**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 June 30, 2008.




**OR**




o
            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, non-accelerated filer, or a smaller reporting company. See the
      definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.


Large
                  accelerated filero
              
              Accelerated
                  fileroNon-accelerated
                  filero(Do not check if a smaller reporting company)
              
              Smaller
                  reporting company 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: 9,484,927 shares of $.01 par value
      common stock as of August 13, 2008.







AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


INDEX
              
              PAGEPart
                  IFinancial
                  InformationReport
                  of Independent Registered Public Accounting Firm
              
              1Condensed
                  Consolidated Balance Sheets for June 30, 2008and
                  December 31, 2007
              
              2Condensed
                  Consolidated Statements of Income for theSix
                  Months Ended June 30, 2008 and 2007
              
              4Condensed
                  Consolidated Statements of Income for theThree
                  Months Ended June 30, 2008 and 2007
              
              5Condensed
                  Consolidated Statements of Cash Flows forthe
                  Six Months Ended June 30, 2008 and 2007
              
              6Notes
                  to Condensed Consolidated Financial Statements
              
              8Management’s
                  Discussion and Analysis ofFinancial
                  Condition and Results of Operations
              
              16Quantitative
                  and Qualitative Disclosures About Market Risks
              
              32Controls
                  and Procedures
              
              32Part
                  IIOther
                  Information
              
              33









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 June 30, 2008 and the
      related condensed consolidated statements of income for the six-month and
      three-month periods ended June 30, 2008 and 2007 and cash flows for the
      six-months ended June 30, 2008 and 2007. 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, 2007, 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
      31, 2008 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, 2007 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





August
      13, 2008





1


**PART
      I - FINANCIAL INFORMATION**




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




AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED BALANCE SHEETS






June
                30, 2008
            
            Dec. 31,
                2007(Unaudited)ASSETSCURRENT
                ASSETSCash
            
            $
            1,078,336
            
            $
            911,525Accounts
                receivable(net
                of allowance for doubtful accounts of $598,000 and
                $554,000)
            
            
            5,606,711
            
            
            5,655,286Note
                receivable
            
            
            27,635
            
            
            26,954Inventory
            
            
            640,123
            
            
            552,736Prepaid
                income taxes
            
            
            166,077
            
            
            309,260Prepaid
                expenses and other current assets
            
            
            960,822
            
            
            941,601Deferred
                income taxes
            
            
            265,000
            
            
            275,000Total
                Current Assets
            
            
            8,744,704
            
            
            8,672,362FIXED
                ASSETS(Net
                of accumulated depreciation and amortization)
            
            
            11,221,914
            
            
            10,799,313OTHER
                ASSETSLong-term
                portion of note receivable
            
            
            7,127
            
            
            21,117Intangible
                assets(net
                of accumulated amortization of $5,034,733****and
                $4,393,073)
            
            
            3,636,229
            
            
            4,232,226Goodwill
                (net of accumulated amortization of $58,868)
            
            
            9,896,438
            
            
            9,766,194Other
                assets
            
            
            1,777,533
            
            
            1,462,00915,317,327
            
            
            15,481,546TOTAL
                ASSETS
            
            $
            35,283,945
            
            $
            34,953,221LIABILITIES
                AND SHAREHOLDERS’ EQUITYCURRENT
                LIABILITIES:Current
                portion of long-term debt
            
            $
            1,311,438
            
            $
            1,414,419Accounts
                payable
            
            
            1,351,068
            
            
            1,716,179Accounts
                payable - acquisitions
            
            
            50,140
            
            
            73,896Accrued
                expenses
            
            
            1,746,875
            
            
            1,550,283Current
                portion of capital lease obligations
            
            
            43,508
            
            
            42,015Deferred
                revenue
            
            
            381,942
            
            
            274,101Total
                Current Liabilities
            
            
            4,884,971
            
            
            5,070,893DEFERRED
                INCOME TAX LIABILITY
            
            
            937,000
            
            
            947,000LONG-TERM
                DEBT, Net of Current Portion
            
            
            3,975,000
            
            
            4,694,316LONG
                -TERM Portion of Capital Lease Obligations
            
            
            10,291
            
            
            32,425CUSTOMER
                DEPOSITS
            
            
            92,225
            
            
            81,200ACCRUED
                RENTAL OBLIGATION
            
            
            477,117
            
            
            446,722OTHER
                LIABILITIES
            
            
            10,000
            
            
            10,000TOTAL
                LIABILITIES
            
            
            10,386,604
            
            
            11,282,556COMMITMENTS
                AND CONTINGENT LIABILITIES
            
            
            -
            
            
            -




2


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****9,472,101
                shares in 2008****and
                9,385,880 shares in 2007
            
            
            94,721
            
            
            93,859Additional
                paid-in capital
            
            
            15,746,900
            
            
            15,421,227Retained
                earnings
            
            
            9,192,297
            
            
            8,281,91425,033,918
            
            
            23,797,000Less
                treasury stock, at cost (48,573 shares in 2008 and 46,798 in
                2007)
            
            
            (136,577
            )
            
            (126,335
            )Total
                Shareholders’ Equity
            
            
            24,897,341
            
            
            23,670,665TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            35,283,945
            
            $
            34,953,221See
                accompanying notes to condensed financial statements.





3


AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME


(Unaudited)


Six
                  Months Ended June 30,2008
              
              2007Revenues:Services
              
              $
              18,558,490
              
              $
              17,401,074Product
                  sales
              
              
              616,576
              
              
              200,56819,175,066
              
              
              17,601,642Costs
                  and Expenses (Income):Costs
                  related to services
              
              
              8,944,634
              
              
              8,464,967Costs
                  of products sold
              
              
              310,708
              
              
              120,999Selling,
                  general and administrative expenses
              
              
              8,379,029
              
              
              7,736,763Interest
                  expense
              
              
              166,868
              
              
              255,136Other
                  income
              
              
              (169,556
              )
              
              (346,191
              )Income
                  before Provision for Income Taxes
              
              
              1,543,383
              
              
              1,369,968Provision
                  for Income Taxes
              
              
              633,000
              
              
              596,000NET
                  INCOME
              
              $
              910,383
              
              $
              773,968Net
                  income per share:Basic
              
              $
              .10
              
              $
              .08Diluted
              
              $
              .09
              
              $
              .08Weighted
                  average number of common shares outstanding:Basic
              
              
              9,411,886
              
              
              9,232,958Diluted
              
              
              9,708,325
              
              
              9,635,350
  See
                  accompanying notes to condensed financial statements.





