ALLIED HEALTHCARE PRODUCTS INC

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update eliminate the need for an organization to analyze whether certain exceptions apply for tax purposes. It also simplifies GAAP for certain taxes. The amendments in these updates are effective for us for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We do not expect the adoption of this standard to have a material impact on our financial statements.

On April 20, 2021, the Company entered into an employment contract with its chief executive officer, Joseph F. Ondrus, Jr., which provides for an initial term of three years with annual renewals. The contract includes termination without cause and change of control provisions, under which the chief executive officer is entitled to continued payments of annual salary and benefits if the Company terminates his employment without cause or he voluntarily terminates his employment with “good reason.” “Good Reason” generally includes changes in the scope of his duties or location of employment but also includes (i) the Company’s written election not to renew the Employment Agreement and (ii) certain voluntary resignations by the chief executive officer following a “Change of Control” as defined in the Agreement.

Orders for the Company’s products for the three months ended March 31, 2021 of $6.8 million were $11.0 million or 61.8% lower than orders for the prior year same quarter of $17.8 million. Domestic orders are down 45.4% over the prior year same quarter while international orders, which represented 18.4% of third quarter orders, were 83.9% lower than orders for the prior year same quarter. The pandemic began in the prior year same quarter and there were unusually higher orders for products used to increase capacity for the care of COVID-19 patients.

Allied had loss before benefit from income taxes in the third quarter of fiscal 2021 of $0.4 million compared to loss before benefit from income taxes in the third quarter of fiscal 2020 of $0.3 million.  The Company’s tax provision net of valuation allowance reflects a tax benefit of $0 for the three months ended March 31, 2021 and 2020. In the quarter ended March 31, 2021 the tax benefit of losses in the amount of approximately $133,000 was fully offset by a valuation allowance of equivalent amount.   In the quarter ended March 31, 2020 the Company recorded the tax benefit of losses incurred in the amount of approximately $82,000 net of additions to the valuation allowance of like amount. To the extent that the Company’s losses continue in future quarters, the tax benefit of those losses will be fully offset by a valuation allowance. To the extent the Company has taxable income, the taxable income will be offset by net operating loss carryforwards.

Net loss for the third quarter of fiscal 2021 was $0.4 million or $0.10 per basic and diluted share compared to net loss of $0.3 million or $0.08 per basic and diluted share for the third quarter of fiscal 2020. The weighted average number of common shares outstanding, used in the calculation of basic and diluted earnings per share for the third quarters of fiscal 2021 and 2020 were 4,013,537.