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SECURITIESAND EXCHANGE COMMISSION

Washington, D.C.20549

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FORM10-K/A

|        |                                                                                    |
|--------|------------------------------------------------------------------------------------|
|   | ANNUAL REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |

For the fiscal year ended September 30, 2003

|        |                                                                                         |
|--------|-----------------------------------------------------------------------------------------|
|   | TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the transition period from                                        to                                        

Commission File No.: 1-11570

Allied Healthcare InternationalInc.

(Exact Name of Registrant asSpecified in Its Charter)

|                                              |  |                                                    |  |                                       |  |  |  |  |  |  |
|----------------------------------------------|--|----------------------------------------------------|--|---------------------------------------|--|--|--|--|--|--|
| NewYork                                      |  |                                               |  | 13-3098275                            |
| (Stateor Other Jurisdictionof Incorporation) |  |                                               |  | (I.R.S.EmployerIdentification Number) |
| 555Madison AvenueNew York, New York          |  | (212)750-0064                                      |  | 10022                                 |
| (Address of principal executiveoffices)      |  | (Registrant's telephone number,includingarea code) |  | (Zip Code)                            |
|                                              |

Securitiesregistered pursuant to Section 12(b) of the Act:

|                             |  |                                          |  |  |  |  |
|-----------------------------|--|------------------------------------------|--|--|--|--|
| Titleof Each Class          |  | Name of Each Exchange on WhichRegistered |
| CommonStock, $.01 par value |  | American Stock Exchange                  |
|                        |  |                                     |
|                        |  |                                     |
|                             |

Securitiesregistered pursuant to Section 12(g) of the Act:

|                 |  |  |
|-----------------|--|--|
| None            |
| (Title ofClass) |
|            |
| (Titleof Class) |
|                 |

Indicate by check markwhether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to suchreporting requirements for the past 90 days.Yes       No   

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405of Regulation S-K is not contained herein, and will not be contained,to the best or registrant's knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Exchange Act Rule  12b-2).Yes       No   

The aggregatemarket value of the voting and non-voting common equity held bynon-affiliates of the registrant as of March 31, 2003 was approximately$31,717,101 based on the closing sales price of $3.99 per share ofcommon stock of the registrant on such date, as reported by theAmerican Stock Exchange.

The number of shares ofcommon stock of the registrant outstanding on December 26, 2003was  22,104,628.

DOCUMENTSINCORPORATED BYREFERENCENone

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EXPLANATORYNOTE

Allied Healthcare International Inc. (the"Company") is filing this Form 10-K/A toamend its Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2003, as filed with the Securities and ExchangeCommission on December  29, 2003. The purpose of filing this Form10-K/A is to include a financial statement schedule that was notincluded in the Form 10-K. In addition, note 16 to the consolidatedfinancial statements of the Company has been revised.

Item8.    Financial Statements and Supplementary Data.

Theconsolidated financial statements and required financial statementschedules of our company are located beginning on page F-1 of thisAnnual Report on Form 10-K/A.

PART IV

Item15.    Exhibits, Financial Statement Schedules and Reports On Form8-K.

(a)    The following documents are filed as part of thisAnnual Report on Form 10-K/A:

|        |  |                                                                                                                                                                                                    |  |        |     |        |  |  |  |  |
|--------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|-----|--------|--|--|--|--|
| (1)    |  | ConsolidatedFinancial Statements:                                                                                                                                                                  |  | Page   |
|   |  | Independent Auditors'Report                                                                                                                                                                        |  |   | F-1 |   |
|   |  | Report of IndependentAuditors                                                                                                                                                                      |  |   | F-2 |   |
|   |  | Consolidated BalanceSheets — September 30, 2003 and 2002                                                                                                                                     |  |   | F-3 |   |
|   |  | Consolidated Statements of Operations — For theYears Ended September 30, 2003, 2002 and 2001                                                                                                 |  |   | F-4 |   |
|   |  | Consolidated Statements of Changes inShareholders' Equity — For the Years Ended September 30,2003, 2002 and 2001                                                                             |  |   | F-5 |   |
|   |  | Consolidated Statements of Cash Flows — For theYears Ended September 20, 2003, 2002 and 2001                                                                                                 |  |   | F-6 |   |
|   |  | Notes to Consolidated FinancialStatements                                                                                                                                                          |  |   | F-8 |   |
| (2)    |  | ConsolidatedFinancial StatementSchedules:                                                                                                                                                          |  |
|   |  | Schedule I - CondensedFinancial Information                                                                                                                                                        |  |   | S-1 |   |
|   |  | ScheduleII - Valuation and Qualifying Accounts                                                                                                                                                     |  |   | S-5 |   |
|   |  | Schedules other than thatlisted above are omitted because they are not required or are notapplicable or the information is shown in the audited consolidatedfinancial statements or related notes. |  |
| (3)    |  | Exhibits:                                                                                                                                                                                          |  |
|        |

|               |  |                                                                                                                                                                                                                                                                             |  |  |  |  |
|---------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                       |
| 3.1           |  | RestatedCertificate of Incorporation of our company filed with the New YorkSecretary of State on December 12, 1990, as amended on August 7, 1992(incorporated herein by reference to Exhibit 3.1 of our QuarterlyReport on Form 10-Q for the quarter ended April  30,1997). |
| 3.2           |  | Certificate of Amendment to theRestated Certificate of Incorporation of our company filed with the NewYork Secretary of State on June 28, 1995 (incorporated herein byreference to Exhibit 3.2 of our Quarterly Report on Form 10-Q for thequarter ended April  30, 1997).  |
|               |

1

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|               |  |                                                                                                                                                                                                                                                                                                                                                                  |  |  |  |  |
|---------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                                                                                                            |
| 3.3           |  | Certificate of Amendmentto the Restated Certificate of Incorporation of our company filed withthe New York Secretary of State on October 9, 1996 (incorporated hereinby reference to Exhibit 3.3 of our Quarterly Report on Form 10-Q forthe quarter ended April  30,1997).                                                                                      |
| 3.4           |  | Certificate of Amendment to theRestated Certificate of Incorporation of our company filed with the NewYork Secretary of State on May 6, 1997 (incorporated herein byreference to Exhibit 3.4 of our Quarterly Report on Form 10-Q for thequarter ended April  30, 1997).                                                                                         |
| 3.5           |  | Certificateof Amendment of the Certificate of Incorporation of our company filedwith the New York Secretary of State on April 16, 1998 (incorporatedherein by reference to Exhibit 3.5 of our Registration Statement onForm S-4 (Reg. St. No. 333-87304) filed with the Securities andExchange Commission on May 1,2002).                                        |
| 3.6           |  | Certificate of Amendment to theCertificate of Incorporation of our company filed with the New YorkSecretary of State on June 7, 2002 (incorporated herein by reference toExhibit 3.1 of our Current Report on Form 8-K filed with the Securitiesand Exchange Commission on June 10,2002).                                                                        |
| 3.7           |  | Restated Bylaws of our company,as amended (incorporated herein by reference to Exhibit 3.4 of ourAnnual Report on Form 10-K for the year ended October 31,1996).                                                                                                                                                                                                 |
| 3.8           |  | Amendment to the Bylaws of ourcompany effective June 7, 2002 (incorporated herein by reference toExhibit 3.2 of our Current Report on Form 8-K filed with the Securitiesand Exchange Commission on June 10,2002).                                                                                                                                                |
| 3.9           |  | Certificate of Amendment to theCertificate of Incorporation of our company which defines the rights ofthe Series A Convertible Preferred Stock, filed with the New YorkSecretary of State on June 26, 2002 (incorporated herein by referenceto Exhibit 4.1 of our Current Report on Form 8-K filed with theSecurities and Exchange Commission on August 9,2002). |
| 3.10          |  | Certificate of Amendment to theprovisions of the Certificate of Incorporation of our company thatdefines the rights of the Series A Convertible Preferred Stock, filedwith the New York Secretary of State on February 12, 2003 (incorporatedherein by reference toExhibit 3.8 of our Quarterly Report on Form 10-Qfor the quarter ended March 31,2003).         |
| 4.1           |  | Specimen Certificate of CommonStock (incorporated herein by reference to Exhibit 4.1 of our CurrentReport on Form 8-K filed with the Securities and Exchange Commission onJune 10, 2002).                                                                                                                                                                        |
| 4.2           |  | Specimen Certificate ofSeries A Convertible Preferred Stock (incorporated herein by referenceto Exhibit 4.2 of Amendment No. 1 to our Registration Statement on FormS-4 (Reg. St. No. 333-87304) filed with the Securities and ExchangeCommission on May 21, 2002).                                                                                              |
| 10.1          |  | Transworld Home HealthCare, Inc. 1992 StockOption Plan, as amended (incorporated herein by reference to Exhibit10.3 of our Quarterly Report on Form 10-Q for the quarter ended June30, 1998).                                                                                                                                                                    |
| 10.2          |  | Form of IndemnificationAgreement with our company (incorporated herein by reference to Exhibit10.31 of our Annual Report on Form 10-K for the year ended October 31,1994).                                                                                                                                                                                       |
|               |

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                    |  |  |  |  |
|---------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.3          |  | Transworld HomeHealthCare, Inc. 1997 Option Plan for Non-Employee Directors(incorporated herein by reference to Exhibit A of our Proxy Statementfor its Annual Meeting held on May 28,1997).                                                                                                                                                                                                                       |
| 10.4          |  | Voting Trust Agreement datedDecember 17, 1999 by and among Transworld Holdings (UK) Limited (nowknown as Allied Healthcare Group Limited ("AlliedHealthcare (UK)"), Transworld Healthcare (UK)Limited ("TWUK"), our company,Triumph Partners III, L.P. and Richard Green, as trustee (incorporatedherein by reference to Exhibit 10.65 of our Annual Report on Form 10-Kfor the year ended September 30,1999).     |
| 10.5          |  | SecuritiesPurchase Agreement , dated December 17, 1999, among Allied Healthcare(UK), TWUK and the Purchasers identified therein (incorporated hereinby reference to Exhibit 10.66 of our Annual Report on Form 10-K for theyear ended September 30, 1999).                                                                                                                                                         |
| 10.6          |  | SeniorCredit Agreement, dated as of December 17, 1999, among AlliedHealthcare (UK), TWUK, Paribas as Arranger, Paribas and Barclays BankPLC as Underwriters, Barclays Bank PLC as Agent and SecurityAgent andOthers (incorporated herein by reference to Exhibit 10.67 of our AnnualReport on Form 10-K for the year ended September 30, 1999).                                                                    |
| 10.7          |  | Mezzanine Credit Agreement, dated as of December17, 1999, among Allied healthcare (UK), TWUK, Paribas as Arranger,Underwriter and Agent, Barclays Bank PLC as Security Agent and Others(incorporated herein by reference to Exhibit 10.68 of our Annual Reporton Form 10-K for the year ended September 30, 1999).                                                                                                 |
| 10.8          |  | Warrant Instrument to subscribe for Shares inTWUK in favor of the mezzanine lenders, dated as of December 17, 1999(incorporated herein by reference to Exhibit 10.69 of our Annual Reporton Form 10-K for the year ended September 30, 1999).                                                                                                                                                                      |
| 10.9          |  | Share Sale and Purchase Agreement of NightingaleNursing Bureau Limited, dated as of April 6, 2000, between TransworldHealthcare (UK) Limited, W.A. Thompson, D.T. Thompon and others(incorporated herein by reference to Exhibit 99.1 of our Current Reporton Form 8-K dated April 20, 2000).                                                                                                                      |
| 10.10         |  | Asset Purchase Agreement, dated as of September18, 2000, between MK Diabetic Support Services, Inc., Respiflow, Inc.and Transworld Ostomy, Inc. and Express-Med, Inc. (incorporated hereinby reference to Exhibit 10.1 of our Current Report on Form 8-K filedOctober 11, 2000).                                                                                                                                   |
| 10.11         |  | Sale and PurchaseAgreement of entire share capital of Amcare Limited with its subsidiaryNovacare UK Limited dated November 22, 2000 between Omnicare Limitedand Bristol-Myers Squibb Holdings Limited (incorporated herein byreference to Exhibit 10.73 of our Annual Report on Form 10-K for theyear ended September 30,2000).                                                                                    |
| 10.12         |  | Agreement for Sale and Purchaseof Staffing Enterprise Limited and Staffing Enterprise (PSV) Limitedbetween Allied Healthcare (UK) Limited and David Christopher Pain andDeborah Kay Pain dated September 27, 2001 (incorporated herein byreference to Exhibit 10.2 of our Current Report on Form 8-K filedOctober 12, 2001).                                                                                       |
| 10.13         |  | Second AmendmentAgreement, dated September 27, 2001, relating to the Mezzanine CreditAgreement dated December 17, 1999 among Allied Healthcare GroupLimited, Transworld Healthcare (UK) Limited, BNP Paribas as Arranger,Underwriter and Agent, Barclays Bank PLC as Agent and Security Agentand Others (incorporated herein by reference to Exhibit 10.3 of ourCurrent Report on Form 8-K filed October 12,2001). |
|               |

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                 |  |  |  |  |
|---------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.14         |  | Second AmendmentAgreement, dated September 27, 2001, relating to the Senior CreditAgreement dated December 17, 1999 among Allied Healthcare GroupLimited, Transworld Healthcare (UK) Limited, BNP Paribas as Arranger,Underwriter and Agent, Barclays Bank PLC as Agent and Security Agentand Others (incorporated herein by reference to Exhibit 10.4 of ourCurrent Report on Form 8-K filed October 12,2001). |
| 10.15         |  | Employment Agreement, datedSeptember 24, 2001, between our company and Timothy M. Aitken(incorporated herein by reference to Exhibit 10.16 of our Annual Reporton Form 10-K for the year ended September 30, 2001).                                                                                                                                                                                             |
| 10.16         |  | EmploymentAgreement, dated September 24, 2001, between our company and SarahEames (incorporated herein by reference to Exhibit 10.17 of our AnnualReport on Form 10-K for the year ended September 30, 2001).                                                                                                                                                                                                   |
| 10.17         |  | Master Reorganization Agreement, dated as ofApril 24, 2002, among our company, Allied Healthcare (UK), TWUK and theInvestors named therein (incorporated herein by reference to Annex A-1to the proxy statement/prospectus forming a part of our RegistrationStatement on Form S-4 (Reg. St. No. 333-87304) filed with theSecurities and Exchange Commission on May 1,2002).                                    |
| 10.17A        |  | First Amendment to MasterReorganization Agreement, dated as of May 16, 2002, by and among ourcompany, Allied Healthcare (UK), TWUK and the Investors named therein(incorporated herein by reference to Exhibit 10.17A of Amendment No. 1to our Registration Statement on Form S-4 (Reg. St. No. 333-87304)filed with the Securities and Exchange Commission on May 21,2002).                                    |
| 10.17B        |  | Second Amendment to MasterReorganization Agreement, dated as of June 26, 2002, by and among ourcompany, Allied Healthcare (UK), TWUK and the Investors named therein(incorporated herein by reference to Exhibit 10.3 of our Current Reporton Form 8-K filed with the Securities and Exchange Commission on August9, 2002).                                                                                     |
| 10.18         |  | Amendment No. 1, dated asof July 25, 2002, among Allied Healthcare (UK), TWUK and the Purchasersidentified therein to the Securities Purchase Agreement dated December17, 1999 (incorporated herein by reference to Exhibit 10.4 of ourCurrent Report on Form 8-K filed with the Securities and ExchangeCommission on August 9, 2002).                                                                          |
| 10.19         |  | Registration Rights Agreement, dated as of July25, 2002, among our company and the persons named therein (incorporatedherein by reference to Exhibit 10.5 of our Current Report on Form 8-Kfiled with the Securities and Exchange Commission on August 9,2002).                                                                                                                                                 |
| 10.20         |  | Amendment No. 1, dated as ofJuly 25, 2002, among TWUK, Allied Healthcare (UK), Richard Green,Triumph Partners III, L.P. and our company to the Voting TrustAgreement dated December 17, 1999 (incorporated herein by reference toExhibit 10.6 of our Current Report on Form 8-K filed with theSecurities and Exchange Commission on August 9,2002).                                                             |
| 10.21A        |  | Tax Bonus, Tax Loan and TaxIndemnification Agreement, dated as of April 22, 2002, by and amongTWUK, our company and Timothy M. Aitken (incorporated herein byreference to Exhibit 10.21 of our Registration Statement on Form S-4(Reg. St. No. 333-87304) filed with the Securities and ExchangeCommission on May 1, 2002).                                                                                     |
|               |

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|               |  |                                                                                                                                                                                                                                                                                                                                                  |  |  |  |  |
|---------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                                                                                            |
| 10.21B        |  | Tax Bonus, Tax Loanand Tax Indemnification Agreement, dated as of April 22, 2002, by andamong TWUK, our company and Sarah L. Eames (incorporated herein byreference to Exhibit 10.22 of our Registration Statement on Form S-4(Reg. St. No. 333-87304) filed with the Securities and ExchangeCommission on May 1, 2002).                         |
| 10.22A        |  | Promissory Note, dated April 30, 2002, executedby Timothy M. Aitken in favor of our company (incorporated herein byreference to Exhibit 10.7A of our Quarterly Report on Form 10-Q for thequarterly period ended June 10, 2002).                                                                                                                 |
| 10.22B        |  | Promissory Note, dated April 30, 2002, executedby Sarah L. Eames in favor of our company (incorporated herein byreference to Exhibit 10.7B of our Quarterly Report on Form 10-Q for thequarterly period ended June 10, 2002).                                                                                                                    |
| 10.23A        |  | Pledgeand Security Agreement, dated as of April 30, 2002, between Timothy M.Aitken and our company (incorporated herein by reference to Exhibit10.8A of our Quarterly Report on Form 10-Q for the quarterly periodended June 10, 2002).                                                                                                          |
| 10.23B        |  | Pledge andSecurity Agreement, dated as of April 30, 2002, between Sarah L. Eamesand our company (incorporated herein by reference to Exhibit 10.8B ofour Quarterly Report on Form 10-Q for the quarterly period ended June10, 2002).                                                                                                             |
| 10.24         |  | Registration RightsAgreement, dated April 30, 2002, among our company, Timothy M. Aitkenand Sarah L. Eames (incorporated herein by reference to Exhibit 10.25of our Registration Statement on Form S-4 (Reg. St. No. 333-87304)filed with the Securities and Exchange Commission on May 1,2002).                                                 |
| 10.25A        |  | Irrevocable Undertaking, datedApril 22, 2002, of Timothy M. Aitken relating to the redeemable sharesof TWUK (incorporated herein by reference to Exhibit 10.26 of ourRegistration Statement on Form S-4 (Reg. St. No. 333-87304) filed withthe Securities and Exchange Commission on May 1,2002).                                                |
| 10.25B        |  | Irrevocable Undertaking, datedApril 22, 2002, of Sarah L. Eames relating to the redeemable shares ofTWUK (incorporated herein by reference to Exhibit 10.27 of ourRegistration Statement on Form S-4 (Reg. St. No. 333-87304) filed withthe Securities and Exchange Commission on May 1,2002).                                                   |
| 10.26         |  | Stock Purchase Agreement, datedas of April 22, 2002, among our company, Hyperion TWH Fund II LLC,Triumph Partners III, L.P. and Triumph III Investors, L.P.(incorporated herein by reference to Exhibit 10.28 of our RegistrationStatement on Form S-4 (Reg. St. No. 333-87304) filed with theSecurities and Exchange Commission on May 1,2002). |
| 10.27         |  | Registration Rights Agreement,dated April 30, 2002, among our company, Triumph Partners III, L.P. andTriumph III Investors, L.P. (incorporated herein by reference toExhibit 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).                           |
| 10.28         |  | 2002 Stock Option Plan(incorporated herein by reference to Annex D to the proxystatement/prospectus forming a part of Amendment No. 1 to ourRegistration Statement on Form S-4 (Reg. St. No. 333-87304) filed withthe Securities and Exchange Commission on May 21, 2002).                                                                       |
| 10.29         |  | Stock Purchase Agreement, dated as of April 6,2002, by and between Promptcare Acquisition Corporation and our company(incorporated herein by reference to Exhibit 10.1 of our Current Reporton Form 8-K filed with the Securities and Exchange Commission on April17, 2003).                                                                     |
|               |

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|               |  |                                                                                                                                                                             |  |  |  |  |
|---------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                       |
| 11            |  | Statement re:computation of earnings per share (computation can be determinedclearly from the material contained in this Annual Report on Form10-K/A).                      |
| 14            |  | AlliedHealthcare International Inc. Code of Conduct (incorporated herein byreference to Exhibit 14 of our Annual Report on Form 10-K for the yearended September 30, 2003). |
| 16            |  | Letter, dated April 14, 2003, from Ernst& Young LLP to the Report on Form 8-K filed with the Securities andExchange Commission on April 15,2003).                       |
| 21            |  | Subsidiaries of ourcompany (incorporated herein by reference to Exhibit 21 of our AnnualReport on Form 10-K for the year ended September 30, 2003).                         |
| 23.1*         |  | Consent of Deloitte &Touche LLP, independent auditors of ourcompany.                                                                                                    |
| 23.2*         |  | Consent of Ernst& Young LLP, former independent auditors of ourcompany.                                                                                                 |
| 31.1*         |  | Rule13a-14(a)/15d-14(a) Certification of Chief Executive Officer, Presidentand Chief Operating Officer.                                                                     |
| 31.2*         |  | Rule13a-14(a)/15d-14(a) Certification of Chief FinancialOfficer.                                                                                                            |
| 32.1*         |  | Section 1350 Certification ofChief Executive Officer, President and Chief ExecutiveOfficer.                                                                                 |
| 32.2*         |  | Section 1350 Certificationof Chief FinancialOfficer.                                                                                                                        |
|               |

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| * | Filedherewith. |
|---|----------------|

(b)    Reports on Form 8-K.

