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SECURITIESAND EXCHANGE COMMISSIONWashington, D.C.20549

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FORM 10-K

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|   | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the fiscalyear ended September 30, 2004

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|   | TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 |

For the transition period from                 to                

Commission File No.:1-11570

ALLIED HEALTHCARE INTERNATIONALINC.

(Exact Name of Registrant asSpecified in Its Charter)

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| NewYork                                       |  |                                                                                                  |  | 13-3098275                                         |
| (Stateor Other Jurisdiction of Incorporation) |  |                                                                                                  |  | (I.R.S.Employer IdentificationNumber)              |
| 555Madison AvenueNew York, NewYork            |  |         10022         |  | (212)750-0064                                      |
| (Addressof principal executive offices)       |  | (ZipCode)                                                                                             |  | (Registrant's telephone number,including areacode) |
|                                               |

Securities registered pursuant toSection  12(b) of the Act:

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| Titleof Each Class |  | Name of Each Exchange on WhichRegistered |
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Securitiesregistered pursuant to Section 12(g) of the Act:

CommonStock, $.01 par value

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(Title ofClass)

    

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(Titleof Class)

Indicate by check mark whether theregistrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such reportingrequirements for the past 90 days.Yes        X        No                

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained, to the best or registrant's knowledge,in definitive proxy or information statements incorporated by referencein Part III of this Form 10-K or any amendment to this Form10-K.        X    

Indicate bycheck mark whether the registrant is an accelerated filer (as definedin Exchange Act Rule12b-2).    Yes                    No        X    

The aggregate market value of the voting andnon-voting common equity held by non-affiliates of the registrant as ofMarch 31, 2004, the last business day of its most-recently completedsecond fiscal quarter, was approximately $53,632,906 based on theclosing sales price of $6.79 per share of common stock of theregistrant on such date, as reported by the Nasdaq National Market. Thecalculation of the number of shares held by non-affiliates is based onthe assumption that the affiliates of the registrant include only (i)directors, (ii) executive officers and (iii) shareholders who havefiled a Schedule 13D or 13G which reflects ownership of at least10% of the outstanding common stock.

The number of shares of common stock of theregistrant outstanding on December 10, 2004 was 44,468,772.

DOCUMENTS INCORPORATED BY REFERENCE

None

    

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ALLIED HEALTHCAREINTERNATIONAL INC.ANNUAL REPORT ON FORM 10-KFor the FiscalYear Ended September  30, 2004

TABLE OFCONTENTS

PARTI

|         |  |                                                    |  |    |  |  |  |  |  |  |
|---------|--|----------------------------------------------------|--|----|--|--|--|--|--|--|
| Item1.  |  | Business                                           |  | 2  |
| Item 2. |  | Properties                                         |  | 11 |
| Item3.  |  | Legal Proceedings                                  |  | 12 |
| Item4.  |  | Submission of Matters to a Vote of SecurityHolders |  | 12 |
|         |

PART II

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|----------|--|------------------------------------------------------------------------------------------------------------|--|----|--|--|--|--|--|--|
| Item5.   |  | Market forRegistrant's Common Equity, Related Stockholder Matters andIssuer Purchases of Equity Securities |  | 13 |
| Item 6.  |  | Selected Financial Data                                                                                    |  | 13 |
| Item7.   |  | Management'sDiscussion and Analysis of Financial Condition and Results ofOperations                        |  | 16 |
| Item 7A. |  | Quantitativeand Qualitative Disclosures About Market Risk                                                  |  | 28 |
| Item 8.  |  | Financial Statements and SupplementaryData                                                                 |  | 29 |
| Item9.   |  | Changes in and Disagreementswith Accountants on Accounting and FinancialDisclosure                         |  | 29 |
| Item 9A. |  | Controls andProcedures                                                                                     |  | 29 |
| Item 9B. |  | OtherInformation                                                                                           |  | 29 |
|          |

PART III

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|----------|--|----------------------------------------------------------------------------------------------|--|----|--|--|--|--|--|--|
| Item10.  |  | Directors and Executive Officers of theRegistrant                                            |  | 30 |
| Item 11. |  | ExecutiveCompensation                                                                        |  | 33 |
| Item12.  |  | Security Ownership ofCertain Beneficial Owners and Management and Related StockholderMatters |  | 39 |
| Item 13. |  | CertainRelationships and Related Transactions                                                |  | 42 |
| Item 14. |  | Principal Accountant Fees andServices                                                        |  | 43 |
|          |

PART IV

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|---------|--|-------------------------------------------|--|----|--|--|--|--|--|--|
| Item15. |  | Exhibits and Financial StatementSchedules |  | 45 |
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FORWARD-LOOKINGSTATEMENTS

This Annual Report on Form 10-K includesforward-looking statements.

Forward-looking statements areidentified by words such as "believe,""anticipate,""expect," "intend,""plan," "will,""may," "should,""could," "think,""estimate" and"predict," and other similar expressions. Inaddition, any statements that refer to expectations, projections orother characterizations of future events or circumstances areforward-looking statements.

We based these forward-lookingstatements on our current expectations and projections about futureevents. Our actual results could differ materially from those discussedin, or implied by, these forward-looking statements. Factors that couldcause actual results to differ from those implied by theforward-looking statements include:

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| •  | our ability to continue to recruit andretain qualified flexible healthcare staff; |

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| •  | our ability to enter into contracts withhospitals and other healthcare facility clients on terms attractive tous; |

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| •  | the general level of patientoccupancy at our clients' hospitals and healthcarefacilities; |

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| •  | our ability tosuccessfully implement our acquisition and integration strategies; |

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| •  | our dependence on the proper functioningof our information systems; |

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| •  | the effectof existing or future government regulation of the healthcare industry,and our ability to comply with these regulations; |

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| •  | the impact of medical malpractice andother claims asserted against us; |

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| •  | theeffect of regulatory change that may apply to us and that may increaseour costs and reduce our revenue and profitability; |

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| •  | our ability to use our net operating losscarryforward to offset net income; |

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| •  | theeffect that fluctuations in foreign currency exchange rates may have onour dollar-denominated results of operations; and |

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| •  | the impairment of our goodwill, of whichwe have a substantial amount on our balance sheet, may have the effectof decreasing our earnings or increasing our losses. |

Otherfactors that could cause actual results to differ from those implied bythe forward-looking statements in this Annual Report on Form 10-K aremore fully described elsewhere in this document, as well as changes inany of the following: the demand for our products and services, generaleconomic conditions, governmental regulation, the level of competitionwe face, customer strategies and pricing and reimbursementpolicies.

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Preliminary Notes

As usedin this Annual Report on Form 10-K, "ourcompany," "we,""us" and similar terms mean Allied HealthcareInternational Inc. and its subsidiaries.

Historical financialand other data originally denominated in pounds sterling have beenconverted to dollars at the then applicable exchange rate. Financialand other data (excluding historical financial and other data)originally denominated in pounds sterling have been converted todollars using the exchange ratio at September 30, 2004 of £1.00 =$1.7994.

PART I

Item 1.    Business

OurCompany

We are a leading provider of flexible, or temporary,healthcare staffing to the U.K. healthcare industry as measured byrevenues, market share and number of staff. As of September 30, 2004,we operated an integrated network of 125 branches throughout most ofthe United Kingdom. Our healthcare staff consists principally ofnurses, nurses aides and home health aides (known as carers in theUnited Kingdom). We focus on placing our staff on a per diem basis inhospitals, nursing homes, care homes (which, unlike nursing homes, donot generally provide medical services to their residents) and privatehomes. We maintain a pool of over 25,000 nurses, nurses aides and homehealth aides, over 22,000 of whom we placed during the fiscal yearended September 30, 2004. Our healthcare staffing business accountedfor 97.6% of our revenues during the fiscal year ended September30, 2004. We also supply medical-grade oxygen for use in respiratorytherapy to the U.K. pharmacy market and to private patients in NorthernIreland. Our medical-grade oxygen business accounted for approximately2.4% of our revenues during the fiscal year ended September 30,2004. We disposed of the last of our active U.S. operations duringfiscal year 2003.

We focus our operations primarily on the perdiem staffing market rather than the long-term staffing market becausewe believe that per diem staffing has a more favorable pricingstructure. Per diem arrangements generally command higher prices thanlong-term contracts and generally have higher margins. In the per diemmarket, healthcare facilities retain flexible staffers on a job-to-jobbasis when needed, without any long-term contractual commitment by thepurchaser or provider. In contrast, long-term contracts are negotiatedfor a number of months or years and guarantee a supply of staff to thepurchaser, but generally do not guarantee that staffing services willbe purchased.

Our principal executive offices are located at 555Madison Avenue, New York, New York 10022, and our telephone number atthat location is (212) 750-0064. Our Internet address iswww.alliedhealthcare.com.

Recent Developments

On July7, 2004, we consummated a firm commitment follow-on public offering of14,500,000 shares of our common stock (the "PublicOffering"). We sold the shares at a price per share of$4.90. We realized net proceeds of approximately $65.7 million from thePublic Offering.

In connection with the Public Offering, weundertook a recapitalization plan designed to (i) refinance our thenoutstanding bank and institutional indebtedness, which consisted of asenior collateralized term and revolving credit facility (the"Senior Credit Facility") and mezzanineindebtedness (the "Mezzanine Loan"), (ii) tofacilitate the conversion of all of our then outstanding shares ofSeries A preferred stock into shares of our common stock and (iii) toprovide funds for the continued expansion of our operations (the"RecapitalizationPlan").

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Pursuant to our RecapitalizationPlan:

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| •  | We used approximately $7.4million of the net proceeds of the Public Offering to pay accrued andunpaid dividends on our shares of Series A preferred stock and $2.0million of the net proceeds of the Public Offering to pay the holdersof our Series A preferred stock a conversion fee. Upon the receipt ofsuch amounts the holders of all of our shares of Series A preferredstock, who held an aggregate of 7,773,660 shares of our Series Apreferred stock, converted all of their shares into a like number ofshares of our common stock. |

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| •  | We usedapproximately $55.5 million of the net proceeds of the Public Offeringto repay a portion of the amounts outstanding under our Senior CreditFacility and our Mezzanine Loan. |

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| •  | Weentered into a new senior secured credit facility in the amount ofapproximately £50 million (approximately $90.0 million) with lessrestrictive covenants than our Senior Credit Facility and our MezzanineLoan. The initial borrowings under this new credit facility, which were$72.0 million, were used to repay the remainder of the amountsoutstanding under our Senior Credit Facility and our Mezzanine Loan andfor general corporate purposes and acquisitions. |

The U.K.Flexible Healthcare Staffing Industry

The U.K. flexiblehealthcare staffing market, according to Laing & Buisson'sreport, Flexible Staffing Services in U.K. Health & Care Markets(2004), was estimated to be £4.5 billion ($8.1 billion) in 2003.The same Laing & Buisson report indicates that the U.K. healthcarestaffing market is highly fragmented with no one company possessing adominant market share, providing opportunities for growth andconsolidation.

The major purchasers of flexible healthcare staffin the United Kingdom are:

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| •  | Thegovernment-funded National Health Service (the"NHS"). Through its Primary Care Trusts, theNHS oversees general practitioners, who refer patients to specialistsfor more complex treatment. The NHS operates its hospitals through NHSTrusts, each of which operates one or more hospitals. (There areapproximately 275 NHS Trusts in England, 28 in Scotland and 14 inWales.) The NHS spent £2.1 billion ($3.7 billion) in 2003 ontemporary healthcare staff, of which £1.8 billion ($3.2 billion)was spent by NHS Trusts. |

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| •  | Localgovernmental social service departments, which purchased £1.3billion ($2.3 billion) in 2003 for the provision of homecare servicesfrom the private sector. |

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| •  | Privateindividuals, who spent £570 million ($1.0 billion) on homecareservices in 2003. An additional £90 million ($161 million) ofhomecare services was purchased from other sources, including theNHS. |

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| •  | Independent hospitals and carehomes in the United Kingdom, which purchased £183 million ($328million) in healthcare staffing. |

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| •  | Othersources, who purchased an estimated £260 million ($466million). |

Our Business Strategy

We seek to become theleading provider of healthcare staffing to the U.K. healthcare industryand to expand our range of healthcare staffing services over thelong-term. The key elements in achieving these strategic objectivesare:

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| •  | **Further expand our strongpresence in the U.K. healthcare staffing industry through acquisitions.**We intend to grow our presence in the U.K. healthcare staffingindustry through the acquisition of other companies. We have teams ofemployees dedicated to evaluating acquisition candidates andintegrating theiroperations. |

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| •  | **Increase revenues on aper branch basis.   **We believe the increasing demand for qualityhealthcare staffing with national coverage and diversity of serviceswill support organic growth |

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|   | in our branches. We intend to foster continuedsame-store revenue growth by leveraging our nationally recognized andlocally recognized brand names, competitive benefits package andleadership in providing temporary healthcarestaffing. |

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| •  | **Recruit and retainhealthcare staff.   **We intend to continue to recruit and retainhigh-quality staff to take advantage of the severe shortages of nursesand home health aides in the United Kingdom, which we expect tocontinue in the foreseeable future. We intend to continue ourrecruitment efforts and to encourage loyalty from our healthcare staffby matching their flexible working preferences (both with regards toscheduling preferences and types of assignments desired) with ourcustomers' needs, maintaining regular contact and promotingopportunities for training and development, such as ourCareMilesTM program, which is discussed below. |

Utilizing our successes in the United Kingdom, we intend to evaluateopportunities to acquire healthcare staffing businesses in the UnitedStates. While we have not in recent years had a significant presence inthe U.S. flexible staffing market, we believe that our competitivestrengths and the increasing demand for temporary healthcare staff inthe United States, together with the fragmented market for flexiblehealthcare staffing in the United States, may provide an attractiveopportunity to us.

Our Operations

We are a leadingprovider of flexible, or temporary, staffing to the U.K. healthcareindustry. We provide flexible staffing, principally nurses, nursesaides and home health aides, to customers throughout most of the UnitedKingdom. Our branches are located in England, Wales and Scotland. We donot have any branches or healthcare staffing customers in NorthernIreland. We also provide respiratory therapy products to pharmacies inthe United Kingdom and to private patients in Northern Ireland.

During fiscal 2004, our revenues were derived from the followinglines of business:

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| •  | 97.6% fromflexible staffing services;and |

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| •  | 2.4% from respiratorytherapy. |

During fiscal 2003, we exited the U.S. market. Ourdiscontinued operations are reflected separately in our consolidatedfinancial statements.

Flexible Staffing

Weprovide a diverse range of flexible staff, principally consisting ofnurses, nurses aides and home health aides, to our customers. A largenumber of our nurses are recently-licensed nurses, who we generallyprovide to hospitals and nursing homes. We also provide specialistnurses and specialized nurses aides, primarily through our StaffingEnterprise and Balfor Medical Limited subsidiaries. Home health aidesprovide personal or basic care in the home. Nurses aides perform manyof the functions of home health aides, but in the hospital setting. Asof September 2004, our mix of flexible staff was approximately23% nurses, 34% nurses aides and 43% home healthaides.

We operate an integrated branch network, which, as ofSeptember 30, 2004, consisted of 125 branches throughout most of theUnited Kingdom. Our branches serve as our direct contact with ourcustomers and our healthcare staff. We operate our branches throughvarious subsidiaries. Our subsidiaries operate under various tradenames. See "Trade Names" below. Our branchesare organized by geographic region, each of which is coordinated by aregional director. A typical branch is overseen by one branch manager,who often has prior nursing experience. A branch manager is responsiblefor developing local customer relations and recruiting staff.

Wegenerally maintain centralized management control in the areas ofpayroll, accounts receivable, contracts, pricing, regulatory matters,quality control and information technology. Our branches are requiredto report their revenues, hours worked and certain other data to us ona weekly basis, and their profit and loss on a monthly basis.

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Recruitment of Flexible Staff

Many healthcare workers are attracted to flexible staffing positionsbecause of their desire to tailor work schedules to personal and familyneeds, obtain varied and challenging work experiences and acquire newskills. We believe that our ability to offer quality flexible staffingassignments well-matched to individuals' preferences assists inour attracting a large number of flexible healthcare workers.

Our branch managers are primarily responsible for recruiting staff.Branch managers recruit on a local basis, with referrals from existingstaff providing an important source of new staff. From time to time, wemay run internal financial promotions to encourage referrals from ourstaff. We also formally recruit through local and national printadvertising and organize recruitment events, including nationalrecruitment days, at the branch level. Our website also advertisesnational branch vacancies.

We impose a standardized recruitmentprocess on our branches. Before they can place a nurse, nurses aide orhome health aide, our branches must obtain, among other things, tworeferences and evidence of proper immunizations, as well as a policebackground check. Our branches must also confirm that each nurse hasbeen licensed by the appropriate governmental body and that each nursesaide and home health aide has received the training mandated by law fortheir occupation.

Training and Retention of FlexibleStaff

Our retention philosophy is based upon each branchmaintaining personal contact with the flexible staff on its register,including a structured campaign whereby current and former staff arecontacted periodically by each branch to assess their needs and toattempt to meet their individual working preferences. We also conduct aformal annual review of all charge and pay rates within the businessand compare them to prevailing market rates to ensure that our marginsare competitive.

In April 2002, we introduced a program called"CareMilesTM" that enables ourflexible staff to earn credits based on the number of hours that theywork for us. Our staff can use the credits to pay for healthcaretraining and personal development courses that the individual wouldotherwise pay for out of his or her pocket. As a healthcare workerbecomes more skilled, he or she has greater flexibility in choosingassignments and also may earn a greater hourly wage. We believe thatthe CareMilesTM program promotes staff loyalty whileproviding us with the opportunity to earn higher commissions as morehighly-trained staff are generally billed out at higher rates. Thehealthcare training and personnel development courses offered throughthe CareMilesTM program are in addition to standard trainingprograms that we offer to our staff to ensure compliance withregulatory requirements.

Quality Assurance

Weare investing heavily in quality assurance systems to ensure that ourflexible healthcare staff meet our internal quality assurancestandards, as well as those mandated under the Care Standards Act 2000.Our investment includes a quality assurance center where flexiblehealthcare staff can update their training requirements, comprehensivetoolkits and procedures for our branches and a national trainingmanager.

We have a quality assurance audit team whose primaryjob responsibility is to visit each of our branches on a periodic basisto assure that the branches adhere to the procedures and policies setby our main office. The quality assurance audit team is independent ofour operations management. A member of our quality assurance audit teamvisits each branch at least once per year. During its visits to ourbranches, the quality assurance audit team reviews employee files toconfirm that staff has proper levels of training for the jobs in whichthey are being placed by the branch and that the documents required byour standardized recruitment process are in order. The qualityassurance audit team also confirms that nurses have been licensed withthe appropriate U.K. body. In addition, to minimize injury to ourstaff, the quality assurance audit team checks customer files toconfirm that all health and safety checks for customers'facilities have been made. Reviews of staff and customer files are doneon a random sample basis.

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Customers

We providehealthcare staff to four types ofcustomers:

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| •  | **The NHS.**  During our fiscal year ended September 30, 2004, we provided nurses andnurses aides to the NHS. We provided staff mainly to NHS hospitals andNHS Primary Care Trusts. |

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| •  | **Localgovernmental social service departments.**   Local governmentalsocial service departments retain us to provide healthcare staff,generally home health aides, to individuals in theirhomes. |

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| •  | **Nursing homes, care homes andindependent hospitals.**  We provide nurses and home healthaides to nursing homes and home health aides to care homes. Care homes,like nursing homes, generally provide shelter and food for theirresidents, but, unlike nursing homes, generally do not provide medicalservices to their residents. We also provide nurses and nurses aides toindependent hospitals in the privatesector. |

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| •  | **Privatepatients.**  We provide both nurses and home health aides toprivate patient customers. These patients may include incapacitatedindividuals who require daily attention or patients with long-termillnesses living at home. |

Types of CustomerContracts

We provide staff to our customers under a variety ofarrangements, including the following categories of contracts common tothe healthcare staffingindustry:

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| •  | **Per diempurchases.**  Business provided on a per diem basis arises whena customer requires flexible staff, and there is no formal ongoingcontractual commitment with the customer. The work services provided ona per diem basis may be limited to one shift lasting a short period oftime or may be an engagement for an indefinite period. We provide mostof our nurses, nurses aides and home health aides to customers on a perdiem basis. |

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| •  | **NHS Framework Agreementsand Service Level Agreements.**   The NHS has divided Englandinto eight regions. The NHS has required any healthcare staffingcompany that provides temporary staff to the NHS hospitals in a regionto enter into a Framework Agreement setting forth, among other things,applicable quality standards and maximum payment rates. Only thosestaffing companies that have executed a Framework Agreement applicableto a particular region of the country can provide temporary staff toNHS hospitals in that region. We have entered into one or moreFramework Agreements in each region of England and are thus an approvedsupplier of staff to all NHS hospitals in England. |

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|   | Individual NHS hospitals in England may selectfrom the list of staffing companies qualified under the FrameworkAgreements and enter into Service Level Agreements. Although theFramework Agreements set the maximum rates to be charged for flexiblestaff, NHS hospitals may obtain lower rates in the Service LevelAgreement by committing to higher volumes of business with a staffingcompany. |

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| •  | **Preferred suppliercontracts.**   These contracts involve the designation ofa flexible staffing business by a local governmental social servicesdepartment as a "preferred supplier" ofstaff. A preferred supplier contract agreement specifies rates to bepaid for staff but it is not an exclusive arrangement and does notguarantee that a flexible staffing business will be used by the localgovernmental social services department. A small proportion of ourservices are provided under preferred suppliercontracts. |

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| •  | "**Cost-volume"contracts.**   A "cost-volume"contract specifies the rates for staff and commits the customer topurchase an agreed-upon volume of staffing services over a specifiedperiod. A "cost-volume" contract may enablecustomers to negotiate lower prices in return for agreeing to minimumvolumes of business. Local governmental social service departments arethe principal users of these contracts. A very small percentage of ourbusiness is conducted on a "cost-volume"basis. |

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|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
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| •  | **Long-termcontracts.**   Under a long-term contract a purchaser ofstaffing services enters into a long-term arrangement (typically threeyears) with a supplier of staff under which rates for staff, usuallydiscounted, are agreed to. Long-term contracts may be exclusivearrangements, with penalties if the staffing business is not able tosatisfy the customer's demand for staff during the term of thecontract. Other than preferred supplier contracts and cost-volumecontracts, none of our staff are provided to customers under long-termcontracts. |

We typically provide in our written contracts that wewill indemnify our customers against liability that they may incur inthe event that the members of our staff cause death, personal injury orproperty damage in the performance of their services. We maintainliability insurance designed to reimburse us in the event that claimsof this type are made. See "Insurance" below.In addition, in some of our written contracts, we agree to indemnifyour customers for the costs they incur if we are not able to providethem with the number of staff or hours required during the term of thecontract and the customer has to outsource its staffing requirements toanother entity.

Marketing Activities

We marketour flexible healthcare staffing business to key decision makers in theNHS, local governmental social service departments, nursing homes, carehomes and independent hospitals. These decision makers can beprocurement officers, contract officers or social workers. Fundamentalto our ability to obtain and retain staffing assignments isestablishing and maintaining a reputation for quality service andresponsiveness to the needs of our customers and their patients.

Acquisition and Integration Process

Since October 1,1998, we have acquired 54 businesses. The average revenue of thesebusinesses in the year prior to their acquisition by us was £2.1million. In our past four fiscal years, we have completed the followingacquisitions of businesses with annual revenues in excess of £4.5million:

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| •  | Medic-One Group Limited, whichwas acquired in November 2002, is a supplier of temporary staffing toNHS hospitals and private hospitals in the UnitedKingdom. |

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| •  | Staffing Enterprise, which wasacquired in September 2001, is a London-based provider of specialistnurses, specialized nurses aides and specialized operating room staffto London-based NHS hospitals and independenthospitals. |

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| •  | Balfor Medical Limited,which was acquired in August 2001, provides nurses, nurses aides andspecialized operating room staff to hospitals in the Midlands andNorthern England. |

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| •  | Crystalglen Limited(operating under the trade name "NursesDirect"), which was acquired in June 2001, operates anursing and care staffing business with 17 branches in South EastEngland. |

We have designated employees who identify suitableacquisition targets and typically seek to develop a pre-acquisitionrelationship with the vendors and key management in order to assessbusiness "fit." We structure our acquisitionsso as to encourage continuity of management and seek to align ourinterests with the vendors'/management's interests throughperformance based earn-out provisions.

We have a separate teamresponsible for the integration of acquired businesses. The integrationprocess includes the adoption of our policies and procedures and theintegration of the acquired business into our IT system. For smalleracquisitions, the process of integrating newly acquired businesses,including integrating them into our IT system, begins prior to theclosing of the acquisition and is usually completed within threemonths. In larger acquisitions, the acquired business generally retainsits own IT system, including payroll and invoicing, for a longer periodof time. However, as is the case with smaller acquisitions, commencingshortly after their date of acquisition, we require larger acquiredbusinesses to adhere to weekly and monthly financial reportingrequirements. In addition, we generally maintain centralized control ofcontracts and pricing for all acquisitions, commencing shortly afterthe date of acquisition.

7

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Competition

The U.K.flexible healthcare staffing business is highly fragmented with over2,100 small operators providing staff locally. The market at the locallevel is characterized by relatively low barriers to entry. Thebarriers to entry at a U.K.-wide level are more significant, as theestablishment and growth of a flexible healthcare staffing business islargely dependent on access to capital.

The privately-ownedcompetitors of our flexible staffing business are mainly small,locally-based agencies serving a limited area or group of customers.These businesses compete with our relevant branch covering the samelocal area, but do not otherwise compete for U.K.-wide market share. Inaddition, a limited number of larger U.K.-based companies compete withus in areas of high population such as London. Such companies includeNestor Healthcare Group plc, Match Group and Reed Health Group plc.

The nature of the U.K. marketplace is such that nurses and homehealth aides often accept placements with more than one flexiblestaffing business.

Since 2000, the NHS has had its own internalagency, called NHS Professionals, which has attempted to provide NHShospitals with high volume/low margin contracts for flexible healthcareworkers. We work with NHS Professionals to fulfill the per diem demandthat it is unable to cover.

Respiratory Therapy

Our respiratory therapy business serves two segments of the oxygentherapy market: (a) oxygen cylinders and (b) oxygen concentrators.

Home oxygen therapy delivered from a cylinder via face-mask isprescribed for a wide array of respiratory diseases ranging from asthmaand emphysema to severe bronchitis. We supply filled oxygen cylindersand related equipment solely to pharmacies, both small independentstores and large retail pharmacy chains. Our equipment is intended forpatients at home who require less than eight hours of oxygen per day orwho may have temporary respiratory conditions. We provide approximately1,250 cylinders per day to pharmacies in the United Kingdom.

Patients that require more than eight hours of oxygen per day aregenerally supplied by an on-site oxygen concentrator. We provide oxygenconcentrators, which separate room air into its constituent gases toprovide 95% oxygen gas, to a total of approximately 1,650patients at home in Northern Ireland. We charge the NHS on a monthlybasis for the period during which the patients have the equipment athome.

Payment for Staffing Services and RespiratoryProducts

In most cases, we contract directly with thegovernmental entity or private entity or individual to whom we provideflexible staff or respiratory therapy products. The party with whom wecontract for the supply of staff or to whom we provide respiratorytherapy products is responsible for paying us directly. In general,reimbursement is received regularly and reliably from all governmentaland private customers. We generally collect payments from our customerswithin two months after services are rendered or products are suppliedbut we pay accounts payable and employees currently.

For theyear ended September 30, 2004, our operations received approximately64.7% of revenues from customers that were U.K. governmentalentities (primarily NHS hospitals and local governmental social servicedepartments) compared to approximately 64.8% for the year endedSeptember 30, 2003. The remaining 35.3% and 35.2% ofrevenues received for 2004 and 2003, respectively, were derived fromservices and products provided to privately-owned nursing homes,privately-owned care homes, pharmacies, independent hospitals andprivate patients.

8

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Trade Names

We operate ourhealthcare staffing business under a number of trade names, includingthe following:

|              |                        |
|--------------|------------------------|
| •  | Allied Healthcare(UK); |

|              |                |
|--------------|----------------|
| •  | BalforMedical; |

|              |               |
|--------------|---------------|
| •  | NursesDirect; |

|              |                 |
|--------------|-----------------|
| •  | Medic-OneGroup; |

|              |                                |
|--------------|--------------------------------|
| •  | Nightingale Nursing Bureau;and |

|              |                      |
|--------------|----------------------|
| •  | Staffing Enterprise. |

Weoperate our respiratory therapy business under the following tradenames:

|              |                    |
|--------------|--------------------|
| •  | Allied Oxycare;and |

|              |          |
|--------------|----------|
| •  | Medigas. |

We do not believethat the loss of any of our trade names would materially adverselyaffect us.

Employees

As of November 2004, we employedapproximately 1,000 individuals in our branch network, our U.K. headoffice and our other offices. None of our employees are represented bya labor union.

In addition, we maintain registers of over 25,000registered nurses, nurses aides and home health aides available tostaff our customer base on a temporary basis. We consider ourrelationship with the staff to be good.

GovernmentRegulation

General

We are subject to regulationby the government of the United Kingdom via Acts of Parliament relatedto healthcare provision and by the general health regulations of theDepartment of Health.

Healthcare Laws andRegulations

Our operations are subject to licensing andapproval regulations from both governmental and non-governmental bodiesaccording to terms of service and operating procedures decided by theU.K. government.

We are currently registered in England andWales under the Care Standards Act 2000 and the Nurses AgenciesRegulations 2002 (which came into force in April 2003) in relation toEngland and the Nurses Agencies (Wales) Regulations 2003 (which cameinto force in October 2003) in relation to Wales to carry on a businessfor the supply of nurses. This legislation requires that a person whocarries on a business for the supply of nurses at any location withinthe jurisdiction of the registration authority must be the holder of acertificate from that authority certifying that the business isregistered to supply to that location. We are similarly registered inScotland under the Regulation of Care (Scotland) Act 2001. Any of ourbranches that supply home health aides working in individuals'homes are authorized under the Care Standards Act 2000 and theDomiciliary Care Agencies Regulations 2002 (in England), theDomiciliary Care Agencies (Wales) Regulations 2004 and the Regulationof Care (Scotland) Act 2001.

The Care Standards Act 2000introduced, among other things, a new registration and regulatorystructure for all non-NHS healthcare services in England and Wales. TheHealth and Social Care (Community Health and Standards) Act 2003established two new independent registration and 

9

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regulatory bodies for independent healthcareservices and social care in England, including suppliers of nurses,called the Commission for Social Care and Inspection and the Commissionfor Healthcare Audit and Inspection, the former of which enforcesregistration of care agencies and establishments. The Care StandardsAct 2000 also appointed a similar registration authority for Wales, theNational Assembly for Wales. The Care Standards Act 2000 also madeprovision for a new General Social Care Council in England and a newCare Council for Wales to be established as non-departmental statutorybodies responsible to the Department of Health and National Assembly ofWales, respectively, with the aim of increasing the protection ofservice users, their home health aides and the general public. TheRegulation of Care (Scotland) Act 2001 also introduced legislationrelating to this area in Scotland and appointed the registrationauthority for Scotland, the Scottish Commission for the Regulation ofCare.

The Care Standards Act 2000 is essentially an enabling actthat provides for regulations to be made by secondary legislation.Regulations relating to registration are already in force (the NationalCare Standards Commission (Registration) Regulations 2001). The CareStandards Act 2000 also provided that regulations can be made imposingany requirements which the appropriate Minister thinks fit for thepurposes of the Care Standards Act 2000 relating to establishments andagencies. Specific regulations set out in the Care Standards Act 2000that may be introduced include provisions relating to the services tobe provided by suppliers of healthcare staff, the keeping of accounts,the keeping of records and documents and arrangements to be made fordealing with complaints made by those seeking or receiving any of theservices provided by the suppliers of healthcare staff. The recentregulations (including the Nurses Agency Regulations 2002 and theDomiciliary Care Agencies Regulations 2002) include provisions in theseareas.

Contracts between suppliers of healthcare staff and NHShospitals for the provision of services, as well as the performance bythe parties of their obligations thereunder, will be reviewed by a newcommission, called the Commission for Healthcare Audit and Inspection.We are accredited by various U.K. social services agencies for thesupply of home health aides within their jurisdiction. The U.K.Medicines and Healthcare Products Regulatory Agency has grantedlicenses to us for the production and distribution of medical-gradeoxygen to pharmacies throughout the United Kingdom.

We believethat we are in substantial compliance in all material respects withU.K. healthcare laws and regulations applicable to our operations.

Healthcare Reform

Our business is subject toextensive and complex laws and regulations in the United Kingdom. Theseinclude, but are not limited to, laws and regulations related tolicensing, conduct of operations, payment for services and referrals,benefits payable to temporary staffers and taxation. Moreover, manypolitical, economic and regulatory organizations are supportingfundamental change in the U.K. healthcare industry. A summary of thematerial existing and proposed regulations follows.

U.K.rules affecting temporary workers.   The benefits andprotections with which temporary workers in the United Kingdom must beprovided have recently increased, and new and or more stringent lawsare likely to be introduced in the future. In particular, the Conductof Employment Agencies and Employment Business Regulations 2003 (the"2003 Regulations") described below and caselaw impact us. For example, a ruling by the European Court of Justicestated that the provisions of the European Working Time Directive,which entitle temporary workers to be paid annual leave only when theyhave been continuously employed for 13 weeks, is unlawful. The U.K.Working Time Regulations have therefore been amended to remove the13-week qualify period, and workers in the United Kingdom are nowentitled to paid leave from the first day of employment.

Care Standards Act and the Health and Social Care (CommunityHealth and Standards) Act 2003.   Under the Health and SocialCare (Community Health and Standards) Act 2003 and applicableregulations, providers of flexible healthcare staff have to registerwith the Commission for Social Care Inspection and must comply with therules relating to management and staffing, fitness of premises and theconduct of specified services.

Changes in U.K. VATrules.   We currently act as an agent in supplying healthcarestaff, which, under U.K. law, requires us to charge VAT only on theamount of commission charged to the 

10

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purchaser of flexible staff. The 2003Regulations, insofar as they relate to VAT, came into effect in theUnited Kingdom on April 6, 2004 and could place an increased VAT burdenon our company. The 2003 Regulations require employment agencies,including those supplying flexible healthcare staff, to enter intocontractual relationships with the workers that they supply.Consequently, for VAT purposes, the flexible staff provider acts asprincipal, rather than agent. For non-medical staff, VAT is due on thetotal amount of the charges made by the flexible staff provider,including salary costs, rather than merely on its commission. Thischange may adversely affect our cash flow if we have to pay theincreased VAT liability to the government before our customers havepaid their fees to us. The law results in the provision of medicalstaff such as nurses being exempt from VAT. Pursuant to such exemption,we will be limited in the amount of VAT paid by us when we purchasegoods and services that we can use to offset the VAT that we owe thegovernment. There is a transition period of at least 18 months, whichruns from April 6, 2004, during which businesses will be permitted tocontinue to act as "agent" in a VAT sense andtherefore account for VAT under the existing rules.

NHSInitiatives

Flexible staffing providers, such as our company,are subject to the risk that the NHS will seek to regulate the price itpays for temporary staff, reduce its use of temporary staff or replaceits use of temporary staff where possible with permanent employees.

In recent years, the NHS has divided England into eight regions. TheNHS has required any healthcare staffing company that providestemporary staff to the NHS hospitals in a region to enter into aFramework Agreement setting forth, among other things, applicablequality standards and maximum payment rates. Only those staffingcompanies that have met the quality standards set by the NHS andexecuted a Framework Agreement applicable to a particular region of thecountry can provide temporary staff to NHS hospitals in that region. Wehave entered into one or more Framework Agreements in each region ofEngland. While the full impact of the Framework Agreements remains tobe seen, it is possible that a long-term effect will be to reduce thecost of commissions paid to healthcare staffing companies and/or toreduce the number of healthcare staffing companies supplying staff tothe NHS.

Another initiative undertaken by the NHS is itscreation of NHS Professionals. NHS Professionals is an internal agencyof the NHS that seeks to provide an efficient temporary staffingservice for NHS hospitals and to reduce the dependence of the NHS onexternal agencies. NHS Professionals seeks to coordinate nurse banksoperated by NHS hospitals with the intention of maintaining qualitystandards and controlling cost across all NHS nurse banks.

Ifthe NHS were to significantly reduce its use of our services (by, forexample, the greater utilization of NHS Professionals), negotiate lowerprices or change its policy on private-sector involvement, it couldhave a material adverse effect on our business, financial condition andresults of operations. However, there is currently a shortage of nurseswithin the United Kingdom, leading not only to the high use of flexiblenurses but also to NHS hospitals seeking to employ nurses from overseason a permanent and temporary basis.

Insurance

Wemaintain general liability insurance, professional liability insuranceand excess liability coverage that provide coverage in the event that aclaim is brought against us alleging negligence, product liability orsimilar legal theories. Each of these policies provides coverage on an"occurrence" basis and has certain exclusionsfrom coverage. Our insurance policies must be renewed annually.

Item 2.    Properties

We lease 97 facilities in theUnited Kingdom, of which 29 are for a period of three months or less.We lease our corporate headquarters in the United States. We believethat our existing leases will be renegotiated as they expire or thatalternative properties can be leased on acceptable terms. We alsobelieve that our present facilities are well maintained and aresuitable for continuing our existing operations. (See"Operating Leases" in Note 13 of Notes toConsolidated Financial Statements for our fiscal year ended September30, 2004.)

