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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

<Table>
<Caption>
(Mark One)

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

FOR THE FISCAL YEAR JUNE 30, 2005

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

</Table>

COMMISSION FILE NUMBER 0-19266
---------------------

ALLIED HEALTHCARE PRODUCTS, INC.
[Exact name of registrant as specified in its charter]

<Table>

DELAWARE 25-1370721
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) identification no.)

1720 SUBLETTE AVENUE 63110
ST. LOUIS, MISSOURI (zip code)
(Address of principal executive offices)
</Table>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(314) 771-2400
---------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<Table>
<Caption>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------

None
</Table>

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock
Preferred Stock
Preferred Stock Purchase Rights
(Title of class)
---------------------
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes. [X] No. [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes. [X] No. [ ]

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

Indicate by check mark whether the registrant is a shell company (as
defined in Exchange Act Rule 12 b-2). Yes. [ ] No. [X]

As of December 31, 2004, the last business day of the registrant's most
recently completed second fiscal quarter; the aggregate market value of the
voting stock held by non-affiliates of the Registrant was approximately
$24,591,726.

As of September 28, 2005, there were 7,829,577 shares of common stock,
$0.01 par value (the "Common Stock"), outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement to be dated October 14, 2005 (portion) (Part III)
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ALLIED HEALTHCARE PRODUCTS, INC.

INDEX TO FORM 10-K

<Table>
<Caption>
PAGE
----

PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 10
Item 3. Legal Proceedings........................................... 10
Item 4. Submission of Matters to a Vote of Security Holders......... 10

PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters..................................................... 11
Item 6. Selected Financial Data..................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 13
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 27
Item 8. Financial Statements and Supplementary Data................. 28
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 52
Item 9A. Controls and Procedures..................................... 52
Item 9B. Other Information........................................... 52

PART III
Item 10. Directors and Executive Officers of the Registrant.......... 52
Item 11. Executive Compensation...................................... 52
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 52
Item 13. Certain Relationships and Related Transactions.............. 52
Item 14. Principal Accountant Fees and Services...................... 52

PART IV
Item 15. Exhibits, Financial Statement Schedule, and Reports on Form
8-K......................................................... 53
</Table>

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995

Statements contained in this Report, which are not historical facts or
information, are "forward-looking statements." Words such as "believe,"
"expect," "intend," "will," "should," and other expressions that indicate future
events and trends identify such forward-looking statements. These
forward-looking statements involve risks and uncertainties, which could cause
the outcome and future results of operations and financial condition to be
materially different than stated or anticipated based on the forward-looking
statements. Such risks and uncertainties include both general economic risks and
uncertainties, risks and uncertainties affecting the demand for and economic
factors affecting the delivery of health care services, and specific matters
which relate directly to the Company's operations and properties as discussed in
Items 1, 3 and 7 in this Report. The Company cautions that any forward-looking
statements contained in this report reflect only the belief of the Company or
its management at the time the statement was made. Although the Company believes
such forward-looking statements are based upon reasonable assumptions, such
assumptions may ultimately prove inaccurate or incomplete. The Company
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement was made.

PART I

ITEM 1. BUSINESS

GENERAL

Allied Healthcare Products, Inc. ("Allied" or the "Company") manufactures a
variety of respiratory products used in the health care industry in a wide range
of hospital and alternate site settings, including sub-acute care facilities,
home health care and emergency medical care. The Company's product lines include
respiratory care products, medical gas equipment and emergency medical products.
The Company believes that it maintains significant market shares in selected
product lines.

The Company's products are marketed under well-recognized and respected
brand names to hospitals, hospital equipment dealers, hospital construction
contractors, home health care dealers, emergency medical products dealers and
others. Allied's product lines include:

RESPIRATORY CARE PRODUCTS

- respiratory care/anesthesia products

- home respiratory care products

MEDICAL GAS EQUIPMENT

- medical gas system construction products

- medical gas system regulation devices

- disposable oxygen and specialty gas cylinders

- portable suction equipment

EMERGENCY MEDICAL PRODUCTS

- respiratory/resuscitation products

- trauma and patient handling products

The Company's principal executive offices are located at 1720 Sublette
Avenue, St. Louis, Missouri 63110, and its telephone number is (314) 771-2400.

MARKETS AND PRODUCTS

In fiscal 2005, respiratory care products, medical gas equipment and
emergency medical products represented approximately 27%, 56% and 17%,
respectively, of the Company's net sales. In fiscal 2004, respiratory care
products, medical gas equipment and emergency medical products represented
approximately 26%, 57%, and 17%, respectively, of the Company's net sales. The
Company operates in a single industry segment and its principal products are
described in the following table:

<Table>
<Caption>
PRINCIPAL BRAND
PRODUCT DESCRIPTION NAMES PRIMARY USERS
- ------- ----------- -------------------- -----------------

RESPIRATORY CARE PRODUCTS
Respiratory Large volume compressors; ventilator Timeter Hospitals and
Care/AnesthesiaProducts calibrators; humidifiers and mist sub-acute
tents; and CO(2) absorbent facilities
Home Respiratory Care Products O2 cylinders; pressure regulators; Timeter; B&F; Schuco Patients at home
nebulizers; portable large volume
compressors; portable suction
equipment and disposable respiratory
products
MEDICAL GAS EQUIPMENT
Construction Products In-wall medical gas system Chemetron; Oxequip Hospitals and
components; central station pumps sub-acute
and compressors and headwalls facilities
Regulation Devices Flowmeters; vacuum regulators; Chemetron; Oxequip; Hospitals and
pressure regulators and related Timeter sub-acute
products facilities
Disposable Cylinders Disposable oxygen and gas cylinders Lif-O-Gen First aid
providers and
specialty gas
distributors
Suction Equipment Portable suction equipment and Gomco; Allied; Hospitals, sub-
disposable suction canisters Schuco acute facilities
and homecare
products
EMERGENCY MEDICAL PRODUCTS
Respiratory/Resuscitation Demand resuscitation valves; bag LSP; Omni-Tech Emergency service
mask resuscitators; emergency providers
transport ventilators, oxygen
regulators and SurgeX -- surge
suppressing post valve
Trauma and Patient Handling Spine immobilization products; LSP Emergency service
Products pneumatic anti-shock garments and providers
trauma burn kits
</Table>

RESPIRATORY CARE PRODUCTS

MARKET. Respiratory care products are used in the treatment of acute and
chronic respiratory disorders such as asthma, emphysema, bronchitis and
pneumonia. Respiratory care products are used in both hospitals and alternate
care settings. Sales of respiratory care products are made through distribution
channels focusing on hospitals and other sub-acute facilities. Sales of home
respiratory care products are made through durable medical equipment dealers
through telemarketing, and by contract sales with national chains.

RESPIRATORY CARE/ANESTHESIA PRODUCTS. The Company manufactures and sells a
broad range of products for use in respiratory care and anesthesia delivery.
These products include large volume air compressors, calibration equipment,
humidifiers, croup tents, equipment dryers and a complete line of respiratory
disposable products such as oxygen tubing, facemasks, cannulas and ventilator
circuits.

1920s. In recent years, the number of inhalation anesthetics has increased,
giving rise to concerns regarding the use of Baralyme(R) in conjunction with
these newer inhalation anesthetics if Baralyme(R) has been allowed, contrary to
recommended practice, to become desiccated. The agreement also provides that,
for a period of eight years, Allied will not manufacture, distribute, promote,
market, sell, commercialize or donate any Baralyme(R) product or similar product
based upon potassium hydroxide and will not develop or license any new carbon
dioxide absorbent product containing potassium hydroxide. More detailed
information concerning this agreement is included in Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations.

HOME RESPIRATORY CARE PRODUCTS. Home respiratory care products represent
one of Allied's potential growth areas. Allied's broad line of home respiratory
care products include aluminum oxygen cylinders, oxygen regulators, pneumatic
nebulizers, portable suction equipment and the full line of respiratory
disposable products.

MEDICAL GAS EQUIPMENT

MARKET. The market for medical gas equipment consists of hospitals,
alternate care settings and surgery centers. The medical gas equipment group is
broken down into three separate categories: construction products, regulation
devices and suction equipment, and disposable cylinders.

CONSTRUCTION PRODUCTS. Allied's medical gas system construction products
consist of in-wall medical system components, central station pumps and
compressors, and headwalls. These products are typically installed during
construction or renovation of a health care facility and are built in as an
integral part of the facility's physical plant. Typically, the contractor for
the facility's construction or renovation purchases medical gas system
components from manufacturers and ensures that the design specifications of the
health care facility are met.

Allied's in-wall components, including outlets, manifolds, alarms, ceiling
columns and zone valves, serve a fundamental role in medical gas delivery
systems.

Central station pumps and compressors are individually engineered systems
consisting of compressors, reservoirs, valves and controls designed to drive a
hospital's medical gas and suction systems. Each system is designed specifically
for a given hospital or facility, which purchases pumps and compressors from
suppliers. The Company's sales of pumps and compressors are driven, in large
part, by its share of the in-wall components market.

The Company's construction products are sold primarily to hospitals,
alternate care settings and hospital construction contractors. The Company
believes that it holds a major share of the U.S. market for its construction
products, that these products are installed in more than three thousand
hospitals in the United States and that its installed base of equipment in this
market will continue to generate follow-on sales. The Company believes that most
hospitals and sub-acute care facility construction spending is for expansion or
renovation of existing facilities. Many hospital systems and individual
hospitals undertake major renovations to upgrade their operations to improve the
quality of care they provide, reduce costs and attract patients and personnel.

REGULATION DEVICES AND SUCTION EQUIPMENT. The Company's medical gas system
regulation products include flowmeters, vacuum regulators and pressure
regulators, as well as related adapters, fittings and hoses which measure,
regulate, monitor and help transfer medical gases from walled piping or
equipment to patients in hospital rooms, operating theaters or intensive care
areas. The Company's leadership position in the in-wall components market
provides a competitive advantage in marketing medical gas system regulation
devices that are compatible with those components.

Portable suction equipment is typically used when in-wall suction is not
available or when medical protocol specifically requires portable suction. The
Company also manufactures disposable suction canisters, which are clear
containers used to collect the fluids suctioned by in-wall or portable suction
systems. The containers have volume calibrations, which allow the medical
practitioner to measure the volume of fluids suctioned.
4

The market for regulation devices and suction equipment includes hospital
and sub-acute care facilities. Sales of these products are made through the same
distribution channel as our respiratory care products. The Company believes that
it holds a significant share of the U.S. market in both regulation devices and
suction equipment.

DISPOSABLE CYLINDERS. Disposable oxygen cylinders are designed to provide
oxygen for short periods of time in emergency situations. Since they are not
subjected to the same pressurization as standard containers, they are much
lighter and less expensive than standard gas cylinders. The Company markets
filled disposable oxygen cylinders through industrial safety distributors and
similar customers, principally to first aid providers, restaurants, industrial
plants and other customers that require oxygen for infrequent emergencies.

EMERGENCY MEDICAL PRODUCTS

MARKET. Emergency medical products are used in the treatment of
trauma-induced injuries. The Company's emergency medical products provide
patient resuscitation or ventilation during cardiopulmonary resuscitation or
respiratory distress as well as immobilization and treatment for burns. The
Company has seen growth in the trauma care venue for health care services, as
the trend continues toward providing health care outside the traditional
hospital setting. The Company also expects that other countries will develop
trauma care systems in the future, although no assurance can be given that such
systems will develop or that they will have a favorable impact on the Company.
Sales of emergency medical products are made through specialized emergency
medical products distributors to ambulance companies, fire departments and
emergency medical systems volunteer organizations.

The emergency medical products are broken down into two categories:
respiratory/resuscitator products and trauma patient handling products.

RESPIRATORY/RESUSCITATION PRODUCTS. The Company's
respiratory/resuscitation products include demand resuscitation valves, portable
resuscitation systems, bag masks and related products, emergency transport
ventilators, precision oxygen regulators, minilators, multilators and
humidifiers.

Demand resuscitation valves are designed to provide 100% oxygen to
breathing or non-breathing patients. In an emergency situation, they can be used
with a mask or tracheotomy tubes and operate from a standard regulated oxygen
system. The Company's portable resuscitation systems provide fast, simple and
effective means of ventilating a non-breathing patient during cardiopulmonary
resuscitation and 100% oxygen to breathing patients on demand with minimal
inspiratory effort. The Company also markets a full line of disposable and
reusable bag mask resuscitators, which are available in a variety of adult and
child-size configurations. Disposable mouth-to-mask resuscitation systems have
the added advantage of reducing the risk of transmission of communicable
diseases.

The Company's autovent transport ventilator can meet a variety of needs in
different applications ranging from typical emergency medical situations to more
sophisticated air and ground transport. Each autovent is accompanied by a
patient valve, which provides effective ventilation during cardiopulmonary
resuscitation or respiratory distress. When administration of oxygen is required
at the scene of a disaster, in military field hospitals or in a multiple-victim
incident, Allied's minilators and multilators are capable of providing oxygen to
one or a large number of patients.

To complement the family of respiratory/resuscitation products, the Company
offers a full line of oxygen product accessories. This line of accessory
products includes reusable aspirators, tru-fit masks, disposable cuffed masks
and related accessories.

TRAUMA AND PATIENT HANDLING PRODUCTS. The Company's trauma and patient
handling products include spine immobilization products, pneumatic anti-shock
garments and trauma burn kits. Spine immobilization products include a backboard
that is designed for safe immobilization of injury victims and provides a
durable and cost effective means of emergency patient transportation and
extrication. The infant/pediatric immobilization board is durable and scaled for
children. The half back extractor/rescue vest is useful for both suspected
cervical/spinal injuries and for mountain and air rescues. The Company's
pneumatic anti-shock

garments are used to treat victims experiencing hypovolemic shock. Allied's
trauma burn kits contain a comprehensive line of products for the treatment of
trauma and burns.

SALES AND MARKETING

Allied sells its products primarily to respiratory care/anesthesia product
distributors, hospital construction contractors, emergency medical equipment
dealers and directly to hospitals. The Company maintains a sales force of 33
sales professionals, all of whom are full-time employees of the Company.

The sales force includes 24 medical gas specialists, 3 emergency
specialists and 6 international sales representatives. Three product managers
are responsible for the marketing activities of our product lines.

The 24 medical gas specialists are responsible for sales of all Allied
products with the exception of emergency products within their territory. Sales
of products are accomplished through respiratory care/anesthesia distributors
for the regulation devices, suction equipment, respiratory care/anesthesia
products and disposable cylinders. The homecare products are sold primarily
through our own in house telemarketing. Construction products are sold direct to
hospital construction contractors and through distributors.

Emergency medical specialists are responsible for sales of
respiratory/resuscitation products, trauma and patient handling products. These
products are principally sold to ambulance companies, fire departments and
emergency medical systems volunteer organizations through specialized emergency
medical products distributors.

Allied's international business represents a potential growth area that the
Company has been pursuing. Allied's net sales to foreign markets totaled 17% of
the Company's net sales in fiscal 2005, 17% of the Company's net sales in fiscal
2004, and 17% of the Company's net sales in fiscal 2003. International sales are
made through a network of dealers, agents and U.S. exporters who distribute the
Company's products throughout the world. Allied has market presence in Canada,
Mexico, Central and South America, Europe, the Middle East and the Far East.

MANUFACTURING

Allied's manufacturing processes include fabrication, electro-mechanical
assembly operations and plastics manufacturing. A significant part of Allied's
manufacturing operations involves electro-mechanical assembly of proprietary
products and the Company is vertically integrated in most elements of metal
machining and fabrication. Most of Allied's hourly employees are involved in
machining, metal fabrication, plastics manufacturing and product assembly.

Allied manufactures small metal components from bar stock in a machine
shop, which includes automatic screw machines, horizontal lathes and drill
presses and computer controlled machining centers. The Company makes larger
metal components from sheet metal using computerized punch presses, brake
presses and shears. In its plastics manufacturing processes, the Company
utilizes both extrusion and injection molding. The Company believes that its
production facilities and equipment are in good condition and sufficient to meet
planned increases in volume over the next few years and that the conditions in
local labor markets should permit the implementation of additional shifts and
days operated.

RESEARCH AND DEVELOPMENT

Allied's research and development group is responsible for the development
of new products. This group is staffed with mechanical and electrical engineers.

During fiscal year 2005 the research and development group completed the
design and released to manufacturing a new line of LSP regulators. These
regulators are used by EMS personnel.

The research and development group has also completed the design of a new
hospital alarm system and gas manifold. These products will be released for sale
in the 1(st) quarter of fiscal year 2006.