During thequarter ended September 30, 2003, we furnished the following CurrentReport on Form 8-K to the Securities and Exchange Commission:

OnAugust 13, 2002, we furnished to the Securities and Exchange Commissiona Current Report on Form 8-K that included information required by Item12 of Form 8-K. The Form 8-K disclosed that we had issued a pressrelease on August 13, 2003 announcing our earnings for the quarterended June 30, 2003. No financial statements were filed. However, thepress release attached to the Form 8-K included a table containingstatement of operations data.

6

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SIGNATURES

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized.

|  | **Allied Healthcare InternationalInc.** |
|--|-----------------------------------------|

|        |  |        |  |                                                                             |  |  |  |  |  |  |
|--------|--|--------|--|-----------------------------------------------------------------------------|--|--|--|--|--|--|
|   |  | By:    |  | /s/Sarah L.Eames                                                            |
|   |  |   |  | SarahL. Eames Chief Executive Officer, President and Chief OperatingOfficer |
|        |

Dated: May 14, 2004

POWER OF ATTTORNEY

Pursuant to the requirements ofthe Securities Exchange Act of 1934, this report has been signed belowby the following persons on behalf of the registrant and in thecapacities and on the datesindicated.

|                          |  |                                                                   |  |                          |
|--------------------------|--|-------------------------------------------------------------------|--|--------------------------|
|      |  |                                               |  |      |
|                          |
| /s/Timothy M. Aitken*    |  | Chairman of the Board                                             |  | May 14, 2004             |
|                          |
| Timothy M. Aitken        |
|                          |
| /s/ Sarah L. Eames       |  | Chief Executive Officer, President and Chief OperatingOfficer     |  | May 14, 2004             |
|                          |
| Sarah L. Eames           |
|                          |
| /s/Charles F. Murphy     |  | Chief Financial Officer(Principal FinancialandAccounting Officer) |  | May 14, 2004             |
|                          |
| Charles F. Murphy        |
|                          |
| /s/ G. Richard Green*    |  | Director                                                          |  | May 14,2004              |
|                          |
| G. RichardGreen          |
|                          |
| /s/ David J.MacFarlane*  |  | Director                                                          |  | May 14, 2004             |
|                          |
| David J. MacFarlane      |
|                          |
| /s/ Wayne Palladino*     |  | Director                                                          |  | May 14,2004              |
|                          |
| WaynePalladino           |
|                          |
| /s/ Jeffrey S.Peris*     |  | Director                                                          |  | May 14, 2004             |
|                          |
| Jeffrey S. Peris         |
|                          |
| /s/ Scott A. Shay*       |  | Director                                                          |  | May 14, 2004             |
|                          |
| Scott A. Shay            |
|                          |

|         |                                                                    |
|---------|--------------------------------------------------------------------|
| *  | By: /s/ Charles F. Murphy,Attorney-in-Fact     |

7

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AlliedHealthcare International Inc.

|                                                                                                                        |  |        |     |        |  |  |
|------------------------------------------------------------------------------------------------------------------------|--|--------|-----|--------|--|--|
| Indexto Consolidated Financial Statements                                                                              |  | Page   |
| Independent Auditors' Report                                                                                           |  |   | F-1 |   |
| Report of Independent Auditors                                                                                         |  |   | F-2 |   |
| Consolidated Balance Sheets — September 30, 2003 and2002                                                         |  |   | F-3 |   |
| Consolidated Statements ofOperations — for the years ended September 30, 2003, 2002 and2001                      |  |   | F-4 |   |
| Consolidated Statements ofChanges in Shareholders' Equity — for the years endedSeptember 30, 2003, 2002 and 2001 |  |   | F-5 |   |
| Consolidated Statements of Cash Flows — for the yearsended September 30, 2003, 2002 and 2001                     |  |   | F-6 |   |
| Notes to Consolidated FinancialStatements                                                                              |  |   | F-8 |   |
| **Indexto Consolidated Financial StatementsSchedules**                                                                 |  |
| Schedule I - Condensed FinancialInformation                                                                            |  |   | S-1 |   |
| Schedule II - Valuation andQualifyingAccounts                                                                          |  |   | S-5 |   |
|                                                                                                                        |

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INDEPENDENTAUDITORS' REPORT

To the Board ofDirectors and Shareholders of Allied Healthcare InternationalInc. New York, NY

We have audited theaccompanying consolidated balance sheet of Allied HealthcareInternational Inc. and subsidiaries (the"Company") as of September 30,2003, and the related consolidated statements of operations,shareholders' equity, and cash flows for the year then ended. Ouraudit also included the financial statement schedules for the yearended September 30, 2003 listed in the index at Item 15. Thesefinancial statements and the financial statement schedules are theresponsibility of the Company's management. Our responsibility isto express an opinion on these financial statements and the financialstatement schedules based on our audit.

We conducted ouraudit in accordance with auditing standards generally accepted in theUnited States of America. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis forour opinion.

In our opinion, such consolidated financialstatements present fairly, in all material respects, the financialposition of the Company as of September 30, 2003, and the results ofits operations and its cash flows for the year then ended, inconformity with accounting principles generally accepted in the UnitedStates of America. Also, in our opinion, such financial statementschedules for the year ended September 30, 2003, when considered inrelation to the basic consolidated financial statements for the yearended September 30, 2003 taken as a whole, present fairly in allmaterial respects the information set forth therein.

/s/Deloitte & Touche LLP

Jericho, New York December10, 2003 (April 8, 2004 as to Note 16)

F-1

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REPORT OF INDEPENDENTAUDITORS

Shareholders and Board ofDirectorsAllied Healthcare InternationalInc.

We have audited the accompanying consolidatedbalance sheet of Allied Healthcare International Inc. (the"Company") as of September 30,2002 and the related consolidated statements of operations,shareholders' equity, and cash flows for the years endedSeptember 30, 2002 and 2001. Our audits also included the financialstatement schedules listed in the Index at Item 15 for the years endedSeptember 30, 2002 and 2001. These financial statements and schedulesare the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financial statementsand schedules based on our audits.

We conducted ouraudits in accordance with auditing standards generally accepted in theUnited States. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis forour opinion.

In our opinion, the financial statementsreferred to above present fairly, in all material respects, theconsolidated financial position of Allied Healthcare International Inc.at September 30, 2002, and the consolidated results of its operationsand its cash flows for the years ended September 30, 2002 and 2001, inconformity with accounting principles generally accepted in the UnitedStates. Also, in our opinion, the related financial statement schedulesfor the years ended September 30, 2002 and 2001, when considered inrelation to the basic financial statements taken as a whole, presentfairly in all material respects the information set forth therein.

As discussed in Note 2, the Company changed its method ofaccounting for goodwill and other intangibles effective October 1,2001.

|  | /s/ Ernst & Young LLP |
|--|---------------------------|

New York,New York November 8, 2002

F-2

----

ALLIEDHEALTHCARE INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Per Share Data)

|                                                                                                                                                        |  |                  |         |                   |  |        |         |         |  |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--|------------------|---------|-------------------|--|--------|---------|---------|--|--|
|                                                                                                                                                   |  | September30,2003 |         | September 30,2002 |
| **ASSETS**                                                                                                                                             |  |
| Currentassets:                                                                                                                                         |  |
| Cash and cashequivalents                                                                                                                               |  | $                | 21,691  |              |  | $      | 18,278  |    |
| Restrictedcash                                                                                                                                         |  |             | 37,693  |              |  |   | 19,840  |    |
| Accountsreceivable, less allowance for doubtful accounts of $3,346 and $22,849,respectively                                                            |  |             | 35,745  |              |  |   | 32,113  |    |
| Unbilled accountsreceivable                                                                                                                            |  |             | 11,278  |              |  |   | 7,046   |    |
| Assets of discontinuedoperations                                                                                                                       |  |             | — |              |  |   | 8,733   |    |
| Inventories                                                                                                                                            |  |             | 431     |              |  |   | 359     |    |
| Prepaid expenses and otherassets                                                                                                                       |  |             | 1,772   |              |  |   | 1,642   |    |
| Total currentassets                                                                                                                                    |  |             | 108,610 |              |  |   | 88,011  |    |
| Property andequipment, net                                                                                                                             |  |             | 10,326  |              |  |   | 8,098   |    |
| Restricted cash                                                                                                                                        |  |             | 3,008   |              |  |   | 43,678  |    |
| Intangible assets,net                                                                                                                                  |  |             | 185,722 |              |  |   | 123,514 |    |
| Deferredfinancing costs and otherassets                                                                                                                |  |             | 4,002   |              |  |   | 4,812   |    |
| Totalassets                                                                                                                                            |  | $                | 311,668 |              |  | $      | 268,113 |    |
| **LIABILITIES AND SHAREHOLDERS'EQUITY**                                                                                                                |  |
| Currentliabilities:                                                                                                                                    |  |
| Notespayable                                                                                                                                           |  | $                | 37,693  |              |  | $      | 19,840  |    |
| Short-termdebt                                                                                                                                         |  |             | — |              |  |   | 3,480   |    |
| Currentportion of long-term debt                                                                                                                       |  |             | 9,005   |              |  |   | 6,249   |    |
| Dividends payable                                                                                                                                      |  |             | 4,464   |              |  |   | 941     |    |
| Liabilities of discontinuedoperations                                                                                                                  |  |             | 690     |              |  |   | 1,270   |    |
| Accounts payable                                                                                                                                       |  |             | 2,676   |              |  |   | 1,505   |    |
| Accruedexpenses                                                                                                                                        |  |             | 24,969  |              |  |   | 23,995  |    |
| Taxespayable                                                                                                                                           |  |             | 4,332   |              |  |   | 4,813   |    |
| Total currentliabilities                                                                                                                               |  |             | 83,829  |              |  |   | 62,093  |    |
| Long-termdebt                                                                                                                                          |  |             | 118,680 |              |  |   | 118,961 |    |
| Derivativeliability                                                                                                                                    |  |             | 211     |              |  |   | — |    |
| Deferredincome taxes and other long-termliabilities                                                                                                    |  |             | 634     |              |  |   | 862     |    |
| Totalliabilities                                                                                                                                       |  |             | 203,354 |              |  |   | 181,916 |    |
| Commitments andcontingencies                                                                                                                           |  |
| Redeemableconvertible Series A preferred stock, $.01 par value; authorized 8,000shares, 7,774 shares issued and outstanding (liquidation value$35,213) |  |             | 33,151  |              |  |   | 32,254  |    |
| Shareholders'equity:                                                                                                                                   |  |
| Preferred stock, $.01 par value;authorized 2,000 shares, issued and outstanding —none                                                            |  |             | — |              |  |   | — |    |
| Common stock,$.01 par value; authorized 62,000 shares, issued 22,689 and 20,945shares, respectively                                                    |  |             | 227     |              |  |   | 209     |    |
| Additional paid-incapital                                                                                                                              |  |             | 142,897 |              |  |   | 139,309 |    |
| Accumulatedother comprehensive income(loss)                                                                                                            |  |             | 3,140   |              |  |   | (3,112  | )  |
| Accumulateddeficit                                                                                                                                     |  |             | (68,814 | )            |  |   | (80,785 | )  |
|                                                                                                                                                   |  |             | 77,450  |              |  |   | 55,621  |    |
| Less notesreceivable from officers                                                                                                                     |  |             | (1,002  | )            |  |   | (958    | )  |
| Less cost of treasury stock (408 and 266 shares,respectively)                                                                                          |  |             | (1,285  | )            |  |   | (720    | )  |
| Total shareholders'equity                                                                                                                              |  |             | 75,163  |              |  |   | 53,943  |    |
| Total liabilities and shareholders'equity                                                                                                              |  | $                | 311,668 |              |  | $      | 268,113 |    |
|                                                                                                                                                        |

Seenotes to consolidated financial statements.

F-3

----

ALLIED HEALTHCARE INTERNATIONALINC.

CONSOLIDATED STATEMENTS OFOPERATIONS

(In Thousands, Except Per ShareData)

|                                                                                |  |               |         |               |  |              |         |         |  |        |         |         |  |  |
|--------------------------------------------------------------------------------|--|---------------|---------|---------------|--|--------------|---------|---------|--|--------|---------|---------|--|--|
|                                                                           |  | YearEnded     |         | Year Ended    |  | Year Ended   |
|                                                                           |  | September 30, |         | September 30, |  | September30, |
|                                                                           |  | 2003          |         | 2002          |  | 2001         |
| Revenues:                                                                      |  |
| Net patientservices                                                            |  | $             | 287,964 |          |  | $            | 237,890 |    |  | $      | 130,719 |    |
| Net respiratory, medical equipment andsupplies                                 |  |          | 6,415   |          |  |         | 4,938   |    |  |   | 7,322   |    |
| Totalrevenues                                                                  |  |          | 294,379 |          |  |         | 242,828 |    |  |   | 138,041 |    |
| Cost of revenues:                                                              |  |
| Patientservices                                                                |  |          | 209,422 |          |  |         | 173,869 |    |  |   | 90,614  |    |
| Respiratory, medical equipment andsupplies                                     |  |          | 3,634   |          |  |         | 2,880   |    |  |   | 4,936   |    |
| Total cost ofrevenues                                                          |  |          | 213,056 |          |  |         | 176,749 |    |  |   | 95,550  |    |
| Grossprofit                                                                    |  |          | 81,323  |          |  |         | 66,079  |    |  |   | 42,491  |    |
| Selling, general and administrativeexpenses                                    |  |          | 53,648  |          |  |         | 48,847  |    |  |   | 32,514  |    |
| General and administrative expenses related to mail-orderoperations            |  |          | — |          |  |         | — |    |  |   | 3,883   |    |
| Losses due to sale ofsubsidiary                                                |  |          | — |          |  |         | — |    |  |   | 354     |    |
| Operatingincome                                                                |  |          | 27,675  |          |  |         | 17,232  |    |  |   | 5,740   |    |
| Interestincome                                                                 |  |          | (2,032  | )        |  |         | (3,024  | )  |  |   | (1,587  | )  |
| Interestexpense                                                                |  |          | 13,311  |          |  |         | 16,496  |    |  |   | 10,020  |    |
| Gain on settlement of PIKinterest                                              |  |          | — |          |  |         | (5,143  | )  |  |   | — |    |
| Foreign exchangeloss                                                           |  |          | 18      |          |  |         | 19      |    |  |   | 400     |    |
| Income (loss) before income taxes, minority interestand discontinuedoperations |  |          | 16,378  |          |  |         | 8,884   |    |  |   | (3,093  | )  |
| Provision for incometaxes                                                      |  |          | 4,910   |          |  |         | 4,971   |    |  |   | 24,117  |    |
| Income (loss) before minority interest and discontinuedoperations              |  |          | 11,468  |          |  |         | 3,913   |    |  |   | (27,210 | )  |
| Minorityinterest                                                               |  |          | — |          |  |         | 120     |    |  |   | 22      |    |
| Income (loss) from continuingoperations                                        |  |          | 11,468  |          |  |         | 3,793   |    |  |   | (27,232 | )  |
| Discontinuedoperations:                                                        |  |
| (Loss) income from discontinuedoperations                                      |  |          | (16     | )        |  |         | 1,001   |    |  |   | 620     |    |
| Gain on disposal of subsidiaries, net of taxes of$775                          |  |          | 519     |          |  |         | — |    |  |   | — |    |
|                                                                           |  |          | 503     |          |  |         | 1,001   |    |  |   | 620     |    |
| Net income(loss)                                                               |  |          | 11,971  |          |  |         | 4,794   |    |  |   | (26,612 | )  |
| Redeemable preferred dividends andaccretion                                    |  |          | 4,005   |          |  |         | 1,016   |    |  |   | — |    |
| Net income (loss) available to commonshareholders                              |  | $             | 7,966   |          |  | $            | 3,778   |    |  | $      | (26,612 | )  |
| Basic and diluted income (loss)per share of common stock from:                 |  |
| Income (loss)from continuingoperations                                         |  | $             | 0.34    |          |  | $            | 0.15    |    |  | $      | (1.57   | )  |
| Income from discontinuedoperations                                             |  |          | 0.02    |          |  |         | 0.05    |    |  |   | 0.04    |    |
| Net income (loss) available to commonshareholders                              |  | $             | 0.36    |          |  | $            | 0.20    |    |  | $      | (1.53   | )  |
| Weighted average number of common sharesoutstanding:                           |  |
| Basic                                                                          |  |          | 21,962  |          |  |         | 18,565  |    |  |   | 17,408  |    |
| Diluted                                                                        |  |          | 22,304  |          |  |         | 18,932  |    |  |   | 17,408  |    |
|                                                                                |

Seenotes to consolidated financial statements.

