Care Trusts), especially services for individuals
requiring continuing healthcare at home, and (3) developing our business and marketing
strategy 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.
  - 5 -




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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 market penetration into specialist service lines. We plan to
continue to continue the expansion of 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.
 
    
    Continue our policy of ensuring that all of our workers meet our
compliance standards before being placed to serve our customer needs.
  Our Operations
     - 6 -




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Recruitment of Flexible Staff
    Training and Retention of Flexible Staff
  Quality Assurance
   - 7 -




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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.
 
    
    The Health and Social Care Board. In Northern Ireland, the Health and Social Care
Board retains us to provide health and social care services.
 
    
    The Health Service Executive. In the Republic of Ireland, the Health Service
Executive retains us to provide health and social care services.
 
    
    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.
  - 8 -




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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
service 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 service
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.
 
    
    NHS Framework Agreement and Service Level Agreements. The NHS requires any
healthcare staffing company that provides temporary staff to certain NHS bodies, mainly
hospitals, to enter into their Framework Agreement. The Framework Agreement sets out
pay structures 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. However, some suppliers still supply to the NHS
outside of these agreements.
 Individual NHS Hospitals may select from the list of approved staffing companies
qualified under the Framework Agreement and enter into Service Level Agreements.
  Marketing Activities
   - 9 -




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Competition
     Payment for Staffing Services
   Trade Names
   - 10 -




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Employees
   Government Regulation
 General
  Healthcare Laws and Regulations
    Position in Great Britain Prior to October 2010
  - 11 -




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Current Position in Great Britain
    - 12 -




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Position in Northern Ireland
   Position in the Republic of Ireland
  - 13 -




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Compliance
 Healthcare Reform
 General
 HM Treasury Comprehensive Spending Review
 Governmental Healthcare and Social Care Initiatives
 The United Kingdom
   - 14 -




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Northern Ireland
 Republic of Ireland
  - 15 -




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Regulations Affecting Employment
 U.K. rules affecting our staff
     - 16 -




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Irish rules affecting our staff
    - 17 -




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Insurance
  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.
   - 18 -




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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, benefits and pension purposes
could result in increased costs.
   - 19 -




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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.
   - 20 -




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We are dependent on the proper functioning of our information systems.
   Our business is subject to certain risks inherent to international operations.
  
    
    because the revenues and expenses of our principal operations are denominated in
pounds sterling and euros but we report our financial results in U.S. dollars, our
financial results are affected by fluctuations in currency exchange rates that are
unrelated to our results of operations;
 
    
    varying laws relating to, among other things, employment and employment termination;
 
    
    changes in regulatory requirements; and
 
    
    potentially adverse tax consequences.
   - 21 -




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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.
   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.
   - 22 -




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Lower U.K. government spending arising from the Comprehensive Spending Review may result in lower
training support grants being awarded which may increase our training costs.
  Local governmental social service departments continue to outsource the majority of their homecare
service requirements.
  If NHS Primary Care Trusts (or, in the future, GP Consortia and NHS Commissioning Boards) do not
continue to use homecare as an alternative to residential or NHS Hospitals, our revenues may be
adversely affected.
  Demand for flexible staffing may fail to rise, remain at current levels or may decline for a
variety of reasons, including general economic conditions.
    - 23 -




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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.
     - 24 -




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NHS reforms may have a substantial negative impact upon us.
   Since the provision of flexible staff is exempt from VAT, we are largely unable to recover any VAT
that we incur, thereby increasing our costs of doing business.
   Significant legal actions could subject us to substantial uninsured liabilities.
   - 25 -




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Our insurance may not be adequate to protect us from claims for which we may become liable.
  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.
     - 26 -




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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.
     - 27 -




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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 certificate of incorporation authorizes our board of directors to issue up
to ten million shares of blank check preferred stock. Without shareholder
approval, the board of directors has the authority to attach special rights,
including voting and dividend rights, to these shares of preferred stock. With
these rights, preferred shareholders could make it more difficult for a third party
to acquire us.
 
    
    Our by-laws require shareholders to provide advance notice of any stockholder
nominations of directors or any proposal of new business to be considered at any
meeting of shareholders.
 
    
    We are subject to Section 912 of the New York Business Corporation Law, which,
with certain exceptions, prohibits business combinations, including mergers,
between a New York corporation and an interested stockholder, which is generally
defined as a stockholder who becomes a beneficial owner of 20% or more of a New
York corporations voting stock, for a five-year period following the date that the
shareholder became an interested shareholder.
  Our shareholder rights plan may make it more difficult for a third-party to acquire us.
   - 28 -




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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
   - 29 -




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Item 4. [Removed and Reserved].
 
 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, 2009
    
    $
    2.15
    
    
    $
    1.00First Quarter
    
    
    1.50
    
    
    
    .94Second Quarter
    
    
    2.48
    
    
    
    1.21Third Quarter
    
    
    2.90
    
    
    
    1.92Fourth QuarterYear Ended September 30, 2010First Quarter
    
    $
    3.40
    
    
    $
    2.27Second Quarter
    
    
    3.09
    
    
    
    2.40Third Quarter
    
    
    2.95
    
    
    
    2.22Fourth Quarter
    
    
    2.62
    
    
    
    1.86Year Ended September 30, 2010:First Quarter (through
December 9, 2010)
    
    $
    3.10
    
    
    $
    2.37
     - 30 -




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Equity Compensation Plan Information
  Recent Repurchases of Equity Securities
  ApproximateTotal Number of
    
    
    Dollar Value ofShares Purchased
    
    
    Shares that Mayas Part of Publicly
    
    
    Yet Be PurchasedTotal Number of
    
    
    Average
    
    
    Announced Plans
    
    
    Under the PlansShares Purchased
    
    
    Price Paid
    
    
    or Programs(1)
    
    
    or ProgramsPeriod
    
    (Thousands)
    
    
    Per Share
    
    
    (Thousands)
    
    
    (Millions)July 1, 2010  July 31, 2010
    
    
    609
    
    
    $
    2.34
    
    
    
    609
    
    
    $
    7.2August 1, 2010  August 31, 2010
    
    
    452
    
    
    $
    2.33
    
    
    
    452
    
    
    $
    6.2September 1, 2010  September 30, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    6.2Total
    
    
    1,061
    
    
    
    2.34
    
    
    
    1,061
    
    
    $
    6.2
 (1)
    
    In May 2010, we announced that our board of directors had approved a stock repurchase program under which we are authorized to repurchase, from
time to time in the open market or negotiated transactions, shares of our outstanding common stock in an aggregate amount up to $10 million. The
2010 program does not have a stated expiration date. Our Comparative Performance
     - 31 -




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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, 2005. 
 Item 6. Selected Financial Data
 10-K.
   - 32 -




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Year Ended September 30,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Financial Data:Total revenues
    
    $
    271,079
    
    
    $
    249,810
    
    
    $
    298,577
    
    
    $
    277,795
    
    
    $
    280,205Gross profit
    
    
    82,305
    
    
    
    76,348
    
    
    
    90,385
    
    
    
    83,956
    
    
    
    85,730Selling, general and administrative expenses
    
    
    68,846
    
    
    
    63,234
    
    
    
    77,655
    
    
    
    75,284
    (2)
    
    
    71,103Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,004
    (4)Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,038
    (5)Operating income (loss)
    
    
    13,459
    
    
    
    13,114
    
    
    
    12,730
    
    
    
    8,672
    
    
    
    (105,415
    )Interest and other income (expense), net
    
    
    331
    
    
    
    427
    
    
    
    393
    
    
    
    (3,273
    )(3)
    
    
    (2,698
    )Foreign exchange (loss) income
    
    
    (210
    )
    
    
    (197
    )
    
    
    (586
    )
    
    
    285
    
    
    
    73Provision for (benefit from) income taxes
    
    
    3,524
    
    
    
    3,408
    
    
    
    3,751
    
    
    
    2,068
    
    
    
    (1,887
    )Income (loss) from continuing operations
    
    
    10,056
    
    
    
    9,936
    
    
    
    8,786
    
    
    
    3,616
    
    
    
    (106,153
    )Income (loss) from discontinued operations, net of
taxes(1)
    
    
    
    
    
    
    367
    
    
    
    
    
    
    
    6,266
    
    
    
    (17,618
    )Gain on disposal of subsidiaries, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,471
    
    
    
    Net income (loss)
    
    
    10,056
    
    
    
    10,303
    
    
    
    8,786
    
    
    
    66,353
    
    
    
    (123,771
    )Less: Net income attributable to
noncontrolling interest
    
    
    (188
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) attributable to Allied Healthcare
International Inc.
    