As part of the agreement relating to the withdrawal of the Baralyme(R)
product, Abbott has agreed to pay to Allied up to $2,150,000 in product
development costs to pursue development of a new carbon dioxide absorption
product for use in connection with inhalation anesthetics that does not contain
potassium hydroxide and does not produce a significant exothermic reaction with
currently available inhalation agents. It is Allied's intention to pursue
development of a new carbon dioxide absorption product. As of June 30, 2005 the
Company had spent $22,000 to pursue development of a new carbon dioxide
absorbent. It is the Company's expectation that this amount will be reimbursed
by Abbott. More detailed information concerning this agreement is included in
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations.

GOVERNMENT REGULATION

The Company's products and its manufacturing activities are subject to
extensive and rigorous government regulation by federal and state authorities in
the United States and other countries. In the United States, medical devices for
human use are subject to comprehensive review by the United States Food and Drug
Administration (the "FDA"). The Federal Food, Drug, and Cosmetic Act ("FDC
Act"), and other federal statutes and regulations, govern or influence the
research, testing, manufacture, safety, labeling, storage, record keeping,
approval, advertising and promotion of such products. Noncompliance with
applicable requirements can result in warning letters, fines, recall or seizure
of products, injunction, refusal to permit products to be imported into or
exported out of the United States, refusal of the government to clear or approve
marketing applications or to allow the Company to enter into government supply
contracts, or withdrawal of previously approved marketing applications and
criminal prosecution.

The Company is required to file a premarket notification in the form of a
premarket approval ("PMA") with the FDA before it begins marketing a new medical
device that offers new technology that is currently not on the market. The
Company also must file a premarket notification in the form of a 510(k) with the
FDA before it begins marketing a new medical device that utilizes existing
technology for devices that are currently on the market. The 510(k) submission
process is also required when the Company makes a change or modifies an existing
device in a manner that could significantly affect the device's safety or
effectiveness.

Compliance with the regulatory approval process in order to market a new or
modified medical device can be uncertain, lengthy and, in some cases, expensive.
There can be no assurance that necessary regulatory approvals will be obtained
on a timely basis, or at all. Delays in receipt or failure to receive such
approvals, the loss of previously received approvals, or failure to comply with
existing or future regulatory requirements could have a material adverse effect
on the Company's business, financial condition and results of operations.

The Company manufactures and distributes a broad spectrum of respiratory
therapy equipment, emergency medical equipment and medical gas equipment. To
date, all of the Company's FDA clearances have been obtained through the 510(k)
clearance process. These determinations are very fact specific and the FDA has
stated that, initially, the manufacturer is best qualified to make these
determinations, which should be based on adequate supporting data and
documentation. The FDA however, may disagree with a manufacturer's determination
not to file a 510(k) and require the submission of a new 510(k) notification for
the changed or modified device. Where the FDA believes that the change or
modification raises significant new questions of safety or effectiveness, the
agency may require a manufacturer to cease distribution of the device pending
clearance of a new 510(k) notification. Certain of the Company's medical devices
have been changed or modified subsequent to 510(k) marketing clearance of the
original device by the FDA. Certain of the Company's medical devices, which were
first marketed prior to May 28, 1976, and therefore, grandfathered and exempt
from the 510(k) notification process, also have been subsequently changed or
modified. The Company believes that these changes or modifications do not
significantly affect the devices' safety or effectiveness, or make a major
change or modification in the devices' intended uses and, accordingly,
submission of new 510(k) notification to the FDA is not required. There can be
no assurance, however, that the FDA would agree with the Company's
determinations.

In addition, commercial distribution in certain foreign countries is
subject to additional regulatory requirements and receipt of approvals that vary
widely from country to country. The Company believes it is in compliance with
regulatory requirements of the countries in which it sells its products.

The Medical Device Reporting regulation requires that the Company provide
information to the FDA on deaths or serious injuries alleged to have been
associated with the use of its devices, as well as product malfunctions that
would likely cause or contribute to death or serious injury if the malfunction
were to recur. The Medical Device Tracking regulation requires the Company to
adopt a method of device tracking of certain devices, such as ventilators, which
are life-supporting or life-sustaining devices used outside of a device user
facility, some of which are permanently implantable devices. The regulation
requires that the method adopted by the Company will ensure that the tracked
device can be traced from the device manufacturer to the person for whom the
device is indicated (i.e., the patient). In addition, the FDA prohibits a
company from promoting an approved device for unapproved applications and
reviews a company's labeling for accuracy. Labeling and promotional activities
also are in certain instances, subject to scrutiny by the Federal Trade
Commission.

The Company's medical device manufacturing facilities are registered with
the FDA, and have received ISO 9001 Certification for the St. Louis facility and
certification per the Medical Device Directive (MDD -- European) for certain
products in 1998. As such, the Company will be audited by the FDA, ISO, and
European auditors for compliance with the Good Manufacturing Practices ("GMP"),
the ISO and MDD regulations for medical devices. These regulations require the
Company to manufacture its products and maintain its products and documentation
in a prescribed manner with respect to design, manufacturing, testing and
control activities. The Company also is subject to the registration and
inspection requirements of state regulatory agencies.

There can be no assurance that any required FDA or other governmental
approval will be granted, or, if granted, will not be withdrawn. Governmental
regulation may prevent or substantially delay the marketing of the Company's
proposed products and cause the Company to undertake costly procedures. In
addition, the extent of potentially adverse government regulation that might
arise from future administrative action or legislation cannot be predicted. Any
failure to obtain, or delay in obtaining, such approvals could adversely affect
the Company's ability to market its proposed products.

Sales of medical devices outside the United States are subject to foreign
regulatory requirements that vary widely from country to country. Medical
products shipped to the European Community require CE certification. The letters
'CE' are an abbreviation of Conformite Europeenne, French for European
conformity. Whether or not FDA approval has been obtained, approval of a device
by a comparable regulatory authority of a foreign country generally must be
obtained prior to the commencement of marketing in those countries. The time
required to obtain such approvals may be longer or shorter than that required
for FDA approval. In addition, FDA approval may be required under certain
circumstances to export certain medical devices.

The Company has also received ISO 13485 Certification for medical device
manufacturers in 2002.

The Company is also subject to numerous federal, state and local laws
relating to such matters as safe working conditions, manufacturing practices,
environmental protections, fire hazard control and disposal of hazardous or
potentially hazardous substances.

THIRD PARTY REIMBURSEMENT

The cost of a majority of medical care in the United States is funded by
the U.S. Government through the Medicare and Medicaid programs and by private
insurance programs, such as corporate health insurance plans. Although the
Company does not receive payments for its products directly from these programs,
home respiratory care providers and durable medical equipment suppliers, who are
the primary customers for several of the Company's products, depend heavily on
payments from Medicare, Medicaid and private insurers as a major source of
revenues. In addition, sales of certain of the Company's products are affected
by the extent of hospital and health care facility construction and renovation
at any given time. The federal government

indirectly funds a significant percentage of such construction and renovation
costs through Medicare and Medicaid reimbursements. In recent years,
governmentally imposed limits on reimbursement to hospitals and other health
care providers have impacted spending for services, consumables and capital
goods. A material decrease from current reimbursement levels or a material
change in the method or basis of reimbursing health care providers is likely to
adversely affect future sales of the Company's products.

PATENTS, TRADEMARKS AND PROPRIETARY TECHNOLOGY

The company owns and maintains patents on several products it believes is
useful to the business and provides the company with an advantage over its
competitors. During fiscal 2005 the company was granted additional US and
international patents on the SurgeX post valve. The company continues to pursue
patents on the XTRA backboard, Construction alarm and several other products
under development.

The Company owns and maintains U.S. trademark registrations for Chemetron,
Gomco, Oxequip, Lif-O-Gen, Life Support Products, Timeter, Vacutron and Schuco,
its principal trademarks. Registrations for these trademarks are also owned and
maintained in countries where such products are sold and such registrations are
considered necessary to preserve the Company's proprietary rights therein.

COMPETITION

The Company has different competitors within each of its product lines.
Many of the Company's principal competitors are larger than Allied and the
Company believes that most of these competitors have greater financial and other
resources. The Company competes primarily on the basis of price, quality and
service. The Company believes that it is well positioned with respect to product
cost, brand recognition, product reliability, and customer service to compete
effectively in each of its markets.

EMPLOYEES

At June 30, 2005, the Company had approximately 412 full-time employees.
Approximately 274 employees in the Company's principal manufacturing facility
located in St. Louis, Missouri, are covered by a collective bargaining agreement
that will expire on May 31, 2006.

On August 27, 2004, Allied entered into an agreement with Abbott
Laboratories ("Abbott") pursuant to which Allied agreed to cease production of
its product Baralyme(R), and to affect the withdrawal of Baralyme(R) product
held by distributors. The agreement permits Allied to pursue the development of
a new carbon dioxide absorbent product. Baralyme(R), a carbon dioxide absorbent
product, has been used safely and effectively in connection with inhalation
anesthetics since its introduction in the 1920s. In recent years, the number of
inhalation anesthetics has increased, giving rise to concerns regarding the use
of Baralyme(R) in conjunction with these newer inhalation anesthetics if
Baralyme(R) has been allowed, contrary to recommended practice, to become
desiccated. The agreement also provides that, for a period of eight years,
Allied will not manufacture, distribute, promote, market, sell, commercialize or
donate any Baralyme(R) product or similar product based upon potassium hydroxide
and will not develop or license any new carbon dioxide absorbent product
containing potassium hydroxide. More detailed information concerning this
agreement is included in Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations.

On September 9, 2004 Allied entered into a Closedown Agreement with the
International Chemical Union representing the employees at the Stuyvesant Falls,
New York facility. The Company had advised the Union that the plant will be
closed and all bargaining unit employees related to such operation would be
permanently laid off, no later than October 15, 2004. The collective bargaining
agreement expired and was terminated as of the closing date. The Company paid
severance to those 12 bargaining unit employees on the active payroll as of
August 27, 2004.

ENVIRONMENTAL AND SAFETY REGULATION

The Company is subject to federal, state and local environmental laws and
regulations that impose limitations on the discharge of pollutants into the
environment and establish standards for the treatment,

storage and disposal of toxic and hazardous wastes. The Company is also subject
to the federal Occupational Safety and Health Act and similar state statutes.
From time to time the Company has been involved in environmental proceedings
involving clean up of hazardous waste. There are no such material proceedings
currently pending. Costs of compliance with environmental, health and safety
requirements have not been material to the Company. The Company believes it is
in material compliance with all applicable environmental laws and regulations.

ITEM 2. PROPERTIES

The Company's headquarters are located in St. Louis, Missouri and the
Company maintains manufacturing facilities in Missouri and New York. Set forth
below is certain information with respect to the Company's manufacturing
facilities at June 30, 2005.

<Table>
<Caption>
SQUARE FOOTAGE OWNED/
LOCATION (APPROXIMATE) LEASED ACTIVITIES/PRODUCTS
- -------- -------------- ------ -------------------

St. Louis, Missouri........... 270,000 Owned Headquarters; medical gas
equipment; respiratory care
products; emergency medical
products
Stuyvesant Falls, New York.... 30,000 Owned CO(2) absorbent
</Table>

In addition, the Company owns a 16.8-acre parcel of undeveloped land in
Stuyvesant Falls, New York.

ITEM 3. LEGAL PROCEEDINGS

Product liability lawsuits are filed against the Company from time to time
for various injuries alleged to have resulted from defects in the manufacture
and/or design of the Company's products. Several such proceedings are currently
pending, which are not expected to have a material adverse effect on the
Company. The Company maintains comprehensive general liability insurance
coverage which it believes to be adequate for the continued operation of its
business, including coverage of product liability claims.

In addition, from time to time the Company's products may be subject to
product recalls in order to correct design or manufacturing flaws in such
products. The Company intends to continue to conduct business in such a manner
as to avert any FDA action seeking to interrupt or suspend manufacturing or
require any recall or modification of products.

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

None

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Allied Healthcare Products, Inc. trades on the NASDAQ National market under
the symbol AHPI. As of September 1, 2005, there were 201 record owners of the
Company's Common Stock. The following tables summarize information with respect
to the high and low closing prices for the Company's Common Stock as listed on
the NASDAQ National market for each quarter of fiscal 2005 and 2004,
respectively. The Company currently does not pay any dividend on its Common
Stock.

COMMON STOCK INFORMATION

<Table>
<Caption>
2005 HIGH LOW
- ---- ----- -----

September quarter........................................... $7.00 $4.51
December quarter............................................ $8.24 $5.83
March quarter............................................... $6.46 $5.50
June quarter................................................ $8.15 $4.86
<Caption>
2004 HIGH LOW
- ---- ----- -----

September quarter........................................... $4.00 $2.90
December quarter............................................ $4.20 $3.00
March quarter............................................... $5.88 $3.50
June quarter................................................ $6.93 $4.62
</Table>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

<Table>
<Caption>
YEAR ENDED JUNE 30,
------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA
Net sales................................... $56,120 $59,103 $60,863 $ 60,415 $64,928
Cost of sales............................... 41,669 42,748 46,809 49,999 48,265
Gross profit................................ 14,451 16,355 14,054 10,416 16,663
Selling, general and administrative
expenses(4)............................... 11,843 12,660 13,551 12,786 14,573
Provision for product recall................ -- -- -- (40) 80
Impairment of goodwill(1)................... -- -- -- 9,600 --
Income (loss) from operations............... 2,608 3,695 503 (11,930) 2,010
Interest expense............................ 123 550 831 1,054 1,530
Other, net.................................. 43 8 41 41 74
Income (loss) before provision (benefit) for
income taxes.............................. 2,442 3,136 (369) (13,025) 406
Provision (benefit) for income taxes(2)..... 101 1,261 (211) (1,294) 172
Net income (loss)........................... $ 2,341 $ 1,875 $ (158) $(11,731) $ 234
Basic earnings (loss) per share............. $ 0.30 $ 0.24 $ (0.02) $ (1.50) $ 0.03
Diluted earnings (loss) per share........... $ 0.29 $ 0.23 $ (0.02) $ (1.50) $ 0.03
Basic weighted average common shares
outstanding............................... 7,822 7,816 7,814 7,809 7,807
Diluted weighted average common shares
outstanding............................... 8,081 7,985 7,814 7,809 8,126
</Table>

<Table>
<Caption>
JUNE 30,
-----------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------
(IN THOUSANDS)

CONSOLIDATED BALANCE SHEET DATA
Working capital.............................. $12,250 $10,992 $ 9,445 $ 9,371 $20,682
Total assets................................. 46,097 47,029 50,303 53,024 65,933
Short-term debt(3)........................... -- 1,245 5,409 7,985 1,169
Long-term debt (net of current portion)(3)... -- 2,366 4,612 4,135 11,019
Stockholders' equity......................... 38,862 36,453 34,567 34,725 46,440
</Table>

- ---------------

(1) Impairment loss on goodwill. See Note 2 to the June 30, 2005 Consolidated
Financial Statements for further discussion of goodwill. The Company
recorded a goodwill impairment charge of $9.6 million in the fourth quarter
of 2002.

(2) See Note 5 to the June 30, 2005 Consolidated Financial Statements for
further discussion of the Company's effective tax rate.

(3) See Note 3 to the June 30, 2005 Consolidated Financial Statements for
further discussion.

(4) During fiscal 2002, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets". Prior to
the adoption of this standard, goodwill amortization of $815 was recorded in
2001, which is included above in selling, general and administrative
expenses.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Certain statements contained herein are forward-looking statements. Actual
results could differ materially from those anticipated as a result of various
factors, including cyclical and other industry downturns, the effects of federal
and state legislation on health care reform, including Medicare and Medicaid
financing, the inability to realize the full benefit of recent capital
expenditures or consolidation and rationalization activities, difficulties or
delays in the introduction of new products or disruptions in selling,
manufacturing and/or shipping efforts.

The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of the Company for the
three fiscal years ended June 30, 2005. This discussion should be read in
conjunction with the consolidated financial statements, notes to the
consolidated financial statements and selected consolidated financial data
included elsewhere herein.

CRITICAL ACCOUNTING POLICIES

In preparing financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company evaluates estimates and judgments on an ongoing
basis, including those related to bad debts, inventory valuations, property,
plant and equipment, intangible assets, income taxes, and contingencies and
litigation. Estimates and judgments are based on historical experience and on
various other factors that may be reasonable under the circumstances. Actual
results may differ from these estimates. The following areas are considered to
be the Company's most significant accounting policies:

REVENUE RECOGNITION:

Revenue is recognized for all sales, including sales to agents and
distributors, at the time products are shipped and title has transferred,
provided that a purchase order has been received or a contract executed, there
are not uncertainties regarding customer acceptance, the sales price is fixed
and determinable and collectibility is reasonably assured. Sales discounts,
returns and allowances are included in net sales, and the provision for doubtful
accounts is included in selling, general and administrative expenses.
Additionally, it is the Company's practice to include revenues generated from
freight billed to customers in net sales with corresponding freight expense
included in cost of sales in the consolidated statement of operations.

