**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**

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

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

----

|                                                                       |                                                                                                                                               | **PAGE** |
|----------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| Part                  I   Financial                  Information |                                                                                                                                               |
|                                                                       |                                                                                                                                               |     |
|                                                                       | Report                  of Independent Registered Public Accounting Firm                                                                           | 1        |
|                                                                       |                                                                                                                                               |     |
|                                                                       | Condensed                  Consolidated Balance Sheets for June 30, 2006 and December 31,                  2005                                    | 2        |
|                                                                       |                                                                                                                                               |     |
|                                                                       | Condensed                  Consolidated Statements of Income for the Six Months Ended June                  30, 2006                  and 2005     | 3        |
|                                                                       |                                                                                                                                               |     |
|                                                                       | Condensed                  Consolidated Statements of Income for the Three Months Ended June                  30, 2006                  and 2005   | 4        |
|                                                                       |                                                                                                                                               |     |
|                                                                       | Condensed                  Consolidated Statements of Cash Flows for the Six Months Ended                  June 30,                  2006 and 2005 | 5        |
|                                                                       |                                                                                                                                               |     |
|                                                                       | Notes                  to Condensed Consolidated Financial Statements                                                                              | 7        |
|                                                                       |                                                                                                                                               |     |
|                                                                       | Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations                      | 17       |
|                                                                       |                                                                                                                                               |     |
|                                                                       | Quantitative                  and Qualitative Disclosures About Market Risks                                                                       | 36       |
|                                                                       |                                                                                                                                               |     |
|                                                                       | Controls                  and Procedures                                                                                                           | 36       |
|                                                                       |                                                                                                                                               |     |
| Part                  II   Other                  Information    | 37                                                                                                                                                 |

----

----

**PART      I - FINANCIAL INFORMATION**

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

|                                                                                                                                                    |   | **June                30, 2006 (Unaudited)** | ** ** | **Dec. 31,                2005** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|------------|---------------------------------------|--------|
| ASSETS                                                                                                                                                  |   |                                         |       |                                  |   |
| CURRENT                ASSETS                                                                                                                           |   |                                         |       |                                  |   |
| Cash                                                                                                                                                    |   | $                                            | 1,450,034  |                                  | $      | 2,638,984 |   |
| Accounts                receivable                                                                                                                      |   |                                         |            |                                  |   |   |   |
| (net                of allowance for doubtful accounts of $549,000** **and                $451,000)                                                |   |                                         | 5,333,142  |                                  |   | 4,354,744 |   |
| Note                receivable                                                                                                                          |   |                                         | 25,010     |                                  |   | 24,394 |   |
| Inventory                                                                                                                                               |   |                                         | 287,896    |                                  |   | 332,323 |   |
| Prepaid                expenses and other current assets                                                                                                |   |                                         | 948,244    |                                  |   | 684,336 |   |
| Deferred                income taxes                                                                                                                    |   |                                         | 366,000    |                                  |   | 309,000 |   |
|                                                                                                                                                    |   |                                         |       |                                  |   |   |   |
| Total                Current Assets                                                                                                                     |   |                                         | 8,410,326  |                                  |   | 8,343,781 |   |
|                                                                                                                                                    |   |                                         |       |                                  |   |   |   |
| FIXED                ASSETS                                                                                                                             |   |                                         |       |                                  |   |   |   |
| (Net                of accumulated depreciation and amortization)                                                                                       |   |                                         | 9,041,751  |                                  |   | 7,810,658 |   |
|                                                                                                                                                    |   |                                         |       |                                  |   |   |   |
| OTHER                ASSETS                                                                                                                             |   |                                         |       |                                  |   |   |   |
| Long-term                portion of note receivable                                                                                                     |   |                                         | 61,052     |                                  |   | 73,713 |   |
| Intangible                assets                                                                                                                        |   |                                         |       |                                  |   |   |   |
| (net                of accumulated amortization of $2,700,291** **and                $2,229,045)                                                   |   |                                         | 4,642,397  |                                  |   | 3,474,252 |   |
| Goodwill                (net of accumulated amortization of $58,868)                                                                                    |   |                                         | 8,232,144  |                                  |   | 6,086,428 |   |
| Other                assets                                                                                                                             |   |                                         | 540,082    |                                  |   | 806,504 |   |
|                                                                                                                                                    |   |                                         | 13,475,675 |                                  |   | 10,440,897 |   |
| TOTAL                ASSETS                                                                                                                             |   | $                                            | 30,927,752 |                                  | $      | 26,595,336 |   |
|                                                                                                                                                    |   |                                         |       |                                  |   |   |   |
| LIABILITIES                AND SHAREHOLDERS' EQUITY                                                                                                     |
|                                                                                                                                                    |   |                                         |       |                                  |   |   |   |
| CURRENT                LIABILITIES:                                                                                                                     |   |                                         |       |                                  |   |   |   |
| Current                portion of notes payable                                                                                                         |   | $                                            | 1,115,245  |                                  | $      | 616,811 |   |
| Accounts                payable                                                                                                                         |   |                                         | 1,402,277  |                                  |   | 1,120,269 |   |
| Accounts                payable - acquisitions                                                                                                          |   |                                         | 1,350,295  |                                  |   | 1,318,103 |   |
| Accrued                expenses and taxes payable                                                                                                       |   |                                         | 1,663,292  |                                  |   | 1,305,091 |   |
| Current                portion of capital lease obligations                                                                                             |   |                                         | -          |                                  |   | 24,082 |   |
| Deferred                revenue                                                                                                                         |   |                                         | 192,403    |                                  |   | 111,428 |   |
| Total                Current Liabilities                                                                                                                |   |                                         | 5,723,512  |                                  |   | 4,495,784 |   |
|                                                                                                                                                    |   |                                         |       |                                  |   |   |   |
| DEFERRED                INCOME TAX LIABILITY                                                                                                            |   |                                         | 1,028,000  |                                  |   | 971,000 |   |
| LONG-TERM                PORTION OF NOTES PAYABLE                                                                                                       |   |                                         | 3,997,452  |                                  |   | 2,429,396 |   |
| ACCRUED                RENTAL OBLIGATION                                                                                                                |   |                                         | 369,789    |                                  |   | 190,230 |   |
| OTHER                LIABILITIES                                                                                                                        |   |                                         | 157,526    |                                  |   | 125,000 |   |
| TOTAL                LIABILITIES                                                                                                                        |   |                                         | 11,276,279 |                                  |   | 8,211,410 |   |
|                                                                                                                                                    |   |                                         |       |                                  |   |   |   |
| COMMITMENTS                AND CONTINGENT LIABILITIES                                                                                                   |   |                                         | -          |                                  |   | - |   |
|                                                                                                                                                    |   |                                         |       |                                  |   |   |   |
| SHAREHOLDERS’                EQUITY                                                                                                               |   |                                         |       |                                  |   |   |   |
| Preferred                stock, $.01 par value - authorized, 1,000,000 shares; none issued                and                outstanding                |   |                                         |       |                                  |   |   |   |
| Common                stock, $.01 par value - authorized 20,000,000 shares; issued 8,993,504                shares in 2006 and 8,765,415 shares in 2005 |   |                                         | 89,936     |                                  |   | 87,654 |   |
| Additional                paid-in capital                                                                                                               |   |                                         | 13,637,873 |                                  |   | 12,897,151 |   |
| Retained                earnings                                                                                                                        |   |                                         | 6,029,696  |                                  |   | 5,505,153 |   |
|                                                                                                                                                    |   |                                         | 19,757,505 |                                  |   | 18,489,958 |   |
| Less                treasury stock, at cost (43,910 shares)                                                                                             |   |                                         | (106,032   | )                                     |   | (106,032 | ) |
| Total                Shareholders’ Equity                                                                                                         |   |                                         | 19,651,473 |                                  |   | 18,383,926 |   |
| TOTAL                LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                         |   | $                                            | 30,927,752 |                                  | $      | 26,595,336 |   |