    $
    9,868
    
    
    $
    10,303
    
    
    $
    8,786
    
    
    $
    66,353
    
    
    $
    (123,771
    )Basic earnings per share  attributable to Allied
Healthcare International Inc. common shareholders:Income from continuing operations
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.20
    
    
    $
    0.08
    
    
    $
    (2.36
    )Income from discontinued operations
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    1.40
    
    
    
    (0.39
    )Net income attributable to Allied Healthcare
International Inc common shareholders
    
    $
    0.22
    
    
    $
    0.23
    
    
    $
    0.20
    
    
    $
    1.48
    
    
    $
    (2.75
    )Diluted earnings per share  attributable to Allied
Healthcare International Inc. common shareholders:Income from continuing operations
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.19
    
    
    $
    0.08
    
    
    $
    (2.36
    )Income from discontinued operations
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    1.39
    
    
    
    (0.39
    )Net income attributable to Allied Healthcare
International Inc. common shareholders
    
    $
    0.22
    
    
    $
    0.23
    
    
    $
    0.19
    
    
    $
    1.47
    
    
    $
    (2.75
    )Weighted average number of common
shares outstanding:Basic
    
    
    44,796
    
    
    
    44,986
    
    
    
    44,986
    
    
    
    44,962
    
    
    
    44,930Diluted
    
    
    45,009
    
    
    
    45,011
    
    
    
    45,078
    
    
    
    45,147
    
    
    
    44,930
 September 30,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Balance Sheet Data:Working capital
    
    $
    44,609
    
    
    $
    42,325
    
    
    $
    31,550
    
    
    $
    20,380
    
    
    $
    (1,165
    )Accounts receivable, net
    
    
    20,092
    
    
    
    19,594
    
    
    
    17,774
    
    
    
    21,490
    
    
    
    26,813Goodwill
    
    
    102,945
    
    
    
    95,649
    
    
    
    109,292
    
    
    
    122,843
    
    
    
    112,538Total assets
    
    
    190,381
    
    
    
    173,067
    
    
    
    183,262
    
    
    
    252,779
    
    
    
    195,683Total debt and capital leases
    
    
    1,003
    
    
    
    
    
    
    
    
    
    
    
    54,795
    
    
    
    71,159Total shareholders equity
    
    
    153,390
    
    
    
    147,273
    
    
    
    152,670
    
    
    
    158,759
    
    
    
    86,383
 (1)
    
    See Note 3 of Notes to Consolidated Financial Statements for our fiscal year ended September
30, 2010 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.  - 33 -




---



##### Table of Contents



(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. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 General
     - 34 -




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- 35 -




---



##### Table of Contents



- 36 -




---



##### Table of Contents



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.
  - 37 -




---



##### Table of Contents



Goodwill and Other Intangible Assets
  Income Taxes
   - 38 -




---



##### Table of Contents



Contingencies
  Revenue Recognition
   Business Combinations
  Results of Operations
 Overview
   - 39 -




---



##### Table of Contents



Year Ended September 30, 2010 vs. Year Ended September 30, 2009
   - 40 -




---



##### Table of Contents



Year Ended September 30,
    
    
    Year Ended September 30,%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    %2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Change(Amounts in thousands)
    
    Revenue
    
    
    Gross ProfitHomecare
    
    $
    231,718
    
    
    $
    203,885
    
    
    
    13.7
    %
    
    $
    71,314
    
    
    
    30.8
    %
    
    $
    63,176
    
    
    
    31.0
    %
    
    
    12.9
    %Nursing Homes
    
    
    18,469
    
    
    
    25,863
    
    
    
    -28.6
    %
    
    
    5,971
    
    
    
    32.3
    %
    
    
    8,097
    
    
    
    31.3
    %
    
    
    -26.3
    %Hospitals
    
    
    19,571
    
    
    
    20,062
    
    
    
    -2.4
    %
    
    
    4,618
    
    
    
    23.6
    %
    
    
    5,075
    
    
    
    25.3
    %
    
    
    -9.0
    %Total, at constant exchange rates
    
    
    269,758
    
    
    
    249,810
    
    
    
    8.0
    %
    
    
    81,903
    
    
    
    30.4
    %
    
    
    76,348
    
    
    
    30.6
    %
    
    
    7.3
    %Effect of foreign exchange
    
    
    1,321
    
    
    
    
    
    
    
    0.5
    %
    
    
    402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
    %Total, as reported
    
    $
    271,079
    
    
    $
    249,810
    
    
    
    8.5
    %
    
    $
    82,305
    
    
    
    
    
    
    $
    76,348
    
    
    
    
    
    
    
    7.8
    %
 SG&ASG&A, at constant exchange rates
& excluding acquisition costs
    
    $
    67,776
    
    
    $
    63,234
    
    
    
    7.2
    %Acquisition costs, at constant
exchange rates
    
    
    752
    
    
    
    
    
    
    
    1.2
    %SG&A, at constant exchange rates
    
    
    68,528
    
    
    
    63,234
    
    
    
    8.4
    %Effect of foreign exchange
    
    
    318
    
    
    
    
    
    
    
    0.5
    %Total SG&A, as reported
    
    $
    68,846
    
    
    $
    63,234
    
    
    
    8.9
    %
 Operating IncomeOperating income, at constant
exchange rates & excluding
acquisition cost
    
    $
    14,127
    
    
    $
    13,114
    
    
    
    7.7
    %Acquisition costs, at constant
exchange rates
    
    
    (752
    )
    
    
    
    
    
    
    -5.7
    %Operating income, at constant
exchange rates
    
    
    13,375
    
    
    
    13,114
    
    
    
    2.0
    %Effect of foreign exchange
    
    
    84
    
    
    
    
    
    
    
    0.6
    %Operating income, as reported
    
    $
    13,459
    
    
    $
    13,114
    
    
    
    2.6
    %
 Net Income Attributable to AlliedBasic
    
    
    
    
    
    
    Basicand
    
    
    
    
    
    
    andDiluted
    
    
    
    
    
    
    DilutedEPS
    
    
    
    
    
    
    EPSIncome from continuing
operations attributable to
Allied, excluding acquisition
costs
    
    $
    10,624
    
    
    $
    0.24
    
    
    $
    9,936
    
    
    $
    0.22Acquisition costs
    
    
    (756
    )
    
    
    -0.02
    
    
    
    
    
    
    
    Net income attributable to Allied
    
    $
    9,868
    
    
    $
    0.22
    
    
    $
    9,936
    
    
    $
    0.22
   - 41 -




---



##### Table of Contents



Revenues
  Gross Profit
  Selling, General and Administrative Expenses
   - 42 -




---



##### Table of Contents



Interest Income
  Foreign exchange loss
  Provision for Income Taxes
  Income From Continuing Operations
  Discontinued Operations
   Net Income Attributable to Noncontrolling Interest
   - 43 -




---



##### Table of Contents



Net Income Attributable to Allied Healthcare International Inc.
  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
   - 44 -




---



##### Table of Contents



Gross Profit
  Selling, General and Administrative Expenses
  Interest Income
  Provision for Income Taxes
   - 45 -




---



##### Table of Contents



Discontinued Operations
   Net Income
  Liquidity and Capital Resources
 General
   Accounts Receivable
 ,
   - 46 -




---



##### Table of Contents



0-30
    
    
    31-60
    
    
    61-90
    
    
    91-120
    
    
    121 Days
    
    
    AR AtAt September 30, 2010
    
    Days
    
    
    Days
    
    
    Days
    
    
    Days
    
    
    And Over
    
    
    9/30/2010SHSD
    
    $
    4,952
    
    
    $
    602
    
    
    $
    140
    
    
    $
    60
    
    
    $
    121
    
    
    $
    5,875NHS
    
    
    9,540
    
    
    
    1,425
    
    
    
    318
    
    
    
    162
    
    
    
    325
    
    
    
    11,770Commercial Payors
    
    
    1,674
    
    
    
    376
    
    
    
    63
    
    
    
    24
    
    
    
    54
    
    
    
    2,191Private Payors
    
    
    1,860
    
    
    
    142
    
    
    
    91
    
    
    
    68
    
    
    
    186
    
    
    
    2,347Gross AR at 9/30/10
    
    $
    18,026
    
    
    $
    2,545
    
    
    $
    612
    
    
    $
    314
    
    
    $
    686
    
    
    $
    22,183Less: Unapplied Cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,120
    )Less: Surcharges(A)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (239
    )Less: Allowance For Doubtful
Accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (732
    )Accounts Receivable, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,092
 0-30
    
    
    31-60
    
    
    61-90
    
    
    91-120
    
    
    121 Days
    
    
    AR AtAt September 30, 2009
    
    Days
    
    
    Days
    
    
    Days
    
    
    Days
    
    
    And Over
    
    
    9/30/2009SHSD
    
    $
    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
 (A)
    