11

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Item 3.    Legal Proceedings

On April 13, 1998, one of our shareholders, purporting to suederivatively on our behalf, commenced a derivative suit in the SupremeCourt of the State of New York, County of New York, entitled Kevin Mak,derivatively and on behalf of Transworld Healthcare, Inc., Plaintiff,vs. Timothy Aitken, Scott A. Shay, Lewis S. Ranieri, Wayne Palladinoand Hyperion Partners II L.P., Defendants, and Transworld Healthcare,Inc., Nominal Defendant, Index No. 98-106401. The suit alleges thatcertain of our officers and directors, and Hyperion Partners II L.P.,breached fiduciary duties owed to us and our shareholders, inconnection with a transaction, approved by a vote of our shareholderson March 17, 1998, in which we were to issue certain shares of stock toHyperion Partners II L.P. in exchange for certain receivables due fromHealth Management, Inc. The action seeks injunctive relief against thistransaction, and damages, costs and attorneys' fees inunspecified amounts. The transaction subsequently closed and theplaintiff has, on numerous occasions, stipulated to extend thedefendants' time to respond to this suit.

We are involvedin various other legal proceedings and claims incidental to our normalbusiness activities. We are vigorously defending our position in allsuch proceedings. We believe that these matters, including thederivative suit, should not have a material adverse impact on ourconsolidated financial position, cash flows, or results ofoperations.

Item 4.    Submission of Matters to a Vote ofSecurity Holders.

We held our annual meeting of shareholders onSeptember 9, 2004. At the annual meeting, our holders of common stockvoted upon the following matters:

(1)    the election of sevendirectors;

(2)    the approval of an amendment to ourcertificate of incorporation that increased the numbers of shares ofcommon stock that we are authorized to issue from 62 million shares to80 million shares; and

(3)    the ratification of Deloitte& Touche LLP as our independent auditors for the fiscal year endedSeptember 30, 2004.

At the annual meeting of shareholders, allseven directors named in our proxy statement were elected and the otherproposals were approved by the shareholders.

The voting resultswith respect to each proposal are set forthbelow:

|                                                  |  |        |            |         |  |                   |         |                                |  |        |           |        |  |        |         |        |  |  |
|--------------------------------------------------|--|--------|------------|---------|--|-------------------|---------|--------------------------------|--|--------|-----------|--------|--|--------|---------|--------|--|--|
| Proposal                                         |  | For    |            | Against |  | AuthorityWithheld |         | Abstentions andBrokerNon-Votes |
| No. 1 (election ofdirectors)                     |  |   |       |    |  |              |    |                           |  |   |      |   |  |   |    |   |
| TimothyM.Aitken                                  |  |   | 34,859,413 |    |  |              | — |                           |  |   | 5,153,135 |   |  |   | — |   |
| SarahL.Eames                                     |  |   | 34,883,140 |    |  |              | — |                           |  |   | 5,139,408 |   |  |   | — |   |
| G.RichardGreen                                   |  |   | 39,687,509 |    |  |              | — |                           |  |   | 335,039   |   |  |   | — |   |
| DavidJ.Macfarlane                                |  |   | 34,874,040 |    |  |              | — |                           |  |   | 5,148,508 |   |  |   | — |   |
| WaynePalladino                                   |  |   | 34,841,113 |    |  |              | — |                           |  |   | 5,181,435 |   |  |   | — |   |
| JeffreyS.Peris                                   |  |   | 39,687,509 |    |  |              | — |                           |  |   | 335,039   |   |  |   | — |   |
| ScottA.Shay                                      |  |   | 34,890,140 |    |  |              | — |                           |  |   | 5,132,468 |   |  |   | — |   |
| No.2 (amendment to certificate ofincorporation)  |  |   | 39,791,960 |    |  |              | 190,453 |                           |  |   | —   |   |  |   | 40,135  |   |
| No.3. (ratification of Deloitte & ToucheLLP) |  |   | 39,941,268 |    |  |              | 41,900  |                           |  |   | —   |   |  |   | 39,380  |   |
|                                                  |

12

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PARTII

|               |                                                                                                             |
|---------------|-------------------------------------------------------------------------------------------------------------|
| Item 5.  | Market for Registrant'sCommon Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities. |

Since February 23, 2004, our common stockhas traded on the Nasdaq National Market under the symbol"AHCI." From April 30, 1999 until February20, 2004, our common stock traded on the American Stock Exchange. Thefollowing table sets forth, for the periods indicated, the high and lowsales price of our common stock, as reported by the Nasdaq NationalMarket or the American Stock Exchange, asappropriate:

|                                         |  |        |        |        |  |        |        |        |  |  |
|-----------------------------------------|--|--------|--------|--------|--|--------|--------|--------|--|--|
| PERIOD                                  |  | HIGH   |        | LOW    |
| YearEnded September 30, 2003:           |  |   |   |   |  |   |   |   |
| FirstQuarter                            |  | $      | 5.35   |   |  | $      | 4.00   |   |
| Second Quarter                          |  |   | 4.54   |   |  |   | 3.47   |   |
| ThirdQuarter                            |  |   | 4.15   |   |  |   | 3.15   |   |
| FourthQuarter                           |  |   | 4.45   |   |  |   | 3.40   |   |
|                                    |  |   |   |   |  |   |   |   |
| YearEnded September 30, 2004:           |  |   |   |   |  |   |   |   |
| FirstQuarter                            |  | $      | 6.46   |   |  | $      | 3.88   |   |
| SecondQuarter                           |  |   | 10.70  |   |  |   | 6.15   |   |
| ThirdQuarter                            |  |   | 9.88   |   |  |   | 4.41   |   |
| FourthQuarter                           |  |   | 5.90   |   |  |   | 4.19   |   |
|                                    |  |
| YearEnded September 30, 2005:           |  |   |   |   |  |   |   |   |
| FirstQuarter (through December 10,2004) |  | $      | 5.97   |   |  | $      | 4.85   |   |
|                                         |

We have neitherdeclared nor paid any dividends on our common stock and do notanticipate paying dividends on our common stock in the foreseeablefuture. Any future payment of dividends will be at the discretion ofour board of directors and will depend upon, among other things, ourearnings, financial position, cash flows, capital requirements andother relevant considerations, including the extent of our indebtednessand any contractual restrictions with respect to the payment ofdividends.

Under the terms of our new senior credit facility,our U.K. subsidiaries generally are prohibited from paying dividends ormaking other cash distributions to us. See "Item7—Management's Discussion and Analysis of FinancialCondition and Results of Operations—RecentDevelopments."

As of December 10, 2004, there wereapproximately 195 shareholders of record of our common stock. Thisnumber does not include shareholders who hold their shares through oneor more intermediaries, such as banks, brokers or depositaries.

Equity Compensation Plan Information

For certaininformation concerning securities authorized for issuance under ourequity compensation plans, see "Item 12—SecurityOwnership of Certain Beneficial Owners and Management and RelatedStockholder Matters—Equity Compensation PlanInformation."

Recent Repurchases of EquitySecurities

During the fourth quarter of fiscal 2004, we did notrepurchase any of our equity securities.

|              |                         |
|--------------|-------------------------|
| Item6.  | Selected Financial Data |

The followingtable sets forth our selected consolidated financial information. Thefinancial information for the years ended September 30, 2004, 2003 and2002 and as of September 30, 2004 and 2003 is derived from auditedfinancial statements that appear elsewhere in this Form 10-K.Thefinancial information for the years ended September 30, 2001 and 2000and as of September 30, 2002, 2001 and 2000 is derived from auditedfinancial statements that do not appear in this Form 10-K.

13

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You should read the following informationin conjunction with our financial statements and notes thereto and theinformation set forth under "Item7—Management's Discussion and Analysis of FinancialCondition and Results of Operations."

All data inthe following table is in thousands, except for per share data.

|                                                                        |  |                        |         |           |  |        |         |        |  |        |         |                        |  |        |         |         |  |        |         |            |  |  |
|------------------------------------------------------------------------|--|------------------------|---------|-----------|--|--------|---------|--------|--|--------|---------|------------------------|--|--------|---------|---------|--|--------|---------|------------|--|--|
|                                                                   |  | YearEnded September30, |
|                                                                   |  | 2004                   |         | 2003      |  | 2002   |         | 2001   |  | 2000   |
| **FinancialData:**                                                     |  |                   |    |      |  |   |    |   |  |   |    |                   |  |   |    |    |  |   |    |       |
| Totalrevenues                                                          |  | $                      | 325,298 |      |  | $      | 294,379 |   |  | $      | 242,828 |                   |  | $      | 138,041 |    |  | $      | 119,925 |       |
| Grossprofit                                                            |  |                   | 93,171  |      |  |   | 81,323  |   |  |   | 66,079  |                   |  |   | 42,491  |    |  |   | 40,654  |       |
| Selling,general and administrativeexpenses                             |  |                   | 63,544  |      |  |   | 53,648  |   |  |   | 48,847  | (5)               |  |   | 32,514  |    |  |   | 44,563  |       |
| Impairmentof long-livedassets                                          |  |                   | — |      |  |   | — |   |  |   | — |                   |  |   | — |    |  |   | 15,073  | (8)   |
| Restructuringcharge                                                    |  |                   | — |      |  |   | — |   |  |   | — |                   |  |   | — |    |  |   | 1,288   | (9)   |
| Legalsettlements,net                                                   |  |                   | — |      |  |   | — |   |  |   | — |                   |  |   | — |    |  |   | 5,082   | (10)  |
| Generaland administrative expense related to mail-orderoperations      |  |                   | — |      |  |   | — |   |  |   | — |                   |  |   | 3,883   |    |  |   | — |       |
| Lossesdue to sale ofsubsidiary                                         |  |                   | — |      |  |   | — |   |  |   | — |                   |  |   | 354     |    |  |   | — |       |
| Operatingincome(loss)                                                  |  |                   | 29,627  |      |  |   | 27,675  |   |  |   | 17,232  |                   |  |   | 5,740   |    |  |   | (25,352 | )     |
| Interestexpense,net                                                    |  |                   | 13,727  | (4)  |  |   | 11,279  |   |  |   | 13,472  | (6)               |  |   | 8,433   |    |  |   | 9,014   | (6)   |
| Gainon settlement of PIKinterest                                       |  |                   | — |      |  |   | — |   |  |   | (5,143  | )												(7)  |  |   | — |    |  |   | — |       |
| Foreignexchangeloss                                                    |  |                   | 184     |      |  |   | 18      |   |  |   | 19      |                   |  |   | 400     |    |  |   | — |       |
| Provisionfor (benefit from) incometaxes(1)                             |  |                   | 5,847   |      |  |   | 4,910   |   |  |   | 4,971   |                   |  |   | 24,117  |    |  |   | (7,756  | )     |
| Equityin income of and interest income earned from U.K.subsidiaries(2) |  |                   | — |      |  |   | — |   |  |   | — |                   |  |   | — |    |  |   | 1,101   |       |
| Minorityinterest                                                       |  |                   | — |      |  |   | — |   |  |   | 120     |                   |  |   | 22      |    |  |   | (70     | )     |
| Income(loss) from continuingoperations                                 |  |                   | 9,869   |      |  |   | 11,468  |   |  |   | 3,793   |                   |  |   | (27,232 | )  |  |   | (25,439 | )     |
| Incomefrom discontinuedoperations                                      |  |                   | — |      |  |   | 503     |   |  |   | 1,001   |                   |  |   | 620     |    |  |   | 495     |       |
| Netincome(loss)                                                        |  |                   | 9,869   |      |  |   | 11,971  |   |  |   | 4,794   |                   |  |   | (26,612 | )  |  |   | (24,944 | )     |
| Redeemablepreferred dividend, conversion fees andaccretion(3)          |  |                   | 7,020   |      |  |   | 4,005   |   |  |   | 1,016   |                   |  |   | — |    |  |   | — |       |
| Netincome (loss) available tocommonstockholders                        |  | $                      | 2,849   |      |  | $      | 7,966   |   |  | $      | 3,778   |                   |  | $      | (26,612 | )  |  | $      | (24,944 | )     |
| Basicand diluted income (loss) per share of common stockfrom:          |  |                   |    |      |  |   |    |   |  |   |    |                   |  |   |    |    |  |   |    |       |
| Income(loss) from continuingoperations                                 |  | $                      | 0.10    |      |  | $      | 0.34    |   |  | $      | 0.15    |                   |  | $      | (1.57   | )  |  | $      | (1.45   | )     |
| Incomefrom discontinuedoperations                                      |  |                   | — |      |  |   | 0.02    |   |  |   | 0.05    |                   |  |   | 0.04    |    |  |   | 0.03    |       |
|                                                                   |  | $                      | 0.10    |      |  | $      | 0.36    |   |  | $      | 0.20    |                   |  | $      | (1.53   | )  |  | $      | (1.42   | )     |
| Weightedaverage number of common sharesoutstanding:                    |  |                   |    |      |  |   |    |   |  |   |    |                   |  |   |    |    |  |   |    |       |
| Basic                                                                  |  |                   | 27,419  |      |  |   | 21,962  |   |  |   | 18,565  |                   |  |   | 17,408  |    |  |   | 17,551  |       |
| Diluted                                                                |  |                   | 28,104  |      |  |   | 22,304  |   |  |   | 18,932  |                   |  |   | 17,408  |    |  |   | 17,551  |       |
|                                                                        |

|                          |  |              |         |        |  |        |         |        |  |        |         |        |  |        |         |        |  |        |         |        |  |  |
|--------------------------|--|--------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                     |  | September30, |
|                     |  | 2004         |         | 2003   |  | 2002   |         | 2001   |  | 2000   |
| **BalanceSheetData:**    |  |         |    |   |  |   |    |   |  |   |    |   |  |   |    |   |  |   |    |   |
| Workingcapital           |  | $            | 13,468  |   |  | $      | 24,781  |   |  | $      | 25,918  |   |  | $      | 25,178  |   |  | $      | 31,141  |   |
| Accountsreceivable,net   |  |         | 31,263  |   |  |   | 35,745  |   |  |   | 32,113  |   |  |   | 27,888  |   |  |   | 19,821  |   |
| Goodwill                 |  |         | 206,110 |   |  |   | 183,703 |   |  |   | 123,514 |   |  |   | 105,542 |   |  |   | 86,470  |   |
| Totalassets              |  |         | 282,394 |   |  |   | 311,668 |   |  |   | 268,113 |   |  |   | 248,073 |   |  |   | 183,746 |   |
| Totaldebt                |  |         | 64,778  |   |  |   | 165,378 |   |  |   | 148,530 |   |  |   | 180,781 |   |  |   | 93,483  |   |
| Totalshareholders'equity |  |         | 186,977 |   |  |   | 75,163  |   |  |   | 53,943  |   |  |   | 36,354  |   |  |   | 63,031  |   |
|                          |

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|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Priorto 2001, we had been committed to implementing tax strategies thatprovided for the sale of appreciated assets, including a portion of ourownership interest in our U.K. subsidiaries, to generate sufficienttaxable income to realize our U.S tax net operating losses prior totheir expiration. While we believed that we would realize the value ofour tax losses, developments in 2001, including the continued expansionof our U.K. operations, had increased the uncertainty as to both theexecution of the original strategy and the appropriateness of a taxstrategy that may not align with our current business strategy. Theseuncertainties impaired our ability to determine whether it was morelikely than not that our deferred tax assets would be realized.Accordingly, in fiscal 2001, a full valuation allowance for allremaining U.S. deferred tax assets was provided. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Simultaneously with the execution of ourSenior Credit Facility and Mezzanine Loan in December 1999, oursubsidiary, Allied Healthcare Group Limited (f/k/a Transworld Holdings(UK) Limited) ("Allied Healthcare (UK)"),issued promissory notes to certain investors. We granted the holders ofthese promissory notes significant veto and approval rights withrespect to the operations of our U.K. subsidiaries and we entered intoa voting trust agreement in which we agreed that we would be allowed tonominate only two of the five directors of another subsidiary, AlliedHealthcare Holdings Limited (f/k/a Transworld Healthcare (UK) Limited)("Allied Holdings"), with one director beinga designee of the holders of the promissory notes of Allied Healthcare(UK) and two directors being independent. Since holders of thepromissory notes issued by Allied Holdings had significant veto andapproval rights and since we no longer controlled a majority of theboard of directors of Allied Holdings, we were no longer able toconsolidate our U.K. subsidiaries into our financial statements eventhough we owned, directly or indirectly, 100% of the outstandingshares of their stock. Accordingly, we began accounting for theinvestment in our U.K. subsidiaries under the equity method,retroactive to October 1, 1999. During the second quarter of fiscal2000, Allied Holdings amended its articles of association to providethat our designee to the board of directors had the right to resolveany tie votes of the board of directors and certain agreements relatingto the promissory notes of Allied Healthcare (UK) were amended to limitthe veto and approval rights of the holders thereof. These amendmentsenabled us to consolidate our U.K. subsidiaries as of January 1,2000. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Reflects the accrual ofdividends on our Series A preferred stock and accretion costs relatedto the issuance of our Series A preferred stock in our fiscal 2002reorganization (the "Reorganization"). Inaddition, fiscal 2004 includes conversion fees of $2.0 million paid tothe holders of our Series A preferred stock in connection with thePublic Offering and write-off of $1.7 million of the remaining issuancecosts. |

|     |                                                                                                                                                                                                       |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | For the year endedSeptember 30, 2004, we recorded a charge of $4.2 million related to thewrite-off of deferred financing fees and unamortized debt discountassociated with the Recapitalization Plan. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5) | For the year ended September 30, 2002,we recorded a non-cash charge of $4.2 million for the issuance ofshares of common stock to senior management (see "Item11—Executive Compensation—The Bonus Share Issuance andRelated Transactions") and $1.6 million related to theexchange of employees' redeemable shares in our U.K subsidiaryfor shares of our common stock, using the net exercise method, in theReorganization. We also recorded a net charge of $0.7 million for theyear ended September 30, 2002, which mainly related to the write-off ofnon-capitalized costs incurred in connection with evaluating options tomaximize the value of our ownership interest in our U.K.operations. |

|     |                                                                                                                                                                                                                                                                                                                                                                                       |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6) | Effective October1, 2001, we adopted Statement of Financial Accounting Standards No.145, which addressed gain or loss on the extinguishment of debt andsale-leaseback accounting for certain lease modifications andaccordingly recorded a charge of $0.9 million in interest expense forthe year ended September 30, 2002. We also reclassified $1.2 million tointerest expense that |

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|  |                                                                                                                                                                             |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | had been recorded as an extraordinary item infiscal 2000. Both charges relate to the write-off of deferred financingcosts associated with the early extinguishment of debt. |

|     |                                                                                                                                                                                                                                                                                               |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7) | In the Reorganization, accrued andunpaid interest owed to the holders of notes issued by one of our U.K.subsidiaries was satisfied by the issuance of shares of our commonstock. We recorded a gain of $5.1 million for the year ended September30, 2002 in connection with this transaction. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (8) | We recorded a charge for impairment oflong-lived assets of $15.1 million in the year ended September 30,2000. The charge related to the write-down of assets, mainly goodwill,to their fair value of $12.4 million for our U.S. mail-order operationsand $2.7 million for Amcare Limited, a distributor of specialtypharmaceutical and medical supplies. We have since divested both ourU.S. mail-order operations and Amcare Limited. |

|     |                                                                                                                                       |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|
| (9) | We recorded a $1.3 million restructuringcharge related to exiting our U.S. mail-order operations in the yearended September 30, 2000. |

|      |                                                                                                           |
|------|-----------------------------------------------------------------------------------------------------------|
| (10) | Werecorded a net charge of $5.1 million related to legal settlements inthe year ended September 30, 2000. |

|              |                                                                                       |
|--------------|---------------------------------------------------------------------------------------|
| Item7.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations. |

General

The following discussion and analysis should be read in conjunctionwith the consolidated financial statements included in this AnnualReport on Form 10-K and in conjunction with the description of ourbusiness included in this Annual Report on Form 10-K. It is intended toassist the reader in understanding and evaluating our financialposition. This discussion contains, in addition to historicalinformation, forward-looking statements that involve risks anduncertainty. Our actual results could differ materially from theresults discussed in the forward-looking statements. Factors that couldcause or contribute to such differences include those discussed in thisAnnual Report on Form 10-K under "Forward-LookingStatements."

We are a leading provider of flexible,or temporary, healthcare staffing to the U.K. healthcare industry asmeasured by revenues, market share and number of staff. As of September30, 2004, we operated an integrated network of 125 branches throughoutmost of the United Kingdom. Our healthcare staff consists principallyof nurses, nurses aides and home health aides. We focus on placing ourstaff on a per diem basis in hospitals, nursing homes, care homes andprivate homes. We maintain a pool of over 25,000 nurses, nurses aidesand home health aides. We also supply medical-grade oxygen for use inrespiratory therapy to the U.K. pharmacy market and to private patientsin Northern Ireland.

Recent Developments

On July 7,2004, we consummated the Public Offering and issued 14,500,000 sharesof our common stock. Each share was sold to the public at a price of$4.90 per share. We realized approximately $65.7 million in netproceeds from the Public Offering. This amount, together with theinitial borrowings available under the new senior credit facilitydescribed below, were used (i) to repay amounts advanced to us underthe then outstanding Senior Credit Facility and the Mezzanine Loan;(ii) to pay accrued but unpaid dividends on our then outstanding sharesof Series A preferred stock; and (iii) to pay a conversion fee to theholders of the Series A preferred stock. Any remaining amounts from theinitial borrowings will be used for general corporate purposes andacquisitions.

Prior to the consummation of the Public Offering,we entered into conversion agreements (the "ConversionAgreements") with all of the holders of our Series Apreferred stock. Such holders (who collectively owned 7,773,660 ofSeries A preferred stock) agreed to convert their shares into a likenumber of shares of common stock upon the consummation of the PublicOffering in return for the payment of accrued but unpaid dividends andconversion fees in the aggregate amount of $9.4 million. Pursuant tothe Conversion Agreements, on July 7, 2004, all 7,773,660 thenoutstanding shares of Series A preferred stock were converted into alike number of shares of common stock and we paid an aggregate of $9.4million for accrued but unpaid dividends and conversion fees.

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On July 19, 2004, our U.K. subsidiary,Allied Healthcare Holdings Limited ("AlliedHoldings"), obtained financing denominated in poundssterling consisting of a £50 million multicurrency new seniorcredit facility (the "New Senior CreditFacility"). Additionally, subject to the terms of the NewSenior Credit Facility, ancillary facilities, in the form of anadditional facility or financial accommodation (including interest rateswap, cap, or other arrangement for the hedging or fixing of interest)are available up to a maximum of £15 million.

The NewSenior Credit Facility (together with approximately $65.7 million ofthe net proceeds of the Public Offering) refinanced our existing SeniorCredit Facility and the Mezzanine Loan, both of which had been enteredinto on December 17, 1999. The New Senior Credit Facility is secured bya first priority lien on the assets of another of our subsidiaries,Allied Healthcare Group Limited, and certain of its subsidiaries, aswell as our guarantee of the debt and other obligations of certainwholly-owned U.K. subsidiaries under the New Senior CreditFacility.

The New Senior Credit Facility consists of thefollowing:

|              |                                                                  |
|--------------|------------------------------------------------------------------|
| •  | a £30 million termloan A that matures on July 19, 2009;and |

|              |                                                                    |
|--------------|--------------------------------------------------------------------|
| •  | a £20 million revolvingloan B that matures on July 19, 2009. |

Repayment of the term loanA commences on January 19, 2005 and continues semi-annually until finalmaturity. Repayment of revolving loan B shall be on the last day of itsinterest period. Both the A and B loans bear interest at rates equal toLIBOR (if sterling) or EURIBOR (if euros) plus any bank mandatory costs(if applicable) plus 0.70% to 0.90% per annum (dependingon consolidated debt to consolidated profit ratios). As of September30, 2004, we have outstanding borrowings of $54.0 million and $9.0million relating to term loan A and revolving loan B, respectively,under the New Senior Credit Facility, that bore interest at a rate of5.66%.

The New Senior Credit Facility agreement is basedon the U.K.'s Loan Markets Association Multicurrency Term andRevolving Facilities agreement, which is a standard form designed to becommercially acceptable to the corporate lending market.

Subjectto certain exceptions, the New Senior Credit Facility prohibits orrestricts the following, among otherthings:

|              |                                                                                                 |
|--------------|-------------------------------------------------------------------------------------------------|
| •  | incurring liens and grantingsecurity interests in the assets of certain of our U.Ksubsidiaries; |

|              |                                   |
|--------------|-----------------------------------|
| •  | incurring additionalindebtedness; |

|              |                                              |
|--------------|----------------------------------------------|
| •  | making certainfundamental corporate changes; |

|              |                                                                                         |
|--------------|-----------------------------------------------------------------------------------------|
| •  | payingdividends (including the payment of dividends to our company by oursubsidiaries); |

|              |                                                            |
|--------------|------------------------------------------------------------|
| •  | making specifiedinvestments, acquisitions or disposals;and |

|              |                                                    |
|--------------|----------------------------------------------------|
| •  | entering into certaintransactions with affiliates. |

The New Senior Credit Facilitycontains affirmative and negative financial covenants customarily foundin agreements of this kind, including the maintenance of certainfinancial ratios, such as debt to earnings (including amounts providedfor depreciation and amortization), earnings (before interest andtaxes) to interest expense, minimum net worth, maximum ancillaryfacilities indebtedness and the prohibition of off balance sheetfunding. We are also obligated to ensure that the guarantors of the NewSenior Credit Facility must not at any time represent less than90% of the consolidated gross assets, turnover or earningsbefore interest and taxes of the U.K. subsidiaries. As of September 30,2004, we were in compliance with such covenants.

CriticalAccounting Policies

Accounts Receivable

We arerequired to estimate the collectibility of our accounts receivables,which requires a considerable amount of judgment in assessing theultimate realization of these receivables, including 

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the current credit-worthiness of eachcustomer. Significant changes in required reserves may occur in thefuture as we continue to expand our business and as conditions in themarketplace change.

Intangible Assets

We havesignificant amounts of goodwill. The determination of whether or notgoodwill has become impaired involves a significant amount of judgment.Changes in strategy and/or market conditions could significantly impactthese judgments and require adjustments to recorded amounts ofgoodwill. We have recorded goodwill and separately identifiableintangible assets resulting from our acquisitions through September 30,2004. Goodwill is tested for impairment annually in the fourth quarterof each fiscal year. A more frequent evaluation will be performed ifindicators of impairment are present. We completed the annualimpairment test of goodwill during the fourth quarter of fiscal 2004and determined that there was no impairment to our goodwill balance.The calculation of fair value used for an impairment test includes anumber of estimates and assumptions, including future income and cashflow projections, the identification of appropriate market multiplesand the choice of an appropriate discount rate. If we are required torecord an impairment charge in the future, it could have an adverseimpact on our consolidated financial position or results ofoperations.

Deferred Income Taxes

We account fordeferred income taxes based upon differences between the financialreporting and income tax bases of our assets and liabilities. Valuationallowances are established, when necessary, to reduce deferred taxassets to the amounts expected to be realized. The determination ofwhether or not valuation allowances are required to be recordedinvolves significant estimates regarding the future profitability ofour company, as well as potential tax strategies for the utilization ofnet loss and operating loss carry forwards.

Contingencies

Related to our acquisitions of certain flexible staffing agencies,we have entered into agreements to pay additional amounts, in cash, inthe form of contingent consideration dependent upon future earnings ofsuch acquired entities. See Notes 3 and 13 of the Notes to ConsolidatedFinancial Statements for the year ended September 30, 2004.

Also, we are involved in various legal proceedings and claimsincidental to our normal business activities. We are required to assessthe likelihood of any adverse judgments or outcomes to these matters aswell as potential ranges of probable losses. A determination of theamount of reserves required, if any, for these contingencies are madeafter careful analysis of each individual issue. The required reservesmay change in the future due to new developments in each matter orchanges in approach such as a change in settlement strategy in dealingwith these matters.

Revenue Recognition

Patientservices and respiratory therapy revenues are recognized when servicesare performed and substantiated by proper documentation. For patientservices, which are billed at fixed rates and account for over97.6% of our company's business, revenue is recognizedupon completion of timesheets that also require the signature of therecipient of services. Revenues from the rental of home medicalequipment (including respiratory equipment) are recognized over therental period (typically on a month-to-month basis). Revenues from thesale of oxygen and supplies for use in respiratory therapy arerecognized when products are shipped, a contractual arrangement exists,the sales price is either fixed or determinable and collection isreasonably assured.

We receive a majority of our revenue fromthe NHS and other U.K. governmental payors. Certain revenues aresubject to review by third-party payors and adjustments, if any, arerecorded when determined.

Purchase Accounting

Weaccount for our acquisitions as purchase business combinations. Atacquisition, preliminary values and useful lives are allocated basedupon fair values that have been determined for assets 

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acquired and liabilities assumed andmanagement's best estimates for values that have not yet beenfinalized. We obtain a third-party valuation in order to complete ourpurchase price allocations. Accordingly, final asset and liability fairvalues as well as useful lives may differ from management'soriginal estimates and could have an adverse impact on our consolidatedfinancial position or results of operations.

Results ofOperations

Year Ended September 30, 2004 vs. Year EndedSeptember 30, 2003

Revenues

Total revenues forthe year ended September 30, 2004 were $325.3 million compared to$294.4 million for the year ended September 30, 2003, an increase of$30.9 million or 10.5%. This increase was mainly due to thefavorable effects of changes in foreign exchange ($34.7 million),acquisitions in the social service sector ($6.3 million) and internalgrowth in the social service sector and in our respiratory, medicalequipment and supplies operations. This increase was offset by adecrease in revenues due to changes to NHS quality standards, causingfewer of our workers to be available for placement with the NHS whilethe necessary training certificates, immunizations and criminal recordchecks required by these standards were obtained, and the expansion ofthe NHS Professionals to encompass more healthcare workers. There canbe no assurance that the continued expansion of the NHS Professionalsmay not adversely affect our revenues in future periods.

Gross Profit

Total gross profit increased by $11.9million to $93.2 million for the year ended September 30, 2004 from$81.3 million for the year ended September 30, 2003, an increase of14.6%. The favorable effects of changes in foreign exchangeaccounted for $9.9 million of the increase. As a percentage of totalrevenue, gross profit for the year ended September 30, 2004 increasedto 28.6% from 27.6% for the comparable prior period.Gross margins for patient services increased (28.2% for the yearended September 30, 2004 versus 27.3% for the comparable priorperiod) mainly due to management's focus on supplying healthcarestaff to our higher margin customers. Gross margins in respiratory,medical equipment and supplies sales increased (45.5% for theyear ended September 30, 2004 versus 43.4% for the comparableprior period) mainly due to an increased focus on sales of portableoxygen therapy equipment and a steady increase in the number ofpatients in Northern Ireland, while keeping costs static.

Selling, General and Administrative Expenses

Totalselling, general and administrative expenses increased by $9.9 millionto $63.5 million for the year ended September 30, 2004 from $53.6million for the year ended September 30, 2003, an increase of18.4%. Changes in foreign exchange accounted for $6.2 million ofthis increase. The remaining increase was mainly a result of higherlevels of overhead costs due principally to increased expenditures onquality assurance audit programs to ensure compliance with changes tolegislation ($1.1 million), acquisitions ($0.6 million), compensationcharges for key executives to complete the reimbursement of taxliabilities and to resolve other consequences incurred by them inconnection with the fiscal 2002 Reorganization as well as a specialcompensation charge ($1.9 million) and fees associated with migratingthe trading of our shares of common stock from the American StockExchange to the Nasdaq National Market ($0.1 million). We do notanticipate incurring further compensation expense related to theReorganization.

Interest Income

Total interestincome for the year ended September 30, 2004 was $0.9 million comparedto $2.0 million for the year ended September 30, 2003, which representsa decrease of $1.1 million. The decrease was attributable to a lowerlevel of funds invested and was partially offset by favorable effectsof changes in foreign exchange ($0.1 million).

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Interest Expense

Totalinterest expense for the year ended September 30, 2004 was $14.6million compared to $13.3 million for the year ended September 30,2003, which represents an increase of $1.3 million. This increase wasprincipally attributable to the write-off of $4.2 million of deferredfinancing fees and unamortized debt discount associated with therefinancing of the Senior Credit Facility and $1.6 million related tochanges in foreign exchange. This increase was partially offset byreduced bank debt in the fiscal year ended September 30, 2004, therecording of a $0.5 million benefit related to the change in the fairvalue of our company's interest rate cap and floor collaragreement in the fiscal year ended September 30, 2004 as compared to a$0.2 million benefit recorded in the fiscal year ended September 30,2003, and the write-off of debt discount of $0.6 million associatedwith the repayment of loan notes in the year ended September 30,2003.

Provision for Income Taxes

We recorded aprovision for income taxes amounting to $5.8 million or 37.2% ofincome before income taxes for the year ended September 30, 2004,compared to a provision of $4.9 million or 30.0% of incomebefore income taxes and discontinued operations for the year endedSeptember 30, 2003. Included in the tax provision for the year endedSeptember 30, 2003 is a benefit related to the reversal of an estimatedincome tax liability ($1.9 million) for a business that was previouslydiscontinued and no longer has any tax liabilities. Excluding thisbenefit, the provision for income taxes would have been $6.8 million or41.4% of income before income taxes and discontinued operationsfor the year ended September 30, 2003. The difference in the effectivetax rate from the year ended September 30, 2003 to the year endedSeptember 30, 2004 is mainly due to the ratio of U.S. pre-tax losses toconsolidated pre-tax income as our company does not provide a taxbenefit for U.S. pre-tax losses as it is more likely than not that wewill not utilize our net operating losses in the U.S. and permanentdifferences in the U.K.

Discontinued Operations and Gainon Sale of Subsidiaries

Discontinued operations resulted inincome of $0.5 million for the year ended September 30, 2003. On April16, 2003, we sold all of the issued and outstanding capital stock oftwo of our subsidiaries for approximately $8.5 million in cash. HomeHealthcare, which comprised our U.S. operations, was concentrated inNew York and New Jersey, and supplied infusion therapy, respiratorytherapy and home medical equipment. In accordance with the provisionsof FAS No. 144, "Accounting for the Impairment orDisposal of Long-Lived Assets," our company hasaccounted for Home Healthcare as a discontinued operation.

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The following table presents the financialresults of the discontinued operations during our fiscal year endedSeptember 30, 2003 (dollars in thousands, other than per sharedata):

|                                                     |  |        |        |         |  |  |
|-----------------------------------------------------|--|--------|--------|---------|--|--|
| Revenues:                                           |  |   |   |    |
| Netinfusion services                                |  | $      | 6,685  |    |
| Net respiratory,medical equipment andsupplies       |  |   | 2,479  |    |
| Totalrevenues                                       |  |   | 9,164  |    |
|                                                |  |   |   |    |
| Costof revenues:                                    |  |   |   |    |
| Infusionservices                                    |  |   | 5,159  |    |
| Respiratory, medicalequipment andsupplies           |  |   | 1,438  |    |
| Totalcost ofrevenues                                |  |   | 6,597  |    |
|                                                |  |   |   |    |
| Selling,general and administrativeexpenses          |  |   | 2,583  |    |
| Gain on sale ofsubsidiaries                         |  |   | (1,294 | )  |
| Tax on gain on sale ofsubsidiaries                  |  |   | 775    |    |
|                                                |  |   |   |    |
| Incomefrom discontinuedoperations                   |  | $      | 503    |    |
| Dilutedincome per share from discontinuedoperations |  | $      | 0.02   |    |
|                                                     |

NetIncome

As a result of the foregoing, we recorded net income of$9.9 million for the year ended September 30, 2004 compared to netincome of $12.0 million for the year ended September 30, 2003.

Series A Preferred Stock

For the year endedSeptember 30, 2004, we accrued $2.9 million of dividends for the SeriesA preferred stock issued in connection with the Reorganization andaccreted $ 0.4 million of costs related to the issuance of our Series Apreferred stock. As further discussed under "RecentDevelopments" above, on July 7, 2004, all of the Series Apreferred stock was converted into a like number of shares of commonstock. In connection with the conversion, we paid conversion fees of$2.0 million to the holders of the Series A preferred stock and wroteoff $1.7 million of the remaining issuance costs. For the year endedSeptember 30, 2003, we accrued $3.5 million of dividends for the SeriesA preferred stock issued in connection with the Reorganization andaccreted $0.5 million of costs related to the issuance of our Series Apreferred stock.

Year Ended September 30, 2003 vs. Year EndedSeptember 30, 2002

Revenues

Total revenues forthe year ended September 30, 2003 were $294.4 million compared to$242.8 million for the year ended September 30, 2002, an increase of$51.6 million or 21.2%. This increase relates primarily to thegrowth of our flexible staffing operations as a result of internalgrowth ($11.0 million) and acquisitions ($15.6 million) as well asinternal growth in our U.K. respiratory, medical equipment and suppliesoperations ($1.0 million). Favorable effects of changes in foreignexchange accounted for $24.0 million of the increase.