4




AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME


(Unaudited)


Three
                  Months Ended June 30,2008
              
              2007Revenues:Services
              
              $
              9,219,378
              
              $
              8,788,093Product
                  sales
              
              
              319,943
              
              
              110,7139,539,321
              
              
              8,898,806Costs
                  and Expenses (Income):Costs
                  related to services
              
              
              4,397,245
              
              
              4,222,906Costs
                  of products sold
              
              
              159,953
              
              
              68,792Selling,
                  general and administrative expenses
              
              
              4,190,177
              
              
              3,928,686Interest
                  expense
              
              
              64,813
              
              
              128,621Other
                  income
              
              
              (48,893
              )
              
              (176,459
              )Income
                  before Provision for Income Taxes
              
              
              776,026
              
              
              726,260Provision
                  for Income Taxes
              
              
              318,000
              
              
              319,000NET
                  INCOME
              
              $
              458,026
              
              $
              407,260Net
                  income per share:Basic
              
              $
              .05
              
              $
              .04Diluted
              
              $
              .05
              
              $
              .04Weighted
                  average number of common shares outstandingBasic
              
              
              9,417,701
              
              
              9,261,738Diluted
              
              
              9,717,985
              
              
              9,692,433See
                  accompanying notes to condensed financial statements.




5


AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


Six
                  Months Ended June 30,2008
              
              2007Cash
                  Flows From Operating Activities:Net
                  income
              
              $
              910,383
              
              $
              773,968Adjustments
                  to reconcile net income to net cash provided by operating
                  activities:Depreciation
                  and amortization
              
              
              2,137,026
              
              
              1,954,628Stock
                  compensation charge
              
              
              206,535
              
              
              144,735Decrease
                  (increase) in:Accounts
                  receivable
              
              
              48,575
              
              
              (740,987
              )Inventory
              
              
              (87,387
              )
              
              (196,407
              )Prepaid
                  income taxes
              
              
              143,183
              
              
              -Prepaid
                  expenses and other current assets
              
              
              (19,492
              )
              
              (228,092
              )Increase
                  (decrease) in:Accounts
                  payable, accrued expenses and other
              
              
              (127,099
              )
              
              845,489Deferred
                  revenue
              
              
              107,841
              
              
              73,253Net
                  Cash Provided by Operating Activities
              
              
              3,319,565
              
              
              2,626,587Cash
                  Flows From Investing Activities:Expenditures
                  for fixed assets
              
              
              (1,912,914
              )
              
              (2,014,778
              )Repayment
                  of notes receivable
              
              
              13,309
              
              
              12,661Payment
                  of accounts payable - acquisitions
              
              
              (73,896
              )
              
              (171,532
              )Deposit
                  on equipment and software
              
              
              (321,990
              )
              
              -Purchase
                  of additional goodwill - American Mediconnect Inc.
              
              
              (80,103
              )
              
              (7,542
              )Purchase
                  - other intangibles
              
              
              (45,663
              )
              
              -Decrease
                  in other assets
              
              
              1,683
              
              
              297,708Net
                  Cash Used In Investing Activities
              
              
              (2,419,574
              )
              
              (1,883,483
              )Cash
                  Flows From Financing Activities:Proceeds
                  from long-term debt
              
              
              100,000
              
              
              **-**Principal
                  payments under capital lease obligation
              
              
              (20,641
              )
              
              (19,249
              )Purchase
                  of Treasury Stock
              
              
              (10,242
              )
              
              -Repayment
                  of long-term debt
              
              
              (922,297
              )
              
              (663,295
              )Proceeds
                  upon exercise of stock options and warrants
              
              
              120,000
              
              
              281,932Net
                  Cash Used In Financing Activities
              
              
              (733,180
              )
              
              (400,612
              )See
                  accompanying notes to condensed financial statements.
  6




AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)


(Unaudited)


Six
                  Months Ended June 30,2008
              
              2007Net
                  Increase in Cash
              
              $
              166,811
              
              $
              342,492Cash,
                  Beginning of Period
              
              
              911,525
              
              
              856,248Cash,
                  End of Period
              
              $
              1,078,336
              
              $
              1,198,740SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:CASH
                  PAID DURING THE PERIOD FOR INTEREST
              
              $
              165,068
              
              $
              232,199CASH
                  PAID DURING THE PERIOD FOR INCOME TAXES
              
              $
              400,312
              
              **$**
              408,450SUPPLEMENTAL
                  SCHEDULE OF NONCASH INVESTINGAND
                  FINANCING ACTIVITIES:Accounts
                payable due sellers in connection
                with
                  acquisition
              
              $
              50,141
              
              $
              102,309


See
      accompanying notes to condensed financial statements.




7


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, 2007 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, except
      for a partial reduction of the Relocation and Employment Assistance Program
      (REAP) benefit accrual recorded in December 31, 2007. The net effect of this
      adjustment, which was included in other income, resulted in a reduction in
      net
      income of approximately $40,000
      for the six and three months ended June 30, 2008) necessary to present fairly
      the financial position as of June 30, 2008 and the results of operations for
      the
      six and three months ended June 30, 2008 and 2007, and cash flows for the six
      months ended June 30, 2008 and 2007




The
      accounting policies used in preparing these financial statements are the same
      as
      those described in the December 31, 2007 financial statements.




Certain
      amounts in the 2007 condensed consolidated financial statements have been
      reclassified to conform to the 2008 presentation.




The
      results of operations for the six and three months ended June 30, 2008 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
      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 adoption of SFAS No. 157 did not have a material effect on the financial
      statements.





In
      December 2007, the FASB issued SFAS No. 141(R) (revised 2007), “Business
      Combinations” (“SFAS 141(R)”), which replaces SFAS 141. The statement provides a
      broader definition of the “Acquirer” and establishes principles and requirements
      of how the Acquirer recognizes and measures in its financial statements the
      identifiable assets acquired and liabilities assumed as well as how the Acquirer
      recognizes and measures the goodwill acquired in the business combination.
      SFAS
      141(R) applies prospectively to business combinations for which the acquisition
      date is on or after the beginning of the first annual reporting period beginning
      on or after December 15, 2008.




8





In
      May 2008, the FASB issued SFAS 162
      “*The
      Hierarchy of Generally Accepted Accounting Principles.”* SFAS 162
      identifies the sources of accounting principles and the framework for selecting
      the principles to be used in the preparation of financial statements of
      non-governmental entities that are presented in conformity with generally
      accepted accounting principles (GAAP) in the United States (the GAAP
      hierarchy). The adoption of SFAS 162
      will
      be effective 60 days following the Securities and Exchange Commission
      (SEC) approval of the Public Company Accounting Oversight Board amendments
      to AU Section 411,*The
      Meaning of Present Fairly in Conformity With Generally Accepted Accounting
      Principles.*We
      donot
      expect that the adoption of this statement will have a material impact on our
      financial position or results of operations.