    Surcharges represent interest charges to customers on overdue accounts. The
surcharges are recognized in income only upon receipt of payment.   - 47 -




---



##### Table of Contents



Debt and Capital Leases
  Financial Instrument
  Commitments
 Employment Agreements
  Leases
  Debt
   - 48 -




---



##### Table of Contents



Contractual Cash Obligations
  TotalOperating
    
    
    Total Capital
    
    
    
    
    
    
    Total OtherFiscal
    
    Leases
    
    
    Leases
    
    
    Total Debt
    
    
    Obligations
    
    
    Total Obligations2011
    
    $
    2,732
    
    
    $
    377
    
    
    $
    294
    
    
    $
    1,102
    
    
    $
    4,5052012
    
    
    1,591
    
    
    
    278
    
    
    
    40
    
    
    
    1,021
    
    
    
    2,9302013
    
    
    734
    
    
    
    128
    
    
    
    
    
    
    
    206
    
    
    
    1,0682014
    
    
    267
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    2712015
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136Thereafter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total:
    
    $
    5,460
    
    
    $
    787
    
    
    $
    334
    
    
    $
    2,329
    
    
    $
    8,910Less: Amounts representing interest
    
    
    
    
    
    
    (118
    )Net present value
of capital lease
obligation
    
    
    
    
    
    
    669Less current portion
    
    
    
    
    
    
    320Long-term lease
obligations
    
    
    
    
    
    $
    349
   - 49 -




---



##### Table of Contents



Miscellaneous
 Treasury Shares
  Litigation
  Contingencies
  Impact of Recent Accounting Standards
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 Foreign Currency Exchange
   - 50 -




---



##### Table of Contents



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.
    - 51 -




---



##### Table of Contents



Report of Management on Internal Control over Financial Reporting.
   Internal ControlIntegrated Framework
  Changes in Internal Control Over Financial Reporting.
  
 Item 9B. Other Information.
   - 52 -




---



##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
 Our Directors and Officers
  Name
    
    Age
    
    Positions with our CompanyAlexander (Sandy) Young
    
    
    56
    
    
    Chief Executive Officer and DirectorPaul Weston
    
    
    46
    
    
    Chief Financial OfficerLeslie J. Levinson
    
    
    55
    
    
    SecretarySophia Corona
    
    
    47
    
    
    DirectorMark Hanley
    
    
    49
    
    
    DirectorWayne Palladino
    
    
    52
    
    
    DirectorJeffrey S. Peris
    
    
    64
    
    
    Non-Executive Chairman of the BoardRaymond J. Playford
    
    
    50
    
    
    DirectorAnn Thornburg
    
    
    61
    
    
    Director
  Alexander (Sandy) Young
 Paul Weston
  - 53 -




---



##### Table of Contents



Leslie J. Levinson
 Sophia Corona
 Mark Hanley
  - 54 -




---



##### Table of Contents



Wayne Palladino
 Jeffrey S. Peris
 Raymond J. Playford
 Ann Thornburg
  - 55 -




---



##### Table of Contents



Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Conduct
         - 56 -




---



##### Table of Contents



Board Committees
  Audit Committee
  Compensation Committee
 Nominating and Corporate Governance Committee
  - 57 -




---



##### Table of Contents



Strategic Investment Committee
  Director Nominations
    - 58 -




---



##### Table of Contents



th th
    - 59 -




---



##### 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. The Compensation Committee
    - 60 -




---



##### Table of Contents



Policy
   Base Salary
 Bonus
  - 61 -




---



##### Table of Contents



Long-Term Incentives
    - 62 -




---



##### Table of Contents



- 63 -




---



##### Table of Contents



Process
 .
     Compensation of our Named Executive Officers
   - 64 -




---



##### Table of Contents



Base Salary
 Bonus
  Long-Term Incentives  2008 Stock Option Grants
   - 65 -




---



##### Table of Contents




 
 
 
  Long-Term Incentives2009 Stock Option Grants
  
 
  - 66 -




---



##### Table of Contents




 
  
 
 
  Long-Term Incentives2010 Stock Option Grants
  
 
  - 67 -




---



##### Table of Contents




 
  
 
 
 Long-Term IncentivesStock Appreciation Rights
 Personal Benefits and Perquisites ,
  - 68 -




---



##### Table of Contents



Potential Payments upon Termination or Change-in- Control
     Tax and Accounting Implications of Executive Compensation
     - 69 -




---



##### Table of Contents



Stock Ownership Guidelines
  Compensation Committee Report
    
  - 70 -




---



##### 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,
    
    
    2010
    
    
    $
    339,784
    
    
    $
    49,115
    
    
    
    
    
    
    $
    69,678
    (5)(6)
    
    $
    458,577Chief Executive Officer(1)
    
    
    2009
    
    
    $
    333,167
    
    
    $
    134,244
    
    
    
    
    (4)
    
    $
    68,350
    (5)(6)
    
    $
    535,7612008
    
    
    $
    298,545
    
    
    $
    128,252
    
    
    
    
    
    
    $
    61,842
    (5)(6)
    
    $
    488,639Paul Weston,
    
    
    2010
    
    
    $
    250,794
    
    
    $
    37,733
    
    
    $
    100,424
    
    
    $
    51,652
    (6)(7)
    
    $
    440,603Chief Financial Officer(2)
    
    
    2009
    
    
    $
    245,909
    
    
    $
    86,700
    
    
    $
    88,016
    
    
    $
    47,664
    (6)(7)
    
    $
    468,2892008
    
    
    $
    127,429
    
    
    $
    86,816
    
    
    $
    82,616
    
    
    $
    26,514
    (6)(7)
    
    $
    323,375
 (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 represent the fair value of grants, on the date of grant,
calculated in accordance with the rules of the Securities and Exchange Commission and the
accounting guidance for option awards. They do not reflect compensation actually received by
the named executive officers. See Note 9 of Notes to Consolidated Financial Statements for
our fiscal year ended September 30, 2010 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.(4)
    
    Amount does not reflect $0.4 million grant date value of the 200,000 options awarded in 2008
to Mr. Young, the terms of which were finalized in 2009, and the 566,135 stock appreciation
rights awarded in 2009 to Mr. Young as we estimated that none of the performance measures will
be achieved. Because the terms of the 200,000 options were finalized in April 2009, the grant
date value of the options was calculated as of such date.(5)
    
    In fiscal 2010, represents payment for a car allowance of $18,710 and payments of $50,968
toward Mr. Youngs U.K.-based private pension fund. 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.  - 71 -




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##### Table of Contents



(6)
    
    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.(7)
    
    In fiscal 2010, represents payment for a car allowance of $14,033 and payments of $37,619
towards Mr. Westons U.K.- based private pension fund. 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(2)Paul Weston
    
    
    5/20/10
    
    
    
    32,000
    (1)
    
    
    (1)
    
    
    
    80,000
    (1)
    
    $
    2.59
    
    
    $
    100,424
 (1)
    
    Of the 80,000 shares underlying the options granted to Mr. Weston in fiscal 2010, 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, 2011 with the
Securities and Exchange Commission, 25% of the Performance Based Shares will vest on May 20, 2012
and 50% of the Performance Based Shares will vest on May 20, 2013. 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: 
 
 
 
  - 72 -




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##### Table of Contents




 
 
 (2)
    
    The amounts in this column represent the fair value of grants, on the date of grant, calculated
in accordance with the rules of the Securities and Exchange Commission and the accounting guidance
for option awards. They do not reflect compensation actually received by the named executive
officers. See Note 9 of Notes to Consolidated Financial Statements for our fiscal year ended
September 30, 2010 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. 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(#)
    
    
    (#)
    
    
    Options
    
    
    Price
    
    
    Option ExpirationName
    
    Exercisable
    
    
    Unexercisable
    
    
    (#)
    
    
    ($)
    
    
    DateAlexander (Sandy) Young
    
    
    
    
    
    
    
    
    
    
    200,000
    (1)
    
    $
    2.11
    
    
    
    2/6/2015
    (3)
    
    
    
    
    
    
    
    566,135
    (2)
    
    
    1.51Paul Weston
    
    
    12,000
    
    
    
    
    
    
    
    
    
    
    $
    6.20
    
    
    
    3/23/201510,000
    
    
    
    
    
    
    
    
    
    
    
    5.65
    
    
    
    9/30/201560,000
    
    
    
    
    
    
    
    
    
    
    
    1.92
    
    
    
    10/16/201640,000
    (4)
    
    
    40,000
    (4)
    
    
    
    
    
