UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(Mark One)
/ X /  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934
       For the fiscal year ended December 31, 2005

OR

/  /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

         For the transition period from _____________ to _______________

                         Commission file number 1-09848

                               ALMOST FAMILY, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                    06-1153720
(State or other jurisdiction of incorporation  (IRS Employer Identification No.)
         or organization)

  9510 Ormsby Station Road, Suite 300                      40223
(Address of principal executive offices)                 (Zip Code)

                                 (502) 891-1000
              (Registrant's telephone number, including area code)

                                      None.
              (Former name, former address and former fiscal year,
                         if changed since last report)

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                               Title of Each Class
                     Common Stock, par value $.10 per share
                         Preferred Stock Purchase Rights

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.   Yes____  No__X__

Indicate by check mark if the  registrant  is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes____   No__X__

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ______

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ____ Accelerated filer ___ Non-accelerated filer __X__
<PAGE>

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).   Yes_____   No__X___

As of June 30, 2005, the aggregate market value of the registrant's common stock
held by non-affiliates of the registrant was $25,936,973 based on the last sale
price of a share of the common stock as of June 30, 2005 ($13.71), as reported
by the NASDAQ SmallCap System.

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

              Class                           Outstanding at December 31, 2005
---------------------------------------       ---------------------------------
Common Stock, $.01 par value per share                 2,399,170  Shares

                       DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement relating to the registrant's Annual Meeting of
Stockholders, to be held May 16, 2005, is incorporated by reference in Part III
to the extent described therein.



<PAGE>



                                              TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>                                                                                                            <C>

PART I..............................................................................................................4
------


   Item 1.     Business.............................................................................................4

   Item 1A.    Risk Factors........................................................................................13

   Item 1B.    Unresolved Staff Comments...........................................................................21

   Item 2.     Properties..........................................................................................21

   Item 3.     Legal Proceedings...................................................................................21

   Item 4.     Submission of  Matters to a Vote of Security Holders................................................22

PART II............................................................................................................22


   Item 5.     Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
               Securities..........................................................................................22

   Item 6.     Selected Financial Data.............................................................................24

   Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations...............25

   Item 7A.  Quantitative and Qualitative Disclosures about Market Risk............................................40

   Item 8.     Financial Statements and Supplementary Data.........................................................41

   Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................63

   Item 9A.  Controls and Procedures...............................................................................63

   Item 9B.  Other Information.....................................................................................63

PART III...........................................................................................................64


   Item 10.   Directors and Executive Officers of the Registrant...................................................64

   Items 11, 12, 13 and 14.  Executive Compensation; Security Ownership of Certain Beneficial Owners and
   Management and Related Stockholder Matters; Certain Relationships and Related Transactions; and Principal
   Accountant Fees and Services....................................................................................65

PART IV............................................................................................................66


   Item 15.   Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................66

</TABLE>


<PAGE>


Special Caution Regarding Forward-Looking Statements

Certain statements contained in this annual report on Form 10-K, including,
without limitation, statements containing the words "believes," "anticipates,"
"intends," "expects," "assumes," "trends" and similar expressions, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are based upon the
Company's current plans, expectations and projections about future events.
However, such statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
factors include, among others, the following:
o     general economic and business conditions;
o     demographic changes;
o     changes in, or failure to comply with, existing governmental regulations;
o     legislative proposals for healthcare reform;
o     changes in Medicare and Medicaid reimbursement levels;
o     effects of competition in the markets in which the Company operates;
o     liability and other claims asserted against the Company;
o     ability to attract and retain qualified personnel;
o     availability and terms of capital;
o     loss of significant contracts or reduction in revenues associated with
      major payer sources;
o     ability of customers to pay for services;
o     business disruption due to natural disasters or terrorist acts;
o     ability to successfully integrate the operations of acquired businesses
      and achieve expected synergies and operating efficiencies from the
      acquisition, in each case within expected time-frames or at all;
o     effect on liquidity of the Company's financing arrangements;
o     changes in estimates and judgments associated with critical accounting
      policies and estimates.

For a detailed discussion of these and other factors that could cause the
Company's actual results to differ materially from the results contemplated by
the forward-looking statements, please refer to Item 1A. "Risk Factors" and Item
7 "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this report. The reader should not place undue
reliance on forward-looking statements, which speak only as of the date of this
report. Except as required under the federal securities laws and the rules and
regulations of the Securities and Exchange Commission ("SEC"), the Company does
not have any intention or obligation to publicly release any revisions to
forward-looking statements to reflect unforeseen or other events after the date
of this report. The Company has provided a detailed discussion of risk factors
within this annual report on Form 10-K and various filings with the SEC. The
reader is encouraged to review these risk factors and filings.

PART I

ITEM 1.  BUSINESS

In this report,  the terms  "Company," "we," "us" or "our" mean Almost Family,
Inc. and all subsidiaries  included in our consolidated financial statements.

Introduction

Almost Family, Inc. TM and subsidiaries (collectively "Almost Family") is a
leading regional provider of home health nursing services. We have service
locations in Florida, Kentucky, Ohio, Maryland, Connecticut, Massachusetts,
Indiana and Alabama (in order of revenue significance).

We were incorporated in Delaware in 1985. Through a predecessor merged into the
Company in 1991, we have been providing health care services, primarily home
health care, since 1976. On January 31, 2000, we changed the Company's name to
Almost Family, Inc. from Caretenders (R) HealthCorp. We reported approximately
<PAGE>

$75 million of revenues from continuing operations in the year ended December
31, 2005. Unless otherwise indicated, the financial information included in Part
I is for continuing operations.

How We Are Currently Organized and Operate

The Company has two reportable segments, Visiting Nurse (VN) and Personal Care
(PC). Reportable segments have been identified based upon how management has
organized the business by services provided to customers and the criteria in
SFAS 131, "Disclosures about Segments of an Enterprise and Related Information."

Our VN segment provides skilled medical services in patients' homes largely to
enable recipients to reduce or avoid periods of hospitalization and/or nursing
home care. VN Medicare revenues are generated on a per episode basis rather than
a fee per visit or hourly basis. Approximately 92% of the VN segment revenues
are generated from the Medicare program while the balance is generated from
Medicaid and private insurance programs.

Our PC segment services are also provided in patients' homes. These services
(generally provided by paraprofessional staff such as home health aides) are
generally of a custodial rather than skilled nature. PC revenues are generated
on an hourly basis. Approximately 67% of the PC segment revenues are generated
from Medicaid and other government programs while the balance is generated from
insurance programs and private pay patients.

Additional financial information about our segments can be found at Note 11 of
our consolidated financial statements and related notes included elsewhere in
this Form 10-K.

On September 30, 2005, we sold our Adult Day Care (ADC) business segment. The
ADC segment information has been reclassified from continuing operations into
discontinued operations for all periods presented.

Our View on Reimbursement and Diversification of Risk

Our Company is highly dependent on government reimbursement programs which pay
for the majority of the services we provide to our patients. Reimbursement under
these programs, primarily Medicare and Medicaid, is subject to frequent changes
as policy makers balance constituents' needs for health care services within the
constraints of the specific government's fiscal budgets.

We believe that an important key to our historical success and to our future
success is our ability to adapt our operations to meet changes in reimbursement
as they occur. One important way in which we have achieved this adaptability in
the past, and in which we plan to achieve it in the future, is to maintain some
level of diversification in our business mix.

The execution of our business plan will place primary emphasis on the
development of our Visiting Nurse operations. Our Personal Care operation will
help us maintain a level of diversification of reimbursement risk that we
believe is appropriate.



<PAGE>


Our Business Plan

Our future success depends on our ability to execute our business plan. Over the
next three to five years we will try to accomplish the following:

o        Generate meaningful same store sales growth through the focused
         provision of high quality services and attending to the needs of our
         patients;

o        Expand the significance of our Visiting Nurse, Medicare-based, home
         health services by selectively acquiring other quality providers, and
         through the startup of new agencies; and

o        Expand our capital base through both earnings performance and by
         seeking additional capital investments in our Company.

Based on our business plan, we expect our Visiting Nurse revenues to grow from
just under one-half of total revenues to about two-thirds of total revenues
sometime in the next three to five years.

Overview of Our Services

Visiting Nurse Services (VN)

Our Visiting Nurse services consist primarily of the provision of skilled
in-home medical services to patients in need of short-term recuperative health
care. A majority of our patients receive this care immediately following a
period of hospitalization or care in another type of in-patient facility. We
operate fourteen (14) Medicare-certified home health agencies with a total of
twenty-seven (27) locations. In the year ended December 31, 2005, approximately
92% of our visiting nurse segment revenues were derived from the Federal
Medicare program.

Our Visiting Nurse segment, which uses the trade name "CaretendersTM", provides
a comprehensive range of Medicare-certified home health nursing services. We
also receive payment from Medicaid and private insurance companies. Our
professional staff includes registered nurses, licensed practical nurses,
physical, speech and occupational therapists, and medical social workers. They
monitor medical treatment plans prescribed by physicians. Our professional staff
is subject to state licensing requirements in the particular states in which
they practice. Para-professional staff members (primarily home health aides)
also provide care to these patients.

Our Visiting Nurse segment operations located in Florida normally experience
higher admissions during the March quarter than in the other quarters due to
seasonal population fluctuations.

Personal Care Services (PC)

Our PC segment services are also provided in patients' homes. These services
(generally provided by para-professional staff such as home health aides) are
generally of a custodial rather than skilled nature. PC revenues are generated
on an hourly basis. We currently operate twenty five (25) personal care
locations.



<PAGE>



                                        Visiting Nurse           Personal Care
       Locations                            Branches                Branches
       ---------------------------   -----------------------  ------------------
       Florida:
         Bradenton                                   1                    -
         Fort Lauderdale                             1                    1
         Fort Myers                                  1                    1
         Gainesville                                 1                    -
         Melbourne                                   1                    -
         Naples                                      1                    1
         Orlando                                     1                    -
         Port Charlotte                              1                    -
         Port St. Lucie                              1                    1
         Sarasota                                    1                    1
         St. Augustine                               1                    1
         Titusville                                  1                    -
         Vero Beach                                  1                    -
         West Palm Beach                             -                    1
       Kentucky:
         Elizabethtown                               1                    1
         Frankfort                                   1                    -
         Lebanon Junction                            1                    1
         Lexington                                   1                    1
         Louisville                                  1                    1
         Northern KY (metro                          1                    1
          Cincinnati)
         Owensboro                                   1                    1
       Ohio:
         Akron                                       1                    1
         Cincinnati                                  -                    1
         Cleveland                                   2                    2
         Columbus                                    -                    1
         Youngstown                                  1                    -
       Connecticut:
         Bridgeport                                  -                    1
         Danbury                                     -                    1
         Stamford                                    -                    1
         Waterbury                                   -                    1
         West Haven                                  -                    1
       Massachusetts:
         Boston                                      1                    -
       Indiana:
         Evansville                                  1                    1
         New Albany                                  1                    -
       Alabama:
         Birmingham                                  -                    1
                                    -------------------  -------------------
       Total                                        27                   25
                                    ===================  ===================

Compensation for Services

We are compensated for our services by (i) Medicare (Visiting Nurse only), (ii)
Medicaid (iii) other third party payors (e.g. insurance companies and other
sources), and (iv) private pay (paid by personal funds). The rates of
reimbursement we receive from Medicare, Medicaid and Other Government programs
are generally dictated by those programs. In determining charge rates for goods
and services provided to our other customers, we evaluate several factors
including cost and market competition. We sometimes negotiate contract rates
with third party providers such as insurance companies.

Our reliance on government sponsored reimbursement programs makes us vulnerable
to possible legislative and administrative regulations and budget cut-backs that
could adversely affect the number of persons eligible for such programs, the
amount of allowed reimbursements or other aspects of the program, any of which
<PAGE>

could materially affect us. In addition, loss of certification or qualification
under Medicare or Medicaid programs could materially affect our ability to
effectively market our services.

The following table sets forth our revenues derived from each major class of
payor during the indicated periods (by percentage of net revenues):
<TABLE>
<CAPTION>
<S>                                <C>                      <C>                       <C>


                                         Year Ended         Year Ended December             Year Ended
Payor Group                           December 31, 2005           31, 2004              December 31, 2003
---------------------------------- ------------------------ ----------------------- ----------------------------
Medicare                                    49.1%                  44.7%                      43.0%
Medicaid and other Government
  Programs                                  34.3%                  36.1%                      37.6%
Insurance and private pay                   16.6%                  19.2%                      19.4%
</TABLE>

Medicare revenues are earned only in our VN segment where they account for 92%
of segment revenues. Historical changes in payment sources are primarily a
result of changes in the types of customers we attract.

Our business plan calls for us to increase our payor mix to about two-thirds
Medicare over the next three to five years with a corresponding decrease in the
percentage of revenue derived from Medicaid and Other Government Programs.

As shown above, approximately 34% of our 2005 revenues were derived from state
Medicaid and other government programs, most of which are currently facing
significant budget issues. The Medicaid programs in each of the states in which
we operate are taking actions or evaluating taking actions to control the rate
of growth of Medicaid expenditures. Among these actions are the following:
         o Redefining eligibility standards for Medicaid coverage
         o Redefining coverage criteria for home and community based care
           services
         o Slowing payments to providers by increasing the minimum time in which
           payments are made
         o Limiting reimbursement rate increases
         o Changing regulations under which providers must operate
The actions being taken and/or being considered are because the number of
Medicaid beneficiaries and their related expenditures are growing at a faster
rate than the government's revenue. Medicaid is consuming a greater percentage
of the budget. This issue is exacerbated when revenues slow in a slowing
economy. We believe that these financial issues are cyclical in nature rather
than indicative of the long-term prospect for Medicaid funding of health care
services. Additionally, we believe our services offer the lowest cost
alternative to institutional care and are a part of the solution to the states'
Medicaid financing problems. It is possible however, that the actions taken by
the state Medicaid programs in the future could have a significant unfavorable
impact on our results of operations, financial condition and liquidity.

See "Government Regulation" and "Risk Factors." We will monitor the effects of
such items and may consider modifications to our expansion and development
strategy when and if necessary.

Acquisitions

Over the next three to five years we will actively seek to acquire quality
providers of Medicare-certified home health services. We may consider
acquisitions of businesses that provide health care services similar to those we
currently offer in our Personal Care segment but we expect most of our
acquisition activity to be focused on Visiting Nurse operations.

Factors which may affect future acquisition decisions include the quality and
potential profitability of the business under consideration, and our
profitability and ability to finance the transaction.

During 2005, we acquired three visiting nurse operations one of which was
essentially a startup operation. These operations added to our market presence
in Florida.
<PAGE>

On April 1, 2005 we acquired all the assets and business operations of a
Medicare-certified visiting nurse agency located in Bradenton, Florida. The
total purchase price of $3.2 million was paid in the form of $2.5 million in
cash at closing with the $700,000 balance in the form of a note payable bearing
interest at 6% payable quarterly and the note balance due in two years after
closing. We funded the cash portion of the purchase price with available
borrowings on our revolving credit facility.

On November 12, 2005 we acquired all the assets and business operations of a
Medicare-certified visiting nurse agency located in St. Augustine, Florida. The
total purchase price of $800,000 was paid in the form of $600,000 in cash at
closing with the balance in the form of a note payable bearing interest at 6%
due in its entirety three years after closing. We funded the cash portion of the
purchase price with cash on hand.

Competition, Marketing and Customers

The visiting nurse industry is highly competitive and fragmented. Competitors
include larger publicly held companies such as Gentiva (NasdaqNM:GTIV) and
Amedisys (NasdaqNM:AMED), numerous privately held multi-site home care
companies, privately held single-site agencies and a significant number of
hospital-based agencies. In some locations, county health departments operate
home health agencies. Competition for customers at the local market level is
very fragmented and market specific. Generally each local market has its own
competitive profile and no one competitor has significant market share across
all our markets. The Federal Centers for Medicare and Medicaid Services (CMS,
formerly HCFA) estimates total national annual Medicare home health spending of
approximately $20.8 billion. To our best knowledge, no individual provider has
more than 2% share of the national market.

We believe the primary competitive factors are quality of service and reputation
among referral sources. However, competitors are increasingly focusing attention
on providing alternative site health care services. We market our services
through our site managers and marketing staff. These individuals contact
referral sources in their areas to market our services. Major referral sources
include: physicians, hospital discharge planners, Offices on Aging, social
workers, and group living facilities. We also utilize consumer-direct sales,
marketing and advertising programs designed to attract customers.

The personal care industry is likewise highly competitive but fragmented.
Competitors include home health providers, senior adult associations, and the
private hiring of caregivers. We market our services primarily through our site
managers, and we compete by offering a high quality of care and by helping
families identify and access solutions for care.

Government Regulation

Overview

The health care industry has experienced, and is expected to continue to
experience, extensive and dynamic change. In addition to economic forces and
regulatory influences, continuing political debate is subjecting the health care
industry to significant reform. Health care reforms have been enacted as
discussed elsewhere in this document and proposals for additional changes are
continuously formulated by departments of the Federal government, Congress, and
state legislatures.

We expect government officials to continue to review and assess alternative
health care delivery systems and payment methodologies. Changes in the law or
new interpretations of existing laws may have a dramatic effect on the
definition of permissible or impermissible activities, the relative cost of
doing business, and the methods and amounts of payments for medical care by both
governmental and other payors. We expect legislative changes to "balance the
budget" and slow the annual rate of growth of Medicare and Medicaid to continue.
Such future changes may further impact reimbursement for our services. There can
be no assurance that future legislation or regulatory changes will not have a
material adverse effect on our operations.



<PAGE>


Medicare Rates

On October 1, 2000, Medicare began paying providers of home health care at
fixed, predetermined rates for services and supplies bundled into 60-day
episodes of home health care. An episode of home health care spans a 60-day
period, starting with the first day a billable visit is furnished to a Medicare
beneficiary and ending 60 days later. If a patient is still in treatment on the
60th day a new episode begins on the 61st day regardless of whether a billable
visit is rendered on that day and ends 60 days later. The first day of a
consecutive episode, therefore, is not necessarily the new episode's first
billable visit. A base episode payment is established by the Medicare Program
through federal legislation for all episodes of care ended on or after the
applicable time periods detailed below:

Period                                                 Base episode
                                                        payment (1)
October 1, 2002 through September 30, 2003            $         2,159
October 1, 2003 through March 31, 2004                $         2,231
April 1, 2004 through December 31, 2004               $         2,213
January 1, 2005 through December 31, 2006             $         2,264

(1)    The actual episode payment rates, as presented in the table vary,
       depending on the home health resource groups ("HHRGs") to which Medicare
       patients are assigned and the per episode payment is typically reduced or
       increased by such factors as the patient's clinical, functional, and
       services utilization characteristics.

Under the Prospective Payment System ("PPS") for Medicare reimbursement, net
revenues are recorded based on a reimbursement rate that varies based on the
severity of the patient's condition, service needs and other related factors.
Net revenues are recorded as services are rendered to patients over the 60-day
episode period. At the end of each month, a portion of our revenue is estimated
for episodes in progress.

Medicare reimbursement, on an episodic basis, is subject to adjustment if there
are significant changes in the patient's condition during the treatment period
or if the patient is discharged but readmitted to another agency within the same
60-day episodic period. Revenue recognition under the Medicare reimbursement
program is based on certain variables including, but not limited, to: (i)
changes in the base episode payments established by the Medicare Program; (ii)
adjustments to the base episode payments for partial episodes and for other
factors, such as case mix, geographic wages, low utilization and intervening
events; and, (iii) recoveries of overpayments. Adjustments to revenue result
from differences between estimated and actual reimbursement amounts, an
inability to obtain appropriate billing documentation or authorizations
acceptable to the payor and other reasons unrelated to credit risk. We recognize
Medicare revenue on an episode-by-episode basis during the course of each
episode over its expected number of visits.

Effective January 1, 2006 the Medicare standard episode rates were frozen at the
2005 rates, but reimbursement was increased approximately 0.4% as a result of
the impact of the new CBSA wage indexes by location and the inclusion of the
rural add on that had been previously eliminated. Based on current law and
regulation, Medicare rates will change each January 1 thereafter, based on a
statutory formula the intent of which is to cause reimbursement rates to reflect
changes in the costs of providing services minus 0.8% per year.

Refer to the "Risk Factors" below, the "Notes to the Consolidated Financial
Statements" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for additional information.

Permits and Licensure

Many states require companies providing certain health care services to be
licensed as home health agencies. In addition, certain health care practitioners
employed by us require state licensure and/or registration and must comply with
laws and regulations governing standards of practice. The failure to obtain,
<PAGE>

renew or maintain any of the required regulatory approvals or licenses could
adversely affect our business. We believe we are currently licensed
appropriately where required by the laws of the states in which we operate.
There can be no assurance that either the states or the Federal government will
not impose additional regulations upon our activities which might adversely
affect our results of operations, financial condition, or liquidity.

Certificates of Need

Certain states require companies providing health care services to obtain a
certificate of need issued by a state health-planning agency. Where required by
law, we have obtained certificates of need from those states. There can be no
assurance that we will be able to obtain any certificates of need which may be
required in the future if we expand the scope of our services or if state laws
change to impose additional certificate of need requirements, and any attempt to
obtain additional certificates of need will cause us to incur certain expenses.

Other Regulations

A series of laws and regulations dating back to the Omnibus Budget
Reconciliation Act of 1987 ("OBRA 1987") and through the Medicare Prescription
Drug Bill of 2003 have been enacted and apply to us. Changes in applicable laws
and regulations have occurred from time to time since OBRA 1987 including
reimbursement reductions and changes to payment rules. Changes are also expected
to occur continuously for the foreseeable future.