----

|                                                                |   | **Six                Months Ended June 30,** |       |
|---------------------------------------------------------------------|--------|----------------------------------------------|------------|
|                                                                |   | **2006**                                     | ** ** | ** 2005** |   |
| Revenues:                                                           |   |                                         |       |    |   |
| Services                                                            |   | $                                            | 14,818,137 |   | $ | 10,509,893 |   |
| Product                sales                                        |   |                                         | 128,391    |   |   | 156,001 |   |
|                                                                |   |                                         | 14,946,528 |   |   | 10,665,894 |   |
| Costs                and Expenses (Income):                         |   |                                         |       |   |   |   |   |
| Costs                related to services                            |   |                                         | 6,993,219  |   |   | 4,874,876 |   |
| Costs                of products sold                               |   |                                         | 70,528     |   |   | 84,683 |   |
| Selling,                general and administrative expenses         |   |                                         | 6,991,787  |   |   | 4,889,544 |   |
| Interest                expense                                     |   |                                         | 175,748    |   |   | 23,088 |   |
| Other                income                                         |   |                                         | (257,297   | ) |   | (171,577 | ) |
|                                                                |   |                                         |       |   |   |   |   |
| Income                before Provision for Income Taxes             |   |                                         | 972,543    |   |   | 965,280 |   |
|                                                                |   |                                         |       |   |   |   |   |
| Provision                for Income Taxes                           |   |                                         | 448,000    |   |   | 463,000 |   |
|                                                                |   |                                         |       |   |   |   |   |
| NET                INCOME                                           |   | $                                            | 524,543    |   | $ | 502,280 |   |
|                                                                |   |                                         |       |   |   |   |   |
| Net                income per share:                                |   |                                         |       |   |   |   |   |
| Basic                                                               |   | $                                            | .06        |   | $ | .06 |   |
| Diluted                                                             |   | $                                            | .06        |   | $ | .06 |   |
|                                                                |   |                                         |       |   |   |   |   |
| Weighted                average number of common shares outstanding |   |                                         |       |   |   |   |   |
| Basic                                                               |   |                                         | 8,849,678  |   |   | 8,247,202 |   |
|                                                                |   |                                         |       |   |   |   |   |
| Diluted                                                             |   |                                         | 9,350,339  |   |   | 8,962,567 |   |

----

|                                                                |   | **Three                Months Ended June 30,** |       |
|---------------------------------------------------------------------|--------|------------------------------------------------|------------|
|                                                                |   | **2006**                                       | ** ** | ** 2005** |   |
| Revenues:                                                           |   |                                           |       |    |   |
| Services                                                            |   | $                                              | 7,748,256  |   | $ | 5,358,181 |   |
| Product                sales                                        |   |                                           | 48,061     |   |   | 69,143 |   |
|                                                                |   |                                           | 7,796,317  |   |   | 5,427,324 |   |
| Costs                and Expenses (Income):                         |   |                                           |       |   |   |   |   |
| Costs                related to services                            |   |                                           | 3,589,107  |   |   | 2,408,135 |   |
| Costs                of products sold                               |   |                                           | 26,077     |   |   | 55,027 |   |
| Selling,                general and administrative expenses         |   |                                           | 3,745,512  |   |   | 2,513,506 |   |
| Interest                expense                                     |   |                                           | 113,706    |   |   | 10,684 |   |
| Other                income                                         |   |                                           | (132,861   | ) |   | (88,809 | ) |
|                                                                |   |                                           |       |   |   |   |   |
| Income                before Provision for Income Taxes             |   |                                           | 454,776    |   |   | 528,781 |   |
|                                                                |   |                                           |       |   |   |   |   |
| Provision                for Income Taxes                           |   |                                           | 210,000    |   |   | 253,000 |   |
|                                                                |   |                                           |       |   |   |   |   |
| NET                INCOME                                           |   | $                                              | 244,776    |   | $ | 275,781 |   |
|                                                                |   |                                           |       |   |   |   |   |
| Net                income per share:                                |   |                                           |       |   |   |   |   |
| Basic                                                               |   | $                                              | .03        |   | $ | .03 |   |
| Diluted                                                             |   | $                                              | .03        |   | $ | .03 |   |
|                                                                |   |                                           |       |   |   |   |   |
| Weighted                average number of common shares outstanding |   |                                           |       |   |   |   |   |
| Basic                                                               |   |                                           | 8,924,786  |   |   | 8,397,848 |   |
|                                                                |   |                                           |       |   |   |   |   |
| Diluted                                                             |   |                                           | 9,429,125  |   |   | 9,045,989 |   |