Gross Profit

Total gross profit increased by $15.2million to $81.3 million for the year ended September 30, 2003 from$66.1 million for the year ended September 30, 2002, an increase of23.1%. The favorable effects of changes in foreign exchangeaccounted for $6.6 million of the increase. As a percentage of

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total revenue, gross profit for the yearended September 30, 2003 increased to 27.6% from 27.2%for the comparable prior period. Gross margins for patient servicesincreased (27.3% for the year ended September 30, 2003 versus26.9% for the comparable prior period). Gross margins inrespiratory, medical equipment and supplies sales increased(43.4% for the year ended September 30, 2003 versus 41.7%for the comparable prior period) mainly due to an increased focus onsales of portable oxygen therapy equipment and a steady increase in thenumber of patients in Northern Ireland, while keeping costs static.

Selling, General and Administrative Expenses

Totalselling, general and administrative expenses increased by $4.8 millionto $53.6 million for the year ended September 30, 2003 from $48.8million for the year ended September 30, 2002, an increase of9.8%. The increase was mainly a result of higher level ofoverhead costs in our operations due principally to acquisitions andinternal growth ($8.3 million), higher level of overhead costs in theU.S. corporate office as well as charges associated with the exerciseof employee stock options ($1.3 million), and changes in foreignexchange ($4.0 million). This increase was partially offset by theeffects of recording, for the year ended September 30, 2002, a non-cashcharge of $5.8 million representing $4.2 million for the issuance ofshares of our common stock to senior management and $1.6 millionrelated to the exchange of employees' redeemable shares (options)in Allied Holdings for shares of our common stock, using the netexercise method in the Reorganization, a $2.3 million chargerepresenting certain tax equalization bonuses paid to senior managementfor the reimbursement of income taxes incurred as a result of shareissuances and a net charge of $0.7 million principally reflecting thewrite-off of non-capitalized costs incurred in connection withevaluating options to maximize the value of our ownership interest inour operations.

Interest Income

Total interestincome for the year ended September 30, 2003 was $2.0 million comparedto $3.0 million for the year ended September 30, 2002, which representsa decrease of $1.0 million. The decrease was attributable to a lowerlevel of funds invested as well as decreases in interest rates and waspartially offset by favorable effects of changes in foreign exchange($0.2 million).

Interest Expense

Total interestexpense for the year ended September 30, 2003 was $13.3 millioncompared to $16.5 million for the year ended September 30, 2002, whichrepresents a decrease of $3.2 million. Excluding the $1.1 millionincrease due to the effect of foreign exchange, the actual decrease ininterest expense was $4.3 million. The decrease was principallyattributable to the exchange of accrued and unpaid interest on theNotes of Allied Healthcare Group Limited for shares of ourcompany's common stock as part of the Reorganization ($2.6million). The decrease was also attributable to reduced bank debt aswell as a reduction in interest rates. The decrease was partiallyoffset by the recording of a $0.2 million charge related to a change inthe fair value of our interest rate cap and floor collar agreement.

Gain on Settlement of Paid in Kind Interest

Werecognized a gain of $5.1 million for the year ended September 30, 2002on the settlement of accrued and unpaid interest owed to the holders ofthe Notes of Allied Healthcare Group Limited in exchange for new sharesof our common stock.

Provision for Income Taxes

We recorded a provision for income taxes amounting to $4.9 millionor 30.0% of income before income taxes and discontinuedoperations for the year ended September 30, 2003 versus a provision of$5.0 million, or 56.0% of income before income taxes, minorityinterest and discontinued operations for the year ended September 30,2002. Included in the tax provision for the year ended September

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30, 2003 is a benefit related to thereversal of an estimated income tax liability ($1.9 million) for abusiness that was previously discontinued and no longer has any taxliabilities. Excluding this benefit, the provision for income taxeswould have been $6.8 million or 41.4% of income before incometaxes and discontinued operations for the year ended September 30,2003. The difference between the 41.4% effective tax rate forthe year ended September 30, 2003 and the statutory tax rate isprimarily due to our recording of an additional valuation allowance forthe tax benefit associated with the current year's U.S. operatingloss.

Minority Interest

We reported a charge forminority interest of $0.1 million in the year ended September 30, 2002.The minority interest represented the 1,050,000 shares of class A1common stock of Allied Holdings issued as part of the consideration inour acquisition of Nightingale Nursing Bureau Limited. In theReorganization, we acquired these shares and the U.K. operations becamewholly owned by our company.

Discontinued Operations andGain on sale of Subsidiaries

Discontinued operations resultedin income of $0.5 million for the year ended September 30, 2003compared to income of $1.0 million for the year ended September 30,2002. On April 16, 2003, we sold all of the issued and outstandingcapital stock of two of our subsidiaries for approximately $8.5 millionin cash. Our home healthcare operations, which comprised our U.S.operations, was concentrated in New York and New Jersey, and suppliedinfusion therapy, respiratory therapy and home medical equipment. Inaccordance with the provisions of Statement of Financial AccountingStandards No. 144, "Accounting for the Impairment orDisposal of Long-Lived Assets," we have accounted forour U.S. home healthcare operations as a discontinued operation. Thefollowing table presents the financial results of the discontinuedoperations (dollars inthousands):

|                                                     |  |                        |        |         |  |        |         |        |  |  |
|-----------------------------------------------------|--|------------------------|--------|---------|--|--------|---------|--------|--|--|
|                                                |  | YearEnded September30, |
|                                                |  | 2003                   |        | 2002    |
| Revenues:                                           |  |                   |   |    |  |   |    |   |
| Netinfusion services                                |  | $                      | 6,685  |    |  | $      | 12,373  |   |
| Netrespiratory, medical equipment andsupplies       |  |                   | 2,479  |    |  |   | 4,697   |   |
| Totalrevenues                                       |  |                   | 9,164  |    |  |   | 17,070  |   |
| Costof revenues:                                    |  |                   |   |    |  |   |    |   |
| Infusionservices                                    |  |                   | 5,159  |    |  |   | 9,068   |   |
| Respiratory,medical equipment andsupplies           |  |                   | 1,438  |    |  |   | 2,292   |   |
| Totalcost ofrevenues                                |  |                   | 6,597  |    |  |   | 11,360  |   |
|                                                |  |                   |   |    |  |   |    |   |
| Selling,general and administrativeexpenses          |  |                   | 2,583  |    |  |   | 4,709   |   |
| Gain on sale ofsubsidiaries, net oftax              |  |                   | (1,294 | )  |  |   | — |   |
| Tax on gain onsale ofsubsidiaries                   |  |                   | 775    |    |  |   | — |   |
| Incomefrom discontinuedoperations                   |  | $                      | 503    |    |  | $      | 1,001   |   |
| Dilutedincome per share from discontinuedoperations |  | $                      | 0.02   |    |  | $      | 0.05    |   |
|                                                     |

NetIncome

As a result of the foregoing, we recorded net income of$12.0 million for the year ended September 30, 2003 compared to netincome of $4.8 million for the year ended September 30, 2002.

Series A Preferred Stock

For the year endedSeptember 30, 2003, we accrued $3.5 million of dividends for the SeriesA preferred stock issued in connection with the Reorganization andaccreted $0.5 million of costs related 

23

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to the issuance of our Series A preferredstock. For the year ended September 30, 2002, we accrued $1.0 millionof dividends for the Series A preferred stock issued in connection withthe Reorganization and accreted $0.1 million of costs related to theissuance of our Series A preferred stock.

Liquidity and CapitalResources

General

For our fiscal year endedSeptember 30, 2004, we generated $23.6 million from operatingactivities. Cash requirements for our fiscal year ended September 30,2004 for capital expenditures ($7.8 million), payments for acquisitionsand acquisitions payable ($10.7 million)**,** payments for costsassociated with the issuance of common stock and financing fees ($6.2million), payments for accrued dividends and conversion fees ($9.4million), payments on long-term debt ($148.3 million) and payments onnotes payable ($38.7 million) were met through operating cash flows,restricted cash, proceeds from the Public Offering, proceeds from theNew Senior Credit Facility and cash on hand.

In January 2001, weinitiated a stock repurchase program, whereby we may purchase up toapproximately $1.0 million of our outstanding shares of common stock inopen-market transactions or in privately-negotiated transactions. InMay 2003, we initiated a second stock repurchase program, pursuant towhich we may purchase up to an additional $3.0 million of ouroutstanding shares of common stock in open-market transactions or inprivately-negotiated transactions. As of September 30, 2004, we hadacquired 407,700 shares of our common stock for an aggregate purchaseprice of $1.3 million pursuant to our stock repurchase programs, whichare reflected as treasury stock in the consolidated balance sheet atSeptember 30, 2003.

On December 2, 2003, Mr. Aitken, ourchairman of the board, and Ms. Eames, who was then serving as our chiefexecutive officer, repaid in full the principal and accrued interest onthe promissory notes issued by them to our company in connection withthe Reorganization in fiscal 2002. The principal and accrued interestrepaid aggregated $0.6 million and $0.4 million, respectively. Theloans were repaid by delivery to our company of 103,596 and 73,459shares of our company's common stock held by Mr. Aitken and Ms.Eames, respectively, valued at $5.70 per share, the closing price onthe day prior to the repayment date. The shares delivered by Mr. Aitkenand Ms. Eames are held by our company as treasury shares. Our companyalso agreed to reimburse Mr. Aitken and Ms. Eames for the taxesincurred by them on the disposition of the shares to our company, whichwere less than $0.2 million in the aggregate.

We believe ourexisting capital resources and those generated from operatingactivities and available under existing borrowing arrangements will beadequate to conduct our operations for the next twelve months.

Accounts Receivable

We maintain a cash managementprogram that focuses on the reimbursement function, as growth inaccounts receivable has been the main operating use of cashhistorically. At September 30, 2004 and September 30, 2003, $31.3million (11.1%) and $35.7 million (11.5%), respectively,of our total assets consisted of accounts receivable. The decrease inthe accounts receivable from 2003 to 2004 is mainly due to improvementsin credit controls to ensure cash collections on a timely basis.

Our goal is to maintain accounts receivable levels equal to or lessthan industry average, which would tend to mitigate the risk ofnegative cash flows from operations by reducing the required investmentin accounts receivable and thereby increasing cash flows fromoperations. Days sales outstanding ("DSOs")is a measure of the average number of days we take to collect ouraccounts receivable, calculated from the date services are rendered. AtSeptember 30, 2004 and September 30, 2003, our average DSOs were 33 and41, respectively.

Borrowings

General

As further described above under"Recent Developments," on July 19, 2004, ourcompany's U.K. subsidiary, Allied Holdings, obtained financingdenominated in pounds sterling consisting of a £50 

24

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million ($90.0 million) multicurrency NewSenior Credit Facility. As of September 30, 2004, we had £35.0million ($63.0 million) of borrowings under the New Senior CreditFacility.

Notes Due in Connection withAcquisitions

In fiscal 2004, we repaid, through AlliedHoldings, notes payable of $38.7 million issued in connection with theacquisition of certain U.K. flexible staffing agencies. In fiscal 2003,we repaid, through Allied Holdings, notes payable of $19.4 millionissued in connection with the acquisition of certain U.K. flexiblestaffing agencies and wrote off $0.6 million of related debt discount.The notes payable were secured by the lender under our Senior CreditFacility, who required us to keep an amount on deposit for the solepurpose of repaying the notes payable.

At September 30, 2004, wehad one outstanding note payable of $1.8 million that bore interest ata rate of 5.25%. At September 30, 2003, we had outstanding notespayable of $37.7 million that bore interest at rates ranging from2.65% to 5.25%. The related cash restricted to thepayment of such notes has been classified as current in theaccompanying Consolidated Balance Sheets.

Guarantees

The New Senior Credit Facility issecured by a first priority lien on the assets of the Allied HealthcareGroup Limited and certain of its subsidiaries. Together with AlliedHealthcare Group Limited and certain of its subsidiaries, our companyis guaranteeing the debt and other obligations of certain wholly-ownedU.K. subsidiaries under the New Senior Credit Facility. At September30, 2004, the amounts guaranteed, which approximates the amountsoutstanding, totalled $63.0 million.

Our U.K. subsidiariesguaranteed the debt and other obligations of certain wholly-owned U.K.subsidiaries under our previous Senior Credit Facility, the MezzanineLoan and various notes issued in connection with the acquisition ofcertain U.K. flexible staffing agencies. At September 30, 2003, theamounts guaranteed, which approximated the amounts outstanding,totalled $166.8 million.

DerivativeInstrument

On March 20, 2003, upon the expiration of our priorRate Cap and Floor Collar Agreement, we entered into a new Rate Cap andFloor Collar Agreement that caps our interest rate at LIBOR of5.50% and our interest floor at LIBOR of 4.47%, subjectto special provisions, on approximately $90.4 million of our floatingrate debt under a contract that expires March 20, 2008. In accordancewith Statement of Financial Accounting Standards No. 133,"Accounting for Certain Derivative Instruments andCertain Hedging Activities," as amended by Statementof Financial Accounting Standards No. 138 and related implementationguidance, we have calculated the fair value of the interest cap andfloor derivative to be an asset of $0.3 million at September 30, 2004and a liability of $0.2 million at September 30, 2003. In addition,changes in the value from period to period of the interest cap andfloor derivative are recorded as an adjustment to interest expense.

Series A Preferred Stock

In theReorganization, we issued 7,773,660 shares of our Series A preferredstock with an aggregate liquidation preference of £22.3 million($35.2 million at the fixed exchange rate of $1.58 set forth in anamendment to our certificate of incorporation defining the rights ofthe Series A preferred stock). The shares of Series A preferred stockwere issued to certain equity investors in Allied Holdings in exchangefor 22,287,000 ordinary shares of Allied Holdings.

Pursuant tothe Conversion Agreements, the holders of all 7,773,660 outstandingshares of Series A preferred stock converted their shares of Series Apreferred stock into a like number of shares of our common stock uponthe consummation of the Public Offering. We paid to the holders of theSeries A preferred stock an aggregate of $7.4 million in accrued andunpaid dividends and $2.0 million in conversion fees in connection withthe conversion. The Conversion Agreements provide that if, at any timeduring the six-month period beginning on the effective date of theregistration statement relating to the Public Offering, the shares ofour common stock trade at $11.32 for ten days during any period ofthirty consecutive trading days (such tenth day being the"Threshold Date"), then the 

25

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holders shall repay a portion of theirconversion fee to us. The portion of the conversion fee to be repaid tous shall be equal to the product of the conversion fee and a fraction,the numerator of which shall be the number of days remaining in thesix-month period after the Threshold Date and the denominator of whichshall be 180.

Commitments

Acquisition Agreements

Related to ouracquisitions of certain flexible staffing agencies, we have enteredinto agreements to pay additional amounts, payable in cash, of up to$10.5 million as of September 30, 2004, in contingent considerationdependent upon future earnings of such acquired entities.

Employment Agreements

See "Item11—Executive Compensation—Employment Agreements;Termination of Employment and Change-in-ControlArrangements."

OperatingLeases

We have entered into various operating lease agreementsfor office space and equipment. Certain of these leases provide forrenewal options.

Contractual CashObligations

As described under"Borrowings,""Commitments—Acquisition Agreements,"and "Commitments—Operating Leases"above, the following table summarizes our contractual cash obligationsas of September 30, 2004 (dollars inthousands):

|            |  |                          |         |                        |  |                         |       |                  |  |        |         |        |  |        |        |        |  |  |
|------------|--|--------------------------|---------|------------------------|--|-------------------------|-------|------------------|--|--------|---------|--------|--|--------|--------|--------|--|--|
| Fiscal     |  | TotalDebt Obligations(1) |         | Total LeaseObligations |  | Total Other Obligations |       | TotalObligations |
| 2005       |  | $                        | 12,595  |                   |  | $                       | 2,203 |             |  | $      | 9,522   |   |  | $      | 24,320 |   |
| 2006       |  |                     | 10,796  |                   |  |                    | 1,812 |             |  |   | 2,338   |   |  |   | 14,946 |   |
| 2007       |  |                     | 10,796  |                   |  |                    | 1,489 |             |  |   | — |   |  |   | 12,285 |   |
| 2008       |  |                     | 10,796  |                   |  |                    | 1,008 |             |  |   | — |   |  |   | 11,804 |   |
| 2009       |  |                     | 19,795  |                   |  |                    | 925   |             |  |   | — |   |  |   | 20,720 |   |
| Thereafter |  |                     | — |                   |  |                    | 2,050 |             |  |   | — |   |  |   | 2,050  |   |
|       |  | $                        | 64,778  |                   |  | $                       | 9,487 |             |  | $      | 11,860  |   |  | $      | 86,125 |   |
|            |

|  |
|--|
|  |  |
|  |

|     |                                                |
|-----|------------------------------------------------|
| (1) | Theseamounts do not include interest payments. |

Lease obligationsreflect future minimum rental commitments required under operatingleases that have non-cancelable lease terms as of September 30, 2004.Other obligations reflect contingent consideration related to ouracquisitions of certain flexible staffing agencies and third-party feesfor the implementation of financial software.

Miscellaneous

Acquisitions

In fiscal 2004, we acquired a total of 8 flexible staffing agenciesfor approximately $8.6 million in cash. As of September 30, 2004, thesetransactions included provisions to pay additional amounts, payable incash, of up to $10.5 million in contingent consideration dependent uponfuture earnings of the acquired entities.

The preliminarypurchase price allocations for the fiscal 2004 acquisitions are subjectto adjustments and will be finalized once additional informationconcerning asset and liability valuations are obtained. Accordingly,final asset and liability fair values may differ from those set forthon the Consolidated Balance Sheet at September 30, 2004; however, thechanges are not expected to have a material effect on our ConsolidatedFinancial Statements.

26

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In fiscal 2003, we acquired a total of 7flexible staffing agencies for approximately $8.8 million in cash andthe issuance of 670,000 shares of our common stock. The transactionsincluded provisions to pay additional amounts, payable by combinationof cash and shares of our common stock, of up to $21.0 million incontingent consideration dependent upon future earnings of the acquiredentities. Of the $21.0 million in contingent consideration, $6.1million was unearned and will not be required and $1.3 million wasearned and paid in fiscal 2003. As such, at September 30, 2003, anaggregate of $13.6 million was payable dependent upon further earningsof the acquired entities. Of the $13.6 million in contingentconsideration, $12.0 million was unearned and will not be required andthe remaining balance was earned and paid in fiscal 2004.

Further, in fiscal 2003, we completed the purchase price allocationfor one of our fiscal 2003 acquisitions. Accordingly, tangible assets,separately identifiable intangible assets and liabilities were assignedvalues of approximately $2.9 million, $1.4 million and $2.2 million,respectively, with the remaining portion of $6.6 million attributableto goodwill. In fiscal 2004, we completed the purchase price allocationfor our remaining fiscal 2003 acquisitions. Accordingly, tangibleassets, separately identifiable intangible assets and liabilities wereassigned values of approximately $0.4 million, $1.2 million and $0.4million, respectively, with the remaining portion of $5.1 millionattributable to goodwill.

In fiscal 2002, we acquired a total of6 flexible staffing agencies for approximately $2.2 million in cash.The transactions included provisions to pay additional amounts, payablein cash, of up to $5.6 million in contingent consideration dependentupon future earnings of the acquired entities. Of the $5.6 million incontingent consideration, $4.4 million was earned and paid in fiscal2003. The remaining amount of contingent consideration of $1.2 millionwas unearned and will not be required.

The pro forma results ofoperations and related per share information for these acquisitionshave not been presented as the amounts are considered immaterial.

Disposition

On April 16, 2003, we disposedof the last of our U.S. operations when we sold all of the issued andoutstanding capital stock of The PromptCare Companies, Inc. andSteri-Pharm, Inc., for approximately $8.5 million in cash. These twosubsidiaries constituted our U.S. home healthcare operations segment.Our home healthcare operations were concentrated in New York and NewJersey and supplied infusion therapy, respiratory therapy and homemedical equipment. In accordance with the provisions of Statement ofFinancial Accounting Standards No. 144, "Accounting forthe Impairment or Disposal of Long-Lived Assets," wehave accounted for our home healthcare operations as a discontinuedoperation. Our consolidated financial statements reflect the assets andliabilities of the discontinued operations as separate line items andthe operations of our home healthcare operations for the current andprior periods are reported in discontinued operations on our incomestatement. For a discussion of the revenues and costs of operations ofour discontinued operations, see Note 3 of Notes to ConsolidatedFinancial Statements for our fiscal year ended September 30, 2004.

Litigation

See "Item3—Legal Proceedings."

Contingencies

Some of our subsidiaries wereMedicare Part B suppliers who submitted claims to the designatedcarrier who is the government's claims processing administrator.From time to time, the carrier may have requested an audit of MedicarePart B claims on a prepayment or postpayment basis. If the outcome ofany audit results in a denial or a finding of an overpayment, then theaffected subsidiary has appeal rights. Under postpayment auditprocedures, the supplier generally pays the alleged overpayment and canpursue appeal rights for a refund of any paid overpayment incorrectlyassessed against the supplier. Some of these subsidiaries are currentlyresponding to these audits and pursuing appeal rights in certaincircumstances.

We believe that we are in compliance, in allmaterial respects, with all applicable federal, state and foreign lawsand regulations. Due to the broad and sometimes vague nature of theselaws and 

27

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regulations, there can be no assurance thatan enforcement action will not be brought against us, or that we willnot be found to be in violation of one or more of these laws orregulations. At present, we cannot anticipate what impact, if any,subsequent administrative or judicial interpretations of applicablefederal, state and foreign laws and regulations may have on ourfinancial position, cash flows and results of operations.

We areinvolved in various legal proceedings and claims incidental to ournormal business activities. We are vigorously defending our position inall such proceedings and, at September 30, 2004, have recorded anaccrual of $0.7 million to cover our estimated exposure related tothese matters. We believe that these matters, including the derivativesuit described in "Item 3—LegalProceedings," should not have a material adverse impact onour financial position, cash flows or results of operations.

Impact of Recent Accounting Standards

See"Recent Accounting Pronouncements" in Note 2of the Notes to Consolidated Financial Statements for our fiscal yearended September 30, 2004.

|               |                                                                              |
|---------------|------------------------------------------------------------------------------|
| Item7A.  |    Quantitative and Qualitative DisclosuresAbout Market Risk. |

Foreign Currency Exchange

We faceexposure to adverse movements in foreign currency exchange rates. Theseexposures may change over time as business practices evolve and couldhave a material adverse impact on our consolidated financial results.Our primary exposure relates to non-U.S. dollar denominated sales inthe U.K., where the principal currency is pounds sterling, and topounds sterling debt-denominated obligations. See"Interest Rate Risk" below for debtobligations, principal cash flows and related weighted average interestrates by expected maturity dates. Currently, we do not hedge foreigncurrency exchange rate exposures.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relateprimarily to our cash equivalents and our U.K. subsidiaries' July19, 2004 financing, which includes the New Senior Credit Facility. Ourcash equivalents include highly liquid short-term investments purchasedwith initial maturities of 90 days or less. We are subject tofluctuating interest rates that may impact our consolidated results ofoperations or cash flows for our variable rate New Senior CreditFacility and cash equivalents.

On March 20, 2003, we enteredinto a Rate Cap and Floor Collar Agreement that caps our interest rateat LIBOR of 5.50% and our interest floor at LIBOR of4.47%, subject to special provisions, on approximately $90.0million of our floating rate debt in a contract, which expires March20, 2008. In accordance with Statement of Financial AccountingStandards No.  133, "Accounting for CertainDerivative Instruments and Certain HedgingActivities," as amended by Statement of FinancialAccounting Standards No.  138 and related implementationguidance, we have calculated the fair value of the interest cap andfloor derivative to be an asset of $0.3 million at September 30, 2004and a liability of $0.2 million at September 30, 2003. In addition,changes in the value from period to period of the interest cap andfloor derivative are recorded as interest expense or income, asappropriate.

As of September 30, 2004, we had one note payablein the aggregate principal amount of $1.8 million outstanding. Thisnote was issued in connection with the acquisition of a U.K. flexiblestaffing agency. The note payable is redeemable, at the holder'soption, and bears interest at a rate of 5.25 % per annum atSeptember 30, 2004. The table below represents the expected maturity ofour variable rate debt (dollars in thousands). Such debt had a weightedaverage interest rate at September 30, 2004 of LIBOR plus0.8%.

28

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|            |  |                  |         |        |  |  |
|------------|--|------------------|---------|--------|--|--|
| Fiscal     |  | ExpectedMaturity |
| 2005       |  | $                | 10,796  |   |
| 2006       |  |             | 10,796  |   |
| 2007       |  |             | 10,796  |   |
| 2008       |  |             | 10,796  |   |
| 2009       |  |             | 19,795  |   |
| Thereafter |  |             | — |   |
|       |  | $                | 62,979  |   |
|            |

Theinterest rate on our company's bank debt is reset at least everymonth to reflect current market rates. Consequently, the carrying valueof our variable rate bank debt approximates its fair value at September30, 2004.

|               |                                             |
|---------------|---------------------------------------------|
| Item 8.  | Financial Statements andSupplementary Data. |

The consolidated financial statements andrequired financial statement schedules of our company begin on page F-1of this Annual Report on Form 10-K.

|              |                                                                                      |
|--------------|--------------------------------------------------------------------------------------|
| Item9.  | Changes in and Disagreements with Accountantson Accounting and Financial Disclosure. |

None.

|               |                                            |
|---------------|--------------------------------------------|
| Item9A.  |    Controls and Procedures. |

Evaluation of Disclosure Controls and Procedures.    Ourcompany's management, with the participation of our chiefexecutive officer and our chief financial officer, has evaluated theeffectiveness of our disclosure controls and procedures as of September30, 2004.

Under the rules of the Securities and ExchangeCommission, "disclosure controls andprocedures" are defined as controls and other proceduresthat are designed to ensure that information required to be disclosedin the reports that we file or submit under the Securities Exchange Actof 1934, such as this Annual Report on Form 10-K, is recorded,processed, summarized and reported within the time periods specified inthe rules of the Securities and Exchange Commission. Disclosurecontrols and procedures include, without limitation, controls andprocedures designed to ensure that information required to be disclosedby us in our reports that we file or submit under the SecuritiesExchange Act of 1934 is accumulated and communicated to our management,including our chief executive officer and chief financial officer, asappropriate to allow timely decisions regarding requireddisclosure.

Based on such evaluation, our chief executiveofficer and chief financial officer have concluded that, as ofSeptember 30, 2004, our disclosure controls and procedures wereeffective to ensure that the information we are required to disclose inreports that we file or submit to the Securities and ExchangeCommission is recorded, processed, summarized and reported within thetime periods specified under the rules and forms of the Securities andExchange Commission.

Changes in Internal Control OverFinancial Reporting.    Under the rules of the Securities andExchange Commission, "internal control over financialreporting" is defined as a process designed by, or underthe supervision of, an issuer's principal executive and principalfinancial officers, and effected by the issuer's board ofdirectors, management and other personnel, to provide reasonableassurances regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordancewith generally accepted accounting principles.

There have notbeen any changes in our "internal control over financialreporting" during the quarter ended September 30, 2004that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

|               |                                      |
|---------------|--------------------------------------|
| Item9B.  |    Other Information. |

There was noinformation that we were required to disclose in a Current Report onForm 8-K during the fourth quarter of fiscal 2004 that was not sodisclosed.

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PART III

Item 10.    Directors and Executive Officers of theRegistrant.

Our Directors and Officers

The followingtable sets forth certain information concerning the directors andofficers of ourcompany:

|                    |  |        |    |                           |  |                                                  |  |  |  |  |
|--------------------|--|--------|----|---------------------------|--|--------------------------------------------------|--|--|--|--|
| Name               |  | Age    |    | Positionswith our Company |
| Timothy M.Aitken   |  |   | 60 |                      |  | Chairman of the Boardand Chief Executive Officer |
| Sarah L.Eames      |  |   | 46 |                      |  | Executive Vice President andDirector             |
| Charles F. Murphy  |  |   | 51 |                      |  | ChiefFinancial Officer                           |
| Leslie J.Levinson  |  |   | 49 |                      |  | Secretary                                        |
| G. RichardGreen    |  |   | 65 |                      |  | Director                                         |
| David J.Macfarlane |  |   | 58 |                      |  | Director                                         |
| WaynePalladino     |  |   | 46 |                      |  | Director                                         |
| Jeffrey S.Peris    |  |   | 58 |                      |  | Director                                         |
| Scott A.Shay       |  |   | 47 |                      |  | Director                                         |
|                    |

Certainbiographical information regarding each director and officer is setforth below:

Timothy M. Aitken has served as chairman ofthe board of our company since January 1997 and as chief executiveofficer of our company since November 2004. He also served as chiefexecutive officer of our company from January 1997 until January 2004.Prior to joining our company, Mr. Aitken served as an independentconsultant to the healthcare industry from November 1995 until January1997. From June 1995 until November 1995, Mr. Aitken served as the vicechairman and president of Apria Healthcare Group, Inc., aCalifornia-based home healthcare company. He also served as chairman ofthe board of Omnicare plc from September 1993 until its acquisition byour company. From 1990 until June 1995, Mr. Aitken served as chairmanof the board, president and chief executive officer of Abbey HealthcareGroup Inc., a predecessor of Apria Healthcare Group, Inc.

Sarah L. Eames has served as a director of our company sinceJune 2002 and as executive vice president of our company since November2004. She served as chief executive officer of our company from January2004 until November 2004, as chief operating officer of our companyfrom June 2001 until November 2004, and as president of our companyfrom May 1998 until November 2004. She was executive vice president ofbusiness development and marketing of our company from June 1997 to May1998. Prior to joining our company, Ms. Eames was employed by Johnson& Johnson Professional, Inc. as a business development consultantfrom 1996 to 1997. From June 1995 until November 1995, Ms. Eames servedas vice president of marketing for Apria Healthcare Group, Inc., aCalifornia-based home healthcare company. From 1980 until June 1995,Ms. Eames held various marketing and business development positions atAbbey Healthcare Group Inc., a predecessor of Apria Healthcare Group,Inc.

Charles F. Murphy served as acting chief financialofficer of our company from May 2003 until March 2004, at which time heassumed the title of chief financial officer. From October 1999 to May2003, Mr. Murphy served as chief financial officer of ourcompany's U.K. operations. From 1997 to 1999, Mr. Murphy was aprincipal of Visual Networks Limited, a technology company. From 1994to 1997, he was finance director of Exceler Healthcare Group, a nursinghome company. From 1987 to 1994, Mr. Murphy was a partner atPricewaterhouse LLP, an accounting firm.

Leslie J.Levinson has served as secretary of our company since September1999 and had previously served in such capacity from October 1990 toJuly 1997. Since January 2002, he has been a partner in the law firm ofBrown Raysman Millstein Felder & Steiner LLP, which firm serves ascounsel to our company. From June 1991 until January 2002, he was apartner in the law firm of Baer Marks & Upham LLP, which firmserved as counsel to our company.

G. Richard Green hasbeen a director of our company since August 1998. Mr. Green has beenthe chairman since 1987 and a director since 1960 of J.H. & F.W.Green Ltd., a conglomerate based in the 

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United Kingdom. Since 1960, Mr. Green hasheld various positions at J.H. & F.W. Green Ltd. and several of itssubsidiaries. Mr. Green was also a director of Abbey Healthcare Group,Inc. from 1991 to 1995.

David John Macfarlane has been adirector of our company since June 2002. Mr. Macfarlane is of counselto Ashurst, a law firm in London, where he has worked since 1986.Ashurst has provided legal services to our company, including duringthe fiscal year ended September 30, 2004. Mr. Macfarlane is also adirector of Platinum Investment Trust plc, a U.K.-based investmenttrust that is listed on the London Stock Exchange.

WaynePalladino has been a director of our company since September 2003.Mr. Palladino has worked at Pzena Investment Management LLC, an assetmanagement firm, since June 2002, where he currently serves asprincipal and a director of client and portfolio services. From August2000 until June 2002, he was a senior vice president and chieffinancial officer of Lillian Vernon Corporation, a catalog retailer.Mr. Palladino was a vice president of our company from February 1991 toSeptember 1996, senior vice president of our company from September1996 to August 2000 and chief financial officer of our company fromFebruary 1991 to August 2000.

Jeffrey S. Peris has been adirector of our company since May 1998. Dr. Peris has been the vicepresident of human resources and chief learning officer of Wyeth(formerly American Home Products Corporation), a pharmaceuticalcompany, since May 2001. Dr. Peris was the vice president of businessoperation of Knoll Pharmaceutical (Abbott Laboratories), where he wasresponsible for human resources and corporate communications, fromApril 1998 until May 2001. Dr. Peris was a management consultant tovarious Fortune 100 companies from May 1997 until April 1998. From 1972until May 1997, Dr. Peris was employed by Merck Co., Inc., apharmaceutical company, where he served as the executive director ofhuman resources from 1985 until May 1997, the executive director ofmarketing from 1976 until 1985, and the director of clinicalbiostatistics and research data systems from 1972 until 1976.

Scott A. Shay has been a director of our company sinceJanuary 1996 and served as acting chairman of the board of our companyfrom September 1996 until January 1997. Mr. Shay has been a managingdirector of Ranieri & Co., Inc., a private investment advisor andmanagement company, since its formation in 1988. Mr. Shay currentlyserves as the chairman of the board of Signature Bank, a subsidiary ofBank Hapoalim, and is currently a director of Bank Hapoalim B.M., inTel Aviv, Israel, and Super Derivatives, Inc., as well as an officer ordirector of other direct and indirect subsidiaries of Hyperion PartnersII L.P. Prior to joining Ranieri & Co., Inc., Mr. Shay was adirector of Salomon Brothers Inc., where he was employed from 1980 to1988.

All directors of our company are elected by theshareholders for a one-year term and hold office until their successorsare elected and qualified or until their earlier death, resignation orremoval. Officers are chosen by and serve at the discretion of theboard of directors, subject to any applicable employment contracts.There are no family relationships among our directors and officers.

All directors who are not employees of our company are entitled toreceive a fee of $10,000 per annum, plus reimbursement of expensesincurred as a result of acting as a director or as a member of anycommittee of our board of directors. In addition, Mr. Palladino isentitled to receive, for serving as chairman of the Audit Committee, anadditional $6,000 per annum and $1,000 per Audit Committee meetingattended in person or by telephone conference call and Mr. Macfarlaneis entitled to an additional director's fee of $10,000 per yearfor advising on U.K. governance and related matters.

Our boardof directors has determined that G. Richard Green, David J. Macfarlane,Wayne Palladino and Jeffrey A. Peris are "independentdirectors," as such term is defined in the rules of theNasdaq Stock Market.

Other than Timothy  M. Aitken,Sarah  L. Eames and Charles F. Murphy, none of ourcompany's executive officers have employment agreements. For moreinformation, see "Item 11—ExecutiveCompensation—Employment Agreements; Termination of Employment andChange-in-Control Arrangements."

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Meetings of the Board of Directors

The business of our company is managed under the direction of ourboard of directors. Members of the board of directors are informedabout our company's affairs through various reports and documentsdistributed to them, through operating and financial reports routinelypresented at meetings of the board of directors and committee meetingsby the chairman and other officers, and through other means. Inaddition, directors of our company discharge their duties throughoutthe year not only by attending board of directors' meetings, butalso through personal meetings and other communications, includingtelephone contact with the chairman of the board and others regardingmatters of interest and concern to our company.

During ourfiscal year ended September  30,  2004, our company'sboard of directors held six formal meetings and acted by unanimouswritten consent in lieu of a meeting on five separate occasions. Duringour fiscal year ended September  30,  2004, no directorattended fewer than 75% of the aggregate of the total number ofmeetings of the board and any committees on which he served.

Board Committees

The board of directors has an AuditCommittee and a Compensation Committee but it does not have anominating committee. The members of each committee are appointed bythe board of directors.

Audit Committee.    The AuditCommittee assists our board of directors in monitoring (1) theintegrity of our financial statements, (2) the independence andqualifications of our independent auditors, and (3) the performance ofour independent auditors and our internal audit functions. The currentwritten charter for the Audit Committee was adopted by our board ofdirectors on February 12, 2004 and is attached as an exhibit to theproxy statement relating to our 2004 annual meeting ofshareholders.

The Audit Committee consists of Messrs.Macfarlane, Palladino and Peris. Mr. Palladino serves as chairman ofthe Audit Committee. All of the members of the Audit Committee are"independent directors," as such term isdefined in the rules of the Nasdaq Stock Market. The board of directorshas determined that Wayne Palladino is an "audit committeefinancial expert," as such term is defined in Item 401(h)of Regulation S-K promulgated by the Securities and ExchangeCommission.

The Audit Committee was in session during each ofthe six formal meetings of our company's board of directorsduring our fiscal year ended September  30,  2004. TheAudit Committee also held four formal meetings and acted by unanimouswritten consent on one occasion during that period.

Compensation Committee.    The Compensation Committeereviews and approves overall policy with respect to compensationmatters, including such matters as compensation plans for employees andemployment agreements and compensation for executive officers. TheCompensation Committee consists of Messrs.  Green, Macfarlane andPeris. All of the members of the Compensation Committee are"independent directors," as such term isdefined in the rules of the Nasdaq Stock Market.

TheCompensation Committee was in session during each of the six formalmeetings of our company's board of directors during our fiscalyear ended September  30,  2004. The Compensation Committeealso held one formal meeting during that period.

