**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


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




**FORM
      10-Q**




**QUARTERLY
      REPORT UNDER SECTION 13 OR 15 (d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**




For
      Quarter Ended September 30, 2006




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
            
            (I.R.S.
                Employerincorporation
                or
                organization)
            
            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)




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




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





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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 on the Exchange Act)  Yes
o  
No
x





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date: 9,101,724 shares of $.01 par value
      common stock as of November 8, 2006.









AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


INDEX




PAGEPart
                I Financial InformationReport
                of Independent Registered Public Accounting Firm
            
            1Condensed
                Consolidated Balance Sheets for September 30, 2006 and December 31,
                2005
            
            2Condensed
                Consolidated Statements of Income for the Nine Months Ended September
                30,
                2006 and 2005
            
            3Condensed
                Consolidated Statements of Income for the Three Months Ended September
                30,
                2006 and 2005
            
            4Condensed
                Consolidated Statements of Cash Flows for the Nine Months Ended September
                30, 2006 and 2005
            
            5Notes
                to Condensed Consolidated Financial Statements
            
            7Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            18Quantitative
                and Qualitative Disclosures About Market Risks
            
            39Controls
                and Procedures
            
            39Part
                II Other Information
            
            40





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 September 30, 2006
      and the related condensed consolidated statements of income for the nine-month
      and three-month periods ended September 30, 2006 and 2005 and cash flows for
      the
      nine-months ended September 30, 2006 and 2005. 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, 2005, 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
      17, 2006 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, 2005 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





November
      8, 2006


1


**PART
      I - FINANCIAL INFORMATION**




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




AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED BALANCE SHEETS




ASSETS




September
                30, 2006
            
            Dec. 31,
                2005(Unaudited)CURRENT
                ASSETSCash
            
            $
            1,615,157
            
            $
            2,638,984Accounts
                receivable(net
                of allowance for doubtful accounts of $546,000****and
                $451,000)
            
            
            5,175,729
            
            
            4,354,744Note
                receivable
            
            
            25,324
            
            
            24,394Inventory
            
            
            328,210
            
            
            332,323Prepaid
                expenses and other current assets
            
            
            976,897
            
            
            684,336Deferred
                income taxes
            
            
            360,000
            
            
            309,000Total
                Current Assets
            
            
            8,481,317
            
            
            8,343,781FIXED
                ASSETS(Net
                of accumulated depreciation and amortization)
            
            
            9,184,952
            
            
            7,810,658OTHER
                ASSETSLong-term
                portion of note receivable
            
            
            54,602
            
            
            73,713Intangible
                assets(net
                of accumulated amortization of $2,958,810****and
                $2,229,045)
            
            
            3,922,741
            
            
            3,474,252Goodwill
                (net of accumulated amortization of $58,868)
            
            
            8,374,769
            
            
            6,086,428Other
                assets
            
            
            1,160,535
            
            
            806,50413,512,647
            
            
            10,440,897TOTAL
                ASSETS
            
            $
            31,178,916
            
            $
            26,595,336LIABILITIES
                AND SHAREHOLDERS' EQUITYCURRENT
                LIABILITIES:Current
                portion of notes payable
            
            $
            1,114,248
            
            $
            616,811Accounts
                payable
            
            
            1,438,835
            
            
            1,120,269Accounts
                payable - acquisitions
            
            
            1,350,295
            
            
            1,318,103Accrued
                expenses and taxes payable
            
            
            1,481,480
            
            
            1,305,091Current
                portion of capital lease obligations
            
            
            38,505
            
            
            24,082Deferred
                revenue
            
            
            249,757
            
            
            111,428Total
                Current Liabilities
            
            
            5,673,120
            
            
            4,495,784DEFERRED
                INCOME TAX LIABILITY
            
            
            1,022,000
            
            
            971,000LONG-TERM
                PORTION OF NOTES PAYABLE
            
            
            3,719,319
            
            
            2,429,396LONG-TERM
                PORTION OF CAPITAL LEASE OBLIGATIONS
            
            
            84,494
            
            
            -ACCRUED
                RENTAL OBLIGATION
            
            
            382,169
            
            
            190,230OTHER
                LIABILITIES
            
            
            98,680
            
            
            125,000TOTAL
                LIABILITIES
            
            
            10,979,782
            
            
            8,211,410COMMITMENTS
                AND CONTINGENT LIABILITIES
            
            
            -
            
            
            -SHAREHOLDERS’
                EQUITYPreferred
                stock, $.01 par value - authorized, 1,000,000 shares; none issued
                and
                outstandingCommon
                stock, $.01 par value - authorized 20,000,000 shares; issued 9,069,883
                shares in 2006 and 8,765,415 shares in 2005
            
            
            90,699
            
            
            87,654Additional
                paid-in capital
            
            
            13,905,350
            
            
            12,897,151Retained
                earnings
            
            
            6,309,117
            
            
            5,505,15320,305,166
            
            
            18,489,958Less
                treasury stock, at cost (43,910 shares)
            
            
            (106,032
            )
            
            (106,032
            )Total
                Shareholders’ Equity
            
            
            20,199,134
            
            
            18,383,926TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            31,178,916
            
            $
            26,595,336




See
      accompanying notes to condensed financial statements.


2




AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME


(Unaudited)




Nine
                Months Ended September 30,2006
            
            2005Revenues:Services
            
            $
            22,465,242
            
            $
            15,947,129Product
                sales
            
            
            265,946
            
            
            214,01722,731,188
            
            
            16,161,146Costs
                and Expenses (Income):Costs
                related to services
            
            
            10,589,344
            
            
            7,626,323Costs
                of products sold
            
            
            140,528
            
            
            117,835Selling,
                general and administrative expenses
            
            
            10,648,000
            
            
            7,303,891Interest
                expense
            
            
            262,788
            
            
            32,695Other
                income
            
            
            (393,436
            )
            
            (275,779
            )Income
                before Provision for Income Taxes
            
            
            1,483,964
            
            
            1,356,181Provision
                for Income Taxes
            
            
            680,000
            
            
            651,000NET
                INCOME
            
            $
            803,964
            
            $
            705,181Net
                income per share:Basic
            
            $
            .09
            
            $
            .08Diluted
            
            $
            .09
            
            $
            .08Weighted
                average number of common shares outstandingBasic
            
            
            8,896,133
            
            
            8,370,315Diluted
            
            
            9,351,160
            
            
            9,067,566




See
      accompanying notes to condensed financial statements.


3


AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME


(Unaudited)




Three
                Months Ended
              September
                30,2006
            
            2005Revenues:Services
            
            $
            7,647,105
            
            $
            5,437,236Product
                sales
            
            
            137,555
            
            
            58,0167,784,660
            
            
            5,495,252Costs
                and Expenses (Income):Costs
                related to services
            
            
            3,596,125
            
            
            2,751,447Costs
                of products sold
            
            
            70,000
            
            
            33,152Selling,
                general and administrative expenses
            
            
            3,656,213
            
            
            2,414,347Interest
                expense
            
            
            87,040
            
            
            9,607Other
                income
            
            
            (136,139
            )
            
            (104,202
            )Income
                before Provision for Income Taxes
            
            
            511,421
            
            
            390,901Provision
                for Income Taxes
            
            
            232,000
            
            
            188,000NET
                INCOME
            
            $
            279,421
            
            $
            202,901Net
                income per share:Basic
            
            $
            .03
            
            $
            .02Diluted
            
            $
            .03
            
            $
            .02Weighted
                average number of common shares outstandingBasic
            
            
            8,989,042
            
            
            8,616,542Diluted
            
            
            9,352,802
            
            
            9,277,566




See
      accompanying notes to condensed financial statements.


4





AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


Nine
                    Months Ended September 302006
                
                2005Cash
                    Flows From Operating Activities:Net
                    income
                
                $
                803,964
                
                $
                705,181Adjustments
                    to reconcile net income to net cash provided by operatingactivities:Provision
                    for deferred income taxes
                
                
                -
                
                
                27,000Depreciation
                    and amortization
                
                
                2,524,473
                
                
                2,193,377Credit
                    for valuation of put warrant
                
                
                -
                
                
                (10,000
                )Stock
                    compensation charge
                
                
                189,911
                
                
                -Decrease
                    (increase) in:Accounts
                    receivable
                
                
                (670,188
                )
                
                (725,601
                )Inventory
                
                
                4,113
                
                
                203,242Prepaid
                    expenses and other current assets
                
                
                (292,561
                )
                
                (312,406
                )Increase
                    (decrease) in:Accounts
                    payable, accrued expenses and other
                
                
                612,376
                
                
                43,602Deferred
                    revenue
                
                
                138,329
                
                
                97,248Net
                    Cash Provided by Operating Activities
                
                
                3,310,417
                
                
                2,221,643Cash
                    Flows From Investing Activities:Expenditures
                    for fixed assets
                
                
                (2,902,529
                )
                
                (1,849,055
                )Repayment
                    of notes receivable
                
                
                18,181
                
                
                17,595Payment
                    of accounts payable - acquisitions
                
                
                (310,872
                )
                
                -Purchase
                    of MD OnCall
                
                
                (2,879,692
                )
                
                -Purchase
                    - other
                
                
                (89,152
                )
                
                -Purchase
                    of LIMC
                
                
                -
                
                
                (443,643
                )Deposit
                    on equipment and software
                
                
                (95,826
                )
                
                (232,625
                )Increase
                    in other assets
                
                
                (264,679
                )
                
                (36,666
                )Payment
                    for account acquisitions andlicensing
                    agreement
                
                
                (31,595
                )
                
                (238,262
                )Net
                    Cash (Used In) Investing Activities
                
                
                (6,556,164
                )
                
                (2,782,656
                )Cash
                    Flows From Financing Activities:Principal
                    payments under capital lease obligations
                
                
                (43,708
                )
                
                (70,803
                )Proceeds
                    from notes payable
                
                
                2,500,000
                
                
                **-**Repayment
                    of notes payable
                
                
                (712,640
                )
                
                (244,940
                )Proceeds
                    upon exercise of stock options and warrants
                
                
                478,268
                
                
                1,762,177Net
                    Cash Provided by Financing Activities
                
                
                2,221,920
                
                
                1,446,434




See
      accompanying notes to condensed financial statements.


5


AMERICAN
      MEDICAL ALERT CORP. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)


(Unaudited)





Nine
                Months Ended September 30,2006
            
            2005Net
                (Decrease) Increase in Cash
            
            $
            (1,023,827
            )
            $
            885,421Cash,
                Beginning of Period
            
            
            2,638,984
            
            
            3,186,852Cash,
                End of Period
            
            $
            1,615,157
            
            $
            4,072,273SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:CASH
                PAID DURING THE PERIOD FOR INTEREST
            
            $
            245,274
            
            $
            35,468CASH
                PAID DURING THE PERIOD FOR INCOME TAXES
            
            **$**
            1,243,900
            
            $
            211,521SUPPLEMENTAL
                SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:Common
                Stock issued in connection with acquisition
            
            $
            343,064
            
            
            -Accounts
                payable due seller in connection with acquisition
            
            
            343,064
            
            
            -





See
      accompanying notes to condensed financial statements.


6





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, 2005 included in the Company’s
      Annual Report on Form 10-KSB.




