**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C.** **20549**




**FORM
      10-Q**




ý
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934




For
      the
      quarter ended March 31, 2007.




**OR**




 ̈
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934




For
      the
      transition period from ____________ to ____________




Commission
      File Number 1-8635




**AMERICAN
      MEDICAL ALERT CORP.**


(Exact
      Name of Registrant as Specified in its Charter)




New
                York
            11-2571221(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                  Employer
                Identification
                  Number)




3265
      Lawson Boulevard, Oceanside, New York 11572


(Address
      of principal executive offices)


(Zip
      Code)




(516)
      536-5850


(Registrant’s
      telephone number, including area code)




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




Indicate
      by check mark whether registrant is a large accelerated filer, accelerated
      filer
      or non-accelerated filer. See definition of accelerated filer and large
      accelerated filer in Rule 12b-2 of the Exchange Act.




Large accelerated filer o
            Accelerated
                filer o
            Non-accelerated
                filer x








Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 on the Exchange Act) Yes
oNo
x





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date: 9,295,895 shares of $.01 par value
      common stock as of May 11, 2007.










AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


INDEX
              PAGEPart
                  IFinancial
                  InformationReport
                  of Independent Registered Public Accounting Firm
              1Condensed
                  Consolidated Balance Sheets for March 31, 2007
              2Condensed
                  Consolidated Statements of Income for the Three Months Ended March
                  31,
                  2007 and 2006
              3Condensed
                  Consolidated Statements of Cash Flows for the Three Months Ended
                  March 31,
                  2007 and 2006
              4Notes
                  to Condensed Consolidated Financial Statements
              6Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              15Quantitative
                  and Qualitative Disclosures About Market Risks
              29Controls
                  and Procedures
              30Part
                  IIOther
                  Information
              30


Report
      of
      Independent Registered Public Accounting Firm





Board
      of
      Directors and Shareholders


American
      Medical Alert Corp. and Subsidiaries


Oceanside,
      New York





We
      have
      reviewed the accompanying condensed consolidated balance sheet of American
      Medical Alert Corp. and Subsidiaries (the “Company”) as of March 31, 2007 and
      the related condensed consolidated statements of income and cash flows for
      the
      three-months ended March 31, 2007 and 2006. These interim financial statements
      are the responsibility of the Company's management.





We
      conducted our reviews in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). A review of interim financial
      information consists principally of applying analytical procedures and making
      inquiries of persons responsible for financial and accounting matters. It is
      substantially less in scope than an audit conducted in accordance with the
      standards of the Public Company Accounting Oversight Board, the objective of
      which is the expression of an opinion regarding the financial statements taken
      as a whole. Accordingly, we do not express such an opinion.





Based
      on
      our reviews, we are not aware of any material modifications that should be
      made
      to the condensed consolidated interim financial statements referred to above
      for
      them to be in conformity with accounting principles generally accepted in the
      United States of America.





We
      have
      previously audited, in accordance with the standards of the Public Company
      Accounting Oversight Board (United States), the consolidated balance sheet
      of
      American Medical Alert Corp. and Subsidiaries as of December 31, 2006, and
      the
      related consolidated statements of income, shareholders’ equity and cash flows
      for the year then ended (not presented herein), and in our report dated March
      30, 2007 we expressed an unqualified opinion on those consolidated financial
      statements. In our opinion, the information set forth in the accompanying
      condensed consolidated balance sheet as of December 31, 2006 is fairly stated,
      in all material respects, in relation to the consolidated balance sheet from
      which it has been derived.








/s/
      Margolin, Winer & Evens LLP








Margolin,
      Winer & Evens LLP


Garden
      City, New York





May
      14,
      2007





1




**PART
      I - FINANCIAL INFORMATION**


**Item
      1.** **Financial
      Statements** **.**




AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED BALANCE SHEETS




ASSETS


March
                31, 2007 (Unaudited)
            
            Dec. 31,
                2006CURRENT
                ASSETSCash
            
            $
            1,320,253
            
            $
            856,248Accounts
                receivable(net
                of allowance for doubtful accounts of $564,000 and
                $547,000)
            
            
            5,354,511
            
            
            4,920,950Note
                receivable
            
            
            25,964
            
            
            25,642Inventory
            
            
            380,183
            
            
            313,851Prepaid
                expenses and other current assets
            
            
            903,226
            
            
            860,863Deferred
                income taxes
            
            
            226,000
            
            
            239,000Total
                Current Assets
            
            
            8,210,137
            
            
            7,216,554FIXED
                ASSETS(Net
                of accumulated depreciation and amortization)
            
            
            9,466,360
            
            
            9,307,912OTHER
                ASSETSLong-term
                portion of note receivable
            
            
            41,458
            
            
            48,071Intangible
                  assets
                (net
                  of accumulated amortization of $3,498,680 and
                  $3,194,677)
            
            
            4,819,090
            
            
            5,115,961Goodwill
                (net of accumulated amortization of $58,868)
            
            
            9,532,961
            
            
            9,532,961Other
                assets
            
            
            1,279,004
            
            
            1,386,28615,672,513
            
            
            16,083,279TOTAL
                ASSETS
            
            $
            33,349,010
            
            $
            32,607,745LIABILITIES
                AND SHAREHOLDERS' EQUITYCURRENT
                LIABILITIES:Current
                portion of long-term debt
            
            $
            1,409,740
            
            $
            1,527,327Accounts
                payable
            
            
            831,191
            
            
            805,002Accounts
                payable - acquisitions
            
            
            305,776
            
            
            477,308Accrued
                expenses
            
            
            1,850,034
            
            
            1,075,256Current
                portion of capital lease obligations
            
            
            39,873
            
            
            39,183Deferred
                revenue
            
            
            152,893
            
            
            104,515Total
                Current Liabilities
            
            
            4,589,507
            
            
            4,028,591DEFERRED
                INCOME TAX LIABILITY
            
            
            979,000
            
            
            992,000LONG-TERM
                DEBT, Net of Current Portion
            
            
            5,294,474
            
            
            5,677,068LONG
                -TERM Portion of Capital Lease Obligations
            
            
            64,210
            
            
            74,440CUSTOMER
                DEPOSITS
            
            
            78,200
            
            
            69,200ACCRUED
                RENTAL OBLIGATION
            
            
            397,623
            
            
            381,256OTHER
                LIABILITIES
            
            
            40,000
            
            
            40,000TOTAL
                LIABILITIES
            
            
            11,443,014
            
            
            11,262,555COMMITMENTS
                AND CONTINGENT LIABILITIES
            
            
            -
            
            
            -SHAREHOLDERS’
                EQUITYPreferred
                stock, $.01 par value - authorized, 1,000,000 shares; none issued
                and
                outstandingCommon
                stock, $.01 par value - authorized 20,000,000 shares; issued 9,278,320
                in
                2007 and 9,230,086 shares in 2006
            
            
            92,784
            
            
            92,302Additional
                paid-in capital
            
            
            14,784,854
            
            
            14,591,238Retained
                earnings
            
            
            7,134,390
            
            
            6,767,68222,012,028
            
            
            21,451,222Less
                treasury stock, at cost (43,910 shares)
            
            
            (106,032
            )
            
            (106,032
            )Total
                Shareholders’ Equity
            
            
            21,905,996
            
            
            21,345,190TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            33,349,010
            
            $
            32,607,745




See
        accompanying notes to condensed financial statements.
  2


AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME




(Unaudited)




Three
                Months Ended March 31,2007
            
            2006Revenues:Services
            
            $
            8,612,981
            
            $
            7,069,881Product
                sales
            
            
            89,855
            
            
            80,3308,702,836
            
            
            7,150,211Costs
                and Expenses (Income):Costs
                related to services
            
            
            4,149,103
            
            
            3,502,147Costs
                of products sold
            
            
            52,207
            
            
            44,451Selling,
                general and administrative expenses
            
            
            3,901,035
            
            
            3,148,240Interest
                expense
            
            
            126,515
            
            
            62,042Other
                income
            
            
            (169,732
            )
            
            (124,436
            )Income
                before Provision for Income Taxes
            
            
            643,708
            
            
            517,767Provision
                for Income Taxes
            
            
            277,000
            
            
            238,000NET
                INCOME
            
            $
            366,708
            
            $
            279,767Net
                income per share:Basic
            
            $
            .04
            
            $
            .03Diluted
            
            $
            .04
            
            $
            .03Weighted
                average number of common shares outstandingBasic
            
            
            9,204,178
            
            
            8,774,571Diluted
            
            
            9,578,266
            
            
            9,271,554


See
        accompanying notes to condensed financial statements.
  3


AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




Three
                Months Ended March 312007
            
            2006Cash
                Flows From Operating Activities:Net
                income
            
            $
            366,708
            
            $
            279,767Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            960,459
            
            
            779,046Stock
                compensation charge
            
            
            42,500
            
            
            42,500Decrease
                (increase) in:Accounts
                receivable
            
            
            (433,561
            )
            
            (324,642
            )Inventory
            
            
            (66,332
            )
            
            44,133Prepaid
                expenses and other current assets
            
            
            (42,363
            )
            
            (54,950
            )Increase
                (decrease) in:Accounts
                payable, accrued expenses and other
            
            
            826,333
            
            
            501,224Deferred
                revenue
            
            
            48,378
            
            
            52,503Net
                Cash Provided by Operating Activities
            
            
            1,702,122
            
            
            1,319,581Cash
                Flows From Investing Activities:Expenditures
                for fixed assets
            
            
            (812,801
            )
            
            (1,129,834
            )Repayment
                of notes receivable
              Payment
                of accounts payable-acquisitions
            
            
            6,291
              (171,532
            )
            
            5,985
              (233,988
            )Purchase
                of Answer Connecticut, Inc.
            