Section 16(a)Beneficial Ownership Reporting Compliance

Section 16(a) of theSecurities Exchange Act of 1934 and the rules thereunder promulgated bythe Securities and Exchange Commission require the reporting oftransactions in our equity securities by our directors and certain ofour officers and by shareholders who beneficially own more than10% of our common stock (collectively, the"Reporting Persons"). Section 16(a) and therules thereunder require the Reporting Persons to report initialstatements of ownership of our equity securities on Form 3 and changesin ownership of our equity securities on Form 4 or Form 5. Based solelyon a review of these reports received by us from the Reporting Personsand written representations from our directors and officers that noForms 5 were required to be filed by them in respect of our fiscal

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year ended September 30, 2004, we believethat no Reporting Person failed to file a Section 16 report on a timelybasis during our fiscal year ended September 30, 2004.

Code ofConduct

In September 2003, our board of directors adopted aCode of Conduct that applies to all of our directors, officers andemployees, including our chief executive officer and our chieffinancial officer. As required by the regulations of the Securities andExchange Commission, the Code of Conduct is designed to deterwrongdoing and to promote:

(1)    honest andethical conduct, including the ethical handling of actual or apparentconflicts of interest between personal and professionalrelationships;

(2)    full, fair, accurate,timely, and understandable disclosure in reports and documents that wefile with, or submit to, the Securities and Exchange Commission and inother public communications made by us;

(3)    compliance with applicable governmentallaws, rules and regulations;

(4)    the promptinternal reporting of violations of the Code of Conduct to the AuditCommittee; and

|        |                                                                                |
|--------|--------------------------------------------------------------------------------|
|   | (5)    accountability for adherence tothe Code of Conduct. |

A copy of our Code of Conduct is filed asan exhibit to this Annual Report onForm 10-K.

Item11.    Executive Compensation.

The following table summarizesall compensation earned by or paid to our chief executive officer andeach of the other most highly compensated executive officers of ourcompany whose total annual salary and bonus compensation exceeded$100,000 in fiscal 2004 (the "Named ExecutiveOfficers") for services rendered in all capacities to ourcompany in respect of our fiscal years ended September  30, 2004,2003 and 2002. The titles given below the individuals' names inthe chart below were the titles held by such individuals at the end ofour 2004 fiscal year.

Summary CompensationTable

|                                     |  |            |      |                          |  |                                |         |                      |  |        |           |           |  |         |  |        |         |        |  |        |           |            |  |  |  |  |
|-------------------------------------|--|------------|------|--------------------------|--|--------------------------------|---------|----------------------|--|--------|-----------|-----------|--|---------|--|--------|---------|--------|--|--------|-----------|------------|--|--|--|--|
|                                |  |       |      | AnnualCompensation       |  | Long-TermCompensationAwards    |         |
|                                |  |       |      | RestrictedStockAwards($) |  | SecuritiesUnderlyingOptions(#) |         |                      |
|                                |  |       |      |
| NameandPrincipalPosition            |  | FiscalYear |      | Salary                   |  | Bonus                          |         | AllOtherCompensation |  |
| Sarah L.Eames(1)                    |  |       | 2004 |                     |  | $                              | 445,189 |                 |  | $      | 300,000   | (4)  |  | — |  |   | 300,000 |   |  | $      | 1,058,570 | (10)  |
| ChiefExecutiveOfficer,              |  |       | 2003 |                     |  |                           | 405,000 |                 |  |   | 270,000   | (5)  |  | — |  |   | 334,000 |   |  |   | 101,431   | (11)  |
| Presidentand Chief OperatingOfficer |  |       | 2002 |                     |  |                           | 365,000 |                 |  |   | 3,049,793 | (6)  |  | — |  |   | — |   |  |   | 7,800     | (12)  |
| TimothyM.Aitken(2)                  |  |       | 2004 |                     |  | $                              | 253,369 |                 |  | $      | 450,000   | (7)  |  | — |  |   | 350,000 |   |  | $      | 91,645    | (13)  |
| Chairmanof theBoard                 |  |       | 2003 |                     |  |                           | 420,000 |                 |  |   | 230,000   | (5)  |  | — |  |   | 384,000 |   |  |   | 170,063   | (14)  |
|                                |  |       | 2002 |                     |  |                           | 380,000 |                 |  |   | 4,214,592 | (8)  |  | — |  |   | — |   |  |   | 9,000     | (12)  |
| CharlesF.Murphy(3)                  |  |       | 2004 |                     |  | $                              | 289,073 |                 |  | $      | 53,781    | (9)  |  | — |  |   | — |   |  | $      | 18,286    | (12)  |
| ChiefFinancialOfficer               |  |       | 2003 |                     |  |                           | 90,096  |                 |  |   | 80,085    | (5)  |  | — |  |   | 99,000  |   |  |   | 6,127     | (12)  |
|                                     |

|  |
|--|
|  |  |
|  |

|           |                                                                                                                                                                                                                                                                                                  |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)  | Ms.Eames became chief executive officer of our company in January 2004,chief operating officer of our company in June 2001 and president ofour company in May 1998. She stepped down from all such positions, andassumed the office of executive vice president of our company, inNovember 2004. |

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|           |                                                                                                                                                                                                                                                |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Mr. Aitkenhas served as chairman of the board of our company since January 1997and as chief executive officer of our company since November 2004. Healso served as chief executive officer of our company from January 1997until January 2004. |

|           |                                                                                                                                                           |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)  | Mr. Murphybecame acting chief financial officer of our company in May 2003 and,in March 2004, assumed the title of chief financial officer of ourcompany. |

|           |                                                                                                                                                                                 |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)  | Paid in fiscal 2004 as abonus for fiscal 2004. See "Item 13—CertainRelationships and Related Transactions—Other Transactions withDirectors and Executive Officers." |

|           |                                                |
|-----------|------------------------------------------------|
| (5)  | Paid in fiscal 2004 as a bonus forfiscal 2003. |

|           |                                                                                                                                                                                                                                                                                                                                                                |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6)  | Consists of (a)$200,000 cash paid in fiscal 2002 as a bonus for fiscal 2001, (b)$250,000 cash paid in fiscal 2003 as a bonus for fiscal 2002, and (c)the value of shares of our common stock issued in the bonus shareissuance described below and the related cash payment made to Ms. Eamesto enable her to pay the income taxes arising from such issuance. |

|           |                                                                                                                                                                                                                                                                                  |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7)  | Consists of (a) $400,000 cash paid infiscal 2004 as a bonus for fiscal 2004 and (b) $50,000 cash paid infiscal 2005 as a bonus for fiscal 2004. See "Item13—Certain Relationships and Related Transactions—OtherTransactions with Directors and Executive Officers." |

|           |                                                                                                                                                                                                                                                                                                                                                                 |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (8)  | Consists of (a) $150,000 cash paid infiscal 2002 as a bonus for fiscal 2001, (b) $200,000 cash paid infiscal 2003 as a bonus for fiscal 2002, and (c) the value of shares ofour common stock issued in the bonus share issuance described below andthe related cash payment made to Mr. Aitken to enable him to pay theincome taxes arising from such issuance. |

|           |                                                |
|-----------|------------------------------------------------|
| (9)  | Paid in fiscal 2005 as a bonus forfiscal 2004. |

|            |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (10)  | Of such amount, (a)$1,000,000 consists of special compensation paid to Ms. Eames for pastservices (see "Item 13—Certain Relationships andRelated Transactions—Other Transactions with Directors andExecutive Officers") and (b) the remainder consists ofpayment for a car allowance and the reimbursement of taxes incurred byMs. Eames in December 2003 (see "The Bonus Share Issuanceand Related Transactions" below). |

|            |                                                                                                                                                                                                              |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (11)  | Reflects payment for a car allowanceof $8,450 and the reimbursement by the Company in fiscal 2004 of taxesof $92,981 incurred by Ms. Eames in connection with her exercise of100,000 options in fiscal 2003. |

|            |                                      |
|------------|--------------------------------------|
| (12)  | Reflects payment for a carallowance. |

|            |                                                                                                                                                                           |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (13)  | Reflects payment for acar allowance and the reimbursement of taxes incurred by Mr. Aitken inDecember 2003 (see "The Bonus Share Issuance and RelatedTransactions" below). |

|            |                                                                                                                                                                                                               |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (14)  | Reflects payment of a car allowanceof $9,750 and the reimbursement by the Company in fiscal 2004 of taxesof $160,313 incurred by Mr. Aitken in connection with his exercise of150,000 options in fiscal 2003. |

The Bonus Share Issuance andRelated Transactions

Prior to our corporate reorganization (the"Reorganization") in July 2002, Mr. Aitken,Ms. Eames and others held redeemable shares in one of our U.K.subsidiaries. The holders of the redeemable shares other than Mr.Aitken and Ms. Eames exchanged their redeemable shares for shares ofour common stock in the Reorganization on a tax-free basis. Had Mr.Aitken and Ms. Eames exchanged their redeemable shares for shares ofour common stock in the Reorganization, they would have received684,258 and 487,099 shares of our common stock, respectively, based onthe number of redeemable shares held by them. However, just prior tothe execution of the reorganization agreement, we learned that theseofficers would in fact, unlike the other holders of the redeemableshares, be liable for U.S. taxes if they exchanged their redeemableshares for shares of common stock in the reorganization.

Inorder to address this matter, Mr. Aitken and Ms. Eames surrenderedtheir redeemable shares for nominal value and we issued to Mr. Aitkenand Ms. Eames 684,258 shares of common stock 

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(valued at $2,463,329) and 487,099 shares ofcommon stock (value at $1,753,556), respectively, as bonus shares,together with cash bonuses and loans in an amount roughly equal to theincome taxes payable by them in respect of such share issuances(grossed-up to reflect the related cash bonuses). Accordingly, infiscal 2002 we made cash bonus payments to Mr. Aitken and Ms. Eames inthe amount of $1,401,263 and $846,237, respectively, and loaned Mr.Aitken and Ms. Eames the amount of $550,000 and $390,000, respectively.The cash bonus payments and loans from us to Mr. Aitken and Ms. Eameswere used by them to pay their income taxes arising from the bonusshare issuance. The payment of their respective promissory notes wassecured by a pledge by each of Mr. Aitken and Ms. Eames of certain oftheir securities in our company.

On December 2, 2003, Mr. Aitkenand Ms. Eames repaid in full the principal amount of and accruedinterest on the promissory notes issued by them to our company infiscal 2002. The principal and accrued interest repaid aggregated$590,500 and $418,718, respectively. The loans were repaid by deliveryto us of 103,596 and 73,459 shares of our common stock held by Mr.Aitken and Ms. Eames, respectively, valued at $5.70 per share, theclosing price on the day prior to the repayment date. We agreed toreimburse Mr. Aitken and Ms. Eames for the taxes incurred by them onthe disposition of the shares to our company, which were $83,395 and$51,421, respectively.

|  |
|--|
|  |  |  |  |
|  |

The following tablesets forth certain information regarding options granted during fiscal2004 to our Named Executive Officers pursuant to our 2002 Stock OptionPlan. During fiscal 2004 we did not grant stock appreciation rights toany of our Named Executive Officers or any other employee. Inaccordance with the rules of the Securities and Exchange Commission,the table sets forth the hypothetical gains or "optionspreads" that would exist for the options at the end oftheir respective terms. These gains are based on assumed rates ofannual compound stock price appreciation of 5% and 10%from the date the option was granted to the end of the option'sterm.

Option Grants in Fiscal2004

|                 |  |                                             |         |                                                           |  |                           |         |                |  |                                                                                             |         |        |  |        |         |        |  |        |           |        |  |        |           |        |  |  |
|-----------------|--|---------------------------------------------|---------|-----------------------------------------------------------|--|---------------------------|---------|----------------|--|---------------------------------------------------------------------------------------------|---------|--------|--|--------|---------|--------|--|--------|-----------|--------|--|--------|-----------|--------|--|--|
| Name            |  | Numberof SecuritiesUnderlyingOptionsGranted |         | PercentageofTotal OptionsGranted toEmployees inFiscalYear |  | Exercise PricePerShare(1) |         | ExpirationDate |  | PotentialRealizable Valueat Assumed Annual Ratesof StockPriceAppreciation for OptionTerm(2) |
|            |  |                                        |         |                                                      |  |                      |         |           |  | 5%                                                                                          |         | 10%    |
| SarahL.Eames    |  |                                        | 300,000 |                                                      |  |                      | 42.1    | %         |  | $                                                                                           | 5.70    |   |  |   | 12/2/13 |   |  | $      | 1,075,410 |   |  | $      | 2,725,300 |   |
| TimothyM.Aitken |  |                                        | 350,000 |                                                      |  |                      | 49.1    | %         |  | $                                                                                           | 5.70    |   |  |   | 12/2/13 |   |  | $      | 1,254,645 |   |  | $      | 3,179,516 |   |
| CharlesF.Murphy |  |                                        | — |                                                      |  |                      | — |           |  |                                                                                        | — |   |  |   | — |   |  |   | —   |   |  |   | —   |   |
|                 |

|           |                                                                                                                                                      |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)  | Optionswere granted at an exercise price equal to the closing price of a shareof our common stock on the Nasdaq National Market on the date ofgrant. |

|           |                                                                                                                                                                                                                      |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | The 5% and10% assumed annual compound rates of stock price appreciationare mandated by the Securities and Exchange Commission and do notrepresent our company's estimate or projection of future commonstock prices. |

The following table sets forth certain informationwith respect to our Named Executive Officers concerning the exercise ofoptions by them during our fiscal year ended September 30, 2004 andunexercised options held by them as of September 30, 2004. We havenever granted stock appreciation rights to any of our Named ExecutiveOfficers or any other employee.

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Aggregate Option Exercises in Fiscal2004and 2004 Fiscal Year-End OptionValues

|                 |  |                          |  |               |  |                                                                                          |                   |                                                                                      |  |   |                    |        |  |  |  |  |  |  |
|-----------------|--|--------------------------|--|---------------|--|------------------------------------------------------------------------------------------|-------------------|--------------------------------------------------------------------------------------|--|---|--------------------|--------|--|--|--|--|--|--|
| Name            |  | SharesAcquiredonExercise |  | ValueRealized |  | Number ofSharesUnderlying UnexercisedOptions at Fiscal Year EndExercisable/Unexercisable |                   | Value of UnexercisedIn-the-MoneyOptionsat Fiscal YearEnd(1)Exercisable/Unexercisable |
| SarahL.Eames    |  | —                  |  | —       |  |                                                                                     | 644,666/139,334   |                                                                                 |  | $ | 850,839/$185,181   |   |
| TimothyM.Aitken |  | —                  |  | —       |  |                                                                                     | 1,273,000/156,000 |                                                                                 |  | $ | 1,071,940/$210,680 |   |
| CharlesF.Murphy |  | —                  |  | —       |  |                                                                                     | 33,000/66,000     |                                                                                 |  | $ | 32,990/$65,980     |   |
|                 |

|  |
|--|
|  |  |
|  |

|           |                                                                                                                                                                               |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)  | Calculatedon the basis of $5.53 per share, the closing sale price of our commonstock, as reported on the Nasdaq Stock Market on September  30,2004, minus the exercise price. |

Compensation of Directors

See "Item 10—Directors and Executive Officers ofthe Registrant—Our Directors and Executive Officers"with respect to compensation of non-employee directors.

Employment Agreements; Termination of Employment andChange-in-Control Arrangements

In September 2001, we enteredinto an employment agreement with Mr. Aitken. The employment agreementhas a three-year term (subject to automatic renewal for successiveadditional one-year periods unless either party provides the other withnotice of intent to terminate the agreement at least 90 days before thethen applicable termination date). The employment agreement providesthat our company will negotiate in good faith, commencing not less than90 days prior to each anniversary date of the employment agreement, theamount, if any, of future salary increases. The salary of Mr. Aitkenfor fiscal 2005 is £250,000. Mr. Aitken's employmentagreement provides that if his employment is terminated during the termof the agreement other than for cause, death or disability, or if,within six months of a "change in control"(as defined in the agreement) of our company, Mr. Aitken or our companyterminates his employment, then (1) all stock options in our companyheld by Mr. Aitken shall immediately vest and (2) Mr. Aitken will beentitled to receive a cash payment of 2.9 times his average annual basesalary during the twelve months preceding the change of control or thetermination of employment.

In September 2001 we entered into anemployment agreement with Ms. Eames, which was modified in November2004. Pursuant to her employment agreement, as modified, Ms. Eames hasagreed to serve as executive vice president of the Company until May2006 at an annual salary of $200,000. Ms. Eames' employmentagreement, as modified, provides that if her employment is terminatedduring the term of the agreement other than for cause, death ordisability, then all stock options in our company held by Mr. Eamesshall immediately vest and Ms. Eames shall be entitled to receive hersalary through May 2006.

In Deeds of Restrictive Covenantsentered into in 1999 with one of our U.K. subsidiaries, Mr. Aitken andMs. Eames have each agreed not to compete with us or our subsidiariesfor twelve months following termination of employment without our priorwritten consent.

We have also entered into an employmentagreement with Mr. Murphy. Our employment agreement with Mr. Murphy isterminable by either party on six month's notice and providesthat Mr. Murphy will not compete against us for a period of twelvemonths following his termination of employment. Pursuant to hisemployment agreement, Mr. Murphy's salary is currently£165,000 (approximately $297,000).

Compensation CommitteeInterlocks and Insider Participation

The Compensation Committeeconsists of Messrs. Green, Macfarlane and Peris. None of suchindividuals has ever served as an officer or employee of our company orany of our subsidiaries nor has any such individual had a businessrelationship with our company or any of our subsidiaries during fiscal2004 that requires disclosure under the rules of the Securities andExchange Commission.

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During the first part of fiscal 2004, ourCompensation Committee consisted of Mr. Green, Frederick S. Moseley IV(who resigned from our board of directors on December 24, 2003) and Mr.Shay (who ceased to be a member of the Compensation Committee effectiveMarch 31, 2004). Mr. Shay, among others, is a control person ofHyperion Partners II, L.P., Hyperion TW Fund L.P., Hyperion TWH FundLLC and Hyperion TWH Fund II LLC, each of which are principalshareholders of our company. Prior to January 1, 2004, Mr. Moseley heldcertain positions with and/or interests in Triumph Capital Group, Inc.and certain of its affiliates, including Triumph Partners III, L.P.(which has changed its name to Washington & Congress CapitalPartners, L.P.) and Triumph III Investors, L.P. See "Item13—Certain Relationships and Related Transactions"for a description of certain transactions between our company andTriumph Partners III, L.P. (which has changed its name to Washington& Congress Capital Partners, L.P.).

Stock Option Plans

1992 and 2002 Stock Option Plans

In July 1992,our board of directors and shareholders approved our 1992 Stock OptionPlan. The 1992 Stock Option Plan, which is substantially similar to our2002 Stock Option Plan discussed below, provided for the grant ofoptions to key employees, officers, directors and non-employeeindependent contractors of our company. Effective with the adoption byour shareholders of our 2002 Stock Option Plan in June 2002, no furtheroptions may be granted under the 1992 Stock Option Plan. Outstandingoptions granted under the 1992 Stock Option Plan may be exercised inaccordance with the terms of the 1992 Stock Option Plan.

InMarch 2002, our board of directors adopted, and in June 2002 ourshareholders approved, our 2002 Stock Option Plan. Options grantedunder the 2002 Stock Option Plan may be either incentive stock options("Incentive Options"), which are intended tomeet the requirements of section 422 of the Internal Revenue Code of1986, or options that do not qualify as Incentive Options (which werefer to as "Non-Qualified Options"). Underthe 2002 Stock Option Plan, the Compensation Committee may grant (1)Incentive Options at an exercise price per share which is not less thanthe fair market value of a share of our common stock on the date onwhich such Incentive Options are granted (and not less than 110%of the fair market value in the case of any optionee who beneficiallyowns more than 10% of the total combined voting power of ourcompany) and (2) Non-Qualified Options at an exercise price per sharewhich is determined by the Compensation Committee (and which may beless than the fair market value of a share of our common stock on thedate on which such Non-Qualified Options are granted). The 2002 StockOption Plan further provides that the maximum period in which optionsmay be exercised will be determined by the Compensation Committee,except that Incentive Options may not be exercised after the expirationof ten years from the date the Incentive Option was initially granted(and five years in the case of any optionee who beneficially owns morethan 10% of the total combined voting power of our company).Under the 2002 Stock Option Plan, if an optionee's employment isterminated, the unexercised Incentive Options generally must beexercised within three months after termination. However, if thetermination is due to the optionee's death or permanentdisability, the option must be exercised within one year of thetermination of employment. If we terminate the optionee'semployment for cause, or if the optionee voluntarily terminates hisemployment, his options generally will expire as of the terminationdate. Any option granted under the 2002 Option Stock Plan will benontransferable, except by will or by the laws of descent anddistribution, and generally may be exercised upon payment of the optionprice in cash or by delivery of shares of our common stock with a fairmarket value equal to the option price.

Shares delivered underthe 2002 Stock Option Plan will be available from authorized butunissued shares of common stock or from shares of common stockreacquired by our company. Shares of common stock that are subject tooptions under the 2002 Stock Option Plan which have terminated orexpired unexercised will return to the pool of shares available forissuance under the 2002 Stock Option Plan.

As of September 30,2004, an aggregate of 1,791,334 shares of our common stock wereissuable upon the exercise of outstanding options that had been grantedunder our 2002 Stock Option Plan 

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and options to purchase an aggregate of1,555,837 shares of our common stock were available for grant undersuch Plan. As of September 30, 2004, an aggregate of 855,000 shares ofour common stock were issuable upon the exercise of outstanding optionsthat had been granted under our 1992 Stock Option Plan. No furtheroptions may be granted under our 1992 Stock Option Plan.

1997 Non-Employee Director Plan

In May 1997,our board of directors adopted the 1997 Option Plan for Non-EmployeeDirectors (the "Director Plan"), pursuant towhich 100,000 shares of our common stock were reserved for issuanceupon the exercise of options granted to non-employee directors. Thepurpose of the Director Plan is to encourage ownership of common stockby non-employee directors of our company whose continued services areconsidered essential to our company's future progress and toprovide them with a further incentive to remain as directors of ourcompany. The Director Plan is administered by the board of directors.Directors of our company who are not employees of our company or anysubsidiary or affiliate of our company are eligible to participate inthe Director Plan. The Director Plan will terminate in May 2007;however, options outstanding on the expiration of the term shallcontinue to have full force and effect in accordance with theprovisions of the instruments evidencing such options. The board ofdirectors may suspend, terminate, revise or amend the Director Plan,subject to certain limitations.

Under the Director Plan, theboard of directors may from time to time at its discretion determinewhich of the eligible directors should receive options, the number ofshares subject to such options and the dates on which such options areto be granted. Each such option is immediately exercisable for a periodof ten years from the date of grant generally, but may not be exercisedmore than 90 days after the date an optionee ceases to serve as adirector of our company. Options granted under the Director Plan arenot transferable by the optionee other than by will, laws of descentand distribution, or as required by law.

Shares of common stockmay be purchased from our company upon the exercise of an option bypayment in cash or cash equivalent, through the delivery of shares ofcommon stock having a fair market value equal to the cash exerciseprice of the option or any combination of the above, subject to thediscretion of the board of directors.

RecentDevelopments

The American Jobs Creation Act of 2004 (the"Act") became law on October 22, 2004 andcontains provisions relating to nonqualified deferred compensationplans. The definition of a "nonqualified deferredcompensation plan" is broad enough to include stockoptions, including stock options granted under our stock option plans.The Act gives the Treasury Department the authority to issue TreasuryRegulations to define terms, provide exceptions, and create a window oftime during which existing plans may be altered or amended in order tocomply with the Act. The Act provides that all compensation deferredafter December 31, 2004 under a "non-qualified deferredcompensation plan" will, under certain circumstances, beincludible in gross income for the tax year. The Act is not intended tochange the tax treatment of incentive stock options or options grantedunder employee stock purchase plans. Furthermore, the Act is notintended to apply to non-qualified stock options under certaincircumstances.

On December 20, 2004, the Internal RevenueService issued Notice 2005-1 (the "Notice"),in which it provides the first part of what is expected to be a seriesof guidelines with respect to the application of the Act. The Noticestates that the grant of an incentive stock option does not constitutea deferral of compensation. Additionally, the Notice provides that anonqualified stock option will not provide for a deferral ofcompensation if: (1) the amount required to purchase stock under theoption (the exercise price) may never be less than the fair marketvalue of the underlying stock on the date the option is granted, (2)the receipt, transfer or exercise of the option is subject to taxationunder Section 83 of the Internal Revenue Code of 1986, and (3) theoption does not include any feature for the deferral of recognition ofincome until the later of exercise or disposition of the option. TheCompany believes that any non-qualified options that it has previouslyissued would satisfy the above requirements.

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Except for matters requiring stockholderapproval under applicable law or Nasdaq rules, our board of directorswill have the right, without further shareholder approval, to amend ourstock option plans, if necessary, so that they comply with the Act,including the guidance issued pursuant thereto.

Indemnification

As permitted under the Business CorporationLaw of the State of New York, our certificate of incorporation providesthat a director of our company will not be personally liable to ourcompany or our shareholders for monetary damages for breach of afiduciary duty owed to our company or our shareholders. By its termsand in accordance with the law of the State of New York, however, thisprovision does not eliminate or otherwise limit the liability of adirector of our company for any breach of duty based upon (1)  anact or omission (a)  resulting from acts committed in bad faithor involving intentional misconduct or involving a knowing violation oflaw or (b)  from which the director personally derived afinancial benefit to which he was not legally entitled, or (2) animproper declaration of dividends, purchase of our securities or otherviolation of section 719 of the Business Corporation Law of the Stateof New York.

Our certificate of incorporation and bylaws providethat our company shall indemnify our directors and officers to thefullest extent permitted by New York law. In addition, we have enteredinto indemnification agreements with each of our directors andexecutive officers and we maintain directors' and officers'liability insurance.

|                |                                                                                               |
|----------------|-----------------------------------------------------------------------------------------------|
| Item 12.  | SecurityOwnership of Certain Beneficial Owners and Management and RelatedStockholder Matters. |

The following table sets forth the numberof shares of common stock, and the percentage of shares of commonstock, beneficially owned as of December 10, 2004 by (1)  eachdirector of our company, (2) each Named Executive Officer, (3) allpersons known by us to be the beneficial owner of more than 5%of our outstanding shares of common stock, and (4)  all currentdirectors and named executive officers of our company as a group (8persons). The information as to the number of shares of our commonstock beneficially owned by the individuals and entities listed belowwas derived from reports filed with the Securities and ExchangeCommission by such persons and companyrecords.

|                                                                    |  |                                               |            |                                              |  |        |      |         |  |  |
|--------------------------------------------------------------------|--|-----------------------------------------------|------------|----------------------------------------------|--|--------|------|---------|--|--|
| Name                                                               |  | NumberofShares ofCommonStockBeneficiallyOwned |            | Percentage ofCommonStockBeneficiallyOwned(1) |
| TimothyM.Aitken                                                    |  |                                          | 2,083,573  | (2)                                     |  |   | 4.6  | %  |
| SarahL.Eames                                                       |  |                                          | 1,141,884  | (3)                                     |  |   | 2.5  | %  |
| CharlesF. Murphy                                                   |  |                                          | 143,539    | (4)                                     |  |   |      | *  |
| G.RichardGreen                                                     |  |                                          | 87,854     | (5)                                     |  |   |      | *  |
| DavidJ.Macfarlane                                                  |  |                                          | 12,000     | (6)                                     |  |   |      | *  |
| WaynePalladino                                                     |  |                                          | 8,914      | (7)                                     |  |   |      | *  |
| JeffreyS.Peris                                                     |  |                                          | 11,666     | (8)                                     |  |   |      | *  |
| LewisS.Ranieri                                                     |  |                                          | 11,920,810 | (9)                                     |  |   | 26.8 | %  |
| ScottA.Shay                                                        |  |                                          | 11,860,610 | (10)                                    |  |   | 26.7 | %  |
| HyperionPartners II L.P...                                         |  |                                          | 11,860,610 | (11)                                    |  |   | 26.7 | %  |
| HyperionTW Fund L.P...                                             |  |                                          | 11,860,610 | (12)                                    |  |   | 26.7 | %  |
| HyperionTWH FundLLC.                                               |  |                                          | 11,860,610 | (13)                                    |  |   | 26.7 | %  |
| HyperionTWH Fund IILLC                                             |  |                                          | 11,860,610 | (14)                                    |  |   | 26.7 | %  |
| Washington& Congress Capital Partners,L.P.                     |  |                                          | 7,697,578  | (15)                                    |  |   | 17.3 | %  |
| Allcurrent executive officers and directors as a group (8persons). |  |                                          | 15,350,040 | (16)                                    |  |   | 33.0 | %  |
|                                                                    |

39

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|  |
|--|
|  |  |
|  |

|         |              |
|---------|--------------|
| *  | Lessthan 1%. |

|           |                                                                                                                                                                                                                                                                                                                                                |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)  | As of December 10,2004, there were 44,468,772 shares of our common stock outstanding. Thepercentage given for each shareholder assumes that such shareholder hasexercised the options held by such shareholder that are exercisablewithin 60 days of December 10, 2004, but that no other shareholdershave exercised the options held by them. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Consists of 672,007 shares of commonstock held by Mr. Aitken, 98,566 shares of common stock held by Aitken(English) Company Limited, an affiliate of Mr. Aitken, 20,000 sharesheld by the Aitken Living Trust, a trust of which Mr. Aitken is thesole beneficiary and the sole trustee, and 1,293,000 shares subject tooptions held by Mr. Aitken that are exercisable within 60 days ofDecember 10, 2004. Does not include an additional 136,000 sharessubject to options held by Mr. Aitken that are not exercisable within60 days of December 10, 2004. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)  | Consists of 473,218 shares of commonstock held by Ms. Eames, 4,000 shares of common stock held jointly byMs. Eames and her husband and 664,666 shares subject to options held byMs. Eames that are exercisable within 60 days of December 10, 2004.Does not include an additional 119,334 shares subject to options heldby Ms. Eames that are not exercisable within 60 days of December 10,2004. |

|           |                                                                                                                                                                                                                                                                                                                            |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)  | Consists of 85,539 shares ofcommon stock held by Mr. Murphy and 58,000 shares subject to optionsheld by Mr. Murphy that are exercisable within 60 days of December 10,2004. Does not include an additional 41,000 shares subject to optionsheld by Mr. Murphy that are not exercisable within 60 days of December10, 2004. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5)  | Consists of 60,995shares of common stock held by Mr. Green, 19,259 shares of common stockheld by Orion Nominees Limited, an affiliate of Mr. Green, 5,000 sharessubject to options held by Mr. Green that are exercisable within 60days of December 10, 2004 and 2,600 shares owned of record by Mr.Green's wife, as to which Mr. Green disclaims beneficialownership. Mr. Green shares voting and dispositive power over theshares of our common stock held by Orion Nominees Limited. |

|           |                                                                                                                                                                                                                                                                               |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6)  | Consists of 12,000 shares subject tooptions held by Mr. Macfarlane that are exercisable within 60 days ofDecember 10, 2004. Does not include an additional 6,000 shares subjectto options held by Mr. Macfarlane that are not exercisable within 60days of December 10, 2004. |

|           |                                                                                                                                                                                                                                                                                                             |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7)  | Consists of 5,914 shares of commonstock held by Mr. Palladino and 3,000 shares subject to options thatare exercisable within 60 days of December 10, 2004. Does not includean additional 6,000 shares subject to options held by Mr. Palladinothat are not exercisable within 60 days of December 10, 2004. |

|           |                                                                                                                                                                                                                                                                                                                       |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (8)  | Consists of 2,000 shares of commonstock held by Mr. Peris and 9,666 shares subject to options held by Mr.Peris that are exercisable within 60 days of December 10, 2004. Doesnot include an additional 2,334 shares subject to options held by Mr.Peris that are not exercisable within 60 days of December 10, 2004. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (9)  | Consists of 60,200 shares of commonstock owned by Mr. Ranieri, 6,854,454 shares of common stock owned byHyperion Partners II L.P., 4,148,456 shares of common stock owned byHyperion TW Fund L.P., 482,700 shares of common stock owned by HyperionTWH Fund LLC and 375,000 shares of common stock owned by Hyperion TWHFund II LLC. Each of such entities is an affiliate of Mr. Ranieri. Mr.Ranieri disclaims beneficial ownership of the shares of common stockowned by such entities except to the extent of his pecuniary interesttherein. Mr. Ranieri shares voting and dispositive power over theshares of common stock held by such entities. |

|            |                                                                                                                                                                                                                                                                                                                                                                   |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (10)  | Consists of 6,854,454 shares ofcommon stock owned by Hyperion Partners II L.P., 4,148,456 shares ofcommon stock owned by Hyperion TW Fund L.P., 482,700 shares of commonstock owned by Hyperion TWH Fund LLC and 375,000 shares of common stockowned by Hyperion TWH Fund II LLC. Each of such entities is anaffiliate of Mr. Shay. Mr. Shay disclaims beneficial |

40

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|        |                                                                                                                                                                                                                         |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ownership of the shares of common stockowned by such entities except to the extent of his pecuniary interesttherein. Mr. Shay shares voting and dispositive power over the sharesof common stock held by such entities. |

|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (11)  | Consists of (a) 6,854,454 shares ofcommon stock held by Hyperion Partners II L.P. and (b) 4,148,456 sharesof common stock owned by Hyperion TW Fund L.P., 482,700 shares ofcommon stock owned by Hyperion TWH Fund LLC and 375,000 shares ofcommon stock owned by Hyperion TWH Fund II LLC, each of which areaffiliates of Hyperion Partners II L.P. and as to which HyperionPartners II L.P. disclaims beneficial ownership except to the extent ofits pecuniary interest therein. Scott A. Shay, a director of ourcompany, may be deemed to be the beneficial owner of all of such sharesof common stock. Mr. Shay disclaims beneficial ownership in such sharesexcept to the extent of his pecuniary interest therein. |

|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (12)  | Consists of (a) 4,148,456 shares ofcommon stock held by Hyperion TW Fund L.P. and (b) 6,854,454 shares ofcommon stock owned by Hyperion Partners II L.P., 482,700 shares ofcommon stock owned by Hyperion TWH Fund LLC and 375,000 shares ofcommon stock owned by Hyperion TWH Fund II LLC, each of which areaffiliates of Hyperion TW Fund L.P. and as to which Hyperion TW FundL.P. disclaims beneficial ownership. Scott A. Shay, a director of ourcompany, may be deemed to be the beneficial owner of all of such sharesof common stock. Mr. Shay disclaims beneficial ownership in such sharesexcept to the extent of his pecuniary interest therein. |

|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (13)  | Consists of (a) 482,700 shares ofcommon stock held by Hyperion TWH Fund LLC and (b) 6,854,454 shares ofcommon stock owned by Hyperion Partners II L.P., 4,148,456 shares ofcommon stock owned by Hyperion TW Fund L.P. and 375,000 shares ofcommon stock owned by Hyperion TWH Fund II LLC, each of which areaffiliates of Hyperion TWH Fund LLC and as to which Hyperion TWH FundLLC disclaims beneficial ownership. Scott A. Shay, a director of ourcompany, may be deemed to be the beneficial owner of all of such sharesof common stock. Mr. Shay disclaims beneficial ownership in such sharesexcept to the extent of his pecuniary interest therein. |

|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (14)  | Consists of (a) 375,000 shares ofcommon stock held by Hyperion TWH Fund II LLC and (b) 6,854,454 sharesof common stock owned by Hyperion Partners II L.P., 4,148,456 shares ofcommon stock owned by Hyperion TW Fund L.P. and 482,700 shares ofcommon stock owned by Hyperion TWH Fund LLC, each of which areaffiliates of Hyperion TWH Fund II LLC and as to which Hyperion TWHFund II LLC disclaims beneficial ownership. Scott A. Shay, a directorof our company, may be deemed to be the beneficial owner of all of suchshares of common stock. Mr. Shay disclaims beneficial ownership in suchshares except to the extent of his pecuniary interest therein. |

|            |                                                                                                                                                                                                            |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (15)  | Excludes 93,492 shares of commonstock held by Triumph III Investors, L.P. Washington & CongressCapital Partners, L.P. may be deemed to be a member of a group thatincludes Triumph III Investors, L.P. |

|            |                                                                                                                                                                                                                                                                            |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (16)  | Includes an aggregate of 2,045,332shares subject to options held by our executive officers and directorsthat are exercisable within 60 days of December 10, 2004 and 2,600shares owned of record by Mr. Green's wife, as to which Mr. Greendisclaims beneficial ownership. |

41

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Equity Compensation PlanInformation

The following table sets forth certain informationas of September 30, 2004 regarding compensation plans under whichequity securities of our company are authorized for issuance:

Equity Compensation PlanInformation

|                                                      |  |                                                                                           |           |                                                                           |  |                                                                                                                                        |         |        |  |        |           |        |  |  |
|------------------------------------------------------|--|-------------------------------------------------------------------------------------------|-----------|---------------------------------------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------|---------|--------|--|--------|-----------|--------|--|--|
| PlanCategory                                         |  | Number of Securities tobe Issued UponExerciseof Outstanding Options,Warrants andRights(a) |           | Weighted-AverageExercise PriceofOutstanding Options,Warrants andRights(b) |  | Number of SecuritiesRemaining Availablefor Future Issuance UnderEquity CompensationPlans(ExcludingSecurities Reflected inColumn(a))(c) |
| Equity compensation plans approved byshareholders    |  |                                                                                      | 2,996,334 |                                                                      |  | $                                                                                                                                      | 4.93    |   |  |   | 1,555,837 |   |
| Equitycompensation plans not approved byshareholders |  |                                                                                      | —   |                                                                      |  |                                                                                                                                   | — |   |  |   | —   |   |
| Total                                                |  |                                                                                      | 2,996,334 |                                                                      |  | $                                                                                                                                      | 4.93    |   |  |   | 1,555,837 |   |
|                                                      |

Item13.    Certain Relationships and Related Transactions.

