ALLIED HEALTHCARE PRODUCTS INC (Form: 10-Q, Received: 05/07/2010 14:43:42)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended March 31, 2010

o	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from________ to ________

Commission File Number: 0-19266

ALLIED HEALTHCARE PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

Delaware		25-1370721
(State or other jurisdiction of		(I.R.S. Employer
Incorporation or organization)		Identification No.)

1720 Sublette Avenue, St. Louis, Missouri 63110

(Address of principal executive offices, including zip code)

(314) 771-2400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 twelve months (or for such shorter periods that the registrant was required to file such reports, and (2) has been subject to such filing requirements for the past ninety days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer,” “accelerated filer" and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer	o (Do not check if smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of shares of common stock outstanding at April 30, 2010 is 8,093,386 shares.

INDEX

			Page
			Number
Part I –	Financial Information
	Item 1.	Financial Statements
		Consolidated Statement of Operations -	3
		Three and nine months ended March 31,
		2010 and 2009 (Unaudited)

		Consolidated Balance Sheet -	4 - 5
		March 31, 2010 (Unaudited) and
		June 30, 2009

		Consolidated Statement of Cash Flows -	6
		Nine months ended March 31, 2010 and 2009
		(Unaudited)

		Notes to Consolidated Financial Statements	7 – 11

	Item 2.	Management’s Discussion and Analysis of	11 – 15
		Financial Condition and Results of Operations

	Item 3.	Quantitative and Qualitative Disclosure	16
		about Market Risk

	Item 4T.	Controls and Procedures	16

Part II -	Other Information

	Item 6.	Exhibits	16

		Signature	18

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 the Company’s annual report on Form 10-K for the year ended June 30, 2009. 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. FINANCIAL INFORMATION

Item 1. Financial Statements

ALLIED HEALTHCARE PRODUCTS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

	Three months ended						Nine months ended
	March 31,						March 31,
	2010			2009			2010			2009

Net sales	$	11,627,418		$	12,389,640		$	34,366,002		$	39,361,993
Cost of sales		8,781,739			9,915,884			26,172,709			30,677,586
Gross profit		2,845,679			2,473,756			8,193,293			8,684,407

Selling, general and administrative expenses		2,705,644			3,198,135			9,197,535			9,782,064
Income (loss) from operations		140,035			(724,379	)		(1,004,242	)		(1,097,657	)

Interest income		(2,956	)		(5,041	)		(4,403	)		(54,155	)
Interest expense		190			-			2,764			5,849
Other, net		80,791			13,403			103,588			36,583
		78,025			8,362			101,949			(11,723	)

Income (loss) before provision for (benefit from) income taxes		62,010			(732,741	)		(1,106,191	)		(1,085,934	)

Provision for (benefit from) income taxes		24,480			(282,469	)		(420,353	)		(407,925	)
Net income (loss)	$	37,530		$	(450,272	)	$	(685,838	)	$	(678,009	)

Basic earnings (loss) per share	$	0.00		$	(0.06	)	$	(0.09	)	$	(0.09	)

Diluted earnings (loss) per share	$	0.00		$	(0.06	)	$	(0.09	)	$	(0.09	)

Weighted average shares outstanding - basic		8,093,386			7,901,327			8,057,890			7,897,937

Weighted average shares outstanding - diluted		8,183,907			7,901,327			8,057,890			7,897,937

See accompanying Notes to Consolidated Financial Statements.

ALLIED HEALTHCARE PRODUCTS, INC.

CONSOLIDATED BALANCE SHEET

ASSETS

	(Unaudited)
	March 31,		June 30,
	2010		2009

Current assets:
Cash and cash equivalents	$	3,273,496	$	1,943,364
Accounts receivable, net of allowances of $300,000		5,371,848		6,172,437
Inventories, net		11,968,396		12,663,938
Income tax receivable		1,634,370		937,273
Other current assets		270,340		327,203

Total current assets		22,518,450		22,044,215

Property, plant and equipment, net		10,040,867		10,799,089
Other assets, net		186,069		390,627

Total assets	$	32,745,386	$	33,233,931

See accompanying Notes to Consolidated Financial Statements.

(CONTINUED)

ALLIED HEALTHCARE PRODUCTS, INC.

CONSOLIDATED BALANCE SHEET

(CONTINUED)

LIABILITIES AND STOCKHOLDERS' EQUITY

	(Unaudited)
	March 31,			June 30,
	2010			2009

Current liabilities:
Accounts payable	$	2,140,610		$	1,633,568
Other accrued liabilities		2,055,459			2,316,558
Deferred income taxes		164,125			419,213
Deferred revenue		688,200			688,200
Total current liabilities		5,048,394			5,057,539

Deferred revenue		974,950			1,491,100

Commitments and contingencies

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; 10,396,878 and 10,204,819 shares issued
at March 31, 2010 and June 30, 2009, respectively;
8,093,386 and 7,901,327 shares outstanding at
March 31, 2009 and June 30, 2009, respectively		103,969			102,048
Additional paid-in capital		48,352,716			47,632,049
Accumulated deficit		(1,003,215	)		(317,377	)
Less treasury stock, at cost; 2,303,492 shares at
March 31, 2010 and June 30, 2009		(20,731,428	)		(20,731,428	)
Total stockholders' equity		26,722,042			26,685,292
Total liabilities and stockholders' equity	$	32,745,386		$	33,233,931

See accompanying Notes to Consolidated Financial Statements.

ALLIED HEALTHCARE PRODUCTS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Nine months ended
	March 31,
	2010			2009

Cash flows from operating activities:
Net loss	$	(685,838	)	$	(678,009	)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:

Depreciation and amortization		948,607			1,074,119
Stock based compensation		637,720			17,392
Provision for doubtful accounts and sales
returns and allowances		(9,832	)		2,886
Deferred taxes		(59,713	)		14,223
Loss on disposition of equipment		67,848			3,056

Changes in operating assets and liabilities:
Accounts receivable		810,421			680,519
Inventories		695,542			(1,611,991	)
Income tax receivable		(697,097	)		-
Other current assets		56,863			(59,655	)
Accounts payable		507,042			(287,444	)
Deferred revenue		(516,150	)		(516,150	)
Other accrued liabilities		(261,099	)		(1,429,952	)
Net cash provided by (used in) operating activities		1,494,314			(2,791,006	)

Cash flows from investing activities:
Capital expenditures		(303,680	)		(1,403,665	)
Proceeds from disposal of fixed assets		54,630			-
Net cash used in investing activities		(249,050	)		(1,403,665	)

Cash flows from financing activities:
Stock options exercised		3,469			81,094
Minimum tax withholdings on stock options exercised		(406,110	)		-
Excess tax benefit from exercise of stock options		487,509			619
Net cash provided by financing activities		84,868			81,713

Net increase (decrease) in cash and cash equivalents		1,330,132			(4,112,958	)
Cash and cash equivalents at beginning of period		1,943,364			6,149,015
Cash and cash equivalents at end of period	$	3,273,496		$	2,036,057

See accompanying Notes to Consolidated Financial Statements.

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Summary of Significant Accounting and Reporting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of Allied Healthcare Products, Inc. (the “Company”) have been prepared in accordance with the instructions for Form 10-Q and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for the full year. These statements should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2009.

Codification of Accounting Standards

On September 30, 2009, the Company adopted SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (the Codification). The Codification combines the previous U.S. GAAP hierarchy which included four levels of authoritative accounting literature distributed among a number of different sources. The Codification does not by itself create new accounting standards but instead reorganizes thousands of pages of existing U.S. GAAP accounting rules into approximately 90 accounting topics. All existing accounting standards documents are superseded by the Codification and all other accounting literature not included in the Codification is now considered non-authoritative. The Codification explicitly recognizes the rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under federal securities laws as authoritative GAAP for SEC registrants. The Codification is now the single source of authoritative nongovernmental accounting standards in the U.S.