2.  Results
      of Operations:




In
      the
      opinion of management, the accompanying unaudited condensed financial statements
      contain all adjustments (consisting only of normal recurring accruals) necessary
      to present fairly the financial position as of September 30, 2006 and the
      results of operations for the nine and three months ended September 30, 2006
      and
      2005, and cash flows for the nine months ended September 30, 2006 and
      2005.




Except
      as
      described in Notes 3 and 5, the accounting policies used in preparing these
      financial statements are the same as those described in the December 31, 2005
      financial statements.




The
      results of operations for the nine and three months ended September 30, 2006
      are
      not necessarily indicative of the results to be expected for any other interim
      period or for the full year.




3.
      New
      Pronouncements:




In
      June
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,”
a replacement of APB No. 20 and SFAS No. 3. SFAS No. 154 applies to all
      voluntary changes in accounting principle and changes the requirements for
      accounting for and reporting of a change in accounting principle to be applied
      retrospectively with all prior period financial statements presented on the
      new
      accounting principle. SFAS No. 154 is effective for accounting changes and
      correction of errors made in fiscal years beginning after December 15, 2005.
      The
      Company adopted SFAS No. 154 and the adoption of this statement did not have
      a
      material impact on the consolidated results of operations or financial position.




In
      November 2004, the FASB issued FASB Statement No. 151, “Inventory ** Costs
      -
      An Amendment of ARB No. 43,” Chapter 4 (“SFAS 151”), which is the result of its
      effort to converge U.S. accounting standards for inventories with International
      Accounting Standards. SFAS 151 requires idle facility expenses, freight,
      handling costs, and wasted material (spoilage) costs to be recognized as
      current-period charges and not included in overhead. It also requires that
      allocation of fixed production overhead cost to inventory be based on normal
      capacity of the production facilities. SFAS 151 is effective for inventory
      costs
      incurred during fiscal years beginning after June 15, 2005. The adoption of
      SFAS
      151 did not have a material impact on the consolidated results of operations
      or
      financial position.


7




On
      January 1, 2006, the Company adopted FASB Statement No. 123 (revised 2004),
      Share Based Payment (see Note 5).





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





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





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




4.
      Fixed
      Assets:




The
      Company’s PERS equipment is subject to approval from the Federal Communication
      Commission (“FCC”). In November 2004, the Company received an inquiry from the
      Federal Communications Commission. In response to that inquiry the Company
      has
      determined that certain versions of its PERS equipment emit levels of radio
      frequency energy that exceed applicable standards designed to reduce the
      possibility of interference with radio communications.




In
      July
      2006, the Company reached an agreement with the FCC on an action plan and
      timeframe to complete an upgrade program for the affected PERS equipment and
      agreed upon a voluntary payment of $75,000 to be paid in regards to this matter.
      At December 31, 2005, the Company had accrued such amount. As part of this
      agreement, the FCC will allow the upgrade program to run substantially parallel
      with the normal recycling of the Company’s PERS equipment and, as such, the only
      additional cost to be incurred will be the incremental cost to bring the units
      into compliance with the FCC regulations.


8


Through
      September 30, 2006, the Company has recorded expenses of approximately
      $1,055,000 in connection with this matter, of which approximately $145,000,
      primarily relating to costs associated with the replacement of equipment, legal
      fees and other professional fees, was recorded during the nine months ended
      September 30, 2006 and $130,000 for the nine months ended September 30, 2005.




5.
      Accounting for Stock-Based Compensation:




Prior
      to
      2006, the Company followed Accounting Principles Board Opinion (“APB”)
      No. 25, “Accounting for Stock Issued to Employees, *”* and
      related Interpretations in accounting for its stock-based compensation plans.
      Under APB No. 25, no compensation expense was recognized for stock options
      when the exercise price of the options equaled the market price of the stock
      at
      the date of grant. Compensation expense was recognized on a straight-line basis
      for stock awards based on the vesting period and the market price at the date
      of
      the award.




On
      January 1, 2006, the Company adopted FASB Statement No. 123 (revised
      2004), “Share-Based Payment” (“Statement No. 123(R)”), which requires the
      measurement and recognition of compensation expense for all share-based payments
      to employees, including grants of stock and employee stock options, based on
      estimated fair values. Statement No. 123(R) supersedes the Company’s
      previous accounting under APB No. 25 for periods beginning in 2006. The
      Company adopted Statement No. 123(R) using the modified prospective
      transition method. The Company’s condensed consolidated financial statements as
      of and for the nine and three months ended September 30, 2006, reflects the
      impact of Statement No. 123(R). In accordance with the modified prospective
      transition method, the Company’s condensed consolidated financial statements for
      prior periods have not been restated to reflect the impact of Statement
      No. 123(R).




Stock-based
      compensation expense recognized during the period is based on the value of
      the
      portion of share-based payment awards that is ultimately expected to vest during
      the period. Stock-based compensation expense recognized in the Company's
      condensed consolidated statements of income for the nine and three months ended
      September 30, 2006 includes compensation expense for share-based payment awards
      granted prior to, but not yet vested as of December 31, 2005 based on the
      grant date fair value estimated in accordance with the pro forma disclosure
      provisions of Statement No. 123 and compensation expense for the
      share-based payment awards granted subsequent to December 31, 2005 based on
      the grant date fair value estimated in accordance with the provisions of
      Statement No. 123(R).




The
      following table summarizes stock option activity for the nine months ended
      September, 30, 2006 and 2005 .




September
      30, 2006




Number
                  of
                Options
            
            Weighted
                  Average
                  Option
                    Price
            
            Weighted
                      Average
                      Remaining
                      Contractual
                      Term
                        (years)
            
            Aggregate
                    Intrinsic
                    ValueBalance
                at January 1
            
            
            1,287,283
            
            
            3.56Granted
            
            
            50,000
            
            
            5.14Exercised
            
            
            199,358
            
            
            1.87Expired/Forfeited
            
            
            38,464
            
            
            4.24Balance
                at September 30
            
            
            1,099,461
            
            
            3.92
            
            
            5.22
            
            $
            1,771,872Vested
                and exercisable
            
            
            1,099,461
            
            
            3.92
            
            
            5.22
            
            $
            1,771,872




9




September
      30, 2005





Number
                  of
                Options
            
            Weighted
                  Average
                  Option
                    Price
            
            Weighted
                      Average
                      Remaining
                      Contractual
                      Term
                        (years)
            
            Aggregate
                    Intrinsic
                    ValueBalance
                at January 1
            
            
            1,440,845
            
            
            2.87Granted
            
            
            48,658
            
            
            6.44Exercised
            
            
            383,509
            
            
            2.80Expired/Forfeited
            
            
            21,187
            
            
            2.89Balance
                at September 30
            
            
            1,084,807
            
            
            3.05
            
            
            5.72
            
            $
            4,299,284Vested
                and exercisable
            
            
            1,077,307
            
            
            3.04
            
            
            5.70
            
            $
            4,280,859





The
      aggregate intrinsic value of options exercised during the nine months ended
      September 30, 2006 and 2005 was $782,580 and $1,354,005, respectively. At
      January 1, 2006 there were 7,500 nonvested stock options outstanding. During
      the
      nine months ended September 30, 2006, 2,500 options vested and 5,000 options
      were forfeited. There are no nonvested stock options outstanding as of September
      30, 2006.





The
      following table summarizes stock-based compensation expense, which is included
      in selling, general and administrative expense, related to all share-based
      payments recognized in the condensed consolidated statements of
      income.


10




Nine Months
                Ended Sept 30,
            
            Three
                Months
              Ended
                Sept 30,2006
            
            2006Stock
                options
            
            $
            48,911
            
            
            45,261Service
                based awards
            
            
            60,000
            
            
            20,000Performance
                based awards
            
            
            81,000
            
            
            39,650Tax
                benefit
            
            
            (87,360
            )
            
            (48,260
            )Stock-based
                compensation expense, net of tax
            
            $
            102,551
            
            
            56,651





Service
      Based Awards





In
      2006,
      the Company granted 60,000 restricted shares to certain executives at no cost.
      These shares vest ratably over periods ranging from 3 to 5 years, on December
      31
      of each year. As of September 30, 2006, no shares were vested. Fair value for
      restricted stock awards is based on the Company's closing common stock price
      on
      the date of grant. The grant date fair value of restricted stock granted during
      the nine months ended September 30, 2006 was $360,000. As of September 30,
      2006,
      the Company had $300,000 of total unrecognized compensation costs related to
      unvested restricted stock units expected to be recognized over a weighted
      average period of 3.95 years.





Performance
      Based Awards





In
      2006,
      the Company granted share awards for 90,000 shares (up to 18,000 shares per
      year
      for the next five years) to an executive. Vesting of such shares is contingent
      upon the Company achieving certain specified consolidated gross revenue and
      Earnings before Interest and Taxes (“EBIT”) objectives in each of the next five
      fiscal years ending December 31. The fair value of the performance shares
      ($540,000) 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 September 30, 2006, no shares were vested. As of September
      30,
      2006, there was $459,000 of total unrecognized compensation costs related to
      unvested share awards; that cost is expected to be recognized over a period
      of
      4.25 years.




The
      following table illustrates pro forma net income and pro forma earnings per
      share as if the Company had applied the fair value recognition provision of
      Financial Accounting Standards Board (“FASB”) Statement No. 123, *Accounting
      for Stock-Based Compensation* (“Statement
      No. 123”), to stock-based employee compensation in 2005.




Nine
                Months Ended September 30,
            
            Three
                Months Ended September 30,2005
            
            2005Net
                income, as reported
            
            $
            705,181
            
            $
            202,901Deduct:
                Total stock-basedemployee
                compensationexpense
                determined underfair
                value based method, net of tax
            
            
            (42,048
            )
            
            (21,270
            )Pro
                forma net income
            
            $
            663,133
            
            $
            181,631Earnings
                per share:Basic
                - as reported
            
            $
            0.08
            
            $
            0.02Basic
                - pro forma
            
            $
            0.08
            
            $
            0.02Diluted
                - as reported
            
            $
            0.08
            
            $
            0.02Diluted
                - pro forma
            
            $
            0.07
            
            $
            0.02




11




6.  Earnings
      Per Share:




Earnings
      per share data for the nine and three months ended September 30, 2006 and 2005
      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:





Nine
                Months September 30, 2006
            
            Income
                (Numerator)
            
            Shares
                (Denominator)
            
            Per-Share
                AmountsBasic
                EPS - Income available to common stockholders
            
            $
            803,964
            
            
            8,896,133
            
            $
            .09Effect
                of dilutive securities -Options and warrants
            
            
            -
            
            
            455,027Diluted
                EPS - Income available to common stockholders and assumed
                conversions
            
            $
            803,964
            
            
            9,351,160
            
            $
            .09Three
                Months September 30, 2006Basic
                EPS -Income available to common stockholders
            
            $
            279,421
            
            
            8,989,042
            
            $
            .03Effect
                of dilutive securities -Options and warrants
            
            
            -
            
            
            363,760Diluted
                EPS - Income available to common stockholders and assumed
                conversions
            
            $
            279,421
            
            
            9,352,802
            
            $
            .03Nine
                Months September 30, 2005Basic
                EPS - Income available to common stockholders
            
            $
            705,181
            
            
            8,370,315
            
            $
            .08Effect
                of dilutive securities -Options and warrants
            
            
            -
            
            
            697,251Diluted
                EPS - Income available to common stockholders and assumed
                conversions
            
            $
            705,181
            
            
            9,067,566
            
            $
            .08Three
                Months Ended September 30, 2005Basic
                EPS -Income available to common stockholders
            
            $
            202,901
            
            
            8,616,542
            
            $
            .02Effect
                of dilutive securities - Options and warrants
            
            
            -
            
            
            661,024Diluted
                EPS - Income available to common stockholders and assumed
                conversions
            
            $
            202,901
            
            
            9,277,566
            
            $
            .02




12




7.  Acquisitions:





On
      March
      10, 2006, the Company acquired substantially all of the assets of MD
      OnCall, a Rhode Island based company and Capitol Medical
      Bureau, **** a
      Maryland based company (collectively “MD OnCall”) ,
      providers of telephone after-hour answering services and stand-alone voice
      mail
      services. The purchase price was $3,382,443 and consisted of an initial cash
      payment of $2,696,315, common stock valued at $343,064 and future cash payments
      of $343,064 to be paid to the Seller within twelve months from the date of
      the
      executed agreement. The Company also recorded finder and professional fees
      of
      approximately $183,000. A potential exists for the payment of additional
      purchase price consideration if certain thresholds concerning revenues and
      earnings of the acquired business are met as of March 31, 2007, 2008 and 2009.
      The results of operations of MD OnCall are included in the Telephone Based
      Communications Services (“TBCS”) segment as of the date of acquisition.