The sales price is fixed by Allied's acceptance of the buyer's firm
purchase order. The sales price is not contingent, or subject to additional
discounts. Allied's standard shipment terms are "F.O.B. shipping point" as
stated in Allied's Terms and Conditions of Sale. The customer is responsible for
obtaining insurance for and bears the risk of loss for product in-transit.
Additionally, sales to customers do not include the right to return merchandise
without the prior consent of Allied. In those cases where returns are accepted,
product must be current and restocking fees must be paid by the respective
customer. A provision has been made for estimated sales returns and allowances.
These estimates are based on historical analysis of credit memo data and
returns.

Allied does not provide installation services for its products. Most
products shipped are ready for immediate use by the customer. The Company's
in-wall medical system components, central station pumps and compressors, and
headwalls do require installation by the customer. These products are typically
purchased by a third-party contractor who is ultimately responsible for
installation services. Accordingly, the customer purchase order or contract does
not require customer acceptance of the installation prior to completion of the
sale transaction and revenue recognition. Allied's standard payment terms are
net 30 days from the date of shipment, and payment is specifically not subject
to customer inspection of acceptance, as stated in Allied's Terms and Conditions
of Sale. The buyer becomes obligated to pay Allied at the time of shipment.
Allied requires credit applications from its customers and performs credit
reviews to determine the creditworthiness of new customers. Allied requires
letters of credit, where warranted, for international transactions. Allied also
protects its legal rights under mechanics lien laws when selling to contractors.

Allied does offer limited warranties on its products. The standard warranty
period is one year; however, most claims occur within the first six months. The
related liability resulting from these transactions is not significant. The
Company's cost of providing warranty service for its products for the year ended
June 30, 2005 and June 30, 2004 was $53,718 and $82,809, respectively.

INVENTORY RESERVE FOR OBSOLETE AND EXCESS INVENTORY:

Inventory is recorded net of a reserve for obsolete and excess inventory
which is determined based on an analysis of inventory items with no usage in the
preceding year and for inventory items for which there is greater than two
years' usage on hand. This analysis considers those identified inventory items
to determine, in management's best estimate, if parts can be used beyond one
year, if there are alternate uses or at what values such parts may be disposed
for. During the fiscal year ended June 30, 2002, the Company implemented this
detailed analysis of inventory in conjunction with its long-term product
planning process. This review indicated that the Company had experienced a
significant decrease in sales during the years prior to fiscal 2002. Sales
decreased from approximately $74.7 million for the fiscal year ended June 30,
1999 to $60.4 million for the fiscal year ended June 30, 2002. This decrease in
sales reflected loss of market share, the effect of product lifecycles, and
changes in product mix. In addition, changes were also made in the manufacturing
processes of many of the Company's products to lower cost as the Company made
changes to return to profitability. As a result, a large number of component
parts were deemed to be obsolete, resulting in a $3.2 million charge to increase
the Company's reserve for obsolete and excess inventory. Of the inventory that
has been identified as excess and obsolete, most has been disposed. Only a small
percentage has been sold. These sales have no impact on gross margins. At June
30, 2005 and 2004, inventory is recorded net of a reserve for obsolete and
excess inventory of $1.3 million and $1.7 million, respectively.

INCOME TAXES:

The Company accounts for income taxes under SFAS No. 109, "Accounting for
Income Taxes". Under SFAS No. 109, the deferred tax provision is determined
using the liability method, whereby deferred tax assets and liabilities are
recognized based upon temporary differences between the financial statement and
income tax bases of assets and liabilities using presently enacted tax rates.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized. See the discussion on page 20
regarding the reversal of the deferred tax asset valuation allowance in the
fourth quarter of fiscal 2005.

ACCOUNTS RECEIVABLE NET OF ALLOWANCES:

Accounts receivable are recorded net of an allowance for doubtful accounts,
which is determined based on an analysis of past due accounts including accounts
placed with collection agencies, and an allowance for returns and credits, which
is based on historical analysis of credit memo data and returns. At June 30,
2005 and 2004, accounts receivable is recorded net of allowances of $0.6
million.

GOODWILL:

At June 30, 2005 and 2004, the Company has goodwill of $15,979,830,
resulting from the excess of the purchase price over the fair value of net
assets acquired in business combinations. During fiscal 2002, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill
and Other Intangible Assets", which establishes new accounting and reporting
standards for purchase business combinations and goodwill. As provided by SFAS
No. 142, the Company ceased amortizing goodwill on July 1, 2001. During the
first half of fiscal 2002, the Company performed the transitional impairment
analysis of its goodwill as of the implementation date, following which the
Company concluded that there was no impairment of goodwill at July 1, 2001. The
Company completed the required initial annual impairment review of its goodwill
at June 30, 2002, which due to declining sales and profitability, resulted in a
goodwill impairment loss of $9,600,000.

The Company conducts a formal impairment test of goodwill on an annual
basis and between annual tests if an event occurs or circumstances change that
would more likely than not reduce the fair value of the Company below its
carrying value. The annual impairment test did not indicate a further impairment
of goodwill at June 30, 2005 or June 30, 2004.

Allied operates as one reporting unit and prepares its annual goodwill
impairment test in that manner. None of our product lines constitute a business,
as that term is defined in EITF 98-3. Most of our products are produced in one
facility, and we do not produce separate financial statements for any part of
our business. The goodwill impairment test is performed at June 30(th) of each
year.

The results of these annual impairment reviews are highly dependent on
management's projection of future results of the Company and there can be no
assurance that at the time such future reviews are completed a material
impairment charge will not be recorded.

SIGNIFICANT FACTORS AFFECTING PAST AND FUTURE OPERATING RESULTS

On August 27, 2004, Allied Healthcare Products, Inc. ("Allied") entered
into an agreement with Abbott Laboratories ("Abbott") pursuant to which Allied
agreed to cease production of its product Baralyme(R), and to affect the
withdrawal of Baralyme(R) product held by distributors. The agreement permits
Allied to pursue the development of a new carbon dioxide absorbent product.
Baralyme(R), a carbon dioxide absorbent product, has been used safely and
effectively in connection with inhalation anesthetics since its introduction in
the 1920s. In recent years, the number of inhalation anesthetics has increased,
giving rise to concerns regarding the use of Baralyme(R) in conjunction with
these newer inhalation anesthetics if Baralyme(R) has been allowed, contrary to
recommended practice, to become desiccated. The agreement also provides that,
for a period of eight years, Allied will not manufacture, distribute, promote,
market, sell, commercialize or donate any Baralyme(R) product or similar product
based upon potassium hydroxide and will not develop or license any new carbon
dioxide absorbent product containing potassium hydroxide.

In consideration of the foregoing, Abbott agreed to pay Allied an aggregate
of $5,250,000 of which $1,530,000 was paid on September 30, 2004 and the
remainder payable in four equal annual installments of $930,000 due on July 1,
2005 through July 1, 2008. Allied has agreed with Abbott that in the event that
it receives approval from the U.S. Food & Drug Administration for the commercial
sale of a new carbon dioxide absorbent product not based upon potassium
hydroxide prior to January 1, 2008, that Abbott will be relieved of any
obligation to fund the $930,000 installment due July 1, 2008.

The initial payment of $1,530,000 from Abbott was received on September 30,
2004. The agreement required Abbott to pay Allied $600,000 for reimbursement of
Allied's cost incurred in connection with withdrawal of Baralyme(R) from the
market, the disposal of such product, and severance payments payable as a result
of such withdrawal. This payment by Abbott of $600,000 has been included in net
sales during the year ended June 30, 2005, in accordance with the FASB's EITF
Issue No. 99-19, "Reporting Revenue Gross as a Principal versus Net as an
Agent." The Company is the primary obligor in the arrangement. It has sole
authority to determine the method of withdrawal of Baralyme(R) and discretion in
such matters as employee layoffs, disposal methods, and customer communications
regarding the sale of replacement products. The costs of executing the
withdrawal are the sole responsibility of the Company.

The remaining $4,650,000 of the payments to be received from Abbott,
including the $930,000 received on September 30, 2004, and $930,000 received on
June 13, 2005, will be recognized into income, as net sales, over the eight-year
term of the agreement. Allied has no further obligations under this agreement
which would require the Company to repay these amounts or otherwise impact this
accounting treatment. During the year ended June 30, 2005 $387,500 was
recognized into income as net sales.

A reconciliation of deferred revenue resulting from the agreement with
Abbott, with the amounts received under the agreement, and amounts recognized as
net sales is as follows:

<Table>
<Caption>
TWELVE MONTHS ENDED
JUNE 30,
-------------------
2005 2004
----------- -----

Beginning balance........................................... $ -- $--
Payment Received from Abbott Laboratories................... 2,460,000 --
Revenue recognized as net sales............................. (987,500) --
---------- ---
1,472,500 --
---------- ---
Less -- Current portion of deferred revenue................. (465,000) --
---------- ---
$1,007,500 $--
========== ===
</Table>

As a result of the agreement with Abbott, Allied has suspended
manufacturing operations at its Stuyvesant Falls, New York facility. Costs
associated with the withdrawal and suspension of operations at that location,
including severance and benefit payments due union employees, have been and will
be recorded in accordance with SFAS 146, "Accounting for the Costs Associated
with Exit or Disposal Activities".

During the first quarter of fiscal 2005, the Company recorded a charge to
cost of sales of $600,000. This charge included $216,000 for severance payments
and fringe benefits for the 12 bargaining unit employees. The charge included
$200,000 for the value of Baralyme(R) inventory in stock and the time of the
withdrawal, and associated disposal cost. The charge also included $184,000 for
replacement of Baralyme(R) inventory which was returned by our customers as a
result of the withdrawal. The Company has replaced Baralyme(R) returned by its
customers with Carbolime(R), a carbon dioxide absorption product which continues
to be offered for sale by Allied.

During the second quarter of fiscal 2005, the Company recorded an
adjustment of $127,912 to reflect an increase in the estimated product
withdrawal cost and disposal cost, as more inventory was returned by customers
than originally estimated.

During the fourth quarter of fiscal 2005, the Company recorded an
adjustment of $1,444 to reflect an increase in the estimated product withdrawal
cost and disposal cost, as disposal costs were more than originally estimated.
Management does not expect further cash expenditures to be paid in connection
with the Baralyme(R) product withdrawal.

The following table reflects the activities related to the withdrawal of
Baralyme(R) and subsequent suspension of operations at the Stuyvesant Falls, New
York facility, and the accrued liabilities in the consolidated balance sheets at
June 30, 2005. Changes to previous estimates have been reflected as "Provision
adjustments" on the table below in the period the changes in estimates were
made.

<Table>
<Caption>
SEVERANCE
INVENTORY TO PAY AND PRODUCT
BE DISPOSED OF BENEFITS WITHDRAWAL TOTAL
-------------- --------- ---------- ---------

Provision............................. $ 200,000 $216,000 $ 184,000 $ 600,000
Cash Expenditures..................... $(149,677) $(85,431) $(119,798) $(354,906)
--------- -------- --------- ---------
Balance at September 30, 2004......... $ 50,323 $130,569 $ 64,202 $ 245,094
Cash Expenditures..................... $ (66,079) $(87,171) $(128,479) $(281,729)
Provision Adjustments................. $ 55,756 $ (2,852) $ 75,008 $ 127,912
--------- -------- --------- ---------
Balance at December 31, 2004.......... $ 40,000 $ 40,546 $ 10,731 $ 91,277
Cash Expenditures..................... $ (35,732) $(15,205) $ (10,731) $ (61,668)
Provision Adjustments................. -- -- -- --
--------- -------- --------- ---------
Balance at March 31, 2005............. $ 4,268 $ 25,341 $ 0 $ 29,609
Cash Expenditures..................... $ (5,712) $(25,341) $ 0 $ (31,053)
Provision Adjustments................. $ 1,444 -- -- $ 1,444
--------- -------- --------- ---------
Balance at June 30, 2005.............. $ 0 $ 0 $ 0 $ 0
========= ======== ========= =========
</Table>

In addition to the provisions of the agreement relating to the withdrawal
of the Baralyme(R) product, Abbott has agreed to pay Allied up to $2,150,000 in
product development costs to pursue development of a new carbon dioxide
absorption product for use in connection with inhalation anesthetics that does
not contain potassium hydroxide and does not produce a significant exothermic
reaction with currently available inhalation agents. As of June 30, 2005 no
amounts have been received, and $22,000 is receivable, as a result of product
development activities.

In 2004, Allied's sales of Baralyme(R) were approximately $2.0 million and
contributed approximately $0.6 million in pre-tax earnings and cash flow from
operations. The majority of the $5,250,000 Allied is to receive from Abbott will
be recognized into income over the eight-year term of the agreement. The net
cash flow expected to be realized by Allied under the agreement with Abbott is
projected be substantially equivalent to the net cash flow Allied would have
expected to realize from continued manufacture and sales of Baralyme(R) during
the initial five years of the period.

RESULTS OF OPERATIONS

Allied manufactures and markets respiratory products, including respiratory
care products, medical gas equipment and emergency medical products. Set forth
below is certain information with respect to amounts and percentages of net
sales attributable to respiratory care products, medical gas equipment and
emergency medical products for the fiscal years ended June 30, 2005, 2004, and
2003.

<Table>
<Caption>
YEAR ENDED
JUNE 30, 2005
--------------------
NET % OF TOTAL
SALES NET SALES
------- ----------
DOLLARS IN THOUSANDS

Respiratory care products................................... $15,454 27.5%
Medical gas equipment....................................... 31,302 55.8%
Emergency medical products.................................. 9,364 16.7%
------- -----
Total....................................................... $56,120 100.0%
======= =====
</Table>

<Table>
<Caption>
YEAR ENDED
JUNE 30, 2004
--------------------
NET % OF TOTAL
SALES NET SALES
------- ----------

Respiratory care products................................... $15,672 26.5%
Medical gas equipment....................................... 33,530 56.7%
Emergency medical products.................................. 9,901 16.8%
------- -----
Total....................................................... $59,103 100.0%
======= =====
</Table>

<Table>
<Caption>
YEAR ENDED
JUNE 30, 2003
--------------------
NET % OF TOTAL
SALES NET SALES
------- ----------

Respiratory care products................................... $16,385 26.9%
Medical gas equipment....................................... 34,497 56.7%
Emergency medical products.................................. 9,981 16.4%
------- -----
Total....................................................... $60,863 100.0%
======= =====
</Table>

The following table sets forth, for the fiscal periods indicated, the
percentage of net sales represented by the various income and expense categories
reflected in the Company's consolidated statement of operations.

<Table>
<Caption>
YEAR ENDED JUNE 30,
---------------------
2005 2004 2003
----- ----- -----

Net sales................................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 74.3 72.3 76.9
----- ----- -----
Gross profit................................................ 25.7 27.7 23.1
Selling, general and administrative expenses................ 21.1 21.4 22.3
Income from operations...................................... 4.6 6.3 0.8
Interest expense............................................ 0.2 1.0 1.4
Other, net.................................................. 0.0 0.0 0.0
----- ----- -----
Income (loss) before provision (benefit) for income taxes... 4.4 5.3 (0.6)
Provision (benefit) for income taxes........................ 0.2 2.1 (0.3)
----- ----- -----
Net income (loss)........................................... 4.2% 3.2% (0.3)%
===== ===== =====
</Table>

FISCAL 2005 COMPARED TO FISCAL 2004

Net sales for fiscal 2005 of $56.1 million were $3.0 million or 5.1% less
than net sales of $59.1 million in fiscal 2004. Domestically, sales decreased by
$2.8 million dollars. Internationally, sales decreased by $0.2 million dollars.
International business is dependent upon hospital construction projects, and the
development of medical facilities in those regions in which the Company
operates. Domestic sales include $1.0 million for the recognition into sales of
payments resulting from the agreement with Abbott Laboratories, as discussed
below.

The overall decrease in net sales for the year is primarily the result of
lower customer purchase order releases than in the prior year. Orders for the
Company's products for the year ended June 30, 2005 of $58.2 million were $0.9
million or 1.5% lower than orders for the year ended June 30, 2004 of $59.1
million. However, customer purchase order releases were $3.4 million lower than
in the prior year, leading to the majority of the decrease in sales for the
year. Purchase order release lead times depend on the scheduling practices of
the individual customers. The company expects a return to normal release
patterns in fiscal 2006.