As a result of the Codification, the references to authoritative accounting pronouncements included herein in this Quarterly Report on Form 10-Q now refer to the Codification topic section rather than a specific accounting rule as was past practice.

Recently Issued Accounting Guidance

In April 2009, the FASB issued guidance (“Fair Value Determination Guidance”) in the Fair Value Measurements and Disclosures Topic of the ASC regarding the determination of fair value in instances where market conditions result in either inactive markets for assets and liabilities or disorderly transactions within markets. The Fair Value Determination Guidance affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction, and clarifies and includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active. The Fair Value Determination Guidance requires an entity to base its conclusion about whether a transaction was not orderly on the weight of the evidence and expands certain disclosure requirements. The Fair Value Determination Guidance became effective for Allied Healthcare Products, Inc. in the quarter ended September 30, 2009, and its adoption did not have a significant effect on the Company’s financial position, results of operations, or cash flows.

In December 2007, the FASB issued the Business Combinations Topic of the ASC. The Business Combinations Topic replaces previously issued guidance regarding business combinations, and applies to all transactions and other events in which one entity obtains control over one or more other businesses. Departing from the cost-allocation process of previous guidance, the Business Combinations Topic requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquired entity at the acquisition date, measured at their fair values as of that date. Contingent consideration is recognized and measured at fair value at the acquisition date, and acquisition related costs are expensed as incurred. The Business Combinations Topic also distinguishes between assets acquired and liabilities assumed arising from contractual contingencies as of the acquisition date and assets or liabilities arising from all other contingencies, requiring different treatment for each type of contingency. The Business Combinations Topic is effective for Allied Healthcare Products, Inc. on July 1, 2009. To the extent business combinations occur on or after the effective date, the Company’s accounting for those transactions will be significantly affected by the provisions of the Business Combinations Topic.

The Company has determined that all other recently issued accounting guidance will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, accounts receivable and accounts payable. The carrying amounts for cash, accounts receivable and accounts payable approximate their fair value due to the short maturity of these instruments.

2. Inventories

Inventories are comprised as follows:

	March 31, 2010			June 30, 2009

Work-in progress	$	744,409		$	718,711
Raw materials and component parts		8,591,912			8,981,435
Finished goods		3,929,250			4,311,440
Reserve for obsolete and excess inventory		(1,297,175	)		(1,347,648	)
	$	11,968,396		$	12,663,938

3. Earnings per share

Basic earnings per share are based on the weighted average number of shares of all common stock outstanding during the period. Diluted earnings per share are based on the sum of the weighted average number of shares of common stock and common stock equivalents outstanding during the period. The number of basic shares outstanding for the three months ended March 31, 2010 and 2009 were 8,093,386 and 7,901,327 respectively. The number of diluted shares outstanding for the three months ended March 31, 2010 and 2009 were 8,183,907 and 7,901,327 respectively. The number of basic and diluted shares outstanding for the nine months ended March 31, 2010 and 2009 were 8,057,890 and 7,897,937 respectively.

4. 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 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 to believe 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.

5. Financing

Effective as of November 13, 2009, Allied Healthcare Products, Inc. (the “Company”) terminated its revolving credit facility arrangement with Bank of America, N.A., as successor to LaSalle Bank National Association (the “Old Credit Agreement”). The Old Credit Agreement provided for borrowings of up to $10,000,000 and was available through September 1, 2010. No loans were outstanding under the Old Credit Agreement as of November 13, 2009.

On November 17, 2009, in order to obtain replacement financing, the Company entered into a Loan and Security Agreement by and between Enterprise Bank & Trust and the Company (the “New Credit Agreement”) pursuant to which the Company obtained a secured revolving credit facility with borrowing availability of up to $7,500,000 (the “New Credit Facility”). The Company’s obligations under the New Credit Facility are secured by certain assets of the Company pursuant to the terms and subject to the conditions set forth in the New Credit Agreement.

The New Credit Facility will be available on a revolving basis until it expires on November 15, 2010, at which time all amounts outstanding under the New Credit Facility will be due and payable. Advances under the New Credit Facility will be made pursuant to a Revolving Credit Note (the “Promissory Note”) executed by the Company in favor of Enterprise Bank & Trust. Such advances will bear interest at a rate equal to .50% in excess of Enterprise Bank & Trust’s prime-rate based interest rate for commercial loans, subject to a minimum annual interest rate of 4.50%. Advances may be prepaid in whole or in part without premium or penalty.

Under the New Credit Agreement, advances are generally subject to customary borrowing conditions. The New Credit Agreement also contains covenants with which the Company must comply during the term of the New Credit Facility. Among other things, such covenants restrict the Company’s ability to incur certain additional debt; make specified restricted payments, dividends and capital expenditures; authorize or issue capital stock; enter into certain transaction with affiliates; consolidate or merge with or acquire another business; sell certain of its assets or dissolve or wind up the Company. The New Credit Agreement also contains certain events of default that are customary for financings of this type including, without limitation: the failure to pay principal, interest, fees or other amounts when due; the breach of specified representations or warranties contained in the loan documents; cross-default with certain other indebtedness of the Company; the entry of uninsured judgments that are not bonded or stayed; failure to comply with the observance or performance of specified agreements contained in the loan documents; commencement of bankruptcy or other insolvency proceedings; and the failure of any of the loan documents entered into in connection with the New Credit Facility to be in full force and effect. After an event of default, and upon the continuation thereof, the principal amount of all loans made under the New Credit Facility would bear interest at a rate per annum equal to 4.00% above the otherwise applicable interest rate (provided, that the interest rate may not exceed the highest rate permissible under law), and the lender would have the option to accelerate maturity and payment of the Company’s obligations under the New Credit Facility.

The prime rate was 3.25% on March 31, 2010.

At March 31, 2010 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 the New Credit Facility at March 31, 2010.

6. Baralyme® Agreement

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

	Three Months ended						Nine Months ended
	March 31,						March 31,
	2010			2009			2010			2009

Beginning balance	$	1,835,200		$	2,522,950		$	2,179,300		$	2,867,500

Revenue recognized
as net sales		(172,050	)		(171,600	)		(516,150	)		(516,150	)

		1,663,150			2,351,350			1,663,150			2,351,350
Less - Current portion
of deferred revenue		(688,200	)		(688,200	)		(688,200	)		(688,200	)
	$	974,950		$	1,663,150		$	974,950		$	1,663,150

In addition to the provisions of the agreement relating to the withdrawal of the Baralyme® 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 March 31, 2010, $2,150,000 has been received as a result of product development activities.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

RESULTS OF OPERATIONS

Three months ended March 31, 2010 compared to three months ended March 31, 2009

Allied had net sales of $11.6 million for the three months ended March 31, 2010, down $0.8 million, or 6.5%, from net sales of $12.4 million in the prior year same quarter. Customer orders of $10.6 million were $1.9 million lower than the prior year same quarter. Purchase order releases were only $1.0 million lower than in the prior year same quarter. Purchase order release times depend on the scheduling practices of individual customers, and do vary over time.

Sales for the three months ended March 31, 2010 and March 31, 2009 include approximately $172,000 for the recognition into income of payments resulting from the agreement with Abbott Laboratories to cease the production and distribution of Baralyme®. Income from the agreement will continue to be recognized at $57,350 per month until the expiration of the agreement in August 2012. Allied continues to sell Carbolime®, a carbon dioxide absorbent with a different formulation than Baralyme®. The Company ceased the sale of Baralyme® on August 27 th , 2004.