    
    2.01
    
    
    
    5/14/2018
    
    
    
    32,000
    (5)
    
    
    48,000
    (5)
    
    
    2.12
    
    
    
    6/17/2019
    
    
    
    32,000
    (6)
    
    
    48,000
    (6)
    
    
    2.59
    
    
    
    5/20/2020
 (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 $4.7 million at the closing exchange rate at September
30, 2010).  - 73 -




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##### Table of Contents



(3)
    
    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.(4)
    
    In May 2008, Mr. Weston was granted 80,000 options. The terms of these options provide that
25% vest on the date that our company files its Annual Report on Form 10-K for the fiscal year
ended September 30, 2009 with the Securities and Exchange Commission, 25% 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: 
 
 
 
  (5)
    
    In June 2009, Mr. Weston was granted 80,000 options. Of these options, 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 the fiscal year ended 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: 
 
 
 
  
 
  - 74 -




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##### Table of Contents




  (6)
    
    The terms of these options are described in the footnotes to the Grant of Plan Based Awards
table above. Exercise of Options During Fiscal 2010
  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.
    - 75 -




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##### Table of Contents



Time Vesting
  Performance Vesting
     - 76 -




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##### Table of Contents



Severance payment in lieu of salary
    
    $
    345,370Severance payment in lieu of health insurance
    
    $
    4,150Severance payment in lieu of car allowance
    
    $
    18,970Severance payment in lieu of payment towards
U.K.-based private pension fund
    
    $
    51,800Total:
    
    $
    420,290
    (1)
 (1)
    
    Represents a single payment.   - 77 -




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##### Table of Contents



Chief Financial Officer
  Severance payment in lieu of salary
    
    $
    254,915Severance payment in lieu of health insurance
    
    $
    2,650Severance payment in lieu of car allowance
    
    $
    14,230Severance payment in lieu of payment towards
U.K.-based private pension fund
    
    $
    38,240Total:
    
    $
    310,035
    (1)
 (1)
    
    Represents a single payment.  Risk Considerations in Our Compensation Program
     - 78 -




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##### Table of Contents



Director Compensation
  Director Compensation Table for Fiscal 2010
 Fees Earnedor Paid in
    
    
    OptionCash
    
    
    Awards
    
    
    TotalName (1)(2)
    
    ($)
    
    
    ($)(6)(7)
    
    
    ($)Sophia Corona
    
    $
    50,000
    
    
    $
    86,415
    
    
    $
    136,415G. Richard Green(3)
    
    $
    35,000
    
    
    $
    74,070
    
    
    $
    109,070Mark Hanley
    
    $
    35,000
    
    
    $
    74,070
    
    
    $
    109,070Wayne Palladino
    
    $
    45,000
    
    
    $
    86,415
    
    
    $
    131,415Jeffrey S. Peris
    
    $
    100,000
    
    
    $
    98,760
    
    
    $
    198,760Raymond J. Playford(4)
    
    $
    3,333
    (5)
    
    $
    
    
    
    $
    3,333Ann Thornburg
    
    $
    50,000
    
    
    $
    92,588
    
    
    $
    142,588
  - 79 -




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##### Table of Contents



(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 2010 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 2010.(3)
    
    Mr. Green resigned from our board of directors effective as of August 21, 2010.(4)
    
    Professor Playford joined our board of directors on August 21, 2010.(5)
    
    Does not include $15,566 in fees that Professor Playford received for serving as medical
advisor to our board of directors from April 2010 until he joined our board in August 2010.(6)
    
    The amounts in this column represent the fair value of grants, on the date of grant,
calculated in accordance with the rules of the Securities and Exchange Commission and the
accounting guidance for option awards. They do not reflect compensation actually received by the
directors. See Note 9 of Notes to Consolidated Financial Statements for our fiscal year ended
September 30, 2010 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.(7)
    
    As of September 30, 2010, our directors had the option awards outstanding set forth below:         - 80 -




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##### Table of Contents



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.
   Equity-Based Compensation
   - 81 -




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##### Table of Contents



Compensation Committee Interlocks and Insider Participation
 .
 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
   - 82 -




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##### Table of Contents



Number ofShares of
    
    
    Percentage ofCommon Stock
    
    
    Common StockBeneficially
    
    
    BeneficiallyName
    
    Owned
    
    
    Owned(1)Alexander (Sandy) Young
    
    
    116,839
    (2)
    
    
    *Paul Weston
    
    
    130,000
    (3)
    
    
    *Sophia Corona
    
    
    177,500
    (4)
    
    
    *Mark Hanley
    
    
    45,000
    (5)
    
    
    *Wayne Palladino
    
    
    204,664
    (6)
    
    
    *Jeffrey S. Peris
    
    
    243,500
    (7)
    
    
    *Raymond J. Playford
    
    
    3,162
    
    
    
    *Ann Thornburg
    
    
    218,750
    (8)
    
    
    *Rutabaga Capital Management
    
    
    3,985,347
    (9)
    
    
    9.1Dimensional Fund Advisors LP
    
    
    3,642,953
    (10)
    
    
    8.4Austin W. Marxe and David
M. Greenhouse
    
    
    2,929,718
    (11)
    
    
    6.7Keane Capital Management, Inc.
    
    
    2,614,581
    (12)
    
    
    6.0All current executive
officers and directors as a
group (8 persons)
    
    
    1,139,415
    (13)
    
    
    2.6
 *
    
    Less than 1%.(1)
    
    As of the Determination Date, there were 43,571,251 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.(2)
    
    Consists of 10,000 shares held by Mr. Young and 106,839 shares held
by Mr. Youngs wife. 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 130,000 shares subject to options held by Mr. Weston that
are exercisable within 60 days of the Determination Date. Does not
include 192,000 shares subject to options held by Mr. Weston that are
not exercisable within 60 days of the Determination Date.(4)
    
    Consists of 177,500 shares subject to options held by Ms. Corona that
are exercisable within 60 days of the Determination Date. Does not
include 112,500 shares subject to options held by Ms. Corona that are
not exercisable within 60 days of the Determination Date.(5)
    
    Consists of 45,000 shares subject to options held by Mr. Hanley that
are exercisable within 60 days of the Determination Date. Does not
include 75,000 shares subject to options held by Mr. Hanley that are
not exercisable within 60 days of the Determination Date.  - 83 -




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##### Table of Contents



(6)
    
    Consists of 5,914 shares of common stock held by Mr. Palladino, 250
shares held jointly by Mr. Palladino and his wife and 198,500 shares
subject to options that are exercisable within 60 days of the
Determination Date. Does not include an additional 112,500 shares
subject to options held by Mr. Palladino that are not exercisable
within 60 days of the Determination Date.(7)
    
    Consists of 2,000 shares of common stock held by Marjon Repjel, LP
and 241,500 shares subject to options held by Dr. Peris that are
exercisable within 60 days of the Determination Date. Dr. Peris has
sole voting and sole dispositive power over the shares of common
stock held by Marjon Repjel, LP. Does not include an additional
137,500 shares subject to options held by Dr. Peris that are not
exercisable within 60 days of the Determination Date.(8)
    
    Consists of 218,750 shares subject to options held by Ms. Thornburg
that are exercisable within 60 days of the Determination Date. Does
not include 131,250 shares subject to options held by Ms. Thornburg
that are not exercisable within 60 days of the Determination Date.(9)
    
    The number of shares owned is given as of February 11, 2010, the date
of filing of the Schedule 13G amendment by Rutabaga Capital
Management (Rutabaga) with the Securities and Exchange Commission.
According to the Schedule 13G amendment, Rutabaga has sole voting
power with respect to 2,422,020 shares of our common stock, shared
voting power with respect to 1,563,327 shares of our common stock,
sole dispositive power with respect to 3,985,347 shares of our common
stock and shared dispositive power with respect to no shares of our
common stock. Rutabagas address is 64 Broad Street, 3rd Floor,
Boston, Massachusetts 02109.(10)
    
    The number of shares owned is given as of February 8, 2010, the date
of filing of the Schedule 13G amendment by Dimensional Fund Advisors
LP (Dimensional) with the Securities and Exchange Commission.
According to the Schedule 13G amendment, Dimensional has sole voting
power with respect to 3,561,850 shares of our common stock, shared
voting power with respect to no shares of our common stock, sole
dispositive power with respect to 3,642,953 shares of our common
stock and shared dispositive power with respect to no shares of our
common stock. Dimensionals address is Palisades West, Building One,
6300 Bee Cave Road, Austin, Texas 78746.(11)
    