Orders for the Company's Emergency Products are higher than in the prior
year. The Company believes that orders for these products have been favorably
impacted by Federal Homeland Security funding for emergency responders. In
addition, the Company has reorganized this area replacing a sales manager and
two of the three sales specialists. This increase in demand has been offset by
decreased demand for the Company's respiratory care products and medical gas
equipment. The Company continues to believe that the market for construction
products remains weaker than in the prior year. In addition, the demand for
respiratory care products has been adversely affected by increased foreign
competition. The Company is continuing its active efforts to further reduce the
cost to produce its products.

Sales for the year ended June 30, 2005 include $387,500 for the recognition
into sales of payments resulting from the agreement with Abbott Laboratories to
cease the production and distribution of Baralyme(R). Sales for the year ended
June 30, 2005 also included recognition as sales of a one-time $600,000 payment
from Abbott Laboratories for cost incurred in connection with the withdrawal of
Baralyme(R) from the market, the disposal of such product, and severance
payments payable of such withdrawal. In total, domestic sales include $1.0
million for recognition into sales of payments resulting from the agreement with
Abbott Laboratories.

Allied continues to sell Carbolime(R), a carbon dioxide absorbent with a
different formulation than Baralyme(R). For the year ended June 30, 2005 the
Company had carbon dioxide absorbent sales of Carbolime(R), of $2.0 million
dollars, compared with $2.4 million for the year ended June 30, 2004.

Respiratory care products sales in fiscal 2005 of $15.5 million were $0.2
million, or 1.3% less than sales of $15.7 million in the prior year. This
decrease is primarily attributable to a decline in the sales of the Company's
line of homecare products of approximately $0.6 million. The Company's efforts
to maintain and increase market share in the homecare market has been hampered
by delivery problems in prior years, price competition from foreign sourced
products, and ineffective sales and marketing efforts for homecare. The Company
has invested the personnel and systems to improve our telemarketing efforts, and
continues to emphasize measures to reduce the cost of its products. Reported
sales of respiratory care products benefited from the approximately $1.0 million
recognized resulting from the agreement to cease the production and distribution
of Baralyme(R). This was offset by the resulting $0.4 million decrease in the
sale of carbon dioxide absorbent products.

Medical gas equipment sales of $31.3 million in fiscal 2005 were $2.2
million, or 6.6% less than prior year levels of $33.5 million. Of this decrease,
approximately $1.8 million is from a decrease of shipments of the Company's
Construction products. The Company continues to believe that the market for
construction products remains weaker than in the prior year, and that the
Company has not lost market share in this project driven market.
Internationally, sales of Medical gas equipment in fiscal 2005 were $0.1 million
greater than in the prior year.

Emergency medical product sales in fiscal 2005 of $9.4 million were $0.5
million or 5.1% less than fiscal 2004 sales of $9.9 million. International sales
of Emergency medical products declined by $0.2 million, while domestic sales
decreased by $0.3 million. However, orders for the Company's Emergency Products
are higher than in the prior year. Orders for Emergency Medical Products
increased from $9.2 million in fiscal 2004 to $9.6 in fiscal 2005. The Company
believes that orders for these products have been favorably impacted by Federal
Homeland Security funding for emergency responders. In addition, the Company has
reorganized this area replacing the sales manager and two of the three sales
specialists, domestically.

International sales, which are included in the product lines discussed
above, decreased $0.2 million, or 2.0%, to $9.7 million in fiscal 2005 compared
to sales of $9.9 million in fiscal 2004. As discussed above, the Company's
international shipments are dependent on hospital construction projects and the
expansion of medical care in those regions. In fiscal 2005, international
shipments of medical gas equipment increased by $0.1 million dollars. This was
offset by a $0.1 million decrease in the sale of Respiratory care products, and
a decrease in sale of Emergency medical products by $0.2 million dollars.

Gross profit in fiscal 2005 was $14.5 million, or 25.7% of sales, compared
to a gross profit of $16.4 million, or 27.7% of sales in fiscal 2004. The change
in gross profit percentage is primarily attributable to lower absorption rates
for fixed cost due to lower sales and production in fiscal 2005 than in the
prior year.

Cost of sales for the year ended June 30, 2005 does include approximately $0.7
million in cost incurred in connection with the withdrawal of Baralyme(R),
including related severance costs. In addition, gross profit for the year ended
June 30, 2004 benefited by a $243,248 distribution representing the Company's
membership interest in the liquidation of the General American Mutual Holding
Company, the Company's former health care benefit provider. During 2005, the
Company received a distribution of $47,126, which is included in the Company's
gross profit. The Company's gross profit did benefit from an approximately $0.4
million decrease in worker's compensation and property insurance expense due to
the improved safety performance of the Company. The Company continues to control
cost and actively pursue methods to reduce its cost. The Company invested $0.5
million in capital expenditures in fiscal 2003, $0.6 million in fiscal 2004, and
$0.4 million in fiscal 2005 for manufacturing equipment, which continues to
decrease production costs and improve efficiencies for several product lines.

Selling, General, and Administrative ("SG&A") expenses for fiscal 2005 were
$11.8 million, a decrease of $0.9 million over SG&A expenses of $12.7 million in
fiscal 2004. Personnel cost, including salaries and benefits, were approximately
$0.6 million lower in fiscal 2005 than in the prior year. This decrease is due
to the workforce reduction which occurred in the first quarter of fiscal 2004,
as well as reductions in incentive compensation to the Company sales force as a
result of lower sales. Insurance costs are approximately $0.2 million lower than
in the prior year as a result of lower negotiated insurance rates on product
liability insurance. In addition, due to continued strong accounts receivable
performance and collection experience, bad debt expense is approximately $0.3
million lower than in the prior year. These savings were partially offset, by
approximately $0.2 million in increases in spending covering several areas,
including audit fees and consulting.

On July 28(th), 2003 the Company announced a workforce reduction of 14
positions from its managerial and administrative staff and 5 positions from its
production group. This reduction resulted in severance pay of approximately
$73,000, which was paid in the first quarter of fiscal 2004. These payments are
reflected in selling, general, and administrative expenses for the year ended
June 30, 2004.

Interest expense decreased by $0.5 million, or 83.3%, to $0.1 million in
fiscal 2005 from $0.6 million in fiscal 2004. Interest expense has been reduced
due to reductions in debt. During Fiscal 2005, debt was reduced from $3.6
million to zero.

The Company had income of $2.4 million before taxes for fiscal 2005,
compared to income of $3.1 million before taxes for fiscal 2004. The Company
recorded an income tax provision of $0.1 million in fiscal 2005, compared to an
income tax provision of $1.3 million in fiscal 2004.

In 2005, the Company realized a tax benefit of $1.1 million from the
reversal of deferred tax asset valuation allowances related primarily to tax net
operating loss carryforwards acquired in 1995 in conjunction with the
acquisition of Bicore Monitoring Systems, Inc. The tax laws in 1995 placed
restrictions on the use of these net operating loss carryforwards, making it
unlikely that the Company would realize the net operating loss carryforwards to
offset future taxes. A deferred tax asset and corresponding valuation allowance
have not been previously disclosed. The tax laws were changed in 1999, making
these net operating loss carryforwards available for utilization on a
consolidated basis from that time forward. However, beginning in 1999, the
Company was not profitable and could not realize the benefit of these net
operating loss carryforwards. The Company reported losses in 1999, 2000, 2002,
and 2003. Although the Company did have taxable income in 2001 and 2004,
management concluded that this did not represent sufficient positive evidence
that the underlying deferred tax assets were more likely than not realizable,
based primarily on the significant amount of cumulative losses in prior years
and uncertainty of future profitability.

During the fourth quarter of 2005 the Company reviewed its performance
during 2004 and 2005, as well as its projections for taxable income in 2006. Due
to the Company's return to profitability, the Company reversed deferred tax
asset valuation allowances of $1.1 million due to management's conclusion that
it was more likely than not that we would realize the underlying deferred tax
assets. For further discussion of the Company's income tax calculation please
refer to Note 5 of the "Notes to Consolidated Financial Statements" section
included in this Form 10-K.

Net income in fiscal 2005 was $2.3 million or $0.30 per basic and $0.29 per
diluted earnings per share, an increase of $0.4 million from net income of $1.9
million, or $0.24 per basic and $0.23 per diluted earnings per share in fiscal
2004. In 2005, the weighted number of shares used in the calculation of basic
earnings per share was 7,821,943 and the weighted number of shares used in the
calculation of diluted earnings per share was 8,080,890. In 2004, the weighted
number of shares used in the calculation of basic earnings per share was
7,816,416 and the weighted number of shares used in the calculation of diluted
earnings per share was 7,984,761.

FISCAL 2004 COMPARED TO FISCAL 2003

Net sales for fiscal 2004 of $59.1 million were $1.8 million or 3.0% less
than net sales of $60.9 million in fiscal 2003. Domestically, sales decreased by
$1.1 million dollars. Domestically, sales increased in all regions of the
country except in the Company's Eastern Region. Of this $1.1 million decrease in
domestic sales, $1.6 million dollars is attributable to the Company's "Eastern
Region" (primarily the northeastern United States). The Company believes that
this decrease in sales was, in part, due to ineffective performance of our sales
organization in that region. The Company has taken action to correct that
problem, reorganizing its sales force in that area. The Company does not believe
that it has permanently lost market share in that region, and feels that sales
in that region should return to normal levels.

Internationally, sales decreased by $0.7 million dollars. International
business is dependent upon hospital construction projects, and the development
of medical facilities in those regions in which the Company operates. The $0.7
million dollar decrease in international shipments includes a $0.4 million
dollar decrease in sales to Latin America, where economic progress has been
uneven over the last several years. The Company expects this market to grow in
future years. In addition, 2003 sales to the Far East included several
construction product projects which did not repeat in 2004. Sales to the Far
East declined by approximately $0.3 million in 2004.

Respiratory care products sales in fiscal 2004 of $15.7 million were $0.7
million, or 4.3% less than sales of $16.4 million in the prior year. This
decrease is attributable to a decline in the sales of the Company's B&F line of
homecare products. The Company has not been able to regain market share lost
from delivery problems in prior years. These delivery problems are now
rectified, and the Company continues to pursue this market.

Medical gas equipment sales of $33.5 million in fiscal 2004 were $1.0
million, or 2.9% less than prior year levels of $34.5 million. Of this decrease
$0.4 million came from a decrease in international business. As discussed above,
International business is dependent upon hospital construction projects and the
development of medical facilities in those regions in which the Company
operates. Domestic sales of Medical gas equipment decreased by $0.6 million, or
2.1%.

Emergency medical product sales in fiscal 2004 of $9.9 million were $0.1
million or 1.0% less than fiscal 2003 sales of $10.0 million. International
sales of Emergency medical products declined by $0.2 million, while domestic
sales increased by $0.1 million.

International sales, which are included in the product lines discussed
above, decreased $0.7 million, or 6.6%, to $9.9 million in fiscal 2004 compared
to sales of $10.6 million in fiscal 2003. As discussed above, the Company's
international shipments are dependent on hospital construction projects and the
expansion of medical care in those regions. In fiscal 2004, international
shipments of medical gas equipment decreased by $0.4 million dollars. In
addition, sales of Respiratory care products decreased by $0.1 million dollars,
and Emergency medical products decreased by $0.2 million dollars.

Gross profit in fiscal 2004 was $16.4 million, or 27.7% of sales, compared
to a gross profit of $14.1 million, or 23.1% of sales in fiscal 2003. In fiscal
2004 the Company continued to improve production efficiency and automation. The
Company invested $3.7 million in capital expenditures during fiscal 2002, $0.5
million in fiscal 2003, and $0.6 million in fiscal 2004 for manufacturing
equipment, which continues to decrease production costs and improve efficiencies
for several product lines. In addition, gross profit improved $0.2 million as a
result of a distribution representing the Company's membership interest in the
liquidation of the General American Mutual Holding Company, the Company's health
care benefit provider. These savings

were partially offset by an approximately $0.2 million increase in Worker's
Compensation insurance, and the decreases to gross margins attributable to lower
sales volumes.

Selling, General, and Administrative ("SG&A") expenses for fiscal 2004 were
$12.7 million, a decrease of $0.9 million over SG&A expenses of $13.6 million in
fiscal 2003. This decrease is the result of two main factors. On July 28(th),
2003 the Company announced an immediate workforce reduction of 14 positions from
its managerial and administrative staff. SG&A expenses decreased $0.8 million
during fiscal 2004 primarily from this staff reduction. The Company's SG&A
expenses decreased by $0.3 million as a result of a decrease in the cost of
property and casualty insurance. These decreases were partially offset by
increases in other SG&A expenses, including a $0.1 million increase in bad debt
expense.

The workforce reduction of 14 positions was not part of a formal
restructuring plan pursuant to SFAS 146. This reduction was an employee layoff
due to declining sales. This workforce reduction did not change either the scope
of a business undertaken by Allied Healthcare Products or the manner in which
business is conducted. Furthermore, this workforce reduction did not result from
a sale or termination of a line of business, the closure of a business location,
a change in management structure, or a fundamental reorganization of the company
as stated in IAS 37 paragraph 70.

Interest expense decreased by $0.2 million, or 25.0%, to $0.6 million in
fiscal 2004 from $0.8 million in fiscal 2003. Interest expense has been reduced
due to reductions in debt.

The Company had income of $3.1 million before taxes for fiscal 2004,
compared to a loss of $0.4 million before taxes for fiscal 2003. The Company
recorded an income tax provision of $1.3 million in fiscal 2004, compared to tax
benefit of $0.2 million in fiscal 2003.

Net income in fiscal 2004 was $1.9 million or $0.24 per basic and $0.23 per
diluted earnings per share, an increase of $2.1 million from net loss of $0.2
million, or $0.02 per basic and diluted earnings per share in fiscal 2003. In
2004, the weighted number of shares used in the calculation of basic earnings
per share was 7,816,416 and the weighted number of shares used in the
calculation of diluted earnings per share was 7,984,761. In 2003, the weighted
number of shares used in the calculation of basic and diluted earnings per share
was 7,813,932.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth selected information concerning Allied's
financial condition at June 30:

<Table>
<Caption>
DOLLARS IN THOUSANDS 2005 2004 2003
- -------------------- ------- ------- -------

Cash & cash equivalents................................. $ 318 $ 8 $ 12
Working Capital......................................... $12,250 $10,993 $ 9,445
Total Debt.............................................. $ 0 $ 3,612 $10,022
Current Ratio........................................... 2.97:1 2.38:1 1.84:1
</Table>

The Company's working capital was $12.2 million at June 30, 2005 compared
to $11.0 million at June 30, 2004. The current portion of long-term debt
decreased by $1.2 million, reflecting the reduction in the Company's revolver
debt. Accounts payable decreased by $1.0 million during fiscal 2005. Cash and
cash equivalents increased by $0.3 million. During fiscal 2005, these increases
in working capital were offset by several other changes. Current deferred
revenue increased by approximately $0.5 million as a result of the agreement
with Abbott. Accounts receivable decreased to $7.2 million at June 30, 2005,
down $0.4 million from $7.6 million at June 30, 2004. This decrease is due to a
decrease in sales. Accounts receivable as measured in days sales outstanding
("DSO") remained constant at 46 DSO for the current and prior year. Inventory
declined by $0.3 million as a result of the Company's inventory reduction
programs. The Company's inventory reduction programs involve consistent,
detailed management review of order quantities, lead times, safety stocks,
inventory levels, and other material planning parameters. These reviews have
allowed the Company to better control its inventory levels, resulting in a $2.4
million decrease in inventory over the last three fiscal years. We do not expect
these programs to significantly further reduce inventory levels. The current
liability for deferred income taxes increased by approximately $0.3 million.
Income taxes receivable

was reduced by $0.1 million as the Company received a federal tax refund
resulting from the carry back of prior year losses.

The Company's working capital was $11.0 million at June 30, 2004 compared
to $9.5 million at June 30, 2003. Inventory declined by $1.2 million as a result
of the Company's inventory reduction programs. Accounts receivable decreased to
$7.6 million at June 30, 2004, down $0.2 million from $7.8 million at June 30,
2003. This decrease in accounts receivable is a result of improvements in
collection performance and a decrease in sales. Accounts receivable as measured
in days sales outstanding ("DSO") decreased to 46 DSO from 48 DSO the prior
year. Income taxes receivable was reduced by $0.3 million as the Company
received a federal tax refund resulting from the carry back of prior year
losses. Accounts payable increased by $0.9 million during fiscal 2004, as a
result of decreased purchases during the fourth quarter of fiscal 2003, from the
Company's inventory reduction programs. These reductions in working capital were
offset by a reduction in the current portion of long-term debt. The current
portion of long-term debt decreased by $4.2 million reflecting the reduction in
the Company's revolver debt.