Domestic sales were down 4.7% from the prior year same quarter, while international business, which represented 20.9% of third quarter sales, was down 11.3%. Orders for the Company’s products for the three months ended March 31, 2010 of $10.6 million were $1.9 million or 15.2% lower than orders for the prior year same quarter of $12.5 million. Domestic orders are down 15.7% over the prior year same quarter while international orders, which represented 20.5% of third quarter orders, were 14.0% lower than orders for the prior year same quarter. The Company believes that the decrease in net sales is primarily the result of the worldwide recession. The Company believes that the purchase of equipment and durable goods by hospitals and municipalities have continued to be reduced as a short term measure to meet budgets and conserve cash, despite early indications of limited recovery in the economy. By and large, the Company’s products are considered durable goods.

Gross profit for the three months ended March 31, 2010 was $2.8 million, or 24.1% of net sales, compared to $2.5 million, or 20.2% of net sales, for the three months ended March 31, 2009. Gross profit during the third quarter was favorably impacted by cost savings initiatives which reduced the cost of purchased materials and manufactured finished goods.

Selling, general and administrative expenses for the three months ended March 31, 2010 were $2.7 million compared to selling, general and administrative expenses of $3.2 million for the three months ended March 31, 2009. The decrease in selling, general and administrative expenses is partially due to a decrease of approximately $0.3 million for compensation expense as a result of a reduction in the Company’s workforce and a decrease of approximately $71,000 for sales commissions due to the decline in sales compared to the same quarter of the prior year. Additionally, selling expenses for business travel decreased approximately $74,000 and expenses for trade shows decreased approximately $52,000 compared to the same quarter of the prior year.

Income from operations was $140,035 for the three months ended March 31, 2010 compared to loss from operations of $0.7 million for the three months ended March 31, 2009. Allied had income before provision for income taxes in the third quarter of fiscal 2010 of $62,010, compared to a loss before benefit from income taxes in the third quarter of fiscal 2009 of $0.7 million. The Company recorded a tax provision of $24,480 for the three-months ended March 31, 2010 compared to a tax benefit of $0.3 million for the three months ended March 31, 2009.

Net income for the third quarter of fiscal 2010 was $37,530 or $0.00 per basic and diluted share compared to net loss of $0.5 million or $0.06 per basic and diluted share for the third quarter of fiscal 2009. The weighted average number of common shares outstanding, used in the calculation of basic earnings per share for the third quarters of fiscal 2010 and 2009 were 8,093,386 and 7,901,327 shares, respectively. The weighted average number of common shares outstanding, used in the calculation of diluted earnings per share for the third quarters of fiscal 2010 and 2009 were 8,183,907 and 7,901,327 shares, respectively.

Nine months ended March 31, 2010 compared to nine months ended March 31, 2009

Allied had net sales of $34.4 million for the nine months ended March 31, 2010, down $5.0 million, or 12.7%, from net sales of $39.4 million in the prior year same period. Customer orders of $33.1 million were $5.0 million lower than the prior year same period. Purchase order releases were $5.0 million lower than in the prior year same period. Purchase order release times depend on the scheduling practices of individual customers, and do vary over time.

$99,000 of the decrease in the Company’s sales compared to the same period last year are due to discontinuation of reimbursement from Abbott for product development activities to pursue development of a new carbon dioxide absorption product. Sales for the nine months ended March 31, 2009 include $99,000 of such reimbursements.

Sales for the nine months ended March 31, 2010 and March 31, 2009 include $516,150 for the recognition into income of payments resulting from the agreement with Abbott Laboratories to cease the production and distribution of Baralyme®.

Domestic sales were down 11.4% from the prior year same period, while international business, which represented 18.1% of sales for the nine months of fiscal 2010, was down 18.3%. Orders for the Company’s products for the nine months ended March 31, 2010 of $33.1 million were $5.0 million or 13.1% lower than orders for the prior year same period of $38.1 million. Domestic orders are down 12.8% over the prior year same period while international orders, which represented 19.8% of orders for the first nine months of fiscal 2010, were 15.1% lower than orders for the prior year same period.

Gross profit for the nine months ended March 31, 2010 was $8.2 million, or 23.8% of net sales, compared to $8.7 million, or 22.1% of net sales, for the nine months ended March 31, 2009. Gross profit during the first nine months of fiscal 2010 was favorably impacted by cost savings initiatives which have reduced the cost of purchased materials and manufactured finished goods.

Selling, general and administrative expenses for the nine months ended March 31, 2010 were $9.2 million compared to selling, general and administrative expenses of $9.8 million for the nine months ended March 31 2009. Stock option expense increased approximately $0.6 million due to the grant of immediately vested stock options to the Company’s President and CEO. This increase was offset by a decrease of approximately $0.6 million for compensation expense as a result of a reduction in the Company’s workforce, a decrease of approximately $46,000 for recruiting expenses, and a decrease of approximately $80,000 for outside professional services compared to the same period of the prior year. Due to the low level of sales for the first nine months of fiscal 2010, sales commissions decreased $154,000 compared to the same period of the prior year. Additionally, selling expenses for business travel decreased approximately $210,000, vehicle expenses decreased approximately $40,000, and expenses for trade shows decreased approximately $110,000 compared to the same period of the prior year.

Loss from operations was $1.0 million for the nine months ended March 31, 2010 compared to loss from operations of $1.1 million for the nine months ended March 31, 2009. Interest income was $4,403 for the nine months ended March 31, 2010 compared to interest income of $54,155 for the nine months ended March 31, 2009. Allied had loss before benefit from income taxes in the first nine months of fiscal 2010 and fiscal 2009 of $1.1 million. The Company recorded a tax benefit of $0.4 million for the nine months ended March 31, 2010 and March 31, 2009.

Net loss for the first nine months of fiscal 2010 was $0.7 million or $0.09 per basic and diluted share compared to net loss of $0.7 million or $0.09 per basic and diluted share for the first nine months of fiscal 2009. The weighted average number of common shares outstanding, used in the calculation of basic and diluted earnings per share for the first nine months of fiscal 2010 and 2009 were 8,057,890 and 7,897,937 shares, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company believes that available resources and anticipated cash flows from operations are sufficient to meet operating requirements in the coming year.

The Company’s working capital was $17.5 million at March 31, 2010 compared to $17.0 million at June 30, 2009. Cash increased $1.3 million and income taxes receivable increased $0.7 million. The current deferred income tax liability decreased $0.3 million and accrued liabilities decreased $0.3 million. At March 31, 2010 these increases in working capital were offset by a decrease in inventory of $0.7 million, a decrease in other current assets of $0.1 million, a $0.5 million increase in accounts payable and a decrease in accounts receivable of $0.8 million to $5.4 million at March 31, 2010. Accounts receivable as measured in days of sales outstanding (“DSO”) decreased to 42 DSO at March 31, 2010; down from 43 DSO at June 30, 2009.

The prime rate was 3.25% on March 31, 2010.

At March 31, 2010 the Company had no aggregate indebtedness, including capital lease obligations, short-term debt and long term debt.

In the event that economic conditions were to severely worsen for a protracted period of time, we believe that we will have borrowing capacity under credit facilities that 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 $1.2 million for the fiscal year ended June 30, 2010, could be postponed.

Inflation has not had a material effect on the Company’s business or results of operations during the first nine months of fiscal 2010.

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. 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.

Recently Issued Accounting Guidance

The impact and any associated risks related to the Company’s critical accounting policies on business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the Company’s Annual Report on Form 10-K for the year ended June 30, 2009.