4.
      Accounting for Stock-Based Compensation:




On
      January 1, 2006, the Company adopted SFAS 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. 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.




The
      Company granted 25,000 stock options during the six month period ended June
      30,
      2008. No options were granted during the six month period ended June 30, 2007.




The
      following tables summarize stock option activity for the six months ended June
      30, 2008 and 2007 .


2008Number
                  of
                Options
              
              Weighted
                Average
                Option
                  Price
              
              Weighted
                Average
                Remaining
                Contractual
                Term
                  (years)
              
              Aggregate
                Intrinsic
                ValueBalance
                  at January 1
              
              
              922,273
              
              $
              4.01Granted
              
              
              25,000
              
              
              6.91Exercised
              
              
              (60,000
              )
              
              2.00
 Expired/Forfeited
                
                
                (15,001
                )
                
                3.35Balance
                    at June 30
                
                
                872,272
                
                $
                4.24
                
                
                3.93
                
                $
                1,482,974Vested
                    and exercisable
                
                
                869,772
                
                $
                4.24
                
                
                3.93
                
                $
                1,482,974
  9


2007Number
                    of
                  Options
                
                Weighted
                  Average
                  Option
                    Price
                
                Weighted
                  Average
                  Remaining
                  Contractual
                  Term
                    (years)
                
                Aggregate
                  Intrinsic
                  ValueBalance
                    at January 1
                
                
                1,052,818
                
                $
                4.02Granted
                
                
                -
                
                
                -Exercised
                
                
                (43,425
                )
                
                4.55Expired/Forfeited
                
                
                (7,800
                )
                
                3.37Balance
                    at June 30
                
                
                1,001,593
                
                $
                4.01
                
                
                4.68
                
                $
                3,989,604Vested
                    and exercisable
                
                
                1,001,593
                
                $
                4.01
                
                
                4.68
                
                $
                3,989,604




The
      aggregate intrinsic value of options exercised during the six months ended
      June
      30, 2008 and 2007 was $288,000 and $102,168, respectively. There were 2,500
      nonvested stock options outstanding as of June 30, 2008. There were no nonvested
      stock options outstanding as of June 30, 2007.





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
                      June 30,
              
              Three
                  Months
                Ended
                  June 30,2008
              
              2007Stock
                  options
              
              $
              32,500
              
              $
              -Stock
                  grants - other
              
              
              22,878
              
              
              -Service
                  based awards
              
              
              31,068
              
              
              42,137Performance
                  based awards
              
              
              31,196
              
              
              48,663Tax
                  benefit
              
              
              (48,250
              )
              
              (39,225
              )Stock-based
                  compensation expense, net of tax
              
              $
              69,392
              
              $
              51,575


Six MonthsEnded
                  June 30,
              
              
              Six Months
                Ended
                  June 30,2008
              
              
              2007Stock
                  options
              
              $
              36,250
              
              $
              -Stock
                  grants - other
              
              
              45,756
              
              
              -Service
                  based awards
              
              
              62,137
              
              
              62,137Performance
                  based awards
              
              
              62,392
              
              
              71,163Tax
                  benefit
              
              
              (84,700
              )
              
              (57,500
              )Stock-based
                  compensation expense, net of tax
              
              $
              121,835
              
              $
              75,800




10




Stock
      Grants - Other





The
      outside Board of Directors are granted shares of common stock at the end of
      each
      quarter as compensation for services provided as members of the Board of
      Directors and other committees. These share grants vest immediately.





Service
      Based Awards





In
      January 2006 and May 2007, the Company granted 60,000 and 22,000 restricted
      shares, respectively, to certain executives in respect of services rendered
      but
      at no monetary cost. These shares vest over periods ranging from 3 to 5 years,
      on December 31 of each year. The Company records the compensation expense on
      a
      straight-line basis over the vesting period. Fair value for restricted stock
      awards is based on the Company's closing common stock price on the date of
      grant.  As
      of
      June 30, 2008 and 2007 there were 31,500 and 12,500 shares vested, respectively.
      The aggregate grant date fair value of restricted stock grants was
      $537,100.  As
      of
      June 30, 2008 and 2007, the Company had $270,688 and $405,350, respectively,
      of
      total unrecognized compensation costs related to nonvested restricted stock
      units expected to be recognized over a weighted average period of 2.42
      years.





Performance
      Based Awards





In
      January 2006 and May 2007, respectively, the Company granted share awards for
      90,000 shares (up to 18,000 shares per year through December 31, 2010) and
      46,000 shares (up to 11,500 shares per year through December 31, 2010) to
      certain executives. 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 four fiscal years
      ending December 31. The fair value of the performance shares (aggregate value
      of
      $909,400) 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
      June 30, 2008 and 2007, 29,750 and 18,000 shares were vested, respectively.
      As
      of June 30, 2008 and 2007, there was $538,743 and $705,700, respectively, of
      total unrecognized compensation costs related to nonvested share awards; that
      cost is expected to be recognized over a period of 2.50 years.




11




5.  Earnings
      Per Share:




Earnings
      per share data for the six and three months ended June 30, 2008 and 2007 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:


Income
              
              Shares
              
              Per-Share(Numerator)
              
              (Denominator)
              
              AmountsSix
                  Months June 30, 2008Basic
                  EPS - Income available to common stockholders
              
              $
              910,383
              
              
              9,411,886
              
              $
              .10Effect
                  of dilutive securities - Options and warrants
              
              
              -
              
              
              296,439Diluted
                  EPS - Income available to common stockholders and assumed
                  conversions
              
              $
              910,383
              
              
              9,708,325
              
              $
              .09Three
                  Months June 30, 2008Basic
                  EPS -Income available to common stockholders
              
              $
              458,026
              
              
              9,417,701
              
              $
              .05Effect
                  of dilutive securities - Options and warrants
              
              
              -
              
              
              300,284Diluted
                  EPS - Income available to common stockholders and assumed
                  conversions
              
              $
              458,026
              
              
              9,717,985
              
              $
              .05Six
                  Months June 30, 2007Basic
                  EPS - Income available to common stockholders
              
              $
              773,968
              
              
              9,232,958
              
              $
              .08Effect
                  of dilutive securities - Options and warrants
              
              
              -
              
              
              402,392Diluted
                  EPS - Income available to common stockholders and assumed
                  conversions
              
              $
              773,968
              
              
              9,635,350
              
              $
              .08Three
                  Months Ended June 30, 2007Basic
                  EPS -Income available to common stockholders
              
              $
              407,260
              
              
              9,261,738
              
              $
              .04
 Effect
                    of dilutive securities - Options and warrants
                
                
                -
                
                
                430,695Diluted
                    EPS - Income available to common stockholders and assumed
                    conversions
                
                $
                407,260
                
                
                9,692,433
                
                $
                .04




12




6.
      Goodwill





Changes
      in the carrying amount of goodwill, all of which relate to the Company’s TBCS
      segment, for the six months ended June 30, 2008 and 2007 are as
      follows:


Six
                  Months Ended June 30, 2008Balance
                  as of January 1, 2008
              
              $
              9,766,194Additional
                  Goodwill
              
              
              130,244Balance
                  as of June 30, 2008
              
              $
              9,896,438Six
                  Months Ended June 30, 2007Balance
                  as of January 1, 2007
              
              $
              9,532,961Additional
                  Goodwill
              
              
              109,891Balance
                  as of June 30, 2007
              
              $
              9,642,852




The
      addition to goodwill during the six months ended June 30, 2008 and 2007 relates
      to additional purchase price of American Mediconnect, Inc. based primarily
      on
      the cash receipts from the clinical trials portion of the business.