The net increase in cash for the fiscal year ended June 30, 2005 was $0.3
million. The net decrease in cash for the fiscal year ended June 30, 2004 was
$3,760. The net increase in cash for the fiscal year ended June 30, 2003 was
$11,216. Net cash provided by operating activities was $4.3 million for fiscal
2005. Net cash provided by operating activities was $7.0 million and $2.6
million for fiscal 2004 and 2003, respectively.

Cash flows provided by operating activities for the fiscal year ended June
30, 2005 consisted of a net income of $2.3 million, supplemented by $1.2 million
in non-cash charges to operations for amortization and depreciation. Changes in
working capital and deferred tax accounts favorably impacted cash flow from
operations by $0.8 million. Cash flow was used to reduce debt and capital lease
obligations by $3.6 million and make capital expenditures of $0.4 million.

Cash flows provided by operating activities for the fiscal year ended June
30, 2004 consisted of a net income of $1.9 million, supplemented by $1.3 million
in non-cash charges to operations for amortization and depreciation. Changes in
working capital and deferred tax accounts favorably impacted cash flow from
operations by $3.8 million. Cash flow was used to reduce debt and capital lease
obligations by $6.4 million and make capital expenditures of $0.6 million.

Cash flows provided by operating activities for the fiscal year ended June
30, 2003 consisted of a net loss $0.2 million, which was offset by $1.2 million
in non-cash charges to operations for amortization and depreciation. Changes in
working capital and deferred tax accounts favorably impacted cash flow from
operations by $1.6 million. Cash flow was used to reduce debt and capital lease
obligations by $2.1 million and make capital expenditures of $0.5 million.

On April 24, 2002, the Company entered into a credit facility arrangement
with LaSalle Bank National Association (the "Bank"), which was subsequently
amended on September 26, 2002. The credit facility provided for total borrowings
up to $19.0 million; consisting of up to $15.0 million through a revolving
credit facility and up to $4.0 million under a term loan. The entire credit
facility accrued interest at prime plus 0.75%. The term loan may be drawn
against for capital expenditures during the first six months of the term of the
credit facility. Repayment of the term loan began on October 24, 2002, with
principal and interest due in equal monthly installments over five years
(subject to payment in full at the maturity of the credit facility if that
facility is not renewed or extended). The credit facility is collateralized by
substantially all of the assets of the Company. The original maturity date of
the new facility was April 24, 2005. The credit facility was further amended on
September 26, 2003, August 25, 2004, and September 1, 2005 as described below.

The revolving credit facility provided for a borrowing base of 80% of
eligible accounts receivable plus the lesser of 50% of eligible inventory or
$7.0 million, subject to reserves as established by the Bank. At June 30, 2005,
$9.2 million was available under the revolving credit facility for additional
borrowings. The credit facility calls for a 0.25% commitment fee payable
quarterly based on the average daily unused portion of the revolving credit
facility. The revolving credit facility also provides for a commitment guaranty
of up to $5.0 million for letters of credit and requires a per annum fee of
2.50% on outstanding letters of credit. At June 30, 2005 and 2004, the Company
had no letters of credit outstanding. Any outstanding letters of credit
decreases the

amount available for borrowing under the revolving credit facility. The weighted
average interest rate on the revolving credit facility was 5.05% and 4.95% for
the years ended June 30, 2005 and 2004, respectively.

Under the terms of the amended credit facility, the Company is required to
be in compliance with certain financial covenants pertaining to stockholders'
equity, capital expenditures and net income. At June 30, 2003, the Company was
in violation of its EBITDA (net income after taxes, plus interest expense,
income tax expense, and depreciation and amortization) covenant which were
waived by the bank in a letter dated on September 26, 2003. On September 26,
2003, the Bank further amended the Company's credit facility. The Bank amended
various financial covenants in conjunction with the amended credit facility
including a reduction in the required fixed coverage charge ratio and the
elimination of the EBITDA covenant. In addition, the outstanding loans under the
amended credit facility will bear interest at an annual interest rate of 1.00%
plus the Bank's prime rate. In conjunction with these amendments to the
Company's credit facility, the Bank extended the maturity on the Company's term
loan on real estate from August 1, 2003 to April 24, 2005. Amortization on the
real estate term loan shall continue on a five-year schedule with equal monthly
payments of $49,685. The real estate term loan will bear interest at an annual
interest rate of 1.00% plus the Bank's prime rate. The Company also received a
waiver from the Bank for its covenant violations pertaining to its EBITDA
covenant, which the Company was in default of on June 30, 2003. Additionally,
the terms of the new credit facility restrict the Company from the payment of
dividends on any class of its stock.

On August 27, 2004, the Bank and the Company agreed to a further amendment
of the credit facility. In conjunction with these amendments to the Company's
credit facility, the Bank extended the maturity on the Company's term loan on
real estate, the Company's revolving credit facility, and term loan on capital
expenditures from April 24, 2005 to April 24, 2007. The total available
borrowing for the revolving credit facility was reduced from $15 million to $10
million. The entire credit facility was amended to accrue interest at the Bank's
prime rate. The prime rate was 6.25% on June 30, 2005. The interest rate on
prime rate loans may increase from prime to prime plus 0.75% if the ratio of the
Company's funded debt to EBITDA exceeds 1.5. The amended credit facility also
provides the Company with a rate of LIBOR plus 2.25%, at the Company's option.
The optional LIBOR rate may increase from LIBOR plus 2.25% to LIBOR plus 3.00%
based on the Company's fixed charge coverage ratio. The 90-day LIBOR rate was
3.70% at June 30, 2005. Amortization on the real estate term loan was to
continue on a five-year schedule with equal monthly payments of $49,685. The
real estate loan was retired on September 30, 2004. Amortization on the capital
expenditure term loan was to continue on a five-year schedule with equal monthly
payments of $50,772. The capital expenditure loan was retired on April 14, 2005.

The credit facility requires lockbox arrangement, which provide for all
receipts to be swept daily to reduce borrowings outstanding under the credit
facility. This arrangement, combined with the existence of a Material Adverse
Effect (MAE) clause in the credit facility, cause the revolving credit facility
to be classified as a current liability, per guidance in the FASB's Emerging
Issues Task Force Issue 95-22, "Balance Sheet Classification of Borrowings
Outstanding under Revolving Credit Agreements that Include Both a Subjective
Acceleration Clause and a Lock-Box Arrangement." However, the Company does not
expect to repay, or be required to repay, within one year, the balance of the
revolving credit facility classified as a current liability. The MAE clause,
which is a typical requirement in commercial credit agreements, allows the
lender to require the loan to become due if it determines there has been a
material adverse effect on the Company's operations, business, properties,
assets, liabilities, condition or prospects. The classification of the revolving
credit facility as a current liability is a result only of the combination of
the two aforementioned factors: the lockbox arrangement and the MAE clause.
However, the revolving credit facility does not expire or have a maturity date
within one year. Additionally, the Bank has not notified the Company of any
indication of a MAE at June 30, 2005.

At June 30, 2005 the Company had no aggregate indebtedness, including
capital lease obligations, short-term debt and long-term debt.

The Company was in compliance with all of the financial covenants
associated with its credit facility at June 30, 2005.

On August 25, 2005, the Board of Directors authorized repurchases of shares
of the Company's common stock pursuant to open market transactions in accordance
with Rule 10b-18 under the Securities Exchange Act or in privately negotiated
block transactions. The authorization permits repurchases from time to time
until June 30, 2007 at the discretion of the Chairman of the Board or the
President and Chief Executive Officer. The authorization permits up to $1.0
million to be applied to such repurchases. No specific number of shares are
sought in connection with the authorization. The Company received the consent of
the Bank for this authorized repurchase.

On September 1, 2005, the Bank and the Company agreed to a further
amendment of the credit facility. In conjunction with these amendments to the
Company's credit facility, the Bank extended the maturity on the Company's
revolving credit facility from April 24, 2007 to September 1, 2008. The entire
credit facility continues to accrue interest at the Bank's prime rate. The prime
rate was 6.50% on September 1, 2005. The interest rate on prime rate loans may
increase from prime to prime plus 0.75% if the ratio of the Company's funded
debt to EBITDA exceeds 2.5. The amended credit facility also provides the
Company with a rate of LIBOR plus 1.75%, at the Company's option. The optional
LIBOR rate may increase from LIBOR plus 1.75% to LIBOR plus 2.75% based on the
Company's fixed charge coverage ratio. The 90-day LIBOR rate was 3.76% at
September 1, 2005.

The following table summarizes the Company's cash obligations at June 30,
2005:

<Table>
<Caption>
PAYMENT DUE BY PERIOD
--------------------------------
LESS THAN
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR 1-3 YEARS
- ----------------------- -------- --------- ---------

Long-Term Debt....................................... -- -- --
Capital Lease Obligations............................ -- -- --
Operating Leases..................................... $395,746 $220,485 $175,261
Unconditional Purchase Obligations................... -- -- --
Other Long-Term Obligations.......................... -- -- --
-------- -------- --------
Total Contractual Cash Obligations................... $395,746 $220,485 $175,261
======== ======== ========
</Table>

Capital expenditures, net of capital leases, were $0.4 million, $0.6
million and $0.5 million in fiscal 2005, 2004, and 2003, respectively. The
Company believes that cash flows from operations and available borrowings under
its credit facilities will be sufficient to finance fixed payments and planned
capital expenditures of $0.7 million in 2006. Cash flows from operations may be
negatively impacted by decreases in sales, market conditions, and adverse
changes in working capital.

In the event that economic conditions were to severely worsen for a
protracted period of time, we believe that our borrowing capacity under our
credit facilities will provide sufficient financial flexibility. The Company
would have options available to ensure liquidity in addition to increased
borrowing. Capital expenditures, which are budgeted at $0.7 million for the
fiscal year ended June 30, 2006, could be postponed. At June 30, 2005, the
Company had no bank debt. Based on the Company's current level of debt, and
performance, debt would bear interest at the Bank's prime rate. The Company's
agreement with the Bank does include provisions for higher interest rates at
higher debt levels and different levels of Company performance.

Inflation has not had a material effect on the Company's business or
results of operations. The Company makes its foreign sales in dollars and,
accordingly, sales proceeds are not affected by exchange rate fluctuations,
although the effect on its customers does impact the pace of incoming orders.

SEASONALITY AND QUARTERLY RESULTS

In past fiscal years, the Company has experienced moderate seasonal
increases in net sales during its second and third fiscal quarters (October 1
through March 31) which in turn have affected net income. Such seasonal
variations were likely attributable to an increase in hospital equipment
purchases at the beginning of each calendar year (which coincides with many
hospitals' fiscal years) and an increase in the severity of influenza during
winter months.

The following table sets forth selected operating results for the eight
quarters ended June 30, 2005. The information for each of these quarters is
unaudited, but includes all normal recurring adjustments which the Company
considers necessary for a fair presentation thereof. These operating results,
however, are not necessarily indicative of results for any future period.
Further, operating results may fluctuate as a result of the timing of orders,
the Company's product and customer mix, the introduction of new products by the
Company and its competitors, and overall trends in the health care industry and
the economy. While these patterns have an impact on the Company's quarterly
operations, the Company is unable to predict the extent of this impact in any
particular period.

<Table>
<Caption>
THREE MONTHS ENDED,
-----------------------------------------------------------------------------------------------------
JUNE 30, MARCH 31, DEC. 31, SEPT. 30, JUNE 30, MARCH 31, DEC. 31, SEPT. 30,
2005 2005 2004 2004 2004 2004 2003 2003
----------- ------------ -------- --------- ----------- ------------ -------- ---------
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

Net sales............. $14,184 $14,328 $13,668 $13,940 $15,261 $14,957 $15,077 $13,808
Gross profit.......... 3,899 3,732 3,413 3,407 4,638 4,212 4,108 3,397
Income from
operations.......... 1,055 719 356 478 1,547 1157 774 217
Net income............ 1,513 408 184 236 861 627 384 3
Basic earnings per
share............... 0.19 0.05 0.02 0.03 0.11 0.08 0.05 0.00
Diluted earnings per
share............... 0.19 0.05 0.02 0.03 0.10 0.08 0.05 0.00
</Table>

Earnings per share is computed independently for each of the quarters
presented. Therefore, the sum of the quarterly amounts will not necessarily
equal the total for the year.

LITIGATION AND CONTINGENCIES

The Company becomes, from time to time, a party to personal injury
litigation arising out of incidents involving the use of its products. More
specifically, there have been a number of lawsuits filed against the Company
alleging that its aluminum oxygen pressure regulator, marketed under its Life
Support Products label, has caused fires that have led to personal injury. The
Company believes, based on preliminary findings, that its products did not cause
the fires. The Company intends to defend these claims in cooperation with its
insurers. Based on the progression of certain cases the Company recorded
additional charges to operations during fiscal 2001 for amounts estimated to be
payable by the Company under its self-insurance retention for legal costs
associated with defending these claims. The Company believes that any potential
judgments resulting from these claims over its self-insured retention will be
covered by the Company's product liability insurance.

OFF BALANCE SHEET ARRANGEMENTS

Allied does not have any off balance sheet arrangements.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" which addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred. Under EITF Issue No. 94-3, a liability for an exit cost
was recognized at the date of an entity's commitment to an exit plan. The
provisions of SFAS No. 146 are effective for exit or disposal activities
initiated after December 31, 2002. Adoption of SFAS No. 146 has not had a
material impact on the Company's results of operations, financial position or
cash flows.

In November 2002, the FASB issued Interpretation (FIN) No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". This

interpretation elaborates on the disclosures to be made by a guarantor in its
financial statements about its obligations under certain guarantees that it has
issued. It also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The Company does not have any commitments
that are within the scope of FIN No. 45.

In December 2002, the FASB issued SFAS No. 148 ,"Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of FAS 123," which
provides alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation.
Additionally, SFAS No. 148 amends the disclosure requirements of SFAS No. 123
"Accounting for Stock-Based Compensation," to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The provisions of SFAS No. 148 are effective for financial statements
issued for fiscal years ending after December 15, 2002 and for financial reports
containing condensed financial statements for interim periods beginning after
December 15, 2002. Adoption of SFAS No. 148 did not have a material impact on
the Company's results of operations, financial position or cash flows.

In January 2003, the FASB released FIN No. 46, "Consolidation of Variable
Interest Entities -- an Interpretation of ARB No. 51", which was subsequently
revised in December 2003 (collectively referred to as "FIN 46" or the
"Interpretation"). The Interpretation, as revised, clarifies issues regarding
the consolidation of entities which may have features that make it unclear
whether consolidation or equity method accounting is appropriate. FIN 46 is
generally effective in 2003. Adoption of FIN 46 had no impact on the Company, as
it is not the beneficiary of any variable interest entities.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS
No. 150 provides guidance on distinguishing between liability and equity
instruments and accounting for instruments that have characteristics of both.
SFAS No. 150 requires specific types of freestanding financial instruments to be
classified as liabilities including mandatory redeemable financial instruments,
obligations to repurchase the issuer's equity shares by transferring assets and
certain obligations to issue a variable number of shares. The provisions of SFAS
No. 150 are effective for financial instruments entered into or modified after
May 31, 2003. For all other instruments, SFAS No. 150 is effective July 1, 2003.
Adoption of SFAS No. 150 did not have a material impact on the Company's results
of operations, financial position or cash flows.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." SFAS No.
151 requires the allocation of fixed production overhead costs be based on the
normal capacity of the production facilities and unallocated overhead costs
recognized as an expense in the period incurred. In addition, other items such
as abnormal freight, handling costs and wasted materials require treatment as
current period charges rather than a portion of the inventory cost. SFAS No. 151
is effective for inventory costs incurred during periods beginning after June
15, 2005. The Company is currently assessing the impact of the adoption of SFAS
No. 151 on its results of operations and financial condition.

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment."
SFAS No. 123R requires measurement of all employee stock-based compensation
awards using a fair value method and the recording of such expense in the
consolidated financial statements. In addition, the adoption of SFAS No. 123R
will require additional accounting related to the income tax effects and
additional disclosure regarding the cash flow effects resulting from share-based
payment arrangements. The Company has adopted the modified prospective method
beginning July 1, 2005. Based on stock options currently outstanding, the
expected gross compensation cost will total $76,659 over the next four fiscal
years.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At June 30, 2005, the Company did not have any debt outstanding. The
revolving credit facility, capital expenditure and real estate loan bear an
interest rate using the commercial bank's "floating reference rate" or LIBOR as
the basis, as defined in the loan agreement, and therefore is subject to
additional expense should there be an increase in market interest rates.

The Company had no holdings of derivative financial or commodity
instruments at June 30, 2005. Allied Healthcare Products has international
sales; however these sales are denominated in U.S. dollars, mitigating foreign
exchange rate fluctuation risk.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following described consolidated financial statements of Allied
Healthcare Products, Inc. are included in response to this item:

Reports of Independent Registered Public Accounting Firms.