See Note 1 – Summary of Significant Accounting and Reporting Policies for more information on recent accounting pronouncements and their impact, if any, on our consolidated financial statements. Management believes there have been no material changes to our critical accounting policies.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

At March 31, 2010, the Company did not have any debt outstanding. The revolving credit facility bears an interest rate using the commercial bank’s prime-rate based interest rate for commercial loans 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 March 31, 2010. Allied Healthcare Products has international sales; however these sales are denominated in U.S. dollars, mitigating foreign exchange rate fluctuation risk.

Item 4T. Controls and Procedures

(a)

Disclosure Controls and Procedures.

The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation of those controls and procedures performed as of March 31, 2010, the Chief Executive Officer and Chief Financial Officer of the Company concluded that its disclosure controls and procedures were effective.

(b)

Changes in internal control over financial reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Part II. OTHER INFORMATION

Item 6. Exhibits

(a) Exhibits:

10.1 Employment Agreement by and between the Company and Earl Refsland, dated December 21, 2009 (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 (furnished herewith)*

32.2 Sarbanes-Oxley Certification of Chief Financial Officer (furnished herewith)*

99.1 Press Release dated May 7, 2010 announcing third quarter earnings*

*Notwithstanding any incorporation of this Quarterly Report on Form 10-Q in any other filing by the Registrant, Exhibits furnished herewith and 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.

SIGNATURE

Pursuant to the requirements 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.

	/s/ Daniel C. Dunn
	Daniel C. Dunn
	Chief Financial Officer

	Date: May 7, 2010

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into effective as of the 21 st day of December, 2009, (the "Effective Date") by and between EARL REFSLAND a resident of Missouri ("Executive") and ALLIED HEALTHCARE PRODUCTS, INC., a Delaware corporation, for itself and on behalf of any of its current or future subsidiary corporations (collectively referred to in this Agreement as the "Company").

WITNESSETH:

WHEREAS, the Company is engaged in the business of designing, manufacturing and distributing a variety of respiratory products used in the health care industry in a wide range of hospital and alternate site settings, including, but not limited to, sub-acute care facilities, home health care and emergency medical care (the "Business");

WHEREAS, the Executive has been employed by the Company as the Company's President and Chief Executive officer; and

WHEREAS, the Company and the Executive desire that such employment relationship continue in accordance with the provisions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises, covenants, and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, the Company and Executive agree as follows:

1. Term . The term of Executive's employment with the Company shall begin as of the Effective Date of this Agreement, and will terminate March 1, 2010, subject to renewal at that time for successive one year terms unless either party shall have notified the other in writing not less than thirty (30) days prior to the then current expiration date of this Agreement of such party's determination not to renew this Agreement (hereinafter the “Term”).

2. Duties of Executive . During the Term, Executive shall serve as the Chief Executive Officer and President of the Company, and shall have, subject to the directives of the Board of Directors of the Company (the "Board"), supervision and control over, and responsibility for, the general management and operation of the Company, and shall have such other powers and duties as may from time to time be prescribed by the Board. Executive shall devote his full working time and best efforts, skill and attention to the Business and interests of the Company. Executive shall follow and act in accordance with all policies established by the Company from time to time. During the Term, Executive shall not actively engage in or be involved in any business activities other than on behalf of the Company unless prior written consent is provided by the Board; provided , however , Executive may continue to serve on the boards of directors of other companies, provided such position does not involve active management, may serve as a director of other organizations with the prior consent of the Company, such consent not to be unreasonably withheld, and may engage in such charitable endeavors and/or other passive ownership activities, provided such activities do not, whether individually or in the aggregate, materially interfere with Executive's duties hereunder. In addition, during the Term, the Company agrees to use reasonable efforts to cause Executive to be nominated to the Board and to remain on the Board.

3. Compensation . As consideration for the services rendered by Executive pursuant to this Agreement, the Company agrees to pay to Executive an initial salary at the rate of Four Hundred Fifteen Thousand Dollars ($415,000) for the first year of the Term ("Annual Salary"), which amount shall be payable in accordance with the Company's normal payroll practices in effect, from time to time. Executive's annual salary for the remainder of the Term will be determined at the sole discretion of the Board, but in no event will Executive's annual salary be reduced below the initial annual salary amount stated herein. All payments of compensation will be subject to normal employee withholding and all other applicable tax deductions.

4. Fringe Benefits . During the Term, Executive may participate in the fringe benefit programs that may generally be made available by the Company to management level employees of the Company from time to time (collectively, "Fringe Benefits"). Executive's participation in the Fringe Benefits offered by the Company shall be in accordance with the participation guidelines that the Company may establish from time to time and may require a financial contribution by Executive. In the event of the death of the Executive during the Term of this Agreement, the Company agrees to notify his heirs or representative of any rights he may have under this Agreement, any employee benefits under employee benefits sponsored by the Company to the extent applicable to a deceased employee, and with regard to stock options or restricted shares applicable to Executive.

5. Other Compensation .

(a) Incentive Compensation . Executive shall be entitled to receive, in addition to his Annual Salary, such incentive compensation payments as the Board, in its sole discretion, may determine appropriate or necessary and such stock options, restricted shares or other benefits as the Board shall determine.

(b) Perquisites . The Company agrees that: (i) during the Term, the Company shall furnish to the Executive an automobile of a type mutually acceptable to the Company and the Executive and the Company shall pay all of the expenses for gasoline, insurance, maintenance and repairs for such automobile, and (ii) at such time, and for so long as, the Board, in its discretion, determines necessary or appropriate, the Company will pay the monthly assessment and/or other monthly charges of the Executive for his existing membership in Algonquin Golf Club.

(c) Vacations . During the Term, the Executive shall be entitled to not less than four (4) weeks of compensated vacation for each year of employment.

6. Expenses . The Company agrees to directly pay or reimburse Executive for necessary and reasonable travel, entertainment and other business expenses actually incurred by Executive in connection with Executive's duties hereunder and approved by the Company pursuant to the Company's existing practices. The Company shall reimburse Executive for such approved business expenses within a reasonable time after submission by Executive of true and correct supporting documentation as may be required by the Company. Without limiting the foregoing, the Company will pay as its own expense for any professional services reasonably incurred and related to the Executive’s obligations under the Sarbanes-Oxley Act of 2002 and such regulations and rules promulgated thereunder; provided, however, that such expenses shall be incurred only with the consent of the Company and using counsel or other professional advisors approved by the Company, which consent and approval shall not be unreasonably withheld.

7. Confidentiality . Executive acknowledges and agrees that:

(a) Executive has created and will continue to create, has and will continue to have access to, and has received and will continue to receive information, documents, and materials of a confidential and proprietary nature to the Company and which may contain trade secrets of the Company or the Company's customers, including, without limitation, designs, drawings, formulas, plans, financial information, processes, methods, customer lists, prospective customers and other prospects, business plans and other information (collectively, "Confidential Information"), which would not have been or be disclosed to Executive except for Executive's employment with the Company.

(b) Executive hereby acknowledges and agrees that Confidential Information is an asset of the Company, is of a confidential nature and is not generally known to the public, and, in order to protect and preserve the goodwill of the Company, must be kept strictly confidential and used only in the conduct of the Company's business from time to time.

(c) Executive hereby agrees that during his lifetime he will not disclose or reveal in any manner whatsoever any of the Confidential Information to any third party, except in the course of and during Executive's employment with the Company or as required by law, including without limitation, pursuant to an order of the Court or other body having jurisdiction over the matter or lawful process or subpoena. Executive shall not use any of the Confidential Information in any manner for his own benefit or for the benefit of any other person or entity.

(d) Executive will promptly return to the Company all written or recorded Confidential Information, including all copies and reproductions thereof in Executive's possession or under Executive's control, upon the earlier of the Company's request or upon the termination of Executive's employment with the Company. At such time, Executive shall also give the Company all notes, summaries and analyses prepared by Executive which relate to or include Confidential Information.

