----

**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**Washington,        D.C. 20549**

**FORM        10-Q**

**ý               Quarterly Report Under Section 13 or 15(d)**

**of        the Securities Exchange Act of 1934**

**for        the quarterly period ended September 30, 2007**

**or**

**o               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 0-9972**

**HOOPER        HOLMES, INC.**

| **New                  York**                                                   | **22-1659359**                                        |
|---------------------------------------------------------------------------------|-------------------------------------------------------|
| (State                  or other jurisdiction of incorporation or organization) | (I.R.S.                  Employer Identification No.) |

| **170                  Mt. Airy Road, Basking Ridge, NJ** |   | **07920**                   |
|-----------------------------------------------------------|--------|-----------------------------|
| (Address                  of principal executive offices) |   | (Zip                  code) |

** (908)        766-5000**

|   | Yes   ý |   | No   o |   |
|--------|-----------------------------|--------|-----------------------|--------|

| Large                  Accelerated Filer   o |   | Accelerated                  Filer   ý |   | Non-accelerated                  Filer   o |
|-------------------------------------------------------------|--------|------------------------------------------------------------|--------|-----------------------------------------------------------|

|   | Yes   o |   | No   ý |   |
|--------|------------------------|--------|----------------------------|--------|

----

**HOOPER        HOLMES, INC. AND SUBSIDIARIES**

**INDEX**

|                                |                                               |                                                                                                                                                     | Page                  No. |
|-------------------------------------|----------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------|
| **PART                  I** -       | Financial                  Information (unaudited) |                                                                                                                                                     |
|                                |                                               |                                                                                                                                                     |                      |
|                                | ITEM                  1 -                          | Financial                  Statements                                                                                                                    |                      |
|                                |                                               |                                                                                                                                                     |                      |
|                                |                                               | Consolidated                  Balance Sheets as of September 30, 2007 and December 31,                  2006                                             | 1                         |
|                                |                                               |                                                                                                                                                     |                      |
|                                |                                               | Consolidated                  Statements of Operations for the Three and Nine Months Ended September                  30,                  2007 and 2006 | 2                         |
|                                |                                               |                                                                                                                                                     |                      |
|                                |                                               | Consolidated                  Statements of Cash Flows for the Nine Months Ended September 30,                  2007 and                  2006           | 3-4                       |
|                                |                                               |                                                                                                                                                     |                      |
|                                |                                               | Notes                  to Unaudited Consolidated Financial Statements                                                                                    | 5-20                      |
|                                |                                               |                                                                                                                                                     |                      |
|                                | ITEM                  2 -                          | Management's                  Discussion and Analysis of Financial Condition and Results of                  Operations                                  | 21-38                     |
|                                |                                               |                                                                                                                                                     |                      |
|                                | ITEM                  3 –                    | Quantitative                  and Qualitative Disclosures About Market Risk                                                                              | 39                        |
|                                |                                               |                                                                                                                                                     |                      |
|                                | ITEM                  4 –                    | Controls                  and Procedures                                                                                                                 | 40                        |
|                                |                                               |                                                                                                                                                     |                      |
| **PART                  II**– | Other                  Information                 |                                                                                                                                                     |
|                                |                                               |                                                                                                                                                     |
|                                | ITEM                  1 –                    | Legal                  Proceedings                                                                                                                       | 41                        |
|                                |                                               |                                                                                                                                                     |                      |
|                                | ITEM                  1A –                   | Risk                  Factors                                                                                                                            | 42                        |
|                                |                                               |                                                                                                                                                     |                      |
|                                | ITEM                  2 –                    | Unregistered                  Sales of Equity Securities and Use of Proceeds                                                                             | 42                        |
|                                |                                               |                                                                                                                                                     |                      |
|                                | ITEM                  3 -                          | Defaults                  upon Senior Securities                                                                                                         | 42                        |
|                                |                                               |                                                                                                                                                     |                      |
|                                | ITEM                  4 –                    | Submission                  of Matters to a Vote of Security Holders                                                                                     | 42                        |
|                                |                                               |                                                                                                                                                     |                      |
|                                | ITEM                  5 –                    | Other                  Information                                                                                                                       | 42                        |
|                                |                                               |                                                                                                                                                     |                      |
|                                | ITEM                  6 –                    | Exhibits                                                                                                                                                 | 43                        |
|                                |                                               |                                                                                                                                                     |                      |
|                                |                                               | Signatures                                                                                                                                               | 44                        |