            
            -
            
            
            (30,493
            )Purchase
                of MD OnCall
            
            
            -
            
            
            (2,877,649
            )Purchase
                of Prompt Response
            
            
            -
            
            
            (45,000
            )Deposit
                on equipment and software
            
            
            -
            
            
            (50,000
            )(Increase)
                decrease in other assets
            
            
            98,048
            
            
            (10,765
            )Payment
                for account acquisitions andlicensing
                agreement
            
            
            -
            
            
            (160,000
            )Net
                Cash (Used In) Investing Activities
            
            
            (879,994
            )
            
            (4,531,744
            )Cash
                Flows From Financing Activities:Principal
                payments under capital lease obligation
            
            
            (9,540
            )
            
            (24,082
            )Proceeds
                from long-term debt
            
            
            -
            
            
            2,500,000Repayment
                of long-term debt
            
            
            (500,181
            )
            
            (154,424
            )Proceeds
                upon exercise of stock options and warrants
            
            
            151,598
            
            
            172,173Net
                Cash Provided by (Used In) Financing Activities
            
            
            (358,123
            )
            
            2,493,667


See
        accompanying notes to condensed financial statements.
  4


AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)


(Unaudited)




Three
                Months Ended March 31,2007
            
            2006Net
                Increase (Decrease) in Cash
            
            $
            464,005
            
            $
            (718,496
            )Cash,
                Beginning of Period
            
            
            856,248
            
            
            2,638,984Cash,
                End of Period
            
            $
            1,320,253
            
            $
            1,920,488SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:CASH
                PAID DURING THE PERIOD FOR INTEREST
            
            $
            165,183
            
            $
            30,284CASH
                PAID DURING THE PERIOD FOR INCOME TAXES
            
            $
            38,625
            
            $
            590,360SUPPLEMENTAL
              SCHEDULE OF NONCASH INVESTING AND
              FINANCING ACTIVITIES:Common
              Stock issued in connection with
              acquisition
            
            $
            -
            
            $
            343,064Accounts
              payable due seller in connection with
              acquisition
            
            
            -
            
            
            343,064




See
      accompanying notes to condensed financial statements.





5




AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES




Notes
      to
      Condensed Consolidated Financial Statements


(Unaudited)




1.  General:




These
      financial statements should be read in conjunction with the financial statements
      and notes thereto for the year ended December 31, 2006 included in the Company’s
      Annual Report on Form 10-K.




2.  Results
      of Operations:




The
      accompanying condensed consolidated financial statements include the accounts
      of
      American Medical Alert Corp. and its wholly-owned subsidiaries; together the
      “Company”. All material inter-company balances and transactions have been
      eliminated.




In
      the
      opinion of management, the accompanying unaudited condensed financial statements
      contain all adjustments (consisting only of normal recurring accruals) necessary
      to present fairly the financial position as of March 31, 2007 and the results
      of
      operations and cash flows for the three months ended March 31, 2007 and
      2006.




Except
      as
      described in Notes 3, the accounting policies used in preparing these financial
      statements are the same as those described in the December 31, 2006 financial
      statements.




Certain
      amounts in the 2006 condensed consolidated financial statements have been
      reclassified to conform to the 2007 presentation.




The
      results of operations for the three months ended March 31, 2007 are not
      necessarily indicative of the results to be expected for any other interim
      period or for the full year.




3.
      Recent
      Accounting Pronouncements:




In
      July 2006, FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes—an Interpretation of FASB Statement No. 109” (“FIN 48”) was
      issued, clarifying the accounting for uncertainty in tax positions. This
      Interpretation requires recognition in the financial statements of the impact
      of
      a tax position, if that position is more likely than not of being sustained
      on
      audit, based on the technical merits of the position. The provisions of FIN
      48
      are effective as of the beginning of our 2007 fiscal year, with the cumulative
      effect of the change in accounting principle recorded as an adjustment to
      opening retained earnings. The Company adopted FIN 48 as of January 2007 and
      the
      adoption of this Interpretation did not have a material impact on the
      consolidated results of operations or financial position.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
      defines fair value, establishes guidelines for measuring fair value and expands
      disclosure regarding fair value measurements. SFAS No. 157 does not require
      new
      fair value measurements but rather eliminates inconsistencies in guidance found
      in various prior accounting pronouncements. SFAS No. 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007.
      The Company does not expect the adoption of SFAS No. 157 to have a material
      effect on its financial statements.




6




In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin (SAB) No. 108, “Financial Statements - Considering the Effects of Prior
      Year Misstatements when Quantifying Misstatements in Current Year Financial
      Statements.” SAB No. 108 provides interpretive guidance on how the effects of
      prior year uncorrected misstatements should be considered when quantifying
      misstatements in the current year financial statements. SAB No. 108 is effective
      for years ending after November 15, 2006. The adoption of the provisions of
      SAB
      No. 108 did not have a material impact on the financial position or results
      of
      operations.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” ("SFAS 159"). SFAS 159 provides
      companies with an option to report selected financial assets and liabilities
      at
      fair value. SFAS 159 also establishes presentation and disclosure requirements
      designed to facilitate comparisons between companies that choose different
      measurement attributes for similar types of assets and liabilities and to
      provide additional information that will help investors and other financial
      statement users to more easily understand the effect of the company's choice
      to
      use fair value on its earnings. Finally, SFAS 159 requires entities to display
      the fair value of those assets and liabilities for which the company has chosen
      to use fair value on the face of the balance sheet. SFAS 159 is effective as
      of
      the beginning of an entity's first fiscal year beginning after November 15,
      2007. Early adoption is permitted as of the beginning of the previous fiscal
      year provided that the entity makes that choice in the first 120 days of that
      fiscal year and also elects to apply the provisions of SFAS 157 (see above).
      The
      Company is currently assessing the impact of SFAS 159.




4.
      Accounting for Stock-Based Compensation:




On
      January 1, 2006, the Company adopted FASB Statement No. 123 (revised
      2004), “Share-Based Payment” ** (“Statement
      No. 123(R)”), which requires the measurement and recognition of
      compensation expense for all share-based payments to employees, including grants
      of stock and employee stock options, based on estimated fair values. Statement
      No. 123(R) supersedes the Company’s previous accounting under APB
      No. 25 for periods beginning in 2006. The Company adopted Statement
      No. 123(R) using the modified prospective transition method. The
      Company’s consolidated financial statements for the year ended December 31,
      2006, reflects the impact of Statement No. 123(R).




Stock-based
      compensation expense recognized during the period is based on the value of
      the
      portion of share-based payment awards that is ultimately expected to vest during
      the period. Stock-based compensation expense recognized in the Company's
      condensed consolidated statements for the three months ended March 31, 2007
      and
      2006 includes compensation expense for share-based payment awards granted prior
      to, but not yet vested as of December 31, 2005, based on the grant
      date fair value estimated in accordance with the pro forma disclosure provisions
      of Statement No. 123 and compensation expense for the share-based payment
      awards granted subsequent to December 31, 2005 based on the grant date fair
      value estimated in accordance with the provisions of Statement No. 123(R).




7




No
      options were granted during either of the three month periods ended March 31,
      2007 and 2006.




The
      following tables summarize stock option activity for the first quarter ended
      March, 31, 2007 and 2006 .




2007




Number
                of
              Options
            
            Weighted
              Average
              Option
                Price
            
            Weighted
              Average
              Remaining
              Contractual
              Term
                (years)
            
            Aggregate
              Intrinsic
              ValueBalance
              at January 1
            
            
            1,052,818
            
            
            4.02Granted
            
            
            -
            
            
            -Exercised
            
            
            (26,400
            )
            
            3.66Expired/Forfeited
            
            
            (5,850
            )
            
            2.64Balance
              at March 31
            
            
            1,020,568
            
            
            4.04
            
            
            4.92
            
            $
            1,987,416Vested
              and exercisable
            
            
            1,020,568
            
            
            4.04
            
            
            4.92
            
            $
            1,987,416





2006


Number
                    of
                  Options
                
                Weighted
                  Average
                  Option
                    Price
                
                Weighted
                  Average
                  Remaining
                  Contractual
                  Term
                    (years)
                
                Aggregate
                  Intrinsic
                  ValueBalance
                  at January 1
                
                
                1,287,283
                
                
                3.56Granted
                
                
                -
                
                
                -Exercised
                
                
                (99,298
                )
                
                1.47Expired/Forfeited
                
                
                (3,102
                )
                
                3.82Balance
                  at March 31
                
                
                1,184,883
                
                
                3.74
                
                
                5.29
                
                $
                2,996,659Vested
                  and exercisable
                
                
                1,184,883
                
                
                3.74
                
                
                5.29
                
                $
                2,996,659
  8


The
      aggregate intrinsic value of options exercised during the first quarter ended
      March 31, 2007 and 2006 were $68,153 and $451,413, respectively. At January
      1,
      2006 there were 7,500 nonvested stock options outstanding. During the three
      months ended March 31, 2006, 2,500 options vested and 5,000 options were
      forfeited. There were no nonvested stock options outstanding as of March 31,
      2007 and 2006.