F-4

----

ALLIED HEALTHCARE INTERNATIONALINC.

CONSOLIDATED STATEMENTS OF CHANGESIN SHAREHOLDERS' EQUITY

(InThousands)

|                                                       |  |             |        |                          |  |                           |        |                                           |  |                |         |         |  |        |        |         |  |        |         |         |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------------|--|-------------|--------|--------------------------|--|---------------------------|--------|-------------------------------------------|--|----------------|---------|---------|--|--------|--------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                  |  |        |        |                     |  |                      |        | AccumulatedOtherComprehensive(Loss)Income |  |                |
|                                                  |  | CommonStock |        | AdditionalPaid-inCapital |  | Retained(Deficit)Earnings |        | Officers'Loan                             |  | TreasuryShares |         | Total   |  |        |
|                                                  |  | Shares      |        | Amount                   |  |
|                                                  |  |
| Balance, October 1,2000                               |  |        | 17,551 |                     |  | $                         | 176    |                                      |  | $              | 128,070 |    |  | $      | (6,248 | )  |  | $      | (58,967 | )  |  | $      | — |    |  | $      | — |    |  | $      | 63,031  |    |
| Comprehensiveloss:                                    |  |        |   |                     |  |                      |   |                                      |  |
| Netloss                                               |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   |   |    |  |   | (26,612 | )  |  |   |    |    |  |   |    |    |  |   | (26,612 | )  |
| Foreign currency translationadjustment                |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   | 648    |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 648     |    |
| Comprehensiveloss                                     |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | (25,964 | )  |
| Issuance of common stock for exercise of stockoptions |  |        | 4      |                     |  |                      |   |                                      |  |           | 7       |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 7       |    |
| Cost of treasuryshares                                |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   | (720    | )  |  |   | (720    | )  |
| Balance, September 30,2001                            |  |        | 17,555 |                     |  |                      | 176    |                                      |  |           | 128,077 |    |  |   | (5,600 | )  |  |   | (85,579 | )  |  |   | — |    |  |   | (720    | )  |  |   | 36,354  |    |
| Comprehensiveincome:                                  |  |        |   |                     |  |                      |   |                                      |  |
| Netincome                                             |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   |   |    |  |   | 4,794   |    |  |   |    |    |  |   |    |    |  |   | 4,794   |    |
| Foreign currency translationadjustment                |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   | 2,488  |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 2,488   |    |
| Comprehensiveincome                                   |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 7,282   |    |
| Issuance of common stockfor:                          |  |        |   |                     |  |
| Hyperionshares                                        |  |        | 375    |                     |  |                      | 4      |                                      |  |           | 1,590   |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 1,594   |    |
| Triumphshares                                         |  |        | 375    |                     |  |                      | 4      |                                      |  |           | 1,590   |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 1,594   |    |
| Non-cash basedcompensation                            |  |        | 1,171  |                     |  |                      | 11     |                                      |  |           | 4,205   |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 4,216   |    |
| Reorganization                                        |  |        | 1,469  |                     |  |                      | 14     |                                      |  |           | 5,727   |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 5,741   |    |
| Common stock issuancecosts                            |  |        |   |                     |  |                      |   |                                      |  |           | (864    | )  |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | (864    | )  |
| Accretion of Series A preferred stock issuancecosts   |  |        |   |                     |  |                      |   |                                      |  |           | (75     | )  |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | (75     | )  |
| Dividends on Series A preferredstock                  |  |        |   |                     |  |                      |   |                                      |  |           | (941    | )  |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | (941    | )  |
| Notes issued toofficers                               |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   |   |    |  |   |    |    |  |   | (940    | )  |  |   |    |    |  |   | (940    | )  |
| Interest on notes toofficers                          |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   |   |    |  |   |    |    |  |   | (18     | )  |  |   |    |    |  |   | (18     | )  |
| Balance, September 30,2002                            |  |        | 20,945 |                     |  |                      | 209    |                                      |  |           | 139,309 |    |  |   | (3,112 | )  |  |   | (80,785 | )  |  |   | (958    | )  |  |   | (720    | )  |  |   | 53,943  |    |
| Comprehensiveincome:                                  |  |        |   |                     |  |                      |   |                                      |  |
| Netincome                                             |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   |   |    |  |   | 11,971  |    |  |   |    |    |  |   |    |    |  |   | 11,971  |    |
| Foreign currency translationadjustment                |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   | 6,252  |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 6,252   |    |
| Comprehensiveincome                                   |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 18,223  |    |
| Issuance of common stockfor:                          |  |        |   |                     |  |
| Reorganization                                        |  |        | 890    |                     |  |                      | 9      |                                      |  |           | 3,471   |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 3,480   |    |
| Acquisition of Medic-One GroupLimited                 |  |        | 670    |                     |  |                      | 7      |                                      |  |           | 2,873   |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 2,880   |    |
| Exercise of stockoptions                              |  |        | 184    |                     |  |                      | 2      |                                      |  |           | 666     |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 668     |    |
| Common stock issuancecosts                            |  |        |   |                     |  |                      |   |                                      |  |           | (20     | )  |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | (20     | )  |
| Accretion of Series A preferred stockissuancecosts    |  |        |   |                     |  |                      |   |                                      |  |           | (482    | )  |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | (482    | )  |
| Dividends on Series A preferredstock                  |  |        |   |                     |  |                      |   |                                      |  |           | (3,523  | )  |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | (3,523  | )  |
| Issuance of warrants for professionalservices         |  |        |   |                     |  |                      |   |                                      |  |           | 603     |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   | 603     |    |
| Cost of treasuryshares                                |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   |   |    |  |   |    |    |  |   |    |    |  |   | (565    | )  |  |   | (565    | )  |
| Interest on notes toofficers                          |  |        |   |                     |  |                      |   |                                      |  |           |    |    |  |   |   |    |  |   |    |    |  |   | (44     | )  |  |   |    |    |  |   | (44     | )  |
| Balance, September 30,2003                            |  |        | 22,689 |                     |  | $                         | 227    |                                      |  | $              | 142,897 |    |  | $      | 3,140  |    |  | $      | (68,814 | )  |  | $      | (1,002  | )  |  | $      | (1,285  | )  |  | $      | 75,163  |    |
|                                                       |

Seenotes to consolidated financial statements.

F-5

----

ALLIED HEALTHCARE INTERNATIONALINC.

CONSOLIDATED STATEMENTS OF CASHFLOWS

(In Thousands)

|                                                                                         |  |               |         |               |  |              |         |         |  |        |         |         |  |  |
|-----------------------------------------------------------------------------------------|--|---------------|---------|---------------|--|--------------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                    |  | YearEnded     |         | Year Ended    |  | Year Ended   |
|                                                                                    |  | September 30, |         | September 30, |  | September30, |
|                                                                                    |  | 2003          |         | 2002          |  | 2001         |
| Cash flows from operatingactivities:                                                    |  |
| Net income(loss)                                                                        |  | $             | 11,971  |          |  | $            | 4,794   |    |  | $      | (26,612 | )  |
| Adjustments to reconcile net income (loss) tonet cash provided by operatingactivities:  |  |
| Income fromdiscontinuedoperations                                                       |  |          | (503    | )        |  |         | (1,001  | )  |  |   | (620    | )  |
| Depreciation andamortization                                                            |  |          | 1,778   |          |  |         | 1,337   |    |  |   | 1,402   |    |
| Amortization ofgoodwill                                                                 |  |          | — |          |  |         | — |    |  |   | 3,722   |    |
| Amortization of other intangibleassets                                                  |  |          | 207     |          |  |         | — |    |  |   | 3       |    |
| Amortization of debt issuance costs andwarrants                                         |  |          | 1,858   |          |  |         | 2,218   |    |  |   | 1,117   |    |
| Provision for doubtfulaccounts                                                          |  |          | 1,205   |          |  |         | 985     |    |  |   | 2,586   |    |
| (Gain) loss on sale of fixedassets                                                      |  |          | (48     | )        |  |         | (13     | )  |  |   | 33      |    |
| Lossesdue to sale ofsubsidiary                                                          |  |          | — |          |  |         | — |    |  |   | 354     |    |
| Interest inkind                                                                         |  |          | 645     |          |  |         | 3,063   |    |  |   | 3,964   |    |
| Minorityinterest                                                                        |  |          | — |          |  |         | 120     |    |  |   | 22      |    |
| Stock based compensation —employees                                               |  |          | 587     |          |  |         | 5,835   |    |  |   | — |    |
| Interest accrued on loans toofficers                                                    |  |          | (44     | )        |  |         | (18     | )  |  |   | — |    |
| Write-off of deferred financing fees and debtdiscount                                   |  |          | 613     |          |  |         | 925     |    |  |   | — |    |
| Gain on settlement of PIKinterest                                                       |  |          | — |          |  |         | (5,143  | )  |  |   | — |    |
| Gain on acquisition of minorityinterest                                                 |  |          | — |          |  |         | (179    | )  |  |   | — |    |
| Deferred incometaxes                                                                    |  |          | (906    | )        |  |         | 159     |    |  |   | 21,494  |    |
| Changes in assets and liabilities, excludingthe effect of businesses acquired and sold: |  |
| Increasein accountsreceivable                                                           |  |          | (30     | )        |  |         | (3,251  | )  |  |   | (4,511  | )  |
| (Increase) decrease ininventories                                                       |  |          | (45     | )        |  |         | 1       |    |  |   | (414    | )  |
| Increase in prepaid expenses and otherassets                                            |  |          | (3,313  | )        |  |         | (1,434  | )  |  |   | (1,305  | )  |
| Increase (decrease) in accounts payable and otherliabilities                            |  |          | 674     |          |  |         | (1,268  | )  |  |   | 1,376   |    |
| Net cash provided by continuingoperations                                               |  |          | 14,649  |          |  |         | 7,130   |    |  |   | 2,611   |    |
| Net cash provided by (used in) discontinuedoperations                                   |  |          | 461     |          |  |         | 2,936   |    |  |   | (259    | )  |
| Net cash provided by operatingactivities                                                |  |          | 15,110  |          |  |         | 10,066  |    |  |   | 2,352   |    |
| Cash flows from investingactivities:                                                    |  |
| Capitalexpenditures                                                                     |  |          | (4,026  | )        |  |         | (3,091  | )  |  |   | (1,259  | )  |
| Proceeds from sale of property andequipment                                             |  |          | 175     |          |  |         | 105     |    |  |   | 12      |    |
| Notes issued toofficers                                                                 |  |          | — |          |  |         | (940    | )  |  |   | — |    |
| Proceeds from sale of discontinuedoperations                                            |  |          | 8,195   |          |  |         | — |    |  |   | — |    |
| Payments for acquisitions — net of cashacquired                                   |  |          | (9,531  | )        |  |         | (2,047  | )  |  |   | (14,616 | )  |
| Proceeds limited to futureacquisitions                                                  |  |          | 26,053  |          |  |         | 11,018  |    |  |   | (52,487 | )  |
| Proceeds from sale ofbusiness                                                           |  |          | — |          |  |         | — |    |  |   | 15,075  |    |
| Payments on acquisitionspayable                                                         |  |          | (7,031  | )        |  |         | (1,038  | )  |  |   | (2,163  | )  |
| Net cash provided by (used in) investingactivities                                      |  |          | 13,835  |          |  |         | 4,007   |    |  |   | (55,438 | )  |
|                                                                                         |

(Continued)

See notes to consolidated financial statements.

F-6

----

ALLIED HEALTHCARE INTERNATIONALINC.

CONSOLIDATED STATEMENTS OF CASHFLOWS (Continued)

(In Thousands)

|                                                                       |  |               |         |               |  |              |         |         |  |        |         |         |  |  |
|-----------------------------------------------------------------------|--|---------------|---------|---------------|--|--------------|---------|---------|--|--------|---------|---------|--|--|
|                                                                  |  | YearEnded     |         | Year Ended    |  | Year Ended   |
|                                                                  |  | September 30, |         | September 30, |  | September30, |
|                                                                  |  | 2003          |         | 2002          |  | 2001         |
| Cash flows from financingactivities:                                  |  |
| Payments for financing fees andissuance costs                         |  |          | (20     | )        |  |         | (4,053  | )  |  |   | (2,004  | )  |
| Proceeds from issuance ofstock                                        |  |          | — |          |  |         | 3,188   |    |  |   | — |    |
| Payments on notespayable                                              |  |          | (19,363 | )        |  |         | (4,575  | )  |  |   | — |    |
| Payments on revolvingloan                                             |  |          | — |          |  |         | — |    |  |   | (6,550  | )  |
| Proceeds from long-termdebt                                           |  |          | — |          |  |         | — |    |  |   | 72,115  |    |
| Principal payments on long-termdebt                                   |  |          | (6,727  | )        |  |         | (5,150  | )  |  |   | (4,038  | )  |
| Payments for treasury sharesacquired                                  |  |          | (565    | )        |  |         | — |    |  |   | (720    | )  |
| Stock options and warrants exercised, net, includingtaxbenefit        |  |          | 80      |          |  |         | — |    |  |   | 7       |    |
| Net cash (used in) provided by financingactivities                    |  |          | (26,595 | )        |  |         | (10,590 | )  |  |   | 58,810  |    |
| Effect of exchange rate oncash                                        |  |          | 1,063   |          |  |         | 1,461   |    |  |   | 584     |    |
| Increase incash                                                       |  |          | 3,413   |          |  |         | 4,944   |    |  |   | 6,308   |    |
| Cash and cash equivalents, beginningofperiod                          |  |          | 18,278  |          |  |         | 13,334  |    |  |   | 7,026   |    |
| Cash and cash equivalents, end ofperiod                               |  | $             | 21,691  |          |  | $            | 18,278  |    |  | $      | 13,334  |    |
| Supplemental cash flowinformation:                                    |  |
| Cash paid forinterest                                                 |  | $             | 10,679  |          |  | $            | 10,728  |    |  | $      | 5,669   |    |
| Cash paid for income taxes,net                                        |  | $             | 6,691   |          |  | $            | 5,914   |    |  | $      | 2,101   |    |
| Supplemental disclosure ofnon-cash investing and financingactivities: |  |
| Detailsof business acquired in purchasetransactions:                  |  |
| Fair value of assetsacquired                                          |  | $             | 12,254  |          |  | $            | 2,525   |    |  | $      | 44,395  |    |
| Liabilities assumed orincurred                                        |  | $             | 2,408   |          |  | $            | 341     |    |  | $      | 6,080   |    |
| Cash paid for acquisitions(including relatedexpenses)                 |  | $             | 9,846   |          |  | $            | 2,184   |    |  | $      | 18,297  |    |
| Cashacquired                                                          |  |          | 315     |          |  |         | 137     |    |  |   | 3,681   |    |
| Net cash paid foracquisitions                                         |  | $             | 9,531   |          |  | $            | 2,047   |    |  | $      | 14,616  |    |
| Issuance of notespayable                                              |  | $             | 36,026  |          |  | $            | 3,747   |    |  | $      | 20,018  |    |
| Issuance of commonstock                                               |  | $             | 6,360   |          |  | $            | 9,960   |    |  |
| Issuance of Series A preferredstock                                   |  |          |    |          |  | $            | 35,051  |    |  |
|                                                                       |

Seenotes to consolidated financial statements.

F-7

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(In Thousands, Except Per ShareData)

1.    Business andOperations:

Allied Healthcare International Inc. and itssubsidiaries (the "Company")is one of the leading providers of flexible healthcare staffingservices, including nursing and ancillary services, to the UnitedKingdom ("U.K.") healthcareindustry. The Company operates a community-based network of over 115branches, with the capacity to provide nurses, carers (often referredto as home health aides in the United States) and specialized medicalpersonnel to locations covering approximately 90% of thepopulation of Great Britain. The Company provides healthcare staffingservices to hospitals, local governmental authorities, nursing homesand private patients in the U.K. Through its U.K. operations, theCompany also supplies medical grade oxygen for use in respiratorytherapy to the U.K. pharmacy market and to private patients in NorthernIreland.

2.    Summary of Significant AccountingPolicies:

Basis of Accounting and Principles ofConsolidation:

The accompanying consolidated financialstatements of the Company are prepared on the accrual basis ofaccounting in accordance with accounting principles generally acceptedin the United States of America("U.S."). All intercompanyaccounts and transactions are eliminated in consolidation.

Cash and Cash Equivalents:

Cash and cashequivalents include highly liquid short-term investments purchased withinitial maturities of 90 days or less.

RestrictedCash:

Restricted cash represents proceeds limited to futureacquisitions. The proceeds refer to amounts available for payment ofconsideration for certain permitted acquisitions under our seniorcollateralized term and revolving credit facility (the"Senior Credit Facility"),including the payment of contingent consideration for completedtransactions, which have been advanced under the Senior CreditFacility.

The current portion of restricted cash represents theamount on deposit, as required by the senior credit lender, for thesole purpose of repaying the notes payable issued in connection withthe acquisition of certain U.K. flexible staffing agencies. (See Notes4 and 7.)

Inventories:

Inventories, whichconsist primarily of finished goods, include oxygen for use inrespiratory therapy, ancillary medical supplies and certain medicalequipment, are valued at the lower of cost (determined using afirst-in, first-out method) or market.

Property andEquipment:

Property and equipment, includingrevenue-producing equipment, is carried at cost, net of accumulateddepreciation and amortization. Revenue-producing equipment consists ofoxygen cylinders, oxygen concentrators and oxygen values. Depreciationfor revenue-producing equipment is provided on the straight-line methodover their estimated useful lives ranging from seven to twenty years.Buildings are being depreciated over their useful lives of twenty-fiveto fifty years and leasehold improvements are amortized over therelated lease terms or estimated useful lives, whichever isshorter.

Intangible Assets:

Intangible assets,consisting principally of goodwill, are carried at cost, net ofaccumulated amortization. All goodwill is enterprise goodwill.

F-8

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

In accordance with Statement of FinancialAccounting Standards ("FAS")No. 142, "Goodwill and Other IntangibleAssets" ("FAS No.142"), all goodwill and intangible assets deemedto have indefinite lives are no longer subject to amortization but willbe subject to annual impairment tests. The Company completed its annualimpairment test required under FAS No. 142 during the fourth quarter offiscal 2003 and determined there is no impairment to its recordedgoodwill balance.

Had amortization of goodwill not been recordedduring the year ended September 30, 2001, the net loss would have beenreduced by $3,722, net of taxes, and basic and diluted net loss pershare would have decreased by $0.21.

