**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C.** **20549**
 
 
 **FORM
        10-Q**
 
 ý
              QUARTERLY
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF 1934
 For
        the
        quarter ended March 31, 2008.
 **OR**
  ̈
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 For
        the
        transition period from ____________ to ____________
 
 Commission
        File Number 1-8635
 
 **AMERICAN
        MEDICAL ALERT CORP.**
 (Exact
        Name of Registrant as Specified in its Charter)
 
 New
                  York
              11-2571221(State
                  or other jurisdiction of
              (I.R.S.
                  Employerincorporation
                  or organization)
              Identification
                  Number)
 
 3265
        Lawson Boulevard, Oceanside, New York 11572
 (Address
        of principal executive offices)
 (Zip
        Code)
 
 (516)
        536-5850
 (Registrant’s
        telephone number, including area code)
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days. Yes x No
o
 
 Indicate
        by check mark whether registrant is a large accelerated filer, accelerated
        filer, non-accelerated filer, or a smaller reporting company. See the
        definitions of “large accelerated filer,” “accelerated filer” and “smaller
        reporting company” in Rule 12b-2 of the Exchange Act.
 Large
                    accelerated filero
                Accelerated
                    fileroNon-accelerated
                    filero(Do not check if a smaller reporting company)
                Smaller
                    reporting company x
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 on the Exchange Act)
 Yes
oNo x
 
 Indicate
        the number of shares outstanding of each of the issuer’s classes of common
        stock, as of the latest practicable date: 9,471,895 shares of $.01 par value
        common stock as of May 14, 2008.
  
  **AMERICAN
        MEDICAL ALERT CORP. AND SUBSIDIARIES**
 
 
 INDEX
 PAGEPart
                  IFinancial
                  InformationReport
                  of Independent Registered Public Accounting Firm
              1Condensed
                  Consolidated Balance Sheets for March 31, 2008and
                  December 31, 2007
              2Condensed
                  Consolidated Statements of Income for the
              3Three
                  Months Ended March 31, 2008 and 2007Condensed
                  Consolidated Statements of Cash Flows forthe
                  Three Months Ended March 31, 2008 and 2007
              4Notes
                  to Condensed Consolidated Financial Statements
              6Management’s
                  Discussion and Analysis ofFinancial
                  Condition and Results of Operations
              13Quantitative
                  and Qualitative Disclosures About Market Risk
              26Controls
                  and Procedures
              27Part
                  IIOther
                  Information
              27
 
 
  Report
        of
        Independent Registered Public Accounting Firm
 
 Board
        of
        Directors and Shareholders
 American
        Medical Alert Corp. and Subsidiaries
 Oceanside,
        New York
 
 We
        have
        reviewed the accompanying condensed consolidated balance sheet of American
        Medical Alert Corp. and Subsidiaries (the “Company”) as of March 31, 2008 and
        the related condensed consolidated statements of income and cash flows for
        the
        three-months ended March 31, 2008 and 2007. These interim financial statements
        are the responsibility of the Company's management.
 
 We
        conducted our reviews in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). A review of interim financial
        information consists principally of applying analytical procedures and making
        inquiries of persons responsible for financial and accounting matters. It
        is
        substantially less in scope than an audit conducted in accordance with the
        standards of the Public Company Accounting Oversight Board, the objective
        of
        which is the expression of an opinion regarding the financial statements
        taken
        as a whole. Accordingly, we do not express such an opinion.
 
 Based
        on
        our reviews, we are not aware of any material modifications that should be
        made
        to the condensed consolidated interim financial statements referred to above
        for
        them to be in conformity with accounting principles generally accepted in
        the
        United States of America.
 
 We
        have
        previously audited, in accordance with the standards of the Public Company
        Accounting Oversight Board (United States), the consolidated balance sheet
        of
        American Medical Alert Corp. and Subsidiaries as of December 31, 2007, and
        the
        related consolidated statements of income, shareholders’ equity and cash flows
        for the year then ended (not presented herein), and in our report dated March
        31, 2008 we expressed an unqualified opinion on those consolidated financial
        statements. In our opinion, the information set forth in the accompanying
        condensed consolidated balance sheet as of December 31, 2007 is fairly stated,
        in all material respects, in relation to the consolidated balance sheet from
        which it has been derived.
 
 
 /s/
        Margolin, Winer & Evens LLP
 
 
 Margolin,
        Winer & Evens LLP
 Garden
        City, New York
 
 May
        14,
        2008
 
 1
  **PART
        I - FINANCIAL INFORMATION**
  **Item
        1.** **Financial
        Statements** **.**
 
 AMERICAN
        MEDICAL ALERT CORP. AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED BALANCE SHEETS
 
 
 ASSETS
 March
                  31, 2008 (Unaudited)
              
              Dec. 31,
                  2007CURRENT
                  ASSETSCash
              
              $
              1,238,196
              
              $
              911,525Accounts
                  receivable(net
                  of allowance for doubtful accounts of $575,000 and
                  $554,000)
              
              
              5,840,457
              
              
              5,655,286Note
                  receivable
              
              
              27,292
              
              
              26,954Inventory
              
              
              689,607
              
              
              552,736Prepaid
                  income taxes
              
              
              131,368
              
              
              309,260Prepaid
                  expenses and other current assets
              
              
              962,097
              
              
              941,601Deferred
                  income taxes
              
              
              265,000
              
              
              275,000Total
                  Current Assets
              
              
              9,154,017
              
              
              8,672,362FIXED
                  ASSETS(Net
                  of accumulated depreciation and amortization)
              
              
              10,815,038
              
              
              10,799,313OTHER
                  ASSETSLong-term
                  portion of note receivable
              
              
              14,166
              
              
              21,117Intangible
                  assets(net
                  of accumulated amortization of $4,713,572 and $4,393,073)
              
              
              3,935,881
              
              
              4,232,226Goodwill
                  (net of accumulated amortization of $58,868)
              
              
              9,849,459
              
              
              9,766,194Other
                  assets
              
              
              1,539,109
              
              
              1,462,00915,338,615
              
              
              15,481,546TOTAL
                  ASSETS
              
              $
              35,307,670
              
              $
              34,953,221LIABILITIES
                  AND SHAREHOLDERS’ EQUITYCURRENT
                  LIABILITIES:Current
                  portion of long-term debt
              
              $
              1,416,024
              
              $
              1,414,419Accounts
                  payable
              
              
              1,066,304
              
              
              1,716,179Accounts
                  payable - acquisitions
              
              
              157,161
              
              
              73,896Accrued
                  expenses
              
              
              2,214,751
              
              
              1,550,283Current
                  portion of capital lease obligations
              
              
              42,688
              
              
              42,015Deferred
                  revenue
              
              
              260,977
              
              
              274,101Total
                  Current Liabilities
              
              
              5,157,905
              
              
              5,070,893DEFERRED
                  INCOME TAX LIABILITY
              
              
              937,000
              
              
              947,000LONG-TERM
                  DEBT, Net of Current Portion
              
              
              4,310,117
              
              
              4,694,316LONG
                  -TERM Portion of Capital Lease Obligations
              
              
              21,455
              
              
              32,425CUSTOMER
                  DEPOSITS
              
              
              87,600
              
              
              81,200ACCRUED
                  RENTAL OBLIGATION
              
              
              461,920
              
              
              446,722OTHER
                  LIABILITIES
              
              
              10,000
              
              
              10,000TOTAL
                  LIABILITIES
              
              
              10,985,997
              
              
              11,282,556COMMITMENTS
                  AND CONTINGENT LIABILITIES
              
              
              -
              
              
              -SHAREHOLDERS’
                  EQUITYPreferred
                  stock, $.01 par value - authorized, 1,000,000 shares; none issued
                  and
                  outstandingCommon
                  stock, $.01 par value - authorized 20,000,000 shares; issued
                  9,458,991shares in 2008 and 9,385,880 shares in 2007
              
              
              94,590
              
              
              93,859Additional
                  paid-in capital
              
              
              15,629,389
              
              
              15,421,227Retained
                  earnings
              
              
              8,734,271
              
              
              8,281,91424,458,250
              
              
              23,797,000Less
                  treasury stock, at cost (48,573 shares in 2008 and 46,798 in
                  2007)
              
              
              (136,577
              )
              
              (126,335
              )Total
                  Shareholders’ Equity
              
              
              24,321,673
              
              
              23,670,665TOTAL
                  LIABILITIES AND SHAREHOLDERS’ EQUITY
              
              $
              35,307,670
              
              $
              34,953,221
 See
          accompanying notes to condensed financial statements.
  2
  **AMERICAN
        MEDICAL ALERT CORP. AND SUBSIDIARIES**
  CONDENSED
        CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
 Three
                    Months Ended March 312008
                
                2007Revenues:Services
                
                $
                9,339,112
                
                $
                8,612,981Product
                    sales
                
                
                296,633
                
                
                89,8559,635,745
                
                
                8,702,836Costs
                    and Expenses (Income):Costs
                    related to services
                
                
                4,547,389
                
                
                4,242,061Costs
                    of products sold
                
                
                150,755
                
                
                52,207Selling,
                    general and administrative expenses
                
                
                4,188,852
                
                
                3,808,077Interest
                    expense
                
                
                102,055
                
                
                126,515Other
                    income
                
                
                (120,663
                )
                
                (169,732
                )Income
                    before Provision for Income Taxes
                
                
                767,357
                
                
                643,708Provision
                    for Income Taxes
                
                
                315,000
                
                
                277,000NET
                    INCOME
                
                $
                452,357
                
                $
                366,708Net
                    income per share:Basic
                
                $
                .05
                
                $
                .04Diluted
                
                $
                .05
                
                $
                .04Weighted
                    average number of common shares outstandingBasic
                
                
                9,406,070
                
                
                9,204,178Diluted
                
                
                9,698,665
                
                
                9,578,266
  See
          accompanying notes to condensed financial statements.
 