As a provider of services under Medicare and Medicaid programs, we are subject
to the Medicare and Medicaid anti-kickback statute, also known as the "fraud and
abuse law." This law prohibits any bribe, kickback, rebate or remuneration of
any kind in return for, or as an inducement for, the referral of Medicare or
Medicaid patients. We may also be affected by the Federal physician
self-referral prohibition, known as the "Stark" law, which, with certain
exceptions, prohibits physicians from referring patients to entities in which
they have a financial interest or from which they receive financial benefit.
Many states in which we operate have adopted similar self-referral laws, as well
as laws that prohibit certain direct or indirect payments or fee-splitting
arrangements between health care providers, if such arrangements are designed to
induce or to encourage the referral of patients to a particular provider.

Health care is an area of extensive and dynamic regulatory change. Changes in
laws or regulations or new interpretations of existing laws or regulations can
have a dramatic effect on our permissible activities, the relative costs
associated with our doing business, and the amount and availability of
reimbursement we receive from government and third-party payors. Furthermore, we
will be required to comply with applicable regulations in each new state in
which we desire to provide services.

As a result of the Health Insurance Portability and Accountability Act of 1996
and other legislative and administrative initiatives, Federal and state
enforcement efforts against the health care industry have increased
dramatically, subjecting all health care providers to increased risk of scrutiny
and increased compliance costs.

We are subject to routine and periodic surveys and audits by various
governmental agencies. We believe that we are in material compliance with
applicable laws. However, we are unable to predict what additional government
regulations, if any, affecting our business may be enacted in the future, how
existing or future laws and regulations might be interpreted or whether we will
be able to comply with such laws and regulations either in the markets in which
we presently conduct, or wish to commence, business.

Health Insurance Portability and Accountability Act (HIPAA)

The Health Insurance Portability and Accountability Act (HIPAA) was enacted by
the Federal government on August 12, 1996, and requires organizations to adhere
to certain standards to protect data integrity, confidentiality and
availability. HIPAA also mandates, among other things, that the Department of
Health and Human Services adopt standards for the exchange of electronic health
information in an effort to encourage overall administrative simplification and
enhance the effectiveness and efficiency of the health care industry. We
implemented changes in our operations to comply with the privacy aspects of
HIPAA and we believe we are in compliance. We do not expect the cost of
complying with privacy standards to have a material effect on our results of
operations or financial position. We implemented changes in our operations to
comply with the electronic transaction and code sets aspects of HIPAA and we
believe we are in compliance with those requirements. Independent of HIPAA
<PAGE>

requirements, we have been developing new information systems with improved
functionality to facilitate improved billing and collection activities, reduced
administrative costs and improved decision support information. We have
incorporated the HIPAA mandated electronic transaction and code sets into the
design of this new software.

Regulations with regard to the security components of HIPAA were published in
2003. Those regulations were required to be implemented by April 2005. We
believe we are in substantial compliance with the security regulations, with no
material impact on our results of operations or financial position.

Insurance Programs and Costs

We bear significant insurance risk under our large-deductible automobile and
workers' compensation insurance programs and our self-insured employee health
program. Under our workers' compensation insurance program, we bear risk up to
$250,000 per incident. We purchase stop-loss insurance for our employee health
plan that places a specific limit, generally $100,000, on our exposure for any
individual covered life.

Malpractice and general patient liability claims for incidents which may give
rise to litigation have been asserted against us by various claimants. The
claims are in various stages of processing and some may ultimately be brought to
trial. We also know of incidents that have occurred through December 31, 2005
that may result in the assertion of additional claims. We carry insurance
coverage for this exposure; however our deductible per claim increased effective
July 21, 2005, from $250,000 to $500,000.

We record estimated liabilities for our insurance programs based on information
provided by the third-party plan administrators, historical claims experience,
the life cycle of claims, expected costs of claims incurred but not paid, and
expected costs to settle unpaid claims. We monitor our estimated
insurance-related liabilities on a monthly basis. As facts change, it may become
necessary to make adjustments that could be material to our results of
operations and financial condition.

We believe that our present insurance coverage is adequate. As part of our
on-going risk management and cost control efforts, we continually seek
alternatives that might provide a different balance of cost and risk, including
potentially accepting additional self-insurance risk in lieu of higher premium
costs.

Executive Officers

See Part III, Item 10 of this Form 10-K for information about the company's
executive officers.

Employees and Labor Relations

As of December 31, 2005 we had approximately 3,200 employees. None of our
employees are represented by a labor organization. We believe our relationship
with our employees is satisfactory.

Change in Fiscal Year End

In September 2001, we changed our fiscal year end from March 31 to December 31
effective December 31, 2001.

Discontinued Operations and Decision to Retain Visiting Nurse Operations

As part of a formal plan of separation, in November 1999 we sold our product
operations (consisting of infusion therapy and respiratory and medical equipment
businesses) to Lincare Holdings, Inc. in an asset sale for $14.5 million. We
<PAGE>

also announced that we would pursue available strategic alternatives to complete
the separation of our Visiting Nurse operations. We used the proceeds from the
sale to repay obligations outstanding under our bank line of credit. As a result
of the operational separations, we recorded a one-time net of tax charge of
approximately $5 million in 1999. That charge reduced the book value of these
operations to their expected net realizable value, provided for losses on
fulfilling certain obligations and close-down costs, and included the estimated
future operating results of the Visiting Nurse operations prior to separation.
As a result of those actions, we accounted for our Visiting Nurse operations as
discontinued operations in our financial statements for periods reported from
September 1999 through June 2001.

On September 14, 2001, our Board of Directors voted to terminate our previously
adopted plan of disposition for our Visiting Nurse operations. This decision
followed a period of extensive analysis and evaluation of numerous alternatives
for the business unit. As a result we terminated the use of discontinued
operations accounting treatment for the Visiting Nurse segment.

As a result of the decision to retain our Visiting Nurse segment, we recorded,
in the nine-months ended December 31, 2001, a one-time after-tax gain of
approximately $1.1 million resulting from the reversal of the remainder of
accounting reserves we originally recorded at the time we adopted discontinued
operations accounting treatment for this segment.

Discontinued Operations in Adult Day Care

On September 30, 2005, the Company completed an asset sale transaction to divest
its adult day care (ADC) segment to Active Services, Inc. ADC operations are now
reported as discontinued operations.

The purchase price consisted of $13.6 million cash plus assumption of
approximately $1.4 million of debt. In return, Active Services acquired
substantially all the assets and assumed certain working capital liabilities
related to Almost Family's 19 medical adult day care centers which generated
approximately $21.0 million in annual revenues. The transaction closed on
September 30, 2005. Proceeds of the sale were used to retire debt with the
balance invested in cash equivalents at December 31, 2005. The Company reported
an after-tax gain on the sale totaling $5.2 million.

We follow the guidance in SFAS 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets" and, when appropriate, reclassify operating units closed,
sold, or held for sale out of continuing operations and into discontinued
operations for all periods presented. Net losses from the discontinued ADC
segment were approximately ($221,000), ($363,000) and ($930,000) in the years
ended December 31, 2005, 2004 and 2003 respectively, and such amounts are
included in net loss from discontinued operations in the accompanying financial
statements.

Website Access to Our Reports

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and all amendments to those reports are available free of charge on
our website at www.almost-family.com as soon as reasonably practicable after
such material is electronically filed with or furnished to the Securities and
Exchange Commission. Also, copies of our annual report will be made available,
free of charge, upon written request.

ITEM 1A.  RISK FACTORS

Investing in our common stock involves a degree of risk. You should consider
carefully the following risks, as well as other information in this filing and
the incorporated documents before investing in our common stock.

Risks Related to Our Industry

Our profitability depends principally on the level of government-mandated
payment rates. Reductions in rates or rate increases that do not cover cost
increases may adversely affect our business.



<PAGE>


We generally receive fixed payments from Medicare for our services based on the
level of care that we provide patients. Consequently, our profitability largely
depends upon our ability to manage the cost of providing services. Although
current Medicare legislation provides for an annual adjustment of the various
payment rates based on the increase or decrease of the medical care expenditure
category of the Consumer Price Index, these Medicare payment rate increases may
be less than actual inflation or could be eliminated or reduced in any given
year. For example, in February 2006, the President of the United States signed
into law a bill freezing home health payment rates for 2006. The freeze will be
effective for one year. Consequently, if our cost of providing services, which
consists primarily of labor costs, is greater than the current Medicare payment
rate, our profitability would be negatively impacted.

If any of our agencies fail to comply with the conditions of  participation  in
the Medicare  program,  that agency could be terminated from the Medicare
program,  which would  adversely  affect our net patient service revenue and
profitability.

Each of our home care agencies must comply with the extensive conditions of
participation in the Medicare program. If any of our agencies fail to meet any
of the Medicare conditions of participation, that agency may receive a notice of
deficiency from the applicable state surveyor. If that agency then fails to
institute a plan of correction to correct the deficiency within the correction
period provided by the state surveyor, that agency could be terminated from the
Medicare program. Any termination of one or more of our home care agencies from
the Medicare program for failure to satisfy the program's conditions of
participation could adversely affect our net service revenue and profitability.
CMS has recently announced that it is currently revising the Medicare conditions
of participation for home health, with publication expected no earlier than
Spring 2006. We do not know at this time what effect the revisions will have on
our operations, and there can be no assurances that the revisions will not
negatively affect our profitability.

We are subject to extensive government regulation. Any changes to the laws and
regulations governing our business, or the interpretation and enforcement of
those laws or regulations, could cause us to modify our operations and could
negatively impact our operating results.

The federal government and the states in which we operate regulate our industry
extensively. The laws and regulations governing our operations, along with the
terms of participation in various government programs, regulate how we do
business, the services we offer, and our interactions with patients and the
public. These laws and regulations, and their interpretations, are subject to
frequent change. Changes in existing laws and regulations, or their
interpretations, or the enactment of new laws or regulations could reduce our
profitability by:
o   increasing our liability;
o   increasing our administrative and other costs;
o   increasing or decreasing mandated services;
o   forcing us to restructure our relationships with referral sources and
    providers; or
o   requiring us to implement additional or different programs and systems.

For example, Congress enacted the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA"), which mandates that provider organizations
enhance privacy protections for patient health information. This requires
companies like us to develop, maintain and monitor administrative, information,
and security systems to prevent inappropriate release of protected health
information. Compliance with this law has added, and will continue to add, costs
that affect our profitability. Failure to comply with HIPAA could result in
fines and penalties, as well as our exclusion from Medicare and Medicaid
programs.

In addition, we are subject to various routine and non-routine governmental
reviews, audits, and investigations. Violation of the laws governing our
operations, or changes in interpretations of those laws, could result in the
imposition of fines, civil or criminal penalties, the termination of our rights
to participate in federal and state-sponsored programs, and the suspension or
revocation of our licenses. If we become subject to material fines or if other
sanctions or other corrective actions are imposed on us, we might suffer a
substantial reduction in profitability.

If we are unable to maintain  relationships  with existing  patient  referral
sources or to establish new referral sources, our growth and profitability could
 be adversely affected.

Our success depends significantly on referrals from physicians, hospitals, and
other patient referral sources in the communities that our home care agencies
serve, as well as on our ability to maintain good relationships with these
<PAGE>

referral sources. Our referral sources are not contractually obligated to refer
home care patients to us and may refer their patients to other providers. Our
growth and profitability depend on our ability to establish and maintain close
working relationships with these patient referral sources and to increase
awareness and acceptance of the benefits of home care by our referral sources
and their patients. We cannot assure you that we will be able to maintain our
existing referral source relationships or that we will be able to develop and
maintain new relationships in existing or new markets. Our loss of, or failure
to maintain, existing relationships or our failure to develop new relationships
could adversely affect our ability to expand our operations and operate
profitably.

We are  subject to federal  and state  laws that  govern our  financial
relationships  with  physicians  and other healthcare providers, including
potential or current referral sources.

We are required to comply with federal and state laws, generally referred to as
"anti-kickback laws," that prohibit certain direct and indirect payments or
fee-splitting arrangements between healthcare providers that are designed to
encourage the referral of patients to a particular provider for medical
services. In addition to enacting anti-kickback laws, some of the states in
which we operate have enacted laws prohibiting certain business relationships
between physicians and other providers of healthcare services. We currently have
contractual relationships with certain physicians who provide consulting
services to our company. Many of these physicians are current or potential
referral sources. Although we believe our physician consultant arrangements
currently comply with state and federal anti-kickback laws and state laws
regulating relationships between healthcare providers, we cannot assure you that
courts or regulatory agencies will not interpret these laws in ways that will
implicate our physician consultant arrangements. Violations of anti-kickback and
similar laws could lead to fines or sanctions that may have a material adverse
effect on our operations.

We may be subject to substantial malpractice or other similar claims.

The services we offer involve an inherent risk of professional liability and
related substantial damage awards. On any given day, we have several hundred
nurses and other direct care personnel driving to and from patients' homes where
they deliver medical and other care. Due to the nature of our business, we and
the caregivers who provide services on our behalf may be the subject of medical
malpractice claims. These caregivers could be considered our agents, and, as a
result, we could be held liable for their medical negligence. We cannot predict
the effect that any claims of this nature, regardless of their ultimate outcome,
could have on our business or reputation or on our ability to attract and retain
patients and employees. We maintain malpractice liability insurance and are
responsible for amounts in excess of the limits of our coverage.

Delays in reimbursement may cause liquidity problems.

Our business is characterized by delays in reimbursement from the time we
provide services to the time we receive reimbursement or payment for these
services. If we have information system problems or issues that arise with
Medicare, we may encounter delays in our payment cycle. Such a timing delay may
cause working capital shortages. Working capital management, including prompt
and diligent billing and collection, is an important factor in our results of
operations and liquidity. We cannot assure you that system problems, Medicare
issues or industry trends will not extend our collection period, adversely
impact our working capital, or that our working capital management procedures
will successfully negate this risk. There are often timing delays when
attempting to collect funds from Medicaid programs. We cannot assure you that
delays in receiving reimbursement or payments from these programs will not
adversely impact our working capital.

Our industry is highly competitive.

Our home health care agencies compete with local and regional home health care
companies, hospitals, nursing homes, and other businesses that provide home
nursing services, some of which are large established companies that have
significantly greater resources than we do. Our primary competition comes from
local companies in each of our markets, and these privately-owned or
hospital-owned health care providers vary by region and market. We compete based
on the availability of personnel; the quality, expertise, and value of our
services; and in select instances, on the price of our services. Increased
competition in the future from existing competitors or new entrants may limit
our ability to maintain or increase our market share. We cannot assure you that
we will be able to compete successfully against current or future competitors or
that competitive pressures will not have a material adverse impact on our
business, financial condition, or results of operations.
<PAGE>

Some of our existing and potential new competitors may enjoy greater name
recognition and greater financial, technical, and marketing resources than we
do. This may permit our competitors to devote greater resources than we can to
the development and promotion of services. These competitors may undertake more
far-reaching and effective marketing campaigns and may offer more attractive
opportunities to existing and potential employees and services to referral
sources.

We expect our competitors to develop new strategic relationships with providers,
referral sources, and payors, which could result in increased competition. The
introduction of new and enhanced service offerings, in combination with industry
consolidation and the development of strategic relationships by our competitors,
could cause a decline in revenue or loss of market acceptance of our services or
make our services less attractive. Additionally, we compete with a number of
non-profit organizations that can finance acquisitions and capital expenditures
on a tax-exempt basis or receive charitable contributions that are unavailable
to us.

We expect that industry forces will continue to have an impact on our business
and that of our competitors. In recent years, the health care industry has
undergone significant changes driven by efforts to reduce costs, and we expect
these cost containment measures to continue in the future. Frequent regulatory
changes in our industry, including reductions in reimbursement rates and changes
in services covered, have increased competition among home health care
providers. If we are unable to react competitively to new developments, our
operating results may suffer.

A shortage of  qualified  registered  nursing  staff and other  caregivers
could  adversely  affect our ability to attract, train and retain qualified
personnel and could increase operating costs.

We rely significantly on our ability to attract and retain caregivers who
possess the skills, experience, and licenses necessary to meet the requirements
of our patients. We compete for personnel with other providers of home nursing
services. Our ability to attract and retain caregivers depends on several
factors, including our ability to provide these caregivers with attractive
assignments and competitive benefits and salaries. We cannot assure you that we
will succeed in any of these areas. In addition, there are occasional shortages
of qualified healthcare personnel in some of the markets in which we operate. As
a result, we may face higher costs of attracting caregivers and providing them
with attractive benefit packages than we originally anticipated, and, if that
occurs, our profitability could decline. Finally, although this is currently not
a significant factor in our existing markets, if we expand our operations into
geographic areas where healthcare providers have historically unionized, we
cannot assure you that the negotiation of collective bargaining agreements will
not have a negative effect on our ability to timely and successfully recruit
qualified personnel. Generally, if we are unable to attract and retain
caregivers, the quality of our services may decline, and we could lose patients
and referral sources.

Risks Related to Our Business

We depend on Medicare for the largest portion of our revenues.

For the years ended December 31, 2005, 2004 and 2003, we received 49%, 45%, and
43%, respectively, of our revenue from Medicare. Reductions in Medicare
reimbursement could have an adverse impact on our profitability. Such reductions
in payments to us could be caused by:
o administrative or legislative changes to the base episode rate;
o the elimination or reduction of annual rate increases based on medical
  inflation;
o the imposition by Medicare of co-payments or other mechanisms shifting
  responsibility for a portion of payment to beneficiaries;
o adjustments to the relative components of the wage index;
o changes to our case mix or therapy thresholds; or
o other adverse changes to the way we are paid for delivering our services.

The Medicare Payment Advisory Commission (MedPAC), an independent federal body
established to advise Congress on issues affecting the Medicare Program, has
recently recommended implementation of pay-for-performance initiatives for home
care providers. If implemented, Medicare will differentiate reimbursement rates
for Medicare home health service providers based on quality measures. While we
believe that we provide high quality services to our patients, there can be no
assurances that a pay-for-performance reimbursement system will not adversely
affect our Medicare reimbursement rates and, consequently, our results of
operations.
<PAGE>

Our non-Medicare revenues and profitability also are affected by the continuing
efforts of third-party payors to contain or reduce the costs of health care by
lowering reimbursement rates, narrowing the scope of covered services,
increasing case management review of services, and negotiating reduced contract
pricing. Any changes in reimbursement levels from these third-party payor
sources and any changes in applicable government regulations could have a
material adverse effect on our revenues and profitability. We can provide no
assurance that we will continue to maintain the current payor or revenue mix.

Migration of our Medicare  beneficiary  patients to Medicare  managed care
providers  could  negatively  impact our operating results.

Historically, we have generated a substantial portion of our revenue from the
Medicare fee-for-service market. Under the Medicare Prescription Drug
Improvement and Modernization Act of December 2003 ("MMA"), however, the United
States Congress allocated significant additional funds and other incentives to
Medicare managed care providers in order to promote greater participation in
those plans by Medicare beneficiaries. If these increased funding levels have
the intended result, the size of the potential Medicare fee-for-service market
could decline, thereby reducing the size of our potential patient population,
which could cause our operating results to suffer.

Our growth strategy depends on our ability to manage growing and changing
operations.

Our business plan calls for significant growth in our business over the next
several years. This growth will place significant demands on our management
systems, internal controls, and financial and professional resources. In
addition, we will need to further develop our financial controls and reporting
systems to accommodate future growth. This could require us to incur expenses
for hiring additional qualified personnel, retaining professionals to assist in
developing the appropriate control systems, and expanding our information
technology infrastructure. Our inability to manage growth effectively could have
a material adverse effect on our financial results.

Our growth strategy depends on our ability to develop and to acquire additional
agencies on favorable terms and to integrate and operate these agencies
effectively. If we are unable to do so, our future growth and operating results
could be negatively impacted.

Development. We expect to continue to open agencies in our existing and new
markets. Our new agency growth, however, will depend on several factors,
including our ability to:
o obtain locations for agencies in markets where need exists;
o identify and hire a sufficient number of sales personnel and appropriately
  trained home care and other health care professionals;
o obtain adequate financing to fund growth; and
o operate successfully under applicable government regulations.

Acquisitions. We are focusing significant time and resources on the acquisition
of home healthcare providers, or of certain of their assets, in targeted
markets. We may be unable to identify, negotiate, and complete suitable
acquisition opportunities on reasonable terms. We may incur future liabilities
related to acquisitions. Should any of the following problems, or others, occur
as a result of our acquisition strategy, the impact could be material:
o  difficulties  integrating  personnel from acquired  entities and other
   corporate cultures into our business;
o  difficulties integrating information systems;
o  the potential loss of key employees or referral sources of acquired
   companies or a reduction in patient referrals by hospitals from which
   we have acquired home health care agencies;
o  the assumption of liabilities and exposure to undisclosed liabilities of
   acquired companies;
o  the acquisition of an agency with undisclosed compliance problems;
o  the diversion of management attention from existing operations;
o  difficulties in recouping partial episode payments and other types of
   misdirected payments for services from the previous owners; or
o  an unsuccessful claim for indemnification rights from previous owners
   for acts or omissions arising prior to the date of acquisition.



<PAGE>


We may require additional capital to pursue our acquisition strategy.

At December 31, 2005, we had cash and cash equivalents of approximately $6
million and additional borrowing capacity of approximately $17 million. Based on
our current plan of operations, including acquisitions, we cannot assure you
that this amount will be sufficient to support our current growth strategies. We
cannot readily predict the timing, size, and success of our acquisition efforts
and the associated capital commitments. If we do not have sufficient cash
resources, our growth could be limited unless we obtain additional equity or
debt financing. At some future point we may elect to issue additional equity
securities in conjunction with raising capital or completing an acquisition. We
cannot assure you that such issuances will not be dilutive to existing
shareholders.

Our business depends on our information  systems. Our inability to effectively
integrate,  manage, and keep secure our information systems could disrupt our
operations.