The following tablepresents the changes in the carrying amount of goodwill for the yearended September 30, 2003:

|                              |  |                              |         |               |  |        |         |        |  |        |         |        |  |  |
|------------------------------|--|------------------------------|---------|---------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                         |  | Year Ended September 30,2003 |
|                         |  | U.K.Operations               |         | U.S.Corporate |  | Total  |
| Balance at September 30,2002 |  | $                            | 121,214 |          |  | $      | 2,300   |   |  | $      | 123,514 |   |
| Goodwill acquired duringyear |  |                         | 51,983  |          |  |   | — |   |  |   | 51,983  |   |
| Foreign exchangeeffect       |  |                         | 8,206   |          |  |   | — |   |  |   | 8,206   |   |
| Balance at September 30,2003 |  | $                            | 181,403 |          |  | $      | 2,300   |   |  | $      | 183,703 |   |
|                              |

Ofthe $51,983 of goodwill acquired during the year ended September 30,2003, $41,036 related to the Company's fiscal 2001 through fiscal2003 acquisitions of various flexible staffing agencies that had earnedcontingent consideration based upon the earnings of the acquiredentities. The Company satisfied its obligation to pay under thesecontingent consideration agreements by cash payments as well as theissuance of notes payable. Accordingly, in the first quarter of fiscal2003, the Company issued notes payable of $36,026 to satisfy amountsowed under these agreements. The notes predominately relate to theCompany's September 27, 2001 acquisition of the issued andoutstanding shares of Staffing Enterprise Limited and StaffingEnterprise (PSV) Limited (collectively, "StaffingEnterprise"), a London based provider of flexiblestaffing of specialist nurses and other healthcare professionals toLondon NHS Trust and independent hospitals.

Intangible assetssubject to amortization after the adoption of FAS No. 142 are beingamortized on the straight-line method and consist of the following:

|                               |  |              |  |                     |       |                         |  |                   |     |        |  |        |       |        |  |  |  |  |
|-------------------------------|--|--------------|--|---------------------|-------|-------------------------|--|-------------------|-----|--------|--|--------|-------|--------|--|--|--|--|
|                          |  |         |  | September 30,2003   |
|                          |  | RangeofLives |  | GrossCarryingAmount |       | AccumulatedAmortization |  | NetCarryingAmount |
| Customerrelationships         |  | 10           |  | $                   | 1,996 |                    |  | $                 | 150 |   |  | $      | 1,846 |   |
| Tradenames                    |  | 3            |  |                | 175   |                    |  |              | 49  |   |  |   | 126   |   |
| Non-Competeagreements         |  | 10           |  |                | 43    |                    |  |              | 11  |   |  |   | 32    |   |
| Favorable leasehold interests |  | 2 –5   |  |                | 20    |                    |  |              | 5   |   |  |   | 15    |   |
| Total                         |  |         |  | $                   | 2,234 |                    |  | $                 | 215 |   |  | $      | 2,019 |   |
|                               |

Amortizationexpense for other intangible assets still subject to amortization was$207 for the year ended September 30, 2003. At September 30, 2003,estimated future amortization expense of other intangible assets stillsubject to amortization is as follows: approximately $281, $274, $214,$202 and $200 for the years ended September 30, 2004, 2005, 2006, 2007and 2008, respectively.

Deferred Financing Costs:

Costs incurred in obtaining long-term financing are amortized overthe terms of the long-term financing agreements using the interestmethod. At September 30, 2003 and 2002, other assets 

F-9

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

included $3,675 and $4,746 of deferredfinancing costs, net of accumulated amortization of $4,250 and $2,677,respectively. Amortization of deferred financing costs is included ininterest expense in the accompanying Consolidated Statements ofOperations.

Income Taxes:

The Company accountsfor income taxes using the liability method in accordance with FAS No.109, "Accounting for Income Taxes." Underthis method, deferred income tax assets and liabilities reflect taxcarryforwards and the net effects of temporary differences between thecarrying amounts of assets and liabilities for financial reporting andincome tax purposes, as determined under currently enacted tax rates.Deferred tax assets are recorded if future realization is more likelythan not.

Deferred taxes are recorded primarily for bad debts,Federal and state net operating loss carryforwards, depreciation andamortization of intangibles, which are reported in different periodsfor Federal income tax purposes than for financial reporting purposes.Valuation allowances are established, when necessary, to reducedeferred tax assets to the amounts expected to be realized.

Revenue Recognition:

Patient services andrespiratory therapy revenues are recognized when services are performedand substantiated by proper documentation. For patient services, whichaccount for over 95% of the Company's business, revenue isrecognized upon completion of timesheets that also require thesignature of the recipient of services and are billed at fixed rates.Unbilled accounts receivable represents amounts due for servicesperformed but not billed as of the balance sheet date. Revenues fromthe rental of home medical equipment (including respiratory equipment)are recognized over the rental period (typically on a month-to-monthbasis) and approximated $457, $328 and $274 in fiscal 2003, 2002 and2001, respectively. Revenues from the sale of oxygen and supplies foruse in respiratory therapy are recognized when products are shipped, acontractual arrangement exists, the sales price is either fixed ordeterminable and collection is reasonably assured.

The Companyreceives a majority of its revenue from the National Health Services(the "NHS") and other U.K.governmental payors. Certain revenues are subject to review bythird-party payors, and adjustments, if any, are recorded whendetermined. For the years ended September 30, 2003, 2002 and 2001,65%, 68% and 61%, respectively, of theCompany's net revenues were attributable to the NHS and otherU.K. governmental payor programs.

Earnings (Loss) PerShare:

Basic earnings (loss) per share("EPS") is computed using theweighted average number of common shares outstanding. Diluted EPSadjusts basic EPS for the effects of stock options, warrants andredeemable convertible stock only when such effect is dilutive. Infuture periods, the impact of the assumed conversion of the 7,774 ofredeemable convertible preferred stock could potentially dilute basicEPS. At September 30, 2003, 2002 and 2001, the Company had outstandingstock options and warrants to purchase 2,244, 705 and 579 shares,respectively, of common stock ranging in price from $4.00 to $7.25,$5.41 to $7.25 and $4.31 to $7.25 per share, respectively, that werenot included in the computation of diluted EPS because the exerciseprice was greater than the average market price of the commonshares.

F-10

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

The weighted average number of shares usedin the basic and diluted earnings (loss) per share computations for theyears ended September 30, 2003, 2002 and 2001 are as follows:

|                                                                                                                              |  |        |         |        |  |        |        |        |  |        |         |        |  |  |
|------------------------------------------------------------------------------------------------------------------------------|--|--------|---------|--------|--|--------|--------|--------|--|--------|---------|--------|--|--|
|                                                                                                                         |  | 2003   |         | 2002   |  | 2001   |
| Weighted average number of common sharesoutstanding                                                                          |  |   | 21,962  |   |  |   | 18,399 |   |  |   | 17,408  |   |
| Weighted average number of common shares contingentlyissuable                                                                |  |   | — |   |  |   | 166    |   |  |   | — |   |
| Weighted average number of common shares outstanding as usedin computation of basic earnings (loss) per share of commonstock |  |   | 21,962  |   |  |   | 18,565 |   |  |   | 17,408  |   |
| Effect of dilutive securities — stockoptions                                                                           |  |   | 342     |   |  |   | 367    |   |  |   | — |   |
| Shares used in computation of diluted earnings (loss) pershare of commonstock                                                |  |   | 22,304  |   |  |   | 18,932 |   |  |   | 17,408  |   |
|                                                                                                                              |

ComprehensiveIncome (Loss):

Components of comprehensive income (loss)include net income (loss) and all other non-owner changes in equity,such as the change in the cumulative translation adjustment, unrealizedgains and losses on investments available for sale and minimum pensionliability. Currency translation is the only item of other comprehensiveincome (loss) impacting the Company.

Stock-basedCompensation:

The accompanying consolidated financialstatements of the Company have been prepared in accordance with theAccounting Principles Board's Opinion No. 25,"Accounting for Stock Issued to Employees"("APB No. 25"). Under APB No.25, generally, no compensation expense is recognized in connection withthe awarding of stock option grants to employees provided that, as ofthe grant date, all terms associated with the award are fixed and thequoted market price of the stock is equal to or less than the amount anemployee must pay to acquire the stock as defined.

The Companyadopted the disclosure only provisions of FAS No. 123,"Accounting for Stock-Based Compensation,"which requires certain financial statement disclosures, including proforma operating results had the Company prepared its consolidatedfinancial statements in accordance with the fair value based method ofaccounting for stock-based compensation. In December 2002, theFinancial Accounting Standards Board("FASB") issued FAS No. 148,"Accounting for Stock-Based Compensation —Transition Disclosure, An Amendment of FAS Statement No.123." This statement provides alternative methods oftransition for a voluntary change to the fair value based method ofaccounting for stock-based employee compensation. In addition, FAS No.148 amends the disclosure requirements of FAS No. 123 to require moreprominent and more frequent disclosures in financial statements aboutthe effects of stock-based compensation. The adoption of FAS No. 148did not have an impact on the Company's financial position orresults of operations.

F-11

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

If the Company had elected to recognizecompensation expense based on the fair value of the options at grantdate as prescribed by FAS No. 123, net income (loss) and net income(loss) per share would have been adjusted to the pro forma amountsindicated in the table below for the three years ended September30:

|                                                                                                                                |  |        |       |         |  |        |         |         |  |        |         |         |  |  |
|--------------------------------------------------------------------------------------------------------------------------------|--|--------|-------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                                                           |  | 2003   |       | 2002    |  | 2001   |
| Net income (loss) available to common shareholders,as reported                                                                 |  |
| Add: Stock-based compensation includedin reported net income (loss), net of related taxeffect                                  |  | $      | 7,966 |    |  | $      | 3,778   |    |  | $      | (26,612 | )  |
|                                                                                                                           |  |   | 587   |    |  |   | — |    |  |   | — |    |
| Less: Total stock-based compensation expense determined underfair value based method for all awards, net of related taxeffects |  |   | (728  | )  |  |   | (173    | )  |  |   | (96     | )  |
| Pro forma net income (loss) available to commonshareholders                                                                    |  | $      | 7,825 |    |  | $      | 3,605   |    |  | $      | (26,708 | )  |
| Net income (loss) pershare:                                                                                                    |  |
| Basic — asreported                                                                                                       |  | $      | 0.36  |    |  | $      | 0.20    |    |  | $      | (1.53   | )  |
| Basic — proforma                                                                                                         |  | $      | 0.36  |    |  | $      | 0.19    |    |  | $      | (1.53   | )  |
| Net income (loss) pershare:                                                                                                    |  |
| Diluted — asreported                                                                                                     |  | $      | 0.36  |    |  | $      | 0.20    |    |  | $      | (1.53   | )  |
| Diluted — proforma                                                                                                       |  | $      | 0.35  |    |  | $      | 0.19    |    |  | $      | (1.53   | )  |
|                                                                                                                                |

The fair value of each option granted isestimated on the date of grant using the Black-Scholes option-pricingmodel with the following assumptions:

|                        |  |        |      |         |  |        |      |         |  |        |      |         |  |  |
|------------------------|--|--------|------|---------|--|--------|------|---------|--|--------|------|---------|--|--|
|                   |  | 2003   |      | 2002    |  | 2001   |
| Expected life (years)  |  |   | 9    |    |  |   | 9    |    |  |   | 4    |    |
| Risk-free interestrate |  |   | 4.1  | %  |  |   | 5.1  | %  |  |   | 5.5  | %  |
| Volatility             |  |   | 66.1 | %  |  |   | 69.1 | %  |  |   | 61.4 | %  |
| Expected dividendyield |  |   | 0    | %  |  |   | 0    | %  |  |   | 0    | %  |
|                        |

Thecompensation cost as generated by the Black-Scholes option-pricingmodel may not be indicative of the future benefit, if any, that may bereceived by the option holder.

Impairment of Long-livedAssets:

Long-lived assets are reviewed for impairmentwhenever events or changes in circumstances indicate that the carryingamount may not be recoverable. If the sum of the undiscounted futurecash flows is less than the carrying amount of the asset, a loss isrecognized for the difference between the fair value (discounted futurecash flows) and carrying value of the asset. Impairment loss on assetsto be sold, if any, is based on the estimated proceeds to be received,less estimated costs to sell.

Foreign CurrencyTranslation:

Assets and liabilities of foreign subsidiarieswhose functional currency is other than the U.S. dollar are translatedto U.S. dollars using the exchange rates in effect at the balance sheetdate. Results of operations are translated using weighted averageexchange rates during the period. Adjustments resulting from thetranslation process are included as a separate component ofshareholders' equity.

F-12

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

Fair Value of FinancialInstruments:

Cash, restricted cash, accounts receivable,unbilled accounts receivable, dividends payable, accounts payable,accrued expenses and taxes payable approximate fair value due to theshort-term maturity of those instruments. The derivative liability isrecorded at its estimated fair value. The estimated fair value of theCompany's outstanding borrowings was $166,772 and $149,198 atSeptember 2003 and 2002, respectively, compared to $165,378 and$148,530 total debt outstanding.

Concentrations of CreditRisk:

Financial instruments which potentially subject theCompany to concentrations of credit risk are cash equivalents andaccounts receivable. The Company places its cash equivalents with highcredit quality financial institutions. The Company believes nosignificant concentration of credit risk exists with respect to thesecash equivalents.

The Company grants credit without collateralto its patients, who are primarily insured under third-partyagreements. The Company maintains an allowance for doubtful accountsbased on the expected collectibility of accounts receivable. AtSeptember 30, 2003 and 2002, 78.2% and 77.1% of accountsreceivable was due from the NHS and other U.K. governmental payors,respectively, with the balance due from various other third-partypayors and self-pay patients (none of which comprise greater than10% of the balance).

Use of Management'sEstimates:

The preparation of financial statements inconformity with generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reportedamounts of assets and liabilities, and disclosure of contingent assetsand liabilities at the date of the financial statements, and thereported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates. Estimates are usedfor, but not limited to, the accounting for allowance for doubtfulaccounts, contractual allowances, valuation of inventories, accruedexpenses, depreciation and amortization.

Reclassifications:

Certain prior year balances havebeen reclassified to conform to the current year presentation.

Recent Accounting Pronouncements:

In April 2002,the FASB issued FAS No. 145, "Rescission of FASBStatements No. 4 (Reporting Gains and Losses From Extinguishment ofDebt), 44 (Accounting for Intangible assets of Motor Carries), and 64(Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements),Amendment of FASB Statement No.13 (Accounting for Leases), andTechnical Corrections" ("FAS No.145"). FAS No. 145 addresses gain or loss on theextinguishment of debt and sale-leaseback accounting for certain leasemodifications. This statement is effective for fiscal years beginningafter May 15, 2002. The Company adopted FAS No. 145, effective October1, 2001, and recorded a charge of $925 in interest expense in thefourth quarter of fiscal 2002.

In June 2002, the FASB issued FASNo. 146, "Accounting for Costs Associated with Exit orDisposal Activities." FAS No. 146 addresses financialaccounting and reporting for costs associated with exit or disposalactivities and nullifies Emerging Issues Task Force Issue No. 94-3,"Liability Recognition for Certain Employee TerminationBenefits and Other Costs to Exit an Activity (including Certain CostsIncurred in a Restructuring)" ("FASNo. 146"). This statement is effective for exitand disposal activities initiated after December 15, 2002. The adoptionof FAS No. 146 did not have a material impact on the Company'sconsolidated financial position or results of operations.

F-13

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

In November 2002, the FASB approved FASBInterpretation No. 45, Guarantor's Accounting and DisclosureRequirements for Guarantees, including Indirect Guarantees ofIndebtedness of Others, an Interpretation of FASB Statement No. 5, 57and 107 and Rescission of FASB Interpretation No. 34("FIN 45"). FIN 45 clarifiesthe requirements of SFAS No. 5, Accounting for Contingencies, relatingto a guarantor's accounting for, and disclosure of, the issuanceof certain types of guarantees. Specifically, FIN 45 requires aguarantor to recognize a liability for the non-contingent component ofcertain guarantees, representing the obligation to stand ready toperform in the event that specified triggering events or conditionsoccur. The provisions for initial recognition and measurement areeffective on a prospective basis for guarantees that are issued ormodified after December 31, 2002, irrespective of a guarantor'sfiscal year end. However, the disclosure provisions of FIN 45 areeffective for financial statements for the interim and annual periodsending after December 15, 2002. The adoption of FIN 45 did not have amaterial impact on the Company's consolidated financial positionor results of operations. The Company has disclosed all guarantees inNote 7 to the Notes to Consolidated Financial Statements.

InJanuary 2003, the FASB issued FASB Interpretation No. 46, Consolidationof Variable Interest Entities ("FIN46"). FIN 46 clarifies the application ofAccounting Research Bulletin No. 51, Consolidated Financial Statements,to certain entities in which equity investors do not have thecharacteristics of a controlling financial interest or do not havesufficient equity at risk for the entity to finance its activitieswithout additional subordinated financial support from other parties.The Company is required to adopt the provisions of FIN 46 for variableinterest entities created after January 31, 2003. The Company does nothave any variable interest entities and therefore, the adoption of FIN46 will not have a material impact on its consolidated financialposition or results of operations.

In April 2003, the FASBissued FAS No. 149, "Amendment of Statement 133 onDerivative Instruments and Hedging Activities"("FAS No. 149"). FAS No. 149amends and clarifies accounting for derivative instruments, includingcertain derivative instruments embedded in other contracts, and forhedging activities under FAS No. 133 and is effective for contractsentered into or modified after June 30, 2003. The adoption of FAS No.149 did not have a material effect on the Company's consolidatedfinancial position or results of operations.

In May 2003, theFASB issued FAS No. 150, "Accounting for Certain FinancialInstruments with Characteristics of Both Liabilities andEquity" ("FAS No.150"). FAS No. 150 establishes standards for howan issuer classifies and measures certain financial instruments withcharacteristics of both liabilities and equity. This statement requiresthat an issuer classify a financial instrument that is within its scopeas a liability (or an asset in some circumstances). Many of thoseinstruments were previously classified as equity. FAS No. 150 iseffective for financial instruments entered into or modified after May31, 2003, and otherwise is effective at the beginning of the firstinterim period beginning after June 15, 2003. The adoption of FAS No.150 did not have a material effect on the Company's consolidatedfinancial position or results of operations.

3.    CorporateReorganization:

On April 24, 2002, the Company entered into aMaster Reorganization Agreement ("ReorganizationAgreement") with two of its U.K. subsidiaries— Allied Healthcare Group Limited ("AlliedHealthcare (UK)") and Transworld Healthcare (UK)Limited ("TWUK") — andcertain investors in such subsidiaries. Both the ReorganizationAgreement and the reorganization (the"Reorganization") were votedupon and approved at the Company's annual meeting of shareholderson June 7, 2002 and the Reorganization subsequently was consummated onJuly 25, 2002. Pursuant to the Reorganization, equity investments inTWUK and subordinated debt investments in Allied Healthcare (UK) wereexchanged for shares of the Company's common stock and shares ofthe Company's new Series A preferred stock. The net effect of theReorganization was that TWUK 

F-14

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

became an indirect wholly-owned subsidiary ofthe Company and the senior subordinated debt investments in AlliedHealthcare (UK) were replaced by shares of the Company's Series Apreferred stock. The primary purpose of the Reorganization was theCompany's desire to increase shareholder value by having theCompany and its subsidiaries be viewed as "onecompany" by the marketplace. Other objectives of theReorganization were to streamline the Company's corporatestructure, improve the potential for equity financings in order to takeadvantage of attractive opportunities in the U.S. healthcare staffingservices market and, effectively convert the equity and subordinateddebt investments in the Company's U.K. subsidiaries into directinvestments in the Company. The Company's management believesthat the Reorganization resulted in the Company having a morestraight-forward and integrated management and corporate structure.