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





Accounts
                receivable
            
            $
            138,798Fixed
                assets
            
            
            260,000Non-compete
                agreement
            
            
            50,000Customer
                list
            
            
            1,050,000Goodwill
            
            
            2,257,848Capital
                lease obligations
            
            
            (142,625
            )Customer
                deposits
            
            
            (48,200
            )Cost
                to acquire MD OnCall
            
            $
            3,565,821




On
      December 9, 2005, the Company acquired substantially all of the assets of Answer
      Connecticut, Inc. (“ACT”), a Connecticut based provider of telephone after-hour
      answering services and stand-alone voice mail services. The purchase price
      was
      $3,088,923 and consisted of an initial cash payment of $2,316,692, common stock
      valued at $154,446 and $617,785 to be paid within twelve months from the date
      of
      the executed agreement. The Company paid $154,446 towards the balance due in
      January 2006. The Company also recorded professional fees of approximately
      $62,000. A potential exists for the payment of additional purchase price
      consideration if certain thresholds concerning revenues and earnings of the
      acquired business are met as of December 31, 2006, 2007 and 2008. The results
      of
      operations of ACT are included in the TBCS segment as of the date of
      acquisition.




13




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





Accounts
                receivable
            
            $
            95,182Fixed
                assets
            
            
            150,000Non-compete
                agreement
            
            
            50,000Customer
                list
            
            
            1,000,000Goodwill
            
            
            1,855,871Cost
                to acquire ACT
            
            $
            3,151,053





On
      October 3, 2005, the Company acquired substantially all of the assets of North
      Shore Answering Service (“NSAS”), a Long Island, New York based provider of
      telephone after-hour answering services. The purchase price was $2,719,461
      and
      consisted of an initial cash payment of $2,175,569 and $543,892 to be paid
      twelve months from the date of the executed agreement. The Company also recorded
      professional fees of approximately $82,000. The results of operations of NSAS
      are included in the TBCS segment as of the date of acquisition.





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





Accounts
                receivable
            
            $
            24,760Fixed
                assets
            
            
            60,000Non-compete
                agreement
            
            
            50,000Customer
                list
            
            
            1,200,000Goodwill
            
            
            1,466,489Cost
                to acquire NSAS
            
            $
            2,801,249





On
      May
      17, 2005, the Company acquired substantially all of the assets of Long Island
      Message Center, Inc., a Long Island, New York based provider of telephone
      after-hour answering services. The purchase price was $397,712 and consisted
      of
      an initial cash payment of $318,170 and $79,542 which was paid in February
      2006.
      The Company also recorded finder and professional fees of approximately $46,000.
      The results of operations of Long Island Message Center, Inc. are included
      in
      the TBCS segment as of the date of acquisition.





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





Accounts
                receivable
            
            $
            12,948Non-compete
                agreement
            
            
            25,000Customer
                list
            
            
            175,000Goodwill
            
            
            230,695Cost
                to acquire Long Island Message Center, Inc.
            
            $
            443,643




14




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





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





Unaudited
      pro forma results of operations for the nine and three months ended September
      30, 2006 and 2005 as if Long Island Message Center, Inc., North Shore Answering
      Service, Answer Connecticut, Inc., and MD OnCall had been acquired as of the
      beginning of the earliest period presented follow. The pro forma results include
      estimates which management believes are reasonable.





Nine
                Months Ended September 30,
            
            Three
                Months Ended September30,2006
            
            2005
            
            2006
            
            2005Revenue
            
            $
            23,254,000
            
            $
            21,662,000
            
            $
            7,785,000
            
            $
            7,269,000Net
                income
            
            
            823,000
            
            
            935,000
            
            
            279,000
            
            
            281,000Net
                income per shareBasic
            
            $
            .09
            
            $
            .11
            
            $
            .03
            
            $
            .03Diluted
            
            $
            .09
            
            $
            .10
            
            $
            .03
            
            $
            .03





The
      unaudited pro forma results of operations for the nine and three months ended
      September 30, 2006 and 2005 do not purport to represent what the Company’s
      results of operations would actually have been had the acquisitions been
      completed at the beginning of the periods presented, or to predict the Company’s
      results of operations for any future period.





8.  Notes
      Payable:





In
      March
      2006, the Company’s credit facility was amended whereby an additional $2,500,000
      was obtained in the form of a term loan. The proceeds were used to finance
      the
      acquisition of MD
      OnCall .
      Under
      the amended credit facility, this portion of the term loan is payable in equal
      monthly principal payments of $41,667. In addition, certain of the covenants
      were amended.





As
      of
      June 30, 2006 and March 31, 2006, the Company was not in compliance with one
      of
      the financial covenants in its loan agreement. The lender waived the
      non-compliance and entered into an amendment to the credit facility which
      management believes will enable the Company to meet the covenant in the future.
      As of September 30, 2006, the Company was in compliance with its financial
      covenants in its loan agreement.





15




9.  Major
      Customers:




Since
      1983, the Company has provided Personal Emergency Response Systems (“PERS”)
      services to the City of New York’s Human Resources Administration Home Care
      Service Program ("HCSP"). The Company has been operating since 1993 with a
      contract to provide HCSP with these services, which has been extended for 1-2
      year periods since 1993, the last such extension is through December 31, 2006.
      During the nine months ended September 30, 2006 and 2005, the Company’s revenue
      from this contract represented 8 % and
      13%,  respectively,
      of its total revenue.




In
      November 2002, a new Request for Proposals (“RFP”) was issued by HRA to provide
      emergency response services to HCSP from April 1, 2004 through March 31, 2007.
      After receiving notification from the City of New York’s Human Resources
      Administration (“HRA”) that the Company was selected as the approved vendor
      under the RFP to provide PERS services to the Home Care Services Program to
      Medicaid Eligible individuals, the Company subsequently received notification
      from HRA that it canceled the RFP “in the best interest of the City of New
      York.” The Company was advised that the cancellation of the RFP was not related
      to any performance issue or negative reflection upon the Company. Concurrently,
      the Company was advised of HRA’s decision to issue a new contract extension to
      the Company through June 2005 under the terms of the contract that the Company
      has been operating under since 1993. The Company has since received this
      contract extension and also has received subsequent extensions which go through
      December 31, 2006. In accordance with the original contract and consistent
      with
      previous extensions, HRA has the right to terminate the contract without cause
      or “in the best interest of the City of New York” upon thirty days written
      notice. HRA has also advised the Company that HRA plans to issue a new RFP
      with
      respect to PERS services in the future. In September 2006, HRA issued a bid
      proposal relating to the providing of PERS services. In October 2006, the
      Company received notice that the bid process was temporarily postponed. As
      of
      November 8, 2006, the bid process is still under postponement.




The
      Company cannot determine (i) when and if the bid process will be continued,
      (ii)
      when and if a new RFP will be published, (iii) what the terms of the bid or
      new
      RFP will be, (iv) how long the current contract terms will remain in effect
      or
      (v) whether AMAC will be the successful bidder on the bid process or new RFP
      (and if so, under what terms and conditions). While the Company has reduced
      its
      dependence on revenue from HCSP, if the Company does not maintain this contract,
      a significant amount of the Company’s revenue could be lost, albeit over a
      protracted period, which could have a material adverse effect on operating
      results and cash flows. The Company continues to implement a variety of
      operational efficiencies, as well as continuing to enhance and diversify its
      other revenue streams, to offset the impact, if any, in the event of this
      occurrence.




As
      of
      September 30, 2006 and December 31, 2005, accounts receivable from the contract
      represented 12% and 11%, respectively, of accounts receivable. Medical devices
      in service under the contract represented approximately 15% and 17%,
      respectively, of the total medical devices used for primary monitoring.




16




10.
      Segment Reporting:





The
      Company has three reportable segments, (i) Health and Safety Monitoring Systems
      (“HSMS”), (ii) Telephone Based Communication Services (“TBCS”) and (iii) Safe
      Com.




The
      table
      below provides a reconciliation of segment information to total consolidated
      information for the nine and three months ended September 30, 2006 and
      2005:




2006





Nine
                Months Ended September 30, 2006
            
            HSMS
            
            TBCS
            
            Safe
                Com
            
            ConsolidatedRevenue
            
            $
            11,566,898
            
            $
            10,761,383
            
            $
            402,907
            
            $
            22,731,188Income
                before provision for income taxes
            
            
            229,788
            
            
            1,174,390
            
            
            79,786
            
            
            1,483,964Total
                assets
            
            
            13,558,684
            
            
            17,189,726
            
            
            430,506
            
            
            31,178,916





Three
                Months Ended September 30, 2006
            
            HSMS
            
            TBCS
            
            Safe
                Com
            
            ConsolidatedRevenue
            
            $
            3,850,913
            
            $
            3,794,472
            
            $
            139,275
            
            $
            7,784,660Income
                before provision for income taxes
            
            
            53,756
            
            
            417,228
            
            
            40,437
            
            
            511,421





2005





Nine
                Months Ended September 30, 2005
            
            HSMS
            
            TBCS
            
            Safe
                Com
            
            ConsolidatedRevenue
            
            $
            10,857,159
            
            $
            4,965,407
            
            $
            338,580
            
            $
            16,161,146Income
                before provision for income taxes
            
            
            584,769
            
            
            742,231
            
            
            29,181
            
            
            1,356,181Total
                assets
            
            
            12,872,812
            
            
            8,128,008
            
            
            921,661
            
            
            21,922,481





Three
                Months Ended September 30, 2005
            
            HSMS
            
            TBCS
            
            Safe
                Com
            
            ConsolidatedRevenue
            
            $
            3,635,677
            
            $
            1,748,455
            
            $
            111,120
            
            $
            5,495,252Income
                before provision for income taxes
            
            
            206,376
            
            
            168,992
            
            
            15,533
            
            
            390,901




17





11.  Commitments and Contingencies:





In
      addition to the FCC inquiry described in Note 4, 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-KSB dated December 31, 2005.