Our business depends on effective and secure information systems that assist us
in, among other things, monitoring utilization and other cost factors,
processing claims, reporting financial results, measuring outcomes and quality
of care, managing regulatory compliance controls, and maintaining operational
efficiencies. These systems include software developed in-house and systems
provided by external contractors and other service providers. To the extent that
these external contractors or other service providers become insolvent or fail
to support the software or systems, our operations could be negatively affected.
Our agencies also depend upon our information systems for accounting, billing,
collections, risk management, quality assurance, payroll, and other information.
If we experience a reduction in the performance, reliability, or availability of
our information systems, our operations and ability to produce timely and
accurate reports could be adversely affected.

Our information systems and applications require continual maintenance,
upgrading, and enhancement to meet our operational needs. Our acquisition
activity requires transitions and integration of various information systems.
 We regularly upgrade and expand our information systems' capabilities. If we
experience difficulties with the transition and integration of information
systems or are unable to implement, maintain, or expand our systems properly, we
could suffer from, among other things, operational disruptions, regulatory
problems, and increases in administrative expenses.

Our business requires the secure transmission of confidential information over
public networks. Advances in computer capabilities, new discoveries in the field
of cryptography or other events or developments could result in compromises or
breaches of our security systems and patient data stored in our information
systems. Anyone who circumvents our security measures could misappropriate our
confidential information or cause interruptions in our services or operations.
The Internet is a public network, and data is sent over this network from many
sources. In the past, computer viruses or software programs that disable or
impair computers have been distributed and have rapidly spread over the
Internet. Computer viruses could be introduced into our systems, or those of our
providers or regulators, which could disrupt our operations or make our systems
inaccessible to our providers or regulators. We may be required to expend
significant capital and other resources to protect against the threat of
security breaches or to alleviate problems caused by breaches. Our security
measures may be inadequate to prevent security breaches, and our business
operations would be negatively impacted by cancellation of contracts and loss of
patients if security breaches are not prevented.

Further, our information systems are vulnerable to damage or interruption from
fire, flood, natural disaster, power loss, telecommunications failure, break-ins
and similar events. A failure to restore our information systems after the
occurrence of any of these events could have a material adverse effect on our
business, financial condition and results of operations. Because of the
confidential health information we store and transmit, loss of
electronically-stored information for any reason could expose us to a risk of
regulatory action, litigation, possible liability and loss.

Our clinical software system has been developed in-house. Failure of, or
problems with, our system could harm our business and operating results.

We have developed and utilize a proprietary clinical software system to collect
assessment data, log patient visits, generate medical orders, and monitor
treatments and outcomes in accordance with established medical standards. The
system integrates billing and collections functionality as well as accounting,
human resource, payroll, and employee benefits programs provided by third
parties. Problems with, or the failure of, our technology and systems could
<PAGE>

negatively impact data capture, billing, collections, and management and
reporting capabilities. Any such problems or failures could adversely affect our
operations and reputation, result in significant costs to us, and impair our
ability to provide our services in the future. The costs incurred in correcting
any errors or problems may be substantial and could adversely affect our
profitability.

We depend on outside software providers.

We depend on the proper functioning and availability of our information systems
in operating our business, some of which are provided by outside software
providers. These information systems and applications require continual
maintenance, upgrading, and enhancement to meet our operational needs. If our
providers are unable to maintain or expand our information systems properly, we
could suffer from operational disruptions and an increase in administrative
expenses, among other things.

The  inability or failure of  management in the future to conclude  that we
maintain  effective  internal  controls over financial  reporting,  or the
inability of our independent auditor to issue a report attesting to management's
assessment  of our  internal  controls  over  financial  reporting,  could
have a material  adverse  effect on our financial position, results of
operations and liquidity.

Under the Sarbanes-Oxley Act of 2002, beginning in 2007, we will be required to
report in our Annual Report on Form 10-K on the effectiveness of our internal
controls over financial reporting, and our independent auditor is required to
attest to management's assessment of our internal controls over financial
reporting. Significant resources will be required to establish that we are in
full compliance with the newly adopted financial reporting controls and
procedures. If we fail to have, or management or our independent auditor is
unable to conclude that we maintain, effective internal controls and procedures
for financial reporting, we could be unable to provide timely and reliable
financial information which could have a material adverse effect on our
financial position, results of operations and liquidity.

Our insurance liability coverage may not be sufficient for our business needs.

We maintain professional liability insurance for the Company with a deductible
of $500,000 per incident. We also bear significant insurance risk under our
large-deductible workers' compensation insurance program and our self-insured
employee health program. Under our workers' compensation insurance program, we
bear risk up to $250,000 per incident. We purchase stop-loss insurance for our
employee health plan that places a specific limit, generally $100,000, on our
exposure for any individual covered life. However, we cannot assure you that
claims will not be made in the future in excess of the limits of such insurance,
if any, nor can we assure you that any such claims, if successful and in excess
of such limits, will not have a material adverse effect on our ability to
conduct business or on our assets. Our insurance coverage also includes fire,
property damage, and general liability with varying limits. Although we maintain
insurance consistent with industry practice, we cannot assure you that the
insurance we maintain will satisfy claims made against us. In addition, as a
result of operating in the home healthcare industry, our business entails an
inherent risk of claims, losses and potential lawsuits alleging employee
accidents that are likely to occur in a patient's home. Finally, we cannot
assure you that insurance coverage will continue to be available to us at
commercially reasonable rates, in adequate amounts or on satisfactory terms. Any
claims made against us, regardless of their merit or eventual outcome, could
damage our reputation and business.

We have established reserves for Medicare liabilities that may be payable by us
in the future. These liabilities may be subject to audit or further review, and
we may owe additional amounts beyond what we expect and have reserved for.

The Company is paid for its services primarily by Federal and state third-party
reimbursement programs, commercial insurance companies, and patients. Revenues
are recorded at established rates in the period during which the services are
rendered. Appropriate allowances to give recognition to third party payment
arrangements are recorded when the services are rendered.

Laws and regulations governing the Medicare and Medicaid programs are extremely
complex and subject to interpretation. It is common for issues to arise related
to: 1) the determination of cost-reimbursed revenues, 2) medical coding,
particularly with respect to Medicare, 3) patient eligibility, particularly
<PAGE>

related to Medicaid, and 4) other reasons unrelated to credit risk, all of which
may result in adjustments to recorded revenue amounts. Management continuously
evaluates the potential for revenue adjustments and when appropriate provides
allowances for losses based upon the best available information. There is at
least a reasonable possibility that recorded estimates could change by material
amounts in the near term.

We depend on the services of our executive officers and other key employees.

Our success depends upon the continued employment of certain members of our
senior management team, including our Chairman and Chief Executive Officer,
William B. Yarmuth, our Senior Vice President and Chief Financial Officer, C.
Steven Guenthner, our Senior Vice President for Administration, P. Todd Lyles,
and our Senior Vice President of VN Operations, Anne T. Liechty. We also depend
upon the continued employment of the individuals that manage several of our key
functional areas, including operations, business development, accounting,
finance, human resources, marketing, information systems, contracting and
compliance. The departure of any member of our senior management team may
materially adversely affect our operations.

Our operations could be affected by natural disasters.

A substantial number of our agencies are located in the Florida, increasing our
exposure to hurricanes and other natural disasters. The occurrence of natural
disasters in the markets in which we operate could not only affect the
day-to-day operations of our agencies, but also could also disrupt our
relationships with patients, employees and referral sources located in the
affected areas. In addition, any episode of care that is not completed due to
the impact of a natural disaster will generally result in lower revenue for the
episode. We cannot assure you that hurricanes or other natural disasters will
not have a material adverse impact on our business, financial condition or
results of operations in the future.

Risks Related to Ownership of Our Common Stock

The price of our common stock may be volatile and this may adversely affect our
stockholders.

The price at which our common stock trades may be volatile. The stock market has
from time to time experienced significant price and volume fluctuations that
have affected the market prices of securities, particularly securities of health
care companies. The market price of our common stock may be influenced by many
factors, including:
o our operating and financial performance;
o variances in our quarterly financial results compared to expectations;
o the depth and liquidity of the market for our common stock;
o future sales of common stock or the perception that sales could occur;
o investor perception of our business and our prospects;
o developments relating to litigation or governmental investigations;
o changes or proposed changes in health care laws or regulations or
  enforcement of these laws and regulations, or announcements relating to
  these matters; or
o general economic and stock market conditions

In addition, the stock market in general, and the Nasdaq Small Cap Market in
particular, has experienced price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of health care
provider companies. These broad market and industry factors may materially
reduce the market price of our common stock, regardless of our operating
performance. In the past, securities class-action litigation has often been
brought against companies following periods of volatility in the market price of
their respective securities. We may become involved in this type of litigation
in the future. Litigation of this type is often expensive to defend and may
divert our management team's attention as well as resources from the operation
of our business.

Sales of  substantial  amounts of our common  stock,  or the  availability  of
those shares for future sale,  could adversely affect our stock price and limit
our ability to raise capital.

At December 31, 2005, 2,399,170 shares of our common stock were outstanding.
There are 415,993 shares of our common stock that may be issued under our 2000
employee stock purchase plan. As of December 31, 2005, 388,000 shares of our
common stock were issuable upon the exercise of stock options. The market price
of our common stock could decline as a result of sales of substantial amounts of
<PAGE>

our common stock in the public or the perception that substantial sales could
occur. These sales also may make it more difficult for us to sell common stock
in the future to raise capital.

We do not anticipate paying dividends on our common stock in the foreseeable
future,  and you should not expect to receive dividends on shares of our common
stock.

We do not pay dividends and intend to retain all future earnings to finance the
continued growth and development of our business. In addition, we do not
anticipate paying cash dividends on our common stock in the foreseeable future.
Any future payment of cash dividends will depend upon our financial condition,
capital requirements, earnings, and other factors deemed relevant by our board
of directors.

Our Board of Directors may use anti-takeover provisions or issue stock to
discourage control contests.

We have implemented anti-takeover provisions or provisions that could have an
anti-takeover effect, including (1) advance notice requirements for director
nominations and stockholder proposals and (2) a stockholder rights plan, also
known as a "poison pill." These provisions, and others that the Board of
Directors may adopt hereafter, may discourage offers to acquire us and may
permit our Board of Directors to choose not to entertain offers to purchase us,
even if such offers include a substantial premium to the market price of our
stock. Therefore, our stockholders may be deprived of opportunities to profit
from a sale of control.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   PROPERTIES

Our executive offices are located in Louisville, Kentucky in approximately
25,000 square feet of space leased from an unaffiliated party.

We have 44 real estate leases ranging from approximately 200 to 24,000 square
feet of space in their respective locations. See "Item 1. Business - Operating
Segments" and Note 9 to our audited consolidated financial statements. We
believe that our facilities are adequate to meet our current needs, and that
additional or substitute facilities will be available if needed.

ITEM 3.  LEGAL PROCEEDINGS

From time to time, we are subject to claims and suits arising in the ordinary
course of our business, including claims for damages for personal injuries. In
our opinion the ultimate resolution of any of these pending claims and legal
proceedings will not have a material effect on our financial position or results
of operations.

Franklin Litigation
On January 26, 1994 Franklin Capital Associates L.P. (Franklin), Aetna Life and
Casualty Company and Aetna Casualty and Surety Company shareholders, who at one
time held approximately 320,000 shares of the Company's common stock
(approximately 13% of shares outstanding), filed suit in Chancery Court of
Williamson County, Tennessee claiming unspecified damages not to exceed three
million dollars in connection with registration rights they received in the
Company's acquisition of certain home health operations in February 1991. The
1994 suit alleged that the Company failed to use its best efforts to register
the shares held by the plaintiffs as required by the merger agreement. The
Company settled with both Aetna parties shortly before the case went to trial in
February 2000. In mid-trial Franklin voluntarily withdrew its complaint
reserving its legal rights to bring a new suit as allowed under Tennessee law.
In April 2000, Franklin re-filed its lawsuit. The second trial took place in
February 2003. In April 2003 the court issued a ruling in favor of the
plaintiffs awarding damages of $984,970. The Company sought appellate review of
the lower court decision. As a part of the appeal, the Company was required to
post cash of $1,154,241 (which consists of $984,970 in damages and $169,271 of
<PAGE>

estimated post-judgment interest) in an escrow account with the Tennessee Courts
in lieu of a supersedeas appeal bond until the appeal court issued a decision.
The Company recorded a litigation loss provision of $1,154,241 on a restated
basis in the year ended December 31, 2003.

In December 2005, the Tennessee Court of Appeals issued its ruling in which it
partially overturned the findings of the trial court thus lowering the amount of
damages previously assessed to and recorded by the Company. The Company and the
plaintiff subsequently entered into a settlement agreement on this case which
resulted in a one-time net of tax gain of $267,426 being recorded in the
Company's results for the year ended December 31, 2005.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the fourth
quarter of fiscal 2005.

PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ SmallCap System. The stock is traded
under the symbol "AFAM" (formerly CTND). Set forth below are the high and low
sale prices for the common stock for the periods indicated reported by NASDAQ:

Closing Common Stock Prices
   Quarter Ended:                          High                    Low
   --------------                          ----                    ---
   March 31, 2004                    $       9.00            $        8.00
   June 30, 2004                     $       8.45            $        7.90
   September 30, 2004                $       8.60            $        7.42
   December 31, 2004                 $      14.45            $        8.02
   March 31, 2005                    $      14.86            $       12.99
   June 30, 2005                     $      14.11            $       11.20
   September 30, 2005                $      16.32            $       13.71
   December 31, 2005                 $      16.25            $       14.89

On March 28, 2006, the last reported sale price for the common stock reported by
NASDAQ was $17.82 and there were approximately 401 holders of record of our
common stock. No cash dividends have been paid by us during the periods
indicated above. We do not presently intend to pay dividends on our common stock
and will retain our earnings for future operations and the growth of our
business.


<PAGE>



                                  Issuer Purchases of Equity Securities (1)

<TABLE>
<CAPTION>
<S>                         <C>                    <C>                    <C>                      <C>
                                                                                                 (d) Maximum Number
                                                                                                    (or Approximate
                                                                        (c) Total Number of       Dollar Value) of
                                (a) Total Number                        Shares (or Units)        Shares (or Units) that
                                 of Shares (or      (b) Average Price   Purchased as Part of         May Yet Be
                                   Units             Paid per Share     Publicly Announced       Purchased Under the
          Period                 Purchased (1)          or Unit)        Plans or Programs        Plans or Programs
--------------------------- --------------------- --------------------- ------------------------ -------------------------

     Month # 1 -
October 1, 2005 -
October 31, 2005                     10,239       $          15.25                        -                         -

Month # 2 - November 1, 2005
- November 30, 2005                       -       $              -                        -                         -

Month # 3 - December 1, 2005
- December 31, 2005                  13,489       $          15.98                        -                         -

                             --------------------- --------------------- ------------------------ -------------------------
Total                                23,728       $          15.67                        -                         -
                            ===================== ===================== ======================== =========================
</TABLE>

(1) All shares included herein were submitted by optionees in lieu of cash
purchase price that would have otherwise been due on option exercise in
transactions approved by the Company's Board of Directors.



<PAGE>



ITEM 6.  SELECTED FINANCIAL DATA

The following table sets forth selected financial information derived from the
consolidated financial statements of the Company for the periods and at the
dates indicated. The information is qualified in its entirety by and should be
read in conjunction with the consolidated financial statements and related notes
included elsewhere in this and prior year Form 10-Ks.

<TABLE>
<CAPTION>

                                                                                                        Year Ended      Nine Months
                                   Year Ended        Year Ended      Year Ended       Year Ended       December 31,        Ended
   (Dollar amounts in 000's       December 31,      December 31,    December 31,     December 31          2001          December 31,
    except per share data)            2005              2004            2003             2002          (unaudited)         2001
<S>                              <C>                  <C>             <C>             <C>              <C>               <C>
Results of operations data:
  Net revenues                   $        75,620   $      65,770   $      61,642    $        58,728  $       54,258    $      40,531
  Income (loss) from:
  Continuing operations          $         2,883   $       1,620   $       1,041    $           729  $        2,720    $       2,380
    Discontinued operations                4,985            (363)           (930)               285           1,041              948
                                 -------------------------------------------------- ------------------------------------------------
      Net income (loss)          $         7,868   $       1,257   $         111    $         1,014  $        3,761    $       3,328
                                 ================================================== ================================================

Per share:
  Basic:
    Number of shares
    (in 000's)                             2,337           2,303           2,295              2,416           2,646            2,478
    Income (loss) from:
    Continuing operations        $          1.24   $        0.70   $        0.46    $          0.30  $         1.03    $        0.96
    Discontinued operations                 2.13           (0.15)          (0.41)              0.12            0.39             0.38
                                 -------------------------------------------------- ------------------------------------------------
      Net income (loss)          $          3.37   $        0.55   $        0.05    $          0.42  $         1.42    $        1.34
                                 ================================================== ================================================

  Diluted:
    Number of shares
    (in 000's)                             2,609           2,567           2,539              2,720           3,077            2,909
    Income (loss) from:
    continuing operations        $          1.11   $        0.63   $        0.41    $          0.27  $         0.88    $        0.82
    Discontinued operations                 1.91           (0.14)          (0.37)              0.10            0.34             0.32
                                 -------------------------------------------------- ------------------------------------------------
      Net income (loss)          $          3.02   $        0.49   $        0.04    $          0.37  $         1.22    $        1.14
                                 ================================================== ================================================


                                       December       December         December       December       December
Balance sheet data as of:                2005            2004            2003           2002           2001
                                       -------------- --------------- -------------- -----------------------------
Working capital                  $            9,300   $      8,752    $      13,320  $    16,405   $     18,155
Total assets                                 30,543         25,578           31,781       34,113         35,166
Long-term liabilities                         1,568          5,552           12,575       16,237         14,884
Total liabilities                            10,408         13,431           21,002       23,486         25,020
Stockholders' equity                         20,135         12,147           10,779       10,627         10,146

</TABLE>




<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

The Company has two reportable segments, Visiting Nurse (VN) and Personal Care
(PC). Reportable segments have been identified based upon how management has
organized the business by services provided to customers and the criteria in
SFAS 131, "Disclosures about Segments of an Enterprise and Related Information."
On September 30, 2005, the Company sold its Adult Day Care (ADC) business
segment. The ADC segment information has been reclassified from continuing
operations and into discontinued operations for all periods presented. The
Company has taken steps to reorganize and strengthen the management team. Also,
the Company continually strives to enhance the information system and improve
operational efficiency.

Our VN segment provides skilled medical services in patients' homes largely to
enable recipients to reduce or avoid periods of hospitalization and/or nursing
home care. VN Medicare revenues are generated on a per episode basis rather than
a fee per visit or an hourly basis. Approximately 92% of the VN segment revenues
are generated from the Medicare program while the balance is generated from
Medicaid and private insurance programs.

Our PC segment services are also provided in patients' homes. These services
(generally provided by paraprofessional staff such as home health aides) are
generally of a custodial rather than skilled nature. PC revenues are typically
generated on an hourly basis. Approximately 67% of the PC segment revenues are
generated from Medicaid and other government programs while the balance is
generated from insurance programs and private pay patients.

Our View on Reimbursement and Diversification of Risk
Our Company is highly dependent on government reimbursement programs which pay
for the majority of the services we provide to our patients. Reimbursement under
these programs, primarily Medicare and Medicaid, is subject to frequent changes
as policy makers balance their own needs to meet the health care needs of
constituents while also meeting their fiscal objectives.

We believe that an important key to our historical success and to our future
success is our ability to adapt our operations to meet changes in reimbursement
as they occur. One important way in which we have achieved this adaptability in
the past, and in which we plan to achieve it in the future, is to maintain some
level of diversification in our business mix.

The execution of our business plan emphasizes our Visiting Nurse operations. Our
Personal Care operations will help us maintain a level of diversification of
reimbursement risk that we believe is appropriate.

Our Business Plan
Our future success depends on our ability to execute our business plan. Over the
next three to five years we will try to accomplish the following:

o        Generate meaningful same store sales growth through the focused
         provision of high quality services and attending to the needs of our
         patients;

o        Expand the significance of our Visiting Nurse, Medicare-based, home
         health services by selectively acquiring other quality providers and
         through the startup of new agencies; and

o        Expand our capital base through both earnings performance and by
         seeking additional capital investments in our Company.

Based on our business plan, we expect our Visiting Nurse revenues to grow from
just under one-half of total revenues to about two-thirds of total revenues
sometime in the next three to five years.
<PAGE>

Critical Accounting Policies

The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States.
When more than one accounting principle, or the method of its application, is
generally accepted, we select the principle or method that is appropriate in the
specific circumstances. Application of these accounting principles requires us
to make estimates about the future resolution of existing uncertainties; as a
result, actual results could differ from these estimates. In preparing these
financial statements, we have made our best estimates and judgments of the
amounts and disclosures included in the financial statements, giving due regard
to materiality.

Receivables and Revenue Recognition
We recognize revenues when patient services are provided. Our receivables and
revenues are stated at amounts estimated by us to be their net realizable
values. The Company is paid for its services primarily by Federal and state
third-party reimbursement programs, commercial insurance companies, and
patients. Revenues are recorded at established rates in the period during which
the services are rendered. Appropriate allowances to give recognition to third
party payment arrangements are recorded when the services are rendered.

Laws and regulations governing the Medicare and Medicaid programs are extremely
complex and subject to interpretation. It is common for issues to arise related
to: 1) medical coding, particularly with respect to Medicare, 2) patient
eligibility, particularly related to Medicaid, and 3) other reasons unrelated to
credit risk, all of which may result in adjustments to recorded revenue amounts.
Management continuously evaluates the potential for revenue adjustments and when
appropriate provides allowances for losses based upon the best available
information. There is at least a reasonable possibility that recorded estimates
could change by material amounts in the near term.