The
      following table summarizes stock-based compensation expense related to all
      share-based payments recognized in the condensed consolidated statements of
      income.




Three Months Ended March 31,2007
            
            2006Stock
              options
            
            $
            -
            
            $
            1,825Service
              based awards
            
            
            20,000
            
            
            20,000Performance
              based awards
            
            
            22,500
            
            
            20,675Tax
              benefit
            
            
            (18,275
            )
            
            (19,125
            )Stock-based
              compensation expense, net of
              tax
            
            $
            24,225
            
            $
            23,375





Service
      Based Awards





In
      January 2006, the Company granted 60,000 restricted shares to certain executives
      at no cost. These shares vest ratably over periods ranging from 3 to 5 years,
      on
      December 31 of each year. As of March 31, 2007 there were 12,500 shares vested.
      As of March 31, 2006 no shares were vested. Fair value for restricted stock
      awards is based on the Company's closing common stock price on the date of
      grant. The grant date fair value of restricted stock was $360,000. As of March
      31, 2007 and 2006, the Company had $260,000 and $340,000, respectively, of
      total
      unrecognized compensation costs related to unvested restricted stock units
      expected to be recognized over a weighted average period of 3.48
      years.





Performance
      Based Awards





In
      January 2006, the Company granted share awards for 90,000 shares (up to 18,000
      shares per year for the next five years) to an executive. Vesting of such shares
      is contingent upon the Company achieving certain specified consolidated gross
      revenue and Earnings before Interest and Taxes (“EBIT”) objectives in each of
      the next five fiscal years ending December 31. The fair value of the performance
      shares is based on the closing trading value of the Company’s stock on the date
      of grant and assumes that performance goals will be achieved. The fair value
      of
      the shares is expensed over the performance period for those shares that are
      expected to ultimately vest. If such objectives are not met, no compensation
      cost is recognized and any recognized compensation cost is reversed. As of
      March
      31, 2007, 18,000 shares were vested. As of March 31, 2006, no shares were
      vested. As of March 31, 2007 and 2006, there was $409,500 and $517,500,
      respectively, of total unrecognized compensation costs related to unvested
      share
      awards; that cost is expected to be recognized over a period of 3.75 years.




9




5.  Earnings
      Per Share:




Earnings
      per share data for the three months ended March 31, 2007 and 2006 is presented
      in conformity with SFAS No. 128, “Earnings Per Share.”





The
      following table is a reconciliation of the numerators and denominators in
      computing earnings per share:





March
              31, 2007
            
            Income
              (Numerator)
            
            Shares
              (Denominator)
            
            Per-Share
              AmountsBasic
                EPS - Income available to common
                shareholders
            
            $
            $366,708
            
            
            9,204,178
            
            $
            .04Effect
                of dilutive securities - Options
                and warrants
            
            
            -
            
            
            374,088Diluted
                EPS - Income available to common shareholders and assumed
                conversions
            
            $
            $366,708
            
            
            9,578,266
            
            $
            .04




March
              31, 2006Basic
                EPS -Income available to common
                shareholders
            
            $
            279,767
            
            
            8,774,571
            
            $
            .03Effect
                of dilutive securities - Options
                and warrants
            
            
            -
            
            
            496,983Diluted
                EPS - Income available to common shareholders andassumed
                conversions
            
            $
            279,767
            
            
            9,271,554
            
            $
            .03




6.  Acquisitions:





On
      December 21, 2006, the Company acquired substantially all of the assets
      of American
      Mediconnect, Inc. and PhoneScreen, Inc., Illinois based companies under common
      ownership (collectively “AMI”) .
      American Mediconnect, Inc. is a provider of telephone after-hour answering
      services primarily focused on hospitals, physicians and other health care
      providers. PhoneScreen, Inc. is a provider of call center and compliance
      monitoring services to hospitals, pharmaceutical companies and clinical resource
      organizations. The purchase price was $2,028,830 and consisted of an initial
      cash payment of $1,493,730, common stock valued at $229,324 and a future cash
      payment of $305,776, which is due in December 2007. In addition, for the three
      years following the acquisition, the Company is required to pay Seller an amount
      equal to twenty-five (25%) percent of the cash receipts collected by the
      Company, excluding sales taxes, from the PhoneScreen business. The Company
      also
      incurred professional fees of approximately $57,000. A potential exists for
      the
      payment of additional purchase price consideration if certain thresholds
      concerning revenue and earnings of the acquired business are met as of December
      31, 2007, 2008 and 2009. The results of operations of AMI are included in the
      Telephone Based Communications Services (“TBCS”) segment as of the date of
      acquisition.




10




The
      following table summarizes the fair values of the assets acquired at the date
      of
      acquisition.


Fixed
                  assets
              
              $
              175,000Non-compete
                  agreement
              
              
              50,000Customer
                  list
              
              
              700,000Goodwill
              
              
              1,160,236Cost
                  to acquire AMI
              
              $
              2,085,236


On
      March
      10, 2006, the Company acquired substantially all of the assets of MD
      OnCall, a Rhode Island based company and Capitol Medical
      Bureau, **** a
      Maryland based company (collectively “MD OnCall”) ,
      providers of telephone after-hour answering services and stand-alone voice
      mail
      services. The purchase price was $3,382,443 and consisted of an initial cash
      payment of $2,696,315, common stock valued at $343,064 and future cash payments
      of $343,064, which was paid in full as of March 2007. The Company also recorded
      finder and professional fees of approximately $181,000. A potential exists
      for
      the payment of additional purchase price consideration if certain thresholds
      concerning revenues and earnings of the acquired business are met as of March
      31, 2007, 2008 and 2009. The first threshold as of March 31, 2007 was not met.
      The results of operations of MD OnCall are included in the TBCS segment as
      of
      the date of acquisition.





The
      following table summarizes the fair values of the assets acquired and
      liabilities assumed at the date of acquisition.


Accounts
                  receivable
              
              $
              138,798Fixed
                  assets
              
              
              260,000Non-compete
                  agreement
              
              
              50,000Customer
                  list
              
              
              1,050,000Goodwill
              
              
              2,255,804Capital
                  lease obligations
              
              
              (142,625
              )Customer
                  deposits
              
              
              (48,200
              )Cost
                  to acquire MD OnCall
              
              $
              3,563,777




In
      the
      case of each of the acquisitions, the Company received a third party valuation
      from Chartered Capital Advisors, Inc. of certain intangible assets in
      determining the allocation of purchase price.




11




The
      purchase price of each acquisition exceeded the fair value of the identifiable
      net assets acquired inasmuch as these acquisitions were consummated to enable
      the Company to expand its presence in the telephone answering service business
      into new regions. Furthermore, the acquisitions were done for the business'
      future cash flows and net earnings as opposed to solely for the identifiable
      tangible and intangible assets.





The
      results of operations for MD OnCall and American MediConnect, Inc. are included
      in the condensed consolidated statement of income for three months ended March
      31, 2007. Unaudited pro forma results of operations for the three months ended
      March 31, 2006 as if MD OnCall and American Mediconnect, Inc. had been acquired
      as of the beginning of the earliest period presented is as follows. The pro
      forma results for the three months ended March 31,  2006 include estimates
      which management believes are reasonable.




Three
                  Months Ended March 31,2007
              
              2006(Actual)
              
              (Pro
                  Forma)Revenue
              
              $
              8,703,000
              
              $
              8,391,000Net
                  income
              
              
              367,000
              
              
              283,000Net
                  income per shareBasic
              
              $
              .04
              
              $
              .03Diluted
              
              $
              .04
              
              $
              .03


The
      unaudited pro forma results of operations for the three months ended March
      31,
      2006 do not purport to represent what the Company’s results of operations would
      actually have been had the acquisition been effected for the period presented,
      or to predict the Company’s results of operations for any future
      period.





7.  Long-term
      Debt:





As
      of
      January 1, 2006 the Company had a credit facility arrangement for $4,500,000
      which included a revolving credit line which permitted borrowings of $1,500,000
      (based on eligible receivables as defined) and a $3,000,000 term loan payable
      in
      equal monthly principal installments of $50,000 over five years commencing
      January 2006.




In
      March
      2006 and December 2006, the Company’s credit facility was amended whereby the
      Company obtained an additional $2,500,000 and $1,600,000 of term loans, the
      proceeds of which were utilized to finance the acquisitions of MD OnCall and
      American Mediconnect, Inc. These term loans are payable over five years in
      equal
      monthly principal installments of $41,666.67 and $26,666.67, respectively.
      Additionally, certain of the covenants were amended.




In
      December 2006, the credit facility was amended to reduce the interest rates
      charged by the bank such that borrowings under the term loan will bear interest
      at either (a) LIBOR plus 2.00% or (b) the prime rate or the federal funds
      effective rate plus .5%, whichever is greater, and the revolving credit line
      will bear interest at either (a) LIBOR plus 1.75% or (b) the prime rate or
      the
      federal funds effective rate plus .5%, whichever is greater.  The LIBOR
      interest rate charge shall be adjusted in .25% intervals based on the Company’s
      ratio of Consolidated Funded Debt to Consolidated EBITDA. The Company has the
      option to choose between the two interest rate options under the amended term
      loan and revolving credit line. Borrowings under the credit facility are
      collateralized by substantially all of the assets of the Company.




12




As
      of
      March 31, 2007, the Company was in compliance with its financial covenants
      in
      its loan agreement. As of March 31, 2006, the Company was not in compliance
      with
      one of its financial covenants in its loan agreement. The lender waived the
      non-compliance as of such date and entered into an amendment to the credit
      facility.