----

|                                                                                                            |   | **Six                Months Ended June 30 ** |       |
|-----------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|------------|
|                                                                                                            |   | **2006**                                          | ** ** | **2005** |   |
| Cash                Flows From Operating Activities:                                                            |   |                                              |       |   |   |
|                                                                                                            |   |                                              |       |   |   |
| Net                income                                                                                       |   | $                                                 | 524,543    |   | $ | 502,280 |   |
|                                                                                                            |   |                                              |       |   |   |   |   |
| Adjustments                to reconcile net income to net cash provided by operating                activities: |   |                                              |       |   |   |   |   |
| Provision                for deferred income taxes                                                              |   |                                              | -          |   |   | 10,000 |   |
| Depreciation                and amortization                                                                    |   |                                              | 1,621,483  |   |   | 1,449,165 |   |
| Credit for                valuation of put warrant                                                         |   |                                              | -          |   |   | (10,000 | ) |
| Stock                compensation charge                                                                        |   |                                              | 85,000     |   |   | - |   |
| Decrease                (increase) in:                                                                          |   |                                              |       |   |   |   |   |
| Accounts                receivables                                                                             |   |                                              | (827,600   | ) |   | (522,222 | ) |
| Inventory                                                                                                       |   |                                              | 44,427     |   |   | 53,751 |   |
| Prepaid                expenses and other current assets                                                        |   |                                              | (263,908   | ) |   | (221,755 | ) |
| Increase                (decrease) in:                                                                          |   |                                              |       |   |   |   |   |
| Accounts                payable, accrued expenses and other                                                     |   |                                              | 804,094    |   |   | (9,493 | ) |
| Deferred                revenue                                                                                 |   |                                              | 80,975     |   |   | 11,176 |   |
|                                                                                                            |   |                                              |       |   |   |   |   |
| Net                Cash Provided by Operating Activities                                                        |   |                                              | 2,069,614  |   |   | 1,262,902 |   |
|                                                                                                            |   |                                              |       |   |   |   |   |
| Cash                Flows From Investing Activities:                                                            |   |                                              |       |   |   |   |   |
| Expenditures                for fixed assets                                                                    |   |                                              | (2,117,013 | ) |   | (649,996 | ) |
| Repayment                of notes receivable                                                                    |   |                                              | 12,045     |   |   | 11,459 |   |
| Payment                of accounts payable - acquisition                                                        |   |                                              | (310,872   | ) |   | - |   |
| Purchase                of MD OnCall                                                                            |   |                                              | (2,879,693 | ) |   | - |   |
| Purchases                - other                                                                                |   |                                              | (80,004    | ) |   | - |   |
| Purchase                of LIMC                                                                                 |   |                                              | -          |   |   | (443,643 | ) |
| Deposit                on equipment and software                                                                |   |                                              | (58,884    | ) |   | (201,625 | ) |
| Increase in                other assets                                                                    |   |                                              | (6,570     | ) |   | - |   |
| Payment                for account acquisitions and                                                             |   |                                              |       |   |   |   |   |
| licensing                agreement                                                                              |   |                                              | (174,320   | ) |   | (88,703 | ) |
|                                                                                                            |   |                                              |       |   |   |   |   |
| Net                Cash (Used In) Investing Activities                                                          |   |                                              | (5,615,311 | ) |   | (1,372,508 | ) |
|                                                                                                            |   |                                              |       |   |   |   |   |
| Cash                Flows From Financing Activities:                                                            |   |                                              |       |   |   |   |   |
| Principal                payments under capital lease obligation                                                |   |                                              | (24,082    | ) |   | (46,860 | ) |
| Proceeds                from notes payable                                                                      |   |                                              | 2,500,000  |   |   | **-** |   |
| Repayment                of notes payable                                                                       |   |                                              | (433,509   | ) |   | (138,921 | ) |
| Proceeds                upon exercise of stock options and warrants                                             |   |                                              | 314,938    |   |   | 1,602,943 |   |
|                                                                                                            |   |                                              |       |   |   |   |   |
| Net                Cash Provided by Financing Activities                                                        |   |                                              | 2,357,347  |   |   | 1,417,162 |   |