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




*You
      should carefully consider such risks, uncertainties and other information,
      disclosures and discussions which contain cautionary statements identifying
      important factors that could cause actual results to differ materially from
      those provided in the forward-looking statements. Readers should carefully
      review the risk factors and any other cautionary statements contained in the
      Company’s Annual Report on Form 10-KSB 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.*


18




**Overview:**




The
        Company’s primary business is the provision of healthcare communication services
        through (1) the development and marketing of healthcare solutions and that
        include personal emergency response systems, telehealth/disease management
        monitoring systems and medication management systems ( “ HSMS ” );
        (2)
        telephony based communication services (“TBCS”) and solutions primarily for the
        healthcare community; (3) pharmacy security monitoring systems. The Company’s
        products and services are primarily marketed to the healthcare industry,
        including home care, durable medical equipment, medical facility, hospice,
        pharmacy, managed care and other healthcare oriented organizations. The Company
        also offers certain products and services directly to consumers. Until 2000,
        the
        Company’s principal business was the marketing of personal emergency response
        systems ( “ PERS ” ),
        a
        device that allows a patient to signal an emergency response center for help
        in
        the event of a debilitating illness or accident. The Company provides PERS
        nationwide to private pay customers, Medicaid programs as well as to healthcare
        related entities. In 2003, the Company initiated a relationship with a large,
        west coast managed care organization that recognized the value associated
        with
        provisioning PERS to its senior population and contracted AMAC to roll out
        its
        PERS product to approximately 3,000 beneficiaries. Today, that program has
        doubled to approximately 6,300 units on line and continues to expand throughout
        the west coast. In 2005, the Company's PERS product was selected by McKesson
        Corporation as its solution to complement its remote patient monitoring product
        offering, to be marketed as McKesson Telehealth AssistTM, a step which the
        Company believes will permit further expansion of its PERS business through
        McKesson's distribution network.




In
      2001,
      the Company entered the emerging telehealth market, an industry in its
      development stage, recognizing the opportunity to provide new monitoring
      technologies to assist healthcare professionals in home-based, health management
      activities. Management believes the provision of health monitoring technologies
      and services is a natural extension to its safety monitoring offering.





With
      an
      established presence in the home from its PERS product, the Company entered
      into
      a marketing and technology agreement with certain exclusive rights with Health
      Hero Networks, Inc. in 2001. The Company marked its entrance into the
      telehealth/disease management monitoring market initially as a provider of
      the
      Health Buddy Ò System.
      In the fourth quarter of 2003, the Company launched the commercial introduction
      of a device known as the PERS Buddy®.





The
      Company believes the telehealth market will continue to provide opportunity
      for
      AMAC’s expansion as a full source provider of remote patient monitoring
      technologies and services based on increasing acceptance as further clinical
      and
      econometric studies concluding that telehealth is both clinically effective
      and
      reduces cost. During the fourth quarter of 2005, the Company commenced plans
      to
      expand its telehealth offering through the creation of new services that
      integrate telehealth monitoring technology with comprehensive health management.





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.


19




The
      Company diversified its products/service mix to include telephony based
      communication services ( “ TBCS ” )
      for
      professionals in the healthcare community. The rationale to enter this segment
      had several components. These include targeting existing customer relationships,
      leveraging existing infrastructure capability, and establishing an additional
      significant revenue source. T he
      Company’s entry into the TBCS market was
      accomplished initially **** through
      acquisition and later
      through internally generated sales growth coupled
      with acquisitions .
      The
      TBCS segment accounted for 47% of the Company’s revenues through September 30,
      2006. The Company believes that TBCS will continue to be a significant business
      segment going forward and intends to pursue further acquisitions in this
      area.




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





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 significantly expanding the
      TBCS reporting segment.





The
      Company’s third reporting segment, SafeCom pharmacy security monitoring systems,
      offers equipment and security monitoring to pharmacies and other 24/7 retail
      organizations. Currently, over 785 stores are monitored with this technology.
      SafeCom monitoring services are provided at the Company’s communication center
      in Long Island City, New York. The SafeCom platform utilizes the basic PERS
      technology with a modified application. Although currently providing a small
      annual revenue contribution, the Company believes a significant opportunity
      exists and will continue to test the market potential for the remainder of
      2006
      and into 2007.




The
      Company continues to view its two core business segments, HSMS and TBCS, as
      the
      primary contributors to the Company’s cash flow from operations. The overall mix
      of cash flow generated from these two business segments, combined with the
      Company’s emphasis on developing innovative telehealth solutions, provides
      continued stability and creates new marketing opportunities. The Company
      believes this strategy will enable it to maintain and increase its role in
      the
      healthcare communications field.




20





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




The
      following table shows the components of the Statement of Income for the three
      and nine months ended September 30, 2006 and 2005.


Three
                  Months Ended September 30,
              
              Nine
                  Months Ended September 30,In
                  thousands (000’s)
              
              2006
              
              %
              
              2005
              
              %
              
              2006
              
              %
              
              2005
              
              %RevenuesHSMS
              
              
              3,851
              
              
              **49**
              **%**
              
              3,636
              
              
              **66**
              **%**
              
              11,567
              
              
              **51**
              **%**
              
              10,857
              
              
              **67**
              **%**TBCS
              
              
              3,795
              
              
              **49**
              **%**
              
              1,748
              
              
              **32**
              **%**
              
              10,761
              
              
              **47**
              **%**
              
              4,965
              
              
              **31**
              **%**Safe
                  Com
              
              
              139
              
              
              **2**
              **%**
              
              111
              
              
              **2**
              **%**
              
              403
              
              
              **2**
              **%**
              
              339
              
              
              **2**
              **%**Total
                  Revenues
              
              
              7,785
              
              
              **100**
              **%**
              
              5,495
              
              
              **100**
              **%**
              
              22,731
              
              
              **100**
              **%**
              
              16,161
              
              
              **100**
              **%**Cost
                  of Services and Goods SoldHSMS
              
              
              1,714
              
              
              **45**
              **%**
              
              1,699
              
              
              **47**
              **%**
              
              5,180
              
              
              **45**
              **%**
              
              4,946
              
              
              **46**
              **%**TBCS
              
              
              1,900
              
              
              **50**
              **%**
              
              1,017
              
              
              **58**
              **%**
              
              5,363
              
              
              **50**
              **%**
              
              2,596
              
              
              **52**
              **%**Safe
                  Com
              
              
              52
              
              
              **37**
              **%**
              
              68
              
              
              **61**
              **%**
              
              187
              
              
              **46**
              **%**
              
              202
              
              
              **60**
              **%**Total
                  Cost of Services and Goods Sold
              
              
              3,666
              
              
              **47**
              **%**
              
              2,784
              
              
              **51**
              **%**
              
              10,730
              
              
              **47**
              **%**
              
              7,744
              
              
              **48**
              **%**Gross
                  ProfitHSMS
              
              
              2,137
              
              
              **55**
              **%**
              
              1,937
              
              
              **53**
              **%**
              
              6,387
              
              
              **55**
              **%**
              
              5,911
              
              
              **54**
              **%**TBCS
              
              
              1,895
              
              
              **50**
              **%**
              
              731
              
              
              **42**
              **%**
              
              5,398
              
              
              **50**
              **%**
              
              2,369
              
              
              **48**
              **%**Safe
                  Com
              
              
              87
              
              
              **63**
              **%**
              
              43
              
              
              **39**
              **%**
              
              216
              
              
              **54**
              **%**
              
              137
              
              
              **40**
              **%**Total
                  Gross Profit
              
              
              4,119
              
              
              **53**
              **%**
              
              2,711
              
              
              **49**
              **%**
              
              12,001
              
              
              **53**
              **%**
              
              8,417
              
              
              **52**
              **%**Selling,
                  General & Administrative
              
              
              3,656
              
              
              **47**
              **%**
              
              2,414
              
              
              **44**
              **%**
              
              10,648
              
              
              **47**
              **%**
              
              7,304
              
              
              **45**
              **%**Interest
                  Expense
              
              
              87
              
              
              **1**
              **%**
              
              10
              
              
              **0**
              **%**
              
              263
              
              
              **1**
              **%**
              
              33
              
              
              **0**
              **%**Other
                  Income
              
              
              (135
              )
              
              **(2**
              **)%**
              
              (105
              )
              
              **(2**
              **)%**
              
              (393
              )
              
              **(2**
              **)%**
              
              (276
              )
              
              **(2**
              **)%**Income
                  before Income Taxes
              
              
              511
              
              
              **7**
              **%**
              
              391
              
              
              **7**
              **%**
              
              1,484
              
              
              **7**
              **%**
              
              1,356
              
              
              **8**
              **%**Provision
                  for Income Taxes
              
              
              232
              
              
              
              
              
              188
              
              
              
              
              
              680
              
              
              
              
              
              651Net
                  Income
              
              
              279
              
              
              
              
              
              203
              
              
              
              
              
              804
              
              
              
              
              
              705




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




**Results
      of Operations:**





The
      Company has three distinct operating business segments, which are HSMS, TAS
      and
      Safe Com. The HSMS and TAS are the two significant segments which generate
      and
      produce approximately 98% of the Company’s revenue and net income, while Safe
      Com has a minimal impact on these areas; therefore, the operations of Safe
      Com
      are not further analyzed below.


21




**Three
      Months Ended September 30, 2006 Compared to Three Months Ended September 30,
      2005**





**Revenues** **:**





**** **HSMS**





Revenues,
      which consist primarily of monthly rental revenues, increased approximately
      $215,000, or 6%, for the three months ended September 30, 2006 as compared
      to
      the same period in 2005. Monthly rental revenues represent revenues that are
      generated from the leasing and monitoring of the medical devices placed in
      subscribers’ residences. The increase is primarily attributed to the following
      factor:





·
            The
                Company continues to experience growth primarily in its existing
                customer
                base. The largest growth continues to be as a result of an agreement,
                which was executed in November 2003, whereby over 3,000 Personal
                Emergency
                Response Systems (“PERS”) were placed online from December 2003 through
                the first quarter of 2004. This account has now grown to approximately
                6,300 PERS online and accounted for approximately a $48,000 increase
                in
                revenue during the three months ended September 30, 2006 as compared
                to
                the same period in the prior year .




·
            In
                late 2004, the Company initiated and executed a new agreement with
                a home
                healthcare agency whereby PERS were placed online. Since inception,
                this
                account has grown to approximately 1,400 subscribers and accounted
                for an
                approximate $25,000 increase in revenue during the three months ended
                September 30, 2006.





·
            In
                2006, the Company commenced the sale of its newly developed senior
                living
                community based emergency monitoring systems to retirement communities.
                The Company’s newly developed proprietary system will enable senior living
                communities to enhance their residential offerings. This has accounted
                for
                approximately $42,000 in revenue for the three months ended September
                30,
                2006. The Company plans to aggressively pursue this product opportunity
                through its sales and marketing efforts.




The
      remaining increase in revenue is from the increase in the execution of new
      agreements as well as the increased number of subscribers currently utilizing
      the PERS device within the remainder of the customer base. The Company
      anticipates that it will continue to grow its subscriber base and corresponding
      revenue through its continued sales and marketing efforts.