    The number of shares owned is given as of February 16, 2010, the date
of the joint filing on Schedule 13G by Mr. Marxe and Mr. Greenhouse
with the Securities and Exchange Commission. According to the
Schedule 13G, Messrs. Marxe and Greenhouse share voting and
investment power over 351,231 shares of our common stock owned by
Special Situations Cayman Fund, L.P. and 2,578,487 shares of our
common stock owned by Special Situations Fund III QP, L.P. Messrs.
Marxes and Greenhouses address is 527 Madison Avenue, Suite 2600,
New York, NY 10022.(12)
    
    The number of shares owned is given as of February 17, 2009, the date
of filing of the Schedule 13G amendment by Keane Capital Management,
Inc. (Keane) with the Securities and Exchange Commission.
According to the Schedule 13G amendment, Keane has sole voting power
with respect to 2,614,581 shares of our common stock, shared voting
power with respect to no shares of our common stock, sole dispositive
power with respect to 2,614,581 shares of our common stock and share
dispositive power with respect to no shares of our common stock.
Keanes address is 3440 Torringdon Way, Suite 308, Charlotte, North
Carolina 28277.(13)
    
    Includes an aggregate of 1,011,250 shares subject to options held by
our executive officers and directors that are exercisable within 60
days of the Determination Date, 106,839 shares held by Mr. Youngs
wife, 250 shares held jointly by Mr. Palladino and his wife and 2,000
shares held by Marjon Repjel, LP, an entity over which Dr. Peris has
sole voting and dispositive power.  - 84 -




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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
    
    
    3,588,334
    
    
    $
    2.34
    
    
    
    2,134,486Equity compensation
plans not approved
by shareholders
    
    
    566,135
    (1)
    
    $
    1.51
    
    
    
    Total
    
    
    4,154,469
    
    
    $
    2.23
    
    
    
    2,134,486
 (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
   - 85 -




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##### Table of Contents



Review of Related Party Transactions
    Director Independence
   - 86 -




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##### Table of Contents



Item 14. Principal Accountant Fees and Services.
 Audit and Other Fees During Fiscal 2010 and Fiscal 2009
  Fiscal 2010
    
    
    Fiscal 2009Audit fees
    
    $
    647,000
    
    
    $
    764,000Audit-related fees
    
    
    
    
    
    
    Tax fees
    
    
    
    
    
    
    All other fees
    
    
    
    
    
    
    
   - 87 -




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##### Table of Contents



Pre-Approval Policy
   
 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, 2010 and 2009
    
    
    F-3Consolidated Statements of Operations  for the years ended
September 30, 2010, 2009 and 2008
    
    
    F-4Consolidated Statements of Changes in Shareholders Equity  for
the years ended September 30, 2010, 2009 and 2008
    
    
    F-5Consolidated Statements of Cash Flows  for the years ended
September 30, 2010, 2009 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7(2) Consolidated Financial Statement Schedules:Schedule II  Valuation and Qualifying Accounts
    
    
    S-1Schedules 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:
  - 88 -




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##### Table of Contents



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).3.4
    
    
    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).
  - 89 -




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##### Table of Contents



ExhibitNumber
    
    Title3.8
    
    
    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).3.12
    
    
    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
    
    
    Amended and Restated By-laws of Allied Healthcare International Inc.
(incorporated herein by reference to Exhibit 3.1 of our Current Report
on Form 8-K filed with the Securities and Exchange Commission on
December 8, 2010; 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).4.3
    
    
    Amendment No. 1 to Rights Agreement, dated as of March 10, 2010,
entered into by 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 March 11, 2010; File No.
001-11570).
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ExhibitNumber
    
    Title4.4
    
    
    Amendment No. 2 to Rights Agreement, dated as of May 10, 2010, entered
into by 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 May 11, 2010; 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).10.2
    
    
    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).10.3
    
    
    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).10.4
    
    
    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).10.5
    
    
    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).10.6
    
    
    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
    
    
    Allied Healthcare International Inc. Supplemental Code of Conduct
(incorporated herein by reference to Exhibit 14.2 to our Form 10-K for
the fiscal year ended September 30, 2009; File No. 001-11570).
  - 91 -




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##### Table of Contents



ExhibitNumber
    
    Title21
    (1)
    
    Subsidiaries of Allied Healthcare International Inc.23
    (1)
    
    Consent of EisnerAmper 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.
 
 (1)
    
    Filed herewith.  - 92 -




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.By:
    /s/ Sandy YoungName:
    Sandy YoungTitle:
    Chief Executive Officer     /s/ Sandy Young
    
    Chief Executive Officer and Director
    
    December 14, 2010Sandy Young
    
    (principal executive officer)/s/ Paul Weston
    
    Chief Financial Officer
    
    December 14, 2010Paul Weston
    
    (principal financial and accounting officer)/s/ Sophia Corona
    
    Director
    
    December 14, 2010Sophia Corona/s/ Mark Hanley
    
    Director
    
    December 13, 2010Mark Hanley
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/s/ Wayne Palladino
    
    Director
    
    December 14, 2010Wayne Palladino/s/ Jeffrey S. Peris
    
    Director
    
    December 8, 2010Jeffrey S. Peris/s/ Raymond J. Playford
    
    Director
    
    December 8, 2010Raymond J. Playford/s/ Ann Thornburg
    
    Director
    
    December 13, 2010Ann Thornburg
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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
 Index to Consolidated Financial Statements
    
    PageReports of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets  September 30, 2010
and 2009
    
    
    F-3Consolidated Statements of Operations  for the
years ended September 30, 2010, 2009 and 2008
    
    
    F-4Consolidated Statements of Changes in
Shareholders Equity  for the years ended
September 30, 2010, 2009 and 2008
    
    
    F-5Consolidated Statements of Cash Flows  for the
years ended September 30, 2010, 2009 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7Index to Consolidated Financial Statement SchedulesSchedule II  Valuation and Qualifying Accounts
    
    
    S-1
  F-i




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
  F-1




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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 30,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    39,031
    
    
    $
    35,273Accounts receivable, less allowance for doubtful
accounts of $732 and $839, respectively
    
    
    20,092
    
    
    
    19,594Unbilled accounts receivable
    
    
    13,393
    
    
    
    11,572Deferred income taxes
    
    
    552
    
    
    
    389Prepaid expenses and other assets
    
    
    1,943
    
    
    
    1,188Total current assets
    
    
    75,011
    
    
    
    68,016Property and equipment, net
    
    
    8,924
    
    
    
    7,756Goodwill
    
    
    102,945
    
    
    
    95,649Other intangible assets, net
    
    
    3,501
    
    
    
    1,646Total assets
    
    $
    190,381
    
    
    $
    173,067LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,581
    
    
    $
    1,186Current maturities of debt and capital leases
    
    
    614
    
    
    
    Accrued expenses, inclusive of payroll and related expenses
    
    
    25,897
    
    
    
    24,304Taxes payable
    
    
    2,310
    
    
    
    201Total current liabilities
    
    
    30,402
    
    
    
    25,691Long-term debt and capital leases, net of current maturities
    
    
    389
    
    
    
    Deferred income taxes
    
    
    1,534
    
    
    
    103Other long-term liabilities
    
    
    308
    
    
    
    Total liabilities
    
    
    32,633
    
    
    
    25,794Commitments and contingencies (Note 10)Noncontrolling interest (Note 3)
    
    
    4,358
    
    
    
    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 45,721 and 45,571 shares, respectively
    
    
    457
    
    
    
    456Additional paid-in capital
    
    
    242,478
    
    
    
    241,555Accumulated other comprehensive loss
    
    
    (15,267
    )
    
    
    (14,418
    )Accumulated deficit
    
    
    (68,158
    )
    
    
    (78,026
    )159,510
    
    
    
    149,567Less cost of treasury stock (2,150 and 585 shares, respectively)
    
    
    (6,120
    )
    
    
    (2,294
    )Total shareholders equity
    
    
    153,390
    
    
    
    147,273Total liabilities and shareholders equity
    
    $
    190,381
    
    
    $
    173,067
   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 30,2010
    
    
    2009
    
    
    2008Revenues:Net patient services
    
    $
    271,079
    
    
    $
    249,810
    
    
    $
    298,577Cost of revenues:Patient services
    
    
    188,774
    
    
    
    173,462
    
    
    
    208,192Gross profit
    
    
    82,305
    
    
    
    76,348
    
    
    
    90,385Selling, general and administrative expenses
    
    
    68,846
    
    
    
    63,234
    
    
    
    77,655Operating income
    
    
    13,459
    
    
    
    13,114
    
    
    
    12,730Interest income
    
    
    361
    
    
    
    537
    
    
    
    935Interest expense
    
    
    (30
    )
    
    
    (110
    )
    
    
    (542
    )Foreign exchange loss
    
    
    (210
    )
    
    
    (197
    )
    
    
    (586
    )Income before income taxes and discontinued operations
    
    
    13,580
    
    
    
    13,344
    
    
    
    12,537Provision for income taxes
    
    
    3,524
    
    
    
    3,408
    
    
    
    3,751Income from continuing operations
    
    
    10,056
    
    
    
    9,936
    
    
    
    8,786Discontinued operations:Income from discontinued operations, net of taxes
    
    
    
    
    
    
    367
    
    
    
    Net income
    
    
    10,056
    
    
    
    10,303
    
    
    
    8,786Less: Net income attributable to noncontrolling interest
    
    
    (188
    )
    
    
    
    
    
    
    Net income attributable to Allied Healthcare International Inc.
    