Medicare Revenue Recognition
On October 1, 2000, Medicare began paying providers of home health care at
fixed, predetermined rates for services and supplies bundled into 60-day
episodes of home health care. An episode of home health care spans a 60-day
period, starting with the first day a billable visit is furnished to a Medicare
beneficiary and ending 60 days later. If a patient is still in treatment on the
60th day a new episode begins on the 61st day regardless of whether a billable
visit is rendered on that day and ends 60 days later. The first day of a
consecutive episode, therefore, is not necessarily the new episode's first
billable visit. A base episode payment is established by the Medicare Program
through federal legislation for all episodes of care ended on or after the
applicable time periods detailed below:

                                                          Base episode
Period                                                     payment (1)

October 1, 2002 through September 30, 2003               $         2,159
October 1, 2003 through March 31, 2004                   $         2,231
April 1, 2004 through December 31, 2004                  $         2,213
January 1, 2005 through December 31, 2006                $         2,264
(1)  The actual episode payment rates, as presented in the table vary, depending
     on the home health resource groups ("HHRGs") to which Medicare patients are
     assigned and the per episode payment is typically reduced or increased by
     such factors as the patient's clinical, functional, and services
     utilization characteristics.

Under the Prospective Payment System ("PPS") for Medicare reimbursement, net
revenues are recorded based on a reimbursement rate that varies based on the
severity of the patient's condition, service needs and other factors. Net
revenues are recorded as services are rendered to patients over the 60-day
episode period. At the end of each month, a portion of our revenue is estimated
for episodes in progress.

Medicare reimbursement, on an episodic basis, is subject to adjustment if there
are significant changes in the patient's condition during the treatment period
or if the patient is discharged but readmitted to another agency within the same
<PAGE>

60-day episodic period. Revenue recognition under the Medicare reimbursement
program is based on certain variables including, but not limited, to: (i)
changes in the base episode payments established by the Medicare Program; (ii)
adjustments to the base episode payments for partial episodes and for other
factors, such as case mix, geographic wages, low utilization and intervening
events; and, (iii) recoveries of overpayments. Adjustments to revenue result
from differences between estimated and actual reimbursement amounts, an
inability to obtain appropriate billing documentation or authorizations
acceptable to the payor and other reasons unrelated to credit risk. We recognize
Medicare revenue on an episode-by-episode basis during the course of that
episode over its expected number of visits.

Allowance for Doubtful Accounts
We evaluate the collectibility of our accounts receivable based on certain
factors, such as payor types, historical collection trends and aging categories.
We calculate our reserve for bad debts based on the length of time that the
receivables are past due. The percentage applied to the receivable balances in
the various aging categories is based on historical collection experience.

Insurance Programs
We bear significant insurance risk under our large-deductible workers'
compensation insurance program and our self-insured employee health program.
Under our workers' compensation insurance program, we bear risk up to $250,000
per incident. We purchase stop-loss insurance for our employee health plan that
places a specific limit, generally $100,000, on our exposure for any individual
covered life.

Malpractice and general patient liability claims for incidents which may give
rise to litigation have been asserted against us by various claimants. The
claims are in various stages of processing and some may ultimately be brought to
trial. We also know of incidents that have occurred through December 31, 2005
that may result in the assertion of additional claims. We carry insurance
coverage for this exposure; however, our deductible per claim increased
effective July 21, 2005, from $250,000 to $500,000.

We record estimated liabilities for our insurance programs based on information
provided by the third-party plan administrators, historical claims experience,
the life cycle of claims, expected costs of claims incurred but not paid, and
expected costs to settle unpaid claims. We monitor our estimated
insurance-related liabilities on a monthly basis. As facts change, it may become
necessary to make adjustments that could be material to our results of
operations and financial condition.

We believe that our present insurance coverage is adequate. As part of our
on-going risk management and cost control efforts, we continually seek
alternatives that might provide a different balance of cost and risk, including
potentially accepting additional self-insurance risk in lieu of higher premium
costs.

Goodwill and Other Intangible Assets
We perform impairment tests of goodwill and indefinite lived assets as required
by Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and
Other Intangible Assets. The impairment analysis requires numerous subjective
assumptions and estimates to determine fair value of the respective reporting
units as required by SFAS No. 142. As of December 31, 2005, we completed our
quarterly impairment review and determined that no impairment charge was
required. Depending on level of sales, our liquidity and other factors, we may
be required to recognize impairment charges in the future.

Accounting for Income Taxes
As of December 31, 2005, we have net deferred tax assets of approximately
$1,532,000. The net deferred tax asset is composed of approximately $1,171,000
of current deferred tax assets and approximately $361,000 of long-term
deferred tax assets. We have provided a valuation allowance against certain net
deferred tax assets based upon our estimation of realizability of those assets
through future taxable income. This valuation was based in large part on our
history of generating operating income or losses in individual tax locales and
expectations for the future. Our ability to generate the expected amounts of
taxable income from future operations is dependent upon general economic
conditions,
<PAGE>

competitive pressures on revenues and margins and legislation and regulation at
all levels of government. We have considered the above factors in reaching our
conclusion that it is more likely than not that future taxable income will be
sufficient to fully utilize the net deferred tax assets (net of the valuation
allowance) as of December 31, 2005. However, there can be no assurances that we
will meet our expectations of future taxable income.

During the years ended December 31, 2005 and 2004, based on changes in facts and
circumstances, favorable changes occurred in the Company's expectations with
regard to the generation of future taxable income in certain tax jurisdictions.
Accordingly, the state and local tax provision for 2005, 2004, and 2003 included
a reduction of previously recorded valuation allowances of approximately
$152,000, $21,000, and $96,000 respectively.

Seasonality
Our Visiting Nurse segment operations located in Florida normally experience
higher admissions during the March quarter than in the other quarters due to
seasonal population fluctuations.

Acquisitions
Over the next three to five years we will actively seek to acquire quality
providers of Medicare-certified home health services like our current Visiting
Nurse segment operations. We may consider acquisitions of businesses that
provide health care services similar to those we currently offer in our Personal
Care segment but we expect most of our acquisition activity to be focused on
Visiting Nurse operations.

Factors which may affect future acquisition decisions include the quality and
potential profitability of the business under consideration, and our
profitability and ability to finance the transaction.

During 2005, we acquired three visiting nurse operations one of which was
essentially a startup operation. These operations added to our market presence
in Florida.

On April 1, 2005 we acquired all the assets and business operations of a
Medicare-certified visiting nurse agency located in Bradenton, Florida. The
total purchase price of $3.2 million was paid in the form of $2.5 million in
cash at closing with the $700,000 balance in the form of a note payable bearing
interest at 6% payable quarterly and the note balance due in two years after
closing. We funded the cash portion of the purchase price with available
borrowings on our revolving credit facility.

On November 12, 2005 we acquired all the assets and business operations of a
Medicare-certified visiting nurse agency located in St. Augustine, Florida. The
total purchase price of $800,000 was paid in the form of $600,000 in cash at
closing with the balance in the form of a note payable bearing interest at 6%
due in its entirety three years after closing. We funded the cash portion of the
purchase price with cash on hand.



<PAGE>


RESULTS OF OPERATIONS

Continuing Operations
Year Ended December 31, 2005 Compared with Year Ended December 31, 2004

<TABLE>
<CAPTION>

 Year Ended

  Consolidated                        December 2005      December 2004            Change
  ------------                       -------------     --------------         --------------
                                     Amount   % Rev      Amount     % Rev        Amount     %
   <S>                          <C>            <C>    <C>            <C>     <C>           <C>

   Net Revenues:
    Visiting nurses            $  40,265,311   53.2%  $  32,227,614  49.0%  $  8,037,697   24.9%
    Personal care                 35,354,834   46.8%     33,542,824  51.0%     1,812,010    5.4%
                               -------------          ------------           ------------
                                  75,620,145  100.0%    65,770,438  100.0%     9,849,707   15.0%

   Operating income:
     Visiting nurses           $   5,275,661  13.1%    $ 4,805,486  14.9%   $    470,175    9.8%
     Personal care                 3,289,835   9.3%      2,309,410   6.9%        980,425   42.5%
                               -------------           ------------           ------------
                                   8,565,496  11.3%      7,114,896  10.8%   $  1,450,600   20.4%
   Corporate expense               4,475,444   5.9%      4,165,442   6.3%        310,002    7.4%
                               -------------           -----------            ------------
                                   4,090,052   5.4%     2,949,454   4.5%       1,140,598   38.7%
   Interest expense                  112,608   0.1%       270,843   0.4%        (158,235) -58.4%
     Gain on Franklin Litigation    (267,426) -0.4%             -   0.0%        (267,426)   NM
     Income taxes                  1,361,582   1.8%     1,058,164   1.6%         303,418   28.7%
     Income from continuing
      operations               $   2,883,288   3.8%    $ 1,620,447  2.5%    $  1,262,841   77.9%
                           ====================       ===================   ==============
EBITDA                         $   5,547,043           $ 4,317,914          $  1,229,129   28.5%
</TABLE>

NM=Not Meaningful

Our net revenues increased approximately $9.8 million or 15% with 25% growth in
VN and 5% growth in PC. VN revenue growth was driven by admissions growth and
acquisitions. New VN operations started in late 2004 and early 2005 generated
approximately $2.6 million in revenue and operating losses of $145,000 in the
twelve months ended December 31, 2005. Acquired operations added approximately
$3.1 million in revenues and about $645,000 in operating income. PC revenue and
operating income increased due to increased volumes. EBITDA increased 28.5%
between periods primarily due to revenue increases. Corporate expenses increased
due to increased incentive provisions partially offset by a decrease in
professional fees related to a 2004 union defense related to one of our personal
care locations.

As a result of the settlement of the Franklin litigation, a gain of $267,426 was
recognized in 2005. Excluding this non-taxable litigation gain, the effective
continuing operations income tax rate was approximately 34.2% and 39.5% of
income before income taxes in 2005 and 2004, respectively. The lower effective
tax rate for continuing operations in 2005 resulted primarily from the reversal
of a valuation allowance of $152,000 (3.6% of pretax income) related to certain
state net operating loss carryforwards.


<PAGE>


Visiting Nurse Segment-Year Ended December 31, 2005 and 2004
Approximately 92% of the VN segment revenues are generated from the Medicare
program while the balance is generated from Medicaid and private insurance
programs. In addition to our focus on operating income from the Visiting Nurse
segment, we also measure this segment's performance in terms of admissions,
patient months of care, revenue per patient month and cost of services per
patient month.

<TABLE>
<CAPTION>

Year Ended
                                      ---------------------------- ----------------------------- ---------------------------
                                             December 2005                December 2004                    Change
                                      ---------------- ----------- ------------------- --------- ---------------- ----------
                                          Amount        % Rev            Amount         % Rev        Amount           %
                                      ---------------- ----------- ------------------- --------- --------------- -----------
<S>                                   <C>                 <C>      <C>                    <C>     <C>               <C>

Net service revenues                  $    40,265,311     100.0%   $     32,227,614      100.0%  $   8,037,697        24.9%
Cost of service revenues                   15,993,844      39.7%         12,600,064       39.1%      3,393,780        26.9%
                                      ----------------             -------------------           ---------------
  Gross margin                             24,271,467      60.3%         19,627,550       60.9%      4,643,917        23.7%
General and administrative
    expenses:
Salaries and benefits                      12,814,465      31.8%          9,700,331       30.1%      3,114,134        32.1%

Other                                       6,181,341      15.4%          5,121,733       15.9%      1,059,608        20.7%
                                      ----------------             -------------------           ---------------
Total general and administrative
     expenses:                             18,995,806      47.2%         14,822,064        46.0%     4,173,742        28.2%
                                      ----------------             -------------------           ---------------
Operating income                      $     5,275,661      13.1%   $      4,805,486        14.9%   $   470,175         9.8%
                                      ================             ===================           ===============

All Payors:
  Admissions                                   14,494                       11,564                        2,930       25.3%
  Patient months of care                       32,690                       26,515                        6,175       23.3%
  Revenue per patient month           $         1,232               $        1,215                  $        17        1.4%
  Cost of services per patient
    month                             $           489               $          475                  $        14        2.9%
  Billable Visits                             281,733                      250,161                       31,572       12.6%

Average number of operations                       25                           19                            6       29.4%

Medicare Statistics:
  Admissions                                   13,273                       10,622                        2,651       25.0%
  Medicare Revenue % of Total                   92.3%                        90.7%                         1.6%        1.8%
</TABLE>

VN operating income for the twelve months was approximately $5.3 million versus
$4.8 million last year. New VN operations started in late 2004 and early 2005
generated approximately $2.6 million in revenue and operating losses of $145,000
in the twelve months ended December 31, 2005. Acquired operations added
approximately $3.1 million in revenues and about $645,000 in operating income.
Excluding these start-up and acquisition operations, operating income grew 14%
as a percentage of revenue. Admissions grew about 25.3% over the prior year
while patient months increased 23.3%, reflecting a small reduction in the
average length of stay. Revenue per patient month increased 1.4% primarily due
to higher Medicare rates between periods. Operating costs per patient month
increased approximately 2.9% primarily due to start-up operations and
higher wage rates and employee benefits related to the direct provision of
service. General and administrative expenses increased primarly as a result
of a 29% increase in units of operation between 2005 and 2004.




<PAGE>


Personal Care (PC) Segment-Year Ended December 31, 2005 and 2004
Approximately 67% of the PC segment revenues are generated from Medicaid and
other government programs while the balance is generated from insurance programs
and private pay patients.

Year Ended
<TABLE>
<CAPTION>

                                       ---------------------------- ----------------------------- -------------------------
                                              December 2005                December 2004                   Change
                                       ---------------- ----------- ------------------- --------- --------------- ---------
                                           Amount        % Rev            Amount         % Rev        Amount         %
                                       ---------------- ----------- ------------------- --------- --------------- ---------
<S>                                    <C>                 <C>     <C>                     <C>   <C>                  <C>

Net services revenue                   $    35,354,834     100.0%   $     33,542,824      100.0%  $   1,812,010       5.4%
Cost of service revenues                    23,668,395      66.9%         22,535,777       67.2%      1,132,618       5.0%
                                      ----------------             -------------------           ---------------
 Gross margin                               11,686,439      33.1%         11,007,047       32.8%         679,392      6.2%
General and administrative
   expenses:
Salaries and benefits                        4,726,474      13.4%          4,692,234       14.0%          34,240      0.7%
Other                                        3,670,130      10.4%          4,005,403       11.9%       (335,273)     -8.4%
                                       ----------------             -------------------           ---------------
Total general and administrative
   expenses:                                 8,396,604      23.7%         8,697,637        25.9%       (301,033)     -3.5%
                                       ----------------             -------------------           ---------------
Operating income                       $     3,289,835       9.3%   $     2,309,410         6.9%  $      980,425     42.5%
                                       ================             ===================           ===============

Admissions                                       2,577                        2,560                          17       0.7%
Patient months of care                          40,256                       36,760                       3,496       9.5%
Patient days of care                           492,552                      464,611                       27,941      6.0%
Billable hours                               1,815,162                    1,659,208                      155,954      9.4%
Revenue per billable hour              $         19.48              $         20.22               $        (0.74)    -3.7%

</TABLE>

PC operating income for the year ended December 31, 2005 was about $3.3 million
versus $2.3 million in the year ended December 31, 2004. Revenue increased over
5.4% due to volume increases. Cost of services grew at a slower rate due to
improved management of direct margins and and changes in payor and service mix.

General and administrative salaries and benefits were relatively unchanged while
the general and administrative expenses decreased primarily die to lower bad
debt losses from improved billing and collection efforts.




<PAGE>



Year Ended December 31, 2004 Compared with Year Ended December 31, 2003
<TABLE>
<CAPTION>

  Year Ended
             Consolidated           -----------------------------  ------------------------------  ----------------------------
             ------------               December 2004                  December 2003                        Change
                                    Amount           %             Amount           % Rev          Amount           %
                                                           Rev
<S>                                 <C>                         <C>                     <C>    <C>    <C>    <C>

Net Revenues:
  Visiting nurses                   $  32,227,614          49.0%        $ 29,375,519       47.7%   $    2,852,095         9.7%
  Personal care                        33,542,824          51.0%          32,266,389       52.3%        1,276,435         4.0%
                                   -------------------            -------------------             -----------------
                                       65,770,438         100.0%        $ 61,641,908      100.0%   $    4,128,530         6.7%
                                    ===================            ===================             =================
Operating income:
   Visiting nurses                  $   4,805,486          14.9%        $  4,335,589       14.8%   $      469,897        10.8%
   Personal care                        2,309,410           6.9%           3,354,372       10.4%       (1,044,962)      -31.2%
                                    -------------------            -------------------             -----------------
                                        7,114,896          10.8%           7,689,961       12.5%         (575,065)       -7.5%
   Corporate expense                    4,165,442           6.3%           4,625,024        7.5%         (459,582)       -9.9%
                                    -------------------            -------------------             -----------------
                                        2,949,454           4.5%           3,064,937        5.0%         (115,483)       -3.8%
   Facility gain                                -           0.0%              76,813        0.1%          (76,813)     -100.0%
   Litigation loss                              -           0.0%           1,154,241        1.9%       (1,154,241)     -100.0%
   Interest expense                       270,843           0.4%             427,056        0.7%         (156,213)      -36.6%
   Income taxes                         1,058,164           1.6%             518,954        0.8%          539,210       103.9%
                                    -------------------            -------------------             -----------------
Income from continuing operations   $   1,620,447           2.5%        $  1,041,499        1.7%   $      578,948        55.6%
                                    ===================            ===================             =================

     EBITDA                         $   4,317,914                      $   3,389,568              $      928,346        27.4%
</TABLE>

Our net revenues increased approximately $4.1 million or 6.7% with 9.7% growth
in VN, and 4% growth in PC. VN revenue growth was driven by admissions growth as
we continue to focus on this segment. EBITDA increased 27.4% between periods
primarily as a result of increased revenues.

VN operating income grew on the increases in admissions and revenues. PC
operating income declined due to shifts in the mix of our business and increased
general and administrative costs, primarily increased provision for
uncollectible accounts (refer to the discussion of each segment below). The
litigation loss in 2003 resulted from the loss at the trial court level of the
Franklin litigation disclosed previously.

In the quarter ended September 30, 2004 four hurricanes hit the State of
Florida. These hurricanes had the effect of reducing 2004 VN operating income by
approximately $180,000, and net income by approximately $108,000. The effective
income tax rate was approximately 39.5% of income before income taxes for 2004
compared to 33.3% in 2003. The tax provision from continuing operations for 2003
included a credit of $96,000 or $0.04 per diluted share related to valuation
allowances for state net operating loss carryforwards. Corporate expenses
declined due to a reduction of corporate staff and the reorganization of segment
operations in early 2004.


<PAGE>


Visiting Nurse Segment-Year Ended December 31, 2004 and 2003
<TABLE>
<CAPTION>

                                                               Year Ended
                                      ---------------------------- ---------------------------- ---------------------------
                                             December 2004                December 2003                   Change
                                      ---------------------------- ---------------------------- ---------------------------
                                        Amount          % Rev            Amount         % Rev     Amount             %
                                      ---------------- ----------- ------------------- -------- ---------------- ----------
<S>                                   <C>                <C>       <C>                  <C>       <C>              <C>

Net service revenues                  $    32,227,614    100.0%    $     29,375,519     100.0%  $    2,852,095       9.7%
Cost of service revenues                   12,600,064     39.1%          11,720,146      39.9%         879,918       7.5%
                                      ----------------             -------------------          ----------------
Gross margin                               19,627,550     60.9%          17,655,373      60.1%       1,972,177      11.2%
General and administrative
   expenses:
Salaries and benefits                       9,700,331     30.1%           8,322,015      28.3%       1,378,316      16.6%
Other                                       5,121,733     15.9%           4,997,769      17.0%         123,964       2.5%
                                      ----------------             -------------------          ----------------
Total general and administrative
   expenses:                               14,822,064     46.0%          13,319,784       45.3%      1,502,280      11.3%
                                      ----------------             -------------------          ----------------
Operating income                      $     4,805,486     14.9%    $      4,335,589       14.8%  $     469,897      10.8%
                                      ================             ===================          ================

Admissions                                     11,564                        10,536                      1,028       9.8%
Patient months of care                         26,515                        24,493                      2,022       8.3%
Revenue per patient month             $         1,215              $          1,199               $         16       1.3%
Cost of services per patient month    $           475              $            478               $         -3      -0.6%
Billable Visits                               250,161                       235,375                     14,786       6.3%

Average number of operations                       19                            17                          2      13.2%

Medicare Statistics:
Admissions                                     10,622                         9,633                        989      10.3%
Medicare Revenue % of Total                     90.7%                         90.1%                       0.6%       0.6%
</TABLE>

VN contribution for the year ended December 31, 2004 was $4.8 million versus
$4.3 million in 2003 despite the effect of Florida hurricanes which lowered 2004
operating income by approximately $180,000. Admissions grew about 9.8% over the
prior year while patient months increased 8.3% reflecting a reduction in the
average length of stay. Revenue per patient month increased about 1.3% primarily
due to higher Medicare rates between periods. Operating costs per patient month
decreased approximately .6%.  General and administrative expenses increased
primarily as a result of a 13% increase in units of operation between 2004 and
2003.

In March 2004, the Company received Medicare certification for a new start-up
agency in Melbourne FL. In April 2004, the Company received Medicare
certification for a new start-up agency in Bradenton FL. These operations
contributed revenues of approximately $1.2 million and operating income of
approximately $134,000 in the year ended December 2004. In the quarter ended
December 31, 2004, the Company purchased a startup agency in Orlando, Florida
and started Medicare operations in Cleveland, Akron and Youngstown, Ohio. These
operations contributed revenues of approximately $37,000 and operating losses of
approximately $184,000.