Consolidated Statement of Operations for the fiscal years ended June
30, 2005, 2004 and 2003.

Consolidated Balance Sheet for the fiscal years ended June 30, 2005
and 2004.

Consolidated Statement of Changes in Stockholders' Equity for the
fiscal years ended June 30, 2005, 2004 and 2003.

Consolidated Statement of Cash Flows for the fiscal years ended June
30, 2005, 2004 and 2003.

Notes to Consolidated Financial Statements.

Schedule of Valuation and Qualifying Accounts and Reserves for the
years ended June 30, 2005, 2004 and 2003.

All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders Allied Healthcare Products, Inc.

We have audited the accompanying consolidated balance sheet of Allied
Healthcare Products, Inc. and subsidiaries as of June 30, 2005 and 2004, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the years then ended. In connection with our audit of the
consolidated financial statements, we also have audited the related financial
statement schedule of valuation and qualifying accounts and reserves for the
years ended June 30, 2005 and 2004. These consolidated financial statements and
the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Allied
Healthcare Products, Inc. and subsidiaries as of June 30, 2005 and 2004, and the
results of their operations and their cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the related financial statement schedule referred
to above, when considered in relation to the consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information set
forth therein.

/s/ RubinBrown LLP

St. Louis, Missouri
August 12, 2005, except for Notes 3 and 13, as to
which the date is September 1, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Allied Healthcare Products, Inc.

In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Allied Healthcare Products, Inc. and its subsidiaries at June 30,
2003 and the results of their operations and their cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement schedule
listed in the accompanying index represents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audit. We conducted our audit of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

St. Louis, Missouri
September 26, 2003

ALLIED HEALTHCARE PRODUCTS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

<Table>
<Caption>
YEAR ENDED JUNE 30,
---------------------------------------
2005 2004 2003
----------- ----------- -----------

Net sales............................................. $56,120,150 $59,103,313 $60,863,358
Cost of sales......................................... 41,669,290 42,748,342 46,809,726
----------- ----------- -----------
Gross profit.......................................... 14,450,860 16,354,971 14,053,632
Selling, general and administrative expenses.......... 11,843,037 12,660,358 13,550,592
----------- ----------- -----------
Income from operations................................ 2,607,823 3,694,613 503,040
----------- ----------- -----------
Other expenses:
Interest expense.................................... 123,076 550,158 830,838
Other, net.......................................... 42,604 8,378 41,135
----------- ----------- -----------
165,680 558,536 871,973
----------- ----------- -----------
Income (loss) before provision (benefit) for income
taxes............................................... 2,442,143 3,136,077 (368,933)
Provision (benefit) for income taxes.................. 100,779 1,261,424 (211,374)
----------- ----------- -----------
Net income (loss)..................................... $ 2,341,364 $ 1,874,653 $ (157,559)
=========== =========== ===========
Basic income (loss) per share:........................ $ 0.30 $ 0.24 $ (0.02)
Diluted income (loss) per share:...................... $ 0.29 $ 0.23 $ (0.02)
=========== =========== ===========
Weighted average shares outstanding -- Basic.......... 7,821,943 7,816,416 7,813,932
----------- ----------- -----------
Weighted average shares outstanding -- Diluted........ 8,080,890 7,984,761 7,813,932
----------- ----------- -----------
</Table>

See accompanying Notes to Consolidated Financial Statements.
31

ALLIED HEALTHCARE PRODUCTS, INC.

CONSOLIDATED BALANCE SHEET

<Table>
<Caption>
JUNE 30,
---------------------------
2005 2004
------------ ------------

ASSETS
Current assets:
Cash and cash equivalents................................. $ 317,775 $ 8,256
Accounts receivable, net of allowances of $565,000 and
$585,000, respectively................................. 7,215,799 7,598,969
Inventories, net.......................................... 10,775,550 11,095,171
Income tax receivable..................................... -- 130,548
Other current assets...................................... 168,431 127,127
------------ ------------
Total current assets................................. 18,477,555 18,960,071
------------ ------------
Property, plant and equipment, net........................ 11,308,866 11,999,927
Goodwill.................................................. 15,979,830 15,979,830
Other assets, net......................................... 330,969 88,867
------------ ------------
Total assets......................................... $ 46,097,220 $ 47,028,695
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 2,110,599 $ 3,125,593
Current portion of long-term debt......................... -- 1,245,484
Deferred income taxes..................................... 711,416 389,644
Deferred revenue.......................................... 465,000 --
Other accrued liabilities................................. 2,940,763 3,206,603
------------ ------------
Total current liabilities............................ 6,227,778 7,967,324
------------ ------------
Deferred income taxes....................................... -- 242,478
------------ ------------
Deferred revenue............................................ 1,007,500 --
Long-term debt.............................................. -- 2,366,076
------------ ------------
Commitments and contingencies (Notes 4 and 9)
Stockholders' equity:
Preferred stock; $0.01 par value; 1,500,000 shares
authorized; no shares issued and outstanding........... -- --
Series A preferred stock; $0.01 par value; 200,000 shares
authorized; no shares issued and outstanding........... -- --
Common stock; $0.01 par value; 30,000,000 shares
authorized; 10,133,069 shares issued and 7,829,577
shares outstanding at June 30, 2005 and 10,121,924
shares issued and 7,818,432 shares outstanding at June
30, 2004............................................... 101,331 101,220
Additional paid-in capital................................ 47,109,143 47,041,493
Retained earnings......................................... 12,382,896 10,041,532
Less: treasury stock, at cost; 2,303,492 shares at June
30, 2005 and 2004 respectively......................... (20,731,428) (20,731,428)
------------ ------------
Total stockholders' equity........................... 38,861,942 36,452,817
------------ ------------
Total liabilities and stockholders' equity........... $ 46,097,220 $ 47,028,695
============ ============
</Table>

See accompanying Notes to Consolidated Financial Statements.
32

ALLIED HEALTHCARE PRODUCTS, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<Table>
<Caption>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TREASURY STOCK TOTAL
-------- ----------- ----------- -------------- -----------

Balance, June 30, 2002....... $101,175 $47,030,549 $ 8,324,438 $(20,731,428) $34,724,734
Net loss for the year ended
June 30, 2003.............. -- -- (157,559) -- (157,559)
-------- ----------- ----------- ------------ -----------
Balance, June 30, 2003....... 101,175 47,030,549 8,166,879 (20,731,428) 34,567,175
Issuance of common stock..... 45 10,944 -- -- 10,989
Net income for the year ended
June 30, 2004.............. -- -- 1,874,653 -- 1,874,653
-------- ----------- ----------- ------------ -----------
Balance, June 30, 2004....... 101,220 47,041,493 10,041,532 (20,731,428) 36,452,817
Issuance of common stock..... 111 67,650 -- -- 67,761
Net income for the year ended
June 30, 2005.............. -- -- 2,341,364 -- 2,341,364
-------- ----------- ----------- ------------ -----------
Balance, June 30, 2005....... $101,331 $47,109,143 $12,382,896 $(20,731,428) $38,861,942
======== =========== =========== ============ ===========
</Table>

See accompanying Notes to Consolidated Financial Statements.
33

ALLIED HEALTHCARE PRODUCTS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

<Table>
<Caption>
YEAR ENDED JUNE 30,
------------------------------------------
2005 2004 2003
------------ ------------ ------------

Cash flows from operating activities:
Net income (loss)................................ $ 2,341,364 $ 1,874,653 $ (157,559)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization............... 1,152,891 1,306,571 1,168,326
Stock based compensation.................... 67,761 -- --
Provision for doubtful accounts............. 36,611 181,489 36,569
Deferred income taxes....................... (188,493) 1,209,753 268,771
Changes in operating assets and liabilities:
Accounts receivable...................... 346,559 (41,481) 902,474
Inventories.............................. 319,621 1,179,801 925,949
Income tax receivable.................... 130,548 261,711 353,636
Other current assets..................... (41,304) 22,868 13,515
Accounts payable......................... (1,014,994) 932,876 (1,234,085)
Deferred revenue......................... 1,472,500 -- --
Other accrued liabilities................ (265,840) 97,622 357,008
------------ ------------ ------------
Net cash provided by operating activities..... 4,357,224 7,025,863 2,634,604
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures............................. (436,145) (630,548) (524,450)
------------ ------------ ------------
Net cash used in investing activities......... (436,145) (630,548) (524,450)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt......... -- -- 1,799,966
Proceeds from issuance of common stock........... -- 10,989 --
Payment of long-term debt........................ (2,366,076) (2,246,236) (763,104)
Payment of capital lease obligations............. -- -- (192,425)
Borrowings under revolving credit agreements..... 57,930,212 57,628,047 63,069,229
Payments under revolving credit agreements....... (59,175,696) (61,791,875) (66,012,604)
------------ ------------ ------------
Net cash used in financing activities......... (3,611,560) (6,399,075) (2,098,938)
------------ ------------ ------------
Net increase (decrease) in cash and equivalents.... 309,519 (3,760) 11,216
Cash and cash equivalents at beginning of year..... 8,256 12,016 800
------------ ------------ ------------
Cash and cash equivalents at end of year........... $ 317,775 $ 8,256 $ 12,016
============ ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest...................................... $ 131,394 $ 566,571 $ 830,228
Income taxes.................................. $ 693,650 $ 138,581 $ 9,375
</Table>

See accompanying Notes to Consolidated Financial Statements.
34

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

Allied Healthcare Products, Inc. (the "Company" or "Allied") is a
manufacturer of respiratory products used in the health care industry in a wide
range of hospital and alternate site settings, including post-acute care
facilities, home health care and trauma care. The Company's product lines
include respiratory care products, medical gas equipment and emergency medical
products.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies followed by Allied are described below.

USE OF ESTIMATES

The policies utilized by the Company in the preparation of the consolidated
financial statements conform to accounting principles generally accepted in the
United States of America, and require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual amounts could differ
from those estimates.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions and
intercompany balances are eliminated.

RECLASSIFICATIONS

Certain financial statement amounts have been reclassified to conform to
the current year presentation.

REVENUE RECOGNITION

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stated in Allied's Terms and Conditions of Sale. The buyer becomes obligated to
pay Allied at the time of shipment. Allied requires credit applications from its
customers and performs credit reviews to determine the creditworthiness of new
customers. Allied requires letters of credit, where warranted, for international
transactions. Allied also protects its legal rights under mechanics lien laws
when selling to contractors.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less when acquired
to be cash equivalents. Book cash overdrafts on the Company's disbursement
accounts totaling $639,403 are included in accounts payable at June 30, 2004.

FOREIGN CURRENCY TRANSACTIONS

Allied has international sales which are denominated in U.S. dollars, the
functional currency for these transactions.

ACCOUNTS RECEIVABLE AND CONCENTRATIONS OF CREDIT RISK

Accounts receivable are recorded at the invoiced amount. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral. The Company maintains reserves for potential credit losses
based on past experience and an analysis of current amounts due, and
historically such losses have been within management's expectations. The
Company's customers can be grouped into three main categories: medical equipment
distributors, construction contractors and health care institutions. At June 30,
2005 the Company believes that it has no significant concentration of credit
risk.

INVENTORIES

Inventories are stated at the lower of cost, determined using the last-in,
first-out ("LIFO") method, or market. If the first-in, first-out method (which
approximates replacement cost) had been used in determining cost, inventories
would have been $1,238,678 and $1,087,952 higher at June 30, 2005 and 2004,
respectively. Changes in the LIFO reserve are included in cost of sales. Cost of
sales were reduced by $136,255, $319,742, and $270,226 in fiscal 2005, 2004, and
2003 respectively, as a result of LIFO liquidations. Costs in inventory include
raw materials, direct labor and manufacturing overhead.

Inventory is recorded net of a reserve for obsolete and excess inventory
which is determined based on an analysis of inventory items with no usage in the
preceding year and for inventory items for which there is greater than two
years' usage on hand. The reserve for obsolete and excess inventory was
$1,253,853 and $1,742,490 at June 30, 2005 and 2004, respectively.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost and are depreciated
using the straight-line method over the estimated useful lives of the assets,
which range from 5 to 35 years. Properties held under capital leases are
recorded at the present value of the non-cancelable lease payments over the term
of the lease and are amortized over the shorter of the lease term or the
estimated useful lives of the assets. Expenditures for repairs, maintenance and
renewals are charged to income as incurred. Expenditures, which improve an asset
or extend its estimated useful life, are capitalized. When properties are
retired or otherwise disposed of, the

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

related cost and accumulated depreciation are removed from the accounts and any
gain or loss is included in income.

GOODWILL

Allied operates as one reporting unit and prepares its annual goodwill
impairment test in that manner. None of our product lines constitute a business,
as that term is defined in Emerging Issues Task Force (EITF) Issue 98-3. Most of
our products are produced in one facility, and we do not produce separate
financial statements for any part of our business. The goodwill impairment test
is performed at June 30(th) of each year.

OTHER ASSETS

Other assets are primarily comprised of debt issuance costs. These costs
are amortized using the effective interest rate method over the life of the
related obligations.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates impairment of long-lived assets under the provisions
of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets". SFAS No. 144 provides a single accounting model for long-lived assets
to be disposed of and reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable. Under SFAS No. 144, if the sum of the expected future cash flows
(undiscounted and without interest charges) of the long-lived assets is less
than the carrying amount of such assets, an impairment loss will be recognized.
No impairment losses of long-lived assets or identifiable intangibles were
recorded by the Company for fiscal years ended June 30, 2005 and 2004.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash, accounts receivable,
accounts payable and debt. The carrying amounts for cash, accounts receivable
and accounts payable approximate their fair value due to the short maturity of
these instruments. The carrying amount of long-term debt approximates fair value
due to the notes bearing interest at a variable rate.

INCOME TAXES

The Company accounts for income taxes under SFAS No. 109, "Accounting for
Income Taxes". Under SFAS No. 109, the deferred tax provision is determined
using the liability method, whereby deferred tax

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assets and liabilities are recognized based upon temporary differences between
the financial statement and income tax bases of assets and liabilities using
presently enacted tax rates. Valuation allowances are established when necessary
to reduce deferred tax assets to the amounts expected to be realized.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred and are included in
selling, general and administrative expenses. Research and development expenses
for the years ended June 30, 2005, 2004 and 2003 were $682,793, $627,822 and
$577,278 respectively.

EARNINGS PER SHARE

Basic earnings per share are based on the weighted average number of shares
of common stock outstanding during the year. Diluted earnings per share are
based on the sum of the weighted averaged number of shares of common stock and
common stock equivalents outstanding during the year. The weighted average
number of basic shares outstanding for the years ended June 30, 2005, 2004 and
2003 was 7,821,943, 7,816,416 and 7,813,932 shares, respectively. The weighted
average number of diluted shares outstanding for the years ended June 30, 2005,
2004 and 2003 was 8,080,890, 7,984,761 and 7,813,932 shares, respectively. The
dilutive effect of the Company's employee and director stock option plans are
determined by use of the treasury stock method. Employee and director stock
option plans are not included as common stock equivalents for earnings per share
purposes in fiscal 2003 as the impact on the number of shares outstanding would
have been anti-dilutive.

EMPLOYEE STOCK-BASED COMPENSATION

The Company accounts for employee stock options in accordance with
Accounting Principles Board No. (APB) 25, "Accounting for Stock Issued to
Employees". Under APB 25, the Company applies the intrinsic value method of
accounting. The Company has not recognized compensation expense at the grant
date for options granted because the Company grants options at a price equal to
market value at the time of grant. SFAS No. 123, "Accounting for Stock-Based
Compensation," prescribes the recognition of compensation expense based on the
fair value of options determined on the grant date. However, SFAS No. 123 grants
an exception that allows companies currently applying APB 25 to continue using
that method. The Company has elected to continue applying the intrinsic value
method under APB 25. For the year ended June 30, 2005, the Company recognized
$67,761 of compensation expense related to the modification of stock options
held by a member of the Company's board of directors.