    $
    9,868
    
    
    $
    10,303
    
    
    $
    8,786Amounts attributable to Allied Healthcare International Inc.:Income from continuing operations, net of tax
    
    $
    9,868
    
    
    $
    9,936
    
    
    $
    8,786Discontinued operations, net of tax
    
    
    
    
    
    
    367
    
    
    
    Net income
    
    $
    9,868
    
    
    $
    10,303
    
    
    $
    8,786Basic earnings per share  attributable to Allied Healthcare
International Inc. common shareholdersIncome from continuing operations
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.20Income from discontinued operations
    
    
    
    
    
    
    0.01
    
    
    
    Net income attributable to Allied Healthcare International
Inc. common shareholders
    
    $
    0.22
    
    
    $
    0.23
    
    
    $
    0.20Diluted earnings per share  attributable to Allied Healthcare
International Inc. common shareholdersIncome from continuing operations
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.19Income from discontinued operations
    
    
    
    
    
    
    0.01
    
    
    
    Net income attributable to Allied Healthcare International
Inc. common shareholders
    
    $
    0.22
    
    
    $
    0.23
    
    
    $
    0.19Weighted average number of common shares outstanding:Basic
    
    
    44,796
    
    
    
    44,986
    
    
    
    44,986Diluted
    
    
    45,009
    
    
    
    45,011
    
    
    
    45,078
   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, 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
    )
    
    $
    147,273Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,868
    
    
    
    
    
    
    
    9,868Foreign currency translation adjustment, net of taxes of $(31)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (849
    )
    
    
    
    
    
    
    
    
    
    
    (849
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,019Cost of treasury shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,826
    )
    
    
    (3,826
    )Stock option exercises
    
    
    150
    
    
    
    1
    
    
    
    287
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    288Stock based compensation
    
    
    
    
    
    
    
    
    
    
    636
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    636Balance, September 30, 2010
    
    
    45,721
    
    
    $
    457
    
    
    $
    242,478
    
    
    $
    (15,267
    )
    
    $
    (68,158
    )
    
    $
    (6,120
    )
    
    $
    153,390
   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 30,2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    10,056
    
    
    $
    10,303
    
    
    $
    8,786Adjustments to reconcile net income to net
cash provided by operating activities:Income from discontinued operations
    
    
    
    
    
    
    (367
    )
    
    
    Depreciation and amortization
    
    
    3,108
    
    
    
    2,590
    
    
    
    3,231Amortization of intangible assets
    
    
    1,324
    
    
    
    1,252
    
    
    
    1,634Foreign exchange (gain) loss
    
    
    (43
    )
    
    
    7
    
    
    
    Increase (decrease) in provision for allowance for doubtful accounts
    
    
    30
    
    
    
    360
    
    
    
    (167
    )Loss on sale of fixed assets
    
    
    31
    
    
    
    20
    
    
    
    166Stock based compensation
    
    
    636
    
    
    
    537
    
    
    
    812Deferred income taxes
    
    
    61
    
    
    
    117
    
    
    
    88Changes in operating assets and liabilities, excluding
the effect of businesses acquired and sold:Decrease (increase) in accounts receivable
    
    
    82
    
    
    
    (4,281
    )
    
    
    1,579(Increase) decrease in prepaid expenses and other assets
    
    
    (1,544
    )
    
    
    2,318
    
    
    
    (3,488
    )Increase (decrease) in accounts payable and other liabilities
    
    
    2,260
    
    
    
    2,867
    
    
    
    (3,779
    )Net cash provided by continuing operations
    
    
    16,001
    
    
    
    15,723
    
    
    
    8,862Net cash used in discontinued operations
    
    
    
    
    
    
    
    
    
    
    (561
    )Net cash provided by operating activities
    
    
    16,001
    
    
    
    15,723
    
    
    
    8,301Cash flows from investing activities:Capital expenditures
    
    
    (2,768
    )
    
    
    (2,850
    )
    
    
    (3,344
    )Acquisition of controlling interest, net of cash acquired
    
    
    (5,680
    )
    
    
    
    
    
    
    Proceeds from sale of business held in escrow and designated for debt repayment
    
    
    
    
    
    
    116
    
    
    
    53,638Proceeds from sale of property and equipment
    
    
    73
    
    
    
    1
    
    
    
    50Payments on acquisitions payable
    
    
    
    
    
    
    (1,082
    )
    
    
    Net cash (used in) provided by investing activities
    
    
    (8,375
    )
    
    
    (3,815
    )
    
    
    50,344Cash flows from financing activities:Repayments of debt and capital lease obligations
    
    
    (152
    )
    
    
    
    
    
    
    Payments under revolving loan, net
    
    
    
    
    
    
    
    
    
    
    (24,664
    )Borrowings (payments) under invoice discounting facility, net
    
    
    255
    
    
    
    
    
    
    
    (4,458
    )Principal payments on long-term debt
    
    
    
    
    
    
    
    
    
    
    (23,678
    )Proceeds from sale of interest rate swap agreements
    
    
    
    
    
    
    
    
    
    
    617Treasury shares acquired
    
    
    (3,826
    )
    
    
    
    
    
    
    Stock options exercised
    
    
    288
    
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    (3,435
    )
    
    
    
    
    
    
    (52,183
    )Effect of exchange rate on cash
    
    
    (433
    )
    
    
    (2,834
    )
    
    
    (504
    )Increase in cash
    
    
    3,758
    
    
    
    9,074
    
    
    
    5,958Cash and cash equivalents, beginning of year
    
    
    35,273
    
    
    
    26,199
    
    
    
    20,241Cash and cash equivalents, end of year
    
    $
    39,031
    
    
    $
    35,273
    
    
    $
    26,199Supplemental cash flow information:Cash paid for interest
    
    $
    30
    
    
    $
    405
    
    
    $
    1,143Cash paid for income taxes, net
    
    $
    1,459
    
    
    $
    1,102
    
    
    $
    4,872Supplemental disclosure of non-cash investing and financing activities:Capital expenditures included in accrued expenses and other long-term liabilities
    
    $
    609Details of business acquired in purchase transactions:Fair value of assets acquired
    
    $
    12,319Liabilities assumed or incurred
    
    $
    2,715Noncontrolling interest
    
    $
    3,888Cash paid for acquisitions
    
    $
    5,716Cash acquired
    
    
    36Net cash paid for acquisitions
    
    $
    5,680
   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:
  Cash and Cash Equivalents:
   F-7




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
 Notes to Consolidated Financial Statements (Continued)
 Stock-Based Compensation:
  Accounts Receivable:
   Property and Equipment:
  Business Combinations:
   F-8




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
 Notes to Consolidated Financial Statements (Continued)
 Goodwill and Other Intangible Assets:
   Goodwill
    
    
    AccumulatedPre Impairment
    
    
    ImpairmentLosses
    
    
    Losses
    
    
    GoodwillBalance at October 1, 2008
    
    $
    220,304
    
    
    $
    (111,012
    )
    
    $
    109,292Foreign exchange effect
    
    
    (27,024
    )
    
    
    13,761
    
    
    
    (13,263
    )Acquisitions payable adjustment
    
    
    (380
    )
    
    
    
    
    
    
    (380
    )Balance at September 30, 2009
    
    $
    192,900
    
    
    $
    (97,251
    )
    
    $
    95,649Goodwill acquired during the
year
    
    
    7,424
    
    
    
    
    
    
    
    7,424Foreign exchange effect
    
    
    (818
    )
    
    
    690
    
    
    
    (128
    )Balance at September 30, 2010
    
    $
    199,506
    
    
    $
    (96,561
    )
    
    $
    102,945
   September 30, 2010Range
    
    
    Gross
    
    
    
    
    
    
    NetOf Lives
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(Years)
    
    
    Amount
    
    
    Amortization
    
    
    AmountCustomer relationships
    
    
    4  12
    
    
    $
    10,387
    
    
    $
    8,124
    
    
    $
    2,263Trade names
    
    
    3  20
    
    
    