(e) The Executive has no obligation, express or implied, to refrain from using or disclosing to others any knowledge or information (i) which is or hereafter shall become available to the public otherwise than by disclosure by the Executive in breach of this Agreement, (ii) was available to the Executive on a nonconfidential basis prior to it disclosure to the Executive through his status as an officer of the Company, or (iii) was available or becomes available to the Executive on a nonconfidential basis from a third party (other than the Company) who is not bound by any confidentiality obligation to the Company.

8. Survival of Confidentiality Provisions . Executive acknowledges and agrees that the provisions of paragraph 7 herein will survive the termination of Executive's employment hereunder and will continue in full force and effect during and throughout Executive's lifetime.

9. Covenants Against Competition and Solicitation . Executive covenants and agrees that, at all times while he is employed by the Company hereunder and for a period of two (2) years after the effective date of the termination of Executive's employment (whether or not such occurs after the Term of this Agreement), he will not, directly or indirectly, in association or in combination with any other person or entity, as an officer, director or shareholder of a corporation, as a member or manager of a limited liability company, or as an employee, agent, independent contractor, consultant, advisor, joint venturer, partner or otherwise, whether or not for pecuniary benefit, whether or not alone or in association with any person or entity:

(a) Carry on, be engaged in, concerned or take part in, or render services, advise or lend money to any person or entity engaged in the Business currently engaged in by the Company or any business in which the Company may engage while Executive is employed by the Company hereunder; provided , however , and notwithstanding the foregoing, after the Executive is no longer employed with the Company, Executive may carry on, be engaged in, concerned or take part in, or render services, advise or lend money to any person or entity engaged in the business of manufacturing respiratory products which do not compete, directly or indirectly, in any manner with any product or service of the Company which, individually or in the aggregate, generated gross revenues to the Company in excess of Five Hundred Thousand Dollars ($500,000) annually as of the effective date of Executive's termination of employment with the Company.

(b) Engage in or own, in whole or in part, manage, provide financing to, operate or otherwise carry on the business of designing, manufacturing and distributing respiratory products used in the health care industry and which, individually or in the aggregate, generated annual gross revenues to the Company in excess of Five Hundred Thousand Dollars ($500,000) annually, except: (i) in the course of Executive's performance of his duties during his employment and then only for the benefit of the Company; and (ii) as a holder of less than 1% of the stock of any corporation whose securities are traded on a national securities exchange.

(c) Solicit, assist the solicitation of, or encourage any employee or independent contractor of the Company to terminate or otherwise modify that person's or entity's employment with or retention by the Company for the purpose of encouraging that person or entity to become employed or retained by any other person or entity unrelated to the Company.

(d) Solicit, assist the solicitation of, or encourage any person or entity who was a material customer of the Company within the one (1) year period immediately preceding the date as of which Executive's employment is terminated hereunder, to: (i) provide the same or similar services as provided by the Company in material competition with the Company; (ii) modify in any material manner that person's or entity's business relationship with the Company; or (iii) materially modify the terms or reduce the volume of business which that person or entity transacts with the Company.

(e) The geographic scope of the covenants contained in subparagraphs (a) and (b) above shall extend to any state, county, municipality or other locality within or without the United States wherein the Company sold or actively attempted to sell products which, individually or in the aggregate, generated annual gross revenues to the Company in excess of Five Hundred Thousand Dollars ($500,000) annually.

(f) If Executive terminates his employment with the Company for Good Reason (other than and excluding on account of a Change of Control), and irrevocably and unconditionally waives, in writing, his right to the payment and other benefits on account of termination of employment for Good Reason as set forth in this Agreement, then the covenants contained in this Section 9 shall terminate.

10. Discoveries and Inventions . Executive agrees that all developments, discoveries and inventions relating to the Company's Business (collectively referred to as the "Inventions") which Executive conceives or makes while employed by the Company shall be the exclusive property of the Company whether the Company, in its sole discretion, decides to pursue or not to pursue a patent, copyright, trademark, service mark or other registered embodiment of any kind of any country for such Invention. Whenever requested by the Company, whether during or subsequent to Executive's employment with the Company, Executive shall execute patent applications and other instruments considered necessary by the Company to apply for and obtain patents of the United States and foreign countries covering any such developments, discoveries or inventions. Executive agrees to assign, and does hereby assign to the Company, all title, interest and rights, including intellectual property rights, in and to any and all Inventions, and Executive agrees to assign to the Company any patents or patent applications arising from any such Inventions, and agrees to execute and deliver all such assignments, patents, patent applications and other documents as the Company may direct. Executive agrees to cooperate fully with the Company, both during and after Executive's employment with the Company is terminated, to enable the Company to secure and maintain rights in any such Inventions in any and all countries. Without limiting the foregoing, Executive hereby acknowledges that all works of authorship or invention which relate in any manner to the Company's Business which are developed or written during the term of Executive's employment with the Company are "works made for hire". Accordingly, Executive agrees to assign, and does hereby assign to the Company, any and all copyright rights and all other rights and all material prepared by Executive during the term of Executive's employment which relate to the Business of the Company.

11. Employer's Remedy . Executive acknowledges and agrees that the covenants set forth in paragraphs 7, 8, 9 and 10 are necessary to protect the Company's legitimate business interests, including, without limitation, the Company's strong interest in the Confidential Information and Inventions and the Company's strong interest in maintaining an undisrupted work place. Executive acknowledges and agrees that the covenants are reasonable in scope, area, and duration, particularly in light of Executive's responsibilities and the international scope of the Company's business. Executive acknowledges that the services to be rendered by him in accordance with the provisions of this Agreement are of a special and unique character, and that the restrictions and obligations on his activities as contained in paragraphs 7, 8, 9 and 10 are reasonable and are required for the Company's protection. Executive hereby agrees that if he violates any of the provisions contained in paragraphs 7, 8, 9 and 10, the Company may seek from the arbitrator damages, at law or in equity; provided, however, that the Company may seek injunctive relief and seek to enjoin Executive from engaging in any activity in violation of this Agreement and without regard to the provisions of Paragraph 13 of this Agreement. For purposes of an action seeking such injunctive relief, Executive hereby irrevocably submits to the jurisdiction of the Circuit Court of the County of St. Louis, Missouri. All rights and remedies of the Company hereunder, at law or in equity, are cumulative in nature and will in no way be, or be deemed to be, the exclusive rights and remedies of the Company. If any court finds that the restrictions set forth in paragraphs 7, 8, 9 and 10 are unreasonable, this Agreement will be interpreted to include the restrictions contained herein to the extent such restrictions are permissible under law, giving effect to the intent of the parties that the restrictions contained herein shall be effective to the fullest extent possible.