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The fair value of options granted (which is amortized over the option
vesting period in determining the pro forma impact) is estimated on the date of
grant using the Black-Scholes option-pricing model. For options granted during
the fiscal years ended June 30, 2005, 2004 and 2003, the assumptions utilized in
the Black-Scholes option-pricing model included an expected option life of 10
years, risk-free interest rates ranging from 2.43% to 4.20%, volatility ranging
from 46% to 52% and no dividend yield. The weighted average fair value of
options granted was $4.57, $2.97 and $1.58 for the years ended June 30, 2005,
2004 and 2003, respectively. The following table shows stock-based compensation
expense included in net income and pro forma stock-based compensation expense,
net income/(loss) and earnings per share had the Company elected to record
compensation expense based on the fair value of options at the grant date for
the fiscal years ended June 30, 2005, 2004, and 2003:

<Table>
<Caption>
YEAR ENDED JUNE 30
-----------------------------------
2005 2004 2003
---------- ---------- ---------

Net income (loss), as reported................... $2,341,364 $1,874,653 $(157,559)
Add: Stock-based employee compensation expense
included in reported net income, net of related
tax effects.................................... 40,657 -- --
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards granted since July 1,
1995, net of related tax effects............... (49,966) (65,295) (158,000)
---------- ---------- ---------
Proforma net income (loss)....................... $2,332,055 $1,809,358 $(315,559)
========== ========== =========
Earnings (loss) per share:
Basic -- as reported........................... $ 0.30 $ 0.24 $ (0.02)
---------- ---------- ---------
Basic -- pro forma............................. $ 0.30 $ 0.23 $ (0.04)
---------- ---------- ---------
Diluted -- as reported......................... $ 0.29 $ 0.23 $ (0.02)
---------- ---------- ---------
Diluted -- pro forma........................... $ 0.29 $ 0.23 $ (0.04)
---------- ---------- ---------
</Table>

NEW ACCOUNTING STANDARDS

In November 2002, the FASB issued Interpretation (FIN) No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". This interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The Company does not have any commitments that are within the scope
of FIN No. 45.

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of FAS 123," which
provides alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation.
Additionally, SFAS No. 148 amends the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation," to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The provisions of SFAS No. 148 are effective for financial statements
issued for fiscal years ending after December 15, 2002 and for financial reports
containing condensed financial statements for interim periods beginning after
December 15, 2002. Adoption of SFAS No. 148 did not have a material impact on
the Company's results of operations, financial position or cash flows.

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. FINANCING

Long-term debt consisted of the following at June 30:

<Table>
<Caption>
2005 2004
----- -----------

UNSUBORDINATED DEBT
Notes payable to bank or other financial lending
institution:
Term loan on real estate -- principal of $49,685 due monthly
with remaining balance due April 24, 2007 (retired
September 2004)........................................... $ -- $ 1,439,156
Revolving credit facility -- aggregate revolving commitment
of $10,000,000; principal due at maturity on September 1,
2008...................................................... -- 40,000
Term loan on capital expenditures -- principal of $50,772
due monthly with remaining balance due on April 24, 2007
(retired April 2005)...................................... -- 2,132,404
--
----- -----------
-- 3,611,560
----- -----------
Less -- Current portion of long-term debt................... -- (1,245,484)
----- -----------
$ -- $ 2,366,076
===== ===========
</Table>

On April 24, 2002, the Company entered into a credit facility arrangement
with LaSalle Bank National Association (the "Bank"), which was subsequently
amended on September 26, 2002. The credit facility provided for total borrowings
up to $19.0 million; consisting of up to $15.0 million through a revolving
credit facility and up to $4.0 million under a term loan. The entire credit
facility accrued interest at prime plus 0.75%. The term loan may be drawn
against for capital expenditures during the first six months of the term of the
credit facility. Repayment of the term loan began on October 24, 2002, with
principal and interest due in equal monthly installments over five years
(subject to payment in full at the maturity of the credit facility if that
facility is not renewed or extended). The credit facility is collateralized by
substantially all of the assets of the Company. The original maturity date of
the new facility was April 24, 2005. The credit facility was further amended on
September 26, 2003 August 25, 2004, and September 1, 2005, as described below.

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Amortization on the real estate term loan shall continue on a five-year schedule
with equal monthly payments of $49,685. The real estate term loan will bear
interest at an annual interest rate of 1.00% plus the Bank's prime rate. The
Company also received a waiver from the Bank for its covenant violations
pertaining to its EBITDA covenant, which the Company was in default of on June
30, 2003. Additionally, the terms of the new credit facility restrict the
Company from the payment of dividends on any class of its stock.

On August 27, 2004, the Bank and the Company agreed to a further amendment
of the credit facility. In conjunction with these amendments to the Company's
credit facility, the Bank extended the maturity on the Company's term loan on
real estate, the Company's revolving credit facility, and term loan on capital
expenditures from April 24, 2005 to April 24, 2007. The total available
borrowing under the revolving credit facility was reduced from $15 million to
$10 million. The entire credit facility was amended to accrue interest at the
Bank's prime rate. The prime rate was 6.25% on June 30, 2005. The interest rate
on prime rate loans may increase from prime to prime plus 0.75% if the ratio of
the Company's funded debt to EBITDA exceeds 1.5. The amended credit facility
also provides the Company with a rate of LIBOR plus 2.25%, at the Company's
option. The optional LIBOR rate may increase from LIBOR plus 2.25% to LIBOR plus
3.00% based on the Company's fixed charge coverage ratio. The 90-day LIBOR rate
was 3.70% at June 30, 2005. Amortization on the real estate term loan was to
continue on a five-year schedule with equal monthly payments of $49,685. The
real estate loan was retired on September 30, 2004. Amortization on the capital
expenditure term loan was to continue on a five-year schedule with equal monthly
payments of $50,772. The capital expenditure loan was retired on April 14, 2005.

The credit facility requires a lockbox arrangement, which provides for all
receipts to be swept daily to reduce borrowings outstanding under the credit
facility. This arrangement, combined with the existence of a Material Adverse
Effect (MAE) clause in the credit facility, cause the revolving credit facility
to be classified as a current liability, per guidance in the FASB's EITF Issue
95-22, "Balance Sheet Classification of Borrowings Outstanding under Revolving
Credit Agreements that Include Both a Subjective Acceleration Clause and a
Lock-Box Arrangement." The MAE clause, which is a typical requirement in
commercial credit agreements, allows the lender to require the loan to become
due if it determines there has been a material adverse effect on the Company's
operations, business, properties, assets, liabilities, condition or prospects.
The classification of the revolving credit facility as a current liability is a
result only of the combination of the two aforementioned factors: the lockbox
arrangement and the MAE clause. However, the revolving credit facility does not
expire or have a maturity date within one year. Additionally, the Bank has not
notified the Company of any indication of a MAE at June 30, 2005.

At June 30, 2005 the Company had no aggregate indebtedness, including
capital lease obligations, short-term debt and long-term debt.

The Company was in compliance with all of the financial covenants
associated with its credit facility at June 30, 2005.

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

interest rate on prime rate loans may increase from prime to prime plus 0.75% if
the ratio of the Company's funded debt to EBITDA exceeds 2.5. The amended credit
facility also provides the Company with a rate of LIBOR plus 1.75%, at the
Company's option. The optional LIBOR rate may increase from LIBOR plus 1.75% to
LIBOR plus 2.75% based on the Company's fixed charge coverage ratio. The 90-day
LIBOR rate was 3.76% at September 1, 2005.

4. LEASE COMMITMENTS

The Company leases certain of its equipment under non-cancelable operating
lease agreements. Minimum lease payments under operating leases at June 30, 2005
are as follows:

<Table>
<Caption>
OPERATING
FISCAL YEAR LEASES
- ----------- ---------

2006........................................................ $220,485
2007........................................................ 154,327
2008........................................................ 20,934
--------
Total minimum lease payments................................ $395,746
========
</Table>

Rental expense incurred on operating leases in fiscal 2005, 2004, and 2003
totaled $378,820, $397,702 and $378,665 respectively.

5. INCOME TAXES

The provision (benefit) for income taxes consists of the following:

<Table>
<Caption>
2005 2004 2003
--------- ---------- ---------

Current:
Federal......................................... $ 234,863 $ 51,671 $(480,145)
State........................................... 54,409 -- --
--------- ---------- ---------
Total current................................... 289,272 51,671 (480,145)
--------- ---------- ---------
Deferred:
Federal......................................... (373,900) 902,186 310,145
State........................................... 185,407 307,567 (41,374)
--------- ---------- ---------
Total deferred.................................. (188,493) 1,209,753 268,771
--------- ---------- ---------
$ 100,779 $1,261,424 $(211,374)
========= ========== =========
</Table>

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During the fourth quarter of 2005 the Company reviewed its performance
during 2004 and 2005, as well as its projections for taxable income in 2006. Due
to the Company's return to profitability, the Company reversed deferred tax
asset valuation allowances of $1.1 million due to management's conclusion that
it was more likely than not that the Company would realize the underlying
deferred tax assets. At June 30, 2005, the Company has net operating loss
carryforwards of approximately $179,000 available to offset future taxable
income. These carryforwards begin to expire in the year ended June 30, 2007.

A reconciliation of income taxes, with the amounts computed at the
statutory federal rate is as follows:

<Table>
<Caption>
2005 2004 2003
----------- ---------- ---------

Computed tax at federal statutory rate.......... $ 830,329 $1,066,266 $(125,437)
State income taxes, net of federal tax
benefit....................................... 307,987 125,355 (78,072)
Change in valuation allowance................... (1,061,956) -- --
Other, net...................................... 24,419 69,803 (7,865)
----------- ---------- ---------
Total........................................... $ 100,779 $1,261,424 $(211,374)
=========== ========== =========
</Table>

The deferred tax assets and deferred tax liabilities recorded on the
balance sheet as of June 30, 2005 and 2004 are as follows:

<Table>
<Caption>
2005 2004
--------------------------- ---------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES ASSETS LIABILITIES
------------ ------------ ------------ ------------

Current:
Bad debts........................ $ 130,000 $ -- $ 190,000 $ --
Prepaid expenses................. -- 30,000 -- --
Deferred revenue................. 186,000 -- -- --
Accrued liabilities.............. 475,379 -- 428,582 --
Inventory........................ -- 1,472,795 -- 1,059,896
Other property basis............. -- -- 51,670 --
---------- ---------- ----------- ----------
791,379 1,502,795 670,252 1,059,896
---------- ---------- ----------- ----------
Non Current:
Depreciation..................... -- 437,846 -- 464,751
Other property basis............. -- 60,400 -- 83,041
Intangible assets................ 59,790 -- 74,416 --
Net operating loss
carryforward.................. 71,404 -- 1,292,137 --
Deferred revenue................. 403,000 -- -- --
Accrued pension liability........ 83,448 -- 81,808 --
Other............................ 148,391 -- -- 81,091
---------- ---------- ----------- ----------
766,033 498,246 1,448,361 628,883
---------- ---------- ----------- ----------
Valuation Allowance.............. -- -- (1,061,956) --
---------- ---------- ----------- ----------
Total deferred taxes............... $1,557,412 $2,001,041 $ 1,056,657 $1,688,779
========== ========== =========== ==========
</Table>

The net long term deferred tax asset of $267,787 is included in other
assets in the June 30, 2005 consolidated balance sheet.

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. RETIREMENT PLAN

The Company offers a retirement savings plan under Section 401(k) of the
Internal Revenue Code to certain eligible salaried employees. Each employee may
elect to enter a written salary deferral agreement under which a portion of such
employee's pre-tax earnings may be contributed to the plan.

During the fiscal years ended June 30, 2005, 2004 and 2003, the Company
made contributions of $239,474, $233,288 and $254,673 respectively.

7. STOCKHOLDERS' EQUITY

The Company has established a 1991 Employee Non-Qualified Stock Option
Plan, a 1994 Employee Stock Option Plan, and a 1999 Incentive Stock Plan
(collectively the "Employee Plans"). The Employee Plans provide for the granting
of options to the Company's executive officers and key employees to purchase
shares of common stock at prices equal to the fair market value of the stock on
the date of grant. Options to purchase up to 1,800,000 shares of common stock
may be granted under the Employee Plans. Options generally become exercisable
ratably over a four year period or one-fourth of the shares covered thereby on
each anniversary of the date of grant, commencing on the first or second
anniversary of the date granted, except certain options granted under the 1994
Employee Stock Option Plan which become exercisable when the fair market value
of the common stock exceeds required levels. The right to exercise the options
expires in ten years from the date of grant, or earlier if an option holder
ceases to be employed by the Company.

In addition, the Company has established a 1991 Directors Non-Qualified
Stock Option Plan and a 1995 Directors Non-Qualified Stock Option Plan
(collectively the "Directors Plans"). The Directors Plans provide for the
granting of options to the Company's directors who are not employees of the
Company to purchase shares of common stock at prices equal to the fair market
value of the stock on the date of grant. Options to purchase up to 250,000
shares of common stock may be granted under the Directors Plans. Options shall
become exercisable with respect to one-fourth of the shares covered thereby on
each anniversary of the date of grant, commencing on the second anniversary of
the date granted, except for certain options granted under the 1995 Directors
Non-Qualified Stock Option Plan which become exercisable with respect to all of
the shares covered thereby one year after the grant date. The right to exercise
the options expires in ten years from the date of grant, or earlier if an option
holder ceases to be a director of the Company.

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of stock option transactions in 2003, 2004 and 2005,
respectively, pursuant to the Employee Plans and the Directors Plans is as
follows:

<Table>
<Caption>
WEIGHTED AVERAGE SHARES SUBJECT
EXERCISE PRICE TO OPTION
---------------- --------------

June 30, 2002........................................... $ 3.41 796,300
Options Granted....................................... 2.66 65,500
Options Exercised..................................... -- --
Options Canceled...................................... 7.11 (90,700)
-------
June 30, 2003........................................... $ 2.91 771,100
-------
Exercisable at June 30, 2003............................ 630,475
=======
June 30, 2003........................................... $ 2.91 771,100
Options Granted....................................... 4.58 15,500
Options Exercised..................................... 2.44 (4,500)
Options Canceled...................................... 13.06 (18,850)
-------
June 30, 2004........................................... $ 2.70 763,250
-------
Exercisable at June 30, 2004............................ 680,250
=======
June 30, 2004........................................... $ 2.70 763,250
Options Granted....................................... 6.84 6,500
Options Exercised..................................... 1.92 (11,145)
Options Canceled...................................... 7.35 (16,855)
-------
June 30, 2005........................................... $ 2.64 741,750
-------
Exercisable at June 30, 2005............................ 688,750
=======
</Table>

The following table provides additional information for options outstanding
and exercisable at June 30, 2005.

OPTIONS OUTSTANDING

<Table>
<Caption>
WEIGHTED AVERAGE WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES NUMBER REMAINING LIFE EXERCISE PRICE
- ------------------------ ------- ---------------- ----------------

$1.00-1.99.................................. 1,750 3.8 years $ 1.88
2.00........................................ 542,000 4.2 years 2.00
2.01-6.99................................... 161,000 6.7 years 3.44
7.00-7.99................................... 33,000 2.3 years 7.31
8.00-18.50.................................. 4,000 0.4 years 18.25
-------
$1.00-18.50................................. 741,750 4.6 years $ 2.64
</Table>

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OPTIONS EXERCISABLE

<Table>
<Caption>
WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES NUMBER EXERCISE PRICE
- ------------------------ ------- ----------------

$1.00-1.99.................................. 1,750 $ 1.88
2.00........................................ 542,000 2.00
2.01-6.99................................... 108,000 3.36
7.00-7.99................................... 33,000 7.31
8.00-18.50.................................. 4,000 18.25
-------
$1.00-18.50................................. 688,750 $ 2.56
</Table>

See Note 2 for discussion of accounting for stock awards, and related fair
value and pro forma income disclosures.

STOCKHOLDER RIGHTS PLAN

The Board of Directors adopted a Stockholder Rights Plan in 1996 that would
permit stockholders to purchase common stock at prices substantially below
market value under certain change-in-control scenarios. At June 30, 2005, no
common stock has been purchased under this plan.

8. SUPPLEMENTAL BALANCE SHEET INFORMATION

<Table>
<Caption>
JUNE 30,
-------------------------
2005 2004
----------- -----------

INVENTORIES
Work in progress......................................... $ 561,157 $ 722,894
Component parts.......................................... 8,746,226 9,170,682
Finished goods........................................... 2,722,020 2,944,085
Reserve for obsolete and excess inventory................ (1,253,853) (1,742,490)
----------- -----------
$10,775,550 $11,095,171
=========== ===========
</Table>

<Table>
<Caption>
ESTIMATED
USEFUL LIFE
(YEARS)
-----------

PROPERTY, PLANT AND EQUIPMENT
Machinery and equipment....................... 5-10 $ 10,039,203 $ 20,001,361
Buildings..................................... 28-35 11,911,730 11,935,298
Land and land improvements.................... 5-7 934,216 934,216
------------ ------------
Total property, plant and equipment at cost... 22,885,149 32,870,875
Less accumulated depreciation and
amortization,.............................. (11,576,283) (20,870,948)
------------ ------------
$ 11,308,866 $ 11,999,927
============ ============
OTHER ACCRUED LIABILITIES
Accrued compensation expense.................. $ 1,612,808 $ 1,773,011
Accrued interest expense...................... 2,728 11,046
Accrued income tax............................ 286,779 702,933
Customer deposits............................. 613,646 454,069
Other......................................... 424,802 265,544
------------ ------------
$ 2,940,763 $ 3,206,603
============ ============
</Table>

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. COMMITMENTS AND CONTINGENCIES

The Company is subject to various investigations, claims and legal
proceedings covering a wide range of matters that arise in the ordinary course
of its business activities. The Company intends to continue to conduct business
in such a manner as to avert any FDA action seeking to interrupt or suspend
manufacturing or require any recall or modification of products.