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.
      The term loan is payable in equal monthly principal installments of $50,000
      over
      five years commencing January 2006. The revolving credit line was set to mature
      in May 2008.




In
      March
      2006 and December 2006, the 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 certain acquisitions. 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.




13




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. In the third quarter
      of 2007, the interest rate was reduced by .25% based on this ratio. 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.




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.




As
      of
      June 30, 2008 and March 31, 2008, the Company was in compliance with its
      financial covenants in its loan agreement. As of June 30, 2007 and March 31,
      2007, the Company was in compliance with its financial covenants in its loan
      agreement.





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, and related extensions, to provide HCSP with these
      services.  During
      the six months ended June 30, 2008 and 2007, the Company’s revenue from this
      contract represented 6 % and
      7%,  respectively,
      of its total revenue. As of June 30, 2008 and December 2007, accounts receivable
      from the contract represented 12% and 10%, respectively, of total accounts
      receivable. Medical devices in service under the contract represented
      approximately 12% of medical devices.




In
      September 2006, Human Resource Administration (“HRA”) issued a bid proposal
      relating to the providing of the PERS services which are the subject of the
      Company’s contract. In October 2007, the Company was informed they were awarded
      the contract with respect to this proposal and executed such contract. The
      contract term is two years, commencing September 21, 2007, with two options
      to
      renew in favor of HRA for two additional two year terms. Under the terms of
      the
      agreement, a downward rate adjustment was made in conjunction with reduced
      equipment requirements from previous years. The estimated impact of this lower
      rate is to reduce this contract’s contribution to gross revenues by
      approximately $270,000 and its contribution to net income by approximately
      $150,000 on an annual basis. For the six months ended June 30, 2008, the
      Company’s revenue from this contract decreased by approximately $130,000 and
      this contract’s contribution to net income decreased by approximately $74,000 as
      a result of this reduced rate.




The
      Company was notified by HRA that one of the bidders has filed an Article 78
      proceeding seeking a reversal of HRA's determination that the Company was the
      lowest qualified bidder. In April
      2008, the Company was notified that the proceeding was completed and it was
      determined that the Company was the lowest qualified bidder.




14


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”).




The
      table
      below provides a reconciliation of segment information to total consolidated
      information for the six and three months ended June 30, 2008 and
      2007:




2008HSMS
            
            TBCS
            
            ConsolidatedSix
                Months Ended June 30, 2008Revenue
            
            $
            9,778,598
            
            $
            9,396,468
            
            $
            19,175,066Income
                before provision for income taxes
            
            
            932,511
            
            
            610,872
            
            
            1,543,383Total
                assets
            
            
            16,385,446
            
            
            18,898,499
            
            
            35,283,945




HSMS
            
            
            TBCS
            
            
            ConsolidatedThree
                Months Ended June 30, 2008Revenue
            
            $
            4,941,643
            
            $
            4,597,678
            
            $
            9,539,321Income
                before provision for income taxes
            
            
            412,250
            
            
            363,776
            
            
            776,026





2007HSMS
            
            TBCS
            
            ConsolidatedSix
                Months Ended June 30, 2007Revenue
            
            $
            8,508,792
            
            $
            9,092,850
            
            $
            17,601,642Income
                before provision for income taxes
            
            
            538,841
            
            
            831,127
            
            
            1,369,968Total
                assets
            
            
            15,447,480
            
            
            18,560,875
            
            
            34,008,355




HSMS
            
            TBCS
            
            ConsolidatedThree
                Months Ended June 30, 2007Revenue
            
            $
            4,409,487
            
            $
            4,489,319
            
            $
            8,898,806Income
                before provision for income taxes
            
            
            360,605
            
            
            365,655
            
            
            726,260




15




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.





**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-K for the year ended December 31,
      2007.




*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 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.*




16




**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, and (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
      hospitals, 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 and 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 with 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. In February of 2007, the Company announced
      it had entered into an exclusive relationship with Walgreen Co. (“Walgreen”) 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 Walgreen stores throughout the United States and Puerto Rico.
      The Company believes the Walgreen relationship will provide a significant
      opportunity for AMAC to increase its PERS market share through Walgreen’s direct
      to consumer distribution channel.





In
      2001,
      the Company entered the emerging telehealth market, a market 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 experienced technical difficulties
      with
      certain products supplied by its primary vendor, Health Hero Networks,
      Inc.  The Company has since reached a financial settlement with respect to
      the technical difficulties associated with the products.





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 .





17


The
      Company has since further expanded its communication infrastructure and capacity
      and now operates a total of nine communication centers in Long Island City
      and
      Port Jefferson, New York, New Jersey, Maryland, Connecticut, Massachusetts,
      Rhode Island, Illinois and New Mexico.





In
      December 2006 the Company acquired the PhoneScreen brand (“PhoneScreen”) through
      the acquisition of AMI. PhoneScreen specializes in the recruitment of patients
      for clinical trials. PhoneScreen’s customers are pharmaceutical companies and
      Contract Research Organizations (“CROs”). CROs 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.





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 six
      and
      three months ended June 30, 2008 and 2007.