----

|                                                                                          |       | **Six                Months Ended June 30, ** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                                    | ** ** | **2006**                                           | ** ** | **2005** |   |
|                                                                                          |       |                                               |       |   |   |
| Net                (Decrease) Increase in Cash                                                |       | $                                                  | (1,188,950 | ) | $ | 1,307,556 |   |
|                                                                                          |       |                                               |       |   |   |   |   |
| Cash,                Beginning of Period                                                      |       |                                               | 2,638,984  |   |   | 3,186,852 |   |
|                                                                                          |       |                                               |       |   |   |   |   |
| Cash,                End of Period                                                            |       | $                                                  | 1,450,034  |   | $ | 4,494,408 |   |
|                                                                                          |       |                                               |       |   |   |   |   |
| SUPPLEMENTAL                DISCLOSURE OF CASH FLOW INFORMATION:                              |       |                                               |       |   |   |   |   |
|                                                                                          |       |                                               |       |   |   |   |   |
| CASH                PAID DURING THE PERIOD FOR INTEREST                                       |       | $                                                  | 124,216    |   | $ | 20,338 |   |
|                                                                                          |       |                                               |       |   |   |   |   |
| CASH                PAID DURING THE PERIOD FOR INCOME TAXES                                   |       | **$**                                              | 1,026,575  |   | $ | 187,964 |   |
|                                                                                          |       |                                               |       |   |   |   |   |
|  See                accompanying notes to condensed                financial statements. |
|                                                                                          |       |                                               |       |   |   |   |   |
| SUPPLEMENTAL                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   |   |   |  - |   |

----

*Accounting      Changes and Error Corrections*

*Inventory      Costs - An Amendment of ARB No. 43,*
*Chapter      4 *

----

*Accounting      for Stock Issued to Employees, *

*Share-Based      Payment *

----

|                                    |   | **Number                  of****Options** | ** ** | **Weighted                  Average Option Price** | ** ** | **Weighted                  Average Remaining Contractual Term                  (years)** | ** ** | **Aggregate                  Intrinsic Value** |   |
|-----------------------------------------|--------|-------------------------------------------|------------|----------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|------------------------------------------------|--------|
| Balance                  at January 1   |   |                                      | 1,287,283  |                                               |       | 3.56                                                                                      |       |                                           |   |   |   |   |   |
| Granted                                 |   |                                      | -          |                                               |       | -                                                                                         |       |                                           |   |   |   |   |   |
| Exercised                               |   |                                      | 130,062    |                                               |       | 1.67                                                                                      |       |                                           |   |   |   |   |   |
| Expired/Forfeited                       |   |                                      | 13,652     |                                               |       | 3.00                                                                                      |       |                                           |   |   |   |   |   |
| Balance                  at June 30     |   |                                      | 1,143,569  |                                               |       | 3.79                                                                                      |       |                                           | 5.40   |   | $ | 2,696,223 |   |
|                                    |   |                                      |       |                                               |       |                                                                                      |       |                                           |   |   |   |   |   |
| Vested                  and exercisable |   |                                      | 1,143,569  |                                               |       | 3.79                                                                                      |       |                                           | 5.40   |   | $ | 2,696,223 |   |

|                                    |   | **Number                  of Options** | ** ** | **Weighted                  Average Option Price** | ** ** | **Weighted                  Average Remaining Contractual Term                  (years)** | ** ** | **Aggregate                  Intrinsic Value** |   |
|-----------------------------------------|--------|----------------------------------------|------------|----------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|------------------------------------------------|--------|
| Balance                  at January 1   |   |                                   | 1,440,845  |                                               |       | 2.87                                                                                      |       |                                           |   |   |   |   |   |
| Granted                                 |   |                                   | 8,658      |                                               |       | 6.23                                                                                      |       |                                           |   |   |   |   |   |
| Exercised                               |   |                                   | 340,705    |                                               |       | 2.77                                                                                      |       |                                           |   |   |   |   |   |
| Expired/Forfeited                       |   |                                   | 17,722     |                                               |       | 2.83                                                                                      |       |                                           |   |   |   |   |   |
| Balance                  at June 30     |   |                                   | 1,091,076  |                                               |       | 2.92                                                                                      |       |                                           | 5.73   |   | $ | 3,187,372 |   |
|                                    |   |                                   |       |                                               |       |                                                                                      |       |                                           |   |   |   |   |   |
| Vested                  and exercisable |   |                                   | 1,081,076  |                                               |       | 2.91                                                                                      |       |                                           | 5.70   |   | $ | 3,142,572 |   |

----

|                                                          |   |   | **Six                  Months EndedJune 30,2006** |   |   | **Three Months                  EndedJune 30,****2006** |   |
|---------------------------------------------------------------|--------|--------|---------------------------------------------------|--------|--------|--------------------------------------------------------------|--------|
| Stock                  options                                |   | $      | 3,650                                             |   | $      | 1,825                                                        |   |
|                                                          |   |   |                                              |   |   |                                                         |   |
| Service                  based awards                         |   |   | 40,000                                            |   |   | 20,000                                                       |   |
| Performance                  based awards                     |   |   | 41,350                                            |   |   | 20,675                                                       |   |
| Tax                  benefit                                  |   |   | (39,100                                           | )      |   | (19,975                                                      | )      |
| Stock-based                  compensation expense, net of tax |   | $      | 45,900                                            |   | $      | 22,525                                                       |   |