12. Termination of Employment .

(a) Termination By Company without Cause . The Company shall have the right to terminate Executive's employment hereunder without Cause (as defined below) upon providing Executive with written notice thereof. Any such termination of employment shall be effective on the date specified in such notice, or if no date is specified, then upon receipt by Executive of such notice. In the event of any such termination of employment, subject to Section 12(i) hereof, (i) the Company shall continue to pay to Executive, for the period (the "Continuation Period") beginning on the effective date of such termination of employment and ending two (2) years after the effective date of such termination of employment an amount per month equal to one-twelfth of Executive's then Annual Salary during the Continuation Period ("Salary Continuation Payments") in accordance with the provisions of Section 3 hereof; (ii) throughout the Continuation Period, Executive shall be entitled to continued participation under all Fringe Benefit programs in which he participates in accordance with the terms thereof to the extent such participation is allowed pursuant to the terms thereof and applicable law with no increase in any amounts payable by the Company with respect thereto as a result of Executive no longer being employed by the Company, or if Executive is not allowed continued participation pursuant to the terms thereof and applicable law, then under another reasonably equivalent plan providing for the same or similar coverage but with no increase in any amounts payable by the Company with respect thereto as a result of Executive no longer being employed by the Company; (iii) the Company shall pay to Executive his unpaid Annual Salary, if any, earned prior to the effective date of the termination of Executive's employment in accordance with the Company's normal policies for same; (iv) the Company shall pay to Executive any incentive compensation payments to which Executive is entitled as of the effective date of the termination of Executive's employment in accordance with the Company's normal policies for same; and (v) the Company shall pay to Executive any business expenses remaining unpaid on the effective date of the termination of Executive's employment for which Executive is entitled to be reimbursed under Section 6 of this Agreement; provided , however , that without limiting any other remedy available hereunder, such payments shall immediately terminate upon a breach or violation by Executive of the provisions of Sections 7, 8, 9 or 10 hereof and, in such event, the Company shall be entitled, in addition to any other remedies it may have, to reimbursement from Executive of the amount paid by the Company to Executive during the Continuation Period pursuant to subparagraph (i) above. Notwithstanding anything in this Agreement to the contrary, if the Company terminates the Executive without cause within 30 days after a Change in Control, the Executive will be entitled to be paid his salary for two (2) years as provided for in Subparagraph 12(a)(i) above.

(b) Termination by Company for Cause . The Company may terminate this Agreement for Cause (as defined below) upon providing Executive with written notice thereof. Any such termination of employment shall be effective on the date specified in such notice, or if no date is specified, then upon receipt by Executive of such notice. In the event of such termination of employment, the Company shall pay to Executive (i) his unpaid Annual Salary through the effective date of such termination of employment, and (ii) any business expenses remaining unpaid on the effective date of such termination of employment for which Executive is entitled to be reimbursed under Section 6 of this Agreement.

(c) Death or Disability . Executive's employment with the Company shall terminate upon the death or Disability (as hereinafter defined), of Executive. Such termination of employment shall be effective as of the date of Executive's death, or in the event of Executive's Disability, upon the Company's giving Executive 30 days written notice thereof. In the event of such termination of employment due to death or Disability, Executive (or his estate or other designated beneficiary upon his death) shall be entitled to receive: (i) his Annual Salary and accrued expense reimbursements earned or accrued through the effective date of the termination of Executive's employment, (ii) any incentive compensation payments to which Executive is entitled as of the effective date of the termination of Executive's employment; and (iii) such payments, if any, as may be provided for pursuant to all Fringe Benefit programs in which Executive is participating as of the effective date of the termination of Executive's employment. All such Annual Salary, incentive compensation and/or Fringe Benefit payments payable upon termination of Executive's employment as aforesaid shall be paid at or following the date of such termination of employment in accordance with the Company's normal policies.

(d) Termination by Executive for Good Reason . Executive shall have the right to terminate his employment hereunder for Good Reason (as defined below), if (A) Executive shall have given the Company prior written notice of the reason therefor and (B) a period of thirty (30) days following receipt by the Company of such notice shall have lapsed and, except for the occurrence of a Change of Control (as hereinafter defined), the matters which constitute or give rise to such "Good Reason" shall not have been cured or eliminated by the Company; provided , however if such matters are of a nature that the same cannot be cured or eliminated within such thirty (30) day period, such period shall be extended for so long as the Company shall be endeavoring in good faith to cure or eliminate such matters, provided , further , however , that for the first such failure during each calendar year during the Term, the Company shall have thirty (30) days after receipt of written notice of such failure to cure such failure, and thereafter during that calendar year no such notice and cure period shall be given. In the event the Company shall not take such actions within such period, Executive may send another notice to the Company electing to terminate his employment hereunder and, in such event, Employee's employment hereunder shall terminate and the effective date of such termination of employment shall be the third business day after the Company shall have received such notice. In the event of any such termination of employment, Executive shall be entitled to receive the same payments and benefits, subject to the same conditions and limitations, as provided in Section 12(a) hereof.

(e) Termination by Executive without Good Reason . Executive shall have the right to terminate his employment hereunder without Good Reason by giving the Company thirty (30) days prior written notice to that effect. Such termination of employment shall be effective on the date specified in such notice. In addition, the Executive shall be deemed to have terminated this Agreement without Good Reason if the Executive provides notices to the Company that he does not wish to extend the Term of this Agreement in the absence on an event which otherwise constitutes Good Reason. In the event of such termination of employment, then the Company shall pay to Executive: (i) his unpaid Annual Salary through the effective date of such termination of employment, and (ii) any business expenses remaining unpaid on the effective date of such termination of employment for which Executive is entitled to be reimbursed under Section 6 of this Agreement.

(f) Expiration of the Term . Upon the termination of Executive's employment at the Expiration Date, Executive shall be entitled to receive: (i) his Annual Salary and accrued expense reimbursements earned or accrued through the effective date of such termination of Executive's employment, (ii) any incentive compensation payments to which Executive is entitled as of the effective date of such termination of Executive's employment; and (iii) such payments as may be provided for pursuant to all Fringe Benefit programs in which Executive is participating as of the effective date of the termination of Executive's employment. All such Annual Salary, incentive compensation and/or Fringe Benefit payments payable upon termination of Executive's employment as aforesaid shall be paid at or following the date of such termination of employment in accordance with the Company's normal policies.

(g) Definitions :

(i) "Cause" shall mean: (A) theft, embezzlement, fraud or misappropriation of funds of the Company; (B) conviction of a felony or other crime involving moral turpitude; (C) chemical or alcohol dependency which adversely affects performance of Executive's duties; (D) failure to substantially perform (other than as a result of physical or mental illness) the duties required under Section 2 hereof in any material manner; (E) a material breach or violation by Executive of Sections 7, 8, 9 or 10 hereof; (F) the Company is convicted of any criminal felony liability due to actions taken or failed to be taken by Executive without the consent of the Company; and (G) failure of Executive (other than as a result of physical or mental illness) to devote substantially all of his working time to the performance of his duties required hereunder.

(ii) “Change of Control” for this Agreement and any other Agreement (including the Incentive Stock Plan) involving Executive means:

(A) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") other than Clayton Management Company (or any other Person or entity controlled by or under common control with John D. Weil or by a trustee or personal representative designated by said John D. Weil in the event of the death or disability of John D. Weil) of ownership of more than fifty percent (50%) of the outstanding common stock of the Company (as beneficial ownership is determined under Section 13(d) of the Securities Exchange Act);

(B) a merger or consolidation of the Company with another Person (regardless of whether the Company or another entity is the surviving or resulting entity of such merger or consolidation) other than a merger or consolidation in which immediately upon giving effect to such merger or consolidation, the Persons who were holders of the common stock of the Company immediately prior thereto continue to be the direct or indirect holders of at least sixty percent (60%) of the surviving or resulting entity; or

A transaction pursuant to which the Company ceases to be required to file periodic or interim reports under the Securities Exchange Act of 1934 shall not constitute a “Change of Control” unless accompanied by a transaction in the form of (A), (B) or (C) above.

(iii) "Disability" shall mean that, as a result of Executive's incapacity due to physical or mental illness (as determined by a physician mutually acceptable to the Company and Executive), Executive shall have been absent from, or does not perform, his duties as described hereunder on a substantially full-time basis for 75 days during any consecutive 150 day period during the Term, and within ten (10) days after the Company notifies Executive in writing that it intends to replace him, shall not have returned to the performance of such duties on a full-time basis.