Three
                Months Ended June 30,
            
            Six
                Months Ended June 30,In
                thousands (000’s)
            
            2008
            
            %
            
            2007
            
            %
            
            2008
            
            %
            
            2007
            
            %RevenuesHSMS
            
            
            4,942
            
            
            **52**
            **%**
            
            4,410
            
            
            **50**
            **%**
            
            9,779
            
            
            **51**
            **%**
            
            8,509
            
            
            **48**
            **%**TBCS
            
            
            4,597
            
            
            **48**
            **%**
            
            4,489
            
            
            **50**
            **%**
            
            9,396
            
            
            **49**
            **%**
            
            9,093
            
            
            **52**
            **%**Total
                Revenues
            
            
            9,539
            
            
            **100**
            **%**
            
            8,899
            
            
            **100**
            **%**
            
            19,175
            
            
            **100**
            **%**
            
            17,602
            
            
            **100**
            **%**Cost
                of Services and Goods SoldHSMS
            
            
            2,149
            
            
            **43**
            **%**
            
            1,978
            
            
            **45**
            **%**
            
            4,231
            
            
            **43**
            **%**
            
            3,910
            
            
            **46**
            **%**TBCS
            
            
            2,408
            
            
            **52**
            **%**
            
            2,314
            
            
            **52**
            **%**
            
            5,024
            
            
            **53**
            **%**
            
            4,676
            
            
            **51**
            **%**Total
                Cost of Services and Goods Sold
            
            
            4,557
            
            
            **48**
            **%**
            
            4,292
            
            
            **48**
            **%**
            
            9,255
            
            
            **48**
            **%**
            
            8,586
            
            
            **49**
            **%**




18


Gross
                ProfitHSMS
            
            
            2,793
            
            
            **57**
            **%**
            
            2,432
            
            
            **55**
            **%**
            
            5,548
            
            
            **57**
            **%**
            
            4,600
            
            
            **54**
            **%**TBCS
            
            
            2,189
            
            
            **48**
            **%**
            
            2,175
            
            
            **48**
            **%**
            
            4,372
            
            
            **47**
            **%**
            
            4,416
            
            
            **49**
            **%**Total
                Gross Profit
            
            
            4,982
            
            
            **52**
            **%**
            
            4,607
            
            
            **52**
            **%**
            
            9,920
            
            
            **52**
            **%**
            
            9,016
            
            
            **51**
            **%**Selling,
                General & Administrative
            
            
            4,190
            
            
            **44**
            **%**
            
            3,929
            
            
            **44**
            **%**
            
            8,379
            
            
            **44**
            **%**
            
            7,737
            
            
            **44**
            **%**Interest
                Expense
            
            
            65
            
            
            **1**
            **%**
            
            129
            
            
            **1**
            **%**
            
            167
            
            
            **1**
            **%**
            
            255
            
            
            **1**
            **%**Other
                Income
            
            
            (49
            )
            
            **(1**
            **)%**
            
            (177
            )
            
            **(2**
            **)%**
            
            (169
            )
            
            **(1**
            **)%**
            
            (346
            )
            
            **(2**
            **)%**Income
                before Income Taxes
            
            
            776
            
            
            **8**
            **%**
            
            726
            
            
            **8**
            **%**
            
            1,543
            
            
            **8**
            **%**
            
            1,370
            
            
            **8**
            **%**Provision
                for Income Taxes
            
            
            318
            
            
            
            
            
            319
            
            
            
            
            
            633
            
            
            
            
            
            596Net
                Income
            
            
            458
            
            
            
            
            
            407
            
            
            
            
            
            910
            
            
            
            
            
            774




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




**Results
      of Operations:**





The
      Company has two distinct operating business segments, which are HSMS and TBCS.





**Three
      Months Ended June 30, 2008 Compared to Three Months Ended June 30,
      2007**





**Revenues** **:**





**** **HSMS**





Revenues,
      which consist primarily of monthly rental revenues, increased approximately
      $532,000, or 12%, for the three months ended June 30, 2008 as compared to the
      same period in 2007. The increase is primarily attributed to the following
      factors:





·
            In
                2007, the Company entered into an exclusive arrangement with Walgreen
                to market the Company’s PERS product directly
                to the consumer. The Company believes this arrangement will
                positively impact the revenues generated from the HSMS services being
                provided directly to the consumer. In the three months ended June
                30,
                2008, the Company recognized increased revenues of approximately
                $424,000,
                as compared to the same period in 2007, from this arrangement. The
                Company
                anticipates it will continue to see increased growth under this
                arrangement with Walgreen.





·
            The
                Company continues to realize increased revenues from the sale of
                its
                enhanced senior living products to retirement communities. During
                the
                three months ended June 30, 2008, the Company generated approximately
                $209,000 of product sales to retirement communities. In the same
                period of
                2007, the enhanced senior living product was still in development
                and no
                sales were generated. The Company anticipates it will continue to
                see
                growth from these product sales in
                2008.





19


These
          increases were partially offset by a decrease of approximately $65,000
          of
          revenues related to a contract executed with the Human Resource Administration
          (HRA) in 2007 whereby a downward rate adjustment was made.


**** **TBCS**





The
      increase in revenues of approximately $108,000, or 2%, for the three months
      ended June 30, 2008 as compared to the same period in 2007 was primarily due
      to
      the following:





·
            The
                Company experienced minimal revenue growth within its existing telephone
                answering service businesses for the three months ended June 30,
                2008 and
                realized increased revenue of approximately $108,000, as compared
                to the
                same period in 2007. The Company believes that it will see increased
                growth from this segment in the latter part of 2008, primarily through
                its
                patient appointment concierge solutions and its clinical trial recruitment
                call center services.





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





**HSMS**





Costs
      related to services and goods sold increased by approximately $171,000 for
      the
      three months ended June 30, 2008 as compared to the same period in 2007, an
      increase of 9%, primarily due to the following:




·
            The
                Company has incurred additional depreciation expense of approximately
                $55,000 primarily due to the increased purchases of PERS related
                products
                during 2007. The increased purchases are a result of the increase
                in the
                number of subscribers online.





·
            In
                relation to the increase in the sales of its enhanced senior living
                products to retirement communities the Company incurred costs of
                approximately $105,000.




**** **TBCS:**





Costs
      related to services and goods sold increased by approximately $94,000 for the
      three months ended June 30, 2008 as compared to the same period in 2007, an
      increase of 4%, primarily due to the following:





·
            In
                2008, the Company incurred additional labor and telephone service
                costs of
                approximately $138,000 with the majority of these costs relating
                to the
                consolidation of its call center infrastructure. As part of operating
                nine
                call centers, in 2007 the Company engaged in a consolidation strategy
                to
                leverage its call center infrastructure in an effort to maximize
                operational efficiencies. The Company has substantially completed
                the
                consolidation. As part of this initiative, the Company has incurred
                these
                additional costs to ensure a seamless transition. Moving forward,
                the
                Company believes this call center consolidation strategy will produce
                operational and financial
                efficiencies.




20


This
      increase was partially offset by the Company receiving a reduction in the cost
      of pagers during this period as compared to the same period in 2007, resulting
      in approximately $30,000 expense savings.




**Selling,
      General and Administrative Expenses:**





Selling,
      general and administrative expenses increased by approximately $261,000 for
      the
      three months ended June 30, 2008 as compared to the same period in 2007, an
      increase of 7%. The increase is primarily attributable to the
      following:





·
            In
                conjunction with various new programs and agreements, the Company
                has
                hired additional marketing and sales personnel and increased its
                internet
                and television advertising. As a result of this, the Company recorded
                an increase in these expenses of approximately $318,000. In an effort
                to
                grow and expand these programs, the Company anticipates increased
                marketing, advertising and travel expenses throughout
                2008.