**** **TBCS**





The
      increase in revenues of approximately $2,047,000, or 117%, for the three months
      ended September 30, 2006 as compared to the same period in 2005 was primarily
      due to the following:





·
            During
                2006 and the fourth quarter of 2005, the Company purchased the assets
                of
                three separate telephone answering service businesses which resulted
                in
                additional revenue for the three months ended September 30, 2006,
                as
                compared to the same period in 2005, of approximately $1,981,000.
                The
                acquisitions were as follows:





·
            In
                October 2005, the Company purchased the assets of North Shore Answering
                Service (“NSAS”). As a result of this acquisition, the Company realized
                approximately $499,000 of revenue the three months ended September
                30,
                2006. The Company believes the acquisition of NSAS will help facilitate
                its growth within the Long Island/New York geographical
                area.


22




·
              In
                  December 2005, the Company purchased the assets of Answer Connecticut,
                  Inc. (“ACT”). As a result of this acquisition, the Company realized
                  approximately $774,000 of revenue for the three months ended September
                  30,
                  2006. The Company believes this acquisition will help facilitate
                  its
                  expansion into the Northeast geographical
                  area.
 ·
              In
                  March 2006, the Company purchased the assets of Capitol Medical,
                  Inc. and
                  Rhode Island Medical Bureau (“MD OnCall”). As a result of this
                  acquisition, the Company realized approximately $708,000 of revenue
                  for
                  the three months ended September 30, 2006. The Company believes
                  this
                  acquisition will further facilitate its expansion into the Northeast
                  geographical area.
 
 ·
              The
                  Company experienced revenue growth within its existing telephone
                  answering
                  service businesses of approximately $128,000, as compared to the
                  same
                  period in 2005. This growth is due to the execution of new agreements
                  with
                  healthcare and hospital organizations as a result of its daytime
                  communication service offerings. The Company has experienced growth
                  in
                  this business segment and anticipates that it will continue to
                  grow this
                  business segment with further expansion into healthcare and hospital
                  organizations, as evidenced by its latest agreement with a hospital
                  organization in which the providing of daytime services commenced
                  in
                  January 2006. This growth was partially offset by a rate renegotiation
                  with one of its large physician based customers resulting in a
                  decrease in
                  revenue of approximately $60,000.
 
 ·
              Along
                  with the plan to grow the TBCS segment through its daytime communication
                  service offerings, the Company continues to evaluate potential
                  additional
                  TBCS business acquisitions.
  **Costs
        Related to Services and Goods Sold:**
 
 **HSMS**
 
 Costs
        related to services and goods increased by approximately $15,000 for the
        three
        months ended September 30, 2006 as compared to the same period in 2005, an
        increase of 1%, primarily due to the following:
 
 ·
              During
                  2005 and into 2006, the Company has increased the number of personnel
                  working in its Emergency Response Center (“ERC”) department which
                  accounted for increased costs of approximately $30,000 in 2006
                  as compared
                  to the same period in 2005. The Company hired additional personnel
                  due to
                  the increased volume of calls which is directly correlated to the
                  increased subscriber base. The Company believes it currently has
                  the
                  appropriate number of personnel to handle the increased call
                  volume.
  23
  ·
              During
                  2006, the Company hired a Manager of Engineering and Fulfillment
                  at a rate
                  of $95,000 per annum. This accounted for approximately $24,000
                  of
                  increased costs as compared to the same period in the prior year.
                  The
                  Company believes the hiring of this Manager was an integral part
                  of its
                  business plan to consolidate its Engineering and Fulfillment center
                  into
                  Long Island City and well as assist in the transition of conducting
                  upgrades and repairs in house.
 
 ·
              In
                  2006, the Company took possession of additional space located in
                  Long
                  Island City with the intention of consolidating its warehouse and
                  distribution center and accounting department into the location
                  which
                  currently houses its principal New York HSMS and TBCS call center.
                  As a
                  result of taking possession of this premises, the Company recorded
                  approximately $30,000 of additional rent expense for the three
                  months
                  ended September 30, 2006, as compared to the same period in the
                  prior
                  year, relating to the warehouse and distribution center. The Company’s
                  lease obligations for its previous warehouse and distribution center
                  ceased as of June 30, 2006.
 
 This
        increase was partially offset by a reduction of upgrades and repairs that
        were
        performed by an outside third party. As part of the Company’s relocation of its
        engineering and fulfillment center, the Company commenced the upgrading and
        repairing of units in house. This has resulted in a decrease of approximately
        $65,000 of costs related to these activities. As the Company continues to
        make
        this transition, it believes that a greater percentage of upgrades and repairs
        will be performed in house moving forward and result in increased cost savings.
 
 **** **TBCS:**
 
 Costs
        related to services and goods increased by approximately $883,000 for the
        three
        months ended September 30, 2006 as compared to the same period in 2005, an
        increase of 87%, primarily due to the following:
 
 ·
              With
                  the continued increase in business in its existing telephone answering
                  services, specifically in its daytime answering service, the Company
                  has
                  continued to hire additional telephone answering service supervisors
                  and
                  operators in its Long Island City location. These personnel additions
                  along with general pay rate increases and associated payroll taxes
                  has
                  accounted for approximately $44,000 of increased costs as compared
                  to the
                  same period in 2005. As the Company continues to grow its customer
                  base
                  and revenues, it will continue to evaluate personnel levels and
                  determine
                  if additional personnel are necessary.
  ·
              During
                  2006 and the fourth quarter of 2005, as discussed above, the Company
                  purchased the assets of three separate telephone answering service
                  businesses which resulted in additional costs related to sales
                  for the
                  three months ended September 30, 2006 of approximately $839,000.
                  The costs
                  related to sales in regard to the acquisitions were as follows:
                  NSAS -
                  $227,000; ACT - $316,000 and MD OnCall -
                  $296,000.
  24
  **Selling,
        General and Administrative Expenses:**
 
 Selling,
        general and administrative expenses increased by approximately $1,242,000
        for
        the three months ended September 30, 2006 as compared to the same period
        in
        2005, an increase of 51%. The increase is primarily attributable to the
        following:
 
 ·
              The
                  Company incurred approximately $804,000 of selling, general and
                  administrative expenses for the three months ended September 30, 2006 as a
                  result of the acquisition of three telephone answering service
                  businesses
                  during 2006 and the fourth quarter of 2005. The largest expenses
                  relate to
                  salaries and related payroll taxes and amortization relating to
                  customer
                  lists and non-compete agreements.
 
 ·
              During
                  the second quarter of 2006, the Company hired a Controller and
                  Human
                  Resources director. During this period the Company also moved its
                  accounting department from its Oceanside, New York location to
                  its Long
                  Island City, New York facility. As part of this process, the Company
                  hired
                  personnel for the LIC location while winding down operations in
                  Oceanside
                  and, therefore incurred additional payroll costs while transitioning
                  this
                  change in location. These items along with general rate increases
                  for
                  existing personnel accounted for approximately $60,000 of increased
                  payroll and associated payroll tax costs as compared to the same
                  period in
                  the prior year. The Company believes the hiring of these employees
                  was
                  necessary to handle the increased workload in both the accounting
                  and
                  human resources departments.
 
 ·
              In
                  the third quarter of 2006, the Company expanded its health benefit
                  options
                  to its employees. As a result of these expanded benefits, the Company
                  experienced an increase in the number of employee’s participating. This,
                  along with increased benefits costs, resulted in approximately
                  a $55,000
                  increase for the three months ended September 30, 2006 as compared
                  to the
                  same period in the prior year. The Company believes this will help
                  to
                  minimize employee turnover.
 
 ·
              Certain
                  executives entered into new employment agreements whereby effective
                  January 1, 2006 their salaries were increased and they received
                  certain
                  stock grants. As a result of these new agreements, the Company
                  recorded
                  approximately $85,000 of additional compensation expense, including
                  payroll taxes, for the three months ended September 30, 2006 as
                  compared
                  to the same period in 2005.
 
 ·
              In
                  August 2006, the Company granted an aggregate of 50,000 stock options
                  to
                  purchase common stock to its independent Board of Directors. In
                  accordance
                  with FASB Statement No. 123(R), which the Company adopted on January
                  1,
                  2006, the Company recognized an expense of approximately $45,000.
                  Prior to
                  the adoption of this Statement, the Company was not required to
                  record the
                  issuance of stock options to purchase common stock as an
                  expense.
 
 25
 
 There
        were other increases in selling, general and administrative expenses which
        arose
        out of the normal course of business such as consulting expense, which were
        partially offset by a reduction in amortization relating to the HSMS
        segment.
 
 **Interest
        Expense:**
 
 Interest
        expense for the three months ended September 30, 2006 and 2005 was approximately
        $87,000 and $10,000, respectively. The increase was primarily due to the
        Company
        borrowing additional funds in December 2005 of $2,550,000 and in March 2006
        of
        $2,500,000 for the purpose of financing its acquisitions of ACT and MD OnCall,
        respectively.
 
 **Other
        Income:**
 
 Other
        income for the three months ended September 30, 2006 and 2005 was approximately
        $136,000 and $104,000, respectively. Other Income for the three months ended
        September 30, 2006 and 2005 includes a Relocation and Employment Assistance
        Program (“REAP”) credit in the approximate amounts of $117,000 and $83,000,
        respectively. In connection with the relocation of certain operations to
        Long
        Island City, New York in April 2003, the Company became eligible for the
        REAP
        credit which is based upon the number of employees relocated to this designated
        REAP area. The REAP is in effect for a twelve year period; during the first
        five
        years the Company will be refunded the full amount of the eligible credit
        and,
        thereafter, the benefit will be available only as a credit against New York
        City
        income taxes.
 
 **Income
        Before Provision for Income Taxes:**
 
 The
        Company’s income before provision for income taxes for the three months ended
        September 30, 2006 was approximately $511,000 as compared to $391,000 for
        the
        same period in 2005. The increase of $117,000 for the three months ended
        September 30, 2006 primarily resulted from an increase in the Company's service
        revenues offset by an increase in the Company’s costs related to services and
        selling, general and administrative costs.
 
 **Nine
        Months Ended September 30, 2006 Compared to Nine Months Ended September 30,
        2005**
 
 **Revenues** **:**
 
 **** **HSMS**
 
 Revenues,
        which consist primarily of monthly rental revenues, increased approximately
        $710,000, or 7%, for the nine months ended September 30, 2006 as compared
        to the
        same period in 2005. Monthly rental revenues represent revenues that are
        generated from the leasing and monitoring of the medical devices placed in
        subscriber’s residences. The increase is primarily attributed to the following
        factors:
 
 ·
              The
                  Company continues to experience growth primarily in its existing
                  customer
                  base. The largest growth continues to be as a result of an agreement,
                  which was executed in November 2003, whereby over 3,000 Personal
                  Emergency
                  Response Systems (“PERS”) were placed online from December 2003 through
                  the first quarter of 2004. This account, which now has grown to
                  approximately 6,300 PERS online, has resulted in approximately
                  $238,000
                  more revenue in 2006 as compared to the same period in 2005. The
                  Company
                  anticipates that the growth in this account will
                  continue.
  26
  ·
              In
                  late 2004, the Company initiated and executed a new agreement with
                  a home
                  healthcare agency whereby PERS were placed online. Since inception,
                  this
                  account has grown to approximately 1,400 subscribers and accounted
                  for an
                  approximate $97,000 increase in revenue during 2006 as compared
                  to the
                  same period in the prior year.
  The
        remaining increase in revenue is from the increase in the execution of new
        agreements, the increase in the number of subscribers currently utilizing
        the
        PERS device within the remainder of the customer base as well as the Company
        increasing its sale of products to retirement communities. The Company
        anticipates that it will continue to grow its subscriber base and corresponding
        revenue through its continued sales and marketing efforts.
 