 3
  **AMERICAN
        MEDICAL ALERT CORP. AND SUBSIDIARIES**
 
 CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three
                    Months Ended March 31,2008
                
                2007Cash
                    Flows From Operating Activities:Net
                    income
                
                $
                452,357
                
                $
                366,708Adjustments
                    to reconcile net income to net cash provided by operating
                    activities:Depreciation
                    and amortization
                
                
                1,036,673
                
                
                960,459Stock
                    compensation charge
                
                
                88,893
                
                
                42,500Decrease
                    (increase) in:Accounts
                    receivable
                
                
                (185,171
                )
                
                (433,561
                )Inventory
                
                
                (136,871
                )
                
                (66,332
                )Prepaid
                    income taxes
                
                
                177,892
                
                
                -Prepaid
                    expenses and other current assets
                
                
                6,492
                
                
                (42,363
                )Increase
                    (decrease) in:Accounts
                    payable, accrued expenses and other
                
                
                36,190
                
                
                826,333Deferred
                    revenue
                
                
                (13,124
                )
                
                48,378Net
                    Cash Provided by Operating Activities
                
                
                1,463,331
                
                
                1,702,122Cash
                    Flows From Investing Activities:Expenditures
                    for fixed assets
                
                
                (729,371
                )
                
                (812,801
                )Repayment
                    of notes receivable
                
                
                6,613
                
                
                6,291Payment
                    of accounts payable-acquisitions
                
                
                -
                
                
                (171,532
                )Deposit
                    on equipment and software
                
                
                (106,953
                )
                
                -Purchase
                    - other
                
                
                (24,153
                )
                
                -Decrease
                    in other assets
                
                
                337
                
                
                98,048Net
                    Cash Used In Investing Activities
                
                
                (853,527
                )
                
                (879,994
                )Cash
                    Flows From Financing Activities:Principal
                    payments under capital lease obligation
                
                
                (10,297
                )
                
                (9,540
                )Purchase
                    of Treasury Stock
                
                
                (10,242
                )
                
                -Repayment
                    of long-term debt
                
                
                (382,594
                )
                
                (500,181
                )Proceeds
                    upon exercise of stock options and warrants
                
                
                120,000
                
                
                151,598Net
                    Cash Used In Financing Activities
                
                
                (283,133
                )
                
                (358,123
                )
 See
          accompanying notes to condensed financial statements.
  4
  **AMERICAN
        MEDICAL ALERT CORP. AND SUBSIDIARIES**
 
 CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 (Unaudited)
  Three
                      Months Ended March 31,2008
                  
                  2007Net
                      Increase in Cash
                  
                  $
                  326,671
                  
                  $
                  464,005Cash,
                      Beginning of Period
                  
                  
                  911,525
                  
                  
                  856,248Cash,
                      End of Period
                  
                  $
                  1,238,196
                  
                  $
                  1,320,253SUPPLEMENTAL
                      DISCLOSURE OF CASH FLOW INFORMATION:CASH
                      PAID DURING THE PERIOD FOR INTEREST
                  
                  $
                  78,480
                  
                  $
                  165,183CASH
                      PAID DURING THE PERIOD FOR INCOME TAXES
                  
                  $
                  134,240
                  
                  $
                  38,625SUPPLEMENTAL
                      SCHEDULE OF NONCASH INVESTINGAND
                      FINANCING ACTIVITIES:Accounts
                      payable due sellers in connection with acquisitions
                  
                  $
                  83,265
                  
                  $
                  -
 
 See
        accompanying notes to condensed financial statements.
 
 5
  **AMERICAN
        MEDICAL ALERT CORP. AND SUBSIDIARIES**
 
 Notes
        to
        Condensed Consolidated Financial Statements
 (Unaudited)
 
 1.
              General:
 
 These
        financial statements should be read in conjunction with the financial statements
        and notes thereto for the year ended December 31, 2007 included in the Company’s
        Annual Report on Form 10-K.
 
 2.
              Results
                  of Operations:
 
 The
        accompanying condensed consolidated financial statements include the accounts
        of
        American Medical Alert Corp. and its wholly-owned subsidiaries; together
        the
“Company”. All material inter-company balances and transactions have been
        eliminated.
 
 In
        the
        opinion of management, the accompanying unaudited condensed financial statements
        contain all adjustments (consisting only of normal recurring accruals) necessary
        to present fairly the financial position as of March 31, 2008 and the results
        of
        operations and cash flows for the three months ended March 31, 2008 and
        2007.
 
 The
        accounting policies used in preparing these financial statements are the
        same as
        those described in the December 31, 2007 financial statements.
 
 Certain
        amounts in the 2007 condensed consolidated financial statements have been
        reclassified to conform to the 2008 presentation.
 
 The
        results of operations for the three months ended March 31, 2008 are not
        necessarily indicative of the results to be expected for any other interim
        period or for the full year.
 
 3.
              Recent
                  Accounting Pronouncements:
 
 In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
        defines fair value, establishes guidelines for measuring fair value and expands
        disclosure regarding fair value measurements. SFAS No. 157 does not require
        new
        fair value measurements but rather eliminates inconsistencies in guidance
        found
        in various prior accounting pronouncements. SFAS No. 157 is effective for
        financial statements issued for fiscal years beginning after November 15,
        2007.
        The adoption of SFAS No. 157 did not have a material effect on the financial
        statements.
 
 In
        December 2007, the FASB issued SFAS No. 141(R) (revised 2007), “Business
        Combinations,” (“SFAS 141(R),”) which replaces SFAS 141. The statement provides
        a broader definition of the “Acquirer” and establishes principles and
        requirements of how the Acquirer recognizes and measures in its financial
        statements the identifiable assets acquired and liabilities assumed as well
        as
        how the Acquirer recognizes and measures the goodwill acquired in the business
        combination. SFAS 141(R) applies prospectively to business combinations for
        which the acquisition date is on or after the beginning of the first annual
        reporting period beginning on or after December 15, 2008.
 
 6
  4.
              Accounting
                  for Stock-Based Compensation:
  On
        January 1, 2006, the Company adopted SFAS No. 123 (revised 2004),
“Share-Based Payment” ** (“Statement
        No. 123(R)”), which requires the measurement and recognition of
        compensation expense for all share-based payments to employees, including
        grants
        of stock and employee stock options, based on estimated fair values. Stock-based
        compensation expense recognized during the period is based on the value of
        the
        portion of share-based payment awards that is ultimately expected to vest
        during
        the period.
 
 The
        Company granted 5,000 stock options during the three month period ended March
        31, 2008. No options were granted during the three month period ended March
        31,
        2007.
  The
        following tables summarize stock option activity for the first quarter ended
        March, 31, 2008 and 2007 .
 
 2008
 WeightedAverage
                
                AggregateWeighted
                
                Remaining
                
                IntrinsicNumber
                    of
                
                Average
                
                Contractual
                
                ValueOptions
                
                Option
                    Price
                
                Term
                    (years)Balance
                    at January 1
                
                
                922,273
                
                $
                4.01Granted
                
                
                5,000
                
                
                6.51Exercised
                
                
                (60,000
                )
                
                2.00Expired/Forfeited
                
                
                (9,525
                )
                
                2.85Balance
                    at March 31
                
                
                857,748
                
                $
                4.18
                
                
                5.17
                
                $
                1,365,846Vested
                    and exercisable
                
                
                855,248
                
                $
                4.17
                
                
                5.17
                
                $
                1,367,696


7
  2007
  WeightedAverage
                
                AggregateWeighted
                
                Remaining
                
                IntrinsicNumber
                    of
                
                Average
                
                Contractual
                
                ValueOptions
                
                Option
                    Price
                
                Term
                    (years)Balance
                    at January 1
                
                
                1,052,818
                
                $
                4.02Granted
                
                
                -
                
                
                -Exercised
                
                
                (26,400
                )
                
                3.66Expired/Forfeited
                
                
                (5,850
                )
                
                2.64Balance
                    at March 31
                
                
                1,020,568
                
                $
                4.04
                
                
                4.92
                
                $
                1,987,416Vested
                    and exercisable
                
                
                1,020,568
                
                $
                4.04
                
                
                4.92
                
                $
                1,987,416
 
 
 The
        aggregate intrinsic value of options exercised during the first quarter ended
        March 31, 2008 and 2007 was $288,000 and $68,153, respectively. There were
        2,500
        nonvested stock options outstanding as of March 31, 2008. There were no
        nonvested stock options outstanding as of March 31, 2007.
 