There
      were decreases in selling, general and administrative expenses which arose
      out
      of the normal course of business such as both health and business insurance
      expense.




**Interest
      Expense:**





Interest
      expense for the three months ended June 30, 2008 and 2007 was approximately
      $65,000 and $129,000, respectively. The decrease of $64,000 was primarily due
      to
      the Company continuing to pay down its term loan as well as a reduction in
      the
      interest rate.





**Other
      Income:**





Other
      income for the three months ended June 30, 2008 and 2007 was approximately
      $49,000 and $177,000, respectively. Other income for the three months ended
      June
      30, 2008 includes an economic development incentive through the City of Clovis
      in the amount of $100,000 **.** This
      amount was partially offset by an adjustment to the Relocation and Employment
      Assistance Program credit due from New York City. Other income for the three
      months ended June 30, 2007 includes a Relocation and Employment Assistance
      Program (“REAP”) credit in the approximate amount of $118,000. 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. As of 2008, the Company is eligible to only receive a credit
      against New York City income taxes, which is reflected within the Company’s tax
      provision.





21




**Income
      Before Provision for Income Taxes:**





The
      Company’s income before provision for income taxes for the three months ended
      June 30, 2008 was approximately $776,000 as compared to $726,000 for the same
      period in 2007. The increase of $50,000 for the three months ended June 30,
      2008
      primarily resulted from an increase in the Company's service and product
      revenues offset by an increase in the Company’s costs related to services and
      product sales and selling, general and administrative costs.





**Six
      Months Ended June 30, 2008 Compared to Six Months Ended June 30,
      2007**





**Revenues** **:**





**** **HSMS**





Revenues,
      which consist primarily of monthly rental revenues, increased approximately
      $1,270,000, or 15%, for the six months ended June 30, 2008 as compared to the
      same period in 2007. The increase is primarily attributed to the following
      factors:





·
            In
                2007, the Company entered into an exclusive arrangement with Walgreen
                to market the Company’s PERS product directly
                to the consumer.The Company believes this arrangement will
                positively impact the revenues generated from the HSMS services being
                provided directly to the consumer. In the first half of 2008, as
                compared
                to the same period in 2007, the Company recognized increased revenues
                of
                approximately $689,000 from this arrangement. The Company anticipates
                it
                will continue to see increased growth under this arrangement with
                Walgreen.





·
            The
                Company continues to realize increased revenues from the sale of
                its
                enhanced senior living products to retirement communities. During
                the
                first half of 2008, the Company generated approximately $407,000
                of
                product sales to retirement communities. In the first half of 2007,
                the
                enhanced senior living product was still in development and no sales
                were
                generated. The Company anticipates it will continue to see growth
                from
                these product sales in 2008.





·
            In
                late 2006, the Company executed a new agreement with a third party
                Agency
                whereby PERS were placed online. Since inception, the subscriber
                base
                associated with this agreement has grown and accounted for an approximate
                $182,000 increase in revenue during the first half of 2008 as compared
                to
                the same period in the prior year. The Company anticipates that the
                growth
                from this new agreement will continue throughout
                2008.





22


These
        increases were partially offset by a decrease of approximately $130,000 of
        revenues related to a contract executed with the Human Resource Administration
        (HRA) in 2007 whereby a downward rate adjustment was made.





**** **TBCS**





The
      increase in revenues of approximately $303,000, or 3%, for the six months ended
      June 30, 2008 as compared to the same period in 2007 was primarily due to the
      following:





·
            The
                Company continues to experience revenue growth within its existing
                telephone answering service businesses and realized increased revenue
                of
                approximately $329,000, as compared to the same period in 2007. This
                growth is due to the diversification of the Company’s customer base to
                provide business process improvements to the healthcare sector. This
                increase was partially offset by a shortfall of revenue relating
                to the
                project based clinical trials business in the amount of approximately
                $26,000.





Based
      on
      the demand for US based healthcare communication services and on some of the
      work which is currently in process, the Company anticipates that there will
      be
      continued growth in this business segment with further expansion into healthcare
      and hospital organizations and to physicians through its marketing strategies.





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





**HSMS**





Costs
      related to services and goods sold increased by approximately $321,000 for
      the
      six months ended June 30, 2008 as compared to the same period in 2007, an
      increase of 8%, primarily due to the following:





·
            The
                Company has incurred additional depreciation expense of approximately
                $117,000 primarily due to the increased purchases of PERS related
                products
                during 2007. The increased purchases are a result of the increase
                in the
                number of subscribers online.





·
            In
                relation to the increase in the sales of its enhanced senior living
                products to retirement communities the Company incurred costs of
                approximately $160,000.




**** **TBCS:**





Costs
      related to services and goods sold increased by approximately $348,000 for
      the
      six months ended June 30, 2008 as compared to the same period in 2007, an
      increase of 7%, primarily due to the following:





·
            In
                the first half of 2008, the Company incurred additional labor and
                telephone service costs of approximately $373,000 with the majority
                of
                these costs relating to the consolidation of its call center
                infrastructure. As part of operating nine call centers, in 2007 the
                Company engaged in a consolidation strategy to leverage its call
                center
                infrastructure in an effort to maximize operational efficiencies.
                During
                the first half of 2008, the Company substantially completed the
                consolidation. As part of this initiative, the Company was incurred
                these
                additional costs to ensure a seamless transition. Moving forward,
                the
                Company believes this call center consolidation strategy will produce
                operational and financial
                efficiencies.




23


This
      increase was partially offset by the Company receiving a reduction in the cost
      of pagers during the first half of 2008 as compared to the same period in 2007,
      which in an approximate $50,000 expense savings.




**Selling,
      General and Administrative Expenses:**





Selling,
      general and administrative expenses increased by approximately $642,000 for
      the
      six months ended June 30, 2008 as compared to the same period in 2007, an
      increase of 8%. The increase is primarily attributable to the
      following:





·
            In
                conjunction with various new programs and agreements, the Company
                has
                hired additional marketing and sales personnel, increased its internet
                and
                television advertising and incurred additional travel expense. As
                a result
                of this, the Company recorded an increase in these expenses of
                approximately $604,000. In an effort to grow and expand these programs,
                the Company anticipates increased marketing, advertising and travel
                expenses throughout 2008.





·
            The
                Company incurred increased commissions of approximately $82,000 as
                a
                result of two factors. First, in conjunction with the project based
                clinical trials business, the Company utilizes an outside consulting
                firm
                to assist in the generation of customers. As part of this arrangement,
                the
                consultant earned approximately $43,000 more in the first quarter
                of 2008
                as compared to 2007. Secondly, the Company incurred approximately
                $39,000
                of increased commissions relating to the HSMS segment as it continues
                to
                look to expand its reach in the market place.