 **** **TBCS**
 
 The
        increase in revenues of approximately $5,796,000, or 117%, for the nine months
        ended September 30, 2006 as compared to the same period in 2005 was primarily
        due to the following:
 
 ·
              During
                  2006 and the fourth quarter of 2005, the Company purchased the
                  assets of
                  three separate telephone answering service businesses which resulted
                  in
                  additional revenue for the nine months ended September 30, 2006,
                  as
                  compared to the same period in 2005, of approximately $5,191,000.
                  The
                  acquisitions were as follows:
 
 ·
              In
                  October 2005, the Company purchased the assets of North Shore Answering
                  Service (“NSAS”). As a result of this acquisition, the Company realized
                  approximately $1,518,000 of revenue in 2006. The Company believes
                  the
                  acquisition of NSAS will help facilitate its growth within the
                  Long
                  Island/New York geographical area.
 ·
              In
                  December 2005, the Company purchased the assets of Answer Connecticut,
                  Inc. (“ACT”). As a result of this acquisition, the Company realized
                  approximately $2,181,000 of revenue in 2006. The Company believes
                  this
                  acquisition will help facilitate its expansion into the Northeast
                  geographical area.
 ·
              In
                  March 2006, the Company purchased the assets of Capitol Medical,
                  Inc. and
                  Rhode Island Medical Bureau (“MD OnCall”). As a result of this
                  acquisition, the Company realized approximately $1,492,000 of revenue
                  in
                  2006. The Company believes this acquisition will further facilitate
                  its
                  expansion into the Northeast geographical
                  area.
 
 ·
              The
                  Company experienced revenue growth within its existing telephone
                  answering
                  service businesses of approximately $618,000, as compared to 2005.
                  This
                  growth is due to the execution of new agreements with healthcare
                  and
                  hospital organizations as a result of new daytime communication
                  service
                  offerings, as well as increases in the physician base. The Company
                  has
                  experienced strong growth in this business segment and anticipates
                  that it
                  will continue to grow this business segment with further expansion
                  into
                  healthcare and hospital organizations, as evidenced by its latest
                  agreement with a hospital organization in which the providing of
                  daytime
                  services commenced in January 2006, and to physicians through its
                  marketing strategies. This growth was partially offset by a rate
                  renegotiation from one of its large physician based customers resulting
                  in
                  a decrease in revenue of approximately
                  $140,000.
  ·
                In
                      May 2005, the Company acquired the assets of a telephone answering
                      service, Long Island Message Center (LIMC). As a result of
                      this
                      acquisition the Company recorded approximately $127,000 of
                      additional
                      revenue for the nine months ended September 30, 2006 as compared
                      to the
                      same period in 2005.
  27
  ·
              Along
                  with the plan to grow the TBCS segment through its daytime communication
                  service offerings, the Company continues to evaluate potential
                  additional
                  TBCS business acquisitions.
 
 **Costs
        Related to Services and Goods Sold:**
 
 **HSMS**
 
 Costs
        related to services and goods increased by approximately $234,000 for the
        nine
        months ended September 30, 2006 as compared to the same period in 2005, an
        increase of 5%, primarily due to the following:
 
 ·
              During
                  2005 and into 2006, the Company has increased the number of personnel
                  working in its Emergency Response Center (“ERC”) department which
                  accounted for increased costs of approximately $132,000 in 2006
                  as
                  compared to the same period in 2005. The Company hired additional
                  personnel due to the increased volume of calls which is directly
                  correlated to the increased subscriber base. The Company believes
                  it
                  currently has the appropriate number of personnel to handle the
                  increased
                  call volume.
 
 ·
              During
                  2006, the Company hired a Manager of Engineering and Fulfillment
                  at a rate
                  of $95,000 per annum. In addition, during the second quarter of
                  2006, the
                  Company moved its fulfillment and warehouse distribution center
                  from Mt.
                  Laurel, New Jersey into its Long Island City facility. As part
                  of this
                  process, the Company hired personnel for the LIC location while
                  winding
                  down operations in Mt. Laurel and, therefore incurred additional
                  payroll
                  costs while transitioning this change in location. These items
                  accounted
                  for approximately $145,000 of increased costs as compared to the
                  same
                  period in the prior year. The Company believes, as part of its
                  overall
                  consolidation initiative, that the Company will realize significant
                  cost
                  efficiencies as a result of this move of its fulfillment and warehouse
                  distribution center to its LIC
                  facility.
 
 This
        increase was partially offset by a reduction of upgrades and repairs that
        were
        performed by an outside third party. As part of the Company’s relocation of its
        engineering and fulfillment center, the Company commenced the upgrading and
        repairing of units in house. This has resulted in a decrease of approximately
        $75,000 of costs related to these activities. As the Company continues to
        make
        this transition, it believes that a greater percentage of upgrades and repairs
        will be performed in house moving forward and result in increased cost savings.
  28
 
 **** **TBCS:**
 
 Costs
        related to services and goods increased by approximately $2,767,000 for the
        nine
        months ended September 30, 2006 as compared to the same period in 2005, an
        increase of 107%, primarily due to the following:
 
 ·
              With
                  the continued increase in business in its existing telephone answering
                  services, specifically in its daytime answering service, the Company
                  continued to hire additional telephone answering service supervisors
                  and
                  operators in its Long Island City location, especially in the second
                  half
                  of 2005 as a result of the Company executing agreements with hospital
                  organizations throughout 2005. The increase in daytime service
                  business
                  has continued into 2006 as evidenced by an additional hospital
                  commencing
                  service in January 2006. In addition, in July 2005 the Company
                  initiated a
                  pay rate increase to all its supervisors and operators in an effort
                  to
                  stabilize employee tenure with the Company. These personnel additions
                  along with general pay rate increases and associated payroll taxes
                  has
                  accounted for approximately $473,000 of increased costs as compared
                  to the
                  same period in 2005. As the Company continues to grow its customer
                  base
                  and revenues, it will continue to evaluate personnel levels and
                  determine
                  if additional personnel are necessary.
  ·
              During
                  2006 and the fourth quarter of 2005, as discussed above, the Company
                  purchased the assets of three separate telephone answering service
                  businesses which resulted in additional costs related to sales
                  for the
                  nine months ended September 30, 2006 of approximately $2,083,000.
                  The
                  costs related to sales in regard to the acquisitions were as follows:
                  NSAS
                  - $572,000; ACT - $870,000 and MD OnCall -
                  $641,000.
  **Selling,
        General and Administrative Expenses:**
 
 Selling,
        general and administrative expenses increased by approximately $3,344,000
        for
        the nine months ended September 30, 2006 as compared to the same period in
        2005,
        an increase of 46%. The increase is primarily attributable to the
        following:
 
 ·
              The
                  Company incurred approximately $2,190,000 of selling, general and
                  administrative expenses as a result of the acquisition of three
                  telephone
                  answering service businesses during 2006 and the fourth quarter
                  of 2005.
                  The largest expenses relate to salaries and related payroll taxes
                  and
                  amortization relating to customer lists and non-compete
                  agreements.
 
 ·
              In
                  early 2006, the Company obtainedadditional space in Long Island City with the intention
                  of
                  consolidating its warehouse and distribution center and accounting
                  department into the location where its principal New York HSMS and
                  TBCS call center is located. For a period of time, the Company
                  was still
                  conducting its warehouse and distribution center and accounting
                  operation
                  from their original locations. As a result of this, the Company
                  recorded
                  approximately $190,000 of additional rent expense.
  29
  ·
              During
                  the second quarter of 2006, the Company hired a Controller and
                  Human
                  Resources director. During this period the Company also moved its
                  accounting department from its Oceanside, New York location to
                  its Long
                  Island City, New York facility. As part of this process, the Company
                  hired
                  personnel for the LIC location while winding down operations in
                  Oceanside
                  and, therefore incurred additional payroll costs while transitioning
                  this
                  change in location. These items along with general rate increases
                  for
                  existing personnel accounted for approximately $125,000 of increased
                  payroll and associated payroll tax costs as compared to the same
                  period in
                  the prior year. The Company believes the hiring of these employees
                  was
                  necessary to handle the increased workload in both the accounting
                  and
                  human resources departments.
 
 ·
              In
                  the third quarter of 2006, the Company expanded its health benefit
                  options
                  to its employees. As a result of these expanded benefits, the Company
                  experienced an increase in the number of employee’s participating. This,
                  along with increased benefits costs, resulted in approximately
                  a $70,000
                  increase as compared to the same period in the prior year. The
                  Company
                  believes this will help to minimize employee turnover.
 
 ·
              Certain
                  executives entered into new employment agreements whereby effective
                  January 1, 2006 their salaries were increased and they received
                  certain
                  stock grants. As a result of these new agreements, the Company
                  recorded
                  approximately $216,000 of additional compensation expense, including
                  payroll taxes, as compared to the same period in 2005.
  ·
              As
                  a result of the Company executing new agreements with healthcare
                  and
                  hospital organizations in 2006, the Company recorded additional
                  commission
                  expense of $155,000 due to a salesperson for the nine months ended
                  September 30, 2006.
 
 These
        increases were partially offset by a decrease in amortization expense in
        the
        HSMS segment. In June 2005, the Company entered into an amended agreement
        with
        Health Hero Network (“HHN”). The amendment includes an extension of the initial
        term for an additional three years ,
        and
        converted the exclusive license to a non-exclusive one .
        The
        cost of the licensing component of $1,115,000, including $115,000 of
        professional fees, which has been paid in full, was being amortized over
        a
        40-month period which commenced in July 2003 upon the Company meeting certain
        milestones under the agreement. With this extension of the initial term,
        the
        Company is amortizing the remaining value of the licensing component as of
        June
        30, 2005 over the revised initial term of the Agreement. This resulted in
        a
        reduction of amortization expense of approximately $120,000 in 2006 as compared
        to the same period in 2005.
 
 There
        were other increases in selling, general and administrative expenses which
        arose
        out of the normal course of business such as consulting expense, travel and
        entertainment expense and bad debt expense.
  30
 
 **Interest
        Expense:**
 
 Interest
        expense for the nine months ended September 30, 2006 and 2005 was approximately
        $263,000 and $33,000, respectively. The increase was primarily due to the
        Company borrowing additional funds in December 2005 of $2,550,000 and in
        March
        2006 of $2,500,000 for the purpose of financing its acquisitions of ACT and
        MD
        OnCall, respectively. Interest rate increases in 2006 also have contributed
        to
        the increase.
 
 **Other
        Income:**
 
 Other
        income for the nine months ended September 30, 2006 and 2005 was approximately
        $393,000 and $276,000, respectively. Other Income for the nine months ended
        September 30, 2006 and 2005 includes a Relocation and Employment Assistance
        Program (“REAP”) credit in the approximate amounts of $318,000 and $240,000,
        respectively. In connection with the relocation of certain operations to
        Long
        Island City, New York in April 2003, the Company became eligible for the
        REAP
        credit which is based upon the number of employees relocated to this designated
        REAP area. The REAP is in effect for a twelve year period; during the first
        five
        years the Company will be refunded the full amount of the eligible credit
        and,
        thereafter, the benefit will be available only as a credit against New York
        City
        income taxes.
 