----

**Consolidated        Balance Sheets**

|                                                                                                                                                                                                                                                              |   |                                       |    |   |                                      |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|--------|-------------------------------------------|--------|
|                                                                                                                                                                                                                                                              |   | **September                  30,****2007** |    |   | **December                  31,****2006** |   |
| **ASSETS                  (Note 11)**                                                                                                                                                                                                                             |   |                                       |    |   |                                      |   |
| Current                  assets:                                                                                                                                                                                                                                  |   |                                       |    |   |                                      |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                        |   | $                                          | 972     |   |                                      | $      | 6,667 |   |
| Accounts                  receivable, net                                                                                                                                                                                                                         |   |                                       | 34,860  |   |                                      |   | 30,425 |   |
| Income                  tax receivable                                                                                                                                                                                                                            |   |                                       | 519     |   |                                      |   | 2,968 |   |
| Other                  current assets                                                                                                                                                                                                                             |   |                                       | 4,609   |   |                                      |   | 4,353 |   |
| Assets                  of subsidiary held for sale                                                                                                                                                                                                               |   |                                       | 12,143  |   |                                      |   | 13,337 |   |
| Total                  current assets                                                                                                                                                                                                                             |   |                                       | 53,103  |   |                                      |   | 57,750 |   |
| Property,                  plant and equipment at cost                                                                                                                                                                                                            |   |                                       | 43,099  |   |                                      |   | 41,574 |   |
| Less:                  Accumulated depreciation and amortization                                                                                                                                                                                                  |   |                                       | 28,627  |   |                                      |   | 26,871 |   |
| Property,                  plant and equipment, net                                                                                                                                                                                                               |   |                                       | 14,472  |   |                                      |   | 14,703 |   |
|                                                                                                                                                                                                                                                              |   |                                       |    |   |                                      |   |   |   |
| Goodwill                                                                                                                                                                                                                                                          |   |                                       | -       |   |                                      |   | 5,702 |   |
| Intangible                  assets, net                                                                                                                                                                                                                           |   |                                       | 4,640   |   |                                      |   | 6,485 |   |
| Other                  assets                                                                                                                                                                                                                                     |   |                                       | 1,063   |   |                                      |   | 570 |   |
| Total                  assets                                                                                                                                                                                                                                     |   | $                                          | 73,278  |   |                                      | $      | 85,210 |   |
|                                                                                                                                                                                                                                                              |   |                                       |    |   |                                      |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS’                  EQUITY**                                                                                                                                                                                  |   |                                       |    |   |                                      |   |   |   |
| Current                  liabilities:                                                                                                                                                                                                                             |   |                                       |    |   |                                      |   |   |   |
| Revolving                  credit facility                                                                                                                                                                                                                        |   | $                                          | 5,000   |   |                                      |   | - |   |
| Accounts                  payable                                                                                                                                                                                                                                 |   |                                       | 8,669   |   |                                      | $      | 10,457 |   |
| Accrued                  expenses                                                                                                                                                                                                                                 |   |                                       | 15,870  |   |                                      |   | 16,730 |   |
| Liabilities                  of subsidiary held for sale                                                                                                                                                                                                          |   |                                       | 7,087   |   |                                      |   | 8,321 |   |
| Total                  current liabilities                                                                                                                                                                                                                        |   |                                       | 36,626  |   |                                      |   | 35,508 |   |
| Other                  long-term liabilities                                                                                                                                                                                                                      |   |                                       | 543     |   |                                      |   | 1,733 |   |
| Commitments                  and Contingencies (Note 12)                                                                                                                                                                                                          |   |                                       |    |   |                                      |   |   |   |
|                                                                                                                                                                                                                                                              |   |                                       |    |   |                                      |   |   |   |
| Stockholders’                  Equity:                                                                                                                                                                                                                      |   |                                       |    |   |                                      |   |   |   |
| Common                  stock, par value $.04 per share; authorized 240,000,000 shares,                  issued                  68,643,982 and 67,933,274 shares as of September 30, 2007 and December                  31,                  2006, respectively. |   |                                       | 2,746   |   |                                      |   | 2,717 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                       |   |                                       | 117,947 |   |                                      |   | 115,465 |   |
| Accumulated                  other comprehensive income                                                                                                                                                                                                           |   |                                       | 1,365   |   |                                      |   | 1,553 |   |
| Accumulated                  deficit                                                                                                                                                                                                                              |   |                                       | (85,878 | )      |                                      |   | (71,695 | ) |
|                                                                                                                                                                                                                                                              |   |                                       | 36,180  |   |                                      |   | 48,040 |   |
| Less:                  Treasury stock, at cost; 9,395 shares as of September 30, 2007                  and                  December 31, 2006                                                                                                                     |   |                                       | 71      |   |                                      |   | 71 |   |
| Total                  stockholders’                  equity                                                                                                                                                                                                |   |                                       | 36,109  |   |                                      |   | 47,969 |   |
| Total                  liabilities and stockholders' equity                                                                                                                                                                                                       |   | $                                          | 73,278  |   |                                      | $      | 85,210 |   |
|                                                                                                                                                                                                                                                              |   |
| *See                  accompanying notes to consolidated financial                  statements*.                                                                                                                                                                  |   |