On
      April
      30, 2007, the Company amended its credit facility whereby the term of the
      revolving credit line was extended through June 2010 and the amount of credit
      available under the revolving credit line was increased to
      $2,500,000.




8.  Major
      Customers:




Since
      1983, the Company has provided Personal Emergency Response Systems (“PERS”)
      services to the City of New York’s Human Resources Administration Home Care
      Service Program ("HCSP"). The Company has been operating since 1993 with a
      contract to provide HCSP with these services, which has been extended for 1-2
      year periods since 1993, the last such extension through December 31, 2006.
      During the three months ended March 31, 2007 and 2006, the Company’s revenue
      from this contract represented 7 % and
      9%,  respectively,
      of its total revenue.




In
      November 2002, a new Request for Proposals (“RFP”) was issued by HRA to provide
      emergency response services to HCSP from April 1, 2004 through March 31, 2007.
      After receiving notification from the City of New York’s Human Resources
      Administration (“HRA”) that the Company was selected as the approved vendor
      under the RFP to provide PERS services to the Home Care Services Program to
      Medicaid Eligible individuals, the Company subsequently received notification
      from HRA that it canceled the RFP “in the best interest of the City of New
      York.” The Company was advised that the cancellation of the RFP is not related
      to any performance issue or negative reflection upon the Company. Concurrently,
      the Company was advised of HRA’s decision to issue a new contract extension to
      the Company through June 2005 under the terms of the contract that the Company
      has been operating under since 1993. The Company has since received this
      contract extension and also has received subsequent extensions which go through
      December 31, 2006. There have been no subsequent extensions beyond December
      31,
      2006; however, the Company continues to service this program under the same
      terms and conditions. In accordance with the original contract and consistent
      with previous extensions, HRA has the right to terminate the contract without
      cause or “in the best interest of the City of New York” upon thirty days written
      notice. In September 2006, HRA issued a bid proposal relating to the providing
      of the PERS services which are the subject of the Company’s contract. As of May
      11, 2007, the Company has not been informed of any decision by HRA with respect
      to this proposal.




As
      of
      March 31, 2007 and December 2006, accounts receivable from the contract
      represented 9% of accounts receivable and medical devices in service under
      the
      contract represented approximately 14% of medical devices.




13




9. Segment
      Reporting:





Effective
      January 1, 2007, the Company has two reportable segments, (i) Health and Safety
      Monitoring Systems (“HSMS”) and (ii) Telephone Based Communication Services
      (“TBCS”). Prior to January 1, 2007, the Company reported three reportable
      segments; HSMS, TBCS and Safe Com. Due to the insignificant nature of the Safe
      Com segment, effective January 1, 2007, the Company has included the activities
      of its Safe Com segment in its HSMS segment.




The
      table
      below provides a reconciliation of segment information to total consolidated
      information for the three months ended March 31, 2007 and 2006:




2007




HSMS
            
            TBCS
            
            ConsolidatedRevenue
            
            $
            4,099,305
            
            $
            4,603,531
            
            $
            8,702,836Income
                before provision for income taxes
            
            
            178,236
            
            
            465,472
            
            
            643,708Total
                assets
            
            
            14,611,896
            
            
            18,737,114
            
            
            33,349,010




2006




HSMS
            
            TBCS
            
            ConsolidatedRevenue
            
            $
            3,914,070
            
            $
            3,236,141
            
            $
            7,150,211Income
                before provision for income taxes
            
            
            164,793
            
            
            347,974
            
            
            517,767Total
                assets
            
            
            10,547,573
            
            
            19,983,765
            
            
            30,531,338




10.  Commitments and Contingencies:





The
      Company is aware of various threatened or pending litigation claims against
      the
      Company relating to its products and services and other claims arising in the
      ordinary course of its business. The Company has given its insurance carrier
      notice of such claims and it believes there is sufficient insurance coverage
      to
      cover any such claims. Currently, there are no litigation claims for which
      an
      estimate of loss, if any, can be reasonably made as they are in the preliminary
      stages and therefore, no liability or corresponding insurance receivable has
      been recorded.




14




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




The
      following discussion and analysis provides information which management believes
      is relevant to an assessment and understanding of the Company’s results of
      operations and financial condition. This discussion and analysis should be
      read
      in conjunction with the consolidated financial statements contained in the
      latest Annual Report on Form 10-KSB dated December 31, 2006.




*Statements
      contained in this Quarterly Report on Form 10-Q include “forward-looking
      statements” within the meaning of Section 27A of the Securities Act and Section
      21E of the Exchange Act, including, in particular and without limitation,
      statements contained herein under the heading “Management’s Discussion and
      Analysis of Financial Condition and Results of Operations.” Forward-looking
      statements involve known and unknown risks, uncertainties and other factors
      which could cause the Company’s actual results, performance and achievements,
      whether expressed or implied by such forward-looking statements, not to occur
      or
      be realized. These include uncertainties relating to government regulation,
      technological changes, our expansion plans, our contract with the City of New
      York and product liability risks. Such forward-looking statements generally
      are
      based upon the Company’s best estimates of future results, performance or
      achievement, based upon current conditions and the most recent results of
      operations. Forward-looking statements may be identified by the use of
      forward-looking terminology such as “may,” “will,” “expect,” “believe,”
“estimate,” “project,” “anticipate,” “continue” or similar terms, variations of
      those terms or the negative of those terms.*




*You
      should carefully consider such risks, uncertainties and other information,
      disclosures and discussions which contain cautionary statements identifying
      important factors that could cause actual results to differ materially from
      those provided in the forward-looking statements. Readers should carefully
      review the risk factors and any other cautionary statements contained in the
      Company’s Annual Report on Form 10-K and other public filings. The Company
      undertakes no obligation to publicly update or revise any forward-looking
      statements, whether as a result of new information, future events or
      otherwise.*




**Overview:**





The
      Company’s primary business is the provision of healthcare communication services
      through (1) the development, marketing and monitoring of health and safety
      monitoring systems ( “ HSMS **”** )
      that
      include personal emergency response systems, telehealth/disease management
      monitoring systems, medication management systems and pharmacy security
      monitoring systems; (2) telephony based communication services and solutions
      primarily for the healthcare community (“TBCS”). The Company’s products and
      services are primarily marketed to the healthcare community, including home
      care, durable medical equipment, medical facility, hospice, pharmacy, managed
      care and other healthcare oriented organizations. The Company also offers
      certain products and services directly to consumers. Until 2000, the Company’s
      principal business was the marketing of personal emergency response systems
      ( “ PERS ” ),
      a
      device that allows a patient to signal an emergency response center for help
      in
      the event of a debilitating illness or accident. The Company provides PERS
      nationwide to private pay customers, Medicaid programs as well as to healthcare
      related entities. In 2003, the Company initiated a relationship with a large,
      west coast managed care organization that recognized the value associated with
      provisioning PERS to its senior population and contracted AMAC to roll out
      its
      PERS product to its subscribers. Today, the number of PERS units in service
      under that program has more than doubled and continues to expand throughout
      the
      west coast. In February of 2007, the Company announced it had entered into
      an
      exclusive relationship with Walgreen Co. to provide the Company’s flagship
      personal emergency response systems under the Walgreen brand. Walgreens Ready
      ResponseTM Medical Alert system is currently being offered at Walgreens stores in
      selected markets and on a national scale through Walgreen’s website. The
      Walgreen program will be expanded to a national rollout effective June 1, 2007.
      The Company believes the Walgreen relationship will provide a significant
      opportunity to increase its PERS market share through Walgreen’s direct to
      consumer distribution channel.




15




In
      2001,
      the Company entered the emerging telehealth market, an industry in its embryonic
      stage, recognizing the opportunity to provide new monitoring technologies to
      assist healthcare professionals in home-based, health management activities.
      The
      Company has made a significant investment in its initial endeavors in the
      disease management monitoring market. This market focuses on various
      technologies to permit chronic disease management through remote patient
      monitoring. During the last several years, the Company has learned how this
      market functions and has explored a variety of methods of making a meaningful
      entry into this market. The Company has also experienced technological
      difficulties with the products provided by its primary vendor and has commenced
      an arbitration proceeding against this vendor in an attempt to compel
      restitution and a corrective action plan. The Company continues to focus efforts
      on other alternatives to exploit this promising market. The Company believes
      that it is uniquely positioned to be successful in this market.





Beginning
      in 2000, the Company began a program of product diversification and customer
      base **** expansion
      to decrease its reliance on a single product line by marketing complementary
      call center and monitoring services to the healthcare community.




The
      Company diversified its products/service mix to include telephony based
      communication services ( “ TBCS ” )
      for
      professionals in the healthcare community. The rationale to enter this segment
      had several components. These include targeting existing customer relationships,
      leveraging existing infrastructure capability, and establishing an additional
      significant revenue source. T he
      Company’s entry into the TBCS market was
      accomplished initially **** through
      acquisition and later
      through internally generated sales growth coupled
      with acquisitions .




The
      Company has since further expanded its communication infrastructure and capacity
      and now operates a total of eight communication centers in Long Island City
      and
      Port Jefferson, New York, New Jersey, Maryland, Connecticut, Massachusetts,
      Rhode Island and Illinois. The TBCS segment now accounts for 53% of the
      Company’s revenues for the three months ended March 31, 2007.