<PAGE>



Personal Care  Segment-Year Ended December 31, 2004 and 2003
<TABLE>
<CAPTION>

                                                                 Year Ended
                                   ----------------------------- ------------------------------ -------------------------
                                          December 2004                  December 2003                   Change
                                   ----------------- ----------- ------------------ ----------- --------------- ---------
                                        Amount        % Rev           Amount          % Rev         Amount         %
                                   ----------------- ----------- ------------------ ----------- --------------- ---------
<S>                                <C>                   <C>     <C>                  <C>       <C>                <C>

Net services revenue               $     33,542,824      100.0%  $   32,266,389     100.0%    $   1,276,435       4.0%
Cost of service revenues                 22,535,777       67.2%      21,596,227      66.9%          939,550       4.4%
                                   -----------------             ------------------             ---------------
 Gross margin                            11,007,047       32.8%      10,670,162      33.1%          336,885       3.2%
General and administrative
 expenses:
Salaries and benefits                     4,692,234       14.0%       4,232,372      13.1%          459,862      10.9%
Other                                     4,005,403       11.9%       3,083,418       9.6%          921,985      29.9%
                                   -----------------             ------------------             ---------------
Total general and
administrative expense:                   8,697,637       25.9%       7,315,790      22.7%        1,381,847      18.9%
                                   -----------------             ------------------             ---------------
Operating income                   $      2,309,410        6.9%  $    3,354,372      10.4%    $  (1,044,962)    -31.2%
                                   =================             ==================             ===============

Admissions                                    2,560                       2,529                          31       1.2%
Patient months of care                       36,760                      36,577                         183       0.5%
Patient days of care                        464,611                     441,732                      22,879       5.2%
Billable hours                            1,659,208                   1,546,705                     112,503       7.3%
Revenue per billable hour          $          20.22               $       20.86                $      (0.64)     -3.1%
</TABLE>


PC contribution for the year ended December 31, 2004 was about $2.3 million
versus $3.4 million in 2003. Patient days and billable hours both increased
reflecting increased utilization of services per patient. Revenue per billable
hour decreased 3.1% from prior year primarily due to changes in mix. Certain of
our PC markets experienced inordinate declines in volumes, while others
experienced volume growth. Significant volume declines in two particular markets
were more than offset by volume growth in certain other lower margin markets.
These changes in our business resulted in aggregate cost of services growing
faster than aggregate revenues.

General administrative (G&A) salaries and benefits increased in total and as a
percentage of revenues due to our management reorganization which added staff to
the PC management team. Our provision for uncollectible accounts in PC in the
year ended December 31, 2004 increased by $258,000 over the prior year primarily
due to an increasing difficulty in the collection of accounts from certain state
Medicaid programs.



<PAGE>



Liquidity and Capital Resources

Revolving Credit Facility. The Company has a $22.5 million credit facility with
JP Morgan Chase Bank, NA, as amended on August 11, 2005, with an expiration date
of September 30, 2008. The credit facility bears interest at the bank's prime
rate plus a margin (ranging from -0.75% to -0.25%, currently -0.75 %) dependent
upon total leverage and is secured by substantially all assets and the stock of
the Company's subsidiaries. The weighted average interest rates were 5.27% and
3.97% for the years ended December 31, 2005 and 2004, respectively. The Company
pays a commitment fee of 0.25% per annum on the unused facility balance.
Borrowings are available equal to the greater of: a) a multiple of four times
earnings before interest, taxes, depreciation and amortization (As Defined
EBITDA) or b) an asset based formula, primarily based on accounts receivable.
"As Defined EBITDA" of acquired operations, up to 50% of base "As Defined
EBITDA," may be included in the availability calculations. Borrowings under the
facility may be used for working capital, capital expenditures, acquisitions,
development and growth of the business and other corporate purposes. As of
December 31, 2005, the formula permitted approximately $22.2 million to be used.
The Company has irrevocable letters of credit, totaling $5.4 million outstanding
in connection with its self-insurance programs. Thus, a total of $16.8 million
was available for use at December 31, 2005. The Company's revolving credit
facility is subject to various financial covenants. As of December 31, 2005, the
Company was in compliance with the covenants. Under the most restrictive of its
covenants, the Company is required to maintain minimum net worth of at least
$10.5 million.

The Company believes that this facility will be sufficient to fund its operating
needs for at least the next year. The Company will continue to evaluate
additional capital, including possible debt and equity investments in the
Company, to support a more rapid development of the business than would be
possible with internal funds.




<PAGE>


Cash Flows
Key elements to the Consolidated Statements of Cash Flows for the years ended
December 31, 2005, 2004 and 2003 were as follows:

<TABLE>
<CAPTION>

                                                         Year Ended              Year Ended             Year Ended
                                                        December 31,         December 31, 2004       December 31, 2003
Net Change in Cash and Cash Equivalents                     2005
---------------------------------------
                                                     --------------------    -------------------    --------------------
<S>                                                  <C>                     <C>                    <C>
Provided by (used in):
    Operating activities                             $       4,670,795       $       3,430,871      $       7,038,417
    Investing activities                                    (3,132,400)               (275,254)            (1,978,340)
    Financing activities                                    (4,022,360)             (7,090,272)            (3,601,196)
    Discontinued operations activities                       7,798,799               3,388,651             (1,209,221)
                                                     --------------------    -------------------    --------------------
Net increase / (decrease) in cash and cash
    Equivalents                                      $       5,314,834       $        (546,004)     $          249,660
                                                     ====================    ===================    ====================

</TABLE>

Year Ended December 31, 2005
Net cash provided by operating activities resulted principally from current
period income, net of changes in accounts receivable, accounts payable and
accrued expenses. Accounts receivable days revenues outstanding were 48 at
December 31, 2005, and 53 at December 31, 2004, due to improved collection
efforts and to a lesser degree changes in payor mix. The increase in combined
accounts payable and accrued liabilities resulted primarily from an increase in
insurance liabilities, accrued accounts payable and accrued taxes. Net cash used
in investing activities resulted principally from the acquisition of home health
agencies. Net cash used in financing activities resulted primarily from the
payoff of our credit facility from the ADC divesture and other principal
reductions of our debt obligations.

Year Ended December 31, 2004
Net cash provided by operating activities resulted principally from our current
period income, net of changes in accounts receivable, accounts payable and
accrued expenses. Most of the decrease in accounts receivable resulted from cost
report settlements. Days sales outstanding were approximately 53 and 62 at
December 31, 2004 and 2003, respectively. The increase in accounts payable and
accrued liabilities resulted primarily from the timing of payments. Net cash
used in financing activities resulted primarily from repayments on our credit
facility and payment of capital lease and debt obligations.

Year Ended December 31, 2003
Net cash provided by operating activities resulted principally from our current
period income, net of changes in accounts receivable, accounts payable and
accrued expenses. Substantially all the decrease in accounts receivable resulted
from Medicare cost report settlements. Days sales outstanding were approximately
62 and 71 at December 31, 2003 and 2002, respectively. The decrease in accounts
payable and accrued liabilities resulted primarily from a lower liability under
our self-insured employee health program. This lower liability resulted from a)
an intentional acceleration of the claims payment process and b) lower employee
participation due to an increase in required employee contributions. The
decrease in other assets and liabilities is principally the result of the
discontinuation and payout of the deferred compensation plan. Net cash used in
investing activities resulted principally from improvements in our information
systems and a cash bond of $1.1 million posted in a litigation appeal, partially
offset by cash received from sale of assets. Net cash used in financing
activities resulted primarily from repayments on our credit facility and payment
of capital lease and debt obligations.

Contractual Obligations. The following table provides information about the
payment dates of our contractual obligations at December 31, 2005, excluding
current liabilities except for the current portion of long-term debt (amounts in
thousands):


<PAGE>


<TABLE>
<CAPTION>

                                2006          2007         2008         2009          2010       Thereafter      Total
                             ------------ ------------- ------------ ------------ -------------- ------------ ------------
<S>                          <C>          <C>            <C>         <C>            <C>           <C>


Revolving credit facility    $        -   $         -   $         -  $         -  $           -           -   $        -
Capital lease obligations           118           118           118            -              -           -          354
Notes payable                        42           721           236            -              -           -          999
Operating leases                  1,694         1,488         1,383          960            700         490        6,715
                             ------------ ------------- ------------ ------------ -------------- ------------ ------------
Total                        $    1,854   $     2,327   $     1,737  $       960  $         700  $      490   $    8,068
                             ============ ============= ============ ============ ============== ============ ============
</TABLE>


We believe that a certain amount of debt has an appropriate place in our overall
capital structure and it is not our strategy to eliminate all debt financing. We
believe that our cash flow from operations, and borrowing capacity on our bank
credit facility will be sufficient to cover operating needs, future capital
expenditure requirements and scheduled debt payments of miscellaneous small
borrowing arrangements and capitalized leases. In addition, it is likely that we
will pursue growth from acquisitions, partnerships and other ventures that would
be funded from excess cash from operations, credit available under the bank
credit agreement and other financing arrangements that are normally available in
the marketplace.

Commitments and Contingencies
Letters of Credit. We have outstanding letters of credit totaling $5.4 million
at December 31, 2005, which benefit our third-party insurer/administrators for
our self-insurance programs. The amount of such insurance program letter of
credit is subject to negotiation annually upon renewal and may vary in the
future based upon such negotiation, our historical claims experience and
expected future claims. It is reasonable to expect that the amount of the letter
of credit will increase in the future, however, we are unable to predict to what
degree.

We currently have no obligations related to acquisition agreements. However, we
periodically seek acquisition candidates and may reasonably be expected to enter
into acquisitions in the future.

General and Professional Liability. Malpractice and general patient liability
claims for incidents which may give rise to litigation have been asserted
against us by various claimants. The claims are in various stages of processing
and some may ultimately be brought to trial. We also know of incidents that have
occurred through December 31, 2005 that may result in the assertion of
additional claims. We carry insurance coverage for this exposure; however our
deductible per claim increased effective July 21, 2005, from $250,000 to
$500,000.

We record estimated liabilities for our insurance programs based on information
provided by the third-party plan administrators, historical claims experience,
the life cycle of claims, expected costs of claims incurred but not paid, and
expected costs to settle unpaid claims. We monitor our estimated
insurance-related liabilities on a monthly basis. As facts change, it may become
necessary to make adjustments that could be material to our results of
operations and financial condition.

Medicaid Dependence
We have a significant dependence on state Medicaid reimbursement programs. For
the year ended December 31, 2005, approximately 14.0%, 8.0%, 6.3%, 2.7%, 1.8%
1.3%, and 0.2% of our revenues were generated from Medicaid reimbursement
programs in the states of Ohio, Kentucky, Connecticut, Massachusetts, Florida,
Indiana and Alabama, respectively.

Approximately 34% of our 2005 revenues were derived from state Medicaid and
other government programs, most of which are currently facing significant budget
issues. The Medicaid programs in each of the states in which we operate are
taking actions or evaluating taking actions to control the rate of growth of
Medicaid expenditures. Among these actions are the following:
         o Redefining eligibility standards for Medicaid coverage
         o Redefining coverage criteria for home and community based care
           services
         o Slowing payments to providers by increasing the minimum time in which
           payments are made
         o Limiting reimbursement rate increases
         o Changing regulations under which providers must operate
<PAGE>

The actions being taken and/or being considered are because the number of
Medicaid beneficiaries and their related expenditures are growing at a faster
rate than the government's revenue. Medicaid is consuming a greater percentage
of the budget. This issue is exacerbated when revenues slow in a slowing
economy. We believe that these financial issues are cyclical in nature rather
than indicative of the long-term prospect for Medicaid funding of health care
services. Additionally, we believe our services offer the lowest cost
alternative to institutional care and are a part of the solution to the states'
Medicaid financing problems. It is possible, however, that the actions taken by
the state Medicaid programs in the future could have a significant unfavorable
impact on our results of operations, financial condition and liquidity.

Health Care Reform
The health care industry has experienced, and is expected to continue to
experience, extensive and dynamic change. In addition to economic forces and
regulatory influences, continuing political debate is subjecting the health care
industry to significant reform. Health care reforms have been enacted as
discussed elsewhere in this document. Proposals for additional changes are
continuously formulated by departments of the Federal government, Congress, and
state legislatures.

Government officials can be expected to continue to review and assess
alternative health care delivery systems and payment methodologies. Changes in
the law or new interpretations of existing laws may have a dramatic effect on
the definition of permissible or impermissible activities, the relative cost of
doing business, and the methods and amounts of payments for medical care by both
governmental and other payors. Legislative changes to "balance the budget" and
slow the annual rate of growth of expenditures are expected to continue. Such
future changes may further impact our reimbursement. There can be no assurance
that future legislation or regulatory changes will not have a material adverse
effect on our operations.

Federal and State legislative proposals continue to be introduced that would
impose more limitations on payments to providers of health care services such as
us. Many states have enacted, or are considering enacting, measures that are
designed to reduce their Medicaid expenditures.

We cannot predict what additional government regulations may be enacted in the
future affecting our business or how existing or future laws and regulations
might be interpreted, or whether we will be able to comply with such laws and
regulations in our existing or future markets.

Refer to the sections on "Reimbursement Changes and Risk Factors" in Part I, and
the "Notes to the Consolidated Financial Statements" and elsewhere in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for additional information.



<PAGE>


Health Insurance Portability and Accountability Act (HIPAA)
The Health Insurance Portability and Accountability Act (HIPAA) was enacted by
the Federal government on August 12, 1996, and requires organizations to adhere
to certain standards to protect data integrity, confidentiality and
availability. HIPAA also mandates, among other things, that the Department of
Health and Human Services adopt standards for the exchange of electronic health
information in an effort to encourage overall administrative simplification and
enhance the effectiveness and efficiency of the health care industry. We
implemented changes in our operations to comply with the privacy aspects of
HIPAA and we believe we are in compliance. We do not expect the cost of
complying with privacy standards to have a material effect on our results of
operations or financial position. We implemented changes in our operations to
comply with the electronic transaction and code sets aspects of HIPAA and we
believe we are in compliance with those requirements. Independent of HIPAA
requirements, we have been developing new information systems with improved
functionality to facilitate improved billing and collection activities, reduced
administrative costs and improved decision support information. We have
incorporated the HIPAA mandated electronic transaction and code sets into the
design of this new software.

Regulations with regard to the security components of HIPAA were published in
2003. Those regulations were required to be implemented by April 2005. We
believe we are in compliance with the security regulations, with no material
impact on our results of operations or financial position.
Discontinued Operations
We follow the guidance in SFAS 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets" and, when appropriate, reclassify operating units closed,
sold, or held for sale out of continuing operations and into discontinued
operations for all periods presented. As a result of the sale of the ADC
segment, it has been reclassified in our financial statements as further
explained in the notes to the financial statements. Revenues from the
discontinued ADC segment were approximately $16.5 million, $23.2 million and
$25.3 million in the years ended December 31, 2005, 2004 and 2003 respectively.
Net losses from the discontinued ADC segment were approximately ($221,000),
($363,000) and ($930,000) in the years ended December 31, 2005, 2004 and 2003
respectively, and such amounts are included in net loss from discontinued
operations in the accompanying financial statements.

In the three years ended December 31, 2005, no operating units in the VN or PC
segments met the criteria to be reclassified as discontinued operations.

Impact of Inflation
We do not believe that inflation has had a material effect on income during the
past several years.

Non-GAAP Financial Measure
The information provided in the some of the tables use certain non-GAAP
financial measures as defined under Securities and Exchange Commission (SEC)
rules. In accordance with SEC rules, the Company has provided, in the
supplemental information and the footnotes to the tables, a reconciliation of
those measures to the most directly comparable GAAP measures.

EBITDA:
EBITDA is defined as income before depreciation and amortization, net interest
expense and income taxes. EBITDA is not a measure of financial performance under
accounting principles generally accepted in the United States of America. It
should not be considered in isolation or as a substitute for net income,
operating income, cash flows from operating, investing or financing activities,
or any other measure calculated in accordance with generally accepted accounting
principles. The items excluded from EBITDA are significant components in
understanding and evaluating financial performance and liquidity. Management
routinely calculates and communicates EBITDA and believes that it is useful to
investors because it is commonly used as an analytical indicator within our
industry to evaluate performance, measure leverage capacity and debt service
ability, and to estimate current or prospective enterprise value. EBITDA is also
used in measurements of borrowing availability and certain covenants contained
in our credit agreement.
<PAGE>

The following table sets forth a reconciliation of Continuing Operations Net
Income -- As Adjusted to EBITDA:
<TABLE>
<CAPTION>

                                                  -----------------------------------------------------------------------
                                                                         Year Ended December 31,
                                                  ---------------------- ------------------------ -----------------------
                                                          2005                    2004                     2003
                                                  ---------------------- ------------------------ -----------------------
<S>                                                <C>                    <C>                     <C>
Net income from continuing operations             $          2,883,288   $            1,620,447   $           1,041,499

Add back:
   Interest expense                                            112,608                  270,843                 427,056
   Income taxes                                              1,361,582                1,058,164                 518,954
   Depreciation and amortization                             1,189,565                1,368,460               1,402,059
                                                  ---------------------- ------------------------ -----------------------

Earnings before interest, income taxes,
depreciation and amortization (EBITDA) from
continuing operations                             $          5,547,043   $            4,317,914   $           3,389,568
                                                  ====================== ======================== =======================
</TABLE>


ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

Derivative Instruments

We do not use derivative instruments.

Market Risk of Financial Instruments

Our primary market risk exposure with regard to financial instruments is to
changes in interest rates.

At December 31, 2005, a hypothetical 100 basis point increase in short-term
interest rates would have no material effect.



<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                      ALMOST FAMILY, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>

                                                                     Year Ended       Year Ended        Year Ended
                                                                      December       December 31,        December
                                                                      31, 2005           2004            31, 2003
                                                                  -----------------------------------------------------
<S>                                                               <C>               <C>               <C>

Net service revenues                                              $  75,620,145    $   65,770,438    $   61,641,908
Cost of service revenue (excluding amortization and depreciation)    39,662,307        35,135,975        33,316,373
                                                                  ---------------- ----------------- -----------------
Gross margin                                                         35,957,838        30,634,463        28,325,535
General and administrative expenses:
   Salaries and benefits                                             19,982,774        16,348,809        14,895,942
   Other                                                             11,885,012        11,336,200        10,364,656
                                                                  ---------------- ----------------- -----------------
Total general and administrative expenses:                           31,867,786        27,685,009        25,260,598
                                                                  ---------------- ----------------- -----------------
Operating income                                                      4,090,052         2,949,454         3,064,937
Other income (expense):
   Franklin litigation                                                  267,426                 -        (1,154,241)
   Facility gain                                                              -                 -            76,813
   Interest expense                                                    (112,608)         (270,843)         (427,056)
                                                                  ---------------- ----------------- -----------------
Income from continuing operations before income taxes                 4,244,870         2,678,611         1,560,453
Income tax expense                                                   (1,361,582)       (1,058,164)         (518,954)
                                                                  ---------------- ----------------- -----------------
Net income from continuing operations                                 2,883,288         1,620,447         1,041,499

Discontinued operations :
   Loss from operations, net of tax of $(244,064), $(1,814) and
     $131,342                                                          (220,518)         (363,472)         (930,309)
   Income on gain of sale, net of tax of $3,155,995                   5,205,698                 -                 -
                                                                  ---------------- ----------------- -----------------
Gain / (loss) on discontinued operations                              4,985,180          (363,472)         (930,309)
                                                                  ---------------- ----------------- -----------------
   Net income                                                     $   7,868,468    $    1,256,975    $      111,190
                                                                  ================ ================= =================

Per share amounts-basic:
   Average shares outstanding                                         2,337,289         2,303,267         2,294,771
Income from continuing operations                                 $        1.24    $         0.70    $         0.46
Income (loss) from discontinued operations                                 2.13            (0.15)             (0.41)
                                                                  ---------------- ----------------- -----------------
   Net income                                                     $        3.37    $         0.55    $         0.05
                                                                  ================ ================= =================

Per share amounts-diluted:
   Average shares outstanding                                         2,609,329         2,567,468         2,538,871
Income from continuing operations                                 $        1.11    $         0.63    $         0.41
Income (loss) from discontinued operations                                 1.91             (0.14)            (0.37)
                                                                  ---------------- ----------------- -----------------
   Net income                                                     $        3.02    $         0.49    $         0.04
                                                                  ================ ================= =================
</TABLE>









       The accompanying notes to consolidated financial statements are an
                  integral part of these financial statements.


<PAGE>


                      ALMOST FAMILY, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>

                                  ASSETS                                December 31, 2005        December 31, 2004
                                                                        -------------------   ----------------------
   <S>                                                                  <C>                     <C>
   CURRENT ASSETS:
     Cash and cash equivalents                                          $      6,188,321       $        873,487
     Accounts receivable - net                                                 9,639,342              9,815,444
     Prepaid expenses and other current assets                                 1,141,213                770,581
     Deferred tax assets                                                       1,171,227              1,352,000
     Net assets of discontinued operations                                             -              3,820,315
                                                                        -------------------    -------------------
       TOTAL CURRENT ASSETS                                                   18,140,103             16,631,827

   CASH HELD IN ESCROW                                                         1,006,696              1,154,241

   PROPERTY AND EQUIPMENT - NET                                                1,312,375              1,561,656

   GOODWILL                                                                    9,595,831              6,125,501

   DEFERRED TAX ASSETS                                                           361,301                      -

   OTHER ASSETS                                                                  126,849                104,786
                                                                        -------------------    -------------------
                                                                        $     30,543,155       $     25,578,011
                                                                        ===================    ===================


                   LIABILITIES AND STOCKHOLDERS' EQUITY

   CURRENT LIABILITIES:
     Accounts payable                                                    $     2,531,565       $     2,130,936
     Accrued liabilities                                                       6,207,962             5,448,416
     Current portion - capital leases and notes payable                          100,542               300,000
                                                                         ------------------    ------------------
                                                                               8,840,069             7,879,352
                                                                         ------------------    ------------------

   LONG-TERM LIABILITIES:
     Revolving credit facility                                                         -             3,769,575
     Capital leases                                                              220,901                     -
     Notes payable                                                               900,000                     -
     Deferred tax liabilities                                                          -               225,690
     Other liabilities                                                           446,704             1,556,683
                                                                         ------------------    ------------------
       TOTAL LONG-TERM LIABILITIES                                             1,567,605             5,551,948
                                                                         ------------------    ------------------
          TOTAL LIABILITIES                                                   10,407,674            13,431,300
                                                                         ------------------    ------------------

   COMMITMENTS AND CONTINGENCIES

   STOCKHOLDERS' EQUITY:
     Common stock, par value $0.10; authorized 10,000,000 shares;
      3,519,681 and 3,414,874 issued, respectively                               351,970               341,490
     Treasury stock, at cost, 1,120,511 shares                                (8,141,438)           (7,772,048)
     Additional paid-in capital                                               27,027,846            26,548,634
     Retained Earnings (Deficit)                                                 897,103            (6,971,365)
                                                                         ------------------    ------------------
       TOTAL STOCKHOLDERS' EQUITY                                             20,135,481            12,146,711
                                                                         ------------------    ------------------
                                                                         $    30,543,155       $    25,578,011
                                                                         ==================    ==================
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these financial statements.