In the Reorganization, accrued and unpaid interest owed to theholders of the senior subordinated promissory notes (the"Notes") issued by AlliedHealthcare (UK) in the refinancing of the Company's U.K.operation in 1999, was satisfied by either the exchange for shares ofthe Company's common stock or the right to receive a funding note(the "Loan Notes"); the LoanNote holders were required to exchange the loan notes for shares of theCompany's common stock. The satisfaction of accrued and unpaidinterest for shares of the Company's common stock was exchangedat the rate of 0.3488 shares for every £2.00 of Loan Notes. Infiscal 2002, the Company issued 117 shares of common stock insettlement of accrued and unpaid interest and the remaining 890 sharesof common stock were issued in the first quarter of fiscal 2003.

In the Reorganization, the Company issued an aggregate of 2,359shares of its common stock and 7,774 shares of its Series A preferredstock with a liquidation preference of £22,287 ($35,213) inexchange for all of the equity investments in TWUK not already held bythe Company and all of the senior subordinated debt investments inAllied Healthcare (UK). The holders of the Series A preferred stock andthe Company agreed to a fixed exchange rate of $1.58 set forth in anamendment to the Company's certificate of incorporation definingthe rights of the Series A preferred stock. The common shares werevalued at $3.91 per share which represented the closing price on AMEXof the Company's stock at April 24, 2002, the date of theReorganization Agreement. The redeemable convertible preferred stockissued in connection with the Reorganization was valued based on theexchange ratio determined pursuant to the Reorganization Agreement. Atissuance, as the value of the common stock into which the preferredshares would convert was less than the fair value of the redeemablepreferred stock, there was no beneficial conversion feature.

TheCompany has registered, at its expense, the resale of all of the sharesof common stock issued in the Reorganization and the shares of commonstock issueable upon conversion of the Series A preferred stock.

The following table displays the unaudited pro forma results ofoperations and related per share information as if the Reorganizationwas completed as of October 1, 2001. The unaudited pro forma resultsprincipally reflect the reversal of interest expense, net of tax,related to the Notes of Allied Healthcare (UK) to reflect the exerciseof Equity Warrants and the related exchange of TWUK shares for theCompany's new Series A preferred stock.

|                                                          |  |                             |         |        |  |  |
|----------------------------------------------------------|--|-----------------------------|---------|--------|--|--|
|                                                     |  | Year EndedSeptember 30,2002 |
| Net revenues                                             |  | $                           | 242,828 |   |
| Gross profit                                             |  |                        | 66,079  |   |
| Operatingincome                                          |  |                        | 19,536  |   |
| Netincome                                                |  |                        | 4,984   |   |
| Net income available forcommon shareholders              |  |                        | 869     |   |
| Income per share ofcommon stock — Basic andDiluted |  | $                           | 0.04    |   |
|                                                          |

F-15

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

The above pro forma results, exclude thefollowing one time and non-recurring adjustments related to theReorganization:

|              |                                                                                                                                                                                                                       |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Companyrecognized compensation expense of $1,619 on the exchange of 2,523management's and employees' redeemable shares of TWUK for414 shares of the Company's common stock calculated using a netexercise method. |

|              |                                                                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Companyrecognized a gain of $5,143 on the settlement of accrued and unpaidinterest owed to the holders of the Notes of Allied Healthcare(UK). |

|              |                                                                                                                                                                                                 |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company recognized acharge of $925 to reflect the write off of deferred costs associatedwith the Notes of Allied Healthcare (UK) issued in 1999, which wereexchanged in the Reorganization. |

|              |                                                                                                                     |
|--------------|---------------------------------------------------------------------------------------------------------------------|
| •  | TheCompany recognized a charge of $686 to reflect the costs associated incompleting the Reorganization transaction. |

4.    BusinessCombinations and Disposals:

Combinations:

OnJuly 8, 2003, the Company completed its acquisition of Cynon HealthAgency, a supplier of flexible healthcare staffing services primarilyto hospitals, nursing homes and prisons in the U.K. The considerationincluded a payment of $1,237 in cash and additional contingent cashconsideration of $1,751 dependent upon future earnings of the acquiredentity.

On June 27, 2003, the Company completed its acquisitionof Carewise Nursing Agency, which specializes in supplying qualifiedcritical care nurses to intensive care units across National HealthService (the "NHS") hospitalsin the U.K. The consideration included a payment of $91 in cash andadditional contingent cash consideration of $1,575 dependent uponfuture earnings of the acquired entity.

On April 11, 2003, theCompany completed its acquisition of First Force Medical RecruitmentsLimited, a supplier of flexible healthcare staffing services primarilyto military and NHS hospitals in the U.K. The consideration included apayment of $787 in cash and additional contingent cash consideration of$2,084 dependent upon future earnings of the acquired entity.

OnMarch 17, 2003, the Company completed its acquisitions of AblecareOxfordshire and Ablecare Northamptonshire, collectively referred to as"Ablecare", both suppliers of flexiblehealthcare staffing services primarily to local authority socialservices departments in the U.K. The consideration included a paymentof $809 in cash and additional contingent cash consideration dependentupon future earnings of the acquired entities. In August of 2003,contingent cash consideration of $630 was earned and paid. Noadditional consideration is required in connection with thisacquisition.

On January 13, 2003, the Company completed itsacquisition of Yorkshire Careline, a supplier of nurses and carers tolocal authority social service departments in the U.K. Theconsideration included a payment of $965 in cash and additionalcontingent cash consideration of $642 dependent upon future earnings ofthe acquired entity. Such contingent consideration was earned and paidin August of 2003. No additional consideration is required inconnection with this acquisition.

On November 28, 2002, theCompany completed its acquisition of Medic-One Group Limited, asupplier of temporary staffing to the NHS hospitals and privatehospitals in the U.K. The consideration included $4,642 in cash, andthe issuance of 670 shares of the Company's common stock and upto approximately $14,270 of additional contingent consideration basedon future earnings. At 

F-16

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

September 30, 2003, the Company is onlyobligated to issue additional contingent consideration of up toapproximately $8,169 dependent upon future earnings of the acquiredentity as $6,101 of the previous contingent consideration was unearnedand will not be required. The additional contingent consideration, ifany, will be satisfied by a combination of cash and shares of theCompany's stock.

On November 18, 2002, the Companycompleted its acquisition of Dalesway Nursing Services, a supplier oftemporary staffing to NHS hospitals, local government authorities andprivate patients in the U.K. The consideration paid was $306 incash.

The acquisitions have been accounted for as purchasebusiness combinations and the pro forma results of operations andrelated per share information have not been presented as the amountsare considered immaterial.

The Company completed its purchaseprice allocation of the Medic-One Group Limited acquisition.Accordingly, tangible assets, identifiable intangible assets andliabilities were assigned values of approximately $2,861, $1,410 and$2,157, respectively, with the remaining portion of $6,576 attributableto goodwill.

The preliminary purchase price allocations for theremaining acquisitions are subject to adjustments and will be finalizedonce additional information concerning asset and liability valuationsare obtained. Then, final asset and liability fair values may differfrom those set forth on the accompanying consolidated balance sheet atSeptember 30, 2003; however, the changes are not expected to have amaterial effect on the consolidated financial position, results ofoperations or cash flows of the Company.

As noted above, thetransactions related to the acquisitions of Cynon Health Agency,Carewise Nursing Agency, First Force Medical Recruitments Limited andMedic-One Group Limited include provisions to pay additional amounts incontingent consideration dependent upon future earnings of the acquiredentities, payable by a combination of cash and shares of theCompany's stock, aggregating $13,579 at September 30, 2003.

In fiscal 2002, the Company acquired a total of 6 flexible staffingagencies for approximately $2,184 in cash. The transactions includedprovisions to pay additional amounts, payable in cash, of up to $5,606in contingent consideration dependent upon future earnings of theacquired entities. Of the $5,606 in contingent consideration, $4,450was earned and paid in fiscal 2003. The remaining amount of contingentconsideration of $1,156 was unearned and will not be required. Theseacquisitions were accounted for as purchase business combinations. Thepro forma results of operations and related per share information forthese acquisitions have not been presented as the amounts areconsidered immaterial.

On September 27, 2001, TWUK acquired allof the issued and outstanding shares of Staffing Enterprise Limited andStaffing Enterprise (PSV) Limited (collectively"Staffing Enterprise"), aLondon based provider of flexible staffing of specialist nurses andother healthcare professionals to London NHS Trust and independenthospitals. The consideration included $7,100 in cash, $14,800 in demandnotes plus an additional sum of up to approximately $30,800 incontingent consideration dependent upon Pre-Tax Profits (as defined inthe agreement for sale and purchase) for the fiscal year endedSeptember 30, 2002. The Company satisfied its obligation to pay underthis contingent consideration agreement by the issuance of notespayable, in the first quarter of fiscal 2003.

F-17

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

The following table displays theunaudited pro forma results of operations and related per shareinformation for the year ended September 30, 2001, as if theacquisition of Staffing Enterprise was completed as of October 1,1999:

|                                    |  |             |         |         |  |  |
|------------------------------------|--|-------------|---------|---------|--|--|
|                               |  | 2001        |
|                               |  | (unaudited) |
| Netrevenues                        |  | $           | 191,936 |    |
| Netloss                            |  |        | (24,181 | )  |
| Net loss per shareof common stock: |  |
| Basic andDiluted                   |  |        | (1.39   | )  |
|                                    |

The acquisition wasaccounted for as a purchase business combination. Accordingly, thetotal cost of the acquisition was allocated on the basis of theestimated fair value of the assets acquired and liabilities assumed andincurred. Assets acquired and liabilities assumed were assigned valuesof approximately $11,200 and $4,200, respectively, with the remainingportion of approximately $14,900 attributable to goodwill and otheridentifiable intangible assets. As the acquisition was completed onSeptember 27, 2001, there are no amounts relating to StaffingEnterprise included in the Consolidated Statement of Operations forfiscal 2001.

In addition to the acquisition of StaffingEnterprise, during fiscal 2001, the Company acquired a total of 11other flexible staffing agencies for approximately $9,144 in cash andthe issuance of $5,720 in demand notes and resulted in the Companyrecording approximately $13,300 of additional goodwill and otheridentifiable intangible assets. The transactions included provisions topay additional amounts, payable in cash, of up to $12,993 in contingentconsideration dependent upon future earnings of the acquired entities.Of the $12,993 in contingent consideration, $6,588 was earned and paidin fiscal 2002 and 2003. The remaining amount of contingentconsideration of $6,405 was unearned and will not be required. Theseacquisitions were accounted for as purchase business combinations. Thepro forma results of operations and related per share information forthese acquisitions have not been presented as the amounts areconsidered immaterial.

Dispositions:

U.S.Home Healthcare

On April 16, 2003, the Company sold all ofthe issued and outstanding capital stock of two of its subsidiaries,The PromptCare Companies, Inc. and Steri-Pharm, Inc., collectivelyreferred to as "Home Healthcare" forapproximately $8,500 in cash. Home Healthcare, which comprised theCompany's U.S. operations, was concentrated in New York and NewJersey, and supplied infusion therapy, respiratory therapy and homemedical equipment. In accordance with the provisions of FAS No. 144,"Accounting for the Impairment or Disposal of Long-LivedAssets," the Company has accounted for Home Healthcare asa discontinued operation. The consolidated financial statements reflectthe assets and liabilities of the discontinued operations and theoperations for the current and prior periods are reported indiscontinued operations.

F-18

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

The following table presents thefinancial results of the discontinued operations:

|                                                      |  |                         |       |        |  |        |         |        |  |        |         |        |  |  |
|------------------------------------------------------|--|-------------------------|-------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                                 |  | Year Ended September30, |
|                                                 |  | 2003                    |       | 2002   |  | 2001   |
| Revenues:                                            |  |
| Net infusionservices                                 |  | $                       | 6,685 |   |  | $      | 12,373  |   |  | $      | 12,505  |   |
| Net respiratory, medical equipment andsupplies       |  |                    | 2,479 |   |  |   | 4,697   |   |  |   | 4,087   |   |
| Totalrevenues                                        |  |                    | 9,164 |   |  |   | 17,070  |   |  |   | 16,592  |   |
| Cost of revenues:                                    |  |
| Infusionservices                                     |  |                    | 5,159 |   |  |   | 9,068   |   |  |   | 8,959   |   |
| Respiratory, medical equipment andsupplies           |  |                    | 1,438 |   |  |   | 2,292   |   |  |   | 2,146   |   |
| Total cost ofrevenues                                |  |                    | 6,597 |   |  |   | 11,360  |   |  |   | 11,105  |   |
| Selling, general and administrativeexpenses          |  |                    | 2,583 |   |  |   | 4,709   |   |  |   | 4,867   |   |
| Gain on sale of subsidiaries, net oftax              |  |                    | 519   |   |  |   | — |   |  |   | — |   |
| Income from discontinuedoperations                   |  | $                       | 503   |   |  | $      | 1,001   |   |  | $      | 620     |   |
| Diluted income per share from discontinuedoperations |  | $                       | 0.02  |   |  | $      | 0.05    |   |  | $      | 0.04    |   |
|                                                      |

AtSeptember 30, 2003, liabilities of discontinued operations of $690relate to tax contingencies. At September 30, 2002, assets ofdiscontinued operations consisted primarily of goodwill, accountsreceivable, property and equipment, inventory, cash and other assets of$3,884, $1,521, $1,408, $597, $530 and $793, respectively, andliabilities of discontinued operations of $1,270 consisted primarily ofaccounts payable and accrued payroll and related costs.

U.S.Mail-order

In September 2000, the Company approved a plan toexit its U.S. Mail-Order Operations and on September 18, 2000, enteredinto an agreement to sell certain assets of this segment located inJacksonville, Florida. Under the terms of the transaction, the Companyreceived $2,000 plus an additional $556 representing the book value ofon-hand saleable inventory at September 29, 2000.

Based uponadditional information and revised cost benefit estimates bymanagement, the Company recorded an additional charge of $1,900 toreflect the write-down of the remaining accounts receivable to theirestimated net realizable value for the first quarter of fiscal 2001. Inaddition to the write-down, the Company incurred operating expenses of$1,983 in fiscal 2001, prior to the closing of the U.S. Mail-OrderOperations.

As of September 30, 2002, the Company had satisfiedits obligations under the restructuring plan and reversed the remaininglease commitments restructuring accrual of $280 into income.

Amcare Ltd.

On November 22, 2000, the Company soldits U.K. subsidiary, Amcare Ltd., for approximately $13,826 in cash.The Company recorded a loss of $354 and realized a foreign exchangeloss of $391 in fiscal 2001 as a result of the completion of thetransaction.

F-19

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

5.    Property andEquipment:

Major classes of property and equipment, net consistof the following at September 30:

|                                               |  |        |        |        |  |        |
|-----------------------------------------------|--|--------|--------|--------|--|--------|
|                                          |  | 2003   |        | 2002   |
| Revenue producingequipment                    |  | $      | 11,776 |   |  | $      | 8,962 |   |
| Furniture,fixtures and equipment              |  |   | 9,901  |   |  |   | 7,300 |   |
| Land, buildings and leaseholdimprovements     |  |   | 776    |   |  |   | 745 |   |
|                                          |  |   | 22,453 |   |  |   | 17,007 |   |
| Less,accumulated depreciation andamortization |  |   | 12,127 |   |  |   | 8,909 |   |
|                                          |  | $      | 10,326 |   |  | $      | 8,098 |   |
|                                               |

Depreciationand amortization of property and equipment for the years endedSeptember 30, 2003, 2002 and 2001 was $1,778, $1,337 and $1,402,respectively. The net book value of revenue producing equipment was$6,623 and $5,398 at September 30, 2003 and September 30, 2002,respectively.

6.    Accrued Expenses:

Accrued expensesconsist of the following at September 30:

|                             |  |        |        |        |  |        |
|-----------------------------|--|--------|--------|--------|--|--------|
|                        |  | 2003   |        | 2002   |
| Payroll and relatedexpenses |  | $      | 17,927 |   |  | $      | 13,779 |   |
| Other                       |  |   | 7,042  |   |  |   | 10,216 |   |
|                        |  | $      | 24,969 |   |  | $      | 23,995 |   |
|                             |

7.    Debt:

Outstanding borrowings consist of the following at September 30:

|                               |  |        |         |        |  |              |         |                |  |               |  |                |  |  |  |  |  |  |
|-------------------------------|--|--------|---------|--------|--|--------------|---------|----------------|--|---------------|--|----------------|--|--|--|--|--|--|
| Facility                      |  | 2003   |         | 2002   |  | InterestRate |         | Final Maturity |
| **Senior CreditFacilities:**  |  |
| Term loanA                    |  | $      | 26,840  |   |  | $            | 31,697  |           |  | LIBOR+2.00%   |  | Dec.17, 2005   |
| Term loanC                    |  |   | 83,355  |   |  |         | 78,070  |           |  | LIBOR+ 3.50%  |  | Jun. 30, 2007  |
| Totalsenior credit facilities |  |   | 110,195 |   |  |         | 109,767 |           |  |
| **Mezzanine TermLoan(1)**     |  |   | 17,490  |   |  |         | 15,443  |           |  | LIBOR +7.00%  |  | Dec. 17, 2007  |
| **Notes WithWarrants**        |  |   | — |   |  |         | 3,480   |           |  | 9.375%        |  | Dec.17, 2008   |
| **NotesPayable(2)**           |  |   | 37,693  |   |  |         | 19,840  |           |  | 2.65%to 5.25% |  | Sept. 27, 2004 |
| **TotalDebt**                 |  |   | 165,378 |   |  |         | 148,530 |           |  |
| **Less CurrentMaturities**    |  |   | 46,698  |   |  |         | 29,569  |           |  |
| **Net Long-termDebt**         |  | $      | 118,680 |   |  | $            | 118,961 |           |  |
|                               |

|  |
|--|
|  |  |
|  |

| 1) | Netof unamortized discount of $1,394 and $1,615 as of September 30, 2003and 2002, respectively. |
|----|-------------------------------------------------------------------------------------------------|

| 2) | Netof unamortized discount of $597 as of September 30, 2002. |
|----|--------------------------------------------------------------|

OnDecember 17, 1999, as amended on September 27, 2001, theCompany's U.K. subsidiaries obtained new financing denominated inpounds sterling. The new financing consists of a senior collateralizedterm and revolving credit facility (the "SeniorCredit Facility"), mezzanine indebtedness (the"Mezzanine Loan") and theNotes.