Conversion of Series A Preferred Stock

In July 2004, uponthe consummation of our public offering of shares of our common stock,all of the holders of our Series A preferred stock converted theirshares into shares of our common stock, on a one-for-one basis. We paidto such holders, in addition to the accrued and unpaid dividends ontheir shares of Series A preferred stock, a conversion fee of $0.26165per share. The holders of Series A preferred stock who are affiliatesof our company and who converted their shares of Series A preferredstock into shares of our common stock, together with their holdings ofSeries A preferred stock, the amount of the accrued and unpaiddividends that we paid them and the amount of the conversion fee thatwe paid them, are set forthbelow.

|                                                   |  |                                                |           |                           |  |               |           |        |  |   |           |        |  |  |
|---------------------------------------------------|--|------------------------------------------------|-----------|---------------------------|--|---------------|-----------|--------|--|---|-----------|--------|--|--|
| Name                                              |  | Numberof Shares ofSeries A PreferredStock Held |           | AccruedandUnpaidDividends |  | ConversionFee |
| Aitken (English) CompanyLimited(1)                |  |                                           | 87,200    |                      |  | $             | 82,874    |   |  | $ | 22,816    |   |
| TimothyM.Aitken                                   |  |                                           | 87,200    |                      |  | $             | 82,874    |   |  | $ | 22,816    |   |
| SarahL.Eames                                      |  |                                           | 21,580    |                      |  | $             | 20,509    |   |  | $ | 5,647     |   |
| CharlesF.Murphy                                   |  |                                           | 17,440    |                      |  | $             | 16,575    |   |  | $ | 4,563     |   |
| OrionNomineesLimited(2)                           |  |                                           | 17,440    |                      |  | $             | 16,575    |   |  | $ | 4,563     |   |
| WaynePalladino                                    |  |                                           | 5,232     |                      |  | $             | 4,972     |   |  | $ | 1,369     |   |
| Washington& Congress Capital Partners,L.P.(3) |  |                                           | 6,547,674 |                      |  | $             | 6,222,821 |   |  | $ | 1,713,217 |   |
|                                                   |

|  |
|--|
|  |  |
|  |

|           |                                                                       |
|-----------|-----------------------------------------------------------------------|
| (1)  | Aitken(English) Company Limited is an affiliate of Timothy M. Aitken. |

|           |                                                            |
|-----------|------------------------------------------------------------|
| (2)  | Orion Nominees Limited is an affiliateof G. Richard Green. |

|           |                                                                                                                                                       |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)  | Does notinclude 79,526 shares of Series A preferred stock held by Triumph IIIInvestors, L.P. or the conversion fee paid to Triumph III Investors,L.P. |

Other Transactions with Directors and ExecutiveOfficers

On December 2, 2003, Mr. Aitken and Ms. Eames repaidin full the principal amount of and accrued interest on the promissorynotes issued by them to our company in connection with theReorganization in 2002. The principal and accrued interest repaidaggregated $590,500 and $418,718, 

42

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respectively. The loans were repaid bydelivery to us of 103,596 and 73,459 shares of common stock held by Mr.Aitken and Ms. Eames, respectively, valued at $5.70 per share, theclosing price on the day prior to the repayment date. We agreed toreimburse Mr. Aitken and Ms. Eames for the taxes incurred by them onthe disposition of the shares to our company, which were $83,395 and$51,421, respectively. See "Item 11—ExecutiveCompensation—The Bonus Share Issuance and RelatedTransactions."

Our board of directors, upon therecommendation of our Compensation Committee, awarded Mr. Aitken,effective December 2, 2003, 350,000 options to acquire common stock,vesting immediately and exercisable at a price of $5.70 per share, and,on November 25, 2003, a cash bonus of $400,000. Our board of directors,also upon the recommendation of our Compensation Committee, awarded Ms.Eames, effective December 2, 2003, 300,000 options to acquire commonstock, vesting immediately and exercisable at a price of $5.70 pershare, and, on November 25, 2003, a cash bonus of $300,000. See"Item 11—Executive Compensation."

In November 2004, Ms. Eames stepped down as chief executive officer,president and chief operating officer of our company and assumed theoffice of executive vice president. In connection therewith, Ms. Eamesand our company modified her employment agreement, as describedelsewhere herein (see "Item 11—ExecutiveCompensation— Employment Agreements; Termination of Employmentand Change-in-Control Arrangements"), and our board ofdirectors, upon the recommendation of the compensation committee,granted her special compensation of $1 million for past servicesrendered to our company.

In November 2004, Mr. Aitken assumedthe office of chief executive officer of our company. At such time, ourboard of directors, upon the recommendation of the compensationcommittee, awarded Mr. Aitken a bonus of $50,000 for past services toour company.

Item 14.    Principal Accountant Fees andServices.

Audit and Other Fees During Fiscal 2003 and Fiscal2004

The following table sets forth the fees we were billed inrespect of our fiscal years ended September 30, 2003 and September 30,2004 for various audit and other services provided to us by ourauditors, Deloitte & ToucheLLP.

|                   |  |            |         |             |  |        |           |        |  |  |
|-------------------|--|------------|---------|-------------|--|--------|-----------|--------|--|--|
|              |  | Fiscal2003 |         | Fiscal 2004 |
| Auditfees         |  | $          | 650,497 |        |  | $      | 1,170,519 |   |
| Audit-relatedfees |  |       | 60,022  |        |  |   | 111,137   |   |
| Taxfees           |  |       | 439,294 |        |  |   | 442,966   |   |
| All otherfees     |  |       | — |        |  |   | —   |   |
|                   |

Auditservices included the audit of our annual financial statements and thereview of financial statements included in our quarterly reports onForm  10-Q. Audit services also included services that wereprovided in connection with regulatory filings, including the issuanceof comfort letters and consents related to SEC filings and securitiesofferings.

Audit-related services are assurance and relatedservices that are related to the performance of the audit or review ofour financial statements. These services principally consisted of workperformed in connection with audits of our 401(k) plan and feesassociated with compliance matters related to acquisitions.

Taxservices consisted of the preparation and/or review of, andconsultations with respect to, federal, state, local and internationaltax returns.

Pre-Approval Policy

The charter of theAudit Committee was revised and restated by the board of directors onFebruary 12, 2004. At such time, the charter of the Audit Committee wasrevised to implement a pre-approval policy for the provision of auditand non-audit services. Pursuant to the provisions of its 

43

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charter, the Audit Committee pre-approvesall auditing services and permitted audit-related services (includingthe fees and terms thereof) to be performed for us by our independentauditor, subject to the de minimus exception (the "deminimus exception") for non-audit services that arepermitted by the Securities Exchange Act of 1934 and that are approvedby the Audit Committee prior to the completion of the audit. The AuditCommittee may form and delegate authority to subcommittees consistingof one or more members when appropriate, including the authority togrant pre-approvals of audit and permitted non-audit services, providedthat a decision of such a subcommittee to grant pre-approvals shall bepresented to the full Audit Committee at its next scheduledmeeting.

None of the audit-related services, tax services orother services described above under "Audit and Other FeesDuring Fiscal 2003 and Fiscal 2004" were approved by theAudit Committee after the fact in reliance upon the de minimusexception.

44

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PART IV

Item 15.    Exhibitsand Financial Statement Schedules.

(a)    The followingdocuments are filed as part of this Annual Report on Form10-K:

|        |  |                                                                                                                                                                                                    |  |        |  |  |  |  |  |  |
|--------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|--|--|--|--|--|--|
| (1)    |  | Consolidated FinancialStatements:                                                                                                                                                                  |  | Page   |
|   |  |                                                                                                                                                                                               |  |   |
|   |  | Reportof Independent Registered Public AccountingFirm                                                                                                                                              |  | F-1    |
|   |  |                                                                                                                                                                                               |  |   |
|   |  | Reportof Independent Registered Public AccountingFirm                                                                                                                                              |  | F-2    |
|   |  |                                                                                                                                                                                               |  |   |
|   |  | ConsolidatedBalance Sheets – September  30, 2004 and2003                                                                                                                                     |  | F-3    |
|   |  |                                                                                                                                                                                               |  |   |
|   |  | ConsolidatedStatements of Operations – For the Years Ended September30, 2004, 2003 and 2002                                                                                                  |  | F-4    |
|   |  |                                                                                                                                                                                               |  |   |
|   |  | ConsolidatedStatements of Changes in Stockholders' Equity – For theYears Ended September 30, 2004, 2003 and 2002                                                                             |  | F-5    |
|   |  | Consolidated Statements of Cash Flows – For theYears Ended September 20, 2004, 2003 and 2002                                                                                                 |  | F-6    |
|   |  |                                                                                                                                                                                               |  |   |
|   |  | Notes toConsolidated Financial Statements                                                                                                                                                          |  | F-8    |
|   |  |                                                                                                                                                                                               |  |   |
| (2)    |  | ConsolidatedFinancial StatementSchedules:                                                                                                                                                          |  |
|   |  |                                                                                                                                                                                               |  |   |
|   |  | ScheduleI – Condensed Financial Information                                                                                                                                                  |  | S-1    |
|   |  |                                                                                                                                                                                               |  |   |
|   |  | Schedule II– Valuation and Qualifying Accounts                                                                                                                                               |  | S-5    |
|   |  |                                                                                                                                                                                               |  |   |
|   |  | Schedules otherthan those listed above are omitted because they are not required orare not applicable or the information is shown in the auditedconsolidated financial statements or relatednotes. |  |   |
|        |

45

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|        |  |           |  |        |  |        |  |  |  |  |
|--------|--|-----------|--|--------|--|--------|--|--|--|--|
|   |  |      |  |   |
| (3)    |  | Exhibits: |  |   |  |   |
|        |

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                |  |  |  |  |
|---------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                                                                                                                                                          |
| 3.1           |  | RestatedCertificate of Incorporation of United States Home Health Care Corp.(now known as Allied Healthcare International Inc.) filed with theDepartment of State of the State of New York on December 12, 1990, asamended on August 7, 1992 (incorporated herein by reference to Exhibit3.1 of our Quarterly Report on Form 10-Q for the quarter ended April30, 1997).                                        |
| 3.2           |  | Certificate of Amendment tothe Restated Certificate of Incorporation of Transworld HomeHealthcare, Inc. (now known as Allied Healthcare International Inc.)filed with the Department of State of the State of New York on June 28,1995 (incorporated herein by reference to Exhibit 3.2 of our QuarterlyReport on Form 10-Q for the quarter ended April 30,1997).                                              |
| 3.3           |  | Certificate of Amendment to theRestated Certificate of Incorporation of Transworld Home Healthcare,Inc. (now known as Allied Healthcare International Inc.) filed with theDepartment of State of the State of New York on October 9, 1996(incorporated herein by reference to Exhibit 3.3 of our QuarterlyReport on Form 10-Q for the quarter ended April 30,1997).                                            |
| 3.4           |  | Certificate of Amendment to theRestated Certificate of Incorporation of Transworld Home Healthcare,Inc. (now known as Allied Healthcare International Inc.) filed with theDepartment of State of the State of New York on May 6, 1997(incorporated herein by reference to Exhibit 3.4 of our QuarterlyReport on Form 10-Q for the quarter ended April 30,1997).                                                |
| 3.5           |  | Certificate of Amendment of theCertificate of Incorporation of Transworld HealthCare, Inc. (now knownas Allied Healthcare International Inc.) filed with the Department ofState of the State of New York on April 16, 1998 (incorporated hereinby reference to Exhibit 3.5 of our Registration Statement on Form S-4(Reg. St. No. 333-87304) filed with the Securities and ExchangeCommission on May 1, 2002). |
| 3.6           |  | Certificateof Amendment to the Certificate of Incorporation of TransworldHealthcare, Inc. (now known as Allied Healthcare International Inc.)filed with the Department of State of the State of New York on June 7,2002 (incorporated herein by reference to Exhibit 3.1 of our CurrentReport on Form 8-K filed with the Securities and Exchange Commission onJune 10, 2002).                                  |
| 3.7           |  | Certificate of Amendmentto the Certificate of Incorporation of Allied Healthcare InternationalInc. which defines the rights of the Series A Convertible PreferredStock, filed with the Department of State of the State of New York onJune 26, 2002 (incorporated herein by reference to Exhibit 4.1 of ourCurrent Report on Form 8-K filed with the Securities and ExchangeCommission on August 9,2002).      |
| 3.8           |  | Certificate of Amendment to theprovisions of the Certificate of Incorporation of Allied HealthcareInternational Inc. that defines the rights of the Series A ConvertiblePreferred Stock, filed with the Department of State of the State of NewYork on February 12, 2003 (incorporated herein by reference to Exhibit3.8 of our Quarterly Report on Form 10-Q for the quarter ended March31, 2003).            |
|               |

46

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  |  |  |
|---------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 3.9           |  | Certificate ofAmendment of the Certificate of Incorporation of Allied HealthcareInternational, Inc. that eliminates all references to the Series AConvertible Preferred Stock, filed with the New York Secretary of Stateon July 20, 2004 (incorporated herein by reference to Exhibit 9 of ourForm 8-A/A filed with the Securities and Exchange Commission on July21, 2004).                                                                                                                                  |
| 3.10          |  | Certificate of Amendment ofthe Certificate of Incorporation of Allied Healthcare International,Inc. filed with the Department of State of the State of New York onSeptember 10, 2004 (incorporated herein by reference to Exhibit 3.1 ofour Current Report on Form 8-K filed with the Securities and ExchangeCommission on September 15,2004).                                                                                                                                                                 |
| 3.11          |  | Restated Bylaws of TransworldHome Healthcare, Inc. (now known as Allied Healthcare InternationalInc.) (incorporated herein by reference to Exhibit 3.4 of our AnnualReport on Form 10-K for the fiscal year ended October 31,1996).                                                                                                                                                                                                                                                                            |
| 3.12          |  | Amendment to the Bylaws ofAllied Healthcare International Inc. effective June 7, 2002(incorporated herein by reference to Exhibit 3.2 of our Current Reporton Form 8-K filed with the Securities and Exchange Commission on June10, 2002).                                                                                                                                                                                                                                                                     |
| 4.1           |  | Specimen Certificate ofCommon Stock (incorporated herein by reference to Exhibit 4.1 of ourCurrent Report on Form 8-K filed with the Securities and ExchangeCommission on June 10,2002).                                                                                                                                                                                                                                                                                                                       |
| 10.1          |  | Transworld Home HealthCare, Inc.1992 Stock Option Plan, as amended (incorporated herein by reference toExhibit 10.3 of our Quarterly Report on Form 10-Q for the quarter endedJune 30, 1998).                                                                                                                                                                                                                                                                                                                  |
| 10.2          |  | Form of IndemnificationAgreement for officers and directors (incorporated herein by referenceto Exhibit 10.31 of our Annual Report on Form 10-K for the fiscal yearended October 31, 1994).                                                                                                                                                                                                                                                                                                                    |
| 10.3          |  | TransworldHome HealthCare, Inc. 1997 Option Plan for Non-Employee Directors(incorporated herein by reference to Exhibit A of our Proxy Statementfor our annual meeting of shareholders held on May 28,1997).                                                                                                                                                                                                                                                                                                   |
| 10.4A         |  | Voting Trust Agreement datedDecember 17, 1999 by and among Transworld Holdings (UK) Limited (nowknown as Allied Healthcare Group Limited), Transworld Healthcare (UK)Limited (now known as Allied Healthcare Holdings Limited), TransworldHealthcare, Inc. (now known as Allied Healthcare International Inc.),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 fiscal year ended September  30,1999).      |
| 10.4B         |  | Amendment No. 1, dated as ofJuly 25, 2002, among Allied Healthcare Group Limited, TransworldHealthcare (UK) Limited (now known as Allied Healthcare HoldingsLimited), Transworld Healthcare, Inc. (now known as Allied HealthcareInternational Inc.), Triumph Partners III, L.P. and Richard Green tothe Voting Trust Agreement dated December 17, 1999 (incorporated hereinby reference to Exhibit 10.6 of our Current Report on Form 8-K filedwith the Securities and Exchange Commission on August 9,2002). |
|               |

47

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |  |  |
|---------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.4C         |  | Deed of Termination,dated June 30, 2004, among Allied Healthcare Group Limited, AlliedHealthcare Holdings Limited, Allied Healthcare International Inc.,Washington & Congress Capital Partners, L.P. and Richard Green(incorporated herein by reference to Exhibit 10.3 of our QuarterlyReport on Form 10-Q for the quarter ended June 30,2004).                                                                                                                                                              |
| 10.5A         |  | Securities Purchase Agreement,dated December 17, 1999, among Transworld Holdings (UK) Limited (nowknown as Allied Healthcare Group Limited), Transworld Healthcare (UK)Limited (now known as Allied Healthcare Holdings Limited) and thePurchasers identified therein (incorporated herein by reference toExhibit 10.66 of our Annual Report on Form 10-K for the fiscal yearended September 30, 1999).                                                                                                           |
| 10.5B         |  | AmendmentNo. 1, dated as of July 25, 2002, among Allied Healthcare GroupLimited, Transworld Healthcare (UK) Limited (now known as AlliedHealthcare Holdings Limited) and the Purchasers identified therein tothe Securities Purchase Agreement dated December 17, 1999 (incorporatedherein by reference to Exhibit 10.4 of our Current Report on Form 8-Kfiled with the Securities and Exchange Commission on August 9,2002).                                                                                     |
| 10.6A         |  | Senior Credit Agreement, datedas of December 17, 1999, among Transworld Holdings (UK) Limited (nowknown as Allied Healthcare Group Limited), Transworld Healthcare (UK)Limited (now known as Allied Healthcare Holdings Limited), Paribas asArranger, Paribas and Barclays Bank plc as Underwriters, Barclays Bankplc as Agent and Security Agent and others (incorporated herein byreference to Exhibit 10.67 of our Annual Report on Form 10-K for thefiscal year ended September  30,1999).                    |
| 10.6B         |  | Second Amendment Agreement,dated September 27, 2001, relating to the Senior Credit Agreement datedDecember 17, 1999 among Allied Healthcare Group Limited, TransworldHealthcare (UK) Limited (now known as Allied Healthcare HoldingsLimited), BNP Paribas as Arranger, Underwriter and Agent, Barclays Bankplc as Agent and Security Agent and others (incorporated herein byreference to Exhibit  10.4 of our Current Report on Form 8-Kfiled with the Securities and Exchange Commission on October  12,2001). |
| 10.6C         |  | Letter, dated October 1, 2003,from Barclays Bank plc to Allied Healthcare Group Limited amending theSenior Credit Agreement dated December 17, 1999 (incorporated herein byreference to Exhibit 10.30 to our Registration Statement on Form S-1(Reg. No. 333-115559) filed with the Securities and Exchange Commissionon May 17, 2004).                                                                                                                                                                           |
| 10.6D         |  | Letter, datedFebruary 4, 2004, from Barclays Bank plc to Allied Healthcare GroupLimited amending the Senior Credit Agreement dated December 17, 1999(incorporated herein by reference to Exhibit 10.32 to our RegistrationStatement on Form S-1 (Reg. No. 333-115559) filed with the Securitiesand Exchange Commission on May 17,2004).                                                                                                                                                                           |
| 10.6E         |  | Letter, dated March 8, 2004,from Barclays Bank plc to Allied Healthcare Group Limited amending theSenior Credit Agreement dated December 17, 1999 (incorporated herein byreference to Exhibit 10.34 to our Registration Statement on Form S-1(Reg. No. 333-115559) filed with the Securities and Exchange Commissionon May 17, 2004).                                                                                                                                                                             |
| 10.7A         |  | Mezzanine CreditAgreement, dated as of December 17, 1999, among Transworld Holdings(UK) Limited (now known as Allied Healthcare Group Limited), TransworldHealthcare (UK) Limited (now known as Allied Healthcare HoldingsLimited), Paribas as Arranger, Underwriter and Agent, Barclays Bank plcas Security Agent and others (incorporated herein by reference toExhibit 10.68 of our Annual Report on Form 10-K for the fiscal yearended September 30, 1999).                                                   |
|               |

48

----

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |  |  |  |
|---------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.7B         |  | Second AmendmentAgreement, dated September 27, 2001, relating to the Mezzanine CreditAgreement dated December 17, 1999 among Allied Healthcare GroupLimited, Transworld Healthcare (UK) Limited (now known as AlliedHealthcare Holdings Limited), BNP Paribas as Arranger, Underwriter andAgent, Barclays Bank plc as Agent and Security Agent and others(incorporated herein by reference to Exhibit 10.3 of our Current Reporton Form 8-K filed with the Securities and Exchange Commission onOctober 12, 2001).                      |
| 10.7C         |  | Letter, datedOctober 1, 2003, from BNP Paribas to Allied Healthcare Group Limitedamending the Mezzanine Credit Agreement dated December 17, 1999(incorporated herein by reference to Exhibit 10.31 to our RegistrationStatement on Form S-1 (Reg. No. 333-115559) filed with the Securitiesand Exchange Commission on May 17,2004).                                                                                                                                                                                                     |
| 10.7D         |  | Letter, dated February 4, 2004,from BNP Paribas to Allied Healthcare Group Limited amending theMezzanine Credit Agreement dated December 17, 1999 (incorporated hereinby reference to Exhibit 10.33 to our Registration Statement on Form S-1(Reg. No. 333-115559) filed with the Securities and Exchange Commissionon May 17, 2004).                                                                                                                                                                                                   |
| 10.7E         |  | Letter, dated March8, 2004, from BNP Paribas to Allied Healthcare Group Limited amendingthe Mezzanine Credit Agreement dated December 17, 1999 (incorporatedherein by reference to Exhibit 10.35 to our Registration Statement onForm S-1 (Reg. No. 333-115559) filed with the Securities and ExchangeCommission on May 17, 2004).                                                                                                                                                                                                      |
| 10.8          |  | WarrantInstrument to subscribe for shares in Transworld Healthcare (UK)Limited (now known as Allied Healthcare Holdings Limited) in favor ofthe mezzanine lenders, dated as of December 17, 1999 (incorporatedherein by reference to Exhibit 10.69 of our Annual Report on Form 10-Kfor the fiscal year ended September 30,1999).                                                                                                                                                                                                       |
| 10.9A         |  | Employment Agreement, datedSeptember 24, 2001, between Transworld Healthcare, Inc. (now known asAllied Healthcare International Inc.) and Timothy M. Aitken(incorporated herein by reference to Exhibit 10.16 of our Annual Reporton Form 10-K for the fiscal year ended September 30,2001).                                                                                                                                                                                                                                            |
| 10.9B         |  | Employment Agreement, datedSeptember 24, 2001, between Transworld Healthcare, Inc. (now known asAllied Healthcare International Inc.) and Sarah Eames (incorporatedherein by reference to Exhibit 10.17 of our Annual Report on Form 10-Kfor the fiscal year ended September 30,2001).                                                                                                                                                                                                                                                  |
| 10.9C         |  | Amendment No. 1, dated November17, 2004, to the Employment Agreement , dated September 24, 2001,between Allied Healthcare International Inc. and Sarah L. Eames(incorporated herein by reference to Exhibit 10.1 of our Current Reporton Form 8-K filed with the Securities and Exchange Commission onNovember 17, 2004).                                                                                                                                                                                                               |
| 10.10A        |  | MasterReorganization Agreement, dated as of April 24, 2002, among TransworldHealthcare, Inc. (now known as Allied Healthcare International Inc.),Allied Healthcare Group Limited, Transworld Healthcare (UK) Limited(now known as Allied Healthcare Holdings Limited) and the Investorsnamed therein (incorporated herein by reference to Annex A-1 to theproxy statement/prospectus forming a part of our Registration Statementon Form S-4 (Reg. St. No. 333-87304) filed with the Securities andExchange Commission on May 1, 2002). |
|               |

49

----

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |  |  |  |
|---------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.10B        |  | First Amendment toMaster Reorganization Agreement, dated as of May 16, 2002, by and amongTransworld Healthcare, Inc. (now known as Allied HealthcareInternational Inc.), Allied Healthcare Group Limited, TransworldHealthcare (UK) Limited (now known as Allied Healthcare HoldingsLimited) and the Investors named therein (incorporated herein byreference to Exhibit 10.17A of Amendment No. 1 to our RegistrationStatement on Form S-4 (Reg. St. No. 333-87304) filed with theSecurities and Exchange Commission on May 21,2002). |
| 10.10C        |  | Second Amendment to MasterReorganization Agreement, dated as of June 26, 2002, by and amongTransworld Healthcare, Inc. (now known as Allied HealthcareInternational Inc.), Allied Healthcare Group Limited, TransworldHealthcare (UK) Limited (now known as Allied Healthcare HoldingsLimited) and the Investors named therein (incorporated herein byreference to Exhibit 10.3 of our Current Report on Form 8-K filed withthe Securities and Exchange Commission on August 9,2002).                                                  |
| 10.11         |  | Registration Rights Agreement,dated as of July 25, 2002, among Transworld Healthcare, Inc. (now knownas Allied Healthcare International Inc.) and the persons named therein(incorporated herein by reference to Exhibit 10.5 of our Current Reporton Form 8-K filed with the Securities and Exchange Commission on August9, 2002).                                                                                                                                                                                                     |
| 10.12A        |  | Tax Bonus, Tax Loan and TaxIndemnification Agreement, dated as of April 22, 2002, by and amongTransworld Healthcare (UK) Limited (now known as Allied HealthcareHoldings Limited), Transworld Healthcare, Inc. (now known as AlliedHealthcare International Inc.) and Timothy M. Aitken (incorporatedherein by reference to Exhibit 10.21 of our Registration Statement onForm S-4 (Reg. St. No. 333-87304) filed with the Securities andExchange Commission on May 1,2002).                                                           |
| 10.12B        |  | Tax Bonus, Tax Loan and TaxIndemnification Agreement, dated as of April 22, 2002, by and amongTransworld Healthcare (UK) Limited (now known as Allied HealthcareHoldings Limited), Transworld Healthcare, Inc. (now known as AlliedHealthcare International Inc.) and Sarah L. Eames (incorporated hereinby reference 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).                                                              |
| 10.13A        |  | Promissory Note, dated April30, 2002, executed by Timothy M. Aitken in favor of TransworldHealthcare, Inc. (now known as Allied Healthcare International Inc.)(incorporated herein by reference to Exhibit 10.7A of our QuarterlyReport on Form 10-Q for the quarterly period ended June 10,2002).                                                                                                                                                                                                                                     |
| 10.13B        |  | Promissory Note, dated April30, 2002, executed by Sarah L. Eames in favor of Transworld Healthcare,Inc. (now known as Allied Healthcare International Inc.) (incorporatedherein by reference to Exhibit 10.7B of our Quarterly Report on Form10-Q for the quarterly period ended June 10,2002).                                                                                                                                                                                                                                        |
| 10.14A        |  | Pledge and Security Agreement,dated as of April 30, 2002, between Timothy M. Aitken and TransworldHealthcare, Inc. (now known as Allied Healthcare International Inc.)(incorporated herein by reference to Exhibit 10.8A of our QuarterlyReport on Form 10-Q for the quarterly period ended June 10,2002).                                                                                                                                                                                                                             |
| 10.14B        |  | Pledge and Security Agreement,dated as of April 30, 2002, between Sarah L. Eames and TransworldHealthcare, Inc. (now known as Allied Healthcare International Inc.)(incorporated herein by reference to Exhibit 10.8B of our QuarterlyReport on Form 10-Q for the quarterly period ended June 10,2002).                                                                                                                                                                                                                                |
|               |

50

----

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |  |  |  |
|---------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.15         |  | Registration RightsAgreement, dated April 30, 2002, among Transworld Healthcare, Inc. (nowknown as Allied Healthcare International Inc.), Timothy M. Aitken andSarah L. Eames (incorporated herein by reference to Exhibit 10.25 ofour Registration Statement on Form S-4 (Reg. St. No. 333-87304) filedwith the Securities and Exchange Commission on May 1,2002).                                                 |
| 10.16A        |  | Irrevocable Undertaking, datedApril 22, 2002, of Timothy M. Aitken relating to the redeemable sharesof Transworld Healthcare (UK) Limited (now known as Allied HealthcareHoldings Limited) (incorporated herein by reference to Exhibit 10.26 ofour Registration Statement on Form S-4 (Reg. St. No. 333-87304) filedwith the Securities and Exchange Commission on May 1,2002).                                    |
| 10.16B        |  | Irrevocable Undertaking, datedApril 22, 2002, of Sarah L. Eames relating to the redeemable shares ofTransworld Healthcare (UK) Limited (now known as Allied HealthcareHoldings Limited) (incorporated herein by reference to Exhibit 10.27 ofour Registration Statement on Form S-4 (Reg.  St. No. 333-87304)filed with the Securities and Exchange Commission on May 1,2002).                                      |
| 10.17         |  | Stock Purchase Agreement, datedas of April 22, 2002, among Transworld Healthcare, Inc. (now known asAllied Healthcare International Inc.), 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). |
| 10.18         |  | Registration Rights Agreement,dated April 30, 2002, among Transworld Healthcare, Inc. (now known asAllied Healthcare International Inc.), 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).                           |
| 10.19         |  | 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).                                                                                                                                           |
| 10.20         |  | Stock Purchase Agreement, datedas of April 6, 2002, by and between Promptcare Acquisition Corporationand Allied Healthcare International Inc. (incorporated herein byreference to Exhibit 10.1 of our Current Report on Form 8-K filed withthe Securities and Exchange Commission on April 17,2003).                                                                                                                |
| 10.21A        |  | Letter agreement, datedDecember 2, 2003, between Timothy M. Aitken and Allied HealthcareInternational Inc. relating to loan repayment (incorporated herein byreference to Exhibit 10.36A to our Registration Statement on Form S-1(Reg. No. 333-115559) filed with the Securities and Exchange Commissionon May 17, 2004).                                                                                          |
| 10.21B        |  | Letter agreement,dated December 2, 2003, between Sarah L. Eames and Allied HealthcareInternational Inc. relating to loan repayment (incorporated herein byreference to Exhibit 10.36B to our Registration Statement on Form S-1(Reg. No. 333-115559) filed with the Securities and Exchange Commissionon May 17, 2004).                                                                                             |
| 10.22         |  | EmploymentAgreement, dated March 29, 2000, between Allied Medicare Limited andCharles Murphy (incorporated herein by reference to Exhibit 10.37 toour Registration Statement on Form S-1 (Reg. No. 333-115559) filed withthe Securities and Exchange Commission on May 17,2004).                                                                                                                                    |
|               |

51

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |  |  |
|---------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Title                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.23         |  | Form of ConversionAgreement between Allied Healthcare International Inc. and the holdersof the shares of Series A Convertible Preferred Stock (incorporatedherein by reference to Exhibit 10.38 to our Registration Statement onForm S-1 (Reg. No. 333-115559) filed with the Securities and ExchangeCommission on May 17,2004).                                                                                                                                  |
| 10.24         |  | Agreement, dated February 17,2004, among Allied Healthcare (UK) Limited and Atos KPMG ConsultingLimited (incorporated herein by reference to Exhibit 10.1 of ourQuarterly Report on Form 10-Q for the quarter ended March 31,2004).                                                                                                                                                                                                                               |
| 10.25         |  | Underwriting Agreement, datedJuly 1, 2004, between the Company and the underwriters named therein(incorporated herein by referenced to Exhibit 10.1 of our QuarterlyReport on Form 10-Q for the quarter ended June 30,2004).                                                                                                                                                                                                                                      |
| 10.26         |  | Facility Agreement, dated July19, 2004, among Allied Healthcare Group Limited, Allied HealthcareInternational, Inc., Allied Healthcare Holdings Limited, thesubsidiaries of Allied Healthcare International Inc. named therein asguarantors, Barclays Capital and Lloyds TSB Bank plc, as arrangers, andthe other banks named therein (incorporated herein by referenced toExhibit 10.4 of our Quarterly Report on Form 10-Q for the quarter endedJune 30, 2004). |
| 10.27         |  | Floating SecurityDocument, dated July 19, 2004, among Allied Healthcare Group Limited,Allied Healthcare Holdings Limited, the subsidiaries of AlliedHealthcare International Inc. named therein, and Barclays Bank plc, assecurity agent (incorporated herein by referenced to Exhibit 10.5 ofour Quarterly Report on Form 10-Q for the quarter ended June 30,2004).                                                                                              |
| 10.28         |  | Subordination Deed, dated July19, 2004, among Allied Healthcare International Inc., Barclays Bank plcand Allied Healthcare Group Limited (incorporated herein by referencedto Exhibit 10.6 of our Quarterly Report on Form 10-Q for the quarterended June 30, 2004).                                                                                                                                                                                              |
| 11            |  | Statement re:computation of earnings per share (computation can be determinedclearly from the material contained in this Annual Report on Form10-K).                                                                                                                                                                                                                                                                                                              |
| 14            |  | Allied Healthcare InternationalInc. Code of Conduct (incorporated herein by reference to Exhibit 14 toour Form 10-K for the fiscal year ended September 30,2003).                                                                                                                                                                                                                                                                                                 |
| 21*           |  | Subsidiaries of Allied HealthcareInternational Inc.                                                                                                                                                                                                                                                                                                                                                                                                               |
| 23.1*         |  | Consent of Deloitte& Touche LLP, independent registered public accounting firm ofAllied Healthcare InternationalInc.                                                                                                                                                                                                                                                                                                                                          |
| 23.2*         |  | Consent of Ernst & Young LLP,independent registered public accounting firm of Allied HealthcareInternational Inc.                                                                                                                                                                                                                                                                                                                                             |
| 31.1*         |  | Rule13a-14(a)/15d-14(a) Certification of Chief ExecutiveOfficer.                                                                                                                                                                                                                                                                                                                                                                                                  |
| 31.2*         |  | Rule 13a-14(a)/15d-14(a)Certification of Chief FinancialOfficer.                                                                                                                                                                                                                                                                                                                                                                                                  |
| 32.1*         |  | Section 1350 Certification ofChief Executive Officer.                                                                                                                                                                                                                                                                                                                                                                                                             |
| 32.2*         |  | Section 1350Certification of Chief FinancialOfficer.                                                                                                                                                                                                                                                                                                                                                                                                              |
|               |

|  |
|--|
|  |  |
|  |

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

52

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

|        |  |                                     |  |                                                                                                      |  |  |  |  |  |  |
|--------|--|-------------------------------------|--|------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
|   |  | ALLIEDHEALTHCARE INTERNATIONAL INC. |
|   |  | By:                                 |  | /s/ Timothy M.Aitken                                                                                 |
|   |  |                                |  | Name:  Timothy M.Aitken Title:  Chairman of the Board and ChiefExecutive Officer |
|        |

Dated:    December 22,2004

POWER OF ATTORNEY

Each person whose signatureappears below constitutes and appoints Sarah L. Eames, Charles F.Murphy and Marvet Abbassi, and each of them, his or her true and lawfulattorneys-in-fact and agents, with full power of substitution andresubstitution, for him or her and in his or her name, place and stead,in any and all capacities, to sign any and all amendments to thisAnnual Report on Form 10-K, and to file the same, with all exhibitsthereto, and other documents in connection therewith, with theSecurities and Exchange Commission, granting unto saidattorneys-in-fact and agents, and each of them, full power andauthority to do and perform each and every act and thing requisite andnecessary to be done, as fully to all intents and purposes as he or shemight or could do in person, hereby ratifying and confirming all thatsaid attorneys-in-fact and agents or any of them, or their or his orher substitute or substitutes, may lawfully do or cause to be done byvirtue hereof.