----

**Consolidated        Statements of Operations**

|                                                                                            |   | Three                  Months ended September 30, |       |   | Nine                  Months ended September 30, |   |
|-------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|------------|--------|--------------------------------------------------|--------|
|                                                                                            |   | 2007                                              |       |   | 2006                                             |   |   | 2007 |   |   | 2006 |   |
| Revenues                                                                                        |   | $                                                 | 56,260     |   |                                             | $      | 60,573 |   |   | $ | 179,408 |   |   | $ | 193,942 |   |
| Cost                  of operations                                                             |   |                                              | 43,049     |   |                                             |   | 47,221 |   |   |   | 135,758 |   |   |   | 148,826 |   |
|  Gross                  profit                                                             |   |                                              | 13,211     |   |                                             |   | 13,352 |   |   |   | 43,650 |   |   |   | 45,116 |   |
| Selling,                  general and administrative expenses                                   |   |                                              | 16,354     |   |                                             |   | 16,666 |   |   |   | 48,652 |   |   |   | 50,179 |   |
| Impairment                  of goodwill and intangibles                                         |   |                                              | 6,296      |   |                                             |   | - |   |   |   | 6,296 |   |   |   | - |   |
| Restructuring                  and other charges                                           |   |                                              | 1,626      |   |                                             |   | 6,551 |   |   |   | 2,871 |   |   |   | 8,284 |   |
|  Operating                  loss                                                           |   |                                              | (11,065    | )      |                                             |   | (9,865 | ) |   |   | (14,169 | ) |   |   | (13,347 | ) |
| Other                  income (expense)                                                         |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense                                                               |   |                                              | (112       | )      |                                             |   | (67 | ) |   |   | (195 | ) |   |   | (139 | ) |
| Interest                  income                                                                |   |                                              | 15         |   |                                             |   | 51 |   |   |   | 38 |   |   |   | 136 |   |
| Other                  expense, net                                                             |   |                                              | (48        | )      |                                             |   | (104 | ) |   |   | (223 | ) |   |   | (304 | ) |
|                                                                                            |   |                                              | (145       | )      |                                             |   | (120 | ) |   |   | (380 | ) |   |   | (307 | ) |
| Loss                  from continuing operations before income taxes                            |   |                                              | (11,210    | )      |                                             |   | (9,985 | ) |   |   | (14,549 | ) |   |   | (13,654 | ) |
|                                                                                            |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Income                  tax provision (benefit)                                                 |   |                                              | (218       | )      |                                             |   | 31,885 |   |   |   | (82 | ) |   |   | 30,281 |   |
|                                                                                            |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  from continuing operations                                                |   |                                              | (10,992    | )      |                                             |   | (41,870 | ) |   |   | (14,467 | ) |   |   | (43,935 | ) |
|                                                                                            |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued                  operations:                                                       |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Income                  (loss) from discontinued operations, net of income taxes                |   |                                              | 351        |   |                                             |   | (270 | ) |   |   | 284 |   |   |   | (154 | ) |
|                                                                                            |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
|  Net                  loss                                                                 |   | $                                                 | (10,641    | )      |                                             | $      | (42,140 | ) |   | $ | (14,183 | ) |   | $ | (44,089 | ) |
| Earnings                  (loss) per share:                                                     |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Continuing                  operations:                                                         |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                           |   | $                                                 | (0.16      | )      |                                             | $      | (0.63 | ) |   | $ | (0.21 | ) |   | $ | (0.66 | ) |
| Diluted                                                                                         |   |                                              | (0.16      | )      |                                             |   | (0.63 | ) |   |   | (0.21 | ) |   |   | (0.66 | ) |
| Discontinued                  operations:                                                       |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                           |   | $                                                 | 0.00       |   |                                             | $      | 0.00 |   |   | $ | 0.00 |   |   | $ | 0.00 |   |
| Diluted                                                                                         |   |                                              | 0.00       |   |                                             |   | 0.00 |   |   |   | 0.00 |   |   |   | 0.00 |   |
| Net                  loss:                                                                      |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                           |   | $                                                 | (0.16      | )      |                                             | $      | (0.63 | ) |   | $ | (0.21 | ) |   | $ | (0.66 | ) |
| Diluted                                                                                         |   |                                              | (0.16      | )      |                                             |   | (0.63 | ) |   |   | (0.21 | ) |   |   | (0.66 | ) |
| Weighted                  average number of shares:                                             |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                           |   |                                              | 68,634,587 |   |                                             |   | 66,972,197 |   |   |   | 68,422,816 |   |   |   | 66,488,603 |   |
| Diluted                                                                                         |   |                                              | 68,634,587 |   |                                             |   | 66,972,197 |   |   |   | 68,422,816 |   |   |   | 66,488,603 |   |
|                                                                                            |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| *See                  accompanying notes to consolidated financial                  statements* |   |                                              |       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |

----

**Consolidated        Statements of Cash Flows**

|                                                                                                                      |   | Nine                  Months ended September 30, |    |
|---------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|---------|
|                                                                                                                      |   | 2007                                             |    |   | 2006 |   |
| **Cash                  flows from operating activities:**                                                                |   |                                             |    |   |   |   |
| Net                  loss                                                                                                 |   | $                                                | (14,183 | ) |   | $ | (44,089 | ) |
| Income                  (loss) from discontinued operations, net of income taxes                                          |   |                                             | 284     |   |   |   | (154 | ) |
| Loss                  from continuing operations                                                                          |   |                                             | (14,467 | ) |   |   | (43,935 | ) |
| Adjustments                  to reconcile loss from continuing operations to net cash                                     |   |                                             |    |   |   |   |   |   |
| used                  in operating activities of continuing operations:                                                   |   |                                             |    |   |   |   |   |   |
| Depreciation                                                                                                              |   |                                             | 2,415   |   |   |   | 2,189 |   |
| Amortization                                                                                                              |   |                                             | 1,251   |   |   |   | 1,972 |   |
| Provision                  for bad debt expense                                                                           |   |                                             | 54      |   |   |   | 5 |   |
| Impairment                  of goodwill and intangibles                                                                   |   |                                             | 6,296   |   |   |   | - |   |
| Share-based                  compensation expense                                                                         |   |                                             | 883     |   |   |   | 224 |   |
| Write-off                  of software                                                                                    |   |                                             | 776     |   |   |   | - |   |
| Deferred                  income taxes                                                                                    |   |                                             | -       |   |   |   | 31,278 |   |
| Loss                  on disposal of fixed assets                                                                         |   |                                             | 79      |   |   |   | 69 |   |
| Changes                  in assets and liabilities, net of effect                                                         |   |                                             |    |   |   |   |   |   |
| from                  acquisitions of businesses:                                                                         |   |                                             |    |   |   |   |   |   |
| Accounts                  receivable                                                                                      |   |                                             | (4,489  | ) |   |   | 1,519 |   |
| Other                  assets                                                                                             |   |                                             | (749    | ) |   |   | 279 |   |
| Income                  tax receivable                                                                                    |   |                                             | 2,449   |   |   |   | 2,998 |   |
| Accounts                  payable, accrued expenses and other long-term liabilities                                       |   |                                             | (3,595  | ) |   |   | 4,360 |   |
| **Net                  cash used in operating activities of continuing                  operations**                      |   |                                             | (9,097  | ) |   |   | 958 |   |
| **Net                  cash provided by operating activities of discontinued                  operations**                |   |                                             | 689     |   |   |   | 850 |   |