F-20

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

Senior Credit Facility.    TheSenior Credit Facility consists of a $46,679 term loan A, maturingDecember 17, 2005, (ii) $20,839 acquisition term loan B, maturingDecember 17, 2006 which may be drawn upon during the first nine yearsfollowing closing, (iii) per the September 27, 2001 amendment, $83,355term loan C, maturing June 30, 2007, and (iv) a $8,335 revolving creditfacility, maturing December 17, 2005. Repayment of the loans commencedon July 30, 2000 and continues until final maturity. The loans bearinterest at rates equal to LIBOR plus 2.00% to 3.50% perannum. As of September 30, 2003, the Company had outstanding borrowingsof $110,195 under the Senior Credit Facility and $49,013 in availableborrowings. As of September 30, 2003 and 2002, borrowings under thesenior credit facilities bore interest at a rate of 5.63% to7.13% and 6.25% to 7.50%, respectively.

Subject to certain exceptions, the Senior Credit Facility prohibitsor restricts the incurrence of liens, the incurrence of additionalindebtedness, certain fundamental corporate changes, dividends(including distributions to the Company), the making of specifiedinvestments and certain transactions with affiliates. In addition, theSenior Credit Facility contains affirmative and negative financialcovenants customarily found in agreements of this kind, including themaintenance of certain financial ratios, such as senior interestcoverage, debt to earnings before interest, taxes, depreciation andamortization, fixed charge coverage and minimum net worth. At September30, 2003, the Company was in compliance with such covenants.

Theloans under the Senior Credit Facility are collateralized by, amongother things, a lien on substantially all of TWUK's and itssubsidiaries' assets, a pledge of TWUK's ownership interestin its subsidiaries and guaranties by TWUK's subsidiaries.

Mezzanine Loan.    The Mezzanine Loan is a term loanmaturing December 17, 2007 and bears interest at the rate of LIBOR plus7% per annum, where LIBOR plus 3.5% will be payable incash, with the remaining interest being added to the principal amountof the loan. The Mezzanine Loan contains other terms and conditionssubstantially similar to those contained in the Senior Credit Facility.As of September 30, 2003 and 2002, borrowings under the mezzanine termloan bore interest at a rate of 10.63% and 11.00%,respectively.

Notes with Warrants.    In connectionwith the Reorganization, the notes with warrants were settled with theissuance of 890 shares of the Company's common stock in the firstquarter of fiscal 2003.

Notes Due in Connection withAcquisitions.    In fiscal 2003, the Company repaid, throughTWUK, notes payable of $19,363 issued in connection with theacquisition of certain U.K. flexible staffing agencies and wrote-off$613 of related debt discount. In fiscal 2003, the Company also issuednotes payable of $36,026 to satisfy amounts owed under agreements topay additional consideration dependent upon future earning of certainacquired entities. The notes payable are secured by the Company'ssenior credit lender which requires us to keep an amount on deposit forthe sole purpose of repaying the notes payable. These notes bearinterest at rates ranging from 2.65% to 5.25%. Ingeneral, the Company may not redeem the notes on or before three yearsafter the date of issuance; however, such notes may be redeemed by theholder within one year from the first interest payment due date upongiving not less than sixty days written notice. At September 30, 2003and 2002, the Company had outstanding notes payable of $37,693 and$19,840, respectively, and related cash restricted to the payment ofsuch notes have been classified as current in the accompanyingConsolidated Balance Sheets.

Guarantees.    TheCompany's U.K. subsidiaries guarantee the debt and otherobligations of certain wholly-owned U.K. subsidiaries under agreementswith the senior collateralized term and revolving credit facility,mezzanine indebtedness and various notes issued in connection with theacquisition of certain U.K. flexible staffing agencies. At September30, 2003 and September 30, 2002, the amounts guaranteed, whichapproximates the amounts outstanding, totaled approximately $167,000and $151,000, respectively.

F-21

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

Derivative Instrument.    TheCompany is subject to fluctuating interest rates that may impact itsconsolidated results of operations or cash flows for its variable rateSenior Credit Facility, Mezzanine Loan and cash equivalents. Inaccordance with provisions of the 1999 refinancing, on January 25,2000, the Company capped its interest rate (LIBOR cap of 9%) onapproximately $41,935 of its floating rate debt in a contract whichexpired on June 30, 2003. On March 20, 2003, the Company entered into anew Rate Cap and Floor Collar Agreement that caps its interest rate atLIBOR of 5.50% and its interest floor at LIBOR of 4.47%,subject to special provisions, on approximately $83,355 of its floatingrate debt in a contract which expires March 20, 2008. In accordancewith FAS No. 133, "Accounting for Certain DerivativeInstruments and Certain Hedging Activities," as amended byFAS No. 138 and related implementation guidance, the Company hascalculated the fair value of the interest cap and floor derivative tobe a liability of $211 at September 30, 2003. In addition, changes inthe value from period to period of the interest cap and floorderivative are recorded as interest expense or income, asappropriate.

Annual maturities of long-term debt for each of thenext five years are:

|                          |  |        |         |        |  |  |
|--------------------------|--|--------|---------|--------|--|--|
| Year Ending September30, |  |
| 2004                     |  | $      | 46,698  |   |
| 2005                     |  |   | 11,670  |   |
| 2006                     |  |   | 30,841  |   |
| 2007                     |  |   | 58,348  |   |
| 2008                     |  |   | 17,821  |   |
| Thereafter               |  |   | — |   |
|                     |  | $      | 165,378 |   |
|                          |

8.    SeriesA Preferred Stock:

In connection with the Reorganization, theCompany issued 7,774 shares of its Series A preferred stock with aliquidation preference of £22,287 ($35,213) to certain equityinvestors in TWUK in exchange for 22,287 TWUK ordinary shares whichwere issued to the equity investors upon exercise of their TWUK equitywarrants that had been issued to them in connection with the 1999 saleof the senior subordinated notes of Allied Healthcare (UK). The SeriesA preferred stock has been recorded net of issuance costs which arebeing accreted using the interest rate method through December 17,2007. The following summary highlights the terms of the Series Apreferred stock.

Dividends.    Each share of Series Apreferred stock is entitled to receive cumulative, compoundingdividends at the per share rate of 9.375% of £2.867($4.53) per year. The shares of Series A preferred stock are entitledto receive dividends at a higher rate in the event of a CovenantBreach, (as that term is defined in the Certificate of Amendment(relating to the Series A preferred stock) to the Company'sCertificate of Incorporation), which principally relate to theprotection of the preferred shareholders rights. Any accrued but unpaiddividends will be paid upon liquidation, redemption or conversion ofthe Series A preferred stock. The Company may not declare or pay anydividends, make any distributions, or set aside any funds or assets forpayment or distribution with regard to its common stock or any otherclass or series of its stock ranking junior to the Series A preferredstock until all accumulated dividends on the Series A preferred stockhave been paid.

Voting Rights.    Each outstandingshare of Series A preferred stock is entitled to that number of votesequal to the number of shares of common stock into which such share ofSeries A preferred stock is convertible. Except for the directors to beelected by the holders of the Series A preferred stock, voting as aclass, the Series A preferred stock and the common stock will vote as asingle class on all matters submitted to a vote of the Company'sshareholders. Until Triumph Partners III, L.P. (or any of itsaffiliates) beneficially owns less than 50% of the shares ofSeries A preferred stock issued to 

F-22

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

it in the Reorganization, the holders ofSeries A preferred stock will be entitled, voting as a separate class,to elect one director to the Company's board of directors. Inaddition, the Series A preferred stock and the Company's commonstock will vote as a single class in the election of all otherdirectors of its board of directors. In the event of a Covenant Breach(as that term is defined in the Certificate of Amendment (relating tothe Series A preferred stock) to the Company's Certificate ofIncorporation), the holders of the Series A preferred stock will beentitled to elect one additional director to the Company's boardof directors.

Liquidation Preference.    In the event ofany liquidation, dissolution or winding up of the Company, the holdersof Series A preferred stock will be entitled to receive, before theholders of common stock or any other class or series of stock rankingjunior to the Series A preferred stock in respect of their shares, aliquidation preference equal to £2.867 ($4.53) per share (subjectto adjustment for stock splits, stock dividends, recapitalizations andsimilar transactions), plus any accrued or declared but unpaiddividends on such shares of Series A preferred stock, which the Companyrefers to as the "Series A PreferenceAmount"; provided, however, that in the event thatthe holders of Series A preferred stock would have received an amountgreater than the Series A Preference Amount had they converted theirSeries A preferred stock into shares of common stock immediately priorto the liquidation, dissolution or winding up of the Company, suchholders will be entitled to receive an amount per share equal to theamount they would have received had they effectuated such aconversion.

Conversion into Common Stock.    Each shareof Series A preferred stock is currently convertible, at the option ofthe holder thereof, into one share of common stock without the paymentof additional consideration. Subject to the satisfaction of certainconditions, the Company has the right to require the holders of theSeries A preferred stock to convert all, but not less than all, oftheir shares into common stock. At issuance, as the value of the commonstock into which the preferred share would convert was less than thefair value of the redeemable preferred stock, there was no beneficialconversion feature.

Redemption.    Subject to certainlimitations, a majority in interest of the holders of the Series Apreferred stock have the right to require the Company to redeem theirshares of Series A preferred stock upon the occurrence of a liquidityevent (as described in the Certificate of Amendment (relating to theSeries A preferred stock) to the Company's Certificate ofIncorporation) or at any time after December 17, 2007 if the Companyhas paid its Senior Credit Facility and the Mezzanine Loan in full onor before such date. The redemption right can be exercised up to threetimes, but for not less than £5 million on any one occasion (orsuch lower amount as is necessary to redeem all of the shares of SeriesA preferred stock then outstanding). Upon such a redemption, theholders of the Series A preferred stock will be entitled to receive anamount equal to the Series A Preference Amount.

The followingtable presents the changes in the carrying amount of the Series Apreferred stock for the years ended September 30, 2003 and2002:

|                                     |  |        |         |        |  |        |
|-------------------------------------|--|--------|---------|--------|--|--------|
|                                |  | 2003   |         | 2002   |
| Balance at October 1,               |  | $      | 32,254  |   |  | $      | — |   |
| Issuance ofSeries A preferred stock |  |   | — |   |  |   | 35,051 |   |
| Issuance costs                      |  |   | — |   |  |   | (2,620 | )  |
| Accretion of issuance costs         |  |   | 482     |   |  |   | 75 |   |
| Foreign exchangeeffect              |  |   | 415     |   |  |   | (252 | )  |
| Balance at September 30,            |  |   | 33,151  |   |  |   | 32,254 |   |
|                                     |

F-23

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

9.    Shareholders' Equity:

On April 22, 2002, the Company issued 684 shares of common stock toTimothy M. Aitken, Chairman and Chief Executive Officer, and 487 sharesof common stock to Sarah L. Eames, President and Chief OperatingOfficer. Simultaneously with this issuance, the Company entered intoagreements with Mr. Aitken and Ms. Eames in which the Company agreed toprovide them (through cash bonuses and loans) with substantially all ofthe cash necessary for them to pay the income taxes that they areexpected to incur as a result of the issuances. Pursuant to theseagreements, the Company made a cash bonus payment to Mr. Aitken of$1,401 and loaned him $550 and made a cash bonus payment to Ms. Eamesof $846 and loaned her $390. The loans, which have been issued on arecourse basis, provide for interest at the rate of 4.65%compounded annually. All outstanding principal and accrued interestwill be due on the earlier of April 30, 2007 or the date on which theemployee disposes of the common shares received in accordance with theagreements. As collateral for the loans the employees have pledged anaggregate of 1,155 fully vested non-qualified stock options held by theemployees and any proceeds received from the sale of the underlyingsecurities. In addition, pursuant to these agreements, TWUK agreed toindemnify Mr. Aitken and Ms. Eames for certain income tax liabilitiesthat they may incur as a result of these share issuances, subject to amaximum aggregate amount of $1,000. These executive bonuses and loanshave been approved by the Company's Board of Directors. TheCompany had recognized an aggregate expense of $6,558 related to thesetransactions in the year ended September 30, 2002.

The Companyregistered, at its expense, the resale of the shares issued to Mr.Aitken and Ms. Eames.

On April 22, 2002, the Company entered intoa Stock Purchase Agreement with Hyperion TWH Fund II LLC, TriumphPartners III, L.P. and Triumph III Investors, L.P pursuant to which theCompany issued, on April 30, 2002, an aggregate of 750 shares of theCompany's common stock at a per share purchase price of $4.25 pershare. In addition, the Company registered, at its expense, the resaleof such shares.

In January 2001, the Company initiated a stockrepurchase program, whereby the Company may purchase up toapproximately $1,000 of its outstanding common stock in open market orprivately negotiated transactions. In May 2003, the Company initiatedanother stock repurchase program, whereby the Company may purchase upto an additional $3,000 of its outstanding common stock in open markettransactions or in privately negotiated transactions. As of September30, 2003, the Company had acquired 408 shares for an aggregate purchaseprice of $1,285 which is reflected as treasury stock in theconsolidated balance sheet at September 30, 2003.

10.    Income Taxes:

The provision for income taxes fromcontinuing operations for the years ended September 30 is summarized asfollows:

|                           |  |        |         |         |  |        |
|---------------------------|--|--------|---------|---------|--|--------|
|                      |  | 2003   |         | 2002    |  | 2001   |
| Current:                  |  |
| Federal                   |  | $      | (1,806  | )  |  | $      | — |   |  | $ | — |   |
| Foreign                   |  |   | 7,622   |    |  |   | 4,770 |   |  |   | 2,623 |   |
| Deferred:                 |  |
| Federal                   |  |   | — |    |  |   | — |   |  |   | 21,462 |   |
| Foreign                   |  |   | (906    | )  |  |   | 201 |   |  |   | 32 |   |
| Provision for incometaxes |  | $      | 4,910   |    |  | $      | 4,971 |   |  | $ | 24,117 |   |
|                           |

F-24

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

Deferred income taxes reflect the net taxeffects of temporary differences between the carrying amounts of assetsand liabilities recorded for financial reporting purposes and theamounts used for income tax purposes. Significant components of theCompany's deferred tax assets and liabilities as of September 30are as follows:

|                                                                                                   |  |        |         |         |  |        |
|---------------------------------------------------------------------------------------------------|--|--------|---------|---------|--|--------|
|                                                                                              |  | 2003   |         | 2002    |
| Deferred taxassets:                                                                               |  |
| Provision for doubtfulaccounts                                                                    |  | $      | 958     |    |  | $      | 6,755 |   |
| Accruedexpenses                                                                                   |  |   | 233     |    |  |   | 265 |   |
| Federal netoperating loss carryforward                                                            |  |   | 24,450  |    |  |   | 19,916 |   |
| State net operating losscarryforward                                                              |  |   | 1,998   |    |  |   | 1,666 |   |
| Capitalloss carryforward                                                                          |  |   | 768     |    |  |   | 768 |   |
| Charitable contribution                                                                           |  |   | 8       |    |  |   | — |   |
| AMT credit                                                                                        |  |   | 68      |    |  |   | — |   |
| Other,net                                                                                         |  |   | 83      |    |  |   | 592 |   |
| Gross deferred taxassets                                                                          |  |   | 28,566  |    |  |   | 29,962 |   |
| Valuationallowance                                                                                |  |   | (27,645 | )  |  |   | (28,187 | )  |
|     Net deferred taxassets                                                    |  |   | 921     |    |  |   | 1,775 |   |
| Deferred taxliabilities:                                                                          |  |
|     Depreciation                                                              |  |   | (938    | )  |  |   | (1,949 | )  |
|     Intangibleassets                                                          |  |   | (510    | )  |  |   | — |   |
|     Other,net                                                                 |  |   | — |    |  |   | (575 | )  |
|         Deferred taxliabilities                           |  |   | (1,448  | )  |  |   | (2,524 | )  |
|             Net deferred taxliability |  | $      | (527    | )  |  | $      | (749 | )  |
|                                                                                                   |

Managementhad been previously committed to implementing tax strategies thatprovided for the sale of appreciated assets, including a portion of theCompany's ownership interest in its U.K. subsidiary, to generatesufficient taxable income to realize the tax net operating losses priorto their expiration. While the Company believes it will eventuallyrealize the value of its tax losses, current developments, includingthe continued expansion of the U.K. operations, have increased theuncertainty as to both the execution of the original strategy and theappropriateness of a tax strategy which may not align with theCompany's current business strategy. These uncertainties haveimpaired the Company's ability to determine whether it is morelikely than not that its deferred tax assets will be realized.Accordingly, a full valuation allowance for all remaining U.S. deferredtax assets has been provided.

As of September 30, 2003, theCompany has a Federal net operating loss carryforward of approximately$73,000 which if unused, will expire in the years 2019 through 2023.The Company has a capital loss carryforward of approximately $2,100which, if unused, will expire in fiscal 2004.

F-25

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

Reconciliations of the differencesbetween income taxes computed at Federal statutory tax rates andconsolidated provisions for income taxes on income (loss) before equityincome of and interest income earned from U.K. subsidiaries for theyears ended September 30 are as follows:

|                                                                                   |  |        |        |         |  |        |
|-----------------------------------------------------------------------------------|--|--------|--------|---------|--|--------|
|                                                                              |  | 2003   |        | 2002    |  | 2001   |
| Income taxes at34%                                                                |  | $      | 5,569  |    |  | $      | 3,021 |   |  | $ | (1,052 | )  |
| Taxcontingency                                                                    |  |   | (1,874 | )  |  |   | — |   |  |   | — |   |
| Nondeductible expenses, primarily amortization andwrite down of intangible assets |  |   | 6      |    |  |   | 943 |   |  |   | 1,305 |   |
| Valuationallowance                                                                |  |   | 1,304  |    |  |   | 1,896 |   |  |   | 24,745 |   |
| Foreign tax,net                                                                   |  |   | (189   | )  |  |   | — |   |  |   | — |   |
| Other,net                                                                         |  |   | 94     |    |  |   | (889 | )  |  |   | (881 | )  |
| Provision for incometaxes                                                         |  | $      | 4,910  |    |  | $      | 4,971 |   |  | $ | 24,117 |   |
|                                                                                   |

Provisionhas not been made for U.S. or additional foreign taxes on approximately$109,556 of undistributed earnings of the U.K. foreign subsidiaries.Those earnings have been and will continue to be reinvested.Determination of the amount of unrecognized deferred tax liability withrespect to such earnings is not practical. We believe that the amountof additional taxes that might be payable on the earnings of foreignsubsidiaries, if remitted, would be partially offset by the U.S.foreign tax credits.

Income before income taxes generated fromthe U.K. operations for the years ended September 30, 2003, 2002 and2001 was $20,307, $14,271 and $3,684, respectively.

11.    Stock Option Plan and Warrants:

StockOptions:

Under the Company's 2002 Option Plan("Option Plan"), options maybe granted by the Compensation Committee of the Board of Directorswhich determines the exercise price, vesting provisions and term ofsuch grants. In accordance with the terms of the Option Plan, thenumber of shares available for issuance increases by one percent of thenumber of shares of Common Stock outstanding as of the first day ofeach fiscal year.