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacities andon the datesindicated.

|                        |  |                                                                             |  |                   |
|------------------------|--|-----------------------------------------------------------------------------|--|-------------------|
|                        |  |                                                                             |  |                   |
|                        |
| /s/Timothy M. Aitken   |  | Chairman of the BoardandChief Executive Officer(principal executiveofficer) |  | December 22,2004  |
|                        |
| Timothy M.Aitken       |
|                        |
| /s/ Sarah L. Eames     |  | Executive Vice PresidentandDirector                                         |  | December 22, 2004 |
|                        |
| Sarah L.Eames          |
|                        |
| /s/Charles F. Murphy   |  | Chief Financial Officer(principal financialandaccounting officer)           |  | December 22,2004  |
|                        |
| Charles F.Murphy       |
|                        |
| /s/ G. Richard Green   |  | Director                                                                    |  | December 22,2004  |
|                        |
| G.Richard Green        |
|                        |
| /s/ David J.Macfarlane |  | Director                                                                    |  | December 22,2004  |
|                        |
| David J.Macfarlane     |
|                        |
| /s/ Wayne Palladino    |  | Director                                                                    |  | December 22,2004  |
|                        |
| WaynePalladino         |
|                        |
| /s/ Jeffrey S.Peris    |  | Director                                                                    |  | December 20,2004  |
|                        |
| Jeffrey S.Peris        |
|                        |
| /s/ Scott A. Shay      |  | Director                                                                    |  | December 22,2004  |
|                        |
| Scott A.Shay           |
|                        |

53

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ALLIEDHEALTHCARE INTERNATIONAL INC.

|                                                                                                                        |  |          |     |        |  |  |
|------------------------------------------------------------------------------------------------------------------------|--|----------|-----|--------|--|--|
| **Indexto Consolidated FinancialStatements**                                                                           |  | **Page** |
| Reportof Independent Registered Public Accounting Firm                                                                 |  |     | F-1 |   |
| Report of Independent Registered Public AccountingFirm                                                                 |  |     | F-2 |   |
| Consolidated Balance Sheets— September 30, 2004 and 2003                                                         |  |     | F-3 |   |
| Consolidated Statements of Operations — for the yearsended September 30, 2004, 2003 and 2002                     |  |     | F-4 |   |
| Consolidated Statements of Changes in Shareholders'Equity — for the years ended September 30, 2004, 2003 and2002 |  |     | F-5 |   |
| Consolidated Statements of CashFlows — for the years ended September 30, 2004, 2003 and2002                      |  |     | F-6 |   |
| Notes to Consolidated FinancialStatements                                                                              |  |     | F-8 |   |
| **Index to ConsolidatedFinancial Statement Schedules**                                                                 |  |
| Schedule I— Condensed Financial Information                                                                      |  |     | S-1 |   |
| Schedule II — Valuation and QualifyingAccounts                                                                   |  |     | S-5 |   |
|                                                                                                                        |

F-i

----

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To theBoard of Directors and Shareholders ofAllied HealthcareInternational Inc. New York, NY

We have audited theaccompanying consolidated balance sheets of Allied HealthcareInternational Inc. and subsidiaries (the"Company") as of September 30, 2004 and 2003,and the related consolidated statements of operations,shareholders' equity, and cash flows for each of the two years inthe period ended September 30, 2004.   Our audits also includedthe financial statement schedules listed in the Index at Item15.   These financial statements and financial statementschedules are the responsibility of the Company'smanagement.   Our responsibility is to express an opinion on thefinancial statements and financial statement schedules based on ouraudits.

We conducted our audits in accordance with the standardsof the Public Company Accounting Oversight Board (UnitedStates).   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 reasonablebasis for our opinion.

In our opinion, such consolidatedfinancial statements present fairly, in all material respects, thefinancial position of the Company as of September 30, 2004 and 2003,and the results of its operations and its cash flows for each of thetwo years in the period ended September 30, 2004, in conformity withaccounting principles generally accepted in the United States ofAmerica.   Also, in our opinion, such financial statementschedules for each of the two years in the period ended September 30,2004, when considered in relation to the basic consolidated financialstatements taken as a whole, present fairly in all material respectsthe information set forth therein.

/s/ DELOITTE & TOUCHELLP

    Jericho, New YorkDecember 21,2004

F-1

----

Report of Independent Registered PublicAccounting Firm

Shareholders and Board of Directors AlliedHealthcare International Inc.

    We have audited theaccompanying consolidated statement of operations, shareholders'equity, and cash flow of Allied Healthcare International Inc. (the"Company") for the year ended September 30,2002. Our audit also included the financial statement schedules listedin the Index at Item 15 for the year ended September 30, 2002. Thesefinancial statements and schedules are the responsibility of theCompany's management. Our responsibility is to express an opinionon these financial statements and schedules based on our audits.

We conducted our audit in accordance with auditing standards of thePublic Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believethat our audit provides a reasonable basis for our opinion.

Inour opinion, the financial statements referred to above present fairly,in all material respects, the consolidated result of operations andcash flow of Allied Healthcare International Inc. for the year endedSeptember 30, 2002, in conformity with U.S. generally acceptedaccounting principles. Also, in our opinion, the related financialstatement schedules for the year ended September 30, 2002, whenconsidered in relation to the basic financial statement taken as awhole, presents fairly in all material respects the information setforth therein.

As discussed in Note 2, the Company changed itsmethod of accounting for goodwill and other intangibles effectiveOctober 1, 2001.

|  | Ernst & Young LLP |
|--|-----------------------|

New York,New York November 8, 2002

F-2

----

ALLIEDHEALTHCARE INTERNATIONAL INC.CONSOLIDATED BALANCESHEETS(In thousands, except per sharedata)

|                                                                                                                                                                             |  |                  |         |                  |  |        |         |         |  |  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|------------------|---------|------------------|--|--------|---------|---------|--|--|
| ASSETS                                                                                                                                                                      |  | September30,2004 |         | September30,2003 |
| Currentassets:                                                                                                                                                              |  |             |    |             |  |   |    |    |
| Cash andcashequivalents                                                                                                                                                     |  | $                | 9,299   |             |  | $      | 21,691  |    |
| Restrictedcash                                                                                                                                                              |  |             | 1,799   |             |  |   | 37,693  |    |
| Accountsreceivable, less allowance for doubtful accounts of $1,269 and $3,346,respectively                                                                                  |  |             | 31,263  |             |  |   | 35,745  |    |
| Unbilledaccountsreceivable                                                                                                                                                  |  |             | 9,325   |             |  |   | 11,278  |    |
| Inventories                                                                                                                                                                 |  |             | 403     |             |  |   | 431     |    |
| Prepaidexpenses and otherassets                                                                                                                                             |  |             | 2,080   |             |  |   | 1,772   |    |
| Totalcurrentassets                                                                                                                                                          |  |             | 54,169  |             |  |   | 108,610 |    |
| Propertyand equipment,net                                                                                                                                                   |  |             | 16,584  |             |  |   | 10,326  |    |
| Restrictedcash                                                                                                                                                              |  |             | — |             |  |   | 3,008   |    |
| Intangibleassets,net                                                                                                                                                        |  |             | 210,416 |             |  |   | 185,722 |    |
| Derivativeasset                                                                                                                                                             |  |             | 312     |             |  |   | — |    |
| Deferred financingcosts and otherassets                                                                                                                                     |  |             | 913     |             |  |   | 4,002   |    |
| Totalassets                                                                                                                                                                 |  | $                | 282,394 |             |  | $      | 311,668 |    |
| **LIABILITIESAND SHAREHOLDERS'EQUITY**                                                                                                                                      |  |             |    |             |  |   |    |    |
| Currentliabilities:                                                                                                                                                         |  |             |    |             |  |   |    |    |
| Notespayable                                                                                                                                                                |  | $                | 1,799   |             |  | $      | 37,693  |    |
| Currentportion of long-termdebt                                                                                                                                             |  |             | 10,796  |             |  |   | 9,005   |    |
| Dividendspayable                                                                                                                                                            |  |             | — |             |  |   | 4,464   |    |
| Liabilities ofdiscontinuedoperations                                                                                                                                        |  |             | 690     |             |  |   | 690     |    |
| Accountspayable                                                                                                                                                             |  |             | 1,700   |             |  |   | 2,676   |    |
| Accruedexpenses                                                                                                                                                             |  |             | 24,950  |             |  |   | 24,969  |    |
| Taxespayable                                                                                                                                                                |  |             | 766     |             |  |   | 4,332   |    |
| Totalcurrentliabilities                                                                                                                                                     |  |             | 40,701  |             |  |   | 83,829  |    |
| Long-termdebt                                                                                                                                                               |  |             | 52,183  |             |  |   | 118,680 |    |
| Derivativeliability                                                                                                                                                         |  |             | — |             |  |   | 211     |    |
| Deferredincome taxes and other long-termliabilities                                                                                                                         |  |             | 2,533   |             |  |   | 634     |    |
| Totalliabilities                                                                                                                                                            |  |             | 95,417  |             |  |   | 203,354 |    |
| Commitmentsandcontingencies                                                                                                                                                 |  |             |    |             |  |   |    |    |
| Redeemableconvertible Series A preferred stock, $.01 par value; authorized 8,000shares, 7,774 shares issued and outstanding at September 30, 2003(liquidation value$35,213) |  |             | — |             |  |   | 33,151  |    |
| Shareholders'equity:                                                                                                                                                        |  |             |    |             |  |   |    |    |
| Preferred stock, $.01 parvalue; authorized 10,000 shares, no shares issued and outstanding atSeptember 30,2004                                                              |  |             | — |             |  |   | — |    |
| Common stock,$.01 par value; authorized 80,000 shares, issued 45,050 and 22,689shares,respectively                                                                          |  |             | 450     |             |  |   | 227     |    |
| Additionalpaid-incapital                                                                                                                                                    |  |             | 236,988 |             |  |   | 142,897 |    |
| Accumulatedother comprehensiveincome                                                                                                                                        |  |             | 10,778  |             |  |   | 3,140   |    |
| Accumulateddeficit                                                                                                                                                          |  |             | (58,945 | )           |  |   | (68,814 | )  |
|                                                                                                                                                                        |  |             | 189,271 |             |  |   | 77,450  |    |
| Lessnotes receivable from officers                                                                                                                                          |  |             | — |             |  |   | (1,002  | )  |
| Less cost of treasury stock (585 and 408 shares,respectively)                                                                                                               |  |             | (2,294  | )           |  |   | (1,285  | )  |
| Total shareholders'equity                                                                                                                                                   |  |             | 186,977 |             |  |   | 75,163  |    |
| Totalliabilities and shareholders'equity                                                                                                                                    |  | $                | 282,394 |             |  | $      | 311,668 |    |
|                                                                                                                                                                             |

Seenotes to consolidated financial statements.

F-3

----

ALLIED HEALTHCARE INTERNATIONAL INC.CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, exceptper sharedata)

|                                                                         |  |                              |         |                              |  |                              |         |         |  |        |         |         |  |  |
|-------------------------------------------------------------------------|--|------------------------------|---------|------------------------------|--|------------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                                                    |  | YearEnded September 30, 2004 |         | Year Ended September30, 2003 |  | Year Ended September 30,2002 |
| Revenues:                                                               |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Netpatientservices                                                      |  | $                            | 317,393 |                         |  | $                            | 287,964 |    |  | $      | 237,890 |    |
| Netrespiratory, medical equipment andsupplies                           |  |                         | 7,905   |                         |  |                         | 6,415   |    |  |   | 4,938   |    |
| Totalrevenues                                                           |  |                         | 325,298 |                         |  |                         | 294,379 |    |  |   | 242,828 |    |
| Costofrevenues:                                                         |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Patientservices                                                         |  |                         | 227,816 |                         |  |                         | 209,422 |    |  |   | 173,869 |    |
| Respiratory,medical equipment andsupplies                               |  |                         | 4,311   |                         |  |                         | 3,634   |    |  |   | 2,880   |    |
| Totalcost ofrevenues                                                    |  |                         | 232,127 |                         |  |                         | 213,056 |    |  |   | 176,749 |    |
| Grossprofit                                                             |  |                         | 93,171  |                         |  |                         | 81,323  |    |  |   | 66,079  |    |
| Selling,general and administrativeexpenses                              |  |                         | 63,544  |                         |  |                         | 53,648  |    |  |   | 48,847  |    |
| Operatingincome                                                         |  |                         | 29,627  |                         |  |                         | 27,675  |    |  |   | 17,232  |    |
| Interestincome                                                          |  |                         | (852    | )                       |  |                         | (2,032  | )  |  |   | (3,024  | )  |
| Interestexpense                                                         |  |                         | 14,579  |                         |  |                         | 13,311  |    |  |   | 16,496  |    |
| Gainon settlement of PIKinterest                                        |  |                         | — |                         |  |                         | — |    |  |   | (5,143  | )  |
| Foreign exchangeloss                                                    |  |                         | 184     |                         |  |                         | 18      |    |  |   | 19      |    |
| Incomebefore income taxes, minority interest and discontinuedoperations |  |                         | 15,716  |                         |  |                         | 16,378  |    |  |   | 8,884   |    |
| Provisionfor incometaxes                                                |  |                         | 5,847   |                         |  |                         | 4,910   |    |  |   | 4,971   |    |
| Incomebefore minority interest and discontinuedoperations               |  |                         | 9,869   |                         |  |                         | 11,468  |    |  |   | 3,913   |    |
| Minorityinterest                                                        |  |                         | — |                         |  |                         | — |    |  |   | 120     |    |
| Incomefrom continuingoperations                                         |  |                         | 9,869   |                         |  |                         | 11,468  |    |  |   | 3,793   |    |
| Discontinuedoperations:                                                 |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| (Loss) incomefrom discontinuedoperations                                |  |                         | — |                         |  |                         | (16     | )  |  |   | 1,001   |    |
| Gainon disposal of subsidiaries, net of taxes of$775                    |  |                         | — |                         |  |                         | 519     |    |  |   | — |    |
|                                                                    |  |                         | — |                         |  |                         | 503     |    |  |   | 1,001   |    |
| Netincome                                                               |  |                         | 9,869   |                         |  |                         | 11,971  |    |  |   | 4,794   |    |
| Redeemablepreferred dividends, conversion fees andaccretion             |  |                         | 7,020   |                         |  |                         | 4,005   |    |  |   | 1,016   |    |
| Netincome available to commonshareholders                               |  | $                            | 2,849   |                         |  | $                            | 7,966   |    |  | $      | 3,778   |    |
| Basicand diluted income per share of common stockfrom:                  |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Income fromcontinuingoperations                                         |  | $                            | 0.10    |                         |  | $                            | 0.34    |    |  | $      | 0.15    |    |
| Incomefrom discontinuedoperations                                       |  |                         | — |                         |  |                         | 0.02    |    |  |   | 0.05    |    |
| Netincome available to commonshareholders                               |  | $                            | 0.10    |                         |  | $                            | 0.36    |    |  | $      | 0.20    |    |
| Weightedaverage number of common sharesoutstanding:                     |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Basic                                                                   |  |                         | 27,419  |                         |  |                         | 21,962  |    |  |   | 18,565  |    |
| Diluted                                                                 |  |                         | 28,104  |                         |  |                         | 22,304  |    |  |   | 18,932  |    |
|                                                                         |

Seenotes to consolidated financial statements.

F-4

----

ALLIED HEALTHCARE INTERNATIONAL INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(Inthousands)

|                                                                                                      |  |             |        |                           |  |                                              |        |                            |  |                |         |                |  |        |        |         |  |        |         |         |  |        |         |         |  |        |        |         |  |        |          |         |  |  |
|------------------------------------------------------------------------------------------------------|--|-------------|--------|---------------------------|--|----------------------------------------------|--------|----------------------------|--|----------------|---------|----------------|--|--------|--------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--------|----------|---------|--|--|
|                                                                                                 |  | CommonStock |        | Additional Paid-inCapital |  | Accumulated Other Comprehensive(Loss) Income |        | Retained (Deficit)Earnings |  | Officers'Loans |         | TreasuryShares |  | Total  |
|                                                                                                 |  | Shares      |        | Amount                    |  |
| Balance,October 1,2001                                                                               |  |        | 17,555 |                      |  | $                                            | 176    |                       |  | $              | 128,077 |           |  | $      | (5,600 | )  |  | $      | (85,579 | )  |  | $      | — |    |  | $      | (720   | )  |  | $      | 36,354   |    |
| Comprehensiveincome:                                                                                 |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   |     |    |
| Netincome                                                                                            |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   | 4,794   |    |  |   |    |    |  |   |   |    |  |   | 4,794    |    |
| Foreigncurrency translationadjustment                                                                |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   | 2,488  |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 2,488    |    |
| Comprehensiveincome                                                                                  |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 7,282    |    |
| Issuanceof common stockfor:                                                                          |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   |     |    |
| Hyperionshares                                                                                       |  |        | 375    |                      |  |                                         | 4      |                       |  |           | 1,590   |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 1,594    |    |
| Triumphshares                                                                                        |  |        | 375    |                      |  |                                         | 4      |                       |  |           | 1,590   |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 1,594    |    |
| Non-cashbasedcompensation                                                                            |  |        | 1,171  |                      |  |                                         | 11     |                       |  |           | 4,205   |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 4,216    |    |
| Reorganization                                                                                       |  |        | 1,469  |                      |  |                                         | 14     |                       |  |           | 5,727   |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 5,741    |    |
| Commonstock issuancecosts                                                                            |  |        |   |                      |  |                                         |   |                       |  |           | (864    | )         |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | (864     | )  |
| Accretionof Series A preferred stock issuancecosts                                                   |  |        |   |                      |  |                                         |   |                       |  |           | (75     | )         |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | (75      | )  |
| Dividendson Series A preferredstock                                                                  |  |        |   |                      |  |                                         |   |                       |  |           | (941    | )         |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | (941     | )  |
| Notesissued toofficers                                                                               |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   | (940    | )  |  |   |   |    |  |   | (940     | )  |
| Intereston 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   |    |
| Foreigncurrency translationadjustment                                                                |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   | 6,252  |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 6,252    |    |
| Comprehensiveincome                                                                                  |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 18,223   |    |
| Issuanceof common stockfor:                                                                          |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   |     |    |
| Reorganization                                                                                       |  |        | 890    |                      |  |                                         | 9      |                       |  |           | 3,471   |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 3,480    |    |
| Acquisitionof Medic-One GroupLimited                                                                 |  |        | 670    |                      |  |                                         | 7      |                       |  |           | 2,873   |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 2,880    |    |
| Exerciseof stockoptions                                                                              |  |        | 184    |                      |  |                                         | 2      |                       |  |           | 666     |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 668      |    |
| Commonstock issuancecosts                                                                            |  |        |   |                      |  |                                         |   |                       |  |           | (20     | )         |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | (20      | )  |
| Accretionof Series A preferred stock issuancecosts                                                   |  |        |   |                      |  |                                         |   |                       |  |           | (482    | )         |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | (482     | )  |
| Dividendson Series A preferredstock                                                                  |  |        |   |                      |  |                                         |   |                       |  |           | (3,523  | )         |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | (3,523   | )  |
| Issuanceof warrants for professionalservices                                                         |  |        |   |                      |  |                                         |   |                       |  |           | 603     |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 603      |    |
| Costof treasuryshares                                                                                |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   | (565   | )  |  |   | (565     | )  |
| Intereston notes toofficers                                                                          |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   | (44     | )  |  |   |   |    |  |   | (44      | )  |
| Balance,September 30,2003                                                                            |  |        | 22,689 |                      |  |                                         | 227    |                       |  |           | 142,897 |           |  |   | 3,140  |    |  |   | (68,814 | )  |  |   | (1,002  | )  |  |   | (1,285 | )  |  |   | 75,163   |    |
| Comprehensiveincome:                                                                                 |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   |     |    |
| Netincome                                                                                            |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   | 9,869   |    |  |   |    |    |  |   |   |    |  |   | 9,869    |    |
| Foreigncurrency translationadjustment                                                                |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   | 7,638  |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 7,638    |    |
| Comprehensiveincome                                                                                  |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 17,507   |    |
| Issuanceof common stockfor:                                                                          |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   |     |    |
| Offering                                                                                             |  |        | 14,500 |                      |  |                                         | 145    |                       |  |           | 70,905  |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 71,050   |    |
| Conversionof Series A preferredstock                                                                 |  |        | 7,774  |                      |  |                                         | 77     |                       |  |           | 35,136  |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 35,213   |    |
| Exerciseof stockoptions                                                                              |  |        | 87     |                      |  |                                         | 1      |                       |  |           | 400     |           |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | 401      |    |
| Commonstock issuancecosts                                                                            |  |        |   |                      |  |                                         |   |                       |  |           | (5,335  | )         |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | (5,335   | )  |
| Conversionfees paid to Series A preferred shareholders, net of conversionagreements claw backfeature |  |        |   |                      |  |                                         |   |                       |  |           | (2,029  | )         |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | (2,029   | )  |
| Write-offof remaining Series A preferred stock issuancecosts                                         |  |        |   |                      |  |                                         |   |                       |  |           | (1,696  | )         |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | (1,696   | )  |
| Accretionof Series A preferred stock issuancecosts                                                   |  |        |   |                      |  |                                         |   |                       |  |           | (366    | )         |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | (366     | )  |
| Dividendson Series A preferredstock                                                                  |  |        |   |                      |  |                                         |   |                       |  |           | (2,924  | )         |  |   |   |    |  |   |    |    |  |   |    |    |  |   |   |    |  |   | (2,924   | )  |
| Intereston notes toofficers                                                                          |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   | (7      | )  |  |   |   |    |  |   | (7       | )  |
| Repaymentof notes issued toofficers                                                                  |  |        |   |                      |  |                                         |   |                       |  |           |    |           |  |   |   |    |  |   |    |    |  |   | 1,009   |    |  |   | (1,009 | )  |  |   | (— | )  |
| Balance,September 30,2004                                                                            |  |        | 45,050 |                      |  | $                                            | 450    |                       |  | $              | 236,988 |           |  | $      | 10,778 |    |  | $      | (58,945 | )  |  | $      | — |    |  | $      | (2,294 | )  |  | $      | 186,977  |    |
|                                                                                                      |

Seenotes to consolidated financial statements.

F-5

----

ALLIED HEALTHCARE INTERNATIONAL INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Inthousands)

|                                                                                        |  |                              |         |                              |  |                              |         |         |  |        |         |         |  |  |
|----------------------------------------------------------------------------------------|--|------------------------------|---------|------------------------------|--|------------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                   |  | YearEnded September 30, 2004 |         | Year Ended September30, 2003 |  | Year Ended September 30,2002 |
| Cash flows from operatingactivities:                                                   |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Netincome                                                                              |  | $                            | 9,869   |                         |  | $                            | 11,971  |    |  | $      | 4,794   |    |
| Adjustmentsto reconcile net income to net cash provided by operatingactivities:        |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Incomefrom discontinuedoperations                                                      |  |                         | — |                         |  |                         | (503    | )  |  |   | (1,001  | )  |
| Depreciationandamortization                                                            |  |                         | 2,419   |                         |  |                         | 1,778   |    |  |   | 1,337   |    |
| Amortizationof other intangibleassets                                                  |  |                         | 644     |                         |  |                         | 207     |    |  |   | — |    |
| Amortizationof debt issuance costs andwarrants                                         |  |                         | 1,645   |                         |  |                         | 1,858   |    |  |   | 2,218   |    |
| (Reversalof) provision for allowance for doubtfulaccounts                              |  |                         | (1,653  | )                       |  |                         | 1,205   |    |  |   | 985     |    |
| Loss(gain) on sale of fixedassets                                                      |  |                         | 3       |                         |  |                         | (48     | )  |  |   | (13     | )  |
| Interestinkind                                                                         |  |                         | 540     |                         |  |                         | 645     |    |  |   | 3,063   |    |
| Minorityinterest                                                                       |  |                         | — |                         |  |                         | — |    |  |   | 120     |    |
| Stockbased compensation -employees                                                     |  |                         | — |                         |  |                         | 587     |    |  |   | 5,835   |    |
| Interestaccrued on loans toofficers                                                    |  |                         | (7      | )                       |  |                         | (44     | )  |  |   | (18     | )  |
| Write-offof deferred financing fees and debtdiscount                                   |  |                         | 4,152   |                         |  |                         | 613     |    |  |   | 925     |    |
| Gainon settlement of PIKinterest                                                       |  |                         | — |                         |  |                         | — |    |  |   | (5,143  | )  |
| Gainon acquisition of minorityinterest                                                 |  |                         | — |                         |  |                         | — |    |  |   | (179    | )  |
| Deferredincometaxes                                                                    |  |                         | 1,030   |                         |  |                         | (906    | )  |  |   | 159     |    |
| Changesin assets and liabilities, excluding the effect of businesses acquiredand sold: |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Decrease(increase) in accountsreceivable                                               |  |                         | 9,479   |                         |  |                         | (30     | )  |  |   | (3,251  | )  |
| Decrease(increase) ininventories                                                       |  |                         | 61      |                         |  |                         | (45     | )  |  |   | 1       |    |
| Decrease(increase) in prepaid expenses and otherassets                                 |  |                         | 2,861   |                         |  |                         | (3,313  | )  |  |   | (1,434  | )  |
| (Decrease)increase in accounts payable and otherliabilities                            |  |                         | (7,489  | )                       |  |                         | 674     |    |  |   | (1,268  | )  |
| Netcash provided by continuingoperations                                               |  |                         | 23,554  |                         |  |                         | 14,649  |    |  |   | 7,130   |    |
| Netcash provided by discontinuedoperations                                             |  |                         | — |                         |  |                         | 461     |    |  |   | 2,936   |    |
| Netcash provided by operatingactivities                                                |  |                         | 23,554  |                         |  |                         | 15,110  |    |  |   | 10,066  |    |
| Cashflows from investingactivities:                                                    |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Capitalexpenditures                                                                    |  |                         | (7,829  | )                       |  |                         | (4,026  | )  |  |   | (3,091  | )  |
| Proceedsfrom sale of property andequipment                                             |  |                         | 29      |                         |  |                         | 175     |    |  |   | 105     |    |
| Notesissued toofficers                                                                 |  |                         | — |                         |  |                         | — |    |  |   | (940    | )  |
| Proceedsfrom sale of discontinuedoperations                                            |  |                         | — |                         |  |                         | 8,195   |    |  |   | — |    |
| Paymentsfor acquisitions - net of cashacquired                                         |  |                         | (8,976  | )                       |  |                         | (9,531  | )  |  |   | (2,047  | )  |
| Proceedslimited to futureacquisitions                                                  |  |                         | 41,974  |                         |  |                         | 26,053  |    |  |   | 11,018  |    |
| Paymentson acquisitionspayable                                                         |  |                         | (1,681  | )                       |  |                         | (7,031  | )  |  |   | (1,038  | )  |
| Netcash provided by investingactivities                                                |  |                         | 23,517  |                         |  |                         | 13,835  |    |  |   | 4,007   |    |
|                                                                                        |

(Continued)

See notes to consolidated financial statements.

F-6

----

ALLIED HEALTHCARE INTERNATIONAL INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(Inthousands)

|                                                              |  |                              |          |                              |  |                              |         |         |  |        |         |         |  |  |
|--------------------------------------------------------------|--|------------------------------|----------|------------------------------|--|------------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                                         |  | Year Ended September30, 2004 |          | Year Ended September 30,2003 |  | Year Ended September 30,2002 |
| Cash flows from financingactivities:                         |  |                         |     |                         |  |                         |    |    |  |   |    |    |
| Paymentsfor financing fees and stock issuancecosts           |  |                         | (6,223   | )                       |  |                         | (20     | )  |  |   | (4,053  | )  |
| Paymentson preferred dividends and conversionfees            |  |                         | (9,422   | )                       |  |                         | — |    |  |   | — |    |
| Proceedsfrom issuance ofstock                                |  |                         | 71,050   |                         |  |                         | — |    |  |   | 3,188   |    |
| Paymentson notespayable                                      |  |                         | (38,740  | )                       |  |                         | (19,363 | )  |  |   | (4,575  | )  |
| Proceedsfrom long-termdebt                                   |  |                         | 71,708   |                         |  |                         | — |    |  |   | — |    |
| Paymentson long-termdebt                                     |  |                         | (148,307 | )                       |  |                         | (6,727  | )  |  |   | (5,150  | )  |
| Paymentsfor treasury sharesacquired                          |  |                         | —  |                         |  |                         | (565    | )  |  |   | — |    |
| Stockoptions and warrantsexercised                           |  |                         | 401      |                         |  |                         | 80      |    |  |   | — |    |
| Netcash used in financingactivities                          |  |                         | (59,533  | )                       |  |                         | (26,595 | )  |  |   | (10,590 | )  |
| Effectof exchange rate oncash                                |  |                         | 70       |                         |  |                         | 1,063   |    |  |   | 1,461   |    |
| (Decrease)increase incash                                    |  |                         | (12,392  | )                       |  |                         | 3,413   |    |  |   | 4,944   |    |
| Cashand cash equivalents, beginning ofperiod                 |  |                         | 21,691   |                         |  |                         | 18,278  |    |  |   | 13,334  |    |
| Cashand cash equivalents, end ofperiod                       |  | $                            | 9,299    |                         |  | $                            | 21,691  |    |  | $      | 18,278  |    |
| Supplementalcash flowinformation:                            |  |                         |     |                         |  |                         |    |    |  |   |    |    |
| Cashpaid forinterest                                         |  | $                            | 10,444   |                         |  | $                            | 10,679  |    |  | $      | 10,728  |    |
| Cashpaid for income taxes,net                                |  | $                            | 8,528    |                         |  | $                            | 6,691   |    |  | $      | 5,914   |    |
| Supplementaldisclosure of investing and financingactivities: |  |                         |     |                         |  |                         |    |    |  |   |    |    |
| Detailsof business acquired in purchasetransactions:         |  |
| Fair value of assetsacquired                                 |  | $                            | 9,975    |                         |  | $                            | 12,254  |    |  | $      | 2,525   |    |
| Liabilitiesassumed orincurred                                |  | $                            | 628      |                         |  | $                            | 2,408   |    |  | $      | 341     |    |
| Cashpaid for acquisitions (including relatedexpenses)        |  | $                            | 9,347    |                         |  | $                            | 9,846   |    |  | $      | 2,184   |    |
| Cashacquired                                                 |  |                         | 371      |                         |  |                         | 315     |    |  |   | 137     |    |
| Netcash paid foracquisitions                                 |  | $                            | 8,976    |                         |  | $                            | 9,531   |    |  | $      | 2,047   |    |
| Issuanceof notespayable                                      |  |                         |     |                         |  | $                            | 36,026  |    |  | $      | 3,747   |    |
| Issuanceof commonstock                                       |  |                         |     |                         |  | $                            | 6,360   |    |  | $      | 9,960   |    |
| Issuanceof 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 a leadingprovider of flexible, or temporary, healthcare staffing to the UnitedKingdom ("U.K.") healthcare industry asmeasured by revenues, market share and number of staff. At September30, 2004, the Company operated an integrated network of 125 branchesthroughout most of the U.K. The Company's healthcare staffconsists principally of nurses, nurses aides and home health aides(known as carers in the U.K.). The Company focuses on placing its staffon a per diem basis in hospitals, nursing homes, care homes (whichprovide assisted living without medical services) and private homes.The Company maintains a pool of over 25,000 nurses, nurses aides andhome health aides. The Company also supplies medical-grade oxygen foruse in respiratory therapy to the U.K. pharmacy market and to privatepatients in Northern Ireland.

2.    Summary of SignificantAccounting Policies:

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."). Allintercompany accounts and transactions are eliminated inconsolidation.

Cash and Cash Equivalents:

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

Stock-BasedCompensation:

In accordance with Statement of FinancialAccounting Standards ("FAS") No. 123,"Accounting for Stock-BasedCompensation", the Company continues to apply APBOpinion No.  25, "Accounting for Stock Issued toEmployees," and related interpretations, in accountingfor its stock-based compensation plans. Accordingly, no compensationcost has been recognized for its stock option plans. The fair value ofeach option granted is estimated on the date of grant using theBlack-Scholes option-pricing model.

Had compensation costs forthe Company's stock options been determined consistent with thefair value method prescribed by FAS No. 123, the Company's netincome and related per share amounts would have been adjusted to thepro forma amounts indicated below for the three years endedSeptember30:

|                                                                                                                               |  |        |         |         |  |        |       |         |  |        |         |         |  |  |
|-------------------------------------------------------------------------------------------------------------------------------|--|--------|---------|---------|--|--------|-------|---------|--|--------|---------|---------|--|--|
|                                                                                                                          |  | 2004   |         | 2003    |  | 2002   |
| Netincome available to common shareholders, asreported                                                                        |  | $      | 2,849   |    |  | $      | 7,966 |    |  | $      | 3,778   |    |
| Add:Stock-based compensation included in reported net income, net ofrelated taxeffect                                         |  |   | — |    |  |   | 587   |    |  |   | — |    |
| Less:Total stock-based compensation expense determined under fair valuebased method for all awards, net of related taxeffects |  |   | (3,876  | )  |  |   | (736  | )  |  |   | (173    | )  |
| Proforma net (loss) income attributable to commonshareholders                                                                 |  | $      | (1,027  | )  |  | $      | 7,817 |    |  | $      | 3,605   |    |
| Netincome (loss) per share:                                                                                                   |  |
| Basic – asreported                                                                                                      |  | $      | 0.10    |    |  | $      | 0.36  |    |  | $      | 0.20    |    |
| Basic– proforma                                                                                                         |  | $      | (0.04   | )  |  | $      | 0.36  |    |  | $      | 0.19    |    |
| Netincome (loss) per share:                                                                                                   |  |
| Diluted – asreported                                                                                                    |  | $      | 0.10    |    |  | $      | 0.36  |    |  | $      | 0.20    |    |
| Diluted– proforma                                                                                                       |  | $      | (0.04   | )  |  | $      | 0.35  |    |  | $      | 0.19    |    |
|                                                                                                                               |

F-8

----

ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

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

|                        |  |        |      |         |  |        |      |         |  |        |      |         |  |  |
|------------------------|--|--------|------|---------|--|--------|------|---------|--|--------|------|---------|--|--|
|                   |  | 2004   |      | 2003    |  | 2002   |
| Expectedlife (years)   |  |   | 9    |    |  |   | 9    |    |  |   | 9    |    |
| Risk-free interestrate |  |   | 2.6  | %  |  |   | 4.1  | %  |  |   | 5.1  | %  |
| Volatility             |  |   | 66.0 | %  |  |   | 66.1 | %  |  |   | 69.1 | %  |
| Expecteddividendyield  |  |   | 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.

Restricted Cash:

Restricted cash represented proceeds limited to future acquisitions.The proceeds referred to amounts advanced to the Company under itsprevious senior collateralized term and revolving credit facility (the"Old Senior Credit Facility") that could haveonly been used by the Company to fund acquisitions permittedthereunder, including paying additional contingent consideration. Thecurrent portion of restricted cash represents the amount on deposit, aswas required by the previous senior credit lender, for the sole purposeof repaying the note payable issued in connection with the acquisitionof a certain U.K. flexible staffing agency.

On July 19, 2004,the Company's U.K. subsidiary, Allied Healthcare Holdings Limited("Allied Holdings"), formerly known asTransworld Healthcare (UK) Limited, obtained financing denominated inpounds sterling consisting of a £50,000 multicurrency new seniorcredit facility (the "New Senior CreditFacility"). Under the New Senior Credit Facility, thereare no loan proceeds limited to future acquisitions. The proceeds fromthe New Senior Credit Facility were used to repay the Old Senior CreditFacility. See Note 6.

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, including revenue-producingequipment, is carried at cost, net of accumulated depreciation andamortization. Revenue-producing equipment consists of oxygen cylinders,oxygen concentrators and oxygen values. Depreciation forrevenue-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.

Purchase Accounting:

At the time the Companycompletes an acquisition, preliminary values and useful lives areallocated based upon fair values that have been determined for assetsacquired and liabilities assumed and management's best estimatesfor values that have not yet been finalized. The Company obtains athird-party valuation in order to complete its purchase priceallocations. Accordingly, final asset and liability fair values as wellas useful lives may differ from management's original estimatesand could have an adverse impact on the Company's consolidatedfinancial position or results of operations.

F-9

----

ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

Intangible Assets:

Intangibleassets, consisting principally of goodwill, are carried at cost, net ofaccumulated amortization.

In accordance with FAS No. 142,"Goodwill and Other IntangibleAssets", all goodwill and intangible assets deemed tohave indefinite lives are no longer subject to amortization but aresubject to annual impairment tests. The Company completed its annualimpairment test required under FAS No. 142 during the fourth quarter offiscal 2004 and determined there was no impairment to its recordedgoodwill balance.

The following table presents the changes inthe carrying amount of goodwill for the year ended September 30,2004:

|                                    |  |        |         |        |  |  |
|------------------------------------|--|--------|---------|--------|--|--|
| Balanceat September 30, 2002       |  | $      | 123,514 |   |
| Goodwillacquired during the period |  |   | 51,983  |   |
| Foreignexchange effect             |  |   | 8,206   |   |
| Balance atSeptember 30, 2003       |  |   | 183,703 |   |
| Goodwill acquiredduring the period |  |   | 8,073   |   |
| Foreign exchangeeffect             |  |   | 14,334  |   |
| Balance at September30, 2004       |  | $      | 206,110 |   |
|                                    |

The goodwillassociated with the acquisitions during the prior twelve months issubject to revision based on the finalization of the determination ofthe fair values of assets acquired and liabilities assumed. Included inthe goodwill acquired during the year ended September 30, 2004 of$8,073 are the re-allocations of net excess purchase price to assetsacquired and liabilities assumed in connection with prior yearacquisitions of $215. In addition, goodwill is not deductible for taxpurposes.