----

*Accounting      for Stock-Based Compensation *

|                                                                                                       |       |       | **Six                  Months EndedJune                  30, ** | ** ** | ** ** | **Three                  Months EndedJune                  30, ** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|------------|----------------------------------------------------------------------|------------|------------|------------------------------------------------------------------------|------------|
| ** **                                                                                                 | ** ** | ** ** | **2005 **                                                       | ** ** | ** ** | ** 2005   **                                       |       |
| Net                  income, as reported                                                                   |       | $          | 502,280                                                              |       | $          | 275,781                                                                |       |
|                                                                                                       |       |       |                                                                      |       |       |                                                                   |       |
| Deduct:                  Total stock-based employee compensation                  expense determined under |       |       |                                                                 |       |       |                                                                   |       |
| fair                  value based method, net of tax                                                       |       |       | (20,778                                                              | )          |       | (20,778                                                                | )          |
| Pro                  forma net income                                                                      |       | $          | 481,502                                                              |       | $          | 255,003                                                                |       |
|                                                                                                       |       |       |                                                                 |       |       |                                                                   |       |
| Earnings                  per share:                                                                       |       |       |                                                                 |       |       |                                                                   |       |
| Basic                  - as reported                                                                       |       | $          | 0.06                                                                 |       | $          | 0.03                                                                   |       |
| Basic                  - pro forma                                                                         |       | $          | 0.06                                                                 |       | $          | 0.03                                                                   |       |
| Diluted                  - as reported                                                                     |       | $          | 0.06                                                                 |       | $          | 0.03                                                                   |       |
| Diluted                  - pro forma                                                                       |       | $          | 0.05                                                                 |       | $          | 0.03                                                                   |       |

|                                                                                                                 | ** ** | **Income****(Numerator)** | ** ** | **Shares**** (Denominator)** | ** ** | **Per-Share ****Amounts** |   |
|-----------------------------------------------------------------------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|--------------------------------|--------|
| Six                  Months June 30, 2006                                                                       |       |                      |       |                              |       |                           |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |
| Basic                  EPS - Income available to common                  stockholders                           |       | $                         | 524,543    |                              |       | 8,849,678                      |   | $ | .06 |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Effect                  of dilutive securities - Options                  and warrants                          |       |                      | -          |                              |       | 500,661                        |   |   |   |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Diluted                  EPS - Income available to common stockholders and assumed                  conversions |       | $                         | 524,543    |                              |       | 9,350,339                      |   | $ | .06 |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Three                  Months June 30, 2006                                                                     |       |                      |       |                              |       |                           |   |   |   |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Basic                  EPS -Income available to common                  stockholders                            |       | $                         | 244,776    |                              |       | 8,924,786                      |   | $ | .03 |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Effect                  of dilutive securities - Options                  and warrants                          |       |                      | -          |                              |       | 504,339                        |   |   |   |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Diluted                  EPS - Income available to common stockholders and assumed                  conversions |       | $                         | 244,776    |                              |       | 9,429,125                      |   | $ | .03 |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Six                  Months June 30, 2005                                                                       |       |                      |       |                              |       |                           |   |   |   |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Basic                  EPS - Income available to common                  stockholders                           |       | $                         | 502,280    |                              |       | 8,247,202                      |   | $ | .06 |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Effect                  of dilutive securities - Options                  and warrants                          |       |                      | -          |                              |       | 715,365                        |   |   |   |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Diluted                  EPS - Income available to common stockholders and assumed                  conversions |       | $                         | 502,280    |                              |       | 8,962,567                      |   | $ | .06 |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Three                  Months Ended June 30, 2005                                                               |       |                      |       |                              |       |                           |   |   |   |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Basic                  EPS -Income available to common                  stockholders                            |       | $                         | 275,781    |                              |       | 8,397,848                      |   | $ | .03 |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Effect                  of dilutive securities - Options                  and warrants                          |       |                      | -          |                              |       | 648,141                        |   |   |   |   |
|                                                                                                            |       |                      |       |                              |       |                           |   |   |   |   |
| Diluted                  EPS - Income available to common stockholders and assumed                  conversions |       | $                         | 275,781    |                              |       | 9,045,989                      |   | $ | .03 |   |

----

** **

----

| Accounts                  receivable       |   | $      | 138,798   |   |
|--------------------------------------------|--------|--------|-----------|--------|
| Fixed                  assets              |   |   | 260,000   |   |
| Non-compete                  agreement     |   |   | 50,000    |   |
| Customer                  list             |   |   | 1,050,000 |   |
| Goodwill                                   |   |   | 2,115,223 |   |
| Customer                  deposits         |   |   | (48,200   | )      |
|                                       |   |   |      |   |
| Cost                  to acquire MD OnCall |   | $      | 3,565,821 |   |

| Accounts                  receivable   |   | $      | 95,182    |   |
|----------------------------------------|--------|--------|-----------|--------|
| Fixed                  assets          |   |   | 150,000   |   |
| Non-compete                  agreement |   |   | 50,000    |   |
| Customer                  list         |   |   | 1,000,000 |   |
| Goodwill                               |   |   | 1,825,380 |   |
|                                   |   |   |      |   |
| Cost                  to acquire ACT   |   | $      | 3,120,562 |   |

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

----

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

|                                  |       | **Six                  Months Ended June 30,** | ** ** | **Three                  Months Ended June 30,** | ** ** |
|---------------------------------------|------------|------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                            | ** ** | ** 2006**                                 | ** ** | **2005**                                         | ** ** | **2006** | ** ** | **2005** |   |
| Revenue                               |       | $                                              | 15,469,000 |                                             | $          | 14,392,000 |   | $ | 7,796,000 |   | $ | 7,261,000 |   |
| Net                  income           |       |                                           | 545,000    |                                             |       | 659,000 |   |   | 245,000 |   |   | 362,000 |   |
| Net                  income per share |       |                                           |       |                                             |       |   |   |   |   |   |   |   |   |
| Basic                                 |       | $                                              | .06        |                                             | $          | .08 |   | $ | .03 |   | $ | .04 |   |
| Diluted                               |       | $                                              | .06        |                                             | $          | .07 |   | $ | .03 |   | $ | .04 |   |