 The
        following table summarizes stock-based compensation expense related to all
        share-based payments recognized in the condensed consolidated statements
        of
        income.
 Three Months Ended March 312008
                
                2007Stock
                    options
                
                $
                3,750
                
                $
                -Stock
                    grants - other
                
                
                22,878
                
                
                -Service
                    based awards
                
                
                31,069
                
                
                20,000Performance
                    based awards
                
                
                31,196
                
                
                22,500Tax
                    benefit
                
                
                (36,450
                )
                
                (18,275
                )Stock-based
                    compensation expense, net of tax
                
                $
                52,443
                
                $
                24,225
 
 Stock
        Grants - Other
 
 The
        outside members of Board of Directors are granted shares of common stock
        at the
        end of each quarter as compensation for services provided as members of the
        Board of Directors and other committees. These share grants vest immediately.
 
 Service
        Based Awards
 
 In
        January 2006 and May 2007, the Company granted 60,000 and 22,000 restricted
        shares, respectively, to certain executives in respect of services rendered
        but
        at no monetary cost. These shares vest over periods ranging from 3 to 5 years,
        on December 31 of each year. The Company records the compensation expense
        on a
        straight-line basis over the vesting period. Fair value for restricted stock
        awards is based on the Company's closing common stock price on the date of
        grant.  As
        of
        March 31, 2008 and 2007 there were 31,500 and 12,500 shares vested,
        respectively. The aggregate grant date fair value of restricted stock grants
        was
        $537,100.  As
        of
        March 31, 2008 and 2007, the Company had $301,756 and $260,000, respectively,
        of
        total unrecognized compensation costs related to nonvested restricted stock
        units expected to be recognized over a weighted average period of 2.62
        years.
  8
  Performance
        Based Awards
 
 In
        January 2006 and May 2007, respectively, the Company granted share awards
        for
        90,000 shares (up to 18,000 shares per year through December 31, 2010) and
        46,000 shares (up to 11,500 shares per year through December 31, 2010) to
        certain executives. Vesting of such shares is contingent upon the Company
        achieving certain specified consolidated gross revenue and Earnings before
        Interest and Taxes (“EBIT”) objectives in each of the next four fiscal years
        ending December 31. The fair value of the performance shares (aggregate value
        of
        $909,400) is based on the closing trading value of the Company’s stock on the
        date of grant and assumes that performance goals will be achieved. The fair
        value of the shares is expensed over the performance period for those shares
        that are expected to ultimately vest. If such objectives are not met, no
        compensation cost is recognized and any recognized compensation cost is
        reversed.  As
        of
        March 31, 2008 and 2007, 29,750 and 18,000 shares were vested, respectively.
        As
        of March 31, 2008 and 2007, there was $569,939 and $409,500, respectively,
        of
        total unrecognized compensation costs related to nonvested share awards;
        that
        cost is expected to be recognized over a period of 2.75 years.
  5.
              Earnings
                  Per Share:
 
 Earnings
        per share data for the three months ended March 31, 2008 and 2007 is presented
        in conformity with SFAS No. 128, “Earnings Per Share.”
 
 The
        following table is a reconciliation of the numerators and denominators in
        computing earnings per share:
 March
                    31, 2008
                
                Income(Numerator)
                
                Shares(Denominator)
                
                Per-Share
                  AmountsBasic
                    EPS - Income available to common shareholders
                
                $
                452,357
                
                
                9,406,070
                
                $
                .05Effect
                    of dilutive securities - Options and warrants
                
                
                -
                
                
                292,596Diluted
                    EPS - Income available to common shareholders and assumed
                    conversions
                
                $
                452,357
                
                
                9,698,665
                
                $
                .05March
                    31, 2007Basic
                    EPS -Income available to common shareholders
                
                $
                366,708
                
                
                9,204,178
                
                $
                .04Effect
                    of dilutive securities - Options and warrants
                
                
                -
                
                
                374,088Diluted
                    EPS - Income available to common shareholders and assumed
                    conversions
                
                $
                366,708
                
                
                9,578,266
                
                $
                .04
  9
 
 6.
              Goodwill
 
 Changes
        in the carrying amount of goodwill, all of which relate to the Company’s TBCS
        segment, for the three months ended March 31, 2008 and 2007 are as
        follows:
 Three
                    Months Ended March 31, 2008Balance
                    as of January 1, 2008
                
                $
                9,766,194Additional
                    Goodwill
                
                
                83,265Balance
                    as of March 31, 2008
                
                $
                9,849,459Three
                    Months Ended March 31, 2007Balance
                    as of January 1, 2007
                
                $
                9,532,961Additional
                    Goodwill
                
                
                -Balance
                    as of March 31, 2007
                
                $
                9,532,961
 10
 
 The
        addition to goodwill during the three months ended March 31, 2008 relates
        to
        additional purchase price of American Mediconnect, Inc. based on the cash
        receipts from the clinical trials portion of the business. There were no
        additions to goodwill for the three months ended March 31, 2007.
 
 7.
              Long-term
                  Debt:
 
 As
        of
        January 1, 2006 the Company had a credit facility arrangement for $4,500,000
        which included a revolving credit line which permitted borrowings of $1,500,000
        (based on eligible receivables as defined) and a $3,000,000 term loan payable.
        The term loan is payable in equal monthly principal installments of $50,000
        over
        five years commencing January 2006. The revolving credit line was set to
        mature
        in May 2008.
 
 In
        March
        2006 and December 2006, the credit facility was amended whereby the Company
        obtained an additional $2,500,000 and $1,600,000 of term loans, the proceeds
        of
        which were utilized to finance certain acquisitions. These term loans are
        payable over five years in equal monthly principal installments of $41,666.67
        and $26,666.67, respectively. Additionally, certain of the covenants were
        amended.
 
 In
        December 2006, the credit facility was amended to reduce the interest rates
        charged by the bank such that borrowings under the term loan will bear interest
        at either (a) LIBOR plus 2.00% or (b) the prime rate or the federal funds
        effective rate plus .5%, whichever is greater, and the revolving credit line
        will bear interest at either (a) LIBOR plus 1.75% or (b) the prime rate or
        the
        federal funds effective rate plus .5%, whichever is greater.  The LIBOR
        interest rate charge shall be adjusted in .25% intervals based on the Company’s
        ratio of Consolidated Funded Debt to Consolidated EBITDA. In the third quarter
        of 2007, the interest rate was reduced by .25% based on this ratio. The Company
        has the option to choose between the two interest rate options under the
        amended
        term loan and revolving credit line. Borrowings under the credit facility
        are
        collateralized by substantially all of the assets of the Company.
 
 On
        April
        30, 2007, the Company amended its credit facility whereby the term of the
        revolving credit line was extended through June 2010 and the amount of credit
        available under the revolving credit line was increased to
        $2,500,000.
 
 As
        of
        March 31, 2008 and 2007, the Company was in compliance with its financial
        covenants in its loan agreement.
 
 8.
              Major
                  Customers:
 
 Since
        1983, the Company has provided Personal Emergency Response Systems (“PERS”)
        services to the City of New York’s Human Resources Administration Home Care
        Service Program ("HCSP"). The Company has been operating since 1993 with
        a
        contract, and related extensions, to provide HCSP with these
        services.  During
        the three months ended March 31, 2008 and 2007, the Company’s revenue from this
        contract represented 6 % and
        7%,  respectively,
        of its total revenue. As of March 31, 2008 and December 2007, accounts
        receivable from the contract represented 10% of accounts receivable and medical
        devices in service under the contract represented approximately 13% of medical
        devices.
 