In
      December 2006 the Company acquired PhoneScreen, Inc (“PhoneScreen”). PhoneScreen
      is a company founded 15 years ago that specializes in the recruitment of
      patients for clinical trials. PhoneScreen’s customers are pharmaceutical
      companies and Contract Research Organizations (“CRO”). CRO’s are organizations
      that offer pharmaceutical companies and medical entities a wide range of
      pharmaceutical research services which include the development and execution
      of
      clinical trials.




16




The
      Company believes it has identified other communication needs as expressed by
      the
      expanded TBCS **** client
      base. In response to these expressed needs, the Company has developed
      specialized healthcare communication solutions. These solutions are creating
      additional opportunities for long-term revenue enhancement. The Company has
      broadened its service offerings and is in the process of significantly expanding the
      TBCS reporting segment.





The
      Company believes that the overall mix of cash flow generating businesses from
      PERS and TBCS, combined with its emphasis on developing products and services
      in
      the telehealth field, provides the correct blend of stability and growth
      opportunity. The Company believes this strategy will enable it to maintain
      and
      increase its role in the healthcare communications field.




**Components
      of Statements of Income by Operating Segment**


The
      following table shows the components of the Statement of Income for the three
      months ended March 31, 2007 and 2006.




In
                thousands (000’s)
            Three
                Months Ended March 31,2007
            %
            2006
            %RevenuesHSMS
            
            4,100
            **47%**
            3,914
            **55%**TBCS
            
            4,603
            **53%**
            3,236
            **45%**Total
                Revenues
            
            8,703
            **100%**
            7,150
            **100%**Cost
                of Services and Goods SoldHSMS
            
            1,839
            **45%**
            1,810
            **46%**TBCS
            
            2,362
            **51%**
            1,736
            **54%**Total
                Cost of Services and Goods Sold
            
            4,201
            **48%**
            3,546
            **50%**Gross
                ProfitHSMS
            
            2,261
            **55%**
            2,104
            **54%**TBCS
            
            2,241
            **49%**
            1,500
            **46%**Total
                Gross Profit
            
            4,502
            **52%**
            3,604
            **50%**Selling,
                General & Administrative
            
            3,901
            **45%**
            3,148
            **44%**Interest
                Expense
            
            127
            **1%**
            62
            **1%**Other
                Income
            
            (170)
            **(2)%**
            (124)
            **(2)%**Income
                before Income Taxes
            
            644
            **7%**
            518
            **7%**Provision
                for Income Taxes
            
            277
            
            238Net
                Income
            
            367
            
            280




**Note:** The
      percentages for Cost of Services and Goods Sold and Gross Profit are calculated
      based on a percentage of revenue.





17





**Results
      of Operations:**





The
      Company has two distinct operating business segments, which are HSMS and TBCS.
      Prior to January 1, 2007, the Company reported three reportable segments; HSMS,
      TBCS and Safe Com. Due to the insignificant nature of the Safe Com segment,
      effective January 1, 2007, the Company has included the activities of its Safe
      Com segment in its HSMS segment.





**Three
      Months Ended March 31, 2007 Compared to Three Months Ended March 31,
      2006**





**Revenues** **:**





**** **HSMS**





Revenues,
      which consist primarily of monthly rental revenues, increased approximately
      $186,000, or 5%, for the three months ended March 31, 2007 as compared to the
      same period in 2006. The increase is primarily attributed to the following
      factors:





§
            The
                Company continues to experience growth primarily in its existing
                customer
                base. The largest growth continues to be as a result of an agreement
                with
                a west coast management organization, which was executed in November
                2003.
                The number of Personal Emergency Response Systems (“PERS”) in service
                under this agreement has more than doubled since its inception and
                has
                resulted in approximately $85,000 more revenue in the first quarter
                of
                2007 as compared to the same period in 2006. The Company anticipates
                that
                the growth in this account will continue for the balance of
                2007.





§
            In
                late 2006, the Company initiated and executed a new agreement with
                an
                agency whereby PERS were placed online. Since inception in the fourth
                quarter of 2006, this account has grown to approximately 1,100 subscribers
                and accounted for an approximate $70,000 increase in revenue during
                the
                first quarter of 2007 as compared to the same period in the prior
                year.




18




**** **TBCS**





The
      increase in revenues of approximately $1,367,000, or 42%, for the three months
      ended March 31, 2007 as compared to the same period in 2006 was primarily due
      to
      the following:





§
            During
                2006, the Company purchased the assets of two separate telephone
                answering
                service businesses which resulted in additional revenue for the three
                months ended March 31, 2007, as compared to the same period in 2006,
                of
                approximately $1,365,000. The acquisitions were as follows:





o
            In
                March 2006, the Company purchased the assets of MD OnCall and Capitol
                Medical Bureau (collectively “MD OnCall”). As a result of this
                acquisition, the Company realized approximately $596,000 of additional
                revenue in the first quarter of 2007 as compared to the same period
                in
                2006. The Company completed this acquisition to facilitate its expansion
                into the Northeast geographical
                area.





o
            In
                December 2006, the Company purchased the assets ofAmerican
                Mediconnect, Inc. and PhoneScreen, Inc.As
                a result of this acquisition, the Company realized approximately
                $769,000
                of revenue in the first quarter of 2007. The Company completed this
                acquisition to further facilitate its expansion of its telephone
                answering
                services businesses and allow them to increase its market base outside
                the
                Northeast geographical area.





Looking
      at 2007 with regard to the TBCS segment, the Company has shifted its
      focus
      from an acquisition driven growth strategy, to one that will place primary
      emphasis on internally driven business development efforts.





**Costs
      Related to Services and Goods Sold:**





**HSMS**





Costs
      related to services and goods sold increased by approximately $29,000 for the
      three months ended March 31, 2007 as compared to the same period in 2006, an
      increase of 2%, primarily due to the following:





§
            The
                relocation of the Company’s fulfillment and warehouse distribution center
                into Long Island City from Mt. Laurel, New Jersey during the second
                quarter of 2006 resulted in increased rent expense due to the Company
                leasing more space and paying a higher rate per square foot for rent.
                As
                part of this relocation process, the Company also took the upgrade
                and
                repairs of its PERS units in-house, which required the Company to
                hire
                additional employees, including a Manager of Engineering and Fulfillment.
                These items accounted for approximately $70,000 of increased costs
                as
                compared to the same period in the prior year, which were primarily
                offset
                by the reduction in costs related to repairs and upgrades.




19




§
            During
                2006 and into 2007, the Company has increased the number of personnel
                working in its Emergency Response Center (“ERC”) department which
                accounted for increased costs of approximately $40,000 in 2007 as
                compared
                to the same period in 2006. The Company hired additional personnel
                due to
                the increased volume of calls which is directly correlated to the
                increased subscriber base, as well as to prepare for the rollout
                of the
                Walgreen’s Ready Response Program.





**** **TBCS:**





Costs
      related to services and goods sold increased by approximately $626,000 for
      the
      three months ended March 31, 2007 as compared to the same period in 2006, an
      increase of 36%, primarily due to the following:





§
            During
                2006, as discussed above, the Company purchased the assets of two
                separate
                telephone answering service businesses which resulted in additional
                costs
                related to services for the three months ended March 31, 2007 of
                approximately $672,000. The increased costs related to services in
                regard
                to the acquisitions were as follows: MD OnCall approximated $261,000
                and
                AMI approximated $411,000.




§
            During
                the latter part of 2006 and into 2007, the Company reduced the number
                of
                telephone answering service operators. This has been accomplished
                through
                overall efficiencies which are being realized by the Company throughout
                its TBCS segment. This accounted for a reduction in costs of approximately
                $93,000 for the quarter ended March 31, 2007 as compared to the same
                period in 2006. As the Company continues to realize these operational
                efficiencies, it will continue to evaluate personnel
                levels.




**Selling,
      General and Administrative Expenses:**





Selling,
      general and administrative expenses increased by approximately $753,000 for
      the
      three months ended March 31, 2007 as compared to the same period in 2006, an
      increase of 24%. The increase is primarily attributable to the
      following:





§
            The
                Company incurred approximately $468,000 of additional selling, general
                and
                administrative expenses, as compared to the same period in 2006,
                as a
                result of the acquisition of two telephone answering service businesses
                during 2006. The largest expenses relate to salaries and related
                payroll
                taxes and amortization relating to customer lists and non-compete
                agreements.





§
            The
                Company incurred approximately $75,000 of additional costs relating
                to
                advertising/marketing expense, as compared to the same period in
                2006.
                This is primarily due to costs incurred with regard to an internet
                advertising campaign through one of its TBCS segments and costs related
                to
                the production of private labeling and marketing materials associated
                with
                the Walgreen program.




20




§
            In
                the third quarter of 2006, the Company expanded its health benefit
                options
                to its employees. As a result of these expanded benefits, the Company
                experienced an increase in the number of employees participating
                in these
                plans. This, along with increased benefits costs, resulted in
                approximately a $40,000 increase as compared to the same period in
                the
                prior year. Although the Company believed this would reduce employee
                turnover, it has only had a minimal impact on the rate of employee
                turnover.





§
            The
                Company incurred increased costs of approximately $70,000, as compared
                to
                the same period in 2006, associated with the research and development.
                These costs primarily associated with the new generation Med-Time
                dispenser, smoke detector and retirement community flush mount console
                unit. The Company continues to move forward with the development
                of these
                new generation products and anticipates having them available within
                the
                next six to twelve months.