    1,427
    
    
    
    189
    
    
    
    1,238Non-compete agreements
    
    
    2  3
    
    
    
    191
    
    
    
    191
    
    
    
    Favorable leasehold interests
    
    
    2  5
    
    
    
    7
    
    
    
    7
    
    
    
    Total
    
    
    
    
    
    $
    12,012
    
    
    $
    8,511
    
    
    $
    3,501
  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
  2011
    
    $
    9192012
    
    
    6122013
    
    
    6102014
    
    
    3712015
    
    
    67Thereafter
    
    
    922$
    3,501
  Income Taxes:
   F-10




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
 Notes to Consolidated Financial Statements (Continued)
  Revenue Recognition:
   Advertising Costs:
  Earnings Per Share:
   F-11




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
 Notes to Consolidated Financial Statements (Continued)
  2010
    
    
    2009
    
    
    2008Weighted average number of common shares outstanding
as used in computation of basic EPS of common stock
    
    
    44,796
    
    
    
    44,986
    
    
    
    44,986Effect of dilutive securities  stock options and warrants
    
    
    213
    
    
    
    25
    
    
    
    92Shares used in computation of diluted EPS of common stock
    
    
    45,009
    
    
    
    45,011
    
    
    
    45,078
 Comprehensive Income (Loss):
  2010
    
    
    2009
    
    
    2008Net income
    
    $
    10,056
    
    
    $
    10,303
    
    
    $
    8,786Change in cumulative translation adjustment
    
    
    (567
    )
    
    
    (16,237
    )
    
    
    (16,199
    )Comprehensive income (loss), net of income
taxes
    
    
    9,489
    
    
    
    (5,934
    )
    
    
    (7,413
    )Comprehensive income attributable to the
noncontrolling interest
    
    
    (470
    )
    
    
    
    
    
    
    Comprehensive income (loss) attributable
to the Company
    
    $
    9,019
    
    
    $
    (5,934
    )
    
    $
    (7,413
    )
  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:
  Recent Accounting Pronouncements:
 Noncontrolling Interests.
 Business Combinations.
 Disclosures about Derivative Instruments and Hedging Activities.
  F-14




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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.
 Fair Value Measurements and Disclosures.
 Subsequent Events.
  F-15




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Stock Compensation.
 3. Business Combinations and Dispositions:
 Combinations:
     F-16




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  (in thousands)
    
    ConsiderationCash
    
    $
    5,716Fair value of total consideration transferred
    
    $
    5,716
 PreliminaryEstimates ofAcquisitionDate(in thousands)
    
    Fair ValueProperty and equipment
    
    $
    986Current assets(a)
    
    
    1,753Current liabilities(b)
    
    
    (1,781
    )Debt and capital lease obligations
    
    
    (823
    )Deferred tax liability
    
    
    (949
    )Total identifiable net liabilities
    
    $
    (814
    )Goodwill
    
    
    7,424Other intangible assets(c)
    
    
    2,994Noncontrolling interest in HILG
    
    
    (3,888
    )Total purchase price
    
    $
    5,716
 (a)
    
    Includes cash, accounts receivable, unbilled accounts receivable, prepaid
expenses and other current assets.(b)
    
    Includes accounts payable and other current liabilities.(c)
    
    Includes customer relationships of $1.8 million with an estimated useful life of
4 years and trade names of $1.2 million with an estimated useful life of 20 years.    F-17




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
   Fair value of noncontrolling interest at acquisition
    
    $
    3,888Net income attributable to noncontrolling interest
    
    
    188Change in cumulative translation adjustment
    
    
    282Noncontrolling interest at September 30, 2010
    
    $
    4,358
  Dispositions:
    F-18




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 4. Property and Equipment:
  2010
    
    
    2009Furniture, fixtures and equipment (including software)
    
    $
    19,331
    
    
    $
    16,448Leasehold improvements
    
    
    1,268
    
    
    
    1,036Vehicles
    
    
    737
    
    
    
    21,336
    
    
    
    17,484Less, accumulated depreciation and amortization
    
    
    12,412
    
    
    
    9,728$
    8,924
    
    
    $
    7,756
  5. Accrued Expenses:
  2010
    
    
    2009Payroll and related expenses
    
    $
    20,112
    
    
    $
    19,750Professional fees
    
    
    1,383
    
    
    
    1,087Refunds payable
    
    
    1,129
    
    
    
    1,024Other
    
    
    3,273
    
    
    
    2,443$
    25,897
    
    
    $
    24,304
 6. Debt:
   F-19




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  Guarantees.
 Financial Instruments.
 7. Shareholders Equity:
   F-20




---



##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
   8. Income Taxes:
  2010
    
    
    2009
    
    
    2008Current:Federal
    
    $
    31
    
    
    $
    26
    
    
    $
    8Foreign
    
    
    3,432
    
    
    
    3,265
    
    
    
    3,655Deferred:Foreign
    
    
    61
    
    
    
    117
    
    
    
    88Provision for income taxes
    
    $
    3,524
    
    
    $
    3,408
    
    
    $
    3,751
  F-21




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  2010
    
    
    2009Deferred tax assets:Accrued expenses
    
    $
    563
    
    
    $
    380Federal net operating loss carryforward
    
    
    23,943
    
    
    
    24,468State net operating loss carryforward
    
    
    8,356
    
    
    
    8,532Provision for doubtful accounts
    
    
    116
    
    
    
    85Depreciation
    
    
    622
    
    
    
    928Stock Options
    
    
    623
    
    
    
    471Other
    
    
    89
    
    
    
    150Gross deferred tax assets
    
    
    34,312
    
    
    
    35,014Valuation allowance
    
    
    (33,035
    )
    
    
    (33,538
    )Net deferred tax assets
    
    
    1,277
    
    
    
    1,476Deferred tax liabilities:Intangible assets
    
    
    (2,158
    )
    
    
    (1,190
    )Other
    
    
    (101
    )
    
    
    Deferred tax liabilities
    
    
    (2,259
    )
    
    
    (1,190
    )Net deferred tax (liability) asset
    
    $
    (982
    )
    
    $
    286Classification of Deferred Taxes:Current Deferred Tax Assets
    
    $
    552
    
    
    $
    389Long-Term Deferred Tax Liabilities
    
    
    (1,534
    )
    
    
    (103
    )Net deferred tax (liabilities) assets
    
    $
    (982
    )
    
    $
    286
    F-22




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 :
 2010
    
    
    2009
    
    
    2008Income taxes at 34%
    
    $
    4,617
    
    
    $
    4,537
    
    
    $
    4,263Valuation allowance
    
    
    (500
    )
    
    
    (1,288
    )
    
    
    (783
    )Foreign tax, net
    
    
    (842
    )
    
    
    (743
    )
    
    
    (592
    )Enacted U.K. rate change
    
    
    (120
    )
    
    
    
    
    
    
    (78
    )Stock options
    
    
    5
    
    
    
    246
    
    
    
    111Expiration of warrants unexercised
    
    
    
    
    
    
    80
    
    
    
    391Other, net
    
    
    364
    
    
    
    576
    
    
    
    439Provision for income taxes
    
    $
    3,524
    
    
    $
    3,408
    
    
    $
    3,751
      F-23




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
     9. Stock Options:
 Stock Options:
   F-24




---



##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  2010
    
    
    2009
    
    
    2008Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Average
    
    
    Number
    
    
    AverageOf Stock
    
    
    Exercise
    
    
    of Stock
    
    
    Exercise
    
    
    of Stock
    
    
    ExerciseOptions
    
    
    Price ($)
    
    
    Options
    
    
    Price ($)
    
    
    Options
    
    
    Price ($)Outstanding beginning of year
    
    
    2,991
    
    
    
    2.22
    
    
    
    2,576
    
    
    
    2.24
    
    
    
    2,977
    
    
    
    3.64Granted
    
    
    1,018
    
    
    
    2.59
    
    
    
    1,221
    
    
    
    2.12
    
    
    
    1,280
    
    
    
    2.01Exercised
    
    
    (150
    )
    
    
    1.92
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (271
    )
    
    
    2.20
    
    
    
    (806
    )
    
    
    2.12
    
    
    
    (1,681
    )
    
    
    4.55Outstanding end of year
    
    
    3,588
    
    
    
    2.34
    
    
    
    2,991
    
    
    
    2.22
    
    
    
    2,576
    
    
    
    2.24
  Weighted-
    
    
    Weighted-Range
    
    
    
    
    
    Average
    
    
    AverageOf
    
    
    
    
    
    Exercise Price
    
    
    Remaining
    
    
    AggregateExercise
    
    Number
    
    
    of Options
    
    
    Contractual
    
    
    IntrinsicPrice ($)
    