 11
 
 In
        September 2006, Human Resource Administration (“HRA”) issued a bid proposal
        relating to the providing of the PERS services which are the subject of the
        Company’s contract. In October 2007, the Company was informed they were awarded
        the contract with respect to this proposal and executed such contract. The
        contract term is two years, commencing September 21, 2007, with two options
        to
        renew in favor of HRA for two additional two year terms. Under the terms
        of the
        agreement, a downward rate adjustment was made in conjunction with reduced
        equipment requirements from previous years. The estimated impact of this
        lower
        rate is to reduce this contract’s contribution to gross revenues by
        approximately $270,000 and its contribution to net income by approximately
        $150,000 on an annual basis. For the quarter ended March 31, 2008, the Company’s
        revenue from this contract decreased by approximately $65,000 and this
        contract’s contribution to net income decreased by approximately $37,000 as a
        result of this reduced rate.
  The
        Company was notified by HRA that one of the bidders has filed an Article
        78
        proceeding seeking a reversal of HRA's determination that the Company was
        the
        lowest qualified bidder. In April 2008, the Company was notified that the
        proceeding was completed and it was determined that the Company was the lowest
        qualified bidder.
  9.
              Segment
                  Reporting:
 
 Effective
        January 1, 2007, the Company has two reportable segments, (i) Health and
        Safety
        Monitoring Systems (“HSMS”) and (ii) Telephone Based Communication Services
        (“TBCS”).
 
 The
        table
        below provides a reconciliation of segment information to total consolidated
        information for the three months ended March 31, 2008 and 2007:
 
 2008
  HSMS
              
              TBCS
              
              ConsolidatedRevenue
              
              $
              4,836,955
              
              $
              4,798,790
              
              $
              9,635,745Income
                  before provision for income taxes
              
              
              520,261
              
              
              247,096
              
              
              767,357Total
                  assets
              
              
              16,778,179
              
              
              18,529,491
              
              
              35,307,670
  2007
  HSMS
              
              TBCS
              
              ConsolidatedRevenue
              
              $
              4,099,305
              
              $
              4,603,531
              
              $
              8,702,836Income
                  before provision for income taxes
              
              
              178,236
              
              
              465,472
              
              
              643,708Total
                  assets
              
              
              14,611,896
              
              
              18,737,114
              
              
              33,349,010
  12
  10.
              Commitments
                  and Contingencies:
 
 The
        Company is aware of various threatened or pending litigation claims against
        the
        Company relating to its products and services and other claims arising in
        the
        ordinary course of its business. The Company has given its insurance carrier
        notice of such claims and it believes there is sufficient insurance coverage
        to
        cover any such claims. Currently, there are no litigation claims for which
        an
        estimate of loss, if any, can be reasonably made as they are in the preliminary
        stages and therefore, no liability or corresponding insurance receivable
        has
        been recorded.
 
 **Item
        2.** **Management’s
        Discussion and Analysis of Financial Condition and Results of
        Operations** .
 
 The
        following discussion and analysis provides information which management believes
        is relevant to an assessment and understanding of the Company’s results of
        operations and financial condition. This discussion and analysis should be
        read
        in conjunction with the consolidated financial statements contained in the
        latest Annual Report on Form 10-K for the year ended December 31,
        2007.
 
 *Statements
        contained in this Quarterly Report on Form 10-Q include “forward-looking
        statements” within the meaning of Section 27A of the Securities Act and Section
        21E of the Exchange Act, including, in particular and without limitation,
        statements contained herein under the heading “Management’s Discussion and
        Analysis of Financial Condition and Results of Operations.” Forward-looking
        statements involve known and unknown risks, uncertainties and other factors
        which could cause the Company’s actual results, performance and achievements,
        whether expressed or implied by such forward-looking statements, not to occur
        or
        be realized. These include uncertainties relating to government regulation,
        technological changes, our expansion plans and product liability risks. Such
        forward-looking statements generally are based upon the Company’s best estimates
        of future results, performance or achievement, based upon current conditions
        and
        the most recent results of operations. Forward-looking statements may be
        identified by the use of forward-looking terminology such as “may,” “will,”
“expect,” “believe,” “estimate,” “project,” “anticipate,” “continue” or similar
        terms, variations of those terms or the negative of those terms.*
 
 *You
        should carefully consider such risks, uncertainties and other information,
        disclosures and discussions which contain cautionary statements identifying
        important factors that could cause actual results to differ materially from
        those provided in the forward-looking statements. Readers should carefully
        review the risk factors and any other cautionary statements contained in
        the
        Company’s Annual Report on Form 10-K and other public filings. The Company
        undertakes no obligation to publicly update or revise any forward-looking
        statements, whether as a result of new information, future events or
        otherwise.*
  13
  **Overview:**
 
 The
        Company’s primary business is the provision of healthcare communication services
        through (1) the development, marketing and monitoring of health and safety
        monitoring systems ( “ HSMS **”** )
        that
        include personal emergency response systems, telehealth/disease management
        monitoring systems, medication management systems and pharmacy security
        monitoring systems, and (2) telephony based communication services and solutions
        primarily for the healthcare community (“TBCS”). The Company’s products and
        services are primarily marketed to the healthcare community, including
        hospitals, home care, durable medical equipment, medical facility, hospice,
        pharmacy, managed care and other healthcare oriented organizations. The Company
        also offers certain products and services directly to consumers. Until 2000,
        the
        Company’s principal business was the marketing of personal emergency response
        systems ( “ PERS ” ),
        a
        device that allows a patient to signal an emergency response center for help
        in
        the event of a debilitating illness or accident. The Company provides PERS
        nationwide to private pay customers, Medicaid programs and healthcare related
        entities. In 2003, the Company initiated a relationship with a large, west
        coast
        managed care organization that recognized the value associated with provisioning
        PERS to its senior population and contracted with AMAC to roll out its PERS
        product to its subscribers. Today, the number of PERS units in service under
        that program has more than doubled. In February of 2007, the Company announced
        it had entered into an exclusive relationship with Walgreen Co. (“Walgreen”) to
        provide the Company’s flagship personal emergency response systems under the
        Walgreen brand. Walgreens Ready ResponseTM Medical Alert system is currently
        being offered at Walgreen stores throughout the United States and Puerto
        Rico.
        The Company believes the Walgreen relationship will provide a significant
        opportunity for AMAC to increase its PERS market share through Walgreen’s direct
        to consumer distribution channel.
 
 In
        2001,
        the Company entered the emerging telehealth market, a market in its embryonic
        stage, recognizing the opportunity to provide new monitoring technologies
        to
        assist healthcare professionals in home-based, health management activities.
        The
        Company has made a significant investment in its initial endeavors in the
        disease management monitoring market. This market focuses on various
        technologies to permit chronic disease management through remote patient
        monitoring. During the last several years, the Company has learned how this
        market functions and has explored a variety of methods of making a meaningful
        entry into this market. The Company has experienced technical difficulties
        with
        certain products supplied by its primary vendor, Health Hero Networks,
        Inc.  The Company has since reached a financial settlement with respect to
        the technical difficulties associated with the products.
 
 Beginning
        in 2000, the Company began a program of product diversification and customer
        base **** expansion
        to decrease its reliance on a single product line by marketing complementary
        call center and monitoring services to the healthcare community.
 
 The
        Company diversified its products/service mix to include telephony based
        communication services ( “ TBCS ” )
        for
        professionals in the healthcare community. The rationale to enter this segment
        had several components. These include targeting existing customer relationships,
        leveraging existing infrastructure capability, and establishing an additional
        significant revenue source. T he
        Company’s entry into the TBCS market was
        accomplished initially **** through
        acquisition and later
        through internally generated sales growth coupled
        with acquisitions .
  14
  The
        Company has since further expanded its communication infrastructure and capacity
        and now operates a total of nine communication centers in Long Island City
        and
        Port Jefferson, New York, New Jersey, Maryland, Connecticut, Massachusetts,
        Rhode Island, Illinois and New Mexico.
 
 In
        December 2006 the Company acquired the PhoneScreen brand (“PhoneScreen”) through
        the acquisition of AMI. PhoneScreen specializes in the recruitment of patients
        for clinical trials. PhoneScreen’s customers are pharmaceutical companies and
        Contract Research Organizations (“CROs”). CROs are organizations that
        offer pharmaceutical companies and medical entities a wide range of
        pharmaceutical research services which include the development and execution
        of
        clinical trials.
 
 The
        Company believes it has identified other communication needs as expressed
        by the
        expanded TBCS **** client
        base. In response to these expressed needs, the Company has developed
        specialized healthcare communication solutions. These solutions are creating
        additional opportunities for long-term revenue enhancement. The Company has
        broadened its service offerings and is in the process of significantly expanding the
        TBCS reporting segment.
 
 The
        Company believes that the overall mix of cash flow generating businesses
        from
        PERS and TBCS, combined with its emphasis on developing products and services
        in
        the telehealth field, provides the correct blend of stability and growth
        opportunity. The Company believes this strategy will enable it to maintain
        and
        increase its role in the healthcare communications field.
 