(iv) "Good Reason" shall mean the occurrence of any of the following: (A) a material breach by the Company in the performance of its obligations hereunder and the Company's failure to cure said breach within thirty (30) days after receipt of written notice of such breach; provided, however if such matters are of a nature that the same cannot be cured or eliminated within such thirty (30) day period, such period shall be extended for so long as the Company shall be endeavoring in good faith to cure or eliminate such matters, provided, further, however, that for the first such failure during each calendar year during the Term, the Company shall have thirty (30) days after receipt of written notice of such failure to cure such failure, and thereafter during that calendar year no such notice and cure period shall be given; or (B) the occurrence of a Change of Control provided Executive elects, within one hundred thirty five (135) days after the effective date of such Change of Control, to terminate his employment hereunder; said election to be evidenced by written notice of same from Executive to the Company within said one hundred thirty five (135) day period; (C) the Company requests Executive to relocate to an office outside the St. Louis metropolitan area; (D) an assignment to the Executive of any duties which are not appropriate for someone in the position of President and Chief Executive Officer or the Executive’s duties, responsibilities, status, titles or authority with the Company hereunder are materially diminished; (E) the Executive is required to report, directly or indirectly, to persons other than the Board or any other person shall be appointed to a position, or granted or allowed to assume duties, responsibilities, status, titles or authority, equal to or superior to the Executive’s (provided that a non-executive Chairman of the Board shall not be deemed to be such other person); (F) there is any failure to nominate or elect the Executive as President and Chief Executive Officer of the Company and as a member of the Board (and the Executive Committee thereof, if such committee exists); (G) the Executive is removed from any of the positions he holds pursuant hereto, except in connection with the termination of the Executive for Cause; (H) the Company fails to assign this Agreement to a successor to the Company, or a successor to the Company fails to expressly assume and agree to be bound by this Agreement in writing; or (I) the Company provides notices to the Executive that it does not wish to extend the Term of this Agreement.

(h) Fringe Benefits. In addition, with respect to Executive's continued participation in any Fringe Benefit programs following termination of employment, (i) the amount of any expense eligible for reimbursement, or any in-kind benefit provided, during any taxable year of Executive may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, (ii) the reimbursement of an eligible expense must be made on or before the last day of Executive's taxable year following the taxable year in which the expense was incurred, and (iii) any right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

(i) Delay in Payments . Anything to the contrary herein notwithstanding, any Salary Continuation Payments and any reimbursement or provision of an in-kind benefit pursuant to any Fringe Benefit programs following termination of employment may not be made before the date that is six (6) months after the date of Executive's Separation From Service (as defined in (j) below). Any Salary Continuation Payments and reimbursements to which Executive would otherwise be entitled during the first six (6) months following his Separation From Service shall be accumulated and paid on the first day of the seventh (7 th ) month following the date of his Separation From Service.

(j) Separation from Service . For purposes of this Section 12, Executive shall not be deemed to have experienced a termination of employment and shall not be entitled to receive any payments pursuant to this Section 12 unless the purported termination of employment constitutes a Separation From Service within the meaning of Treasury Regulation Section 1.409A-1(h).

13. Arbitration of Disputes . The Executive and the Company shall resolve any claim, controversy or dispute whether concerning, arising out of, or relating to this Agreement, the employment relationship between the parties or alleging the violation of either a statutory or common law duty or both, by arbitration, except for the remedy at law or in equity as provided for in paragraph 11 herein which the Company may determine to be enforced by any court having applicable jurisdiction. Executive or the Company shall invoke this right to arbitrate any such claim, controversy or dispute only after first attempting to resolve it through the exhaustion of any Executive problem solving policy that the Company may establish from time to time without obtaining a satisfactory result. The Missouri Uniform Arbitration Act in effect when any arbitration occurs shall govern the procedures of any arbitration between the parties. Any arbitration held in accordance with this paragraph shall take place in St. Louis, Missouri, and shall be conducted by a single arbitrator.

The arbitrator may award full reimbursement to the prevailing party for out-of-pocket expenses and losses, including, without limitation, reasonable attorneys' fees, costs, and expenses arising from the preparation and arbitration of the dispute. "Prevailing party" within the meaning of this section includes, without limitation, a party who (i) agrees to dismiss an action upon the other party's payment of all or a substantial portion of the sums allegedly due or the other party's substantial performance of the covenants allegedly breached, or (ii) who obtains substantially the relief sought by it.

14. Prior Agreements .

(a) Executive represents and warrants to the Company that Executive is not presently a party to any agreement containing a non-competition provision or other restriction with respect to: (a) the nature of any services or business that Executive is entitled to perform or conduct for the Company, or (b) the disclosure or use of any information which directly or indirectly relates to the nature or business of the Company or the services to be rendered by Executive to the Company. Executive further certifies that he has not disclosed or used, and will not disclose or use during his employment with the Company, any confidential information that he acquired as a result of any previous employment or under a contractual obligation of confidentiality before Executive's employment by the Company.

(b) This Employment Agreement revokes and supersedes in its entirety any previous Employment Agreement between Company and Executive.

15 . Notice . Any notice, agreement, or other communication provided for in this Agreement shall be given in writing and will be considered effectively given the day of delivery if sent via an overnight delivery service, the actual time of receipt of a facsimile transmission, or on the third day after mailing is sent by registered or certified mail, postage prepaid return receipt requested and addressed to the parties as follows:

If to the Company:	with a copy (which shall not constitute notice) to:

Allied Healthcare Products, Inc.	Joseph D. Lehrer, Esq.
1720 Sublette Avenue	Greensfelder, Hemker & Gale, P.C.
St. Louis, Missouri 63110	2000 Equitable Building
Attn: Chairman of the Board	10 South Broadway
Fax: (314) 771-1241	St. Louis, Missouri 63102
	Fax: (314) 241-8624

If to Executive:	with a copy (which shall not constitute notice to:

Earl Refsland	James F. Bennett
7 Algonquin Woods	Dowd Bennett LLP
Glendale, Missouri 63122	7733 Forsyth Blvd.
	Suite 1410
	St. Louis, Missouri 63105
	Fax: (314) 863-2111

or to another person or address as the Company or Executive may designate.

16. Governing Law . This Agreement will be governed by, and construed and interpreted according to, the laws and decisions of the State of Missouri without regard to the choice of law provisions thereof.

17. Counterparts; Facsimile Signatures . This Agreement may be executed by the parties hereto on any number of separate counterparts, and all such counterparts so executed constitute one agreement binding on all the parties hereto notwithstanding that all the parties hereto are not signatories to the same counterpart. This Agreement and any other document to be executed in connection herewith may be delivered by facsimile and documents delivered in such manner shall be binding as though an original thereof had been delivered.

18. Entire Agreement . This Agreement, and any agreements or documents referred to herein or executed contemporaneously herewith, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral. There are no conditions, covenants, agreements, representations, warranties or other provisions, express or implied, collateral, statutory or otherwise relating to the subject matter hereof except as herein provided. Without limiting the foregoing, the Prior Employment Agreement is expressly superseded by this Agreement and is of no further force or effect. Nothing in this Agreement, however, shall prevent or limit the executive’s continuing or future participation in any bonus, incentive, equity, insurance, pension, retirement, profit sharing, savings, health, dental, disability, welfare, fringe, or other benefit plan, policy, practice or arrangement of the Company or any of its subsidiaries or other Affiliates, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreement with the Company or any of it subsidiaries or other Affiliates. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or arrangement of the Company or any of its subsidiaries or other Affiliates shall be payable in accordance with such plan, policy, practice or arrangement except as expressly modified by this Agreement.

19. Assignability and Enforceability. This Agreement shall inure to the benefit of the Company and its successors and assigns. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree in writing to perform the Company’s obligations hereunder in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place, and shall deliver to the Executive a copy of any document(s) embodying such assumption. As used in this Agreement, “the Company” shall mean both Allied Healthcare Products, Inc. and any such successor that assumes this Agreement, by operation of law or otherwise. This Agreement and all rights of the Executive hereunder shall inure to the benefit of all be enforceable by the Executive’s personal legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees.