F-26

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

Following is a summary of transactionsunder the Option Plan during the year ended September 30, 2003, 2002and 2001:

|                                                              |  |                       |        |                                 |  |                       |      |                                 |  |                         |         |                                    |  |        |        |        |  |        |        |         |  |        |      |        |  |  |
|--------------------------------------------------------------|--|-----------------------|--------|---------------------------------|--|-----------------------|------|---------------------------------|--|-------------------------|---------|------------------------------------|--|--------|--------|--------|--|--------|--------|---------|--|--------|------|--------|--|--|
|                                                         |  | 2003                  |        | 2002                            |  | 2001                  |
|                                                         |  | Numberof StockOptions |        | WeightedAverageExercisePrice($) |  | Numberof StockOptions |      | WeightedAverageExercisePrice($) |  | Number of Stock Options |         | WeightedAverage Exercise Price ($) |
| Outstandingbeginning ofyear                                  |  |                  | 1,530  |                            |  |                  | 4.24 |                            |  |                    | 1,394   |                               |  |   | 4.22   |   |  |   | 1,040  |    |  |   | 5.22 |   |
|                                                         |  |
| Granted                                                      |  |                  | 1,415  |                            |  |                  | 4.30 |                            |  |                    | 205     |                               |  |   | 5.41   |   |  |   | 400    |    |  |   | 1.75 |   |
| Exercised                                                    |  |                  | (403   | )                          |  |                  | 2.40 |                            |  |                    | — |                               |  |   |   |   |  |   | (4     | )  |  |   | 1.75 |   |
| Forfeited                                                    |  |                  | (288   | )                          |  |                  | 4.42 |                            |  |                    | (69     | )                             |  |   | 7.25   |   |  |   | (42    | )  |  |   | 5.59 |   |
|                                                         |  |
| Outstandingend ofyear                                        |  |                  | 2,254  |                            |  |                  | 4.58 |                            |  |                    | 1,530   |                               |  |   | 4.24   |   |  |   | 1,394  |    |  |   | 4.22 |   |
|                                                         |  |
| Weighted-average fair value of optionsgranted during theyear |  |                  |   |                            |  |                  | 3.29 |                            |  |                    |    |                               |  |   | 2.93   |   |  |   |   |    |  |   | 0.34 |   |
|                                                         |  |
| Availablefor future grants                                   |  |                  | 1,814  |                            |  |
|                                                              |

On May28, 1997, the Company adopted a stock option plan for non-employeedirectors (the "DirectorsPlan") which gives non-employee directors optionsto purchase up to 100 shares of common stock. As of September 30, 2003,no options have been granted under the Directors Plan. Options underthe Directors Plan may be granted by the Board of Directors whichdetermines the exercise price, vesting provisions and term of suchgrants.

A summary of the 2,254 options outstanding as ofSeptember 30, 2003 is as follows:

|                          |  |                   |       |                                                       |  |                                                  |      |                   |  |                                                       |      |        |  |        |         |        |  |        |         |        |  |  |  |  |  |  |
|--------------------------|--|-------------------|-------|-------------------------------------------------------|--|--------------------------------------------------|------|-------------------|--|-------------------------------------------------------|------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|--|--|--|--|
| Rangeof ExercisePrice($) |  | NumberOutstanding |       | WeightedAverageExercise Priceof OptionsOutstanding($) |  | Weighted AverageRemainingContractual LifeInYears |      | NumberExercisable |  | WeightedAverageExercise Priceof OptionsExercisable($) |      |
| 1.75                     |  |              | 351   |                                                  |  |                                             | 1.75 |              |  |                                                  | 2.2  |   |  |   | 351     |   |  |   | 1.75    |   |  |
| 3.83                     |  |              | 9     |                                                  |  |                                             | 3.83 |              |  |                                                  | 9.9  |   |  |   | — |   |  |   | — |   |  |
| 4.00                     |  |              | 237   |                                                  |  |                                             | 4.00 |              |  |                                                  | 9.7  |   |  |   | 185     |   |  |   | 4.00    |   |  |
| 4.00                     |  |              | 556   |                                                  |  |                                             | 4.00 |              |  |                                                  | 11.0 |   |  |   | — |   |  |   | — |   |  |
| 4.31                     |  |              | 10    |                                                  |  |                                             | 4.31 |              |  |                                                  | 5.2  |   |  |   | 10      |   |  |   | 4.31    |   |  |
| 4.70                     |  |              | 501   |                                                  |  |                                             | 4.70 |              |  |                                                  | 9.1  |   |  |   | — |   |  |   | — |   |  |
| 5.41                     |  |              | 90    |                                                  |  |                                             | 5.41 |              |  |                                                  | 8.7  |   |  |   | 30      |   |  |   | 5.41    |   |  |
| 7.25                     |  |              | 500   |                                                  |  |                                             | 7.25 |              |  |                                                  | 4.3  |   |  |   | 500     |   |  |   | 7.25    |   |  |
| 1.75 to7.25              |  |              | 2,254 |                                                  |  |                                             | 4.58 |              |  |                                                  | 7.5  |   |  |   | 1,076   |   |  |   | 4.82    |   |  |
|                          |

Warrants:

In the fourth quarter of fiscal 2003, in connection with theexecution of an agreement with an unaffiliated third party pursuant towhich such third party agreed to provide us with consulting servicesrelated to corporate finance and investment banking matters, theCompany issued to such third party warrants to purchase up to anaggregate of 350 shares of its common stock. Of the 350 warrantsissued, 100 of the warrants are exercisable at $4.75 per share, 175 ofthe warrants are exercisable at $5.50 per share and 75 of the warrantsare exercisable at a price of $6.00 per share. The warrants expire onAugust 13, 2007. At issuance, the fair value of the warrants of $603was recorded 

F-27

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

as a deferred cost and is being amortizedover the two year life of the agreement. For the year ended September30, 2003, the Company recorded $41 in amortization related to suchwarrants.

12.    Commitments and Contingencies:

Acquisition Agreements:

Related to the Company'sacquisitions of certain flexible staffing agencies, we have enteredinto agreements to pay additional amounts, payable in cash and sharesof the Company's stock, of up to $13,579 at September 30, 2003,in contingent consideration dependent upon future earnings of suchacquired entities.

Employment Agreements:

The Companyhas two employment agreements with certain executive officers (theCompany's Chief Executive Officer and the Company's ChiefOperating Officer) that provided for minimum aggregate annualcompensation of $825 in fiscal 2003. Each employment agreementcontains, among other things, customary confidentiality and terminationprovisions and provides that in the event of the termination of theexecutive following a "change of control" ofthe Company (as defined in such agreements), or a significant change intheir responsibilities, such person will be entitled to receive a cashpayment of up to 2.9 times their average annual base salary during thepreceding 12 months. Each employment agreement expire on September 24,2004; however, each employment agreement shall be automatically renewedon such date, and on each anniversary of such date, for an additionalperiod of one-year, unless the Company or the executive gives notice tothe other of its intents to terminate the employment agreement within90 days of the then applicable termination date.

OperatingLeases:

The Company has entered into various operating leaseagreements for office space and equipment. Certain of these leasesprovide for renewal options.

Future minimum rental commitmentsrequired under operating leases that have non-cancelable lease terms inexcess of one year as of September 30, 2003 are as follows:

|            |  |        |       |        |  |  |
|------------|--|--------|-------|--------|--|--|
| 2004       |  | $      | 1,643 |   |
| 2005       |  |   | 1,372 |   |
| 2006       |  |   | 1,191 |   |
| 2007       |  |   | 1,116 |   |
| 2008       |  |   | 789   |   |
| Thereafter |  |   | 2,438 |   |
|       |  | $      | 8,549 |   |
|            |

Rent expenseunder non-capitalized, non-cancelable lease agreements for the yearsended September 30, 2003, 2002 and 2001 amounted to $2,749, $2,002 and$1,565, respectively.

F-28

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

Litigation:

On April 13, 1998,one of the Company's shareholders, purporting to sue derivativelyon its behalf, commenced a derivative suit in the Supreme Court of theState of New York, County of New York, entitled Kevin Mak, derivativelyand on behalf of Transworld Healthcare, Inc., Plaintiff, vs. TimothyAitken, Scott A. Shay, Lewis S. Ranieri, Wayne Palladino and HyperionPartners II L.P., Defendants, and Transworld Healthcare, Inc., NominalDefendant, Index No. 98-106401. The suit alleges that certain of theCompany's officers and directors, and Hyperion Partners II L.P.,breached fiduciary duties owed to the Company and its shareholders, inconnection with a transaction, approved by a vote of theCompany's shareholders on March 17, 1998, in which the Companywas to issue certain shares of stock to Hyperion Partners II L.P. inexchange for certain receivables due from Health Management, Inc.("HMI"). The action seeksinjunctive relief against this transaction, and damages, costs andattorneys' fees in unspecified amounts. The transactionsubsequently closed and the plaintiff has, on numerous occasions,stipulated to extend the defendants' time to respond to thissuit.

Contingencies:

Some of the Company'ssubsidiaries were Medicare Part B suppliers who submit claims to thedesignated carrier who is the government's claims processingadministrator. From time to time, the carrier may request an audit ofMedicare Part B claims on a prepayment or postpayment basis. Some ofthe Company's subsidiaries currently have pending such audits. Ifthe outcome of any audit results in a denial or a finding of anoverpayment, then the affected subsidiary has appeal rights. Underpostpayment audit procedures, the supplier generally pays the allegedoverpayment and can pursue appeal rights for a refund of any paidoverpayment incorrectly assessed against the supplier. Some of thesubsidiaries currently are responding to these audits and pursuingappeal rights in certain circumstances.

The Company believesthat it is substantially in compliance, in all material respects, withthe applicable provisions of the Federal statutes, regulations and lawsand applicable state laws together with all applicable laws andregulations of other countries in which the Company operates. Becauseof the broad and sometimes vague nature of these laws, there can be noassurance that an enforcement action will not be brought against theCompany, or that the Company will not be found to be in violation ofone or more of these provisions. At present, the Company cannotanticipate what impact, if any, subsequent administrative or judicialinterpretation of the applicable Federal and state laws and those ofother countries may have on the Company's consolidated financialposition, cash flows or results of operations.

The Company isinvolved in various other legal proceedings and claims incidental toits normal business activities. The Company is vigorously defending itsposition in all such proceedings and has recorded an accrual ofapproximately $1,117 to cover its estimate for exposure related tothese matters. Management believes these matters should not have amaterial adverse impact on the consolidated financial position, cashflows or results of operations of the Company.

13.    Operations by Business Segments and Geographic Areas:

As disclosed in Note 4, the Company sold all of the issued andoutstanding capital stock of its Home Healthcare operations on April16, 2003 and the Home Healthcare results of operations have beenclassified as discontinued operations. As a result of this transaction,the Company no longer operates in the U.S. Home Healthcare segment.Accordingly, during the years ended September 30, 2003, 2002 and 2001,the Company's continuing operations were in the U.K. The U.K.operations derive its revenues from flexible healthcare services,principally nursing and ancillary services, and provision ofrespiratory therapy products to patients throughout most of theU.K.

F-29

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ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

The Company evaluates performance andallocates resources based on profit and loss from operations beforecorporate expenses, interest and income taxes. The accounting policiesof the business segment are the same as those described in the summaryof significant accounting policies.

The following tables presentcertain financial information by reportable business segment andgeographic area of operations for the years ended September 30, 2003,2002 and 2001.

|                                                      |  |                              |         |        |  |        |         |         |  |  |
|------------------------------------------------------|--|------------------------------|---------|--------|--|--------|---------|---------|--|--|
|                                                 |  | Year Ended September 30,2003 |
|                                                 |  | U.K.Operations               |         | Total  |
| Net patientservices                                  |  | $                            | 287,964 |   |  | $      | 287,964 |    |
| Netrespiratory, medical equipment andsupplies        |  |                         | 6,415   |   |  |   | 6,415   |    |
| Total revenues to unaffiliatedcustomers              |  | $                            | 294,379 |   |  | $      | 294,379 |    |
| Segment operatingprofit                              |  | $                            | 31,497  |   |  | $      | 31,497  |    |
|                                                 |  |
| Corporateexpenses                                    |  |                         |    |   |  |   | (3,822  | )  |
| Interest expense,net                                 |  |                         |    |   |  |   | (11,279 | )  |
| Foreign exchangeloss                                 |  |                         |    |   |  |   | (18     | )  |
| Income beforeincome taxes and discontinuedoperations |  |                         |    |   |  | $      | 16,378  |    |
|                                                 |  |
| Depreciation andamortization                         |  | $                            | 1,976   |   |  | $      | 1,976   |    |
| Corporate depreciation andamortization               |  |                         |    |   |  |   | 9       |    |
| Totaldepreciation andamortization                    |  |                         |    |   |  | $      | 1,985   |    |
|                                                 |  |
| Identifiableassets, September 30,2003                |  | $                            | 302,309 |   |  | $      | 302,309 |    |
|                                                 |  |
| Corporateassets                                      |  |                         |    |   |  |   | 9,359   |    |
| Totalassets, September 30,2003                       |  |                         |    |   |  | $      | 311,668 |    |
|                                                 |  |
| Capitalexpenditures                                  |  | $                            | 4,015   |   |  | $      | 4,015   |    |
| Corporate capitalexpenditures                        |  |                         |    |   |  |   | 11      |    |
| Totalcapitalexpenditures                             |  |                         |    |   |  | $      | 4,026   |    |
|                                                      |

F-30

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

|                                                                         |  |                              |         |        |  |        |
|-------------------------------------------------------------------------|--|------------------------------|---------|--------|--|--------|
|                                                                    |  | Year Ended September 30,2002 |
|                                                                    |  | U.K.Operations               |         | Total  |
| Net patientservices                                                     |  | $                            | 237,890 |   |  | $      | 237,890 |   |
| Netrespiratory, medical equipment andsupplies                           |  |                         | 4,938   |   |  |   | 4,938 |   |
| Total revenues to unaffiliatedcustomers                                 |  | $                            | 242,828 |   |  | $      | 242,828 |   |
| Segment operatingprofit                                                 |  | $                            | 27,786  |   |  | $      | 27,786 |   |
|                                                                    |  |
| Corporateexpenses                                                       |  |                         |    |   |  |   | (10,554 | )  |
| Interestexpense, net                                                    |  |                         |    |   |  |   | (13,472 | )  |
| Gain onsettlement of PIK interest                                       |  |                         |    |   |  |   | 5,143 |   |
| Foreign exchangeloss                                                    |  |                         |    |   |  |   | (19 | )  |
|                                                                    |  |
| Income before income taxes, minorityinterest and discontinuedoperations |  |                         |    |   |  | $      | 8,884 |   |
|                                                                    |  |
| Depreciationand amortization                                            |  | $                            | 1,321   |   |  | $      | 1,321 |   |
|                                                                    |  |
| Corporate depreciation andamortization                                  |  |                         |    |   |  |   | 16 |   |
|                                                                    |  |
| Total depreciation andamortization                                      |  |                         |    |   |  | $      | 1,337 |   |
|                                                                    |  |
|                                                                    |  |
| Identifiableassets, September 30,2002                                   |  | $                            | 256,407 |   |  | $      | 256,407 |   |
|                                                                    |  |
| Assetsof discontinued operations                                        |  |                         |    |   |  |   | 8,733 |   |
|                                                                    |  |
| Corporateassets                                                         |  |                         |    |   |  |   | 2,973 |   |
|                                                                    |  |
| Totalassets, September 30,2002                                          |  |                         |    |   |  | $      | 268,113 |   |
|                                                                    |  |
| Capitalexpenditures                                                     |  | $                            | 3,082   |   |  | $      | 3,082 |   |
|                                                                    |  |
| Corporatecapital expenditures                                           |  |                         |    |   |  |   | 9 |   |
| Total capitalexpenditures                                               |  |                         |    |   |  | $      | 3,091 |   |
|                                                                         |

F-31

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

|                                                                       |  |                              |         |        |  |        |
|-----------------------------------------------------------------------|--|------------------------------|---------|--------|--|--------|
|                                                                  |  | Year Ended September 30,2001 |
|                                                                  |  | U.K.Operations               |         | Total  |
| Net patientservices                                                   |  | $                            | 130,719 |   |  | $      | 130,719 |   |
| Netrespiratory, medical equipment andsupplies                         |  |                         | 7,322   |   |  |   | 7,322 |   |
| Revenues to unaffiliatedcustomers                                     |  | $                            | 138,041 |   |  | $      | 138,041 |   |
| Segment operatingprofit                                               |  | $                            | 12,676  |   |  | $      | 12,676 |   |
|                                                                  |  |
| Corporateexpenses                                                     |  |                         |    |   |  |   | (3,053 | )  |
| Mail-orderexpenses                                                    |  |                         |    |   |  |   | (3,883 | )  |
| Interest expense,net                                                  |  |                         |    |   |  |   | (8,433 | )  |
| Foreign exchangeloss                                                  |  |                         |    |   |  |   | (400 | )  |
|                                                                  |  |
| Lossbefore income taxes, minority interest and discontinuedoperations |  |                         |    |   |  | $      | (3,093 | )  |
| Depreciation andamortization                                          |  | $                            | 5,080   |   |  | $      | 5,080 |   |
|                                                                  |  |
| Corporatedepreciation and amortization                                |  |                         |    |   |  |   | 47 |   |
| Total depreciation andamortization                                    |  |                         |    |   |  | $      | 5,127 |   |
| Identifiable assets, September 30,2001                                |  | $                            | 236,472 |   |  | $      | 236,472 |   |
|                                                                  |  |
| Assets of discontinuedoperations                                      |  |                         |    |   |  |   | 10,899 |   |
| Corporateassets                                                       |  |                         |    |   |  |   | 702 |   |
| Total assets,September 30, 2001                                       |  |                         |    |   |  | $      | 248,073 |   |
|                                                                  |  |
| Capitalexpenditures                                                   |  | $                            | 1,244   |   |  | $      | 1,244 |   |
| Corporate capitalexpenditures                                         |  |                         |    |   |  |   | 15 |   |
| Totalcapitalexpenditures                                              |  |                         |    |   |  | $      | 1,259 |   |
|                                                                       |

Thenet assets for the U.K. Operations were $109,556 and $81,377 as ofSeptember 30, 2003 and 2002, respectively.

14.    ProfitSharing Plan:

The Company has a profit sharing plan pursuant toSection 401(k) of the Internal Revenue Code, concerning all U.S.employees who meet certain requirements. These requirements include,among other things, at least one year of service and attainment of theage of 21.

The plan operates as a salary reduction plan wherebyparticipants contribute anywhere from 1% to 15% of theircompensation, not to exceed the maximum available under the Code.

The Company may make additional matching cash contributions at itsdiscretion. The Company's contributions to the plan wereapproximately $35, $30 and $19 for the years ended September 30, 2003,2002 and 2001, respectively.

F-32

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

In addition to the U.S. plan describedabove, certain of the Company's U.K. subsidiaries also sponsorpersonal pension plans. The plans operate as salary reduction plans,which also allows for lump sum contributions, whereby participantscontribute anywhere from 1% to 40% of their compensation,not to exceed the maximum available under the U.K. tax laws. TheCompany may make an additional contribution (which varies according toemployee contracts and contribution elections) which is in the form ofcash. The Company's contributions to the U.K. plans were $131,$252 and $26 for the years ended September 30, 2003, 2002 and 2001,respectively.