 **Components
        of Statements of Income by Operating Segment**
  The
        following table shows the components of the Statement of Income for the three
        months ended March 31, 2008 and 2007.
  In
                    thousands (000’s)
                
                Three
                    Months Ended March 31,2008
                
                %
                
                2007
                
                %RevenuesHSMS
                
                
                4,837
                
                
                **50**
                **%**
                
                4,100
                
                
                **47**
                **%**TBCS
                
                
                4,799
                
                
                **50**
                **%**
                
                4,603
                
                
                **53**
                **%**Total
                    Revenues
                
                
                9,636
                
                
                **100**
                **%**
                
                8,703
                
                
                **100**
                **%**Cost
                    of Services and Goods SoldHSMS
                
                
                2,082
                
                
                **43**
                **%**
                
                1,932
                
                
                **47**
                **%**TBCS
                
                
                2,616
                
                
                **55**
                **%**
                
                2,362
                
                
                **51**
                **%**Total
                    Cost of Services and Goods Sold
                
                
                4,698
                
                
                **49**
                **%**
                
                4,294
                
                
                **49**
                **%**Gross
                    ProfitHSMS
                
                
                2,755
                
                
                **57**
                **%**
                
                2,168
                
                
                **53**
                **%**TBCS
                
                
                2,183
                
                
                **45**
                **%**
                
                2,241
                
                
                **49**
                **%**Total
                    Gross Profit
                
                
                4,938
                
                
                **51**
                **%**
                
                4,409
                
                
                **51**
                **%**Selling,
                    General & Administrative
                
                
                4,189
                
                
                **43**
                **%**
                
                3,808
                
                
                **44**
                **%**Interest
                    Expense
                
                
                102
                
                
                **1**
                **%**
                
                127
                
                
                **1**
                **%**Other
                    Income
                
                
                (120
                )
                
                **(1**
                **)%**
                
                (170
                )
                
                **(2**
                **)%**Income
                    before Income Taxes
                
                
                767
                
                
                **8**
                **%**
                
                644
                
                
                **7**
                **%**Provision
                    for Income Taxes
                
                
                315
                
                
                
                
                
                277Net
                    Income
                
                
                452
                
                
                
                
                
                367
  **Note:** The
        percentages for Cost of Services and Goods Sold, Gross Profit and Selling,
        General & Administrative are calculated based on a percentage of revenue.
  15
  **Results
        of Operations:**
 
 The
        Company has two distinct operating business segments, which are HSMS and
        TBCS.
 
 **Three
        Months Ended March 31, 2008 Compared to Three Months Ended March 31,
        2007**
 
 **Revenues** **:**
 
 **HSMS**
 
 Revenues,
        which consist primarily of monthly rental revenues, increased approximately
        $737,000, or 18%, for the three months ended March 31, 2008 as compared to
        the
        same period in 2007. The increase is primarily attributed to the following
        factors:
 
 §
              In
                  2007, the Company entered into an exclusive arrangement with Walgreen
                  to
                  provide the Company’s PERS product which the Company believes will
                  positively impact the revenues generated from the HSMS services
                  being
                  provided directly to the consumer. In the first quarter of 2008,
                  the
                  Company recognized revenue of approximately $255,000 from this
                  arrangement. The Company anticipates it will continue to see increased
                  growth under this arrangement with
                  Walgreen.
  16
  §
              The
                  Company continues to realize increased revenue from the sale of
                  its
                  enhanced senior living products to retirement communities. During
                  the
                  first quarter of 2008, the Company generated approximately $143,000
                  of
                  product sales to retirement communities. In the first quarter of
                  2007, the
                  enhanced senior living product was still in development and no
                  sales were
                  generated. The Company anticipates it will continue to see growth
                  from
                  these product sales in 2008.
  §
              In
                  late 2006, the Company executed a new agreement with a third party
                  Agency
                  whereby PERS were placed online. Since inception, the subscriber
                  base
                  associated with this agreement has grown and accounted for an approximate
                  $125,000 increase in revenue during 2008 as compared to the same
                  period in
                  the prior year. The Company anticipates that the growth from this
                  new
                  agreement will continue throughout
                  2008.
  The
        remaining increase in revenue is from the execution of other new agreements,
        growth within its existing customer base as well as the acquisition of certain
        subscriber bases from companies which were providing the PERS service. This
        increase was partially offset by approximately $65,000 as a result of the
        contract executed with the Human Resource Administration (HRA) in 2007 whereby
        a
        downward rate adjustment was made.
 
 The
        Company anticipates that it will continue to grow its subscriber base and
        corresponding revenue through its continued sales and marketing
        efforts.
 
 **TBCS**
 
 The
        increase in revenues of approximately $196,000, or 4%, for the three months
        ended March 31, 2008 as compared to the same period in 2007 was primarily
        due to
        the following:
 
 §
              The
                  Company continues to experience revenue growth within its existing
                  telephone answering service businesses and realized increased revenue
                  of
                  approximately $286,000, as compared to the same period in 2007.
                  This
                  growth is due to the diversification of the Company’s customer base to
                  provide business process improvements to the healthcare sector.
                  This
                  increase was partially offset by a shortfall of revenue relating
                  to the
                  project based clinical trials business in the amount of approximately
                  $90,000.
 
 Based
        on
        the demand for US based healthcare communication services and on some of
        the
        work which is currently in process, the Company anticipates that there will
        be
        continued growth in this business segment with further expansion into healthcare
        and hospital organizations and to physicians through its marketing strategies.
 
 **Costs
        Related to Services and Goods Sold:**
 
 **HSMS**
 
 Costs
        related to services and goods sold increased by approximately $150,000 for
        the
        three months ended March 31, 2008 as compared to the same period in 2007,
        an
        increase of 8%, primarily due to the following:
 
 §
              During
                  2007, the Company increased the number of personnel working in
                  its
                  Emergency Response Center (“ERC”) department, specifically as it relates
                  to the Walgreen’s Ready ResponseTM Program which accounted for increased
                  costs of approximately $53,000 in 2008 as compared to the same
                  period in
                  2007. The Company hired additional personnel due to the increased
                  volume
                  of calls which is directly correlated to the increased subscriber
                  base
                  within the Walgreen’s Ready ResponseTM Program. The Company will continue
                  to monitor the growth and call volume received from subscribers
                  under the
                  Walgreen’s Ready ResponseTM Program and evaluate employee
                  levels.
  17
 §
              The
                  Company has incurred additional depreciation expense of approximately
                  $62,000 primarily due to the increased purchases of PERS related
                  products
                  during 2007. The increased purchases are a result of the increase
                  in the
                  number of subscribers online.
 
 §
              In
                  relation to the increase in the sales of its enhanced senior living
                  products to retirement communities the Company incurred costs of
                  approximately $65,000.
  **TBCS:**
 
 Costs
        related to services and goods sold increased by approximately $254,000 for
        the
        three months ended March 31, 2008 as compared to the same period in 2007,
        an
        increase of 11%, primarily due to the following:
 
 §
              In
                  the first quarter of 2008, the Company incurred additional labor
                  and
                  telephone service costs of approximately $235,000 with the majority
                  of
                  these costs relating to the consolidation of its call center
                  infrastructure. As part of operating nine call centers, in 2007
                  the
                  Company engaged in a consolidation strategy to leverage its call
                  center
                  infrastructure in an effort to maximize operational efficiencies.
                  During
                  the first quarter of 2008, the Company substantially completed
                  the
                  consolidation. As part of this initiative, the Company was incurred
                  these
                  additional costs to ensure a seamless transition. Moving forward,
                  the
                  Company believes this call center consolidation strategy will produce
                  operational and financial
                  efficiencies.
 
 **Selling,
        General and Administrative Expenses:**
 
 Selling,
        general and administrative expenses increased by approximately $381,000 for
        the
        three months ended March 31, 2008 as compared to the same period in 2007,
        an
        increase of 10%. The increase is primarily attributable to the
        following:
 
 §
              In
                  conjunction with various new programs and agreements, the Company
                  has
                  hired additional marketing and sales personnel, increased its advertising
                  and incurred additional travel expense. As a result of this, the
                  Company
                  recorded an increase in these expenses of approximately $286,000.
                  In an
                  effort to grow and expand these programs, the Company anticipates
                  to incur
                  increased marketing, advertising and travel expenses throughout
                  2008.
  18
  §
              The
                  Company incurred increased commissions of approximately $68,000
                  as a
                  result of two factors. First, in conjunction with the project based
                  clinical trials business, the Company utilizes an outside consulting
                  firm
                  to assist in the generation of customers. As part of this arrangement,
                  the
                  consultant earned approximately $40,000 more in the first quarter
                  of 2008
                  as compared to 2007. Secondly, the Company incurred approximately
                  $28,000
                  of increased commissions relating to the HSMS segment as it continues
                  to
                  look to expand its reach in the market place.
  There
        were other increases in selling, general and administrative expenses which
        arose
        out of the normal course of business such as executive and administrative
        salaries, legal and amortization expense which were partially offset by
        decreases in consulting and insurance expense.
 