There
      were other increases in selling, general and administrative expenses which
      arose
      out of the normal course of business such as consulting expense, sales and
      marketing salaries and travel and entertainment expense which were partially
      offset by decreases in legal and bad debt expense.





**Interest
      Expense:**





Interest
      expense for the three months ended March 31, 2007 and 2006 was approximately
      $127,000 and $62,000, respectively. The increase was primarily due to the
      Company borrowing additional funds in March 2006 of $2,500,000 and December
      2006
      of $1,600,000 for the purpose of financing its acquisitions of MD OnCall and
      AMI, respectively.





**Other
      Income:**





Other
      income for the three months ended March 31, 2007 and 2006 was approximately
      $170,000 and $124,000, respectively. Other Income for the three months ended
      March 31, 2007 and 2006 includes a Relocation and Employment Assistance Program
      (“REAP”) credit in the approximate amounts of $118,000 and $97,000,
      respectively. In connection with the relocation of certain operations to Long
      Island City, New York in April 2003, the Company became eligible for the REAP
      credit which is based upon the number of employees relocated to this designated
      REAP area. The REAP is in effect for a twelve year period commencing in April
      2003; during the first five years the Company will be refunded the full amount
      of the eligible credit and, thereafter, the benefit will be available only
      as a
      credit against New York City income taxes.





**Income
      Before Provision for Income Taxes:**





The
      Company’s income before provision for income taxes for the three months ended
      March 31, 2007 was approximately $644,000 as compared to $518,000 for the same
      period in 2006. The increase of $126,000 for the three months ended March 31,
      2007 primarily resulted from an increase in the Company's service revenues
      offset by an increase in the Company’s costs related to services and selling,
      general and administrative costs.





21





**Liquidity
      and Capital Resources**




As
      of
      January 1, 2006 the Company had a credit facility arrangement for $4,500,000
      which included a revolving credit line which permitted borrowings of $1,500,000
      (based on eligible receivables as defined) and a $3,000,000 term loan payable
      in
      equal monthly principal installments of $50,000 over five years commencing
      January 2006.




In
      March
      2006 and December 2006, the Company’s credit facility was amended whereby the
      Company obtained an additional $2,500,000 and $1,600,000 of term loans, the
      proceeds of which were utilized to finance the acquisitions of MD OnCall and
      AMI. These term loans are payable over five years in equal monthly principal
      installments of $41,666.67 and $26,666.67, respectively. Additionally, certain
      of the covenants were amended. As of March 31, 2007, there was $5,651,667
      outstanding under the term loans.




In
      December 2006, the credit facility was amended to reduce the interest rates
      charged by the bank such that borrowings under the term loan will bear interest
      at either (a) LIBOR plus 2.00% or (b) the prime rate or the federal funds
      effective rate plus .5%, whichever is greater, and the revolving credit line
      will bear interest at either (a) LIBOR plus 1.75% or (b) the prime rate or
      the
      federal funds effective rate plus .5%, whichever is greater.  The LIBOR
      interest rate charge shall be adjusted in .25% intervals based on the Company’s
      ratio of Consolidated Funded Debt to Consolidated EBITDA. The Company has the
      option to choose between the two interest rate options under the amended term
      loan and revolving credit line. Borrowings under the credit facility are
      collateralized by substantially all of the assets of the Company.




As
      of
      March 31, 2007, the Company was in compliance with its financial covenants
      in
      its loan agreement. As of March 31, 2006, the Company was not in compliance
      with
      one of its financial covenants in its loan agreement. The lender waived the
      non-compliance as of such date and entered into an amendment to the credit
      facility.





On
      April
      30, 2007, the Company amended its credit facility whereby the term of the
      revolving credit line was extended through June 2010 and the amount of credit
      available under the revolving credit line was increased to
      $2,500,000.





The
      following table is a summary of contractual obligations as of March 31,
      2007:




Payments
                Due by PeriodContractual
                Obligations
            Total
            Less
                than 1 year
            1-3
                years
            4-5
                years
            After
                5 yearsRevolving
                Credit Line
            $
                750,000
            
            $
                750,000Debt
                (a)
            $
                5,954,214
            $1,409,740
            $4,304,474
            $
                240,000Capital
                Leases (b)
            $
                104,083
            $
                39,872
            $
                64,211Operating
                Leases (c)
            $
                8,854,222
            $
                939,385
            $2,351,983
            $1,473,755
            $
                4,089,099Total
                Contractual Obligations
            $15,662,519
            $2,388,997
            $7,470,668
            $1,713,755
            $
                4,089,099





22




(a)
            -
                Debt includes the Company’s aggregate term loans of $7,100,000 which
                mature in 2010 and 2011, as well as loans associated with the purchase
                of
                automobiles.




(b)
            -
                Capital lease obligations relate to the of telephone answering service
                equipment.  These capital leases mature in the second quarter of
                2009




(c)
            -
                Operating leases include rental of facilities at various locations
                within
                the United States. These operating leases include the rental of the
                Company’s call center, warehouse and the office facilities. These
                operating leases have various maturity dates. The Company currently
                leases
                office space from the Chairman and principal shareholder pursuant
                to a
                lease which expires in September 2007. The Company leased a second
                building from the Chairman and principal shareholder until October
                2004,
                at which time the Company was released from its obligation.




The
      primary sources of liquidity are cash flows from operating activities.  Net
      cash provided by operating activities was approximately $1.7 million for the
      three months ended March 31, 2007, as compared to approximately $1.3 million
      for
      the same period in 2006. During the first quarter of 2007, increases in cash
      provided by operating activities from depreciation and amortization of
      approximately $1.0 million, increase in liabilities of $0.8 and net earnings
      of
      approximately $0.4 million were partially offset by an increase in trade
      receivables of approximately $0.4 million. The components of depreciation and
      amortization primarily relate to the purchases of the Company’s traditional PERS
      product and the customer lists associated with the acquisition of telephone
      answering service businesses. The increase in liabilities is due to an increase
      in the purchase of its PERS product not paid for at March 31, 2007, accrual
      of
      2007 taxes and timing of payments of other expenses in the ordinary course
      of
      business. The increase in trade receivables is primarily due to the Company
      consummating an acquisition in December 2006, which resulted in approximately
      $0.5 million of increased receivables through the normal course of business.
      Increases in cash provided by operating activities during the first quarter
      of
      2006 were the result of an increase in depreciation and amortization of
      approximately $0.8 million, increase in liabilities of $0.5 and net earnings
      of
      approximately $0.3 million. These increases were partially offset by an increase
      in trade receivables of approximately $0.3 million.




Net
      cash
      used in investing activities for the three months ended March 31, 2007 was
      approximately $0.9 million as compared to $4.5 million in the same period in
      2006. The primary component of net cash used in investing activities in the
      first quarter of 2007 was capital expenditures of approximately $0.8 million.
      Capital expenditures for the first quarter of 2007 primarily related to the
      continued production and purchase of the traditional PERS system. The primary
      components of net cash used in investing activities in the first quarter of
      2006
      were the acquisition of telephone answering service businesses and capital
      expenditures of $3.1 and $1.1 million, respectively.




23




Cash
      flows for the three months ended March 31, 2007 used in financing activities
      were approximately $0.4 million compared to cash flows provided by financing
      activities of $2.5 million for the same period in 2006. The primary component
      of
      cash flow used in financing activities in the first quarter of 2007 was the
      payments of long-term debt of approximately $0.5 million. The primary component
      of cash flow provided by financing activities in the first quarter of 2006
      was
      proceeds received from additional borrowings of $2.5 million which were
      primarily used for the acquisition of a telephone answering service.




During
      the next twelve months, the Company anticipates it will make capital
      expenditures of approximately $3.0 - $3.5 million for the production and
      purchase of the traditional PERS systems and telehealth systems, enhancements
      to
      its computer operating systems and the production of its Med-Time pill dispenser
      (this includes outstanding purchase orders issued to purchase approximately
      $1,350,000 of the traditional PERS systems). This amount is subject to
      fluctuations based on customer demand. The Company also anticipates incurring
      approximately $0.2 - $0.4 million of costs relating to research and development
      of its telehealth product, Med-Time dispenser and retirement community flush
      mount console unit. In July 2005, the Company entered into a technology,
      licensing, development, distribution and marketing agreement with a supplier
      for
      its HSMS sector. Pursuant to this agreement the Company anticipates expending
      approximately $0.3 - $0.5 million over the next twelve to eighteen months.




As
      of
      March 31, 2007, the Company had approximately $1.3 million in cash and the
      Company’s working capital was approximately $3.6 million. The Company believes
      that with its present cash balance and with operations of the business
      generating positive cash flow, it will be able to meet its cash, working capital
      and capital expenditure needs for at least the next twelve months. The Company
      also has a revolving credit line, which expires in June 2010 that permits
      borrowings up to $2.5 million, of which $750,000 was outstanding at March 31,
      2007.




Off-Balance
      Sheet Arrangements:




As
      of
      March 31, 2007, the Company has not entered into any off-balance sheet
      arrangements that are reasonably likely to have an impact on the Company’s
      current and future financial condition.