15.    Selected Quarterly Financial Data(unaudited):

The following table presents the comparativeunaudited quarterly results for the years ended September 30, 2003 and2002:

|                                                       |  |              |        |          |  |          |
|-------------------------------------------------------|--|--------------|--------|----------|--|----------|
| 2003 QuarterEnded                                     |  | December 31, |        | March31, |  | June 30, |  | September 30, |
| Totalrevenues                                         |  | $            | 67,998 |     |  | $        | 71,686 |   |  | $ | 75,274 |   |  | $ | 79,421 |   |
| Grossprofit                                           |  | $            | 18,898 |     |  | $        | 19,625 |   |  | $ | 20,595 |   |  | $ | 22,205 |   |
| Discontinuedoperations                                |  | $            | 184    |     |  | $        | (62 | )  |  | $ | 381 |   |  | $ | — |   |
| Netincome                                             |  | $            | 2,303  |     |  | $        | 3,526 | (a)  |  | $ | 2,120 |   |  | $ | 4,022 |   |
| Net income available to common shareholders           |  | $            | 1,309  |     |  |     | 2,552 |   |  | $ | 1,117 |   |  | $ | 2,988 |   |
| Basic and diluted net income per share of commonstock |  | $            | 0.06   |     |  | $        | 0.11 |   |  | $ | 0.05 |   |  | $ | 0.13 |   |
| 2002Quarter Ended                                     |  | December 31, |        | March31, |  | June 30, |  | September 30, |
| Totalrevenues                                         |  | $            | 56,582 |     |  | $        | 57,511 |   |  | $ | 60,587 |   |  | $ | 68,148 |   |
| Grossprofit                                           |  | $            | 14,903 |     |  | $        | 15,149 |   |  | $ | 16,412 |   |  | $ | 19,615 |   |
| Discontinuedoperations                                |  | $            | 203    |     |  | $        | 265 |   |  | $ | 234 |   |  | $ | 299 |   |
| Net income(loss)                                      |  | $            | 1,457  |     |  | $        | 1,626 |   |  | $ | (5,465) | (b)  |  | $ | 7,176 | (c)  |
| Net income (loss) available to commonshareholders     |  | $            | 1,457  |     |  |     | 1,626 |   |  | $ | (5,579 | )  |  | $ | 6,274 |   |
| Basic net income (loss) per share of commonstock      |  | $            | 0.08   |     |  | $        | 0.09 |   |  | $ | (0.30 | )  |  | $ | 0.30 |   |
| Diluted net income (loss) per share of commonstock    |  | $            | 0.06   |     |  | $        | 0.07 |   |  | $ | (0.30 | )  |  | $ | 0.26 |   |
|                                                       |

|  |
|--|
|  |  |
|  |

| (a) | Includesbenefit $1,873 related to the reversal of an estimated income taxliability for a business that was previously discontinued and no longerhas any tax liabilities. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Includes anon-cash charge of $4,216 for the issuance of shares of theCompany's common stock to senior management and a charge for$2,341 for tax equalization bonuses paid to senior management forreimbursement of income taxes incurred as a result of the shareissuances. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | Includes net charges of$2,410 related to the completion of the Reorganization and $5,143 gainin the settlement of PIK interest. |
|-----|---------------------------------------------------------------------------------------------------------------------------------|

F-33

----

ALLIEDHEALTHCARE INTERNATIONAL INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**(Continued)**(In Thousands, Except Per ShareData)

16.    SubsequentEvents:

(a)   On December 2, 2003, Mr. Aitken and Ms. Eamesrepaid in full the principal and accrued interest on the promissorynotes issued by them to the Company in connection with theReorganization in fiscal 2002. The principal and accrued interestrepaid aggregated $591 and $419, respectively. The loans were repaid bydelivery to the Company of 104 and 73 shares of the Company'scommon stock held by Mr. Aitken and Ms. Eames, respectively, valued at$5.70 per share, the closing price on the day prior to the repaymentdate. The Company also agreed to reimburse Mr. Aitken and Ms. Eames forthe taxes incurred by them on the disposition of the shares to theCompany, which are estimated to be approximately $83 and $51,respectively.

(b)   On December 24, 2003, the Companycompleted its acquisition of Primary Care Agency Limited, a supplier offlexible healthcare staffing services primarily to hospitals, primarycare trusts and learning disability homes in the U.K. The considerationincluded a payment of $2,095 in cash and additional contingent cashconsideration of $1,873 dependent upon future earnings of the acquiredentity.

(c)   On April 8, 2004, the Company completed itsacquisition of certain assets of the business of Kingston Care &Yorkshire Care, a supplier of home health aides to social serviceproviders in the Yorkshire area of the U.K. The consideration includedan initial payment of $1,196 in cash and additional contingent cashconsideration of up to a further $2,009 dependent upon future earningsof the acquired business over the next 12months.

F-34

----

SCHEDULEI

ALLIED HEALTHCARE INTERNATIONAL INC.(PARENT COMPANYONLY)SCHEDULE I - CONDENSED FINANCIAL INFORMATIONBALANCESHEETS(In thousands, except per sharedata)

|                                                                                                                                                        |  |                  |         |                   |  |        |         |         |  |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--|------------------|---------|-------------------|--|--------|---------|---------|--|--|
|                                                                                                                                                   |  | September30,2003 |         | September 30,2002 |
| **ASSETS**                                                                                                                                             |  |
| **Currentassets:**                                                                                                                                     |  |
| Cash and cashequivalents                                                                                                                               |  | $                | 5,813   |              |  | $      | 383     |    |
| Receivables from subsidiaries                                                                                                                          |  |             | 46,242  |              |  |   | 56,631  |    |
| Prepaid expenses and otherassets                                                                                                                       |  |             | 897     |              |  |   | 202     |    |
| Total current assets                                                                                                                                   |  |             | 52,952  |              |  |   | 57,216  |    |
| Property and equipment,net                                                                                                                             |  |             | 21      |              |  |   | 23      |    |
| Investment insubsidiaries                                                                                                                              |  |             | 60,699  |              |  |   | 31,922  |    |
| Goodwill                                                                                                                                               |  |             | 2,300   |              |  |   | 2,300   |    |
| Other assets                                                                                                                                           |  |             | 327     |              |  |   | 66      |    |
| Totalassets                                                                                                                                            |  | $                | 116,299 |              |  | $      | 91,527  |    |
| **LIABILITIESAND SHAREHOLDERS'EQUITY**                                                                                                                 |  |
| **Currentliabilities:**                                                                                                                                |  |
| Dividendspayable                                                                                                                                       |  | $                | 4,464   |              |  | $      | 941     |    |
| Liabilities ofdiscontinued operations                                                                                                                  |  |             | 690     |              |  |   | — |    |
| Accounts payable                                                                                                                                       |  |             | 676     |              |  |   | 434     |    |
| Accrued expenses                                                                                                                                       |  |             | 1,983   |              |  |   | 1,913   |    |
| Taxes payable                                                                                                                                          |  |             | 68      |              |  |   | 1,931   |    |
| Total currentliabilites                                                                                                                                |  |             | 7,881   |              |  |   | 5,219   |    |
| Long-termliabilities                                                                                                                                   |  |             | 104     |              |  |   | 111     |    |
| Total liabilities                                                                                                                                      |  |             | 7,985   |              |  |   | 5,330   |    |
| Commitmentsand contingencies                                                                                                                           |  |
| Redeemable convertible Series Apreferred stock, $.01 par value; authorized 8,000 shares, 7,774 sharesissued and outstanding (liquidation value$35,213) |  |             | 33,151  |              |  |   | 32,254  |    |
| Shareholders'equity:                                                                                                                                   |  |
| Preferred stock, $.01 par value; authorized2,000 shares, issued and outstanding - none                                                                 |  |             | — |              |  |   | — |    |
| Common stock, $.01 par value;authorized 62,000 shares, issued 22,689 and 20,945 shares,respectively                                                    |  |             | 227     |              |  |   | 209     |    |
| Additionalpaid-in capital                                                                                                                              |  |             | 142,897 |              |  |   | 139,309 |    |
| Accumulated other comprehensive income(loss)                                                                                                           |  |             | 3,140   |              |  |   | (3,112  | )  |
| Accumulateddeficit                                                                                                                                     |  |             | (68,814 | )            |  |   | (80,785 | )  |
|                                                                                                                                                   |  |             | 77,450  |              |  |   | 55,621  |    |
| Less notes receivable fromofficers                                                                                                                     |  |             | (1,002  | )            |  |   | (958    | )  |
| Less cost oftreasury stock (408 and 266 shares,respectively)                                                                                           |  |             | (1,285  | )            |  |   | (720    | )  |
| Total shareholders'equity                                                                                                                              |  |             | 75,163  |              |  |   | 53,943  |    |
| Total liabilities and shareholders'equity                                                                                                              |  | $                | 116,299 |              |  | $      | 91,527  |    |
|                                                                                                                                                        |

See note to condensedfinancial information.

S-1

----

ALLIED HEALTHCARE INTERNATIONALINC.(PARENT COMPANY ONLY)SCHEDULE I - CONDENSED FINANCIALINFORMATIONSTATEMENTS OF OPERATIONS(Inthousands)

|                                                              |  |                            |         |                            |  |                            |         |         |  |        |         |         |  |  |
|--------------------------------------------------------------|--|----------------------------|---------|----------------------------|--|----------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                                         |  | YearEndedSeptember 30,2003 |         | Year EndedSeptember30,2002 |  | Year EndedSeptember30,2001 |
| Revenue                                                      |  | $                          | — |                       |  | $                          | — |    |  | $      | — |    |
| Expenses:                                                    |  |
| Selling,general and administrative expenses                  |  |                       | 4,178   |                       |  |                       | 10,848  |    |  |   | 3,054   |    |
| Forgiveness of intercompanydebt                              |  |                       | 12,106  |                       |  |                       | — |    |  |   | — |    |
| Totalexpenses                                                |  |                       | 16,284  |                       |  |                       | 10,848  |    |  |   | 3,054   |    |
| Gain on settlement of PIK interest                           |  |                       | — |                       |  |                       | (5,143  | )  |  |   | — |    |
| Equityin income (loss) of subsidiares                        |  |                       | 26,043  |                       |  |                       | 10,615  |    |  |   | (2,195  | )  |
| Other expense(income)                                        |  |                       | 113     |                       |  |                       | 116     |    |  |   | (99     | )  |
| Income (loss) before income taxes anddiscontinued operations |  |                       | 9,646   |                       |  |                       | 4,794   |    |  |   | (5,150  | )  |
| (Benefit from) provision for incometaxes                     |  |                       | (1,806  | )                     |  |                       | — |    |  |   | 21,462  |    |
| Income(loss) before discontinued operations                  |  |                       | 11,452  |                       |  |                       | 4,794   |    |  |   | (26,612 | )  |
| Discontinuedoperations —                               |  |
| Gain on disposal of subsidiaries,net of taxes of $775        |  |                       | 519     |                       |  |                       | — |    |  |   | — |    |
|                                                         |  |                       | 519     |                       |  |                       | — |    |  |   | — |    |
| Netincome(loss)                                              |  | $                          | 11,971  |                       |  | $                          | 4,794   |    |  | $      | (26,612 | )  |
|                                                              |

Seenote to condensed financial information.

S-2

----

SCHEDULE I

ALLIEDHEALTHCARE INTERNATIONAL INC.(PARENT COMPANY ONLY)SCHEDULE I- CONDENSED FINANCIAL INFORMATIONSTATEMENTS OF CASHFLOWS(Inthousands)

|                                                                                                  |  |                            |         |                            |  |                             |         |         |  |        |         |         |  |  |
|--------------------------------------------------------------------------------------------------|--|----------------------------|---------|----------------------------|--|-----------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                             |  | YearEndedSeptember 30,2003 |         | Year EndedSeptember30,2002 |  | Year EndedSeptember 30,2001 |
| Cash flows from operatingactivities:                                                             |  |
| Net income(loss)                                                                                 |  | $                          | 11,971  |                       |  | $                           | 4,794   |    |  | $      | (26,612 | )  |
| Adjustments to reconcile net income (loss) tonet cash (used in) provided by operatingactivities: |  |
| Equity interest in netincome (loss) ofsubsidiaries                                               |  |                       | (26,043 | )                     |  |                        | (10,615 | )  |  |   | 2,195   |    |
| Gain on sale ofsubsidiaries                                                                      |  |                       | (519    | )                     |  |                        | — |    |  |   | — |    |
| Depreciation and amortization                                                                    |  |                       | 9       |                       |  |                        | 16      |    |  |   | 47      |    |
| Amortization of debt issuance costs andwarrants                                                  |  |                       | 203     |                       |  |                        | — |    |  |   | — |    |
| Forgiveness of intercompanydebt                                                                  |  |                       | 12,106  |                       |  |                        | — |    |  |   | — |    |
| Loss on sale of fixed assets                                                                     |  |                       | 3       |                       |  |                        | — |    |  |   | 5       |    |
| Minority interest                                                                                |  |                       | — |                       |  |                        | 120     |    |  |   | 22      |    |
| Stock based compensation -employees                                                              |  |                       | 587     |                       |  |                        | 5,835   |    |  |   | — |    |
| Interest accrued on loans toofficers                                                             |  |                       | (44     | )                     |  |                        | (18     | )  |  |   | — |    |
| Gain on settlement of PIK interest                                                               |  |                       | — |                       |  |                        | (5,143  | )  |  |   | — |    |
| Gain on acquisition ofminority interest                                                          |  |                       | — |                       |  |                        | (179    | )  |  |   | — |    |
| Deferred incometaxes                                                                             |  |                       | — |                       |  |                        | — |    |  |   | 21,462  |    |
| Changes in operating assets and liabilities,excluding the effect of businesses acquired andsold: |  |
| Decrease (increase) in receivables fromsubsidiaries                                              |  |                       | 1,164   |                       |  |                        | 4,287   |    |  |   | (394    | )  |
| (Increase) decrease in prepaid expenses and otherassets                                          |  |                       | (394    | )                     |  |                        | (82     | )  |  |   | 62      |    |
| Increase (decrease) in accounts payable and otherliabilities                                     |  |                       | (1,641  | )                     |  |                        | 305     |    |  |   | (110    | )  |
| Net cash used in continuingoperations                                                            |  |                       | (2,598  | )                     |  |                        | (680    | )  |  |   | (3,323  | )  |
| Net cash provided by discontinuedoperations                                                      |  |                       | 463     |                       |  |                        | 1,640   |    |  |   | 1,679   |    |
| Net cash (used in) provided byoperatingactivities                                                |  |                       | (2,135  | )                     |  |                        | 960     |    |  |   | (1,644  | )  |
| Cash flows frominvesting activities:                                                             |  |
| Capitalexpenditures                                                                              |  |                       | (11     | )                     |  |                        | (9      | )  |  |   | (15     | )  |
| Loans to officers                                                                                |  |                       | — |                       |  |                        | (940    | )  |  |   | — |    |
| Proceeds from sale ofdiscontinued operations                                                     |  |                       | 8,195   |                       |  |                        | — |    |  |   | — |    |
| Net cashprovided by (used in) investingactivities                                                |  |                       | 8,184   |                       |  |                        | (949    | )  |  |   | (15     | )  |
| Cash flowsfrom financing activities:                                                             |  |
| Payments for stockissuance costs                                                                 |  |                       | (20     | )                     |  |                        | (4,054  | )  |  |   | — |    |
| Proceeds from issuance of stock                                                                  |  |                       | — |                       |  |                        | 3,188   |    |  |   | — |    |
| Payments for treasuryshares acquired                                                             |  |                       | (565    | )                     |  |                        | — |    |  |   | (720    | )  |
| Stock options and warrants exercised, net, including taxbenefit                                  |  |                       | 80      |                       |  |                        | — |    |  |   | 7       |    |
| Net cash used in financingactivities                                                             |  |                       | (505    | )                     |  |                        | (866    | )  |  |   | (713    | )  |
| Effect of exchange rate oncash                                                                   |  |                       | (114    | )                     |  |                        | 252     |    |  |   | 1       |    |
| Increase (decrease) incash                                                                       |  |                       | 5,430   |                       |  |                        | (603    | )  |  |   | (2,371  | )  |
| Cash and cash equivalents, beginning ofperiod                                                    |  |                       | 383     |                       |  |                        | 986     |    |  |   | 3,357   |    |
| Cash and cash equivalents, end ofperiod                                                          |  | $                          | 5,813   |                       |  | $                           | 383     |    |  | $      | 986     |    |
|                                                                                                  |

See note to condensedfinancial information.

S-3

----

ALLLIED HEALTHCARE INTERNATIONALINC.(PARENT COMPANY ONLY)SCHEDULE I - CONDENSED FINANCIALINFORMATION NOTE TO CONDENSED FINANCIAL INFORMATION

Basisof Presentation:

Certain information and footnotedisclosures normally included in financial statements prepared inconformity with generally accepted accounting principles have beencondensed or omitted. Accordingly, these financial statements should beread in conjunction with the consolidated financial statements ofAllied Healthcare International Inc. (the"Company") in its 2003 Annual Report on Form10-K/A.

The investments in the Company'ssubsidiaries are carried on the equity basis, which represents amountinvested less dividends received plus or minus the Company'sequity in the subsidiaries' income or loss to date. Significantintercompany balances and activities have not been eliminated in theunconsolidated financialinformation.

S-4

----

AlliedHealthcare International Inc. (In Thousands)

Schedule II— Valuation and Qualifying Accounts

|                              |  |                             |        |                     |  |            |       |                       |  |   |     |           |  |   |        |           |  |   |        |        |  |  |
|------------------------------|--|-----------------------------|--------|---------------------|--|------------|-------|-----------------------|--|---|-----|-----------|--|---|--------|-----------|--|---|--------|--------|--|--|
| Column A                     |  | ColumnB                     |        | Column C            |  | Column D   |       | Column E              |
| Description                  |  | BalanceatBeginningof Period |        | Additions Chargedto |  | Deductions |       | Balance atEndofPeriod |
| CostandExpenses              |  | OtherAccounts               |        |
| Allowance forDoubtful        |  |
| Accounts:                    |  |
| Yearended September 30,2003  |  | $                           | 22,849 |                |  | $          | 1,205 |                  |  | $ | 227 | (B)  |  | $ | 20,935 | (A)  |  | $ | 3,346  |   |
| Year ended September 30,2002 |  | $                           | 22,737 |                |  | $          | 985   |                  |  | $ | 158 | (B)  |  | $ | 1,031  | (A)  |  | $ | 22,849 |   |
| Year ended September 30,2001 |  | $                           | 20,751 |                |  | $          | 2,586 |                  |  | $ | 347 | (B)  |  | $ | 947    | (A)  |  | $ | 22,737 |   |
|                              |

| (A) | Doubtfulaccounts written off, net of recoveries and sold. |
|-----|-----------------------------------------------------------|

| (B) | Assumed in acquisitions and adjustmentsarising from translation of foreign financial statements to U.S.dollars. |
|-----|-----------------------------------------------------------------------------------------------------------------|

S-5

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