There
      were other increases in selling, general and administrative expenses which
      arose
      out of the normal course of business such as executive and administrative
      salaries, depreciation and amortization expense which were partially offset
      by
      decreases in insurance expense.





**Interest
      Expense:**





Interest
      expense for the six months ended June 30, 2008 and 2007 was approximately
      $167,000 and $255,000, respectively. The decrease of $88,000 was primarily
      due
      to the Company continuing to pay down its term loan as well as a reduction
      in
      the interest rate.





24


**Other
      Income:**





Other
      income for the six months ended June 30, 2008 and 2007 was approximately
      $169,000 and $346,000, respectively. Other income for the six months ended
      June
      30, 2008 includes a training incentive received from the State of New Mexico
      for
      hiring and training employees within the State and an economic development
      incentive through the City of Clovis. In 2007, the Company opened a network
      operating call center in New Mexico and hired employees to serve as operators
      for the telephone answering service. In 2008, the Company plans on continuing
      its further expansion into this facility by also hiring employees to serve
      as
      emergency response operators for the HSMS segment. These amounts were partially
      offset by an adjustment to the Relocation and Employment Assistance Program
      credit due from New York City. Other income for the six months ended June 30,
      2007 includes a Relocation and Employment Assistance Program (“REAP”) credit in
      the approximate amount of $237,000. 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. As of
      2008, the Company is eligible to only receive a credit against New York City
      income taxes, which is reflected within the Company’s tax
      provision.





**Income
      Before Provision for Income Taxes:**





The
      Company’s income before provision for income taxes for the six months ended June
      30, 2008 was approximately $1,543,000 as compared to $1,370,000 for the same
      period in 2007. The increase of $173,000 for the six months ended June 30,
      2008
      primarily resulted from an increase in the Company's service and product
      revenues offset by an increase in the Company’s costs related to services and
      product sales and selling, general and administrative costs.




**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. The revolving credit line was set to mature in May
      2008.




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 certain acquisitions. 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.




25


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. In the third quarter
      of 2007, the interest rate was reduced by .25% based on this ratio. 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.




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.





As
      of
      June 30, 2008 and 2007, the Company was in compliance with its financial
      covenants in its loan agreement.





The
      following table is a summary of contractual obligations as of June 30,
      2008:




Payments
                Due by PeriodContractual
                Obligations
            
            Total
            
            Less
                than 1 year
            
            1-3
                years
            
            4-5
                years
            
            After
                5 yearsRevolving
                Credit Line
            
            $
            1,400,000
            
            
            
            
            $
            1,400,000Debt
                (a)
            
            $
            3,886,438
            
            $
            1,311,438
            
            $
            2,575,000Capital
                Leases (b)
            
            $
            53,799
            
            $
            43,508
            
            $
            10,291Operating
                Leases (c)
            
            $
            8,201,105
            
            $
            983,367
            
            $
            2,529,854
            
            $
            1,566,546
            
            $
            3,121,338Purchase
                Commitments (d)
            
            $
            1,270,983
            
            $
            1,270,983Interest
                Expense (e)
            
            $
            422,296
            
            $
            230,809
            
            $
            191,487Acquisition
                related Commitment (f)
            
            $
            50,140
            
            $
            50,140Total
                Contractual Obligations
            
            $
            15,284,761
            
            $
            3,890,245
            
            $
            6,706,632
            
            $
            1,566,546
            
            $
            3,121,338





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




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




26


(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 and certain
                telephone answering service managers pursuant to leases.




(d)
            -Purchase
                commitments relate to orders for the Company’s traditional
                PERS.




(e)
            -
                Interest expense relates to interest on the Company’s revolving credit
                line and debt at the Company’s current rate of
                interest.




(f)
            -
                Acquisition related commitment involving payments due based on collections
                of the clinical trial business relating to the American Mediconnect,
                Inc
                acquisition in December 2006.




The
      primary sources of liquidity are cash flows from operating activities.  Net
      cash provided by operating activities was approximately $3.3 million for the
      six
      months ended June 30, 2008, as compared to approximately $2.6 million for the
      same period in 2007. During 2008, the cash provided by operating activities
      was
      primarily from depreciation and amortization of approximately $2.1 million
      and
      net earnings of approximately $0.9 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. Cash provided by operating activities during
      2007
      were the result of depreciation and amortization of approximately $2.0 million,
      increase in liabilities of $0.8 million and net earnings of approximately $0.8
      million. These amounts were partially offset by an increase in trade receivables
      of approximately $0.7 million.




Net
      cash
      used in investing activities for the six months ended June 30, 2008 and 2007
      were approximately $2.4 million and $1.9 million, respectively. The primary
      component of net cash used in investing activities in 2008 was capital
      expenditures of approximately $1.9 million. Capital expenditures for 2008
      primarily related to the continued production and purchase of the traditional
      PERS system and the build-out of the Company’s new call center in New Mexico.
      The primary components of net cash used in investing activities in 2007 were
      capital expenditures of approximately $2.0 million.




Cash
      flows for the six months ended June 30, 2008 used in financing activities were
      approximately $0.7 million compared to $0.4 million for the same period in
      2007.
      The primary component of cash flow used in financing activities in 2008 was
      the
      payment of long-term debt of approximately $0.9 million. This was partially
      offset by the proceeds received from long-term debt of $0.1 million and the
      exercise of stock options of approximately $0.1 million. The primary component
      of cash flow used in financing activities in 2007 was the payment of long-term
      debt of approximately $0.7 million, which was partially offset by the proceeds
      received on the exercise of stock options of approximately $0.3 million. Capital
      expenditures for 2007 primarily related to the continued production and purchase
      of the traditional PERS system.




During
      the next twelve months, the Company anticipates it will make capital
      expenditures of approximately $3.25 - $3.75 million for the production and
      purchase of the traditional PERS systems, and telehealth systems and
      enhancements to its computer operating systems. This amount is subject to
      fluctuations based on customer demand. The Company also anticipates incurring
      approximately $0.1 - $0.3 million of costs relating to research and development
      of its telehealth product and enhanced pill dispenser. 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 $0.2 - $0.4 million over the next
      twelve to eighteen months.




27


As
      of
      June 30, 2008, the Company had approximately $1.1 million in cash and the
      Company’s working capital was approximately $3.9 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 $1,400,000 was outstanding at June
      30,
      2008.