 **Income
        Before Provision for Income Taxes:**
 
 The
        Company’s income before provision for income taxes for the nine months ended
        September 30, 2006 was approximately $1,484,000 as compared to $1,356,000
        for
        the same period in 2005. The increase of $128,000 for the nine months ended
        September 30, 2006 primarily resulted from an increase in the Company's service
        revenues offset by an increase in the Company’s costs related to services and
        selling, general and administrative costs.
 
 **Liquidity
        and Capital Resources**
  In
        March
        2006, the Company obtained an additional $2,500,000 term loan, the proceeds
        of
        which were utilized to finance the acquisition of MD OnCall and Capitol Medical
        Bureau.
 
 As
        of
        September 30, 2006, the Company has a credit facility of $6,850,000, which
        includes a term loan in the original amount of $5,350,000 and a revolving
        credit
        line that permits maximum borrowings of $1,500,000 (based on eligible
        receivables, as defined). Borrowings under the term loan bear interest at
        either
        (a) LIBOR plus 2.25% 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 2.0% or (b) the prime rate or the federal funds
        effective rate plus .5%, whichever is greater. The term loan is payable in
        equal
        monthly principal payments of $91,667 over five years while the revolving
        credit
        line is available through May 2008. The outstanding balance on the term loan
        at
        September 30, 2006 was $4,800,000 and there were no amounts outstanding on
        the
        revolving credit line at September 30, 2006. As of November 8, 2006, the
        Company
        had $300,000 outstanding on its revolving credit line.
  31
 
 As
        of
        September 30, 2006, the Company was in compliance with its financial covenants
        in its loan agreement.
 
 The
        following table is a summary of contractual obligations as of September 30,
        2006:
  Payments
                  Due by PeriodContractual
                  Obligations
              
              Total
              
              Less
                  than 1 year
              
              1-3
                  years
              
              4-5
                  years
              
              After
                  5 yearsRevolving
                  Credit Line
              
              $
              -
                  0 -Debt
                  (a)
              
              $
              4,833,567
              
              $
              1,114,248
              
              $
              3,319,319
              
              $
              400,000Capital
                  Leases (b)
              
              $
              122,999
              
              $
              38,505
              
              $
              84,494Operating
                  Leases (c)
              
              $
              9,284,745
              
              $
              957,664
              
              $
              2,391,969
              
              $
              1,473,533
              
              $
              4,461,579Total
                  Contractual Obligations
              
              $
              14,241,311
              
              $
              2,110,417
              
              $
              5,795,782
              
              $
              1,873,533
              
              $
              4,461,579
  (a)
              -
                  Debt includes the Company’s term loan in the original amount of $5,350,000
                  which matures in March 2012, as well as loans associated with the
                  purchase
                  of automobiles.
  (b)
              -
                  Capital leases include the leases of telephony equipment associated
                  with
                  the Company’s telephone answering service in its Rhode Island
                  location.
  (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 Chief Executive Officer and principal shareholder
                  pursuant to a lease which expires in September 2007. The Company
                  leased a
                  second building from the Chief Executive Officer and principal
                  shareholder
                  until October 2004, at which time the Company was released from
                  its
                  obligation.
  Net
        cash
        provided by operating activities was approximately $3.3 million for the nine
        months ended September 30, 2006, as compared to approximately $2.2 million
        for
        the same period in 2005. During 2006, increases in cash provided by operating
        activities from depreciation and amortization of approximately $2.5 million,
        increases in liabilities of $0.8 million and net earnings of approximately $0.8
        million were partially offset by an increase in trade receivables of
        approximately $0.7 million. The increase in liabilities is related to the
        Company’s increased capital expenditures, acquisition of a telephone answering
        service business and increased income tax obligations. The increase in trade
        receivables is primarily due to the following reasons: (i) the Company
        consummated acquisitions which resulted in approximately $0.3 million of
        increased receivables through the normal course of business, (ii) with the
        Company expanding its daytime service offerings to homecare and hospital
        organizations, the number of days receivables remaining outstanding has
        increased as these organizations typically process invoices slower than the
        physician based customer who receives the traditional answering service offering
        (accounts for approximately $0.2 million of the increased receivable), and
        (iii)
        the Company reimbursement under the HRA program due in the month of September
        in
        the amount of approximately $0.2 million was delayed due to computer processing
        issues. Such amount was paid in October 2006 and the computer processing
        issues
        have been resolved.
  32
  Net
        cash
        used in investing activities for the nine months ended September 30, 2006
        was
        approximately $6.6 million as compared to $2.8 million in the same period
        in
        2005. The primary components of net cash used in investing activities in
        2006
        were the acquisition of telephone answering service businesses and capital
        expenditures. The payments towards acquisition of telephone answering service
        businesses were approximately $3.3 million and capital expenditures were
        approximately $2.9 million. Capital expenditures for 2006 primarily relate
        to
        the continued production and purchase of the traditional PERS system as well
        as
        construction performed on new facilities. The primary components of net cash
        used in investing activities in 2005 were capital expenditures of $1.8 million
        and the acquisition of a telephone answering service business of $0.4 million.
  Cash
        flows for the nine months ended September 30, 2006 provided by financing
        activities were approximately $2.2 million compared to $1.4 million for the
        same
        period in 2005. The primary component of cash flow provided by financing
        activities in 2006 were proceeds received from additional borrowings. The
        proceeds from the borrowing were $2.5 million and were primarily used for
        the
        acquisition of a telephone answering service. The primary component of cash
        flow
        provided by financing activities in 2005 was proceeds received of approximately
        $1.8 million from the exercise of stock options and warrants.
  During
        the next twelve months, the Company anticipates it will make capital
        expenditures of approximately $2.75 - $3.25 million for the production and
        purchase of the traditional PERS systems and telehealth systems, enhancements
        to
        its computer operating systems, its retirement facility resident monitoring
        systems and the production of its Med-Time pill dispenser (this includes
        outstanding purchase orders issued to purchase approximately $1,050,000 of
        the
        traditional PERS systems). This amount is subject to fluctuations based on
        customer demand. The Company also anticipates incurring approximately $0.2
        -
        $0.4 million of costs relating to research and development of its telehealth
        product and Med-Time 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 $0.3 - $0.5 million over the next twelve to eighteen
        months.
  As
        of
        September 30, 2006, the Company had approximately $1.6 million in cash and
        the
        Company’s working capital was approximately $2.8 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 May 2008 that permits
        borrowings up to $1.5 million of which no amounts were outstanding at September
        30, 2006.
  33
  Off-Balance
        Sheet Arrangements:
  As
        of
        September 30, 2006, the Company has not entered into any off-balance sheet
        arrangements that are reasonably likely to have an impact on the Company’s
        current and future financial condition.
  Other
        Factors:
  On
        March
        10, 2006, the Company acquired substantially all of the assets of MD
        OnCall, a Rhode Island based company and Capitol Medical
        Bureau, **** a
        Maryland based company (collectively “MD OnCall”) ,
        providers of telephone after-hour answering services and stand-alone voice
        mail
        services. The purchase price was $3,382,443 and consisted of an initial cash
        payment of $2,696,315, common stock valued at $343,064 and future cash payments
        of $343,064 to be paid to the Seller within twelve months from the date of
        the
        executed agreement, of which $170,032 was paid in October 2006. The Company
        also
        recorded finder and professional fees of approximately $183,000. A potential
        exists for the payment of additional purchase price consideration if certain
        thresholds concerning revenues and earnings of the acquired business are
        met as
        of March 31, 2007, 2008 and 2009. The results of operations of MD OnCall
        are
        included in the Telephone Based Communications Services (“TBCS”) segment as of
        the date of acquisition.
 
 On
        December 9, 2005, the Company acquired substantially all of the assets of
        Answer
        Connecticut, Inc. (“ACT”), a Connecticut based provider of telephone after-hour
        answering services and stand-alone voice mail services. The purchase price
        was
        $3,088,923 and consisted of an initial cash payment of $2,316,692, common
        stock
        valued at $154,446 and $617,785 to be paid to the Seller within twelve months
        from the date of the executed agreement. The Company also recorded professional
        fees of approximately $62,000. A potential exists for the payment of additional
        purchase price consideration if certain thresholds concerning revenue and
        earnings are met as of December 31, 2006, 2007 and 2008.
 
 On
        October 3, 2005, the Company acquired substantially all of the assets of
        North
        Shore Answering Service (“NSAS”), a Long Island, New York based provider of
        telephone after-hour answering services. The purchase price was $2,719,461
        and
        consisted of an initial cash payment of $2,175,569 and $543,892 to be paid
        twelve months from the date of the executed agreement, of which $393,892
        was
        paid in October 2006. The Company also recorded professional fees of
        approximately $82,000.
 
 On
        May
        17, 2005, the Company acquired substantially all of the assets of Long Island
        Message Center, Inc., a Long Island, New York based provider of telephone
        after-hour answering services. The purchase price was $397,712 and consisted
        of
        an initial cash payment of $318,170 and $79,542 which was paid in February
        2006.
        The Company also recorded finder and professional fees of approximately $46,000.
 
 On
        January 14, 2002, the Company entered into an operating lease agreement for
        space in Long Island City, New York in an effort to consolidate its HCI and
        Oceanside ERC and Customer Service facilities. The Company believes that
        centralization of the ERC, Customer Service and H-LINK® OnCall operations will
        provide additional efficiencies and facilitate the continued projected growth
        of
        the H-LINK and PERS divisions. The fifteen (15) year lease term commenced
        in
        April 2003 when the property was first occupied by the Company. The lease
        calls
        for minimum annual rentals of $269,500, subject to a 3% annual increase plus
        reimbursement for real estate taxes.
  34
 
 During
        2005, the Company entered into two operating lease agreements for additional
        space at its Long Island City, New York location with the intention of
        consolidating its warehouse and distribution center and accounting department
        into the location which currently houses its principal New York HSMS and
        TBCS
        call center. The leases expire in March 2018, call for minimal annual rentals
        of
        $220,000 and $115,000, respectively, and are subject to increases in accordance
        with the term of the agreements. The Company is also responsible for the
        reimbursement of its share of real estate taxes.
 