Other
      Factors:




On
      December 21, 2006, the Company acquired substantially all of the assets
      of American
      Mediconnect, Inc. and PhoneScreen, Inc., **** Illinois
      based companies under common ownership (collectively “AMI”) .
      American Mediconnect, Inc. is a provider of telephone after-hour answering
      services primarily focused on hospitals, physicians and other health care
      providers. PhoneScreen, Inc. is a provider of call center and compliance
      monitoring services to hospitals, pharmaceutical companies and clinical resource
      organizations. The purchase price was $2,028,830 and consisted of an initial
      cash payment of $1,493,730, common stock valued at $229,324 and a future cash
      payment of $305,776, which is due in December 2007. In addition, for the three
      years following the acquisition, the Company is required to pay AMI an amount
      equal to twenty-five (25%) percent of the cash receipts collected by the
      Company, excluding sales taxes, from the PhoneScreen business. The Company
      also
      incurred professional fees of approximately $57,000. A potential exists for
      the
      payment of additional purchase price consideration if certain thresholds
      concerning revenues and earnings of the acquired business are met as of December
      31, 2007, 2008 and 2009.




24




On
      March
      10, 2006, the Company acquired substantially all of the assets of MD
      OnCall, a Rhode Island based company and Capitol Medical
      Bureau, **** a
      Maryland based company (collectively "MD OnCall") ,
      providers of telephone after-hour answering services and stand-alone voice
      mail
      services. The purchase price was $3,382,443 and consisted of an initial cash
      payment of $2,696,315, common stock valued at $343,064, and future cash payments
      of $343,064, which was paid in full as of March 2007. The Company also recorded
      finder and professional fees of approximately $181,000. A potential exists
      for
      payments of additional purchase price consideration if certain thresholds
      concerning revenue and earnings of the acquired business are met as of March
      31,
      2007, 2008 and 2009. The first threshold as of March 31, 2007 was not
      met.





During
      2005, the Company entered into two operating lease agreements for additional
      space at its Long Island City, New York location in order to consolidate its
      warehouse and distribution center and accounting department into this location.
      The leases, which commenced in January 2006 and expire in March 2018, call
      for
      minimum annual rentals of $220,000 and $115,000, respectively, and are subject
      to increases in accordance with the term of the agreements. The Company is
      also
      responsible for the reimbursement of real estate taxes.





On
      January 14, 2002, the Company entered into an operating lease agreement for
      space in Long Island City, New York in order to consolidate its HCI TBCS and
      PERS ERC/ Customer Service facilities.  The centralization of the ERC,
      Customer Service and H-LINK® OnCall operations has provided certain operating
      efficiencies and allowed for continued growth of the H-LINK and PERS
      divisions.  The fifteen (15) year lease term commenced in April 2003. 
The lease calls for minimum annual rentals of $269,500, subject to a 3% annual
      increase plus reimbursement for real estate taxes.




On
      November 1, 2001, the Company entered into a five-year Cooperative Licensing,
      Development, Services and Marketing Agreement with HHN (the “HHN Agreement”)
      pursuant to which the Company developed, with the
      assistance of HHN , a
      new
      integrated appliance combining the features of the Company’s PERS product with
      HHN’s technology .
      The
      agreement was amended on June 30, 2005 and includes an extension of the initial
      term for an additional three years, through October 31, 2009.




Since
      1983, the Company has provided Personal Emergency Response Systems (“PERS”)
      services to the City of New York’s Human Resources Administration Home Care
      Service Program ("HCSP"). The Company has been operating since 1993 with a
      contract to provide HCSP with these services, which has been extended for 1-2
      year periods since 1993, the last such extension through December 31, 2006.
      During the three months ended March 31, 2007 and 2006, the Company’s revenue
      from this contract represented 7% and 9% respectively, of its total revenue.




25




In
      November 2002, a new Request for Proposals (“RFP”) was issued by HRA to provide
      emergency response services to HCSP from April 1, 2004 through March 31, 2007.
      After receiving notification from the City of New York’s Human Resources
      Administration (“HRA”) that the Company was selected as the approved vendor
      under the RFP to provide PERS services to the Home Care Services Program to
      Medicaid Eligible individuals, the Company subsequently received notification
      from HRA that it canceled the RFP “in the best interest of the City of New
      York.” The Company was advised that the cancellation of the RFP is not related
      to any performance issue or negative reflection upon the Company. Concurrently,
      the Company was advised of HRA’s decision to issue a new contract extension to
      the Company through June 2005 under the terms of the contract that the Company
      has been operating under since 1993. The Company has since received this
      contract extension and also has received subsequent extensions which go through
      December 31, 2006. There have been no subsequent extensions beyond December
      31,
      2006; however, the Company continues to service this program under the same
      terms and conditions. In accordance with the original contract and consistent
      with previous extensions, HRA has the right to terminate the contract without
      cause or “in the best interest of the City of New York” upon thirty days written
      notice. HRA had also advised the Company that HRA plans to issue a new RFP
      with
      respect to PERS services in the future. In September 2006, HRA issued a bid
      proposal relating to the providing of the PERS services which are the subject
      of
      the Company’s contract. As of May 11, 2007, the Company has not been informed of
      any decision by HRA with respect to this proposal.




The
      Company cannot determine (i) how long the current contract terms will remain
      in
      effect or (ii) whether it will be the successful bidder on the bid process
      and
      if so, under what terms and conditions. While the Company has greatly reduced
      its dependence on revenue from HCSP, if subsequent to March 31, 2007, the
      Company does not maintain this contract, approximately 7% of the Company’s
      revenue could be lost, albeit over a protracted period, which could have a
      material adverse effect on operating results and cash flows. The Company
      continues to implement a variety of operational efficiencies, as well as
      continuing to enhance and diversify its other revenue streams, to offset the
      impact, if any, of this occurrence.




As
      of
      March 31, 2007 and December 31, 2006, accounts receivable from the contract
      represented 9% of accounts receivable and medical devices in service under
      the
      contract represented approximately 14% of medical devices.




**Recent
      Accounting Pronouncements:**




In
      July 2006, FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”) was
      issued, clarifying the accounting for uncertainty in tax positions. This
      Interpretation requires that we recognize in our financial statements, the
      impact of a tax position, if that position is more likely than not of being
      sustained on audit, based on the technical merits of the position. The
      provisions of FIN 48 are effective as of the beginning of our 2007 fiscal year,
      with the cumulative effect of the change in accounting principle recorded as
      an
      adjustment to opening retained earnings. The Company adapted FIN 48 as of
      January 2007 and the adoption of this Interpretation did not have a material
      impact on the consolidated results of operations or financial position.




26




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
      defines fair value, establishes guidelines for measuring fair value and expands
      disclosure regarding fair value measurements. SFAS No. 157 does not require
      new
      fair value measurements but rather eliminates inconsistencies in guidance found
      in various prior accounting pronouncements. SFAS No. 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007.
      We do not expect the adoption of SFAS No. 157 to have a material effect on
      our
      financial statements.





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin (SAB) No. 108, “Financial Statements - Considering the Effects of Prior
      Year Misstatements when Quantifying Misstatements in Current Year Financial
      Statements”. SAB No. 108 provides interpretive guidance on how the effects of
      prior year uncorrected misstatements should be considered when quantifying
      misstatements in the current year financial statements. SAB No. 108 is effective
      for years ending after November 15, 2006. The adoption of the provisions of
      SAB
      No. 108 did not have a material impact on the financial position or results
      of
      operations.





In
      February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities ("SFAS 159"). SFAS 159 provides companies
      with
      an option to report selected financial assets and liabilities at fair value.
      SFAS 159 also establishes presentation and disclosure requirements designed
      to
      facilitate comparisons between companies that choose different measurement
      attributes for similar types of assets and liabilities and to provide additional
      information that will help investors and other financial statement users to
      more
      easily understand the effect of the company's choice to use fair value on its
      earnings. Finally, SFAS 159 requires entities to display the fair value of
      those
      assets and liabilities for which the company has chosen to use fair value on
      the
      face of the balance sheet. SFAS 159 is effective as of the beginning of an
      entity's first fiscal year beginning after November 15, 2007. Early adoption
      is
      permitted as of the beginning of the previous fiscal year provided that the
      entity makes that choice in the first 120 days of that fiscal year and also
      elects to apply the provisions of SFAS 157 (see above). The Company is currently
      assessing the impact of SFAS 159.





**Critical
      Accounting Policies:**





In
      preparing the financial statements, the Company makes estimates, assumptions
      and
      judgments that can have a significant impact on our revenue, operating income
      and net income, as well as on the reported amounts of certain assets and
      liabilities on the balance sheet. The Company believes that the estimates,
      assumptions and judgments involved in the accounting policies described below
      have the greatest potential impact on its financial statements due to the
      materiality of the accounts involved, and therefore, considers these to be
      its
      critical accounting policies. Estimates in each of these areas are based on
      historical experience and a variety of assumptions that the Company believes
      are
      appropriate. Actual results may differ from these estimates.




27




**Reserves
      for Uncollectible Accounts Receivable**


The
      Company makes ongoing assumptions relating to the collectibility of its accounts
      receivable. The accounts receivable amount on the balance sheet includes a
      reserve for accounts that might not be paid. In determining the amount of the
      reserve, the Company considers its historical level of credit losses. The
      Company also makes judgments about the creditworthiness of significant customers
      based on ongoing credit evaluations, and it assesses current economic trends
      that might impact the level of credit losses in the future. The Company recorded
      reserves for uncollectible accounts receivable of $564,000 as of March 31,
      2007,
      which is equal to 9.5% of total accounts receivable. While the Company believes
      that the current reserves are adequate to cover potential credit losses, it
      cannot predict future changes in the financial stability of its customers and
      the Company cannot guarantee that its reserves will continue to be adequate.
      For
      each 1% that actual credit losses exceed the reserves established, there would
      be an increase in general and administrative expenses and a reduction in
      reported net income of approximately $59,000. Conversely, for each 1% that
      actual credit losses are less than the reserve, this would decrease the
      Company’s general and administrative expenses and increase the reported net
      income by approximately $59,000.