<PAGE>


                      ALMOST FAMILY, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>


                                                                                            Additional    Retained        Total
                                         Common Stock                Treasury Stock          Paid-in      Earnings   Stockholders'
                                   --------------------------  ---------------------------
                                      Shares        Amount      Shares        Amount         Capital         (Deficit)    Equity
                                   ------------- ------------- ----------  -------------- --------------- ---------------- ---------
<S>                                 <C>          <C>            <C>        <C>             <C>              <C>              <C>

Balance, December 31, 2002      3,369,674   $  336,970     1,087,383  $ (7,706,152)   $26,335,863     $ (8,339,530)     $ 10,627,150

Options Exercised                 25,200        2,520                                     73,630                             76,150
Repurchased Shares                                             9,400       (65,896)                                         (65,896)
Tax benefit from exercise of                                                                                                  29,811
  non-qualified stock options                                                              29,811
Net Income                                                                                                111,190           111,190
                               ------------- ------------- ----------  -------------- --------------- ----------------  ------------
Balance, December 31, 2003      3,394,874   $  339,490     1,096,783  $ (7,772,048)  $ 26,439,304    $  (8,228,340)    $  10,778,405

Options Exercised                  20,000        2,000                                     66,750                             68,750
Tax benefit from exercise of
 non-qualified stock options                                                              42,580                             42,580
Net Income                                                                                               1,256,975         1,256,975

                              ------------- ------------- ----------  -------------- --------------- ----------------  -------------
Balance, December 31, 2004      3,414,874   $  341,490     1,096,783  $ (7,772,048)  $ 26,548,634    $  (6,971,365)    $  12,146,711

Options exercised, net of shares
  surrendered or withheld         104,807       10,480        23,728      (369,390)      (261,464)                         (620,374)
Tax benefit from exercise of
  non-qualified stock options                                                             740,676                            740,676
Net Income                                                                                               7,868,468         7,868,468
                               ------------- ------------- ----------  -------------- --------------- ----------------  ------------
Balance, December 31, 2005      3,519,681   $  351,970     1,120,511  $ (8,141,438)  $ 27,027,846    $     897,103     $  20,135,481
                              ============= ============= ==========  ============== =============== ================  =============
</TABLE>























   The accompanying notes to consolidated financial statements are an integral
                      part of these financial statements.


<PAGE>


                      ALMOST FAMILY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                    Year Ended          Year Ended       Year Ended
                                                                   December 31,        December 31,     December 31,
                                                                       2005                2004             2003
                                                                  ----------------   ----------------- ----------------
<S>                                                               <C>                <C>               <C>

Cash flows from operating activities:
Net income                                                        $ 7,868,468        $   1,256,975     $    111,190
  Less gain / (loss) from discontinued operations                   4,985,180            (363,472)         (930,309)
                                                                  ----------------   ----------------- ----------------
Income from continuing operations                                   2,883,288            1,620,447         1,041,499
Adjustments to reconcile income from continuing operations to
  net cash provided by operating activities:
  Depreciation and amortization                                     1,189,565            1,368,460         1,402,059
  Provision for uncollectible accounts                                935,141            1,326,765         1,140,796
  Litigation loss accrued                                                   -                    -         1,154,241
  Loss on sale of assets                                                    -                    -          (76,813)
  Deferred income taxes                                              (406,218)            (120,727)         806,557
                                                                  ----------------   ----------------- ----------------
                                                                    4,601,776            4,194,945         5,468,339
   Change in certain net assets, net of the effects of acquisitions:
  (Increase) decrease in:
   Accounts receivable                                               (759,039)            (190,496)         844,399
      Prepaid expenses and other current assets                      (427,402)             (32,598)         (301,420)
      Other assets                                                    (22,063)              (6,806)         783,299
   Increase (decrease) in:
      Accounts payable and accrued expenses                         1,233,261             (534,174)          243,800
         Other                                                         44,262                    -                -
                                                                  ----------------   ----------------- ----------------
      Net cash provided by operating activities                     4,670,795            3,430,871         7,038,417
                                                                  ----------------   ----------------- ----------------
Cash flows from investing activities:
   Cash held in escrow                                                      -                     -      (1,154,241)
   Capital expenditures                                              (562,070)            (161,727)        (973,568)
   Cash received from sale of assets                                        -                    -          149,469
   Acquisitions, net of cash acquired                              (2,570,330)            (113,527)               -
                                                                  ----------------   ----------------- ----------------
      Net cash used in investing activities                        (3,132,400)            (275,254)      (1,978,340)
                                                                  ----------------   ----------------- ----------------
Cash flows from financing activities:
   Net revolving credit facility repayments                        (3,769,575)           (7,121,848)     (3,590,814)
   Repurchase of common shares                                              -                    -          (65,896)
   Proceeds from stock option exercises                                47,215               68,750           76,150
   Principal payments on capital leases and notes payable            (300,000)             (37,174)         (20,636)
                                                                  ----------------   -----------------    -------------
      Net cash used in financing activities                        (4,022,360)           (7,090,272)     (3,601,196)
Cash flows from discontinued operations
   Operating activities                                              (466,440)           2,887,472         (958,211)
   Investing activities                                             8,448,621              740,745            3,491
   Financing activities                                              (183,382)            (239,566)        (254,501)
                                                                  ----------------   ----------------- ----------------
      Net cash provided by (used in) discontinued operations        7,798,799            3,388,651       (1,209,221)
                                                                  ----------------   ----------------- ----------------

Net increase / (decrease) in cash and cash equivalents              5,314,834             (546,004)          249,660
Cash and cash equivalents at beginning of period                      873,487             1,419,491        1,169,831
                                                                  ----------------   ----------------- ----------------
Cash and cash equivalents at end of period                        $ 6,188,321        $     873,487     $   1,419,492
                                                                  ================   ================= ================

Supplemental disclosures of cash flow information:
  Cash payment of interest, net of amounts capitalized            $   325,000        $     517,000     $     703,000
  Cash payment of taxes                                           $ 4,489,000        $     993,000     $      42,000
Summary of non-cash investing activities:
  Capital expenditures financed under capital leases              $   321,444        $     556,520     $     392,012
  Acquisition note payable                                        $   900,000        $           -     $           -
</TABLE>


   The accompanying notes to consolidated financial statements are an integral
                      part of these financial statements.


<PAGE>




                      ALMOST FAMILY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION AND DESCRIPTION OF BUSINESS

The consolidated financial statements include the accounts of Almost Family,
Inc. (a Delaware corporation) and its wholly-owned subsidiaries (collectively
"Almost Family" or the "Company"). The Company has operations in Alabama,
Connecticut, Florida, Indiana, Kentucky, Maryland, Massachusetts, and Ohio. All
material intercompany transactions and accounts have been eliminated in
consolidation.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.

Uninsured deposits at December 31, 2005, and December 31, 2004 were
approximately $6.2 million and $873,000, respectively. These amounts have been
deposited with national financial institutions.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives. The estimated useful lives
of depreciable assets are as follows:
                                                                 Estimated
                                                                 Useful Life
                                                                  In Years
     Leasehold improvements                                         3-10
     Medical equipment                                              2-10
     Office and other equipment                                     3-10
     Transportation equipment                                        3-5
     Internally generated software                                    3

GOODWILL

The goodwill acquired is stated at cost. Subsequent to its acquisitions, the
Company evaluates whether events and circumstances have occurred that indicate
the remaining estimated useful life of goodwill may warrant revision or that the
remaining balance of goodwill may not be recoverable. When factors indicate that
goodwill should be evaluated for possible impairment, the Company utilizes
appropriate methods in measuring whether or not the goodwill is recoverable.

The Company has completed the required annual tests for impairment under
Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other
Intangible Assets for 2005, 2004, and 2003, and concluded that no impairment
exists.

There were additions to the Company's goodwill of $3,483,164 for the fiscal year
ended December 31, 2005 for three acquisitions. Accumulated goodwill
amortization at December 31, 2005 and 2004 was approximately $4 million.
<PAGE>

LONG-LIVED ASSETS

The Company has completed the required annual tests for impairment under SFAS
144 "Accounting for the Impairment or Disposal of Long-Lived Assets" for 2005,
2004, and 2003, and concluded that no impairment exists.

CAPITALIZATION POLICIES

Maintenance, repairs and minor replacements are charged to expense as incurred.
Major renovations and replacements are capitalized to appropriate property and
equipment accounts. Upon sale or retirement of property, the cost and related
accumulated depreciation are eliminated from the accounts and the related gain
or loss is recognized in income.

Consistent with AICPA Statement of Position 98-1, the Company capitalizes the
cost of internally generated computer software developed for the Company's own
use. Software development costs of approximately $184,000, $218,000 and $922,000
were capitalized in the years ended December 31, 2005 and 2004 and 2003,
respectively.

NET REVENUES

The Company is paid for its services primarily by Federal and state third-party
reimbursement programs, commercial insurance companies, and patients. Revenues
are recorded at established rates in the period during which the services are
rendered. Appropriate allowances to give recognition to third party payment
arrangements are recorded when the services are rendered.

Laws and regulations governing the Medicare and Medicaid programs are extremely
complex and subject to interpretation. It is common for issues to arise related
to: 1) the determination of cost-reimbursed revenues, 2) medical coding,
particularly with respect to Medicare, 3) patient eligibility, particularly
related to Medicaid, and 4) other reasons unrelated to credit risk, all of which
may result in adjustments to recorded revenue amounts. Management continuously
evaluates the potential for revenue adjustments and when appropriate provides
allowances for losses based upon the best available information. There is at
least a reasonable possibility that recorded estimates could change by material
amounts in the near term.

Changes in Contractual Allowance Estimates Pertaining to Prior Periods
Approximately 98% of the Company's revenues are earned on a "fee for service"
basis. For all services provided, the Company uses either payor-specific or
patient-specific fee schedules for the recording of revenues at the amounts
actually expected to be received. Changes in estimates related to prior period
contractual allowances decreased revenues by $89,000, $82,000, and $72,000 in
the years ended December 31, 2005, 2004 and 2003, respectively.

Approximately 34% of the Company's 2005 revenues were derived from state
Medicaid and other government programs, some of which are currently facing
significant budget issues. It is possible that the actions taken by the state
Medicaid programs in the future could have a significant unfavorable impact on
the Company's results of operations, financial condition and liquidity.

Revenue and Receivable Concentrations
The following table sets forth the percent of the Company's revenues generated
from Medicare, state Medicaid programs and other payors:

                                          Year Ended         Year Ended December
                                      December 31, 2005            31, 2004
                                      ---------------------  -------------------
Medicare                                           49.1%             44.7%

Medicaid & other government programs:
  Ohio                                             14.0%             15.1%
  Kentucky                                          8.0%              8.5%
  Connecticut                                       6.3%              6.3%
  Massachusetts                                     2.7%              2.6%
  Florida                                           1.8%              2.3%
  Indiana                                           1.3%              1.1%
  Alabama                                           0.2%              0.2%
                                     ---------------------  --------------------
  Subtotal                                         34.3%             36.1%
  All other payers                                 16.6%             19.2%
                                      ---------------------  -------------------
   Total                                          100.0%            100.0%
                                      =====================  ===================


<PAGE>

Concentrations in the Company's accounts receivable were as follows:
<TABLE>
<CAPTION>

                                                         As of December 31, 2005             As of December 31, 2004
                                            -------------------------------------   ----------------------------------
                                                     Amount             Percent            Amount           Percent
                                            -----------------------  -------------   -----------------  --------------
     <S>                                      <C>                             <C>       <C>                   <C>

     Medicare                                $   4,331,255                37.9%              $   2,847,698        23.9%
                                              -------------------------------------------------------------------------
     Medicaid & other government programs:

        Kentucky                                 1,331,193                11.6%                  1,214,343        10.2%
                                                 1,381,775                12.1%                  2,278,610        19.2%
        Connecticut                                946,378                 8.3%                    895,190         7.5%
        Indiana                                    542,601                 4.7%                    537,921         4.5%
        Massachusetts                              346,526                 3.0%                    471,013         4.0%
        Alabama                                     25,981                 0.2%                     24,065         0.2%
        Florida                                    245,787                 2.2%                    345,812         2.9%
          Subtotal                               4,820,241                80.0%                  5,766,954        72.4%
                                              --------------------------------------------------------------------------
       All other payers                         2,283,646                20.0%                  3,282,186        27.6%
                                              --------------------------------------------------------------------------
          Subtotal                              11,435,142               100.0%                 11,896,838       100.0%
        Allowance for uncollectible accounts    (1,795,800)                                     (2,081,394)
                                              ----------------                          -------------------
                                              $  9,639,342                                   $   9,815,444
                                              ================                          ===================
</TABLE>

At December 31, 2005 and 2004, the Company had approximately ($68,000) and
$525,000 of net receivables (payables) outstanding specifically related to filed
or estimated cost reports. Of these amounts, approximately ($287,000) and
$5,000, respectively, were due from (to) the Kentucky Medicaid program.

The ability of payors to meet their obligations depends upon their financial
stability, future legislation and regulatory actions. The Company does not
believe there are any significant credit risks associated with receivables from
Federal and state third-party reimbursement programs. The allowance for doubtful
accounts principally consists of management's estimate of amounts that may prove
uncollectible for coverage, eligibility and technical reasons.

Payor Mix Concentrations and Related Aging of Accounts Receivable
The approximate breakdown of accounts receivable by payor classification as of
December 31, 2005 and 2004 is set forth in the following tables:

<TABLE>
<CAPTION>

As of December 31, 2005:                   Percent of Accounts Receivable
                                                                    >1yr
            Payor                    0-120          121-365         <2yrs          >2yrs          Total
------------------------------    ------------    ------------    ----------     ----------    -------------
<S>                                 <C>             <C>             <C>          <C>

Medicare                                  37%              1%            -%             -%              38%
Medicaid & Government                     32%              7%            3%             -%              42%
Self Pay                                   8%              2%            1%             -%              11%
Insurance                                  6%              2%            1%             -%               9%
Total                                     83%             12%            5%             -%             100%

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

As of December 31, 2004:                   Percent of Accounts Receivable
                                                                    >1yr
            Payor                    0-120          121-365         <2yrs          >2yrs          Total
------------------------------    ------------    ------------    ----------     ----------    -------------
<S>                                 <C>            <C>              <C>          <C>           <C>

Medicare                                  23%              1%            -%             -%              24%
Medicaid & Government                     37%              8%            6%             -%              51%
Self Pay                                   7%              2%            4%             -%              13%
Insurance                                  6%              4%            2%             -%              12%
Total                                     73%             15%           12%             -%             100%
</TABLE>

The balance sheet as of December 31, 2005 reflects a 2.8% decrease in net
accounts receivable from December 31, 2004 and a 10.4% decrease from December
31, 2003 despite increasing sales over that time frame. Days sales outstanding
declined to 48 days at December 31, 2005 from 52 days at December 31, 2004 and
64 days at December 31, 2003.

Allowance for Uncollectible Accounts by Payor Mix and Related Aging
The Company records an estimated allowance for uncollectible accounts by
applying estimated bad debt percentages to its accounts receivable agings. The
percentages to be applied by payor type are based on the Company's historical
collection and loss experience. The Company's effective allowances for bad debt
were as follows:

As of December 31, 2005:                Percent of Accounts Receivable
                                                       >1yr
    Payor                 0-120           121-365         <2yrs          >2yrs
---------------------------------    ------------    ----------     -----------
Medicare                      3%             18%          100%            100%
Medicaid & Government         2%             14%           76%            100%
Self Pay                      1%             11%           73%            100%
Insurance                     2%             17%           74%            100%
Total                         2%             15%           95%            100%

As of December 31, 2004:        Percent of Accounts Receivable
                                                       >1yr
    Payor                  0-120           121-365         <2yrs          >2yrs
---------------------------------    ------------    ----------     -----------
Medicare                      3%             14%          100%            100%
Medicaid & Government         2%             20%           89%            100%
Self Pay                      5%             26%           30%            100%
Insurance                     2%             14%           65%            100%
Total                         2%             19%           75%            100%

The Company's provision for uncollectible accounts for the years ended December
31, 2005, 2004 and 2003 was $935,000, $1,327,000 and $1,141,000, respectively.


<PAGE>


NET INCOME PER SHARE

Net income per share is presented as a unit of basic shares outstanding and
diluted shares outstanding. Diluted shares outstanding is computed based on the
weighted average number of common shares and common equivalent shares
outstanding. Common equivalent shares result from dilutive stock options. The
following table is a reconciliation of basic to diluted shares used in the
earnings per share calculation:

<TABLE>
<CAPTION>

                                                            Year Ended        Year Ended       Year Ended
                                                            December 31,      December 31,     December 31,
                                                               2005              2004             2003
                                                      -------------------------------------------------------
<S>                                                     <C>                     <C>             <C>
   Basic weighted average outstanding shares                   2,337,289         2,303,267       2,294,771
   Add-common equivalent shares representing
     shares issuable upon  exercise of dilutive
     options                                                     272,040           264,201         244,100
                                                        -----------------------------------------------------
   Diluted weighted average number of shares at
     year end                                                  2,609,329         2,567,468       2,538,871
                                                        =====================================================
</TABLE>

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Refer also to "NET
REVENUES" above and to Note 2 -- "HEALTHCARE REFORM LEGISLATION, REGULATIONS AND
MARKET CONDITIONS."

FINANCIAL STATEMENT RECLASSIFICATIONS

Certain amounts have been reclassified in the December 31, 2004 financial
statements and related notes in order to conform to the 2005 presentation. Such
reclassifications had no effect on previously reported net income.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash, accounts receivable,
payables and debt instruments. The book values of cash, accounts receivable and
payables are considered representative of their respective fair values. The fair
value of the Company's debt instruments approximates their carrying values as
substantially all of such debt has rates which fluctuate with changes in market
rates.



<PAGE>


STOCK-BASED COMPENSATION

The Company applies APB Opinion 25 and related interpretations in accounting for
its stock option plans. In 1995, Statement of Financial Accounting Standards No.
123 "Accounting for Stock-Based Compensation" (SFAS No. 123) was issued and, if
fully adopted, changes the method of recognition of costs on plans similar to
the Company's. The Company adopted the disclosure-only provisions of SFAS No.
123. Accordingly, no compensation cost has been recognized for the Company's
stock option grants since options granted have been at exercise prices at least
equal to fair value of the Company's common stock at the grant date.

Had compensation cost for stock option grants been determined based upon the
fair value at the grant date for the awards in the years ended December 31,
2005, 2004 and 2003 consistent with the provisions of SFAS 123, the effect on
net income and earnings per share would have been reduced to the following pro
forma amounts:
<TABLE>
<CAPTION>

                                            Year Ended December          Year Ended                 Year Ended
                                                  31, 2005            December 31, 2004            December 31,
                                                                                                       2003
                                            ---------------------    --------------------     -----------------------
   <S>                                      <C>                      <C>                        <C>
      Net income, as reported:              $         7,868,468      $         1,256,975      $           111,190
        Pro forma stock-based
         compensation expense, net of
         tax                                              4,753                      710                   41,808
                                            ---------------------    --------------------     -----------------------
      Pro forma net income                  $         7,863,715      $         1,256,265      $            69,382
                                            =====================    ====================     =======================

      Pro forma earnings per share:
        Basic                               $              3.36      $              0.55      $              0.03
        Diluted                             $              3.01      $              0.49      $              0.03

</TABLE>

NEW ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board ("FASB") issued FASB
Statement No. 123 (revised 2004) ("SFAS 123R"), Share-Based Payment, which is a
revision of FASB Statement No. 123, Accounting for Stock Based Compensation.
SFAS 123R supersedes Accounting Principles Bulletin ("APB") No. 25, Accounting
for Stock Issued to Employees and amends FASB Statement No. 95, Statement of
Cash Flows. The Company is required to adopt Statement 123R on January 1, 2006
using the modified prospective method. Upon adoption, two transition methods are
available. Under the modified-prospective method, companies will be required to
apply the provisions of SFAS 123R to all share-based payments that are granted,
modified or settled after the date of adoption. Under the modified-retrospective
transition method, companies may restate prior periods by recognizing
compensation cost in the amounts previously reported in the pro-forma footnote
disclosures required by SFAS 123. New awards and unvested awards would be
accounted for in the same manner as the modified-prospective method. The Company
plans to reflect the adoption of SFAS 123R in the interim consolidated financial
statements for the first quarter of 2006 using the modified prospective method
of application. Based upon the Company's initial analysis, the Company does not
believe that the adoption of this pronouncement will have a material impact on
its future operating results.

ADVERTISING COSTS

The Company expenses the costs of advertising as incurred. Advertising expense
was $87,898, $76,201 and $95,845 for the years ended December 31, 2005, 2004,
and 2003, respectively.