Off-Balance
      Sheet Arrangements:




As
      of
      June 30, 2008, 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:




In
      August
      2007 the Company entered into a settlement agreement whereby a third party
      has
      agreed to reimburse the Company in a net amount of $425,000 for matters related
      to certain product and warranty disputes. This reimbursement is associated
      with
      costs that have primarily been incurred in previous years relating to
      engineering, payroll and related costs and depreciation pertaining to the
      affected assets. The Company anticipates receiving this reimbursement over
      approximately two years. The Company also recorded a write-down o the assets
      affected of approximately $111,000 in the third quarter of 2007.  Through
      June 30, 2008, the Company has been reimbursed $194,978.





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 $122,000, 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 $307,900, subject to a 3% annual
      increase plus reimbursement for real estate taxes.




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, and related extensions, to provide HCSP with these
      services.  During
      the six months ended June 30, 2008 and 2007, the Company’s revenue from this
      contract represented 6 % and
      7%,  respectively,
      of its total revenue. As of June 30, 2008 and December 2007, accounts receivable
      from the contract represented 12% and 10% of accounts receivable, respectively,
      of
      total accounts receivable. Medical devices in service under the contract
      represented approximately 12% of medical devices.




28


In
      September 2006, Human Resource Administration (“HRA”) issued a bid proposal
      relating to the providing of the PERS services which are the subject of the
      Company’s contract. In October 2007, the Company was informed they were awarded
      the contract with respect to this proposal and executed such contract. The
      contract term is two years, commencing September 21, 2007, with two options
      to
      renew in favor of HRA for two additional two year terms. Under the terms of
      the
      agreement, a downward rate adjustment was made in conjunction with reduced
      equipment requirements from previous years. The estimated impact of this lower
      rate is to reduce this contract’s contribution to gross revenues by
      approximately $270,000 and its contribution to net income by approximately
      $150,000 on an annual basis. For the six months ended June 30, 2008, the
      Company’s revenue from this contract decreased by approximately $130,000 and
      this contract’s contribution to net income decreased by approximately $74,000 as
      a result of this reduced rate.




The
      Company was notified that one of the bidders has filed an Article 78 proceeding
      seeking a reversal of HRA's determination that the Company was the lowest
      qualified bidder. In April 2008, the Company was notified that the proceeding
      was completed and it was determined that the Company was the lowest qualified
      bidder.




The
      Company has paid approximately $825,000 in licensing fees and associated
      products in connection with the Company obtaining certain new remote monitoring
      products. While the Company is confident in the successful completion and sale
      of these new remote monitoring products, there has been a delay in the
      manufacturing of these products. Since the Company has capitalized the these
      costs, if the Company does not obtain these products or the Company cannot
      market or sell the products, the Company would be required to write down all
      or
      some of the value of these costs.





**Recent
      Accounting Pronouncements:**




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 adoption of SFAS No. 157 did not have a material effect on our financial
      statements or results of operations.





In
      December 2007, the FASB issued SFAS No. 141(R) (revised 2007), “SFAS 141(R),”
“Business Combinations,” which replaces SFAS 141. The statement provides a
      broader definition of the “Acquirer” and establishes principles and requirements
      of how the Acquirer recognizes and measures in its financial statements the
      identifiable assets acquired and liabilities assumed as well as how the acquirer
      recognizes and measures the goodwill acquired in the business combination.
      SFAS
      141(R) applies prospectively to business combinations for which the acquisition
      date is on or the beginning of the first annual reporting period beginning
      on or
      after December 15, 2008.





29


In
      May 2008, the FASB issued SFAS 162 “ *The
      Hierarchy of Generally Accepted Accounting Principles.”* SFAS
      162
      identifies the sources of accounting principles and the framework for selecting
      the principles to be used in the preparation of financial statements of
      non-governmental entities that are presented in conformity with generally
      accepted accounting principles (GAAP) in the United States (the GAAP
      hierarchy). The adoption of SFAS 162 will be effective 60 days following
      the Securities and Exchange Commission (SEC) approval of the Public Company
      Accounting Oversight Board amendments to AU Section 411, *The
      Meaning of Present Fairly in Conformity With Generally Accepted Accounting
      Principles.* We
      do ** not
      expect that the adoption of this statement will have a material impact on our
      financial position or results of operations.





**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.





**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 $598,000 as of June 30, 2008,
      which is equal to 9.7% 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 $62,000. 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 $62,000.





30


**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 $185,000 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 $145,000
      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 $9,896,438 and
      $9,766,194 at June 30, 2008 and December 31, 2007, respectively. If the Company
      were to experience a significant adverse impact on goodwill, it would negatively
      impact the Company’s net income.





**Accounting
      for Stock-Based Awards**




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. 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.  As
      a
      result of adopting SFAS No. 123R, the Company recorded a pre-tax expense of
      approximately $207,000 and $133,000 for stock-based compensation for the six
      months ended June 30, 2008 and 2007, respectively.




31


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 financial instruments, nor does
      it
      trade financial instruments for trading purposes. 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 June 30, 2008 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.





**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
      1.75% and LIBOR plus 1.50%, 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
      4T.** **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 disclosure 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.





32


There
      were no changes in the Company’s internal control over financial reporting that
      occurred during the quarter ended June 30, 2008 that have materially affected,
      or are reasonably likely to materially affect, the Company’s internal control
      over financial reporting.





**PART
      II - OTHER INFORMATION**





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





The
      Company was notified that one of the bidders for the contract it was awarded
      with HRA, New York Merchants Protective Co., Inc. (“Merchants”) filed an Article
      78 proceeding on or about August 13, 2007. Merchants was moving to annul the
      HRA’s disqualification of Merchants as a bidder to provide PERS and to therefore
      annul the HRA’s contract with the Company. The Article 78 proceeding was filed
      in the Supreme Court of the State of New York, County of New York. In April
      2008, the Company was notified that the proceeding was completed and it was
      determined that the Company was the lowest qualified bidder.





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.





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


No.
              
              
              Description15.1
              
              
              Letter
                  from Margolin, Winer & Evens LLP, the independent accountant of the
                  Company, acknowledging awareness of the use in a registration statement
                  of
                  a report on the unaudited interim financial information in this
                  quarterly
                  report31.1
              
              
              Certification
                  of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of
                  200231.2
              
              
              Certification
                  of CFO Pursuant to Section 302 of the Sarbanes Oxley Act of
                  200232.1
              
              
              Certification
                  of CEO Pursuant to Section 906 of the Sarbanes Oxley Act of
                  200232.2
              
              
              Certification
                  of CFO Pursuant to Section 906 of the Sarbanes Oxley Act of
                  2002





33





**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:
              August 14, 2008
            By:
            /s/
              Jack
              RhianName:
              Jack RhianTitle:
                Chief Executive Officer and
                President




By:
            /s/
              Richard RalloName:
                Richard RalloTitle:
                Chief Financial Officer




34