----

----

|                                                         |   | **HSMS** | ** ** | **TBCS** | ** ** | **Safe                Com** | ** ** | **Consolidated** |    |
|---------------------------------------------------------|--------|----------|------------|----------|------------|-----------------------------|------------|------------------|---------|
| Six                Months Ended June 30, 2006           |   |     |       |     |       |                        |       |             |    |
| Revenue                                                 |   | $        | 7,715,985  |     | $          | 6,966,911                   |       | $                | 263,632 |   | $ | 14,946,528 |   |
| Income                before provision for income taxes |   |     | 21,031     |     |       | 912,163                     |       |             | 39,349  |   |   | 972,543 |   |
| Total                assets                             |   |     | 13,363,180 |     |       | 17,181,824                  |       |             | 382,748 |   |   | 30,927,752 |   |

|                                                    |   | **HSMS** | ** ** | **TBCS** | ** ** | **Safe                Com** | ** ** | **Consolidated** |    |
|---------------------------------------------------------|--------|----------|------------|----------|------------|-----------------------------|------------|------------------|---------|
| Three                Months Ended June 30, 2006         |   |     |       |     |       |                        |       |             |    |
| Revenue                                                 |   | $        | 3,931,827  |     | $          | 3,730,770                   |       | $                | 133,720 |   | $ | 7,796,317 |   |
| Income                before provision for income taxes |   |     | 19,870     |     |       | 419,379                     |       |             | 15,527  |   |   | 454,776 |   |

|                                                    |   | **HSMS** | ** ** | **TBCS ** | ** ** | **Safe                Com** | ** ** | **Consolidated** |    |
|---------------------------------------------------------|--------|----------|------------|----------------|------------|-----------------------------|------------|------------------|---------|
| Six                Months Ended June 30, 2005           |   |     |       |           |       |                        |       |             |    |   |   |   |   |
| Revenue                                                 |   | $        | 7,221,482  |           | $          | 3,216,952                   |       | $                | 227,460 |   | $ | 10,665,894 |   |
| Income                before provision for income taxes |   |     | 378,393    |           |       | 573,239                     |       |             | 13,648  |   |   | 965,280 |   |
| Total                assets                             |        |          | 12,911,854 |                |       | 7,771,924                   |            |                  | 844,363 |  |  | 21,528,141 |   |

|                                                           |   | **HSMS** | ** ** | **TBCS ** | ** ** | **Safe                Com** | ** ** | **Consolidated** |    |
|----------------------------------------------------------------|--------|----------|------------|----------------|------------|-----------------------------|------------|------------------|---------|
| Three                Months Ended June 30, 2005                |   |     |       |           |       |                        |       |             |    |
| Revenue                                                        |   | $        | 3,682,753  |           | $          | 1,638,391                   |       | $                | 106,180 |   | $ | 5,427,324 |   |
| Income                (loss) before provision for income taxes |   |     | 233,069    |           |       | 297,695                     |       |             | (1,983  | ) |   | 528,781 |   |

----

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

*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.*

**Overview:**

----

** **

** **

** **

----

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

| In                  thousands (000’s)            |   | **Three                  Months Ended June 30,** |       | **Six                  Months Ended June 30,** |       |
|--------------------------------------------------------|--------|--------------------------------------------------|------------|------------------------------------------------|------------|
|                                                   |   | **2006**                                         | ** ** | ** %**                                    | ** ** | **2005** | ** ** | ** %** | ** ** | **2006** | ** ** | ** %** | ** ** | **2005** | ** ** | ** %** |   |
| Revenues                                               |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |
| HSMS                                                   |   |                                             | 3,931      |                                           |       | **50** | **%** |   | 3,683 |   |   | **68** | **%** |   | 7,716 |   |   | **52** | **%** |   | 7,221 |   |   | **68** | **%** |
| TBCS                                                   |   |                                             | 3,731      |                                           |       | **48** | **%** |   | 1,638 |   |   | **30** | **%** |   | 6,967 |   |   | **46** | **%** |   | 3,217 |   |   | **30** | **%** |
| Safe                  Com                              |   |                                             | 134        |                                           |       | **2** | **%** |   | 106 |   |   | **2** | **%** |   | 264 |   |   | **2** | **%** |   | 228 |   |   | **2** | **%** |
|                                                   |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  Revenues                        |   |                                             | 7,796      |                                           |       | **100** | **%** |   | 5,427 |   |   | **100** | **%** |   | 14,947 |   |   | **100** | **%** |   | 10,666 |   |   | **100** | **%** |
|                                                   |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost                  of Services and Goods Sold       |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HSMS                                                   |   |                                             | 1,719      |                                           |       | **44** | **%** |   | 1,596 |   |   | **43** | **%** |   | 3,466 |   |   | **45** | **%** |   | 3,246 |   |   | **45** | **%** |
| TBCS                                                   |   |                                             | 1,825      |                                           |       | **49** | **%** |   | 803 |   |   | **49** | **%** |   | 3,463 |   |   | **50** | **%** |   | 1,579 |   |   | **49** | **%** |
| Safe                  Com                              |   |                                             | 71         |                                           |       | **53** | **%** |   | 63 |   |   | **59** | **%** |   | 135 |   |   | **51** | **%** |   | 134 |   |   | **59** | **%** |
|                                                   |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  Cost of Services and Goods Sold |   |                                             | 3,615      |                                           |       | **46** | **%** |   | 2,462 |   |   | **45** | **%** |   | 7,064 |   |   | **47** | **%** |   | 4,959 |   |   | **46** | **%** |
|                                                   |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross                  Profit                          |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HSMS                                                   |   |                                             | 2,212      |                                           |       | **56** | **%** |   | 2,087 |   |   | **57** | **%** |   | 4,250 |   |   | **55** | **%** |   | 3,975 |   |   | **55** | **%** |
| TBCS                                                   |   |                                             | 1,906      |                                           |       | **51** | **%** |   | 835 |   |   | **51** | **%** |   | 3,504 |   |   | **50** | **%** |   | 1,638 |   |   | **51** | **%** |
| Safe                  Com                              |   |                                             | 63         |                                           |       | **47** | **%** |   | 43 |   |   | **41** | **%** |   | 129 |   |   | **49** | **%** |   | 94 |   |   | **41** | **%** |
|                                                   |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  Gross Profit                    |   |                                             | 4,181      |                                           |       | **54** | **%** |   | 2,965 |   |   | **55** | **%** |   | 7,883 |   |   | **53** | **%** |   | 5,707 |   |   | **54** | **%** |
|                                                   |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,                  General & Administrative |   |                                             | 3,745      |                                           |       | **48** | **%** |   | 2,514 |   |   | **46** | **%** |   | 6,992 |   |   | **47** | **%** |   | 4,890 |   |   | **46** | **%** |
| Interest                  Expense                      |   |                                             | 114        |                                           |       | **1** | **%** |   | 11 |   |   | **0** | **%** |   | 176 |   |   | **1** | **%** |   | 23 |   |   | **0** | **%** |
| Other                  Income                          |   |                                             | (133       | )                                              |       | **(2** | **)%** |   | (89 | ) |   | **(2** | **)%** |   | (258 | ) |   | **(2** | **)%** |   | (171 | ) |   | **(2** | **)%** |
|                                                   |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  before Income Taxes            |   |                                             | 455        |                                           |       | **6** | **%** |   | 529 |   |   | **10** | **%** |   | 973 |   |   | **7** | **%** |   | 965 |   |   | **9** | **%** |
|                                                   |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision                  for Income Taxes            |   |                                             | 210        |                                           |       |   |   |   | 253 |   |   |   |   |   | 448 |   |   |   |   |   | 463 |   |   |   |   |
|                                                   |   |                                             |       |                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  Income                            |   |                                             | 245        |                                           |       |   |   |   | 276 |   |   |   |   |   | 525 |   |   |   |   |   | 502 |   |   |   |   |