**Fixed
      Assets**


Fixed
      assets are stated at cost. Depreciation for financial reporting purposes is
      being provided by the straight-line method over the estimated useful lives
      of
      the related assets. The valuation and classification of these assets and the
      assignment of useful depreciable lives involves significant judgments and the
      use of estimates. Fixed assets are reviewed for impairment whenever events
      or
      changes in circumstances indicate that the carrying amount of an asset may
      not
      be recoverable. Historically, impairment losses have not been required. Any
      change in the assumption of estimated useful lives could either result in a
      decrease or increase to the Company’s financial results. A decrease in estimated
      useful life would reduce the Company’s net income and an increase in estimated
      useful life would increase the Company’s net income. If the estimated useful
      lives of the PERS medical device were decreased by one year, the cost of goods
      related to services would increase and net income would decrease by
      approximately $165,000 per annum. Conversely, if the estimated useful lives
      of
      the PERS medical device were increased by one year, the cost of goods related
      to
      services would decrease and net income would increase by approximately $135,000
      per annum.




**Valuation
      of Goodwill**


Pursuant
      to Statement of Financial Accounting Standards No. 142, “Goodwill and Other
      Intangible Assets,” goodwill and indefinite life intangible assets are no longer
      amortized, but are subject to annual impairment tests. To date, the Company
      has
      not been required to recognize an impairment of goodwill. The Company tests
      goodwill for impairment annually or more frequently when events or circumstances
      occur indicating goodwill might be impaired. This process involves estimating
      fair value using discounted cash flow analyses. Considerable management judgment
      is necessary to estimate discounted future cash flows. Assumptions used for
      these estimated cash flows were based on a combination of historical results
      and
      current internal forecasts. The Company cannot predict certain events that
      could
      adversely affect the reported value of goodwill, which totaled $9,532,961 at
      March 31, 2007 and December 31, 2006. If the Company were to experience a
      significant adverse impact on goodwill, it would negatively impact the Company’s
      net income.




28




**Accounting
      for Stock-Based Awards**


On
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123R, "Share-Based Payment." Prior to January 1, 2006, the Company had
      applied the intrinsic value method of accounting for stock options granted
      to
      our employees and directors under the provisions of Accounting Principles Board
      Opinion No. 25, "Accounting for Stock Issued to Employees," and related
      interpretations, as permitted by SFAS No. 123, "Accounting for Stock-Based
      Compensation." Accordingly, employee and director compensation expense was
      recognized only for those options whose exercise price was less than the market
      value of our common stock at the measurement date.





The
      Company adopted the fair value recognition provisions of SFAS No. 123R, using
      the modified prospective transition method. Under the modified prospective
      method, (i) compensation expense for share-based awards granted prior to January
      1, 2006 are recognized over the remaining service period using the compensation
      cost calculated for pro forma disclosure purposes under SFAS No. 123 and (ii)
      compensation expense for all share-based awards granted subsequent to December
      31, 2005 are based on the grant date fair value estimated in accordance with
      the
      provisions of SFAS No. 123R. Results for periods prior to January 1, 2006 have
      not been restated. As a result of adopting SFAS No. 123R, the Company recorded
      a
      pre-tax expense of approximately $42,500 for stock-based compensation for the
      three months ended March 31, 2007 and 2006.





The
      determination of fair value of share-based payment awards to employees and
      directors on the date of grant using the Black-Scholes model is affected by
      the
      Company's stock price as well as assumptions regarding a number of highly
      complex and subjective variables. These variables include, but are not limited
      to the expected stock price volatility over the term of the awards, and actual
      and projected employee stock option exercise behaviors.




**Item
      3.** **Quantitative
      and Qualitative Disclosure About Market Risk.**





**Market
      Risk Disclosure**





The
      Company does not hold market risk-sensitive trading instruments, nor does it
      use
      financial instruments for trading purposes. Except as disclosed below in this
      item, all sales, operating items and balance sheet data are denominated in
      U.S.
      dollars; therefore, the Company has no significant foreign currency exchange
      rate risk.





In
      the
      ordinary course of its business the Company enters into commitments to purchase
      raw materials and finished goods over a period of time, generally six months
      to
      one year, at contracted prices. At March 31, 2007 these future commitments
      were
      not at prices in excess of current market, or in quantities in excess of normal
      requirements. The Company does not utilize derivative contracts either to hedge
      existing risks or for speculative purposes.




29




**Interest
      Rate Risk**





We
      are
      exposed to market risk from changes in interest rates primarily through our
      financing activities. Interest on our outstanding balances on our term loan
      and
      revolving credit line under our credit facility accrues at a rate of LIBOR
      plus
      2.00% and LIBOR plus 1.75%, respectively. Our ability to carry out our business
      plan to finance future working capital requirements and acquisitions of TBCS
      businesses may be impacted if the cost of carrying debt fluctuates to the point
      where it becomes a burden on our resources.





**Item
      4.** **Controls
      and Procedures** **.**




As
      of the
      end of the period covered by this report, the Company carried out an evaluation,
      under the supervision and with the participation of its Chief Executive Officer
      and President and its Chief Financial Officer, of the effectiveness of the
      design and operation of our disclosure controls and procedures. Based on this
      evaluation, the Chief Executive Officer and President and the Chief Financial
      Officer concluded that the Company's controls and procedures are effective
      to
      ensure that information required to be disclosed by the Company in the reports
      filed by it under the Securities and Exchange Act of 1934, as amended, is
      recorded, processed, summarized and reported within the time periods specified
      in the SEC's rules and forms, and include controls and procedures designed
      to
      ensure that information required to be disclosed by the Company in such reports
      is accumulated and communicated to the Company's management, including the
      Chief
      Executive Officer and President and Chief Financial Officer of the Company,
      as
      appropriate to allow timely decisions regarding required
      disclosure.





There
      were no changes in the Company’s internal control over financial reporting that
      occurred during the quarter ended March 31, 2007 that has materially affected,
      or is reasonably likely to affect, the Company’s internal control over financial
      reporting.





**PART
      II - OTHER INFORMATION**





**Item
      1.**  **** **Legal
      Proceedings** **.**





The
      Company is aware of various threatened or pending litigation claims against
      the
      Company relating to its products and services and other claims arising in the
      ordinary course of its business. The Company has given its insurance carrier
      notice of such claims and it believes there is sufficient insurance coverage
      to
      cover any such claims. Currently, there are no litigation claims for which
      an
      estimate of loss, if any, can be reasonably made as they are in the preliminary
      stages and therefore, no liability or corresponding insurance receivable has
      been recorded.




30




On
      April
      20, 2007, the Company commenced an arbitration proceeding before the American
      Arbitration Association against its primary vendor of telehealth products,
      Health Hero Networks, Inc. (“HHN”). The Company is seeking $2.3 million in
      damages in connection with its claim that the products and services provided
      by
      HHN do not meet contractual specifications. In connection with these claims,
      the
      Company is also seeking an order compelling HHN to correct the technical defects
      in its products and services and honor its product warranty.





**Item
      2.** **Unregistered
      Sales of Equity Securities and Use of Proceeds** **.**





On
      April
      6, 2007, the Company issued 5,000 shares of Common Stock to an investor of
      the
      Company, pursuant to an exercise of a warrant, for a total purchase price of
      $19,000. The shares were issued without registration in reliance on Section
      4(2)
      of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder,
      and in reliance on the purchaser's representation as to its status as an
      accredited investor, and that it was acquiring the shares for investment
      purposes and not with a view to any sale or distribution. In addition, the
      shares bore a 1933 Act restrictive legend.





On
      April
      18, 2007, the Company issued 2,500 shares of Common Stock to an investor of
      the
      Company, pursuant to an exercise of a warrant, for a total purchase price of
      $9,500. The shares were issued without registration in reliance on Section
      4(2)
      of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder,
      and in reliance on the purchaser's representation as to its status as an
      accredited investor, and that it was acquiring the shares for investment
      purposes and not with a view to any sale or distribution. In addition, the
      shares bore a 1933 Act restrictive legend.





**Item
      6.** **Exhibits** **.**





No .   Description





10.1
            Amendment
                to Credit Agreement dated April 30, 2007 between the Company and
                JPMorgan
                Chase


31.1
            Certification
                of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of
                2002


31.2
            Certification
                of CFO Pursuant to Section 302 of the Sarbanes Oxley Act of
                2002


32.1
            Certification
                of CEO Pursuant to Section 906 of the Sarbanes Oxley Act of
                2002


32.2
            Certification
                of CFO Pursuant to Section 906 of the Sarbanes Oxley Act of
                2002





31





**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Company has
      duly
      caused this report to be signed on its behalf by the undersigned thereunto
      duly
      authorized.




**AMERICAN
                MEDICAL ALERT CORP.**Dated:
              May 14, 2007
            By:
            /s/ Jack
              RhianName:
              Jack Rhian
              Title:
                Chief Executive Officer and President


By:
            /s/ Richard
              RalloName:
                Richard Rallo
              Title:
                Chief Financial Officer




32