 On
        November 1, 2001, the Company entered into a Cooperative Licensing, Development,
        Services and Marketing Agreement with HHN (the “HHN Agreement”) pursuant to
        which the Company developed, with the
        assistance of HHN , a
        new
        integrated appliance combining the features of the Company’s PERS product with
        HHN’s technology .
        Pursuant to the HHN Agreement, the Company was the exclusive manufacturer
        and
        distributor in the United States, of an enhanced PERS system that combines
        the
        Company’s traditional safety monitoring features with HHN’s internet based
        disease management monitoring technology. The HHN Agreement, which had a
        minimum
        five-year term (“initial term”), and provided for the payment by the Company of
        certain fees based on the service revenue derived from the enhanced PERS
        product, was amended on June 30, 2005. The amendment includes an extension
        of
        the initial term for an additional three years ,
        and
        converted the exclusive license to a non-exclusive one .
        The
        cost of the licensing component of $1,115,000, including $115,000 of
        professional fees, which has been paid in full, was being amortized over
        a
        40-month period which commenced in July 2003 upon the Company meeting certain
        milestones under the agreement. With this extension of the initial term,
        the
        Company is amortizing the remaining value of the licensing component as of
        June
        30, 2005 over the revised initial term of the Agreement. Additionally, if
        certain acceptance criteria were met, the Company would have been required
        to
        purchase a minimum of 1,500 devices over the term of the Agreement at an
        estimated aggregate cost of $450,000. Such criteria were not met; therefore,
        the
        Company is not obligated to purchase a minimum of 1,500 devices.
  Since
        1983, the Company has provided Personal Emergency Response Systems (“PERS”)
        services to the City of New York’s Human Resources Administration Home Care
        Service Program ("HCSP"). The Company has been operating since 1993 with
        a
        contract to provide HCSP with these services, which has been extended for
        1-2
        year periods since 1993, the last such extension through December 31, 2006.
  In
        November 2002, a new Request for Proposals (“RFP”) was issued by HRA to provide
        emergency response services to HCSP from April 1, 2004 through March 31,
        2007.
        After receiving notification from the City of New York’s Human Resources
        Administration (“HRA”) that the Company was selected as the approved vendor
        under the RFP to provide PERS services to the Home Care Services Program
        to
        Medicaid Eligible individuals, the Company subsequently received notification
        from HRA that it canceled the RFP “in the best interest of the City of New
        York.” The Company was advised that the cancellation of the RFP is not related
        to any performance issue or negative reflection upon the Company. Concurrently,
        the Company was advised of HRA’s decision to issue a new contract extension to
        the Company through June 2005 under the terms of the contract that the Company
        has been operating under since 1993. The Company has since received this
        contract extension and also has received subsequent extensions which go through
        December 31, 2006. In accordance with the original contract and consistent
        with
        previous extensions, HRA has the right to terminate the contract without
        cause
        or “in the best interest of the City of New York” upon thirty days written
        notice. HRA has also advised the Company that HRA plans to issue a new RFP
        with
        respect to PERS services in the future. In September 2006, HRA issued a bid
        proposal relating to the providing of PERS services. In October 2006, the
        Company received notice that the bid process was temporarily postponed. As
        of
        November 8, 2006, the bid process is still under postponement.
  35
  The
        Company cannot determine (i) when and if the bid process will be continued,
        (ii)
        when and if a new RFP will be published, (iii) what the terms of the bid
        or new
        RFP will be, (iv) how long the current contract terms will remain in effect
        or
        (v) whether AMAC will be the successful bidder on the bid process or new
        RFP
        (and if so, under what terms and conditions). While the Company has greatly
        reduced its dependence on revenue from HCSP, if subsequent to September 2006,
        the Company does not maintain this contract, approximately 8% of the Company’s
        revenue could be lost, albeit over a protracted period, which could have
        a
        material adverse effect on operating results and cash flows. The Company
        continues to implement a variety of operational efficiencies, as well as
        continuing to enhance and diversify its other revenue streams, to offset
        the
        impact, if any, of this occurrence.
  As
        of
        September 30, 2006 and December 31, 2005, accounts receivable from the contract
        represented 12% and 11%, respectively, of accounts receivable and medical
        devices in service under the contract represented approximately 15% and 17%,
        respectively, of medical devices used for primary monitoring.
  The
        Company’s PERS equipment is subject to approval from the Federal Communication
        Commission (“FCC”). In November 2004, the Company received an inquiry from the
        Federal Communications Commission. In response to that inquiry the Company
        has
        determined that certain versions of its PERS equipment emit levels of radio
        frequency energy that exceed applicable standards designed to reduce the
        possibility of interference with radio communications.
 
 In
        July
        2006, the Company reached an agreement with the FCC on an action plan and
        timeframe to complete an upgrade program for the affected PERS equipment
        and
        agreed upon a voluntary payment of $75,000 to be paid in regards to this
        matter.
        At December 31, 2005, the Company had accrued such amount. As part of this
        agreement, the FCC will allow the upgrade program to run substantially parallel
        with the normal recycling of the Company’s PERS equipment and, as such the only
        additional cost to be incurred will be the incremental cost to bring the
        units
        into compliance with the FCC regulations.
 
 Through
        September 30, 2006, the Company has expensed approximately $1,055,000 in
        connection with this matter, of which approximately $145,000, primarily relating
        to costs associated with the replacement of equipment, legal fees and other
        professional fees, was recorded in 2006. The Company anticipates the total
        charge to complete this upgrade program to range from $1,100,000 to $1,300,000.
  36
 
 **Recent
        Accounting Pronouncements:**
  In
        June
        2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,”
a replacement of APB No. 20 and SFAS No. 3. SFAS No. 154 applies to all
        voluntary changes in accounting principle and changes the requirements for
        accounting for and reporting of a change in accounting principle to be applied
        retrospectively with all prior period financial statements presented on the
        new
        accounting principle. SFAS No. 154 is effective for accounting changes and
        correction of errors made in fiscal years beginning after December 15, 2005.
        The
        Company adopted SFAS No. 154 and the adoption of this statement did not have
        a
        material impact on the consolidated results of operations or financial position.
  In
        November 2004, the FASB issued FASB Statement No. 151, “Inventory Costs - An
        Amendment of ARB No. 43,” Chapter 4 (“SFAS 151”), which is the result of its
        effort to converge U.S. accounting standards for inventories with International
        Accounting Standards. SFAS 151 requires idle facility expenses, freight,
        handling costs, and wasted material (spoilage) costs to be recognized as
        current-period charges and not included in overhead. It also requires that
        allocation of fixed production overhead cost to inventory be based on normal
        capacity of the production facilities. SFAS 151 is effective for inventory
        costs
        incurred during fiscal years beginning after June 15, 2005. The adoption
        of SFAS
        151 did not have a material impact on our  financial.
 
 In
        July 2006, FASB Interpretation No. 48, “Accounting for Uncertainty in
        Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”) was
        issued, clarifying the accounting for uncertainty in tax positions. This
        Interpretation requires that we recognize in our financial statements, the
        impact of a tax position, if that position is more likely than not of being
        sustained on audit, based on the technical merits of the position. The
        provisions of FIN 48 are effective as of the beginning of our 2007 fiscal
        year,
        with the cumulative effect of the change in accounting principle recorded
        as an
        adjustment to opening retained earnings. We are currently evaluating the
        impact
        of adopting FIN 48, if any, on our financial statements.
  In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
        defines fair value, establishes guidelines for measuring fair value and expands
        disclosure regarding fair value measurements. SFAS No. 157 does not require
        new
        fair value measurements but rather eliminates inconsistencies in guidance
        found
        in various prior accounting pronouncements. SFAS No. 157 is effective for
        financial statements issued for fiscal years beginning after November 15,
        2007.
        We do not expect the adoption of SFAS No. 157 to have a material effect on
        our
        financial statements.
 
 In
        September 2006, the Securities and Exchange Commission issued Staff Accounting
        Bulletin (SAB) No. 108, “Financial Statements - Considering the Effects of Prior
        Year Misstatements when Quantifying Misstatements in Current Year Financial
        Statements”. SAB No. 108 provides interpretive guidance on how the effects of
        prior year uncorrected misstatements should be considered when quantifying
        misstatements in the current year financial statements. SAB No. 108 is effective
        for years ending after November 15, 2006. We do not expect the provisions
        of SAB
        No. 108 will have a material impact on its financial position or results
        of
        operations.
  37
  **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 $546,000 as of September
        30,
        2006, which is equal to 9.6% 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 $57,000. 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 $57,000.
 
 **Fixed
        Assets**
  Fixed
        assets are stated at cost. Depreciation for financial reporting purposes
        is
        being provided by the straight-line method over the estimated useful lives
        of
        the related assets. The valuation and classification of these assets and
        the
        assignment of useful depreciable lives involves significant judgments and
        the
        use of estimates. Fixed assets are reviewed for impairment whenever events
        or
        changes in circumstances indicate that the carrying amount of an asset may
        not
        be recoverable. Historically, impairment losses have not been required. Any
        change in the assumption of estimated useful lives could either result in
        a
        decrease or increase 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 $175,000 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 $140,000
        per annum.
  38
 
 **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 $8,374,769
        and
        $6,086,428 at September 30, 2006 and December 31, 2005, respectively. If
        the
        Company were to experience a significant adverse impact on goodwill, it would
        negatively impact the Company’s net income.
  **Item
        3.** **Quantitative
        and Qualitative Disclosure About Market Risk**
 
 We
        are
        exposed to market risk related to changes in interest rates.
 
 *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
        under our credit facility accrues at a rate of LIBOR plus 2.25%. Our ability
        to
        carry out our business plan to finance future working capital requirements
        and
        acquisitions of TBCS businesses may be impacted if the cost of carrying debt
        fluctuates to the point where it becomes a burden on our
        resources.
  **Item
        4.** **Controls
        and Procedures** **.**
  As
        of the
        end of the period covered by this report, the Company carried out an evaluation,
        under the supervision and with the participation of its Chief Executive Officer,
        President and the 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, President and the Chief Financial
        Officer concluded that the Company's controls and procedures are effective
        to
        ensure that information required to be disclosed by the Company in the reports
        filed by it under the Securities and Exchange Act of 1934, as amended, is
        recorded, processed, summarized and reported within the time periods specified
        in the SEC's rules and forms, and include controls and procedures designed
        to
        ensure that information required to be disclosed by the Company in such reports
        is accumulated and communicated to the Company's management, including the
        Chief
        Executive Officer, President and Chief Financial Officer of the Company,
        as
        appropriate to allow timely decisions regarding required
        disclosure.
 
 39
  There
        were no changes in the Company’s internal control over financial reporting that
        occurred during the quarter ended September 30, 2006 that has materially
        affected, or is reasonably likely to affect, the Company’s internal control over
        financial reporting.
 
 **PART
        II - OTHER INFORMATION**
 
 **Item
        1.**  **** **Legal
        Proceedings** **.**
 
 The
        Company is aware of various threatened or pending litigation claims against
        the
        Company relating to its products and services and other claims arising in
        the
        ordinary course of its business. The Company has given its insurance carrier
        notice of such claims and it believes there is sufficient insurance coverage
        to
        cover any such claims. Currently, there are no litigation claims for which
        an
        estimate of loss, if any, can be reasonably made as they are in the preliminary
        stages and therefore, no liability or corresponding insurance receivable
        has
        been recorded.
 
 **Item
        2.** **Unregistered
        Sales of Equity Securities and Use of Proceeds** **.**
 
 None
 
 **Item
        6.** **Exhibits.**
 
 No.
              
              Description31.1
              
              Certification
                  of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of
                  200231.2
              
              Certification
                  of President Pursuant to Section 302 of the Sarbanes Oxley Act
                  of
                  200231.3
              
              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 President Pursuant to Section 906 of the Sarbanes Oxley Act
                  of
                  200232.3
              
              Certification
                  of CFO Pursuant to Section 906 of the Sarbanes Oxley Act of
                  2002
 
 40
 
 **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:
                November 14, 2006
              By:
              /s/
                Howard M. SiegelName:
                  Howard M. SiegelTitle:  
                  Chairman of the Board,
                Chief
                  Executive Officer
 By:
              /s/
                Richard RalloName:
                  Richard RalloTitle:
                  Chief Financial Officer
  41