**Note:      **

----

**Results      of Operations:**

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

**Revenues**
**:**

** **
**HSMS**

| ·                      | 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                6,100 PERS online. |
|----------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                        | 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 1,200 subscribers and accounted                  for an approximate $35,000 increase in revenue during the three                  months                  ended June 30, 2006. |
|------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                          | The                    remaining increase in revenue is from the increase in the execution                    of new                    agreements as well as monthly fee increases to certain                    subscribers. The Company anticipates that it will continue to grow                    its subscriber base and corresponding revenue through its continued                    sales                    and marketing efforts. |
|--------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

** TBCS**

| ·                      | 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 June 30, 2006, as compared                to the same period in 2005, of approximately $1,865,000. 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 $501,000 of revenue the three months ended June 30,                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 $715,000 of revenue for the three months ended June                  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 $649,000 of revenue                for                the three months ended June 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 $228,000, 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. |
|----------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                      | 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**

| ·   | 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 $53,000 for the three                months ended June 30, 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 (“LIC”) 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 $81,000 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 cost                efficiencies as a result of this move of its fulfillment and warehouse                distribution center to its LIC                facility. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**TBCS:**

| ·   | 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 $229,000 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 June 30, 2006 of approximately $766,000. The costs                related to sales in regard to the acquisitions were as follows: NSAS                -                $199,000; ACT - $287,000 and MD OnCall -                $280,000. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Selling,      General and Administrative Expenses:**

| ·   | 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 $95,000 of rent expense for the three months ended                June 30,                2006. The Company’s lease obligations for its warehouse and distribution                center ceased as of June 30, 2006. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | As                a result of the Company executing new agreements with healthcare                and                hospital organizations in 2006, the Company recorded additional commission                expense of $113,000 due to a salesperson for the three months ended                June                30, 2006. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Company incurred approximately $834,000 of selling, general and                administrative expenses for the three months ended June 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. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Interest      Expense:**

**Other      Income:**

**Income      Before Provision for Income Taxes:**

----

**Six      Months Ended June 30, 2006 Compared to Six Months Ended June 30,      2005**

**Revenues**
**:**

** **
**HSMS**

| ·   | 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 6,100 PERS online, has resulted in approximately $190,000                more revenue in 2006 as compared to the same period in 2005. The                Company                anticipates that the growth in this account will                continue. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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 1,200 subscribers and accounted                for an                approximate $75,000 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 as well as monthly fee increases to certain subscribers.                The                Company anticipates that it will continue to grow its subscriber                base and                corresponding revenue through its continued sales and marketing                efforts. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

** **
**TBCS**

| ·   | 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 six months ended June 30, 2006, as compared                to                the same period in 2005, of approximately $3,229,000. 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 $1,020,000 of revenue in 2006. The Company believes                the                acquisition of NSAS will help facilitate its growth within the Long                Island/New York geographical area. |
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| ·   | In                December 2005, the Company purchased the assets of Answer Connecticut,                Inc. (“ACT”). As a result of this acquisition, the Company realized                approximately $1,406,000 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 $803,000 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 $521,000, 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. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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**

| ·   | In                November 2004, the Company received an inquiry from the Federal                Communications Commission ("FCC"). In response to that inquiry the                Company                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. Based                on this,                the Company decided to accelerate the remediation of certain effected                PERS                units and incurred costs of approximately $59,000 in 2006 in connection                with its decision to accelerate the remediation of certain affected                PERS                units. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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 $101,000 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. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | 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 $110,000 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. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