    Outstanding
    
    
    Outstanding ($)
    
    
    Life in Years
    
    
    Value ($)1.92  2.59
    
    
    3,453
    
    
    
    2.22
    
    
    
    7.6
    
    
    
    1,0643.83  4.70
    
    
    41
    
    
    
    4.36
    
    
    
    2.4
    
    
    
    5.41  6.20
    
    
    94
    
    
    
    6.02
    
    
    
    3.8
    
    
    
    Options outstanding
    
    
    3,588
    
    
    
    2.34
    
    
    
    7.4
    
    
    
    1,064Options vested and expect to vest
    
    
    2,855
    
    
    
    2.38
    
    
    
    7.5
    
    
    
    836
 Weighted-
    
    
    Weighted-Range
    
    
    
    
    
    Average
    
    
    AverageOf
    
    
    
    
    
    Exercise Price
    
    
    Remaining
    
    
    AggregateExercise
    
    Number
    
    
    of Options
    
    
    Contractual
    
    
    IntrinsicPrice ($)
    
    Exercisable
    
    
    Exercisable ($)
    
    
    Life in Years
    
    
    Value ($)1.92  2.59
    
    
    1,421
    
    
    
    2.10
    
    
    
    6.5
    
    
    
    5803.83  4.70
    
    
    42
    
    
    
    4.36
    
    
    
    2.4
    
    
    
    5.41  6.20
    
    
    94
    
    
    
    6.02
    
    
    
    3.8
    
    
    
    Options exercisable
    
    
    1,557
    
    
    
    2.40
    
    
    
    6.3
    
    
    
    580
  F-25




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
   2010
    
    
    2009
    
    
    2008Expected life (years)
    
    
    6.0
    
    
    
    6.0
    
    
    
    5.8Risk-free interest rate
    
    
    2.0
    %
    
    
    2.7
    %
    
    
    3.1
    %Volatility
    
    
    49.1
    %
    
    
    52.7
    %
    
    
    49.3
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
   Expected life (years)
    
    
    4.1Risk-free interest rate
    
    
    1.6
    %Volatility
    
    
    62
    %Expected dividend yield
    
    
    0
    %
  F-26




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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, 2009
    
    
    1,855
    
    
    
    1.01Granted
    
    
    1,018
    
    
    
    1.25Vested
    
    
    (588
    )
    
    
    1.08Forfeited
    
    
    (254
    )
    
    
    1.11Nonvested at September 30, 2010
    
    
    2,031
    
    
    
    1.10
  Weighted-AverageRemainingContractual
    
    
    AggregateTime and Performance Based
    
    Stock
    
    
    Weighted-Average
    
    
    Life
    
    
    IntrinsicStock Options
    
    Options
    
    
    Exercise Price ($)
    
    
    In Years
    
    
    Value ($)Outstanding at October 1, 2009
    
    
    1,099
    
    
    
    2.05Granted
    
    
    362
    
    
    
    2.59Forfeited
    
    
    (166
    )
    
    
    2.11Outstanding at September 30, 2010
    
    
    1,295
    
    
    
    2.20
    
    
    
    7.7
    
    
    
    426Vested and expected to vest at
September 30, 2010
    
    
    647
    
    
    
    2.22
    
    
    
    8.0
    
    
    
    203Exercisable at September 30, 2010
    
    
    310
    
    
    
    1.96
    
    
    
    6.8
    
    
    
    166
  F-27




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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, 2009
    
    
    939
    
    
    
    0.96Granted
    
    
    362
    
    
    
    1.26Vested
    
    
    (168
    )
    
    
    1.03Forfeited
    
    
    (148
    )
    
    
    1.07Nonvested at September 30, 2010
    
    
    985
    
    
    
    1.04
   Stock Appreciation Rights:
    F-28




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Time Vesting
  Performance Vesting
    F-29




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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
    %
  10. Commitments and Contingencies:
 Guarantees:
   F-30




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 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-31




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 Contractual Cash Obligations:
 Leases:
    Other Obligations:
   F-32




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  Total
    
    
    TotalOperating
    
    
    Capital
    
    
    Total
    
    
    Total Other
    
    
    TotalFiscal
    
    Leases
    
    
    Leases
    
    
    Debt
    
    
    Obligations
    
    
    Obligations2011
    
    $
    2,732
    
    
    $
    377
    
    
    $
    294
    
    
    $
    1,102
    
    
    $
    4,5052012
    
    
    1,591
    
    
    
    278
    
    
    
    40
    
    
    
    1,021
    
    
    
    2,9302013
    
    
    734
    
    
    
    128
    
    
    
    
    
    
    
    206
    
    
    
    1,0682014
    
    
    267
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    2712015
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136Thereafter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    5,460
    
    
    $
    787
    
    
    $
    334
    
    
    $
    2,329
    
    
    $
    8,910Less: Amounts
representing
interest
    
    
    
    
    
    
    (118
    )Net present value
of capital lease
obligations
    
    
    
    
    
    
    669Less current portion
    
    
    
    
    
    
    320Long-term capital
lease obligations
    
    
    
    
    
    $
    349
 Contingencies:
    F-33




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
  11. Profit Sharing and Private Pension Plans:
  12. Selected Quarterly Financial Data (Unaudited):
  2010 Quarter Ended
    
    December 31,
    
    
    March 31,
    
    
    June 30,
    
    
    September 30,Total revenues
    
    $
    69,384
    
    
    $
    65,530
    
    
    $
    65,748
    
    
    $
    70,417Gross profit
    
    $
    20,877
    
    
    $
    19,948
    
    
    $
    19,768
    
    
    $
    21,712Income from continuing operations
    
    $
    2,854
    
    
    $
    2,642
    
    
    $
    1,717
    
    
    $
    2,843Net income
    
    $
    2,854
    
    
    $
    2,642
    
    
    $
    1,717
    
    
    $
    2,843Net income attributable to
Allied Healthcare International
Inc.
    
    $
    2,854
    
    
    $
    2,642
    
    
    $
    1,660
    
    
    $
    2,712Basic and diluted net income per
share attributable to Allied
Healthcare International Inc.
common shareholders
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.04
    
    
    $
    0.06Weighted
average number of common shares outstanding:Basic
    
    
    45,127
    
    
    
    45,136
    
    
    
    45,045
    
    
    
    43,888Diluted
    
    
    45,417
    
    
    
    45,405
    
    
    
    45,269
    
    
    
    43,960
  F-34




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##### Table of Contents



ALLIED HEALTHCARE INTERNATIONAL INC.
Notes to Consolidated Financial Statements (Continued)
 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
    
    
    $
    21,196Income from continuing operations
    
    $
    2,467
    
    
    $
    2,144
    
    
    $
    2,388
    
    
    $
    2,937Discontinued Operations
    
    $
    
    
    
    $
    367
    
    
    $
    
    
    
    $
    Net income
    
    $
    2,467
    
    
    $
    2,511
    
    
    $
    2,388
    
    
    $
    2,937Net income attributable to Allied
Healthcare International Inc.
    
    $
    2,467
    
    
    $
    2,511
    
    
    $
    2,388
    
    
    $
    2,937Basic and diluted earnings per share
attributable to Allied Healthcare
International Inc. common
shareholders:Income from continuing operations
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.07Income from discontinued operations
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    Net income attributable to Allied
Healthcare International Inc. common
shareholders
    
    $
    0.05
    
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.07Weighted average number of common shares outstanding:Basic
    
    
    44,986
    
    
    
    44,986
    
    
    
    44,986
    
    
    
    44,986Diluted
    
    
    44,986
    
    
    
    44,986
    
    
    
    44,998
    
    
    
    45,074
  F-35




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##### Table of Contents



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
    
    
    
    
    
    
    End ofDescription
    
    of Period
    
    
    Expenses
    
    
    Accounts
    
    
    Deductions
    
    
    PeriodAllowance for
Doubtful Accounts:Year ended
September 30, 2010
    
    $
    839
    
    
    $
    30
    
    
    $
    30
    (B)
    
    $
    167
    (A)
    
    $
    732Year ended
September 30, 2009
    
    $
    823
    
    
    $
    360
    
    
    $
    (93
    )(B)
    
    $
    251
    (A)
    
    $
    839Year ended
September 30, 2008
    
    $
    1,570
    
    
    $
    (167
    )
    
    $
    (163
    )(B)
    
    $
    417
    (A)
    
    $
    823
 (A)
    
    Doubtful accounts written off, net of recoveries.(B)
    
    Assumed in acquisitions and adjustments arising from translation of foreign financial
statements to U.S. dollars.  S-1