DISCONTINUED OPERATIONS

The Company follows the guidance in SFAS 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets" and, when appropriate, reclassifies operating

units closed, sold, or held for sale out of continuing operations and into
discontinued operations for all periods presented. The ADC segment sale has been
reclassified in the Company's financial statements as further explained
elsewhere in the notes to the financial statements.

In the three years ended December 31, 2005, no operating units in the VN or PC
segments met the criteria to be reclassified as discontinued operations.

NOTE 2 - HEALTHCARE REFORM LEGISLATION, REGULATIONS AND MARKET
CONDITIONS

HEALTH CARE REFORM

The health care industry has experienced, and is expected to continue to
experience, extensive and dynamic change. In addition to economic forces and
regulatory influences, continuing political debate is subjecting the health care
industry to significant reform. Health care reforms have been enacted and
proposals for additional changes are continuously formulated by departments of
the Federal government, Congress, and state legislatures.

Government officials can be expected to continue to review and assess
alternative health care delivery systems and payment methodologies. Changes in
the law or new interpretations of existing laws may have a dramatic effect on
the definition of permissible or impermissible activities, the relative cost of
doing business, and the methods and amounts of payments for medical care by both
governmental and other payors. Legislative changes to "balance the budget" and
slow the annual rate of growth of expenditures are expected to continue. Such
future changes may further impact reimbursement. There can be no assurance that
future legislation or regulatory changes will not have a material adverse effect
on the operations of the Company.

State legislative proposals continue to be introduced that would impose more
limitations on payments to providers of health care services such as the
Company. Many states have enacted, or are considering enacting, measures that
are designed to reduce their Medicaid expenditures.

The Company cannot predict what additional government regulations may be enacted
in the future affecting its business or how existing or future laws and
regulations might be interpreted, or whether the Company will be able to comply
with such laws and regulations in its existing or future markets.

Health Insurance Portability and Accountability Act (HIPAA)
The Health Insurance Portability and Accountability Act (HIPAA) was enacted by
the Federal government on August 12, 1996, and requires organizations to adhere
to certain standards to protect data integrity, confidentiality and
availability. HIPAA also mandates, among other things, that the Department of
Health and Human Services adopt standards for the exchange of electronic health
information in an effort to encourage overall administrative simplification and
enhance the effectiveness and efficiency of the health care industry. The
Company implemented changes in its operations to comply with the privacy aspects
of HIPAA and it believes it is in compliance. The Company does not expect the
cost of complying with privacy standards to have a material effect on its
results of operations or financial position. The Company implemented changes in
its operations to comply with the electronic transaction and code sets aspects
of HIPAA and believes it is in compliance with those requirements. Independent
of HIPAA requirements, the Company has been developing new information systems
with improved functionality to facilitate improved billing and collection
activities, reduced administrative costs and improved decision support
information. The Company has incorporated the HIPAA mandated electronic
transaction and code sets into the design of this new software.

Regulations with regard to the security components of HIPAA were published in
2003. Those regulations were required to be implemented by April 2005. The
Company believes it is in compliance with the security regulations.



<PAGE>


NOTE 3 - ACCRUED LIABILITIES

Accrued liabilities consist of the following:

                                            December 31,          December 31,
                                               2005                  2004
                                         -------------------    ----------------
 Wages and employee benefits               $      1,800,516       $    1,202,150
 Insurance accruals                               1,993,747            1,633,628
 Accrued taxes                                      795,594              841,479
 Accrued professional fees and other                147,013              165,883
 Insurance and other accruals related to
 sold ADC operations:                             1,471,092            1,605,276
                                             -------------------    ------------
                                              $   6,207,962       $    5,448,416
                                             =================== ===============

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment, including equipment under capital leases, consist of the
following:

                                   December 31, 2005          December 31, 2004
                                   --------------------    --------------------

Leasehold improvements                     1,251,156               1,236,107
Medical equipment                            202,464                 142,103
Computer equipment and software            8,697,618               8,016,712
Office and other equipment                 1,546,627               1,517,342
                                   --------------------    --------------------
                                          11,697,865              10,912,264
Less accumulated depreciation            (10,385,490)             (9,350,608)
                                   --------------------    --------------------
                                   $       1,312,375       $       1,561,656
                                   ====================    ====================

Depreciation and amortization expense (including amortization of assets held
under capital leases) was $1,189,565 and $1,368,460 for the years ended December
31, 2005 and 2004, respectively.

NOTE 5 - REVOLVING CREDIT FACILITY

Revolving Credit Facility. The Company has a $22.5 million credit facility with
JP Morgan Chase Bank, NA, as amended on August 11, 2005, with an expiration date
of September 30, 2008. The credit facility bears interest at the bank's prime
rate plus a margin (ranging from -0.75% to -0.25%, currently -0.5%) dependent
upon total leverage and is secured by substantially all assets and the stock of
the Company's subsidiaries. The weighted average interest rates were 5.27% and
3.97% for the years ended December 31, 2005 and 2004, respectively. The Company
pays a commitment fee of 0.25% per annum on the unused facility balance.
Borrowings are available equal to the greater of: a) a multiple of four times
earnings before interest, taxes, depreciation and amortization (As Defined
EBITDA) or b) an asset based formula, primarily based on accounts receivable.
"As Defined EBITDA" of acquired operations, up to 50% of base "As Definded
EBITDA", may be included in the availability calculations. Borrowings under the
facility may be used for working capital, capital expenditures, acquisitions,
development and growth of the business and other corporate purposes. As of
December 31, 2005, the formula permitted approximately $22.2 million to be used.
The Company has irrevocable letters of credit, totaling $5.4 million outstanding
in connection with its self-insurance programs. Thus, a total of $16.8 million
was available for use at December 31, 2005. The Company's revolving credit
facility is subject to various financial covenants. As of December 31, 2005, the
Company was in compliance with the covenants. Under the most restrictive of its
covenants, the Company is required to maintain minimum net worth of at least
$10.5 million.




<PAGE>


NOTE 6 - INCOME TAXES

The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the Company's book
and tax bases of assets and liabilities and tax carryforwards using enacted tax
rates in effect for the year in which the differences are expected to reverse.
The principal tax carryforwards and temporary differences were as follows:



                                         December 31, 2005     December 31, 2004
                                        ---------------------    ---------------
 Deferred tax assets
 Nondeductible reserves and
   allowances                           $          530,000       $      654,000
 Intangibles                                       763,000              955,000
 Insurance accruals                                641,000              744,000
 Net operating loss carryforwards                  624,000              725,000
                                        ---------------------    ---------------
                                                 2,558,000            3,078,000
 Valuation allowance                              (329,000)            (557,000)
                                        ---------------------    ---------------
                                                 2,229,000            2,521,000
 Deferred tax liabilities
 Accelerated depreciation                         (697,000)          (1,395,000)
                                        ---------------------    ---------------
 Net deferred tax assets                $        1,532,000       $    1,126,000
                                        =====================    ===============

 Deferred tax assets (liabilities) are reflected in the accompanying balance
 sheets as:
   Current                              $        1,171,000       $    1,352,000
   Long-term                                       361,000             (226,000)
                                        ---------------------    ---------------
 Net deferred tax assets                $        1,532,000       $    1,126,000
                                        =====================    ===============

The Company has state and local net operating loss carryforwards of
approximately $13.2 million which expire on various dates through 2016.

Provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>

                                                        Year Ended              Year Ended            Year Ended
                                                    December 31, 2005       December 31, 2004       December 31, 2003
                                                    --------------------    -------------------    ------------------
   <S>                                              <C>                      <C>                     <C>

   Federal - current                                $       1,443,000        $       911,000      $        531,000
   State and local - current                                  191,000                154,000               367,000
   Deferred                                                  (272,000)                (7,000)             (379,000)
                                                    --------------------    -------------------    ------------------
                                                    $       1,362,000        $      1,058,000     $        519,000
                                                    ====================    ===================    ==================

   Shown in the accompanying statements of income as:
       Continuing operations                        $       1,362,000        $      1,058,000     $        519,000
       Discontinued operations                              2,912,000                 (2,000)              131,000
                                                    --------------------    -------------------    ------------------
                                                    $       4,274,000        $      1,056,000     $        650,000
                                                    ====================    ===================    ==================

</TABLE>


<PAGE>


A reconciliation of the statutory to the effective rate of the Company is as
follows:
<TABLE>
<CAPTION>

                                                       Year Ended              Year Ended               Year Ended
                                                   December 31, 2005        December 31, 2004      December 31, 2003
                                                 ----------------------- ----------------------  -----------------------
<S>                                                 <C>                     <C>                      <C>
  Tax provision using statutory rate                             34.0%                  34.0%                    34.0%
  Valuation allowance                                            -3.6%                  -0.5%                    -0.8%
  State and local taxes, net of Federal benefit                   4.5%                   5.7%                    23.5%
  Other, net                                                     -2.9%                   0.3%                   -23.4%
                                                 ----------------------- ----------------------  -----------------------
  Tax provision for continuing operations                        32.0%                  39.5%                    33.3%
                                                 ======================= ======================  =======================
</TABLE>

The Company has provided a valuation allowance against certain net deferred tax
assets based upon management's estimation of realizability of those assets
through future taxable income. This valuation was based in large part on the
Company's history of generating operating income or losses in individual tax
locales and expectations for the future. The Company's ability to generate the
expected amounts of taxable income from future operations to realize its
recorded net deferred tax assets is dependent upon general economic conditions,
competitive pressures on revenues and margins and legislation and regulation at
all levels of government. There can be no assurances that the Company will meet
its expectations of future taxable income. However, management has considered
the above factors in reaching its conclusion that it is more likely than not
that future taxable income will be sufficient to realize the net deferred tax
assets as of December 31, 2005.

During the year ended December 31, 2005, 2004 and 2003, based on changes in
facts and circumstances, favorable changes occurred in the Company's
expectations with regard to the generation of future taxable income in certain
tax jurisdictions. Accordingly, the state and local tax provision for these
periods include a reduction of previously recorded valuation allowances of
approximately $152,000, $21,000 and $96,000, respectively.

During the year ended December 31, 2003, the Company recorded a provision for
litigation loss in the Franklin litigation case. The Company will receive no tax
deduction for this loss and accordingly, this loss has been excluded from income
for purposes of income tax calculations and the above disclosures.

NOTE 7 - STOCKHOLDERS' EQUITY

Employee Stock Option Plans

The Company has the following stock option plans:

1. The Company has a Nonqualified Stock Option Plan which provided for the
granting of options to key employees, officers, and directors, to purchase up to
220,000 shares of the Company's common stock. The period of time for granting
options under this plan has expired. As of December 31, 2005, there were no
shares outstanding under this plan.

2. The Company has a 1991 Long-term Incentive Nonqualified Stock Option Plan
which provided for the granting of options to purchase up to 500,000 shares of
the Company's common stock to key employees, officers, and directors. The period
of time for granting options under this plan has expired. As of December 31,
2005, options for 280,993 shares were outstanding under this plan.

3. The Company has a 1993 Stock Option Plan for Non-employee Directors which
provided for the granting of options to purchase up to 120,000 shares of the
Company's common stock to directors who are not employees. Each newly elected
director or any director who did not possess options to purchase 10,000 shares
of the Company's common stock were automatically granted options to purchase
10,000 shares of common stock under this plan at an exercise price based on the
market price as of the date of grant. As of December 31, 2005, all option shares
available under this plan have been granted and options for 65,500 shares were
outstanding under this plan.
<PAGE>

4. The Company has a 2000 Stock Option Plan which provides for options to
purchase up to 500,000 shares of the Company's common stock to key employees,
officers and directors. The Board of Directors determines the amount and terms
of the options, which cannot exceed ten years. As of December 31, 2005, options
for 41,507 shares had been granted and were outstanding under this plan. Shares
available for future grant amount to 415,993 shares at December 31, 2005.

Changes in option shares outstanding are summarized as follows:

                                                       Wtd. Avg
                                    Shares            Ex. Price
                                  -------------     ---------------
 December 31, 2001                   667,500                 3.06

 Granted                              12,500                10.51
 Exercised                           (51,800)                2.80
 Terminated                                -                    -
                                  -------------
 December 31, 2002                   628,200                 3.38

 Granted                                   -                     -
 Exercised                           (25,200)                3.02
 Terminated                          (39,500)                3.26
                                  -------------
 December 31, 2003                   563,500                 3.40

 Granted                                  -                   -
 Exercised                           (20,000)                3.44
 Terminated                          (17,500)                9.54
                                  -------------
 December 31, 2004                   526,000                 3.20
                                  =============

 Granted                              10,000                5.41
 Exercised                          (104,807)                2.91
 Forfeited                           (43,193)                2.82
                                   -------------
 December 31, 2005                   388,000                 3.45
                                   =============



<PAGE>


The following table details exercisable options and related information:

<TABLE>
<CAPTION>

                                                           Year Ended          Year Ended          Year Ended
                                                        December 31, 2005  December 31, 2004   December 31, 2003
                                                        ------------------ ------------------- -------------------
<S>                                                     <C>                <C>                  <C>

   Exercisable at end of year                                    383,000            524,750              502,375
   Weighted average exercise price                      $           3.39   $           3.18    $            3.20

   Weighted average fair value
       of options granted during the year               $           5.41   $              -    $               -
</TABLE>

The fair value of each option award is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for awards in the year ended December 31, 2005: risk-free
interest rates of 4.44%, expected volatility of approximately 45.81%, expected
lives of 10 years, and no expected dividend yields.

The following table summarizes information about stock options outstanding at
December 31, 2005:
<TABLE>
<CAPTION>

                                 Options Outstanding                                     Options Exercisable
      --------------------------------------------------------------------------- -----------------------------------
                             Outstanding          Wtd. Avg.                          Exercisable
          Range of              As of             Remaining          Wt. Avg.           As of            Wt. Avg.
         Ex. Price        December 31, 2005    Contractual Life      Ex. Price    December 31, 2005     Ex. Price
      -----------------   ------------------  -------------------  -------------- ------------------   -------------
         <S>               <C>                    <C>                <C>           <C>                   <C>
         $2.19-2.50               147,500            3.17              $2.19              147,500         $2.19
        $2.50 - 3.00               57,000            2.82              $3.68               52,000         $3.21
         Over $3.00               183,500            5.12              $4.40              183,500         $4.40
                          ------------------                                      ------------------
       $2.19 - $10.59             388,000            4.04              $3.45              383,000         $3.39
                          ==================                                      ==================
</TABLE>


Shareholders Rights Plan
On February 1, 1999 the Company implemented a shareholder protection rights
plan. One right was distributed as a dividend on each share of common stock of
the Company held of record as of the close of business on February 16, 1999.
Subject to the terms and conditions of the plan, the rights will be exercisable
only if a person or group acquires beneficial ownership of 20% or more of the
Company's common stock or announces a tender or exchange offer upon consummation
of which, such person or group would beneficially own 20% or more of the common
stock of the Company. If the rights are triggered, then each right not owned by
the acquiring person or group entitles its holder to purchase shares of Company
common stock at the right's current exercise price, having a value of twice the
right's exercise price. The Company may redeem the rights at any time until the
close of business on the tenth business day following an announcement by the
Company that an acquiring person or group has become the beneficial owner of 20%
or more of the Company's common stock.

Directors Deferred Compensation Plan
The Company has a Non-Employee Directors Deferred Compensation Plan which allows
Directors to elect to receive fees for Board services in the form of shares of
the Company's common stock. The Plan authorized 100,000 shares for such use. As
of December 31, 2005, 55,550 shares have been allocated in deferred accounts,
4,311 have been issued to previous Directors and 40,139 remain available for
future allocation. Allocated shares are to be issued to Directors when they
cease to be Directors or upon a change in control. Directors' fees are expensed
as incurred whether paid in cash or deferred into the Plan.



<PAGE>


NOTE 8 - RETIREMENT PLAN

The Company administers a 401 (k) defined contribution retirement plan for the
benefit of the majority of its employees, who have completed 90 days of service
and been credited with 1,000 hours of service as defined by the plan agreement.
The Company matches contributions in an amount equal to one-quarter of the first
10% of each participant's contribution to the plan. 401 (k) assets are held by
an independent trustee, are not assets of the Company, and accordingly are not
reflected in the Company's balance sheets.

The Company's retirement plan expense was approximately $103,000, $60,000 and
$5,000 for the years ended December 31, 2005, 2004, and 2003.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Operating Leases
The Company leases certain real estate, office space, and equipment under
non-cancelable operating leases expiring at various dates through 2010 and which
contain various renewal and escalation clauses. Rent expense amounted to
approximately $1,947,787, $1,796,734 and $1,841,939 for years ended December 31,
2005, 2004 and 2003. At December 31, 2005 the minimum rental payments under
these leases were as follows:

           2006                           $     1,694,344
           2007                                 1,488,384
           2008                                 1,383,272
           2009                                   959,415
           2010                                   699,431
           Thereafter                             490,292
                                          ------------------
                                          $     6,715,138
                                          ==================

Capital Leases and Term Debt
The Company has certain assets, primarily computer equipment, under a capital
lease. The leases include interest of approximately 6.25% per annum. Assets held
under capital lease are carried at cost of approximately $321,000 with
accumulated depreciation of approximately $41,000 as of December 31, 2005.

The Company has two unsecured notes payable totaling $700,000 and $200,000 to
sellers bearing interest at 6% per annum at December 31, 2005, due in March 2007
and November 2008, respectively.

Future minimum lease payments and principal and interest payments on the term
debt are as follows:
<TABLE>
<CAPTION>
                                              Capital            Acquisition
      Year Ending December 31,                 Leases            Notes Payable           Total
                                         ------------------    ------------------    -------------------
      <S>                                <C>                   <C>                   <C>

      2006                               $        117,784      $        42,000       $        159,784
      2007                                        117,784              721,000                838,784
      2008                                        117,784              236,000                353,784
      2009                                              -                    -                      -
      2010                                              -                    -                      -
      Thereafter                                        -                    -                      -
                                         ------------------    ------------------    -------------------
                                                  353,352              999,000              1,352,352
      Less: amount representing
        Interest                                  (31,909)             (99,000)              (130,909)
                                         ------------------    ------------------    -------------------
      Present value of minimum
        lease/principal payments                  321,443              900,000              1,221,443
      Less: current portion                       100,542                    -                100,542
                                         ------------------    ------------------    -------------------
                                         $        220,901      $       900,000       $      1,120,901
                                         ==================    ==================    ===================
</TABLE>

Insurance Programs

The Company bears significant insurance risk under our large-deductible workers'
compensation insurance program and its self-insured employee health program.
Under the workers' compensation insurance program, the Company bears risk up to
$250,000 per incident. The Company purchases stop-loss insurance for the
employee health plan that places a specific limit, generally $100,000, on its
exposure for any individual covered life.

Malpractice and general patient liability claims for incidents which may give
rise to litigation have been asserted against the Company by various claimants.
The claims are in various stages of processing and some may ultimately be
brought to trial. The Company is aware of incidents that have occurred through
December 31, 2004 that may result in the assertion of additional claims. The
Company carries insurance coverage for this exposure; however, its deductible
per claim increased effective July 21, 2005, from $250,000 to $500,000

The Company records estimated liabilities for its insurance programs based on
information provided by the third-party plan administrators, historical claims
experience, the life cycle of claims, expected costs of claims incurred but not
paid, and expected costs to settle unpaid claims. The Company monitors its
estimated insurance-related liabilities on a monthly basis. As facts change, it
may become necessary to make adjustments that could be material to the Company's
results of operations and financial condition.

Legal Proceedings

The Company is currently, and from time to time, subject to claims and suits
arising in the ordinary course of its business, including claims for damages for
personal injuries. In the opinion of management, the ultimate resolution of any
of these pending claims and legal proceedings will not have a material effect on
the Company's financial position or results of operations.

NOTE 10 - STOCK REPURCHASES

During the year ended December 31, 2005, the Company redeemed 23,728 shares of
its common stock in conjunction with the exercise of employee stock options and
issuance of related stock. These were shares previously outstanding and owned by
option holders submitted them in lieu of the cash exercise price (an aggregate
of $(369,390) that would have otherwise been due on option exercise. During the
year ended December 31, 2003, the Company purchased 9,400 shares of its common
stock in open market purchases for a total cost of approximately $66,000.

NOTE 11 - SEGMENT DATA

The Company has two reportable segments, Visiting Nurse (VN) and Personal Care
(PC). Reportable segments have been identified based upon how management has
organized the business by services provided to customers and the criteria in
SFAS 131, "Disclosures about Segments of an Enterprise and Related Information."
On September 30, 2005, the Company sold its Adult Day Care (ADC) business
segment. The ADC segment information has been reclassified from continuing
operations and into discontinued operations for all periods presented.

The Company's VN segment provides skilled medical services in patients' homes
largely to enable recipients to reduce or avoid periods of hospitalization
and/or nursing home care. VN Medicare revenues are generated on a per episode
basis rather than a fee per visit or day of care. Approximately 92% of the VN
segment revenues are generated from the Medicare program while the balance is
generated from Medicaid and private insurance programs.

The Company's PC segment services are also provided in patients' homes. These
services (generally provided by paraprofessional staff such as home health
aides) are generally of a custodial rather than skilled nature. PC revenues are
generated on an hourly basis. Approximately 67% of the PC segment revenues are
generated from Medicaid and other government programs while the balance is
generated from insurance programs and private pay patients.