** **
**TBCS:**

| ·   | 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 $510,000 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 six                months ended June 30, 2006 of approximately $1,274,000. The costs                related                to sales in regard to the acquisitions were as follows: NSAS - $376,000;                ACT - $554,000 and MD OnCall -                $344,000. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Selling,      General and Administrative Expenses:**

| ·   | 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 $190,000 of rent expense for the six months ended June                30,                2006. The Company occupied this additional space in the second quarter                of                2006. The Company’s lease obligations for its warehouse and distribution                center ceased as of June 30, 2006. |
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| ·   | 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 $135,000 of additional compensation expense, including                payroll taxes, as compared to the same period in 2005. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Company incurred approximately $1,386,000 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. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Interest      Expense:**

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**Other      Income:**

**Liquidity      and Capital Resources**

|                                           |   | **Payments                  Due by Period** |                   |
|------------------------------------------------|--------|---------------------------------------------|------------------------|
| **Contractual                  Obligations**   |   | **Total**                                   | ** **             | **Less                  than 1 year** | ** ** | **1-3                  years** | ** ** | **4-5                  years** | ** ** | **After                  5 years** |   |
| Revolving                  Credit Line         |   | $                                           | -                  0 - |   |   |   |   |   |  |   |   |   |   |   |   |   |
| Debt                  (a)                      |   | $                                           | 5,112,697              |   | $ | 1,115,245 |   | $ | 3,322,452 |   | $ | 675,000 |   |   |   |   |
| Operating                  Leases (b)          |   | $                                           | 9,522,899              |   | $ | 964,990 |   | $ | 2,424,413 |   | $ | 1,484,735 |   | $ | 4,648,761 |   |
| Total                  Contractual Obligations |   | $                                           | 14,635,596             |   | $ | 2,080,235 |   | $ | 5,746,865 |   | $ | 2,159,735 |   | $ | 4,648,761 |   |

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| (a)   | -                Debt includes the Company’s term loan of $5,350,000 which matures in March                2012, as well as loans associated with the purchase of                automobiles. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | -                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. |
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** **

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**Recent      Accounting Pronouncements:**

*Accounting      Changes and Error Corrections*

*Inventory      Costs - An Amendment of ARB No. 43,*
*Chapter      4 *

**Critical      Accounting Policies:**

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**Reserves      for Uncollectible Accounts Receivable**

**Fixed      Assets**

**Valuation      of Goodwill**

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

*Interest      Rate Risk*

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

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**PART      II - OTHER INFORMATION**

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

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

**Item        4.**
** **
**Submission        of Matters to a Vote of Security Holders.**

| **1.  ** | The                  vote with respect to the election of directors was as                  follows: |
|--------------------|------------------------------------------------------------------------------------------------------|

| **Name**                                      |   | **For** |      | **Authority                  Withheld** |   |
|-----------------------------------------------|--------|---------|-----------|-----------------------------------------|--------|
| (a) Howard                  M. Siegel    |   |    | 7,067,881 |                                    |   | 1,088,704 |   |
| (b) James                  LaPolla       |   |    | 8,068,735 |                                    |   | 87,850 |   |
| (c)                  Jack Rhian               |   |    | 8,091,935 |                                    |   | 64,650 |   |
| (d) Frederick                  Siegel    |   |    | 7,887,775 |                                    |   | 268,810 |   |
| (e) Ronald                  Levin        |   |    | 7,929,424 |                                    |   | 227,161 |   |
| (f) Yacov                  Shamash       |   |    | 8,082,435 |                                    |   | 74,150 |   |
| (g) John                  S.T. Gallagher |   |    | 8,095,435 |                                    |   | 61,150 |   |
| (h)                  Gregory Fortunoff        |   |    | 8,055,335 |                                    |   | 101,250 |   |

| **2.  ** | The                  proposal to approve the Additional Rhian Stock Grant was approved                  by the                  following vote: |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| **For**   |   | **Against** |    | **Abstain** |   | **Broker                  Non-Votes** |   |
|-----------|--------|-------------|---------|-------------|--------|---------------------------------------|--------|
| 3,992,431 |   |        | 190,236 |        |   | 49,713                                |   |   | 3,924,205 |   |

| **3.  ** | The                proposal to ratify the selection of Margolin, Winer & Evens LLP as the                Company’s independent auditors for the fiscal year ending December 31,                2006, was approved by the following vote: |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **For**   |   | **Against** |   | **Abstain** |   |
|-----------|--------|-------------|--------|-------------|--------|
| 8,126,314 |   |        | 14,051 |        |   | 16,220 |   |

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

| No.    |   | Description                                                                                                                             |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                    |
| 31.1   |   | Certification                  of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of                  2002                        |
| 31.2   |   | Certification                  of President Pursuant to Section 302 of the Sarbanes Oxley Act                  of                  2002 |
| 31.3   |   | Certification                  of CFO Pursuant to Section 302 of the Sarbanes Oxley Act of                  2002                        |
| 32.1   |   | Certification                  of CEO Pursuant to Section 906 of the Sarbanes Oxley Act of                  2002                        |
| 32.2   |   | Certification                  of President Pursuant to Section 906 of the Sarbanes Oxley Act                  of                  2002 |
| 32.3   |   | Certification                  of CFO Pursuant to Section 906 of the Sarbanes Oxley Act of                  2002                        |

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**SIGNATURES**

|                                |                                                                                               |                 |
|-------------------------------------|----------------------------------------------------------------------------------------------------|----------------------|
|                                | **AMERICAN                MEDICAL ALERT CORP.**                                                    |
|                           |                                                                                          |            |
| Dated:              August 14, 2006 | By:                                                                                      | /s/ Howard M. Siegel |
|                                | Name:              Howard M. Siegel                                                                |
|                                | Title:                Chairman of the Board, Chief                Executive                Officer |

|   |                                        |                           |
|--------|---------------------------------------------|--------------------------------|
|   | By:                               | /s/              Richard Rallo |
|   | Name:              Richard Rallo            |
|   | Title:              Chief Financial Officer |

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