The Company has recognized the costs and associated liabilities only for
those investigations, claims and legal proceedings for which, in its view, it is
probable that liabilities have been incurred and the related amounts are
estimable. Based upon information currently available, management believes that
existing accrued liabilities are sufficient and that it is not reasonably
possible at this time that any additional liabilities will result from the
resolution of these matters that would have a material adverse effect on the
Company's consolidated results of operations, financial position, or cash flows.

10. SEGMENT INFORMATION

The Company operates in one segment consisting of the manufacturing,
marketing and distribution of a variety of respiratory products used in the
health care industry to hospitals, hospital equipment dealers, hospital
construction contractors, home health care dealers and emergency medical product
dealers. The Company's product lines include respiratory care products, medical
gas equipment and emergency medical products. The Company does not have any one
single customer that represents more than 10 percent of total sales. Sales by
region, and by product, are as follows:

<Table>
<Caption>
SALES BY REGION
---------------------------------------
2005 2004 2003
----------- ----------- -----------

Domestic United States........................ $46,442,420 $49,230,985 $50,299,274
Europe........................................ 1,650,366 1,248,361 1,245,554
Canada........................................ 1,268,172 1,338,115 1,096,953
Latin America................................. 3,543,842 3,170,344 3,606,712
Middle East................................... 546,320 771,378 799,348
Far East...................................... 2,008,227 2,651,217 2,888,302
Other International........................... 660,803 692,913 927,215
----------- ----------- -----------
$56,120,150 $59,103,313 $60,863,358
=========== =========== ===========
</Table>

<Table>
<Caption>
SALES BY PRODUCT
---------------------------------------
2005 2004 2003
----------- ----------- -----------

Respiratory care products..................... $15,453,507 $15,671,960 $16,384,599
Medical gas equipment......................... 31,301,769 33,530,756 34,496,628
Emergency medical products.................... 9,364,874 9,900,597 9,982,131
----------- ----------- -----------
$56,120,150 $59,103,313 $60,863,358
=========== =========== ===========
</Table>

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data for fiscal 2005 and 2004 appears below
(all amounts in thousands):

Net sales................. $14,184 $14,328 $13,668 $13,940 $15,261 $14,957 $15,077 $13,808
Gross profit.............. 3,899 3,732 3,413 3,407 4,638 4,212 4,108 3,397
Income from operations.... 1,055 719 356 478 1,547 1,157 774 217
Net income................ 1,513 408 184 236 861 627 384 3
Basic earnings per
share................... 0.19 0.05 0.02 0.03 0.11 0.08 0.05 0.00
Diluted earnings per
share................... 0.19 0.05 0.02 0.03 0.10 0.08 0.05 0.00
</Table>

Earnings per share is computed independently for each of the quarters
presented. Therefore, the sum of the quarterly amounts will not necessarily
equal the total for the year.

12. BARALYME(R) AGREEMENT

In consideration of the foregoing, Abbott agreed to pay Allied an aggregate
of $5,250,000 of which $1,530,000 which was paid on September 30, 2004, and the
remainder payable in four equal annual installments of $930,000 due on July 1,
2005 through July 1, 2008. Allied has agreed with Abbott that in the event that
it receives approval from the U.S. Food & Drug Administration for the commercial
sale of a new carbon dioxide absorbent product not based upon potassium
hydroxide prior to January 1, 2008, that Abbott will be relieved of any
obligation to fund the $930,000 installment due July 1, 2008.

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of deferred revenue resulting from the agreement with
Abbott, with the amounts received under the agreement, and amounts recognized as
net sales is as follows:

<Table>
<Caption>
TWELVE MONTHS
ENDED JUNE 30,
------------------
2005 2004
---------- -----

Beginning balance........................................... $ -- $ --
Payment Received from Abbott Laboratories................... 2,460,000 --
Revenue recognized as net sales............................. (987,500) --
---------- -----
1,472,500 --
---------- -----
Less -- Current portion of deferred revenue................. (465,000) --
---------- -----
$1,007,500 $ --
========== =====
</Table>

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
SEVERANCE
INVENTORY TO PAY AND PRODUCT
BE DISPOSED OF BENEFITS WITHDRAWAL TOTAL
-------------- --------- ---------- ---------

Provision............................. $ 200,000 $216,000 $ 184,000 $ 600,000
Cash Expenditures..................... $(149,677) $(85,431) $(119,798) $(354,906)
--------- -------- --------- ---------
Balance at Sepember 30, 2004.......... $ 50,323 $130,569 $ 64,202 $ 245,094
Cash Expenditures..................... $ (66,079) $(87,171) $(128,479) $(281,729)
Provision Adjustments................. $ 55,756 $ (2,852) $ 75,008 $ 127,912
--------- -------- --------- ---------
Balance at December 31, 2004.......... $ 40,000 $ 40,546 $ 10,731 $ 91,277
Cash Expenditures..................... $ (35,732) $(15,205) $ (10,731) $ (61,668)
Provision Adjustments................. -- -- -- --
--------- -------- --------- ---------
Balance at March 31, 2005............. $ 4,268 $ 25,341 $ 0 $ 29,609
Cash Expenditures..................... $ (5,712) $(25,341) $ 0 $ (31,053)
Provision Adjustments................. $ 1,444 -- -- $ 1,444
--------- -------- --------- ---------
Balance at June 30, 2005.............. $ 0 $ 0 $ 0 $ 0
========= ======== ========= =========
</Table>

In 2004, Allied's sales of Baralyme(R) were approximately $2.0 million and
contributed approximately $0.6 million in pre-tax earnings and cash flow from
operations. The majority of the $5,250,000 Allied is to receive from Abbott will
be recognized into income over the eight-year term of the agreement. Management
believes the net cash flow expected to be realized by Allied under the agreement
with Abbott is projected be substantially equivalent to the net cash flow Allied
would have expected to realize from continued manufacture and sales of
Baralyme(R) during the initial five years of the period.

13. SUBSEQUENT EVENTS

As described in Note 3, the Company amended its credit facility on
September 1, 2005.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of
1934, as of the end of the period covered by this report and under the
supervision and with the participation of management, including the Chief
Executive Officer and the Chief Financial Officer, the Company has evaluated the
effectiveness of the design and operation of its disclosure controls and
procedures. Based on such evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that such disclosure controls and procedures
are effective in ensuring that material information relating to the Company,
including its consolidated subsidiaries, is made known to the certifying
officers by others within the Company and its consolidated subsidiaries during
the period covered by this report.

(b) Changes in Internal Controls.

There were no changes in the Company's internal controls for financial
reporting or other factors during the fourth quarter of the most recent fiscal
year that could significantly affect such internal controls. However, in
connection with the new rules, the Company has been engaged in the process of
further reviewing and documenting its disclosure controls and procedures,
including its internal accounting controls. The company may from time to time
make changes aimed at enhancing the effectiveness of its disclosure controls and
procedures, including its internal controls, to ensure that the Company's
systems evolve with its business.

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

A definitive proxy statement is expected to be filed with the Securities
and Exchange Commission on or about October 14, 2005. The information required
by this item is set forth under the caption "Election of Directors", under the
caption "Executive Officers", and under the caption Section 16(a) Beneficial
Ownership Reporting Compliance in the definitive proxy statement, which
information is incorporated herein by reference thereto.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is set forth under the caption
"Executive Compensation" in the definitive proxy statement, which information is
incorporated herein by reference thereto.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the
definitive proxy statement, which information is incorporated herein by
reference thereto.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information by this item will appear in the section entitled "Audit
Fees" included in the Company's definitive Proxy Statement to be filed on or
about October 14, 2005, relating to the 2005 Annual Meeting of Shareowners and
such information is incorporated herein by reference.
52

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

1. FINANCIAL STATEMENTS

The following consolidated financial statements of the Company and its
subsidiaries are included in response to Item 8:

Consolidated Statement of Operations for the years ended June 30,
2005, 2004, and 2003

Consolidated Balance Sheet at June 30, 2005 and 2004

Consolidated Statement of Changes in Stockholders' Equity for the
years ended June 30, 2005, 2004 and 2003

Consolidated Statement of Cash Flows for the years ended June 30,
2005, 2004 and 2003

Notes to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firms

2. FINANCIAL STATEMENT SCHEDULE

Valuation and Qualifying Accounts and Reserves for the Years Ended
June 30, 2005, 2004 and 2003

All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.

3. EXHIBITS

The exhibits listed on the accompanying Index to Exhibits are filed as part
of this Report.

SIGNATURES

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

ALLIED HEALTHCARE PRODUCTS, INC.

By:

/s/ EARL R. REFSLAND
--------------------------------------
Earl R. Refsland
President and Chief Executive Officer

/s/ DANIEL C. DUNN
--------------------------------------
Daniel C. Dunn
Vice President, Chief Financial
Officer, and Secretary

Dated: September 27, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on September 25, 2005.

<Table>
<Caption>
SIGNATURES TITLE
---------- -----

* Chairman of the Board
- --------------------------------------
John D. Weil

* President, Chief Executive Officer and Director
- -------------------------------------- (principal Executive Officer)
Earl R. Refsland

* Director
- --------------------------------------
William A. Peck

* Director
- --------------------------------------
James B. Hickey, Jr.

* Director
- --------------------------------------
Judy Graves.

/s/ EARL R. REFSLAND
*By: ------------------------------
Earl R. Refsland
Attorney-in-Fact
</Table>

- ---------------

* Such signature has been affixed pursuant to the following Power of Attorney.

ALLIED HEALTHCARE PRODUCTS, INC.

RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<Table>
<Caption>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------- ------------ ------------------------------- ------------- --------------
BALANCE AT CHARGED TO CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS -- DEDUCTIONS -- BALANCE AT END
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
- ----------- ------------ ------------ ---------------- ------------- --------------

FOR THE YEAR ENDED
JUNE 30, 2005
Accounts Receivable
Allowances.......... (585,000) $ (36,611) $ 56,611(1) (565,000)
Inventory Allowance
For Obsolescence And
Excess Quantities... $(1,742,490) $ (52,486)(3) $ 541,123(2) (1,253,853)
Deferred Tax Asset
Valuation
Allowance........... $(1,061,956) $1,061,956(4) --
----------- --------- --------- ---------- -----------
FOR THE YEAR ENDED
JUNE 30, 2004
Accounts Receivable
Allowances.......... $ (585,000) $(181,489) $ 181,489(1) (585,000)
Inventory Allowance
For Obsolescence And
Excess Quantities... $(2,324,258) $(385,451)(3) $ 967,219(2) $(1,742,490)
Deferred Tax Asset
Valuation
Allowance........... $(1,061,956) (1,061,956)
----------- --------- --------- ---------- -----------
FOR THE YEAR ENDED
JUNE 30, 2003
Accounts Receivable
Allowances.......... $ (560,000) $ (36,569) $ 11,569(1) (585,000)
Inventory Allowance
For Obsolescence And
Excess Quantities... $(4,812,074) $2,487,816(2) $(2,324,258)
Deferred Tax Asset
Valuation
Allowance........... $(1,061,956) (1,061,956)
----------- --------- --------- ---------- -----------
</Table>

- ---------------

(1) Decrease due to bad debt write-offs and recoveries.

(2) Decrease due to disposal of obsolete inventory.

(3) Increase due to inventory revaluation. The other account charged as a result
of this revaluation was inventory before reserves. This did not result in a
change to our net inventory or net income.

(4) See Note 5 to the consolidated financial statements.

S-1

INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------

3.1 Amended and Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 3(1) to the Company's
Registration Statement on Form S-1, as amended, Registration
No. 33-40128, filed with the Commission on May 8, 1991 (the
"Registration Statement") and incorporated herein by
reference)

3.2 By-Laws of the Registrant (filed as Exhibit 3(2) to the
Registration Statement and incorporated herein by reference)

4.1 Certificate of Designations, Preferences and Rights of
Series A Preferred Stock of Allied Healthcare Products, Inc.
dated August 21, 1996 (filed with the Commission as Exhibit
4(1) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1997 (the "1997 Form 10-K") and
incorporated herein by reference)

10.1 NCG Trademark License Agreement, dated April 16, 1982,
between Liquid Air Corporation and Allied Healthcare
Products, Inc. (filed as Exhibit 10(24) to the Registration
Statement and incorporated herein by reference)

10.2 Allied Healthcare Products, Inc. 1991 Employee Non-Qualified
Stock Option Plan (filed as Exhibit 10(26) to the
Registration Statement and incorporated herein by reference)

10.3 Employee Stock Purchase Plan (filed as Exhibit 10(3) to the
Company's Annual Report on Form 10-K for the year ended June
30, 1998 (the "1998 Form 10-K") and incorporated by
reference)

10.4 Allied Healthcare Products, Inc. 1994 Employee Stock Option
Plan (filed with the Commission as Exhibit 10(39) to the
Company's Annual Report on Form 10-K for the year ended June
30, 1994 (the "1994 Form 10-K") and incorporated herein by
reference)

10.5 Allied Healthcare Products, Inc. 1995 Directors
Non-Qualified Stock Option Plan (filed with the Commission
as Exhibit 10(25) to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1995 (the "1995 Form
10-K") and incorporated herein by reference)

10.6 Allied Healthcare Products, Inc. Amended 1994 Employee Stock
Option Plan (filed with the Commission as Exhibit 10(28) to
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 (the "1996 Form 10-K") and incorporated
herein by reference)

10.22 Form of Indemnification Agreement with officers and
directors (filed with the Commission as Exhibit 10.22 to the
2002 Form 10-K and incorporated herein by reference).

10.25 Employment Agreement dated August 24, 1999 by and between
Allied Healthcare Products, Inc. and Earl Refsland (filed
with the Commission as Exhibit 10(25) to the 1999 Form 10-K
and incorporated herein by reference)

10.26 Allied Healthcare Products, Inc. 1999 Incentive Stock Plan
(filed with the Commission as Exhibit 10(26) to the 1999
Form 10-K and incorporated herein by reference)

10.28 Agreement between Allied Healthcare Products, Inc. Medical
Products Division and District No. 9 International
Association of Machinists and Aerospace Workers dated August
1, 2000 through May 31, 2003 (filed with the Commission as
Exhibit 10.28 to the 2002 Form 10-K)

10.29 Letter Agreement dated July 2, 2001 between Allied
Healthcare Products, Inc. and Daniel C. Dunn (filed with the
Commission as Exhibit 10.29 to the 2002 Form 10-K)

10.30 Loan and security agreement dated April 24, 2002 between the
Company and LaSalle Bank National Association, including
form of notes (filed with the Commission as Exhibit 10.1 to
the Quarterly Report on Form 10-Q filed May 15, 2002)

10.30.1 Amendment to Loan and security agreement dated September
26,2002 (filed with the Commission as an exhibit to Current
Report on Form 8-K on October 1, 2002)

10.30.2 Amendment to Loan and security agreement dated September 26,
2003

10.30.3 Amendment to Loan and Security Agreement dated August 27,
2004 (filed herewith)

10.31 Agreement dated August 27, 2004 between Allied Healthcare
Products, Inc and Abbott Laboratories, Inc. (incorporated by
reference to 8-K filed August 30, 2004 with event date of
August 27, 2004)
</Table>

<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------

21 Subsidiaries of the Registrant (filed with the Commission as
Exhibit 21 to the 2000 Form 10-K)

23.1 Consent of RubinBrown LLP (filed herewith)

23.2 Consent of PricewaterhouseCoopers LLP (filed herewith)

24 Form of Power of Attorney -- (filed herewith)

31.1 Certification of Chief Executive Officer (filed herewith)

31.2 Certification of Chief Financial Officer (filed herewith)

32.1 Sarbanes-Oxley Certification of Chief Executive Officer
(provided herewith)*
32.2 Sarbanes-Oxley Certification of Chief Financial Officer
(provided herewith)*
</Table>

- ---------------

* Notwithstanding any incorporation of this Annual Report on Form 10-K in any
other filing by the Registrant, Exhibits designated with an asterisk (*) shall
not be deemed incorporated by reference to any other filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934 unless
specifically otherwise set forth therein.