 **Interest
        Expense:**
 
 Interest
        expense for the three months ended March 31, 2008 and 2007 was approximately
        $102,000 and $127,000, respectively. The decrease of $25,000 was primarily
        due
        to the Company continuing to pay down its term loan as well as a reduction
        in
        the interest rate.
 
 **Other
        Income:**
 
 Other
        income for the three months ended March 31, 2008 and 2007 was approximately
        $120,000 and $170,000, respectively. Other income for the three months ended
        March 31, 2008 includes a training incentive received from the State of New
        Mexico for hiring and training employees within the State. In 2007, the Company
        opened a network operating call center in New Mexico and hired employees
        to
        serve as operators for the telephone answering service. In 2008, the Company
        plans on continuing its further expansion into this facility by also hiring
        employees to serve as emergency response operators for the HSMS segment.
        This
        incentive accounted for approximately $80,000. Other income for the three
        months
        ended March 31, 2007 includes a Relocation and Employment Assistance Program
        (“REAP”) credit in the approximate amount of $118,000. In connection with the
        relocation of certain operations to Long Island City, New York in April 2003,
        the Company became eligible for the REAP credit which is based upon the number
        of employees relocated to this designated REAP area. The REAP is in effect
        for a
        twelve year period commencing in April 2003; during the first five years
        the
        Company will be refunded the full amount of the eligible credit and, thereafter,
        the benefit will be available only as a credit against New York City income
        taxes. As of 2008, the Company is available to only receive a credit against
        New
        York City income taxes, which is reflected within the Company’s tax
        provision.
 
 **Income
        Before Provision for Income Taxes:**
 
 The
        Company’s income before provision for income taxes for the three months ended
        March 31, 2008 was approximately $767,000 as compared to $644,000 for the
        same
        period in 2007. The increase of $123,000 for the three months ended March
        31,
        2008 primarily resulted from an increase in the Company's service and product
        revenues offset by an increase in the Company’s costs related to services and
        product sales and selling, general and administrative costs.
  19
  **Liquidity
        and Capital Resources**
 
 As
        of
        January 1, 2006 the Company had a credit facility arrangement for $4,500,000
        which included a revolving credit line which permitted borrowings of $1,500,000
        (based on eligible receivables as defined) and a $3,000,000 term loan payable
        in
        equal monthly principal installments of $50,000 over five years commencing
        January 2006. The revolving credit line was set to mature in May
        2008.
 
 In
        March
        2006 and December 2006, the Company’s credit facility was amended whereby the
        Company obtained an additional $2,500,000 and $1,600,000 of term loans, the
        proceeds of which were utilized to finance certain acquisitions. These term
        loans are payable over five years in equal monthly principal installments
        of
        $41,666.67 and $26,666.67, respectively. Additionally, certain of the covenants
        were amended.
 
 In
        December 2006, the credit facility was amended to reduce the interest rates
        charged by the bank such that borrowings under the term loan will bear interest
        at either (a) LIBOR plus 2.00% or (b) the prime rate or the federal funds
        effective rate plus .5%, whichever is greater, and the revolving credit line
        will bear interest at either (a) LIBOR plus 1.75% or (b) the prime rate or
        the
        federal funds effective rate plus .5%, whichever is greater.  The LIBOR
        interest rate charge shall be adjusted in .25% intervals based on the Company’s
        ratio of Consolidated Funded Debt to Consolidated EBITDA. In the third quarter
        of 2007, the interest rate was reduced by .25% based on this ratio. The Company
        has the option to choose between the two interest rate options under the
        amended
        term loan and revolving credit line. Borrowings under the credit facility
        are
        collateralized by substantially all of the assets of the Company.
 
 On
        April
        30, 2007, the Company amended its credit facility whereby the term of the
        revolving credit line was extended through June 2010 and the amount of credit
        available under the revolving credit line was increased to
        $2,500,000.
 
 As
        of
        March 31, 2008 and 2007, the Company was in compliance with its financial
        covenants in its loan agreement.
  20
  The
        following table is a summary of contractual obligations as of March 31,
        2008:
  Payments
                  Due by PeriodContractual
                  Obligations
              
              Total
              
              Less
                  than 1 year
              
              1-3
                  years
              
              4-5
                  years
              
              After
                  5 yearsRevolving
                  Credit Line
              
              $
              1,300,000
              
              
              
              
              $
              1,300,000Debt
                  (a)
              
              $
              4,426,141
              
              $
              1,416,024
              
              $
              3,010,117Capital
                  Leases (b)
              
              $
              64,143
              
              $
              42,688
              
              $
              21,455Operating
                  Leases (c)
              
              $
              8,115,519
              
              $
              1,006,244
              
              $
              2,216,553
              
              $
              1,573,824
              
              $
              3,318,898Purchase
                  Commitments (d)
              
              $
              811,630
              
              $
              811,630Interest
                  Expense (e)
              
              $
              486,926
              
              $
              252,232
              
              $
              234,694Acquisition
                  related Commitment (f)
              
              $
              157,161
              
              $
              157,161Total
                  Contractual Obligations
              
              $
              15,361,520
              
              $
              3,685,979
              
              $
              6,782,819
              
              $
              1,573,824
              
              $
              3,318,898
  (a)
              -
                  Debt includes the Company’s aggregate outstanding term loans which mature
                  in 2010 and 2011, as well as loans associated with the purchase
                  of
                  automobiles.
 
 (b)
              -
                  Capital lease obligations related to telephone answering service
                  equipment.  These capital lease obligations expire in the second
                  quarter of 2009.
 
 (c)
              -
                  Operating leases include rental of facilities at various locations
                  within
                  the United States. These operating leases include the rental of
                  the
                  Company’s call center, warehouse and the office facilities. These
                  operating leases have various maturity dates. The Company currently
                  leases
                  office space from the Chairman and principal shareholder and certain
                  telephone answering service managers pursuant to leases.
 
 (d)
              -Purchase
                  commitments relate to orders for the Company’s traditional
                  PERS.
 
 (e)
              -
                  Interest expense relates to interest on the Company’s revolving credit
                  line and debt at the Company’s current rate of
                  interest.
 
 (f)
              -
                  Acquisition related commitment involving payments due based on
                  collections
                  of the clinical trial business relating to the American Mediconnect,
                  Inc
                  acquisition in December 2006.
 
 The
        primary sources of liquidity are cash flows from operating activities.  Net
        cash provided by operating activities was approximately $1.5 million for
        the
        three months ended March 31, 2008, as compared to approximately $1.7 million
        for
        the same period in 2007. During the first quarter of 2008, the cash provided
        by
        operating activities was primarily from depreciation and amortization of
        approximately $1.0 million and net earnings of approximately $0.5 million.
        The
        components of depreciation and amortization primarily relate to the purchases
        of
        the Company’s traditional PERS product and the customer lists associated with
        the acquisition of telephone answering service businesses. Cash provided
        by
        operating activities during the first quarter of 2007 were the result of
        depreciation and amortization of approximately $1.0 million, increase in
        liabilities of $0.8 million and net earnings of approximately $0.4 million.
        These amounts were partially offset by an increase in trade receivables of
        approximately $0.4 million.
 
 Net
        cash
        used in investing activities for the three months ended March 31, 2008 and
        2007
        were approximately $0.9 million. The primary component of net cash used in
        investing activities in the first quarter of 2008 was capital expenditures
        of
        approximately $0.7 million. Capital expenditures for the first quarter of
        2008
        primarily related to the continued production and purchase of the traditional
        PERS system and the build-out of the Company’s new call center in New Mexico.
        The primary components of net cash used in investing activities in the first
        quarter of 2007 were capital expenditures of approximately $0.8 million.
  21
  Cash
        flows for the three months ended March 31, 2008 used in financing activities
        were approximately $0.3 million compared to $0.4 million for the same period
        in
        2007. The primary component of cash flow used in financing activities in
        the
        first quarter of 2008 was the payment of long-term debt of approximately
        $0.4
        million. This was partially offset by the proceeds received on the exercise
        of
        stock options of approximately $0.1 million. The primary component of cash
        flow
        used in financing activities in the first quarter of 2007 was the payment
        of
        long-term debt of approximately $0.5 million, which was partially offset
        by the
        proceeds received on the exercise of stock options of approximately $0.2
        million. Capital expenditures for the first quarter of 2007 primarily related
        to
        the continued production and purchase of the traditional PERS system.
 