| **Net                  cash used in operating activities**                                                                |   |                                             | (8,408  | ) |   |   | 1,808 |   |
|                                                                                                                      |   |                                             |    |   |   |   |   |   |
| **Cash                  flows from investing activities:**                                                                |   |                                             |    |   |   |   |   |   |
| Redemptions                  of marketable securities                                                                     |   |                                             | -       |   |   |   | 385 |   |
| Business                  acquisitions, net of cash acquired                                                              |   |                                             | -       |   |   |   | (856 | ) |
| Capital                  expenditures                                                                                     |   |                                             | (3,283  | ) |   |   | (4,156 | ) |
| **Net                  cash used in investing activities of continuing                  operations**                      |   |                                             | (3,283  | ) |   |   | (4,627 | ) |
| **Net                  cash used in investing activities of discontinued                  operations**                    |   |                                             | (298    | ) |   |   | (1,835 | ) |
| **Net                  cash used in investing activities**                                                                |   |                                             | (3,581  | ) |   |   | (6,462 | ) |
|                                                                                                                      |   |                                             |    |   |   |   |   |   |
| **Cash                  flows from financing activities:**                                                                |   |                                             |    |   |   |   |   |   |
| Borrowings                  under revolving credit facility                                                               |   |                                             | 7,000   |   |   |   |   |   |
| Payments                  under revolving credit facility                                                                 |   |                                             | (2,000  | ) |   |   | (1,000 | ) |
| Seller                  financed debt                                                                                     |   |                                             | -       |   |   |   | (2,927 | ) |
| Proceeds                  related to the exercise of stock options                                                        |   |                                             | 1,627   |   |   |   | 3,088 |   |
| **Net                  cash provided by financing activities of continuing                  operations**                  |   |                                             | 6,627   |   |   |   | (839 | ) |
| **Net                  cash provided by  financing activities of discontinued                  operations**     |   |                                             | -       |   |   |   | - |   |
| **Net                  cash provided by  financing activities**                                                 |   |                                             | 6,627   |   |   |   | (839 | ) |
|                                                                                                                      |   |                                             |    |   |   |   |   |   |
| Effect                  of exchange rate changes on cash and cash equivalents of discontinued                  operations |   |                                             | (333    | ) |   |   | 225 |   |
|                                                                                                                      |   |                                             |    |   |   |   |   |   |
| **Net                  decrease in cash and cash equivalents**                                                            |   |                                             | (5,695  | ) |   |   | (5,268 | ) |
| **Cash                  and cash equivalents at beginning of period**                                                     |   |                                             | 6,667   |   |   |   | 11,683 |   |
| **Cash                  and cash equivalents at end of period**                                                           |   | $                                                | 972     |   |   | $ | 6,415 |   |
|                                                                                                                      |   |                                             |    |   |   |   |   |   |