<TABLE>
<CAPTION>

                                              Year Ended             Year Ended              Year Ended
                                          December 31, 2005       December 31, 2004      December 31, 2003
----------------------------------------- ------------------- --- ------------------ --- -------------------
<S>                                       <C>                      <C>                   <C>
Net revenues
Visiting nurses                           $     40,265,311        $     32,227,614       $    29,375,519
Personal care                                   35,354,834              33,542,824            32,266,389
                                          -------------------     ------------------     -------------------
                                          $     75,620,145        $     65,770,438       $    61,641,908
                                          ===================     ==================     ===================
Operating income (loss)
Visiting nurses                           $      5,275,661        $      4,805,486       $     4,335,589
Personal care                                    3,289,835               2,309,410             3,354,372
Corporate                                       (4,475,444)             (4,165,442)           (4,625,024)
                                          -------------------     ------------------     -------------------
                                          $      4,090,052        $      2,949,454       $     3,064,937
                                          ===================     ==================     ===================
Identifiable assets
Visiting nurses                           $      8,567,595        $      4,304,820       $     3,753,238
Personal care                                    9,350,761               9,467,064            11,213,644
Corporate                                       12,624,799               7,985,812             9,241,800
Discontinued operations                                  -               3,820,315             7,572,438
                                          -------------------     ------------------     -------------------
                                          $     30,543,155        $     25,578,011       $    31,781,120
                                          ===================     ==================     ===================
Identifiable liabilities
Visiting nurses                           $      3,737,863        $      2,140,354       $       2,508,940
Personal care                                    2,838,394               3,111,892               2,669,347
Corporate                                        3,831,417               8,179,054              15,824,428
                                          -------------------     ------------------     -------------------
                                          $     10,407,674        $     13,431,300       $      21,002,715
                                          ===================     ==================     ===================
Capital expenditures
Visiting nurses                           $         85,963        $         68,517       $         500,323
Personal care                                        6,768                   5,615                 377,042
Corporate                                          469,339                  87,595                  96,203
                                          -------------------     ------------------     -------------------
                                          $        562,070        $        161,727       $         973,568
                                          ===================     ==================     ===================
Depreciation and amortization
Visiting nurses                           $        712,039        $        842,389       $         860,478
Personal care                                      291,414                 399,518                 195,782
Corporate                                          186,112                 126,553                 345,799
                                          -------------------     ------------------     -------------------
                                          $      1,189,565        $      1,368,460       $       1,402,059
                                          ===================     ==================     ===================
</TABLE>

NOTE 12 - SALE OF ADULT DAY CARE (ADC) SEGMENT

On September 30, 2005, the Company sold its adult day care (ADC) segment to
Active Services, Inc.. ADC operations are now reported as discontinued
operations. The sale price consisted of $13.6 million cash plus assumption of
approximately $1.4 million of debt. In return, Active Services acquired
substantially all the assets and assume certain working capital liabilities
related to Almost Family's 19 medical adult day care centers which generated
approximately $21.0 million in annual revenues. The Company reported an
after-tax gain on the sale totaling $5.2 million. The Company's balance sheet as
of December 31, 2005 includes opportunity $1 million of the sale price held in
escrow for 1 year from the date of sale pending possible indemnification claims.
To date no such claims have been asserted by the buyer.



<PAGE>


Revenues from the discontinued ADC segment were approximately $16.5 million,
$23.2 million and $25.3 million in the years ended December 31, 2005, 2004 and
2003 respectively. Net losses from the discontinued ADC segment were
approximately ($221,000), ($363,000) and ($930,000) in the years ended December
31, 2005, 2004 and 2003 respectively, and such amounts are included in net loss
from discontinued operations in the accompanying financial statements.

NOTE 13 -- ACQUISITIONS

Consistent with its stated business plan, on April 1, 2005 the Company acquired
all the assets and business operations of a Medicare-certified visiting nurse
agency located in Bradenton, Florida. The total purchase price of $3.2 million
was paid in the form of $2.5 million in cash at closing with the $700,000
balance in the form of a note payable bearing interest at 6% payable quarterly
and the note balance due in two years after closing. The acquired operations
generated net revenues of approximately $3.8 million in the year ended December
31, 2004.

On November 12, 2005 the Company acquired all the assets and business operations
of a Medicare-certified visiting nurse agency located in St. Augustine, Florida.
The total purchase price of $800,000 was paid in the form of $600,000 in cash at
closing with the $200,000 balance in the form of a note payable bearing interest
at 6% due in its entirety three years after closing. The acquired operations
generated net revenues of approximately $2.4 million in the year ended December
31, 2004.

The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed of the Bradenton, Florida acquisition on April 1, 2005.
(Rounded to nearest thousands):

       Accounts receivable - net            $   450
       Property, plant & equipment              105
       Goodwill                               2,858
       Assets acquired                        3,414
       Liabilities assumed                      (61)
                                          ------------
       Net assets acquired                 $  3,353
                                          ============

The unaudited pro-forma results of operations of the Company as if the
Bradenton, Florida acquisition had been made at the beginning of 2004 are as
follows:
                                      Twelve Months ended December 31
                                 ------------------------------------------
                                         2005                  2004
                                 ---------------------- -------------------
Revenues                         $         76,624,111   $      69,539,888
Income from continuing
operations                                  3,007,931           1,976,363
Earnings per share
     Basic                       $               1.29   $            0.86
     Diluted                     $               1.15   $            0.77


The pro forma information presented above is presented for illustrative purposes
only and may not be indicative of the results of operations that would have
actually occurred if the transaction described had been completed as of the
beginning of 2004. In addition, future results may vary significantly from the
results reflected in such information.



<PAGE>


NOTE 14 - QUARTERLY FINANCIAL DATA-- (UNAUDITED)

Summarized quarterly financial data for the years ended December 31, 2005 and
2004 are as follows (in thousands except per share data):
<TABLE>
<CAPTION>

                                    Year Ended December 31, 2005                        Year Ended December 31, 2004
                          -------------------------------------------------- ----------------------------------------------------
<S>                       <C>         <C>           <C>         <C>          <C>           <C>

Net service revenues      $   19,377  $   18,508   $  19,323   $   18,412    $   16,895  $  16,035  $    16,397  $      16,443
Gross margin                   9,327       8,587       9,229        8,815         7,732      7,287        7,672          7,943
Income from continuing
  operations                   1,280         397         675          531           363        259          406           592
Income from discontinued
  operations                     203       4,982         (53)        (147)         (207)       146          (11)         (291)
Net income                     1,483       5,379         622          384           156        405          395           301

Income (loss) from
continuing operations
    Basic                 $     0.54  $     0.17   $     0.29  $     0.23    $     0.16  $     0.11  $     0.18  $       0.26
    Diluted               $     0.48  $     0.15   $     0.26  $     0.20    $     0.14  $     0.10  $     0.16  $       0.23

Income (loss) from
  discontinued operations
    Basic                 $     0.09  $     2.14   $    (0.02) $    (0.06)   $    (0.09) $     0.06  $        -  $      (0.13)
    Diluted               $     0.08  $     1.89   $    (0.02) $    (0.06)   $    (0.08) $     0.06  $        -  $      (0.11)

Net income (loss)
  per share
    Basic                 $     0.63  $     2.31   $     0.27  $     0.17    $     0.07  $     0.17  $     0.18  $       0.13
    Diluted               $     0.56  $     2.04   $     0.24  $     0.14    $     0.06  $     0.16  $     0.16  $       0.12


</TABLE>



<PAGE>



             Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Almost Family, Inc.

We have audited the accompanying consolidated balance sheets of Almost Family,
Inc. and subsidiaries as of December 31, 2005 and 2004, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 2005. Our audits also
included the financial statement schedule listed in the index at Item 15(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal controls over financial reporting. Our audits
included consideration of internal controls over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal controls over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Almost Family,
Inc. and subsidiaries at December 31, 2005 and 2004, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2005, in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.

/s/ Ernst & Young, LLP


Louisville, Kentucky
March 8, 2006





<PAGE>


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.

ITEM 9A.  CONTROLS AND PROCEDURES

The Company's management, with participation of the Company's Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company's disclosure controls and procedures as of December 31, 2005. Based on
the evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures were
effective as of December 31, 2005. There were no changes in the Company's
internal controls over financial reporting during the fourth quarter of 2005
that has materially affected, or is reasonably likely to materially affect, such
internal controls over financial reporting.

ITEM 9B.  OTHER INFORMATION

Following the sale of the Company's adult day care operations to Active
Services, Inc., on October 15, 2005, the Company awarded discretionary bonuses
to the officers in the following amounts: William B. Yarmuth - $50,000; C.
Steven Guenthner - $35,000; and Patrick T. Lyles - $35,000.

Effective February 13, 2006, the Company increased the annual base salaries of
the following officers to the following amounts: William B. Yarmuth to $395,000;
C. Steven Guenthner to $225,678; and Patrick T. Lyles to $203,000.



<PAGE>


                                                  PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is set forth in the Registrant's
definitive proxy statement to be filed with the Commission no later than 120
days after December 31, 2005, except for the information regarding executive
officers of the Company. The information required by this Item contained in such
definitive proxy statement is incorporated herein by reference.

The following table sets forth certain information with respect to the Company's
executive officers.

Name                          Age           Position with the Company
--------------------------------------------------------------------------------
William B. Yarmuth (1)        53          Chairman of the Board President
                                             and Chief Executive Officer
C. Steven Guenthner (2)       45          Senior Vice President and
                                              Chief Financial Officer
P. Todd Lyles       (3)       44          Senior Vice President - Administration
Anne T. Liechty     (4)       53          Senior Vice President - Operations

Executive officers of the Company are elected by the Board of Directors for one
year and serve at the pleasure of the Board of Directors with the exception of
William B. Yarmuth who has an employment agreement with the Company.  There are
no family relationships between any director or executive officer.

(1)      William B. Yarmuth has been a director of the Company since 1991, when
         the Company acquired National Health Industries ("National"), where Mr.
         Yarmuth was Chairman, President and Chief Executive Officer. After the
         acquisition, Mr. Yarmuth became the President and Chief Operating
         Officer of the Company. Mr. Yarmuth became Chairman and CEO in 1992. He
         was Chairman of the Board, President and Chief Executive Officer of
         National from 1981 to 1991.

(2)      C. Steven Guenthner has been Senior Vice President and Chief Financial
         Officer of the Company since 1992. From 1983 through 1992 Mr. Guenthner
         was employed as a C.P.A. with Arthur Andersen LLP. Prior to joining the
         Company he served as a Senior Manager in the firm's Accounting and
         Audit division specializing in mergers and acquisitions, public
         companies and the healthcare industry.

(3)      P. Todd Lyles joined the Company as Senior Vice President Planning and
         Development in October 1997 and now serves as Senior Vice President -
         Administration. Prior to joining the Company Mr. Lyles was Vice
         President Development for the Kentucky Division of Columbia/HCA, a
         position he had held since 1993. Mr. Lyles experience also includes 8
         years with Humana Inc. in various financial and hospital management
         positions.

(4)      Anne T. Liechty became Senior Vice President - VN Operations in 2001.
         Ms. Liechty has been employed by the Company since 1986 in various
         capacities including Vice President of Operations for the Company's VN
         segment and its Product segment.


<PAGE>


Code of Ethics and Business Conduct

The Company has adopted a Code of Ethics and Business Conduct that applies to
all its directors, officers (including its chief executive officer, chief
financial officer, chief accounting officer and any person performing similar
functions) and employees. The Company has made the Code of Ethics and Business
Conduct available on its website at www.almost-family.com.

ITEMS  11,  12,  13  and  14.  EXECUTIVE  COMPENSATION;   SECURITY  OWNERSHIP
OF  CERTAIN  BENEFICIAL  OWNERS  AND MANAGEMENT  AND RELATED  STOCKHOLDER
MATTERS;  CERTAIN  RELATIONSHIPS  AND RELATED  TRANSACTIONS;  AND  PRINCIPAL
ACCOUNTANT FEES AND SERVICES

The Registrant intends to file a definitive proxy statement with the Commission
pursuant to Regulation 14A (17 CFR 240.14a) not later than 120 days after the
close of the fiscal year covered by this report. In accordance with General
Instruction G(3) to Form 10-K, the information called for by Items 11, 12, 13
and 14 is incorporated herein by reference to the definitive proxy statement.
Neither the report on Executive Compensation nor the performance graph included
in the Company's proxy statement shall be deemed incorporated herein by
reference.

Equity Compensation Plans

As of December 31, 2005, shares of common stock authorized for issuance under
our equity compensation plans are summarized in the following table. See note 7
to the consolidated financial statements for a description of the plans. The
table below is furnished pursuant to item 12.

<TABLE>
<CAPTION>

                                               Shares to Be         Weighted-Average
                                                Issued Upon          Option Exercise      Shares Available for
              Plan Category                      Exercise                 Price               Future Grants
              -------------
                                            --------------------    ------------------    ----------------------
<S>                                          <C>                     <C>                   <C>
Plans approved by shareholders                        388,000       $          3.45                   415,993
Plans not approved by shareholders                          -                     -                         -
                                            --------------------    ------------------    ----------------------

Total                                                 388,000       $          3.45                   415,993
                                            ====================    ==================    ======================
</TABLE>


<PAGE>


PART IV


Item 15.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
               8-K.
<TABLE>
<CAPTION>
                                                                                                      Page Number
(a) The following items are filed as part of this report:

1.             Index to Consolidated Financial Statements
<S>            <C>                                                                                         <C>

               Consolidated Statements of Income for the years ended December
               31, 2005, 2004 and 2003                                                                        38
               Consolidated Balance Sheets - December 31, 2005 and 2004                                       39
               Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and
                2003                                                                                          41
               Consolidated Statements of Stockholders' Equity for the years ended December 31, 2005,
                 2004 and 2003                                                                                40
               Notes to Consolidated Financial Statements                                                     42
               Report of Independent Registered Public Accounting Firm                                        60

2.             Index to Financial Statement Schedule

               Schedule II - Valuation and Qualifying Accounts                                                68

               All other Schedules have been omitted because they are either not
               required, not applicable or, the information has otherwise been
               supplied in the financial statements or notes thereto.

3.             Exhibits required to be filed by Item 601 of Regulation S-K,
               and by Item 15 (c) below:

</TABLE>

<PAGE>



    Number                    Description of Exhibit


       3.1        Certificate of Incorporation,  as amended, of the Registrant
                  (incorporated by reference to Exhibit  No. 3.1 of the
                  Registrant's  Annual  Report on Form 10-K for the year ended
                  March 31, 1997)

       3.2        Amended and Restated Bylaws of the Registrant (incorporated by
                  reference to Exhibit 3 of the Registrant's Current Report on
                  Form 8-K dated February 1, 1999)

       4.1        Stockholder Protection Rights Agreement dated February 1,
                  1999, between the Registrant and Reliance Trust Company
                  (incorporated by reference to Exhibit 4 to the Registrant's
                  Current Report on Form 8-K dated February 1, 1999)

       4.2        Other Debt Instruments -- copies of other debt instruments for
                  which the total debt is less than 10% of assets will be
                  furnished to the Commission upon request.

       10.1       Nonqualified  Stock Option Plan, as amended  (incorporated by
                  reference to the Registrant's Registration Statement on Form
                  S-8 Reg. No. 33-20815)

       10.2       Supplemental  Nonqualified  Stock Option Plan (incorporated by
                  reference to Exhibit 19.4 to the  Registrant's  Report on Form
                  10-Q for the Quarter Ended  November 30, 1987  Commission
                  File No. 15342)

       10.3       Incentive  Stock Option Plan,  as amended  (incorporated  by
                  reference to the  Registrant's Registration Statement on Form
                  S-8 Reg. No. 33-20815)

       10.4       Amendment to the Senior Service Corporation 1987 Nonqualified
                  Stock Option Plan (incorporated by reference to Exhibit 19.3
                  to the Registrant's Report on Form 10-Q for the quarter ended
                  November 30, 1989)

       10.5       1991 Long-Term Incentive Plan (incorporated by references to
                  the Registrant's  Registration Statement on Form S-8 Reg. No.
                  33-81124)

       10.6       Employment Agreement, dated January 1, 1996, between the
                  Company and William B. Yarmuth (incorporated by reference to
                  the Registrant's report on Form 10K for the year ended March
                  31, 1996).

       10.7       Loan Agreement between the Company and Bank One, KY
                  (incorporated by reference to the Registrant's report on Form
                  10K for the year ended March 31, 2001).

       10.8       Third Amendment to Loan Agreement between the Company and Bank
                  One, NA, dated March 23, 2004 (incorporated by reference to
                  the Registrant's report on Form 10-K for the year ended
                  December 31, 2003)

       10.9       Fourth Amendment to Loan Documents dated as of August 11,
                  2005, by and between (i) Almost Family, Inc., (ii) each of the
                  subsidiaries of AFI that is party to the Agreement, and (iii)
                  JP Morgan Chase Bank, N.A. (successor by merger to Bank One
                  N.A.). (incorporated by reference to the Registrant's report
                  on Form 10-Q for the quarter ended June 30, 2005).


<PAGE>

       10.10      Asset Purchase Agreement between the Company and Manatee
                  Memorial Hospital, L.P. (Florida Home Health) (incorporated by
                  reference to the Registrant's report on Form 10-Q for the
                  quarter ended March 31, 2005).  Schedules have been omitted
                  but will be furnished separately to the SEC upon request.

       10.11*     Asset Purchase Agreement dated as of November 12, 2005 between
                  Caretenders Visiting Services of St. Augustine, LLC and
                  Flagler Memorial Hospital. (St. Augustine)(schedules have been
                  omitted but will be furnished separately to the SEC upon
                  request).

       10.12      2000 Stock Option Plan (incorporated by reference to the
                  Registrant's Registration Statement on Form S-8 Reg.
                  No. 333-88744)

       10.13      Non-Employee Director Deferred Compensation Plan

       10.14      1993 Non-Employee Directors Stock Option Plan (incorporated by
                  reference to the Registrant's Registration Statement on Form
                  S-8 Reg. No. 333-881100)

       10.15      Asset Purchase Agreement (the "ADC Asset Purchase Agreement")
                  dated as of August 3, 2005, by and among (i) Almost Family,
                  Inc., (ii) Caretenders of Cincinnati, Inc., (iii) Adult Day
                  Care of Maryland, Inc., (iv)  Caretenders of Columbus, Inc.,
                  (v) Caretenders of   New Jersey, Inc., (vi) Caretenders of
                  Southwest Florida, Inc., (vii) Caretenders of West
                  Palm Beach, Inc. (viii) Adult Day Care of Louisville, Inc.
                  (ix) Active Day FL, Inc., (x) Active Day Oh, Inc., (xi)
                  Active Day of MD, Inc., (xii) Active Day KY, Inc., (xiii)
                  Active Day Fleet, Inc., and (xiv) Active Service
                  Corporation (schedules have been omitted but will be furnished
                  supplementally to the SEC upon request) (incorporated by
                  reference to the Registrant's report on Form 10-Q for the
                  quarter ended June 30, 2005).

       10.16      Executive Change of Control Security Agreement dated September
                  30, 2005 between the Company and Mary A. Yarmuth.

       10.17      Amendment No. 1 dated September 30, 2005 to the ADC Asset
                  Purchase Agreement set forth at Exhibit 10.15.

       21*        List of Subsidiaries of Almost Family, Inc.

       23.1*      Consent of Ernst & Young LLP

       31.1*      Certification of Chief Executive Officer pursuant to Rule
                  13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
                  as amended.

       31.2*      Certification of Chief Executive Officer pursuant to Rule
                  13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
                  as amended.

       32.1*      Certification of Chief Executive Officer  pursuant to 18 U.S.C
                  1350, as adopted pursuant to section 906 of the Sarbanes Oxley
                  Act of 2002.

       32.2*      Certification of Chief Financial Officer  pursuant to 18 U.S.C
                  1350, as adopted pursuant to section 906 of the Sarbanes Oxley
                  Act of 2002.

*Denotes filed herein.




<PAGE>


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

ALMOST FAMILY, INC.
March 31, 2006

/S/ William B. Yarmuth
    -------------------
    William B. Yarmuth
    Chairman, President and Chief Executive Officer

/S/ C. Steven Guenthner
   --------------------
    C. Steven Guenthner
    Senior Vice President and Chief Financial Officer
    (Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated:

/S/ William B. Yarmuth                 March 31, 2006
-----------------------                Date
    William B. Yarmuth
    Director

/S/ Steven B. Bing                     March 31, 2006
-----------------------                Date
    Steven B. Bing
    Director

/S/ Donald G. McClinton                March 31, 2006
------------------------               Date
    Donald G. McClinton
    Director

/S/ Tyree G. Wilburn                   March 31, 2006
------------------------               Date
    Tyree G. Wilburn
    Director

/S/ Jonathan D. Goldberg               March 31, 2006
-------------------------              Date
    Jonathan D. Goldberg
    Director

/S/ Wayne T. Smith                     March 31, 2006
-------------------------              Date
    Wayne T. Smith
    Director

/S/ W. Earl Reed, III                  March 31, 2006
-------------------------              Date
  W. Earl Reed, III
  Director

/S/ Henry M. Altman Jr.                March 31, 2006
-------------------------              Date
  Henry M. Altman Jr.
  Director


<PAGE>



                                    ALMOST FAMILY, INC. AND SUBSIDIARIES
                                      VALUATION AND QUALIFYING ACCOUNTS
                                                 SCHEDULE II
<TABLE>
<CAPTION>


              Col. A                          Col. B           Col. C                       Col. D          Col. E
              ------                          ------           ------                       ------          ------

                                                                 Additions
                                                           ------------------------------
                                                                 (1)            (2)
                                              Balance at     Charged to      Charged to
                                             Beginning of       Costs          Other           (3)          Balance at
             Description                        Period      and Expenses      Accounts      Deductions     End of Period
--------------------------------------------------------------------------- ------------- --------------- ----------------
<S>                                         <C>            <C>                 <C>        <C>             <C>

Allowance for bad debts:
Year Ended December 31, 2005                $  2,081,394   $     935,141       262,303    $  1,483,038    $   1,795,800

Year Ended December 31, 2004                $  1,717,185   $   1,326,765             -    $    962,556    $   2,081,394

Year ended December 31, 2003                $  1,456,623   $   1,140,796             -    $    880,234    $   1,717,185
</TABLE>


(1)            Charged to bad debt expense.
(2)            Acquired Bad Debt Reserves.
(3)            Write-off of accounts.