Intangible assets subject to amortization are beingamortized on the straight-line method and consist of thefollowing:

|                              |  |              |  |                     |       |                         |  |                   |     |        |  |        |       |        |  |  |  |  |
|------------------------------|--|--------------|--|---------------------|-------|-------------------------|--|-------------------|-----|--------|--|--------|-------|--------|--|--|--|--|
|                         |  |         |  | September30,2004    |
|                         |  | RangeOfLives |  | GrossCarryingAmount |       | AccumulatedAmortication |  | NetCarryingAmount |
| Customerrelationships        |  | 5–12   |  | $                   | 4,844 |                    |  | $                 | 689 |   |  | $      | 4,155 |   |
| Tradenames                   |  | 3            |  |                | 185   |                    |  |              | 113 |   |  |   | 72    |   |
| Non-competeagreements        |  | 2 –5   |  |                | 135   |                    |  |              | 65  |   |  |   | 70    |   |
| Favorableleasehold interests |  | 2 –5   |  |                | 21    |                    |  |              | 12  |   |  |   | 9     |   |
| Total                        |  |         |  | $                   | 5,185 |                    |  | $                 | 879 |   |  | $      | 4,306 |   |
|                              |

|                              |  |              |  |                     |       |                         |  |                   |     |        |  |        |       |        |  |  |  |  |
|------------------------------|--|--------------|--|---------------------|-------|-------------------------|--|-------------------|-----|--------|--|--------|-------|--------|--|--|--|--|
|                         |  |         |  | September30,2003    |
|                         |  | RangeOfLives |  | GrossCarryingAmount |       | AccumulatedAmortication |  | NetCarryingAmount |
| Customerrelationships        |  | 10           |  | $                   | 1,996 |                    |  | $                 | 150 |   |  | $      | 1,846 |   |
| Tradenames                   |  | 3            |  |                | 175   |                    |  |              | 49  |   |  |   | 126   |   |
| Non-competeagreements        |  | 2 –3   |  |                | 43    |                    |  |              | 11  |   |  |   | 32    |   |
| Favorableleasehold interests |  | 2 –5   |  |                | 20    |                    |  |              | 5   |   |  |   | 15    |   |
| Total                        |  |         |  | $                   | 2,234 |                    |  | $                 | 215 |   |  | $      | 2,019 |   |
|                              |

F-10

----

ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

Amortization expense for otherintangible assets still subject to amortization was $644 and $207 forthe years ended September 30, 2004 and 2003, respectively. At September30, 2004, estimated future amortization expense of other intangibleassets still subject to amortization is as follows: approximately $799,$725, $708, $629 and $535 for the fiscal years ending September 30,2005, 2006, 2007, 2008 and 2009, respectively.

DeferredFinancing Costs:

Costs incurred in obtaining long-termfinancing are amortized over the terms of the long-term financingagreements using the straight-line method. At September 30, 2004 and2003, other assets included $846 and $3,675 of deferred financingcosts, net of accumulated amortization of $45 and $4,250, respectively.During the fourth quarter of fiscal 2004, the Company wrote-off $2,937of deferred refinancing costs related to the refinancing of its OldSenior Credit Facility. See Note 6. Amortization of deferred financingcosts is included in interest expense in the accompanying ConsolidatedStatements of Operations.

Income Taxes:

The Companyaccounts for income taxes using the liability method in accordance withFAS No. 109, "Accounting for IncomeTaxes." Under this method, deferred income tax assetsand liabilities reflect tax carryforwards and the net effects oftemporary differences between the carrying amounts of assets andliabilities for financial reporting and income tax purposes, asdetermined under currently enacted tax rates. Deferred tax assets arerecorded if future realization is more likely than not.

Deferredtaxes are recorded primarily for bad debts, Federal and state netoperating loss carryforwards, depreciation and amortization ofintangibles, which are reported in different periods for Federal incometax purposes than for financial reporting purposes. Valuationallowances are established, when necessary, to reduce deferred taxassets to the amounts expected to be realized.

RevenueRecognition:

Patient services and respiratory therapy revenuesare recognized when services are performed and substantiated by properdocumentation. For patient services, which account for over 95%of the Company's business, revenue is recognized upon completionof timesheets that also require the signature of the recipient ofservices. Unbilled accounts receivable represents amounts due forservices performed, but not billed as of the balance sheet date.Revenues from the rental of home medical equipment (includingrespiratory equipment) are recognized over the rental period (typicallyon a month-to-month basis) and approximated $482, $457 and $328 infiscal 2004, 2003 and 2002, respectively. Revenues from the sale ofoxygen and supplies for use in respiratory therapy are recognized whenproducts are shipped, a contractual arrangement exists, the sales priceis either fixed or determinable and collection is reasonablyassured.

The Company receives a majority of its revenue from theNational Health Services (the "NHS") andother U.K. governmental payors. Certain revenues are subject to reviewby third-party payors, and adjustments, if any, are recorded whendetermined. For the years ended September 30, 2004, 2003 and 2002**,**65%, 65% and 68%, respectively, of theCompany's net revenues were attributable to the NHS and otherU.K. governmental payor programs.

Earnings Per Share:

Basic earnings per share ("EPS") iscomputed using the weighted average number of common sharesoutstanding. Diluted EPS adjusts basic EPS for the effects of stockoptions and warrants only when such effect is dilutive. At September30, 2004, 2003 and 2002, the Company had outstanding 

F-11

----

ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

stock options and warrants to purchase 1,493,2,244 and 705 shares, respectively, of common stock ranging in pricefrom $5.41 to $7.25, $4.00 to $7.25 and $5.41 to $7.25 per share,respectively, that were not included in the computation of diluted EPSbecause the exercise price was greater than the average market price ofthe common shares.

The weighted average number of shares used inthe basic and diluted earnings per share computations for the yearsended September 30, 2004, 2003 and 2002 are asfollows:

|                                                                                                                      |  |        |         |        |  |        |         |        |  |        |        |        |  |  |
|----------------------------------------------------------------------------------------------------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--------|--------|--------|--|--|
|                                                                                                                 |  | 2004   |         | 2003   |  | 2002   |
| Weightedaverage number of common sharesoutstanding                                                                   |  |   | 27,419  |   |  |   | 21,962  |   |  |   | 18,399 |   |
| Weightedaverage number of common shares contingentlyissuable                                                         |  |   | — |   |  |   | — |   |  |   | 166    |   |
| Weightedaverage number of common shares outstanding as used in computation ofbasic earnings per share of commonstock |  |   | 27,419  |   |  |   | 21,962  |   |  |   | 18,565 |   |
| Effectof dilutive securities - stockoptions                                                                          |  |   | 685     |   |  |   | 342     |   |  |   | 367    |   |
| Sharesused in computation of diluted earnings per share of commonstock                                               |  |   | 28,104  |   |  |   | 22,304  |   |  |   | 18,932 |   |
|                                                                                                                      |

ComprehensiveIncome:

Components of comprehensive income include net incomeand all other non-owner changes in equity, such as the change in thecumulative translation adjustment, which is the only item of othercomprehensive income impacting the Company.

Impairment ofLong-Lived Assets:

Long-lived assets are reviewed forimpairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. If the sum of theundiscounted future cash flows is less than the carrying amount of theasset, a loss is recognized for the difference between the fair value(discounted future cash flows) and carrying value of the asset.Impairment loss on assets to be sold, if any, is based on the estimatedproceeds to be received, less estimated costs to sell.

ForeignCurrency Translation:

Assets and liabilities of foreignsubsidiaries whose functional currency is other than the U.S. dollarare translated to U.S. dollars using the exchange rates in effect atthe balance sheet date. Results of operations are translated usingweighted average exchange rates during the period. Adjustmentsresulting from the translation process are included as a separatecomponent of shareholders' equity.

Fair Value ofFinancial Instruments:

Cash, restricted cash, accountsreceivable, unbilled accounts receivable, dividends payable, accountspayable, accrued expenses and taxes payable approximate fair value dueto the short-term maturity of those instruments. The derivative asset(liability) is recorded at its estimated fair value. The estimated fairvalue of the Company's outstanding borrowings was $64,778 and$166,772 at September 30, 2004 and 2003, respectively, compared to$64,778 and $165,378 total debt outstanding.

Concentrations ofCredit Risk:

Financial instruments which potentially subjectthe Company to concentrations of credit risk are cash equivalents andaccounts receivable. The Company places its cash equivalents with highcredit 

F-12

----

ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

quality financial institutions. The Companybelieves no significant concentration of credit risk exists withrespect to these cash equivalents.

The Company grants creditwithout collateral to its patients, who are primarily insured underthird-party agreements. The Company maintains an allowance for doubtfulaccounts based on the expected collectibility of accounts receivable.At September 30, 2004 and 2003, 65.0% and 78.2% ofaccounts receivable was due from the NHS and other U.K. governmentalpayors, respectively, with the balance due from various otherthird-party payors and self-pay patients (none of which comprisegreater than 10% of the balance).

Use ofManagement's Estimates:

The preparation of financialstatements in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingentassets and 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 have beenreclassified to conform to the current year presentation.

Recent Accounting Pronouncements:

The Financial AccountingStandards Board ("FASB") issued FASBInterpretation No. 46, Consolidation of Variable InterestEntities ("FIN 46") in January 2003 and arevised interpretation of FIN 46 ("FIN 46R")in December 2003. FIN 46 clarifies the application of AccountingResearch Bulletin No. 51, Consolidated Financial Statements, tocertain 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.For all arrangements entered into after January 31, 2003, the Companywas required to continue to apply FIN 46 through the end of the firstquarter of fiscal 2004. The Company was required to adopt theprovisions of FIN 46R, for those arrangements entered into prior toFebruary 1, 2003, in the second quarter of fiscal 2004. As the Companydoes not have any variable interest entities, the adoptions of FIN 46and FIN 46R did not have a material impact on the Company'sconsolidated financial position or results of operations.

InDecember 2003, the FASB revised FAS No. 132,"Employers' Disclosures about Pensions and OtherPostretirement Benefits" ("FAS No.132"), to require additional disclosures to those in theoriginal FAS No. 132 about assets, obligations, cash flows and netperiodic benefit costs of defined benefit pension plans and otherdefined benefit postretirement plans. The Company maintains a definedcontribution plan, pursuant to Section 401(k) of the Internal RevenueCode, covering all U.S. employees who meet certain requirements. Inaddition to the U.S. plan, the Company's U.K. subsidiaries alsosponsor personal pension plans that operate as salary reduction plans.The Company's contribution to such plans was $92 and $166 infiscal 2004 and 2003, respectively. See Note 15. The adoption of FASNo. 132 did not have a material impact on the Company'sconsolidated financial position or results of operations.

F-13

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ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

3.    Business Combinations andDisposals:

Combinations:

In fiscal 2004, the Companyacquired a total of 8 flexible staffing agencies for approximately$8,610 in cash. As of September 30, 2004, these transactions includedprovisions to pay additional amounts, payable in cash, of up to $10,501in contingent consideration dependent upon future earnings of theacquired entities.

The preliminary purchase price allocationsfor the fiscal 2004 acquisitions are subject to adjustments and will befinalized once additional information concerning asset and liabilityvaluations are obtained. Accordingly, final asset and liability fairvalues may differ from those set forth on the accompanying consolidatedbalance sheet at September 30, 2004; however, the changes are notexpected to have a material effect on the consolidated financialposition, results of operations or cash flows of the Company.

Infiscal 2003, the Company acquired a total of 7 flexible staffingagencies for approximately $8,837 in cash and the issuance of 670shares of the Company's common stock. The transactions includedprovisions to pay additional amounts, payable by combination of cashand shares of the Company's stock, of up to $20,952 in contingentconsideration dependent upon future earnings of the acquired entities.Of the $20,952 in contingent consideration, $6,101 was unearned andwill not be required and $1,272 was earned and paid in fiscal 2003. Assuch, at September 30, 2003, an aggregate of $13,579 was payabledependent upon further earnings of the acquired entities. Of the$13,579 in contingent consideration, $12,015 was unearned and will notbe required and the remaining balance was earned and paid in fiscal2004.

Further, in fiscal 2003, the Company completed itspurchase price allocation for one of its fiscal 2003 acquisitions.Accordingly, tangible assets, separately identifiable intangible assetsand liabilities were assigned values of approximately $2,861, $1,410and $2,157, respectively, with the remaining portion of $6,576attributable to goodwill. In fiscal 2004, the Company completed itspurchase price allocation for its remaining fiscal 2003 acquisitions.Accordingly, tangible assets, separately identifiable intangible assetsand liabilities were assigned values of approximately $377, $1,209 and$368, respectively, with the remaining portion of $5,109 attributableto goodwill.

In fiscal 2002, the Company acquired a total of 6flexible staffing agencies for approximately $2,184 in cash. Thetransactions included provisions to pay additional amounts, payable incash, of up to $5,606 in contingent consideration dependent upon futureearnings of the acquired entities. Of the $5,606 in contingentconsideration, $4,450 was earned and paid in fiscal 2003. The remainingamount of contingent consideration of $1,156 was unearned and will notbe required.

The pro forma results of operations and related pershare information for these acquisitions have not been presented as theamounts are considered immaterial.

Dispositions:

U.S.Home Healthcare

In the third quarter of fiscal 2003, theCompany sold all of the issued and outstanding capital stock of two ofits subsidiaries, The PromptCare Companies, Inc. and Steri-Pharm, Inc.,collectively referred to as "HomeHealthcare," for approximately $8,500 in cash. HomeHealthcare, which comprised the Company's U.S. operations, wasconcentrated in New York and New Jersey, and supplied infusion therapy,respiratory therapy and home medical equipment. In accordance with theprovisions of FAS No. 144, "Accounting for theImpairment or Disposal of Long-Lived Assets"("FAS No. 144"), the Company has accountedfor Home Healthcare as a discontinued operation. The 

F-14

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ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

consolidated financial statements reflect theliabilities of the discontinued operations, and the operations for theprior periods are reported in discontinued operations.

Thefollowing table presents the financial results of the discontinuedoperations:

|                                                     |  |                         |        |         |  |        |         |        |  |  |
|-----------------------------------------------------|--|-------------------------|--------|---------|--|--------|---------|--------|--|--|
|                                                |  | Year Ended September30, |
|                                                |  | 2003                    |        | 2002    |
| Revenues:                                           |  |
| Netinfusion services                                |  | $                       | 6,685  |    |  | $      | 12,373  |   |
| Netrespiratory, medical equipment andsupplies       |  |                    | 2,479  |    |  |   | 4,697   |   |
| Totalrevenues                                       |  |                    | 9,164  |    |  |   | 17,070  |   |
| Costof revenues:                                    |  |
| Infusionservices                                    |  |                    | 5,159  |    |  |   | 9,068   |   |
| Respiratory,medical equipment andsupplies           |  |                    | 1,438  |    |  |   | 2,292   |   |
| Totalcost ofrevenues                                |  |                    | 6,597  |    |  |   | 11,360  |   |
| Selling,general and administrativeexpenses          |  |                    | 2,583  |    |  |   | 4,709   |   |
| Gain on sale ofsubsidiaries                         |  |                    | (1,294 | )  |  |   | — |   |
| Tax ongain on sale ofsubsidiaries                   |  |                    | 775    |    |  |   | — |   |
| Incomefrom discontinuedoperations                   |  | $                       | 503    |    |  | $      | 1,001   |   |
| Dilutedincome per share from discontinuedoperations |  | $                       | 0.02   |    |  | $      | 0.05    |   |
|                                                     |

AtSeptember 30, 2004, liabilities of discontinued operations of $690relate to certain tax contingencies.

4.    Property andEquipment:

Major classes of property and equipment, net,consist of the following at September30:

|                                               |  |        |        |        |  |        |        |        |  |  |
|-----------------------------------------------|--|--------|--------|--------|--|--------|--------|--------|--|--|
|                                          |  | 2004   |        | 2003   |
| Revenueproducingequipment                     |  | $      | 14,108 |   |  | $      | 11,776 |   |
| Furniture,fixtures andequipment               |  |   | 16,971 |   |  |   | 9,901  |   |
| Land,buildings and leaseholdimprovements      |  |   | 879    |   |  |   | 776    |   |
|                                          |  |   | 31,958 |   |  |   | 22,453 |   |
| Less,accumulated depreciation andamortization |  |   | 15,374 |   |  |   | 12,127 |   |
|                                          |  | $      | 16,584 |   |  | $      | 10,326 |   |
|                                               |

Depreciationand amortization of property and equipment for the years endedSeptember 30, 2004, 2003 and 2002 were $2,419, $1,778 and $1,337,respectively. The net book value of revenue producing equipment was$7,690 and $6,623 at September 30, 2004 and September 30, 2003,respectively.

F-15

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ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

5.    Accrued Expenses:

Accruedexpenses consist of the following at September30:

|                            |  |        |        |        |  |        |        |        |  |  |
|----------------------------|--|--------|--------|--------|--|--------|--------|--------|--|--|
|                       |  | 2004   |        | 2003   |
| Payrolland relatedexpenses |  | $      | 20,500 |   |  | $      | 17,927 |   |
| Other                      |  |   | 4,450  |   |  |   | 7,042  |   |
|                       |  | $      | 24,950 |   |  | $      | 24,969 |   |
|                            |

6.    Debt:

On July 19, 2004, the Company's U.K. subsidiary obtained a NewSenior Credit Facility. Additionally, subject to the terms of the NewSenior Credit Facility, ancillary facilities, in the form of anadditional facility or financial accommodation (including an interestrate swap, cap, or other arrangement for the hedging or fixing ofinterest) are available up to a maximum of £15 million.

The New Senior Credit Facility (together with approximately $65,715of the net proceeds of the Company's recently completed publicoffering – See Note 9) refinanced the Company's Old SeniorCredit Facility and mezzanine indebtedness (the "MezzanineLoan"), both of which had been entered into on December17, 1999. The New Senior Credit Facility is secured by a first prioritylien on the assets of Allied Healthcare Group Limited and certain ofits subsidiaries. Together with Allied Healthcare Group Limited andcertain of its subsidiaries, the Company is guaranteeing the debt andother obligations of certain wholly-owned U.K. subsidiaries under theNew Senior Credit Facility.

The New Senior Credit Facilityconsists of the following:

|              |                                                      |
|--------------|------------------------------------------------------|
| •  | £30,000term loan A, maturing July 19, 2009;and |

|              |                                                                                                    |
|--------------|----------------------------------------------------------------------------------------------------|
| •  | £20,000 revolving loan Bmaturing July 19, 2009 which may be drawn upon until August 18,2004. |

Repayment of the term loan A commences on January 19, 2005and continues semi-annually until final maturity. Repayment of loan Bshall be on the last day of its interest period. Both A and B loansbear interest at rates equal to LIBOR (if sterling) or EURIBOR (ifeuros) plus any bank mandatory costs (if applicable) plus 0.70%to 0.90% per annum (depending on consolidated debt toconsolidated profit ratios). As of September 30, 2004, the Company hadoutstanding borrowings of $53,982 and $8,997 relating to term loan Aand revolving loan B, respectively, under the New Senior CreditFacility, that bore interest at a rate of 5.66%.

The NewSenior Credit Facility agreement is based on the U.K.'s LoanMarkets Association Multicurrency Term and Revolving Facilitiesagreement which is a standard form designed to be commerciallyacceptable to the corporate lending market.

Subject to certainexceptions, the New Senior Credit Facility prohibits or restricts thefollowing, among other things:

|              |                                                |
|--------------|------------------------------------------------|
| •  | incurringliens and granting securityinterests; |

|              |                                   |
|--------------|-----------------------------------|
| •  | incurring additionalindebtedness; |

|              |                                              |
|--------------|----------------------------------------------|
| •  | making certain fundamentalcorporate changes; |

|              |                                                                                         |
|--------------|-----------------------------------------------------------------------------------------|
| •  | paying dividends(including the payment of dividends to the Company by itssubsidiaries); |

|              |                                                            |
|--------------|------------------------------------------------------------|
| •  | making specifiedinvestments, acquisitions or disposals;and |

|              |                                                    |
|--------------|----------------------------------------------------|
| •  | entering into certain transactionswith affiliates. |

F-16

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ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

The New Senior Credit Facility containsaffirmative and negative financial covenants customarily found inagreements of this kind, including the maintenance of certain financialratios, such as debt to earnings (including amounts provided fordepreciation and amortization), earnings (before interest and taxes) tointerest expense, minimum net worth, maximum ancillary facilitiesindebtedness and the prohibition of off balance sheet funding. TheCompany is also obligated to ensure that the guarantors of the NewSenior Credit Facility must not at any time represent less than90% of the consolidated gross assets, turnover or earningsbefore interest and taxes of the U.K. subsidiaries. As of September 30,2004, the Company was in compliance with such covenants.

AtSeptember 30, 2003, outstanding borrowings under the Old Senior CreditFacility and Mezzanine Loan consisted of thefollowing:

|                               |  |        |         |              |  |                |  |                |  |  |  |  |  |  |
|-------------------------------|--|--------|---------|--------------|--|----------------|--|----------------|--|--|--|--|--|--|
| Facility                      |  | 2003   |         | InterestRate |  | Final Maturity |
| Seniorcredit facilities:      |  |
| Term loanA                    |  | $      | 26,840  |         |  | LIBOR+ 2.00%   |  | Dec. 17,2005   |
| Term loanC                    |  |   | 83,355  |         |  | LIBOR + 3.50%  |  | Jun.30, 2007   |
| Total senior creditfacilities |  |   | 110,195 |         |  |
| Mezzanine termloan(1)         |  |   | 17,490  |         |  | LIBOR +7.00%   |  | Dec. 17, 2007  |
| Notespayable                  |  |   | 37,693  |         |  | 2.65% to5.25%  |  | Sept. 27, 2004 |
| Totaldebt                     |  |   | 165,378 |         |  |
| Less currentmaturities        |  |   | 46,698  |         |  |
| Net long-termdebt             |  | $      | 118,680 |         |  |
|                               |

|  |
|--|
|  |  |
|  |

|     |                                                                |
|-----|----------------------------------------------------------------|
| (1) | Netof unamortized discount of $1,394 as of September 30, 2003. |

As of September 30, 2003, the Company had outstanding borrowings of$110,195 under the Old Senior Credit Facility that bore interest at arate of 5.63% to 7.13%.

Subject to certainexceptions, the Old Senior Credit Facility prohibited or restricted theincurrence of liens, the incurrence of additional indebtedness, certainfundamental corporate changes, dividends (including distributions tothe Company), the making of specified investments and certaintransactions with affiliates. In addition, the Senior Credit Facilitycontained affirmative and negative financial covenants customarilyfound in agreements of this kind, including the maintenance of certainfinancial ratios, such as senior interest coverage, debt to earningsbefore interest, taxes, depreciation and amortization, fixed chargecoverage and minimum net worth. At September 30, 2003, the Company wasin compliance with such covenants.

The loans under the OldSenior Credit Facility were collateralized by, among other things, alien on substantially all of Allied Holding's and itssubsidiaries' assets, a pledge of Allied Holding'sownership interest in its subsidiaries and guaranties by AlliedHolding's subsidiaries.

The Mezzanine Loan contained otherterms and conditions substantially similar to those contained in theOld Senior Credit Facility. As of September 30, 2003, borrowings underthe Mezzanine Loan bore interest at a rate of 10.63%.

Notes Due in Connection with Acquisitions.    In fiscal2004, the Company repaid, through Allied Holding, notes payable of$38,740 issued in connection with the acquisition of certain U.K.flexible staffing agencies. In fiscal 2003, the Company repaid, throughAllied Holding, 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. The notes payable were secured by theCompany's previous senior credit lender which required theCompany to keep an amount on deposit for the sole purpose of repaying

F-17

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ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

the notes payable. At September 30, 2004,the Company had one outstanding note payable of $1,799 that boreinterest at a rate of 5.25%. At September 30, 2003, the Companyhad outstanding notes payable of $37,693 that bore interest at ratesranging from 2.65% to 5.25%. The related cash restrictedto the payment of such notes has been classified as current in theaccompanying Consolidated Balance Sheets.

Guarantees.    The New Senior Credit Facility is secured bya first priority lien on the assets of the Allied Healthcare GroupLimited and certain of its subsidiaries. Together with AlliedHealthcare Group Limited and certain of its subsidiaries, the Companyis guaranteeing the debt and other obligations of certain wholly-ownedU.K. subsidiaries under the New Senior Credit Facility. At September30, 2004, the amounts guaranteed, which approximate the amountsoutstanding, totalled $62,979. The Company's U.K. subsidiariesguaranteed the debt and other obligations of certain wholly-owned U.K.subsidiaries under the Company's previous agreements with thesenior collateralized term and revolving credit facility, mezzanineindebtedness and various notes issued in connection with theacquisition of certain U.K. flexible staffing agencies.   AtSeptember 30, 2003, the amounts guaranteed, which approximated theamounts outstanding, totalled $166,772.

DerivativeInstrument.    On March 20, 2003, upon the expiration of theCompany's prior Rate Cap and Floor Agreement, the Company enteredinto a Rate Cap and Floor Collar Agreement that caps its interest rateat LIBOR of 5.50% and its interest floor at LIBOR of4.47%, subject to special provisions, on approximately $89,970of the Company's floating rate debt under a contract whichexpires March 20, 2008. In accordance with FAS No. 133,"Accounting for Certain Derivative Instruments andCertain Hedging Activities," as amended by FAS No. 138and related implementation guidance, the Company has calculated thefair value of the interest cap and floor derivative to be an asset of$312 at September 30, 2004 and a liability of $211 at September 30,2003. In addition, changes in the value from period to period of theinterest cap and floor derivative are recorded as an adjustment tointerest expense.

Annual maturities of long-term debt for eachof the next five yearsare:

|                             |  |        |         |        |  |  |
|-----------------------------|--|--------|---------|--------|--|--|
| **Yearending September30,** |  |
| 2005                        |  | $      | 12,595  |   |
| 2006                        |  |   | 10,796  |   |
| 2007                        |  |   | 10,796  |   |
| 2008                        |  |   | 10,796  |   |
| 2009                        |  |   | 19,795  |   |
| Thereafter                  |  |   | — |   |
|                        |  | $      | 64,778  |   |
|                             |

7.    CorporateReorganization:

On July 25, 2002, the Company consummated areorganization (the "Reorganization").Pursuant to the Reorganization, equity investments in one subsidiary,Allied Holdings and subordinated debt investments in a secondsubsidiary, Allied Healthcare Group Limited ("AlliedHealthcare (UK)"), were exchanged for shares of theCompany's common stock and shares of the Company's newSeries A preferred stock. The net effect of the Reorganization was thatAllied Holdings became an indirect wholly-owned subsidiary of theCompany and the senior subordinated debt investments in AlliedHealthcare (UK) were exchanged for shares of the Company's SeriesA preferred 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 staffing

F-18

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ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

services market and, effectively convert theequity and subordinated debt investments in the Company's U.K.subsidiaries into direct investments in the Company. TheCompany's management believes that the Reorganization resulted inthe Company having a more straight-forward and integrated managementand corporate structure.

In the Reorganization, accrued andunpaid interest owed to the holders of the senior subordinatedpromissory notes (the "Notes") issued byAllied Healthcare (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 Loan Note holderswere 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 Allied Holdings notalready held by the Company and all of the senior subordinated debtinvestments in Allied Healthcare (UK). The holders of the Series Apreferred stock and the Company agreed to a fixed exchange rate of$1.58 set forth in an amendment to the Company's certificate ofincorporation defining the rights of the Series A preferred stock. Thecommon shares were valued at $3.91 per share which represented theclosing price on AMEX of the Company's stock at April 24, 2002,the date of the Reorganization Agreement. The redeemable convertiblepreferred stock issued in connection with the Reorganization was valuedbased on the exchange ratio determined pursuant to the ReorganizationAgreement. At issuance, as the value of the common stock into which thepreferred shares would convert was less than the fair value of theredeemable preferred stock, there was no beneficial conversionfeature.

The Company has registered, at its expense, the resaleof all of the shares of common stock issued in the Reorganization andthe shares of common stock issueable upon conversion of the Series Apreferred stock.

The following table displays the unaudited proforma results of operations and related per share information as if theReorganization was completed as of October 1, 2001. The unaudited proforma results principally reflect the reversal of interest expense, netof tax, related to the Notes of Allied Healthcare (UK) to reflect theexercise of equity warrants and the related exchange of Allied Holdingsshares for the Company's new Series A preferred stock.

|                                                    |  |                             |         |        |  |  |
|----------------------------------------------------|--|-----------------------------|---------|--------|--|--|
|                                               |  | YearEndedSeptember 30, 2002 |
| Netrevenues                                        |  | $                           | 242,828 |   |
| Grossprofit                                        |  |                        | 66,079  |   |
| Operatingincome                                    |  |                        | 19,536  |   |
| Netincome                                          |  |                        | 4,984   |   |
| Net income available for commonshareholders        |  |                        | 869     |   |
| Income per share of commonstock -Basic and Diluted |  | $                           | 0.04    |   |
|                                                    |

Theabove pro forma results, exclude the following one time andnon-recurring adjustments related to theReorganization:

|              |                                                                                                                                                                                                                                 |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company recognizedcompensation expense of $1,619 on the exchange of 2,523management's and employees' redeemable shares of AlliedHolding for 414 shares of the Company's common stock calculatedusing a net exercise method. |

F-19

----

ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

|              |                                                                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | 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 a chargeof $925 to reflect the write off of deferred costs associated with theNotes of Allied Healthcare (UK) issued in 1999, which were exchanged inthe Reorganization. |

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

8.    Series APreferred Stock:

In the Reorganization, the Company issued7,774 shares of its Series A preferred stock with an aggregateliquidation preference of £22,287 ($35,213 at the fixed exchangerate of $1.58 set forth in an amendment to our certificate ofincorporation defining the rights of the Series A preferred stock). Theshares of Series A preferred stock were issued to certain equityinvestors in Allied Holdings in exchange for 22,287 ordinary shares ofAllied Holdings.

During March through May of 2004, the Companyentered into conversion agreements (the "ConversionAgreements") with all of the holders of our Series Apreferred stock. Pursuant to the Conversion Agreements, such holdersagreed to convert their shares into a like number of shares of commonstock upon the consummation of the Company's public offering inreturn for the payment of accrued but unpaid dividends and a conversionfee in the aggregate amount of $2,034. The Conversion Agreementsprovide that if, at any time during the six-month period beginning onthe effective date of the registration statement, the shares of theCompany's common stock trade at $11.32 for ten days during anyperiod of thirty consecutive trading days (such tenth day being the"Threshold Date"), then the holders shallrepay a portion of their conversion fee to the Company. The portion ofthe conversion fee to be repaid to the Company shall be equal to theproduct of the conversion fee and a fraction, the numerator of whichshall be the number of days remaining in the six-month period after theThreshold Date and the denominator of which shall be 180. Pursuant tothe Conversion Agreements, on July 7, 2004, all 7,774 outstandingshares of Series A preferred stock were converted into a like number ofshares of common stock. The Company paid to the holders of the Series Apreferred stock an aggregate of $7,388 in accrued and unpaid dividendsand $2,034 in conversion fees in connection with the conversion.

On July 20, 2004, the Company filed a certificate of amendment toits certificate of incorporation that eliminated all references in itscertificate of incorporation to the Series A preferred stock, of whichthere were 8,000 authorized shares. Pursuant to such certificate ofamendment, the Series A preferred stock was returned to the status ofauthorized but unissued shares of "blankcheck" preferred stock.

The following tablepresents the changes in the carrying amount of the Series A preferredstock for the years ended September 30, 2004 and2003:

|                                                                        |  |        |         |         |  |        |         |        |  |  |
|------------------------------------------------------------------------|--|--------|---------|---------|--|--------|---------|--------|--|--|
|                                                                   |  | 2004   |         | 2003    |
| Balanceat October 1, 2003 and 2002, respectively, net of issuancecosts |  | $      | 33,151  |    |  | $      | 32,254  |   |
| Accretion ofissuance costs, based on interest ratemethod               |  |   | 366     |    |  |   | 482     |   |
| Foreign exchangeeffect                                                 |  |   | — |    |  |   | 415     |   |
| Write-off ofremaining issuancecosts                                    |  |   | 1,696   |    |  |   | — |   |
| Conversion intocommonshares                                            |  |   | (35,213 | )  |  |   | — |   |
| Balanceat September 30, 2004 and 2003,respectively                     |  |   | — |    |  |   | 33,151  |   |
|                                                                        |

F-20

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ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

9.    Common Stock Offering:

On July 1, 2004, the Securities and Exchange Commission declared aregistration statement on Form S-1 filed by the Company effective and,on July 7, 2004, the Company issued 14,500 shares of its common stockpursuant to the registration statement (the"Offering"). Each share was sold to thepublic at a price of $4.90 per share. The Company realizedapproximately $65,715 in net proceeds from the sale of its shares ofcommon stock**.**This amount, together with the initial borrowingsavailable under the New Senior Credit Facility were used (1) to repaythe Old Senior Credit Facility and Mezzanine Loan; (2) to pay accruedbut unpaid dividends on the Series A preferred stock; and (3) to pay aconversion fee to the holders of the Series A preferred stock. Anyremaining amounts from the initial borrowings will be used for generalcorporate purposes and acquisitions.

10. Shareholders'Equity:

On April 22, 2002, the Company issued 684 shares ofcommon stock to Mr. Aitken and 487 shares of common stock to Ms. Eames.Simultaneously with this issuance, the Company entered into agreementswith Mr. Aitken and Ms. Eames in which the Company agreed to providethem (through cash bonuses and loans) with substantially all of thecash necessary for them to pay the income taxes that they are expectedto incur as a result of the issuances. Pursuant to these agreements,the Company made a cash bonus payment to Mr. Aitken of $1,401 andloaned him $550 and made a cash bonus payment to Ms. Eames of $846 andloaned her $390. The loans, which had been issued on a recourse basis,provide for interest at the rate of 4.65% compounded annually.All outstanding principal and accrued interest will be due on theearlier of April 30, 2007 or the date on which the employee disposes ofthe common shares received in accordance with the agreements. Ascollateral for the loans the employees have pledged an aggregate of1,155 fully vested non-qualified stock options held by the employeesand any proceeds received from the sale of the underlying securities.In addition, pursuant to these agreements, Allied Holdings 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 December 2, 2003, Mr. Aitken, theCompany's Chairman of the Board, and Ms. Eames, who was thenserving as the Company's Chief Executive Officer, repaid in fullthe principal and accrued interest on the promissory notes issued bythem to the Company in connection with the Reorganization in fiscal2002. The principal and accrued interest repaid aggregated $591 and$419, respectively. The loans were repaid by delivery to the Company of104 and 73 shares of the Company's common stock held by Mr.Aitken and Ms. Eames, respectively, valued at $5.70 per share, theclosing price on the day prior to the repayment date. The sharesdelivered by Mr. Aitken and Ms. Eames are held by the Company astreasury shares. The Company also agreed to reimburse Mr. Aitken andMs. Eames for the taxes incurred by them on the disposition of theshares to the Company, which were $83 and $51, respectively.

OnApril 22, 2002, the Company entered into a Stock Purchase Agreementwith Hyperion TWH Fund II LLC, Triumph Partners III, L.P. and TriumphIII Investors, L.P pursuant to which the Company issued, on April 30,2002, an aggregate of 750 shares of the Company's common stock ata per share purchase price of $4.25 per share. In addition, the Companyregistered, at its expense, the resale of such shares.

InJanuary 2001, the Company initiated a stock repurchase program, wherebythe Company may purchase up to approximately $1,000 of its outstandingcommon stock in open market or privately 

F-21

----

ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

negotiated transactions. In May 2003, theCompany initiated another stock repurchase program, whereby the Companymay purchase up to an additional $3,000 of its outstanding common stockin open market transactions or in privately negotiated transactions. Asof September 30, 2004, the Company had acquired 408 shares for anaggregate purchase price of $1,285 pursuant to its stock repurchaseprograms, which are reflected as treasury stock in the consolidatedbalance sheet at September 30, 2004.

11.    IncomeTaxes:

The provision for income taxes from continuingoperations for the years ended September 30, 2004, 2003 and 2002 issummarized as follows:

|                          |  |        |         |         |  |        |         |         |  |        |         |        |  |  |
|--------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|--------|--|--|
|                     |  | 2004   |         | 2003    |  | 2002   |
| Current:                 |  |
| Federal                  |  | $      | (68     | )  |  | $      | (1,806  | )  |  | $      | — |   |
| Foreign                  |  |   | 4,885   |    |  |   | 7,622   |    |  |   | 4,770   |   |
| Deferred:                |  |
| Federal                  |  |   | — |    |  |   | — |    |  |   | — |   |
| Foreign                  |  |   | 1,030   |    |  |   | (906    | )  |  |   | 201     |   |
| Provisionfor incometaxes |  | $      | 5,847   |    |  | $      | 4,910   |    |  | $      | 4,971   |   |
|                          |

Deferredincome taxes reflect the net tax effects of temporary differencesbetween the carrying amounts of assets and liabilities recorded forfinancial reporting purposes and the amounts used for income taxpurposes. Significant components of the Company's deferred taxassets and liabilities as of September 30, 2004 and 2003 are asfollows:

|                                       |  |        |         |         |  |        |         |         |  |  |
|---------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                  |  | 2004   |         | 2003    |
| Deferredtax assets:                   |  |
| Provision for doubtfulaccounts        |  | $      | — |    |  | $      | 958     |    |
| Accruedexpenses                       |  |   | 260     |    |  |   | 233     |    |
| Federal netoperating losscarryforward |  |   | 26,402  |    |  |   | 24,450  |    |
| State netoperating losscarryforward   |  |   | 9,046   |    |  |   | 1,998   |    |
| Depreciation                          |  |   | 6       |    |  |   | 7       |    |
| Intangibleassets                      |  |   | 104     |    |  |   | 96      |    |
| Capital losscarryforward              |  |   | — |    |  |   | 768     |    |
| Charitablecontribution                |  |   | — |    |  |   | 8       |    |
| AMTcredit                             |  |   | — |    |  |   | 68      |    |
| Other,net                             |  |   | 14      |    |  |   | 83      |    |
| Grossdeferred taxassets               |  |   | 35,832  |    |  |   | 28,669  |    |
| Valuationallowance                    |  |   | (35,832 | )  |  |   | (27,645 | )  |
| Netdeferred taxassets                 |  |   | — |    |  |   | 1,024   |    |
| Deferredtaxliabilities:               |  |
| Depreciation                          |  |   | (1,054  | )  |  |   | (945    | )  |
| Intangibleassets                      |  |   | (1,292  | )  |  |   | (606    | )  |
| Other,net                             |  |   | (94     | )  |  |   | — |    |
| Deferredtaxliabilities                |  |   | (2,440  | )  |  |   | (1,551  | )  |
| Netdeferred taxliability              |  | $      | (2,440  | )  |  | $      | (527    | )  |
|                                       |

F-22

----

ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

The Company has recorded a fullvaluation allowance against it U.S. deferred tax assets as managementbelieves it is not more likely than not that these deferred tax assetswill be utilized prior to their expiration. Subsequent recognition ofthese deferred tax assets would result in an income tax benefit in theyear of such recognition.