 During
        the next twelve months, the Company anticipates it will make capital
        expenditures of approximately $3.25 - $3.75 million for the production and
        purchase of the traditional PERS systems, and telehealth systems, enhancements
        to its computer operating systems and the production of its pill dispensers
        (this includes outstanding purchase orders issued to purchase approximately
        $1.1
        million of the traditional PERS systems). This amount is subject to fluctuations
        based on customer demand. The Company also anticipates incurring approximately
        $0.2 - $0.4 million of costs relating to research and development of its
        telehealth product and enhanced pill dispenser. In July 2005, the Company
        entered into a technology, licensing, development, distribution and marketing
        agreement with a supplier for its HSMS sector. Pursuant to this agreement
        the
        Company anticipates expending approximately $0.2 - $0.4 million over the
        next
        twelve to eighteen months.
 
 As
        of
        March 31, 2008, the Company had approximately $1.2 million in cash and the
        Company’s working capital was approximately $4.0 million. The Company believes
        that with its present cash balance and with operations of the business
        generating positive cash flow, it will be able to meet its cash, working
        capital
        and capital expenditure needs for at least the next twelve months. The Company
        also has a revolving credit line, which expires in June 2010 that permits
        borrowings up to $2.5 million, of which $1,300,000 was outstanding at March
        31,
        2008.
 
 Off-Balance
        Sheet Arrangements:
 
 As
        of
        March 31, 2008, the Company has not entered into any off-balance sheet
        arrangements that are reasonably likely to have an impact on the Company’s
        current and future financial condition.
 
 Other
        Factors:
 
 In
        August
        2007 the Company entered into a settlement agreement whereby a third party
        has
        agreed to reimburse the Company in a net amount of $425,000 for matters related
        to certain product and warranty disputes. This reimbursement is associated
        with
        costs that have primarily been incurred in previous years relating to
        engineering, payroll and related costs and depreciation pertaining to the
        affected assets. The Company anticipates receiving this reimbursement over
        approximately two years. The Company also recorded a write-down on the assets
        affected of approximately $111,000 in the third quarter of 2007.
  22
  During
        2005, the Company entered into two operating lease agreements for additional
        space at its Long Island City, New York location in order to consolidate
        its
        warehouse and distribution center and accounting department into this location.
        The leases, which commenced in January 2006 and expire in March 2018, call
        for
        minimum annual rentals of $220,000 and $122,000, respectively, and are subject
        to increases in accordance with the term of the agreements. The Company is
        also
        responsible for the reimbursement of real estate taxes.
 
 On
        January 14, 2002, the Company entered into an operating lease agreement for
        space in Long Island City, New York in order to consolidate its HCI TBCS
        and
        PERS ERC/ Customer Service facilities.  The centralization of the ERC,
        Customer Service and H-LINK® OnCall operations has provided certain operating
        efficiencies and allowed for continued growth of the H-LINK and PERS
        divisions.  The fifteen (15) year lease term commenced in April 2003. 
The lease calls for minimum annual rentals of $307,900, subject to a 3% annual
        increase plus reimbursement for real estate taxes.
  Since
        1983, the Company has provided Personal Emergency Response Systems (“PERS”)
        services to the City of New York’s Human Resources Administration Home Care
        Service Program ("HCSP"). The Company has been operating since 1993 with
        a
        contract, and related extensions, to provide HCSP with these
        services.  During
        the three months ended March 31, 2008 and 2007, the Company’s revenue from this
        contract represented 6 % and
        7%,  respectively,
        of its total revenue. As of March 31, 2008 and December 2007, accounts
        receivable from the contract represented 10% of accounts receivable and medical
        devices in service under the contract represented approximately 13% of medical
        devices.
  In
        September 2006, Human Resource Administration (“HRA”) issued a bid proposal
        relating to the providing of the PERS services which are the subject of the
        Company’s contract. In October 2007, the Company was informed they were awarded
        the contract with respect to this proposal and executed such contract. The
        contract term is two years, commencing September 21, 2007, with two options
        to
        renew in favor of HRA for two additional two year terms. Under the terms
        of the
        agreement, a downward rate adjustment was made in conjunction with reduced
        equipment requirements from previous years. The estimated impact of this
        lower
        rate is to reduce this contract’s contribution to gross revenues by
        approximately $270,000 and its contribution to net income by approximately
        $150,000 on an annual basis. For the quarter ended March 31, 2008, the Company’s
        revenue from this contract decreased by approximately $65,000 and this
        contract’s contribution to net income decreased by approximately $37,000 as a
        result of this reduced rate.
  The
        Company was notified that one of the bidders has filed an Article 78 proceeding
        seeking a reversal of HRA's determination that the Company was the lowest
        qualified bidder. In April 2008, the Company was notified that the proceeding
        was completed and it was determined that the Company was the lowest qualified
        bidder.
 
 23
 
 The
        Company has paid approximately $815,000 in licensing fees and associated
        products in connection with the Company obtaining certain new remote monitoring
        products. While the Company is confident in the successful completion and
        sale
        of these new remote monitoring products, there has been a delay in the
        manufacturing of these products. Since the Company has capitalized these
        costs,
        if the Company does not obtain these products or the Company cannot market
        or
        sell the products, the Company would be required to write down all or some
        of
        the value of these costs.
 
 **Recent
        Accounting Pronouncements:**
 
 In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
        defines fair value, establishes guidelines for measuring fair value and expands
        disclosure regarding fair value measurements. SFAS No. 157 does not require
        new
        fair value measurements but rather eliminates inconsistencies in guidance
        found
        in various prior accounting pronouncements. SFAS No. 157 is effective for
        financial statements issued for fiscal years beginning after November 15,
        2007.
        The adoption of SFAS No. 157 did not have a material effect on our financial
        statements or results of operations.
 
 In
        December 2007, the FASB issued SFAS No. 141(R) (revised 2007), “SFAS 141(R),”
“Business Combinations,” which replaces SFAS 141. The statement provides a
        broader definition of the “Acquirer” and establishes principles and requirements
        of how the Acquirer recognizes and measures in its financial statements the
        identifiable assets acquired and liabilities assumed as well as how the acquirer
        recognizes and measures the goodwill acquired in the business combination.
        SFAS
        141(R) applies prospectively to business combinations for which the acquisition
        date is on or the beginning of the first annual reporting period beginning
        on or
        after December 15, 2008.
 
 **Critical
        Accounting Policies:**
 
 In
        preparing the financial statements, the Company makes estimates, assumptions
        and
        judgments that can have a significant impact on our revenue, operating income
        and net income, as well as on the reported amounts of certain assets and
        liabilities on the balance sheet. The Company believes that the estimates,
        assumptions and judgments involved in the accounting policies described below
        have the greatest potential impact on its financial statements due to the
        materiality of the accounts involved, and therefore, considers these to be
        its
        critical accounting policies. Estimates in each of these areas are based
        on
        historical experience and a variety of assumptions that the Company believes
        are
        appropriate. Actual results may differ from these estimates.
 