20. Severability . If any provision contained in this Agreement is held to be invalid or unenforceable, that provision will be severed from this Agreement and that invalidity or unenforceability will not affect any other provision of this Agreement, the balance of which will remain in and have its intended full force and affect; provided, however, if any invalid or unenforceable provision may be modified so as to be valid and enforceable as a matter of law, that provision will be deemed to have been modified to the extent necessary so as to be valid and enforceable to the maximum extent permitted by law.

21. Non-Waiver . Failure to enforce any of the provisions of this Agreement at any time shall not be interpreted to be a waiver of such provision or to affect either the validity of this Agreement or the right of either party thereafter to enforce each and every provision of this Agreement.

22. Attorneys' Fees . If either party hereto brings any action to enforce his or its rights hereunder, the prevailing party in any such action shall be entitled to recover his or its reasonable attorneys' fees and costs incurred in connection with such action.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

ALLIED HEALTHCARE PRODUCTS, INC.		EXECUTIVE

By:	/s/ John D. Weil	/s/ Earl Refsland
Name:	John D. Weil	Earl Refsland
Title	Chairman of the Board

Exhibit 31.1

CERTIFICATION

I, EARL R. REFSLAND, certify that:

1. I have reviewed this Form 10-Q of ALLIED HEALTHCARE PRODUCTS, INC.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 7, 2010

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

Exhibit 31.2

CERTIFICATION

I, DANIEL C. DUNN, certify that:

1. I have reviewed this Form 10-Q of ALLIED HEALTHCARE PRODUCTS, INC.;

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 7, 2010

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

Exhibit 32.1

CERTIFICATION Pursuant to 18 U.S.C. § 1350

The undersigned officer of ALLIED HEALTHCARE PRODUCTS, INC. (the "Company"), hereby certifies, to such officer's knowledge, that the Company's Quarterly Report on Form 10-Q for the Company’s fiscal quarter ended March 31, 2010 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Earl R. Refsland
	Earl R. Refsland
	President & Chief Executive Officer

May 7, 2010

Exhibit 32.2

CERTIFICATION Pursuant to 18 U.S.C. § 1350

	/s/ Daniel C. Dunn
	Daniel C. Dunn
	Vice President, Chief Financial Officer & Secretary

May 7, 2010

Exhibit 99.1

Contact: Daniel C. Dunn

Chief Financial Officer

314/771-2400

Allied Healthcare Products Offsets Sales Declines

With Cost Reductions for Break-Even Quarter

ST. LOUIS, May 7, 2010 – Budget constraints for hospitals and municipalities continued to depress sales for Allied Healthcare Products, Inc. (NASDAQ: AHPI) but the company managed to improve its third quarter results over last year’s performance by reducing overhead and operating costs.

Sales for the quarter ending March 31, 2010, fell about 6 percent, from about $12.4 million to $11.6 million in the current quarter. However, Allied reduced its cost of sales even more in the quarter, from approximately $9.9 million to less than $8.8 million, or more than 11 percent. Allied also managed to cut its selling, general and administrative costs for the quarter from almost $3.2 million to $2.7 million, or more than 15 percent.

As a result, Allied earned net income of about $37,500, equating to zero cents per share, compared to a loss of $450,000, or negative 6 cents per share, in the same quarter last year.

Cost controls also enabled the company to increase its profit margins and improve its cash position for the quarter.

For the nine-month period ending March 31, Allied sales declined by almost 13 percent, from about $39.4 million to $34.4 million in the current period. Net income for the two nine-month periods remained virtually flat at approximately a negative $686,000, or negative 9 cents per share, for the current period versus a negative $678,000, also equating to a negative 9 cents per share, for the previous year.

“Allied is not losing sales to competitors,” said Earl Refsland, Allied president and chief executive officer. “We’re losing sales to recession-driven budget reductions by hospitals and state and local governments.

“When our markets return to more normal levels, Allied has built a strong cost position that will drive increased profits,” Refsland said.

Allied Healthcare Products, Inc., manufactures a variety of respiratory products used in the healthcare industry in a range of hospital and alternate care settings including sub-acute facilities, home healthcare and emergency medical care. Allied’s products lines include respiratory care products, medical gas equipment, emergency medical products and mass casualty ventilators. Allied’s products are marketed to hospitals, hospital equipment dealers, hospital construction contractors, home healthcare dealers and emergency medical products dealers

“SAFE HARBOR” STATEMENT: Statements contained in this release that 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 that 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 its periodic filings with the Securities and Exchange Commission. The Company cautions that any forward-looking statement contained in this report reflects 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.

ALLIED HEALTHCARE PRODUCTS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

	Three months ended,						Nine months ended,
	March 31,						March 31,
	2010			2009			2010			2009

Net sales	$	11,627,418		$	12,389,640		$	34,366,002		$	39,361,993
Cost of sales		8,781,739			9,915,884			26,172,709			30,677,586
Gross profit		2,845,679			2,473,756			8,193,293			8,684,407

Selling General and administrative expenses		2,705,644			3,198,135			9,197,535			9,782,064
Income (loss) from operations		140,035			(724,379	)		(1,004,242	)		(1,097,657	)

Interest income		(2,956	)		(5,041	)		(4,403	)		(54,155	)
Interest expense		190			0			2,764			5,849
Other, net		80,791			13,403			103,588			36,583
		78,025			8,362			101,949			(11,723	)

Income (loss) before provision for (benefit from) income taxes		62,010			(732,741	)		(1,106,191	)		(1,085,934	)

Provision for (benefit from) income taxes		24,480			(282,469	)		(420,353	)		(407,925	)
Net income (loss)	$	37,530		$	(450,272	)	$	(685,838	)	$	(678,009	)

Net income (loss) per share - Basic	$	0.00		$	(0.06	)	$	(0.09	)	$	(0.09	)

Net income (loss) per share - Diluted	$	0.00		$	(0.06	)	$	(0.09	)	$	(0.09	)

Weighted average common shares Outstanding - Basic		8,093,386			7,901,327			8,057,890			7,897,937

Weighted average common shares Outstanding - Diluted		8,183,907			7,901,327			8,057,890			7,897,937

ALLIED HEALTHCARE PRODUCTS, INC.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

	March 31, 2010			June 30, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	3,273,496		$	1,943,364
Accounts receivable, net of allowances
of $300,000		5,371,848			6,172,437
Inventories, net		11,968,396			12,663,938
Income tax receivable		1,634,370			937,273
Other current assets		270,340			327,203
Total current assets		22,518,450			22,044,215
Property, plant and equipment, net		10,040,867			10,799,089
Other assets, net		186,069			390,627
Total assets	$	32,745,386		$	33,233,931

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	2,140,610		$	1,633,568
Other accrued liabilities		2,055,459			2,316,558
Deferred income taxes		164,125			419,213
Deferred revenue		688,200			688,200
Total current liabilities		5,048,394			5,057,539

Deferred revenue		974,950			1,491,100

Commitments and contingencies

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; 10,396,878 and 10,204,819 shares issued
at March 31, 2010 and June 30, 2009, respectively;
8,093,386 and 7,901,327 shares outstanding at
March 31, 2010 and June 30, 2009, respectively		103,969			102,048
Additional paid-in capital		48,352,716			47,632,049
Retained earnings		(1,003,215	)		(317,377	)
Less treasury stock, at cost; 2,303,492 shares at
March 31, 2010 and June 30, 2009, respectively		(20,731,428	)		(20,731,428	)
Total stockholders' equity		26,722,042			26,685,292
Total liabilities and stockholders' equity	$	32,745,386		$	33,233,931