As of September 30, 2004, the Companyhas a Federal net operating loss carryforward of approximately $77,652which if unused, will expire in the years 2018 through 2023.

Reconciliations of the differences between income taxes computed atFederal statutory tax rates and consolidated provisions for incometaxes on income before income taxes and discontinued operations for theyears ended September 30, 2004, 2003 and 2002 are asfollows:

|                                                                                  |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                             |  | 2004   |         | 2003    |  | 2002   |
| Incometaxes at34%                                                                |  | $      | 5,343   |    |  | $      | 5,569   |    |  | $      | 3,021   |    |
| Taxcontingency                                                                   |  |   | — |    |  |   | (1,874  | )  |  |   | — |    |
| Nondeductibleexpenses, primarily amortization and write down of intangibleassets |  |   | 5       |    |  |   | 6       |    |  |   | 943     |    |
| Nondeductiblecompensation                                                        |  |   | 304     |    |  |   | 94      |    |  |   | — |    |
| Valuationallowance                                                               |  |   | 1,071   |    |  |   | 1,304   |    |  |   | 1,896   |    |
| Foreigntax,net                                                                   |  |   | (876    | )  |  |   | (189    | )  |  |   | — |    |
| Other,net                                                                        |  |   | — |    |  |   | — |    |  |   | (889    | )  |
| Provisionfor incometaxes                                                         |  | $      | 5,847   |    |  | $      | 4,910   |    |  | $      | 4,971   |    |
|                                                                                  |

Provisionhas not been made for U.S. or additional foreign taxes on approximately$47,365 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, 2004, 2003 and2002 was $19,970, $20,307 and $14,271, respectively.

12.    Stock Option Plan and Warrants:

StockOptions:

Under the Company's 2002 Option Plan("Option Plan"), options may be granted bythe Compensation Committee of the Board of Directors which determinesthe exercise price, vesting provisions and term of such grants. Inaccordance with the terms of the Option Plan, the number of sharesavailable for issuance increases by one percent of the number of sharesof Common Stock outstanding as of the first day of each fiscalyear.

F-23

----

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, 2004, 2003and2002:

|                                                              |  |                      |        |                                 |  |                      |      |                                 |  |                       |        |                                 |  |        |      |        |  |        |         |         |  |        |      |        |  |  |
|--------------------------------------------------------------|--|----------------------|--------|---------------------------------|--|----------------------|------|---------------------------------|--|-----------------------|--------|---------------------------------|--|--------|------|--------|--|--------|---------|---------|--|--------|------|--------|--|--|
|                                                         |  | 2004                 |        | 2003                            |  | 2002                 |
|                                                         |  | NumberOfStockOptions |        | WeightedAverageExercisePrice($) |  | NumberofStockOptions |      | WeightedAverageExercisePrice($) |  | Number ofStockOptions |        | WeightedAverageExericsePrice($) |
| Outstanding beginning ofyear                                 |  |                 | 2,254  |                            |  |                 | 4.58 |                            |  |                  | 1,530  |                            |  |   | 4.24 |   |  |   | 1,394   |    |  |   | 4.22 |   |
| Granted                                                      |  |                 | 713    |                            |  |                 | 5.70 |                            |  |                  | 1,415  |                            |  |   | 4.30 |   |  |   | 205     |    |  |   | 5.41 |   |
| Exercised                                                    |  |                 | (87    | )                          |  |                 | 4.63 |                            |  |                  | (403   | )                          |  |   | 2.40 |   |  |   | — |    |  |
| Forfeited                                                    |  |                 | (234   | )                          |  |                 | 4.68 |                            |  |                  | (288   | )                          |  |   | 4.42 |   |  |   | (69     | )  |  |   | 7.25 |   |
| Outstandingend ofyear                                        |  |                 | 2,646  |                            |  |                 | 4.87 |                            |  |                  | 2,254  |                            |  |   | 4.58 |   |  |   | 1,530   |    |  |   | 4.24 |   |
| Weighted-averagefair value of options granted during theyear |  |                 |   |                            |  |                 | 5.70 |                            |  |                  |   |                            |  |   | 3.29 |   |  |   |    |    |  |   | 2.93 |   |
| Availablefor future grants                                   |  |                 | 1,556  |                            |  |
|                                                              |

On May28, 1997, the Company adopted a stock option plan for non-employeedirectors (the "Directors Plan") which givesnon-employee directors options to purchase up to 100 shares of commonstock. As of September 30, 2004, no options have been granted under theDirectors Plan. Options under the Directors Plan may be granted by theBoard of Directors which determines the exercise price, vestingprovisions and term of such grants.

A summary of the 2,646options outstanding as of September 30, 2004 is asfollows:

|                         |  |                   |       |                                                       |  |                                                  |      |                   |  |                                                       |     |        |  |        |       |        |  |        |      |        |  |  |
|-------------------------|--|-------------------|-------|-------------------------------------------------------|--|--------------------------------------------------|------|-------------------|--|-------------------------------------------------------|-----|--------|--|--------|-------|--------|--|--------|------|--------|--|--|
| RangeOfExericsePrice($) |  | NumberOutstanding |       | WeightedAverageExercise Priceof OptionsOutstanding($) |  | Weighted AverageRemainingContractual LifeInYears |      | NumberExercisable |  | WeightedAverageExercise Priceof OptionsExercisable($) |
| 1.75                    |  |              | 345   |                                                  |  |                                             | 1.75 |              |  |                                                  | 1.2 |   |  |   | 345   |   |  |   | 1.75 |   |
| 3.83–5.70         |  |              | 1,801 |                                                  |  |                                             | 4.81 |              |  |                                                  | 8.8 |   |  |   | 1,211 |   |  |   | 5.00 |   |
| 7.25                    |  |              | 500   |                                                  |  |                                             | 7.25 |              |  |                                                  | 3.3 |   |  |   | 500   |   |  |   | 7.25 |   |
|                    |  |              | 2,646 |                                                  |  |                                             | 4.87 |              |  |                                                  | 6.7 |   |  |   | 2,056 |   |  |   | 5.00 |   |
|                         |

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 as a deferred cost and is being amortized over the twoyear life of the agreement. For the years ended September 30, 2004 and2003, the Company recorded $302 and $41, respectively, in amortizationrelated to such warrants.

13.    Commitments andContingencies:

Acquisition Agreements:

Related to theCompany's acquisitions of certain flexible staffing agencies, theCompany has entered into agreements to pay additional amounts, in cash,of up to $10,501 at September 30, 2004, in contingent considerationdependent upon future earnings of such acquired entities.

F-24

----

ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

Employment Agreements:

TheCompany has three employment agreements that provided for minimumaggregate annual compensation of $988 in fiscal 2004.

InSeptember 2001, the Company entered into an employment agreement withMr. Aitken. The employment agreement has a three-year term (subject toautomatic renewal for successive additional one-year periods unlesseither party provides the other with notice of intent to terminate theagreement at least 90 days before the then applicable terminationdate). The employment agreement provides that the Company willnegotiate in good faith, commencing not less than 90 days prior to theanniversary date of the employment agreement, the amount, if any, offuture salary increases. The salary of Mr. Aitken for fiscal 2005 is£250,000. Mr. Aitken's employment agreement provides thatif his employment is terminated during the term of the agreement otherthan for cause, death or disability, or if, within six months of a"change in control" (as defined in theagreement) of the Company, Mr. Aitken or the Company terminates hisemployment, then (1) all stock options in the Company held by Mr.Aitken shall immediately vest and (2) Mr. Aitken will be entitled toreceive a cash payment of 2.9 times his average annual base salaryduring the twelve months preceding the change of control or thetermination of employment.

In September 2001, the Companyentered into an employment agreement with Ms. Eames, which was modifiedin November 2004. Pursuant to her employment agreement, as modified,Ms. Eames will serve as Executive Vice President of the Company untilMay 2006 at an annual salary of $200,000. Ms. Eames' employmentagreement, as amended, provides that if her employment is terminatedduring the term of the agreement other than for cause, death ordisability, then all stock options in the Company held by Mr. Eamesshall immediately vest and Ms. Eames shall be entitled to receive hersalary through May 2006.

In Deeds of Restrictive Covenantsentered into in 1999 with one of our U.K. subsidiaries, Mr. Aitken andMs. Eames have each agreed not to compete with the Company or itssubsidiaries for twelve months following termination of employmentwithout the Company's prior written consent.

The Companyhas also entered into an employment agreement with Mr. Murphy, itsChief Financial Officer. The employment agreement with Mr. Murphy isterminable by either party on six months' notice and providesthat Mr. Murphy will not compete against us for a period of twelvemonths following his termination of employment. Pursuant to hisemployment agreement, Mr. Murphy's salary is currently£165,000.

Operating Leases:

The Company hasentered into various operating lease agreements for office space andequipment. Certain of these leases provide for renewal options.

Future minimum rental commitments required under operating leasesthat have non-cancelable lease terms in excess of one year as ofSeptember 30, 2004 are asfollows:

|            |  |        |       |        |  |  |
|------------|--|--------|-------|--------|--|--|
| 2005       |  |   | 2,203 |   |
| 2006       |  |   | 1,812 |   |
| 2007       |  |   | 1,489 |   |
| 2008       |  |   | 1,008 |   |
| 2009       |  |   | 925   |   |
| Thereafter |  |   | 2,050 |   |
|       |  | $      | 9,487 |   |
|            |

Rentexpense under non-capitalized, non-cancelable lease agreements for theyears ended September 30, 2004, 2003 and 2002 amounted to $3,493,$2,749 and $2,002, respectively.

F-25

----

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 seeks injunctive reliefagainst this transaction, and damages, costs and attorneys' feesin unspecified amounts. The transaction subsequently closed and theplaintiff has, on numerous occasions, stipulated to extend thedefendants' time to respond to this suit.

Contingencies:

Some of the Company's subsidiarieswere Medicare Part B suppliers who submitted claims to the designatedcarrier who is the government's claims processing administrator.From time to time, the carrier may have requested an audit of MedicarePart B claims on a prepayment or postpayment basis. If the outcome ofany audit results in a denial or a finding of an overpayment, then theaffected subsidiary has appeal rights. Under postpayment auditprocedures, the supplier generally pays the alleged overpayment and canpursue appeal rights for a refund of any paid overpayment incorrectlyassessed against the supplier. Some of the subsidiaries currently areresponding to these audits and pursuing appeal rights in certaincircumstances.

The Company believes that it is in compliance, inall material respects, with the applicable provisions of the Federalstatutes, regulations and laws and applicable state laws together withall applicable laws and regulations of other countries in which theCompany operates. Due to the broad and sometimes vague nature of theselaws and regulations, there can be no assurance that an enforcementaction will not be brought against the Company, or that the Companywill not be found to be in violation of one or more of theseprovisions. At present, the Company cannot anticipate what impact, ifany, subsequent administrative or judicial interpretation of theapplicable Federal and state laws and those of other countries may haveon the Company's consolidated financial position, cash flows orresults of operations.

The Company is involved in various otherlegal proceedings and claims incidental to its normal businessactivities. The Company is vigorously defending its position in allsuch proceedings and, at September 30, 2004, has recorded an accrual ofapproximately $694 to cover its estimate for exposure related to thesematters. Management believes these matters, including the derivativesuit, should not have a material adverse impact on the consolidatedfinancial position, cash flows or results of operations of theCompany.

14.    Operations by Business Segments andGeographic Areas:

As disclosed in Note 3, the Company sold allof the issued and outstanding capital stock of its Home Healthcareoperations on April 16, 2003 and the Home Healthcare results ofoperations have been classified as discontinued operations. As a resultof this transaction, the Company no longer operates in the U.S. HomeHealthcare segment. Accordingly, during the years ended September 30,2004, 2003 and 2002, the Company's continuing operations were inthe U.K. The U.K. operations derive its revenues from flexiblehealthcare services, principally nursing and ancillary services, andprovision of respiratory therapy products to patients throughout mostof the U.K.

F-26

----

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, 2004,2003 and2002.

|                                               |  |                             |         |        |  |        |         |         |  |  |
|-----------------------------------------------|--|-----------------------------|---------|--------|--|--------|---------|---------|--|--|
|                                          |  | YearEnded September 30,2004 |
|                                          |  | U.K.Operations              |         | Total  |
| Netpatientservices                            |  | $                           | 317,393 |   |  | $      | 317,393 |    |
| Netrespiratory, medical equipment andsupplies |  |                        | 7,905   |   |  |   | 7,905   |    |
| Totalrevenues to unaffiliatedcustomers        |  | $                           | 325,298 |   |  | $      | 325,298 |    |
| Segmentoperatingprofit                        |  | $                           | 34,553  |   |  | $      | 34,553  |    |
| Corporateexpenses                             |  |                        |    |   |  |   | (4,926  | )  |
| Interest expense,net                          |  |                        |    |   |  |   | (13,727 | )  |
| Foreign exchangeloss                          |  |                        |    |   |  |   | (184    | )  |
| Income beforeincometaxes                      |  |                        |    |   |  | $      | 15,716  |    |
| Depreciationandamortization                   |  | $                           | 2,412   |   |  | $      | 2,412   |    |
| Corporatedepreciation andamortization         |  |                        |    |   |  |   | 7       |    |
| Totaldepreciation andamortization             |  |                        |    |   |  | $      | 2,419   |    |
| Identifiableassets, September 30,2004         |  | $                           | 277,675 |   |  | $      | 277,675 |    |
| Corporateassets                               |  |                        |    |   |  |   | 4,719   |    |
| Totalassets, September 30,2004                |  |                        |    |   |  | $      | 282,394 |    |
| Capitalexpenditures                           |  | $                           | 7,829   |   |  | $      | 7,829   |    |
| Corporatecapitalexpenditures                  |  |                        |    |   |  |   | — |    |
| Totalcapitalexpenditures                      |  |                        |    |   |  | $      | 7,829   |    |
|                                               |

|                                                      |  |                             |         |        |  |        |         |         |  |  |
|------------------------------------------------------|--|-----------------------------|---------|--------|--|--------|---------|---------|--|--|
|                                                 |  | Year EndedSeptember 30,2003 |
|                                                 |  | U.K.Operations              |         | Total  |
| Netpatientservices                                   |  | $                           | 287,964 |   |  | $      | 287,964 |    |
| Netrespiratory, medical equipment andsupplies        |  |                        | 6,415   |   |  |   | 6,415   |    |
| Totalrevenues to unaffiliatedcustomers               |  | $                           | 294,379 |   |  | $      | 294,379 |    |
| Segmentoperatingprofit                               |  | $                           | 31,497  |   |  | $      | 31,497  |    |
| Corporateexpenses                                    |  |                        |    |   |  |   | (3,822  | )  |
| Interest expense,net                                 |  |                        |    |   |  |   | (11,279 | )  |
| Foreign exchangeloss                                 |  |                        |    |   |  |   | (18     | )  |
| Income beforeincome taxes and discontinuedoperations |  |                        |    |   |  | $      | 16,378  |    |
| Depreciationandamortization                          |  | $                           | 1,976   |   |  | $      | 1,976   |    |
| Corporatedepreciation 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   |    |
| Corporatecapitalexpenditures                         |  |                        |    |   |  |   | 11      |    |
| Totalcapitalexpenditures                             |  |                        |    |   |  | $      | 4,026   |    |
|                                                      |

F-27

----

ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

|                                                                         |  |                             |         |        |  |        |         |         |  |  |
|-------------------------------------------------------------------------|--|-----------------------------|---------|--------|--|--------|---------|---------|--|--|
|                                                                    |  | YearEnded September 30,2002 |
|                                                                    |  | U.K.Operations              |         | Total  |
| Netpatientservices                                                      |  | $                           | 237,890 |   |  | $      | 237,890 |    |
| Netrespiratory, medical equipment andsupplies                           |  |                        | 4,938   |   |  |   | 4,938   |    |
| Totalrevenues to unaffiliatedcustomers                                  |  | $                           | 242,828 |   |  | $      | 242,828 |    |
| Segmentoperatingprofit                                                  |  | $                           | 27,786  |   |  | $      | 27,786  |    |
| Corporateexpenses                                                       |  |                        |    |   |  |   | (10,554 | )  |
| Interest expense,net                                                    |  |                        |    |   |  |   | (13,472 | )  |
| Gain on settlementof PIK interest                                       |  |                        |    |   |  |   | 5,143   |    |
| Foreignexchange loss                                                    |  |                        |    |   |  |   | (19     | )  |
| Incomebefore income taxes, minority interest and discontinuedoperations |  |                        |    |   |  | $      | 8,884   |    |
| Depreciationandamortization                                             |  | $                           | 1,321   |   |  | $      | 1,321   |    |
| Corporatedepreciation andamortization                                   |  |                        |    |   |  |   | 16      |    |
| Totaldepreciation andamortization                                       |  |                        |    |   |  | $      | 1,337   |    |
| Identifiableassets, September 30,2002                                   |  | $                           | 256,407 |   |  | $      | 256,407 |    |
| Assetsof discontinuedoperations                                         |  |                        |    |   |  |   | 8,733   |    |
| Corporateassets                                                         |  |                        |    |   |  |   | 2,973   |    |
| Totalassets, September 30,2002                                          |  |                        |    |   |  | $      | 268,113 |    |
| Capitalexpenditures                                                     |  | $                           | 3,082   |   |  | $      | 3,082   |    |
| Corporatecapitalexpenditures                                            |  |                        |    |   |  |   | 9       |    |
| Totalcapitalexpenditures                                                |  |                        |    |   |  | $      | 3,091   |    |
|                                                                         |

Thenet assets for the U.K. Operations were $131,216 and $109,556 as ofSeptember 30, 2004 and 2003, respectively.

15.    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 $3, $35 and $30 for the years ended September 30, 2004,2003 and 2002, respectively.

In addition to the U.S. plandescribed above, certain of the Company's U.K. subsidiaries alsosponsor personal pension plans. The plans operate as salary reductionplans, which also allows for lump sum contributions, wherebyparticipants contribute anywhere from 1% to 40% of theircompensation, not to exceed the maximum available under the U.K. taxlaws. The Company may make an additional contribution (which variesaccording to employee contracts and contribution elections) which is inthe form of cash. The Company's contributions to the U.K. planswere $89, $131 and $252 for the years ended September 30, 2004, 2003and 2002, respectively.

F-28

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ALLIEDHEALTHCARE INTERNATIONAL, INC.Notes to Consolidated FinancialStatements (Continued)(In thousands, except per sharedata)

16. Selected Quarterly Financial Data(Unaudited):

The following table presents the comparativeunaudited quarterly results for the years ended September 30, 2004 and2003:

|                                                             |  |              |        |          |  |          |        |               |  |   |        |        |  |   |         |           |  |  |
|-------------------------------------------------------------|--|--------------|--------|----------|--|----------|--------|---------------|--|---|--------|--------|--|---|---------|-----------|--|--|
| 2004Quarter Ended                                           |  | December 31, |        | March31, |  | June 30, |        | September 30, |
| Totalrevenues                                               |  | $            | 78,543 |     |  | $        | 80,167 |          |  | $ | 81,914 |   |  | $ | 84,674  |      |
| Grossprofit                                                 |  | $            | 22,310 |     |  | $        | 22,533 |          |  | $ | 23,586 |   |  | $ | 24,742  |      |
| Netincome                                                   |  | $            | 1,762  |     |  | $        | 2,643  |          |  | $ | 3,299  |   |  | $ | 2,165   | (a)  |
| Netincome (loss) available to commonshareholders            |  | $            | 706    |     |  | $        | 1,574  |          |  | $ | 2,208  |   |  | $ | (1,639) | (b)  |
| Basicand diluted net income (loss) per share of commonstock |  | $            | 0.03   |     |  | $        | 0.07   |          |  | $ | 0.10   |   |  | $ | (0.04   | )    |
|                                                             |

|     |                                                                                                                         |
|-----|-------------------------------------------------------------------------------------------------------------------------|
| (a) | Includescharges of $2,906, net of tax, related to write-offs associated withrefinancing the Old Senior Credit Facility. |

|     |                                                                                     |
|-----|-------------------------------------------------------------------------------------|
| (b) | Includes charges of $3,730 related to the conversionof the Series A preferredstock. |

|                                                      |  |              |        |          |  |          |        |               |  |   |        |        |  |   |         |        |  |  |
|------------------------------------------------------|--|--------------|--------|----------|--|----------|--------|---------------|--|---|--------|--------|--|---|---------|--------|--|--|
| 2003Quarter Ended                                    |  | 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  | (c)      |  | $ | 2,120  |   |  | $ | 4,022   |   |
| Netincome available to commonshareholders            |  | $            | 1,309  |     |  | $        | 2,552  |          |  | $ | 1,117  |   |  | $ | 2,988   |   |
| Basicand diluted net income per share of commonstock |  | $            | 0.06   |     |  | $        | 0.11   |          |  | $ | 0.05   |   |  | $ | 0.13    |   |
|                                                      |

|     |                                                                                                                                                                             |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (c) | Includesbenefit of $1,874 related to the reversal of an estimated income taxliability for a business that was previously discontinued and no longerhas any tax liabilities. |

17.    Subsequent Events:

In November 2004, the Company acquired two flexible staffingagencies for approximately $3,289 in cash and additional contingentcash consideration of up to $3,142 dependent upon future earnings ofthe acquired entities.

F-29

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ALLIEDHEALTHCARE INTERNATIONAL INC. (PARENT COMPANY ONLY) SCHEDULEI—CONDENSED FINANCIAL INFORMATION BALANCE SHEETS(In thousands, except per sharedata)

|                                                                                                                                                                             |  |                   |         |                    |  |        |         |         |  |  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|-------------------|---------|--------------------|--|--------|---------|---------|--|--|
|                                                                                                                                                                        |  | September30, 2004 |         | September 30, 2003 |
| **ASSETS**                                                                                                                                                                  |  |              |    |               |  |   |    |    |
| **Currentassets:**                                                                                                                                                          |  |              |    |               |  |   |    |    |
| Cash and cashequivalents                                                                                                                                                    |  | $                 | 1,906   |               |  | $      | 5,813   |    |
| Receivablesfromsubsidiaries                                                                                                                                                 |  |              | 103,013 |               |  |   | 46,242  |    |
| Prepaidexpenses and otherassets                                                                                                                                             |  |              | 431     |               |  |   | 897     |    |
| Totalcurrentassets                                                                                                                                                          |  |              | 105,350 |               |  |   | 52,952  |    |
|                                                                                                                                                                        |  |              |    |               |  |   |    |    |
| Propertyand equipment, net                                                                                                                                                  |  |              | 15      |               |  |   | 21      |    |
| Investmentinsubsidiaries                                                                                                                                                    |  |              | 82,317  |               |  |   | 60,699  |    |
| Goodwill                                                                                                                                                                    |  |              | 2,300   |               |  |   | 2,300   |    |
| Otherassets                                                                                                                                                                 |  |              | 66      |               |  |   | 327     |    |
| Totalassets                                                                                                                                                                 |  | $                 | 190,048 |               |  | $      | 116,299 |    |
|                                                                                                                                                                        |  |              |    |               |  |   |    |    |
| **LIABILITIESAND SHAREHOLDERS'EQUITY**                                                                                                                                      |  |              |    |               |  |   |    |    |
|                                                                                                                                                                        |  |
| **Currentliabilities:**                                                                                                                                                     |  |              |    |               |  |   |    |    |
| Dividendspayable                                                                                                                                                            |  | $                 | — |               |  | $      | 4,464   |    |
| Liabilitiesof discontinuedoperations                                                                                                                                        |  |              | 690     |               |  |   | 690     |    |
| Accountspayable                                                                                                                                                             |  |              | 246     |               |  |   | 676     |    |
| Accruedexpenses                                                                                                                                                             |  |              | 2,042   |               |  |   | 1,983   |    |
| Taxespayable                                                                                                                                                                |  |              | — |               |  |   | 68      |    |
| Totalcurrentliabilities                                                                                                                                                     |  |              | 2,978   |               |  |   | 7,881   |    |
|                                                                                                                                                                        |  |              |    |               |  |   |    |    |
| Long-termliabilities                                                                                                                                                        |  |              | 93      |               |  |   | 104     |    |
| Totalliabilities                                                                                                                                                            |  |              | 3,071   |               |  |   | 7,985   |    |
|                                                                                                                                                                        |  |              |    |               |  |   |    |    |
| Commitmentsandcontingencies                                                                                                                                                 |  |              |    |               |  |   |    |    |
|                                                                                                                                                                        |  |              |    |               |  |   |    |    |
| Redeemableconvertible Series A preferred stock, $.01 par value; authorized 8,000shares, 7,774 shares issued and outstanding at September 30, 2003(liquidation value$35,213) |  |              | — |               |  |   | 33,151  |    |
|                                                                                                                                                                        |  |              |    |               |  |   |    |    |
| Shareholders'equity:                                                                                                                                                        |  |              |    |               |  |   |    |    |
| Preferred stock, $.01 parvalue; authorized 10,000 shares, no shares issued and outstanding atSeptember 30,2004                                                              |  |              | — |               |  |   | — |    |
| Common stock,$.01 par value; authorized 80,000 shares, issued 45,050 and 22,689shares,respectively                                                                          |  |              | 450     |               |  |   | 227     |    |
| Additionalpaid-incapital                                                                                                                                                    |  |              | 236,988 |               |  |   | 142,897 |    |
| Accumulatedother comprehensiveincome                                                                                                                                        |  |              | 10,778  |               |  |   | 3,140   |    |
| Accumulateddeficit                                                                                                                                                          |  |              | (58,945 | )             |  |   | (68,814 | )  |
|                                                                                                                                                                        |  |              | 189,271 |               |  |   | 77,450  |    |
| Lessnotes receivable fromofficers                                                                                                                                           |  |              | — |               |  |   | (1,002  | )  |
| Less costof treasury stock (585 and 408 shares,respectively)                                                                                                                |  |              | (2,294  | )             |  |   | (1,285  | )  |
| Totalshareholders'equity                                                                                                                                                    |  |              | 186,977 |               |  |   | 75,163  |    |
| Totalliabilities and shareholders'equity                                                                                                                                    |  | $                 | 190,048 |               |  | $      | 116,299 |    |
|                                                                                                                                                                             |

Seenote to condensed financial information.

S-1

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ALLIED HEALTHCARE INTERNATIONAL INC.(PARENT COMPANY ONLY)SCHEDULE I—CONDENSED FINANCIALINFORMATION STATEMENTS OF OPERATIONS(Inthousands)

|                                                                                    |  |                              |         |                              |  |                              |         |         |  |        |         |         |  |  |
|------------------------------------------------------------------------------------|--|------------------------------|---------|------------------------------|--|------------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                                                               |  | YearEnded September 30, 2004 |         | Year Ended September30, 2003 |  | Year Ended September 30,2002 |
|                                                                               |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Revenue                                                                            |  | $                            | — |                         |  | $                            | — |    |  | $      | — |    |
|                                                                               |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Expenses:                                                                          |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Selling,general and administrativeexpenses                                         |  |                         | 4,884   |                         |  |                         | 4,178   |    |  |   | 10,848  |    |
| Forgivenessof intercompanydebt                                                     |  |                         | — |                         |  |                         | 12,106  |    |  |   | — |    |
| Totalexpenses                                                                      |  |                         | 4,884   |                         |  |                         | 16,284  |    |  |   | 10,848  |    |
|                                                                               |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Gainon settlement of PIKinterest                                                   |  |                         | — |                         |  |                         | — |    |  |   | (5,143  | )  |
| Equityin income ofsubsidiaries                                                     |  |                         | 14,013  |                         |  |                         | 26,043  |    |  |   | 10,615  |    |
| Interestincome                                                                     |  |                         | (856    | )                       |  |                         | (68     | )  |  |   | (24     | )  |
| Otherexpense                                                                       |  |                         | 184     |                         |  |                         | 181     |    |  |   | 140     |    |
| Incomebefore income taxes and discontinuedoperations                               |  |                         | 9,801   |                         |  |                         | 9,646   |    |  |   | 4,794   |    |
|                                                                               |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Benefitfrom income taxes                                                           |  |                         | (68     | )                       |  |                         | (1,806  | )  |  |   | — |    |
|                                                                               |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Incomebefore discontinuedoperations                                                |  |                         | 9,869   |                         |  |                         | 11,452  |    |  |   | 4,794   |    |
|                                                                               |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Discontinuedoperations—Gain on disposal of subsidiaries, net of taxes of$775 |  |                         | — |                         |  |                         | 519     |    |  |   | — |    |
|                                                                               |  |                         | — |                         |  |                         | 519     |    |  |   | — |    |
|                                                                               |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Netincome                                                                          |  | $                            | 9,869   |                         |  | $                            | 11,971  |    |  | $      | 4,794   |    |
|                                                                                    |

Seenote to condensed financial information.

S-2

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SCHEDULE I

ALLIEDHEALTHCARE INTERNATIONAL INC.(PARENT COMPANY ONLY)SCHEDULEI—CONDENSED FINANCIAL INFORMATIONSTATEMENTS OF CASHFLOWS(In thousands)

|                                                                                                  |  |                              |         |                              |  |                              |         |         |  |        |         |         |  |  |
|--------------------------------------------------------------------------------------------------|--|------------------------------|---------|------------------------------|--|------------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                             |  | YearEnded September 30, 2004 |         | Year Ended September30, 2003 |  | Year Ended September 30,2002 |
| Cash flows from operatingactivities:                                                             |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Netincome                                                                                        |  | $                            | 9,869   |                         |  | $                            | 11,971  |    |  | $      | 4,794   |    |
| Adjustmentsto reconcile net income to net cash (used in) provided by operatingactivities:        |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Equityinterest in net income of subsidiaries                                                     |  |                         | (14,013 | )                       |  |                         | (26,043 | )  |  |   | (10,615 | )  |
| Gain on saleof subsidiaries                                                                      |  |                         | — |                         |  |                         | (519    | )  |  |   | — |    |
| Depreciation andamortization                                                                     |  |                         | 7       |                         |  |                         | 9       |    |  |   | 16      |    |
| Amortizationof debt issuance costs andwarrants                                                   |  |                         | 302     |                         |  |                         | 203     |    |  |   | — |    |
| Forgivenessof intercompanydebt                                                                   |  |                         | — |                         |  |                         | 12,106  |    |  |   | — |    |
| Losson sale of fixedassets                                                                       |  |                         | — |                         |  |                         | 3       |    |  |   | — |    |
| Minorityinterest                                                                                 |  |                         | — |                         |  |                         | — |    |  |   | 120     |    |
| Stockbased compensation -employees                                                               |  |                         | — |                         |  |                         | 587     |    |  |   | 5,835   |    |
| Interestaccrued on loans to officers                                                             |  |                         | (7      | )                       |  |                         | (44     | )  |  |   | (18     | )  |
| Gain on settlement of PIKinterest                                                                |  |                         | — |                         |  |                         | — |    |  |   | (5,143  | )  |
| Gain on acquisition of minorityinterest                                                          |  |                         | — |                         |  |                         | — |    |  |   | (179    | )  |
| Changes in operating assets andliabilities, excluding the effect of businesses acquired andsold: |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| (Increase) decreasein receivables from subsidiaries                                              |  |                         | (56,771 | )                       |  |                         | 1,164   |    |  |   | 4,287   |    |
| Decrease (increase) inprepaid expenses and other assets                                          |  |                         | 431     |                         |  |                         | (394    | )  |  |   | (82     | )  |
| (Decrease) increase in accountspayable and other liabilities                                     |  |                         | (451    | )                       |  |                         | (1,641  | )  |  |   | 305     |    |
| Net cash usedin continuing operations                                                            |  |                         | (60,633 | )                       |  |                         | (2,598  | )  |  |   | (680    | )  |
| Net cash provided by discontinuedoperations                                                      |  |                         | — |                         |  |                         | 463     |    |  |   | 1,640   |    |
| Netcash (used in) provided by operatingactivities                                                |  |                         | (60,633 | )                       |  |                         | (2,135  | )  |  |   | 960     |    |
| Cashflows from investingactivities:                                                              |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Capitalexpenditures                                                                              |  |                         | — |                         |  |                         | (11     | )  |  |   | (9      | )  |
| Loans toofficers                                                                                 |  |                         | — |                         |  |                         | — |    |  |   | (940    | )  |
| Proceeds from sale of discontinuedoperations                                                     |  |                         | — |                         |  |                         | 8,195   |    |  |   | — |    |
| Netcash provided by (used in) investingactivities                                                |  |                         | — |                         |  |                         | 8,184   |    |  |   | (949    | )  |
| Cash flowsfrom financingactivities:                                                              |  |                         |    |                         |  |                         |    |    |  |   |    |    |
| Paymentsfor stock issuance costs                                                                 |  |                         | (5,335  | )                       |  |                         | (20     | )  |  |   | (4,054  | )  |
| Payments for preferred dividends                                                                 |  |                         | (9,422  | )                       |  |                         | — |    |  |   | — |    |
| Proceeds fromissuance ofstock                                                                    |  |                         | 71,050  |                         |  |                         | — |    |  |   | 3,188   |    |
| Paymentsfor treasury shares acquired                                                             |  |                         | — |                         |  |                         | (565    | )  |  |   | — |    |
| Stock options and warrantsexercised, net, including taxbenefit                                   |  |                         | 401     |                         |  |                         | 80      |    |  |   | — |    |
| Netcash provided by (used in) financingactivities                                                |  |                         | 56,694  |                         |  |                         | (505    | )  |  |   | (866    | )  |
| Effectof exchange rate on cash                                                                   |  |                         | 32      |                         |  |                         | (114    | )  |  |   | 252     |    |
| (Decrease)increase in cash                                                                       |  |                         | (3,907  | )                       |  |                         | 5,430   |    |  |   | (603    | )  |
| Cash and cash equivalents,beginning ofperiod                                                     |  |                         | 5,813   |                         |  |                         | 383     |    |  |   | 986     |    |
| Cashand cash equivalents, end ofperiod                                                           |  | $                            | 1,906   |                         |  | $                            | 5,813   |    |  | $      | 383     |    |
|                                                                                                  |

Seenote to condensed financial information.

S-3

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ALLIEDHEALTHCARE INTERNATIONAL INC.(PARENT COMPANY ONLY)SCHEDULEI—CONDENSED FINANCIAL INFORMATIONNOTE TO CONDENSED FINANCIALINFORMATION

Basis of Presentation:

Certaininformation and footnote disclosures normally included in financialstatements prepared in conformity with generally accepted accountingprinciples have been condensed or omitted. Accordingly, these financialstatements should be read in conjunction with the consolidatedfinancial statements of Allied Healthcare International Inc. (the"Company") in its 2004 Annual Report on Form10-K.

The investments in the Company's subsidiariesare carried on the equity basis, which represents amount invested lessdividends received plus or minus the Company's equity in thesubsidiaries' income or loss to date. Significant intercompanybalances and activities have not been eliminated in the unconsolidatedfinancial information.

S-4

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ALLIED HEALTHCARE INTERNATIONALINC.(In thousands)

SCHEDULE II —VALUATION AND QUALIFYINGACCOUNTS

|                                 |  |                              |        |                    |  |               |        |            |  |                        |     |           |  |   |        |           |  |   |        |        |  |  |
|---------------------------------|--|------------------------------|--------|--------------------|--|---------------|--------|------------|--|------------------------|-----|-----------|--|---|--------|-----------|--|---|--------|--------|--|--|
| ColumnA                         |  | Column B                     |        | Column C           |  | ColumnD       |        | ColumnE    |
|                            |  |                         |        | AdditionsChargedto |  |
| Description                     |  | BalanceatBeginning of Period |        | CostandExpenses    |  | OtherAccounts |        | Deductions |  | BalanceatEnd of Period |
| Allowance forDoubtful Accounts: |  |
| Yearended September 30,2004     |  | $                            | 3,346  |               |  | $             | (1,653 | )     |  | $                      | 259 | (B)  |  | $ | 683    | (A)  |  | $ | 1,269  |   |
| Yearended September 30,2003     |  | $                            | 22,849 |               |  | $             | 1,205  |       |  | $                      | 227 | (B)  |  | $ | 20,935 | (A)  |  | $ | 3,346  |   |
| Yearended September 30,2002     |  | $                            | 22,737 |               |  | $             | 985    |       |  | $                      | 158 | (B)  |  | $ | 1,031  | (A)  |  | $ | 22,849 |   |
|                                 |

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

|     |                                                                                                                 |
|-----|-----------------------------------------------------------------------------------------------------------------|
| (B) | Assumed in acquisitions and adjustments arising fromtranslation of foreign financial statements to U.S.dollars. |

S-5

----