 **Reserves
        for Uncollectible Accounts Receivable**
  The
        Company makes ongoing assumptions relating to the collectibility of its accounts
        receivable. The accounts receivable amount on the balance sheet includes
        a
        reserve for accounts that might not be paid. In determining the amount of
        the
        reserve, the Company considers its historical level of credit losses. The
        Company also makes judgments about the creditworthiness of significant customers
        based on ongoing credit evaluations, and it assesses current economic trends
        that might impact the level of credit losses in the future. The Company recorded
        reserves for uncollectible accounts receivable of $575,000 as of March 31,
        2008,
        which is equal to 9.0% of total accounts receivable. While the Company believes
        that the current reserves are adequate to cover potential credit losses,
        it
        cannot predict future changes in the financial stability of its customers
        and
        the Company cannot guarantee that its reserves will continue to be adequate.
        For
        each 1% that actual credit losses exceed the reserves established, there
        would
        be an increase in general and administrative expenses and a reduction in
        reported net income of approximately $64,000. Conversely, for each 1% that
        actual credit losses are less than the reserve, this would decrease the
        Company’s general and administrative expenses and increase the reported net
        income by approximately $64,000.
  24
  **Fixed
        Assets**
  Fixed
        assets are stated at cost. Depreciation for financial reporting purposes
        is
        being provided by the straight-line method over the estimated useful lives
        of
        the related assets. The valuation and classification of these assets and
        the
        assignment of useful depreciable lives involves significant judgments and
        the
        use of estimates. Fixed assets are reviewed for impairment whenever events
        or
        changes in circumstances indicate that the carrying amount of an asset may
        not
        be recoverable. Historically, impairment losses have not been required. Any
        change in the assumption of estimated useful lives could either result in
        a
        decrease or increase to the Company’s financial results. A decrease in estimated
        useful life would reduce the Company’s net income and an increase in estimated
        useful life would increase the Company’s net income. If the estimated useful
        lives of the PERS medical device were decreased by one year, the cost of
        goods
        related to services would increase and net income would decrease by
        approximately $185,000 per annum. Conversely, if the estimated useful lives
        of
        the PERS medical device were increased by one year, the cost of goods related
        to
        services would decrease and net income would increase by approximately $145,000
        per annum.
  **Valuation
        of Goodwill**
  Pursuant
        to Statement of Financial Accounting Standards No. 142, “Goodwill and Other
        Intangible Assets,” goodwill and indefinite life intangible assets are no longer
        amortized, but are subject to annual impairment tests. To date, the Company
        has
        not been required to recognize an impairment of goodwill. The Company tests
        goodwill for impairment annually or more frequently when events or circumstances
        occur indicating goodwill might be impaired. This process involves estimating
        fair value using discounted cash flow analyses. Considerable management judgment
        is necessary to estimate discounted future cash flows. Assumptions used for
        these estimated cash flows were based on a combination of historical results
        and
        current internal forecasts. The Company cannot predict certain events that
        could
        adversely affect the reported value of goodwill, which totaled $9,849,459
        and
        $9,766,194 at March 31, 2008 and December 31, 2007, respectively. If the
        Company
        were to experience a significant adverse impact on goodwill, it would negatively
        impact the Company’s net income.
  25
  **Accounting
        for Stock-Based Awards**
  On
        January 1, 2006, the Company adopted FASB Statement No. 123 (revised
        2004), “Share-Based Payment” ** (“Statement
        No. 123(R)”), which requires the measurement and recognition of
        compensation expense for all share-based payments to employees, including
        grants
        of stock and employee stock options, based on estimated fair values. Stock-based
        compensation expense recognized during the period is based on the value of
        the
        portion of share-based payment awards that is ultimately expected to vest
        during
        the period.  As
        a
        result of adopting SFAS No. 123R, the Company recorded a pre-tax expense
        of
        approximately $89,000 and $42,500 for stock-based compensation for the three
        months ended March 31, 2008 and 2007, respectively.
  The
        determination of fair value of share-based payment awards to employees and
        directors on the date of grant using the Black-Scholes model is affected
        by the
        Company's stock price as well as assumptions regarding a number of highly
        complex and subjective variables. These variables include, but are not limited
        to the expected stock price volatility over the term of the awards, and actual
        and projected employee stock option exercise behaviors.
 
 **Item
        3.** **Quantitative
        and Qualitative Disclosures About Market Risk.**
 
 **Market
        Risk Disclosure**
 
 The
        Company does not hold market risk-sensitive financial instruments, nor does
        it
        trade financial instruments for trading purposes. All sales, operating items
        and
        balance sheet data are denominated in U.S. dollars; therefore, the Company
        has
        no significant foreign currency exchange rate risk.
 
 In
        the
        ordinary course of its business the Company enters into commitments to purchase
        raw materials and finished goods over a period of time, generally six months
        to
        one year, at contracted prices. At March 31, 2008 these future commitments
        were
        not at prices in excess of current market, or in quantities in excess of
        normal
        requirements. The Company does not utilize derivative contracts either to
        hedge
        existing risks or for speculative purposes.
 
 **Interest
        Rate Risk**
 
 We
        are
        exposed to market risk from changes in interest rates primarily through our
        financing activities. Interest on our outstanding balances on our term loan
        and
        revolving credit line under our credit facility accrues at a rate of LIBOR
        plus
        1.75% and LIBOR plus 1.50%, respectively. Our ability to carry out our business
        plan to finance future working capital requirements and acquisitions of TBCS
        businesses may be impacted if the cost of carrying debt fluctuates to the
        point
        where it becomes a burden on our resources.
  26
  **Item
        4T.** **Controls
        and Procedures** **.**
 
 As
        of the
        end of the period covered by this report, the Company carried out an evaluation,
        under the supervision and with the participation of its Chief Executive Officer
        and President and its Chief Financial Officer, of the effectiveness of the
        design and operation of our disclosure controls and procedures. Based on
        this
        evaluation, the Chief Executive Officer and President and the Chief Financial
        Officer concluded that the Company's disclosure controls and procedures are
        effective to ensure that information required to be disclosed by the Company
        in
        the reports filed by it under the Securities and Exchange Act of 1934, as
        amended, is recorded, processed, summarized and reported within the time
        periods
        specified in the SEC's rules and forms, and include controls and procedures
        designed to ensure that information required to be disclosed by the Company
        in
        such reports is accumulated and communicated to the Company's management,
        including the Chief Executive Officer and President and Chief Financial Officer
        of the Company, as appropriate to allow timely decisions regarding required
        disclosure.
 
 There
        were no changes in the Company’s internal control over financial reporting that
        occurred during the quarter ended March 31, 2008 that have materially affected,
        or are reasonably likely to materially affect, the Company’s internal control
        over financial reporting.
 
 **PART
        II - OTHER INFORMATION**
 
 **Item
        1.**  **** **Legal
        Proceedings** **.**
 
 The
        Company was notified that one of the bidders for the contract it was awarded
        with HRA, New York Merchants Protective Co., Inc. (“Merchants”) filed an Article
        78 proceeding on or about August 13, 2007. Merchants was moving to annul
        the
        HRA’s disqualification of Merchants as a bidder to provide PERS and to therefore
        annul the HRA’s contract with the Company. The Article 78 proceeding was filed
        in the Supreme Court of the State of New York, County of New York. In April
        2008, the Company was notified that the proceeding was completed and it was
        determined that the Company was the lowest qualified bidder.
 
 The
        Company is aware of various threatened or pending litigation claims against
        the
        Company relating to its products and services and other claims arising in
        the
        ordinary course of its business. The Company has given its insurance carrier
        notice of such claims and it believes there is sufficient insurance coverage
        to
        cover any such claims. Currently, there are no litigation claims for which
        an
        estimate of loss, if any, can be reasonably made as they are in the preliminary
        stages and therefore, no liability or corresponding insurance receivable
        has
        been recorded.
 **Item
          2.**  **Unregistered
          Sales of Equity Securities and Use of Proceeds**
  (c)
            Purchases of Equity Securities by the Issuer
 
 During
            the period covered by this report, the Company purchased an aggregate
            of 4,663
            shares of common stock from certain executives to effect tax withholding
            from
            such executives in connection with tax liabilities arising from stock
            grants.
            The purchases are delineated by month in the table below.
 Period
                
                Total
                    number of shares (or units) purchased
                
                Average
                    price paid per share (or unit)
                
                Total
                    number of shares (or units) purchased as part of publicly announced
                    plans
                    or programs
                
                Maximum
                    number (or approximate dollar value) of shares (or units) that
                    may yet be
                    purchased under the plans or programsJanuary
                    1, 2008 - January 31, 2008
                
                
                2,888
                    (1
                )
                $
                7.03
                
                
                0
                
                
                0March
                    1, 2008 - March 31, 2008
                
                
                1,775
                    (2
                )
                $
                5.77
                
                
                0
                
                
                0
 
 (1)  (i)
          1,029
          shares were repurchased by the Company from an executive of the Company
          in
          connection with the executive’s payment of tax liability arising from a bonus
          stock grant and (ii) 1,859 shares were repurchased by the Company from
          an
          executive of the Company in connection with the executive’s payment of tax
          liability arising from a non-performance stock grant.
 
 (2)  These
          shares were repurchased by the Company from an executive of the Company
          in
          connection with the executive’s payment of tax liability arising from a
          performance-related stock grant.
  27
  **Item
        6.** **Exhibits** **.**
 No.
                Description15.1
                Letter
                    from Margolin, Winer & Evens LLP,
                    the independent accountant of the Company,acknowledgingawareness
                    ofthe
                    usein
                    a registration statement of areport on the unaudited interim financialinformation
                    in this quarterly report31.1
                Certification
                    of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of
                    200231.2
                Certification
                    of CFO Pursuant to Section 302 of the Sarbanes Oxley Act of
                    200232.1
                Certification
                    of CEO Pursuant to Section 906 of the Sarbanes Oxley Act of
                    200232.2
                Certification
                    of CFO Pursuant to Section 906 of the Sarbanes Oxley Act of
                    2002
  28
 
 **SIGNATURES**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Company has
        duly
        caused this report to be signed on its behalf by the undersigned thereunto
        duly
        authorized.
 
 
 **AMERICAN
                  MEDICAL ALERT CORP.**Dated:
                  May 15, 2008
              By:
              /s/
                  Jack RhianName:
              Jack
                  RhianTitle:
              Chief
                  Executive Officer and President


By:
                /s/
                    Richard
                    RalloName:
                Richard
                      RalloTitle:
                Chief
                      Financial Officer
 
 29