----

|                                                                     |   |   |   |   |   |   |
|--------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Supplemental                  disclosure of non-cash investing activity: |   |   |   |   |   |   |
| Fixed                  assets vouchered but not paid                     |   |   | 124    |   |   |   | 409 |   |
| Supplemental                  disclosure of cash flow information:       |   |   |   |   |   |   |   |   |
| Cash                  paid during the period for:                        |   |   |   |   |   |   |   |   |
| Interest                                                                 |   |   | 131    |   |   |   | 15 |   |
| Income                  taxes                                            |   |   | 186    |   |   |   | 347 |   |

*See        accompanying notes to consolidated financial statements.*

----

**HOOPER        HOLMES, INC.**

**Notes        to Unaudited Consolidated Financial Statements**

**Note        1: Basis of Presentation**

----

| **Note                  2:** | **Liquidity** |
|------------------------------|---------------|

| ·   | restructuring                  payments related to employee severance and branch office closure                  costs                  totaling $2.0 million; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | capital                  expenditures of $3.3 million; |
|--------------------|--------------------------------------------------------|

| ·   | an                  increase in accounts receivable of $4.5 million                  and, |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | payment                  of a contract cancellation fee and fees to outside consultants                  related to                  cost saving opportunities identified in the Company’s 2006 strategic                  review, totaling $1.9 million. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **Note                  3:** | **Earnings                  Per Share** |
|------------------------------|-----------------------------------------|

**Note        4: Share-Based        Compensation**

*Stock        Option Plans*

*Stock        Purchase Plan*

----

*Stock        Awards*

|                                                                              |   | For                  the three months ended September 30, |   |   | For                  the nine months ended September 30, |   |
|-----------------------------------------------------------------------------------|--------|-----------------------------------------------------------|--------|--------|----------------------------------------------------------|--------|
|                                                                              |   | 2007                                                      |   |   | 2006                                                     |   |   | 2007 |   |   | 2006 |   |
| Expected                  life (years)                                            |   |                                                      | 5.91   |   |                                                     |   | 6.23 |   |   |   | 5.91 |   |   |   | 6.28 |   |
| Expected                  volatility                                              |   |                                                      | 46.95  | %      |                                                     |   | 46.88 | % |   |   | 46.93 | % |   |   | 46.77 | % |
| Expected                  dividend yield                                          |   |                                                      | 0      | %      |                                                     |   | 0 | % |   |   | 0 | % |   |   | 0 | % |
| Risk-free                  interest rate                                          |   |                                                      | 4.63   | %      |                                                     |   | 5.03 | % |   |   | 4.62 | % |   |   | 4.97 | % |
| Weighted                  average fair value of options granted during the period |   | $                                                         | 1.33   |   |                                                     | $      | 1.51 |   |   | $ | 1.39 |   |   | $ | 1.55 |   |

----

|  * (in                  thousands, except share and per share amounts)*   |   | Shares |      |   | Weighted                  Average Exercise Price Per Share |   |   | Weighted                  Average Remaining Contractual Life (years) |   |   | Aggregate                  Intrinsic Value |   |
|-----------------------------------------------------------------------------------------------|--------|--------|-----------|--------|------------------------------------------------------------|--------|--------|----------------------------------------------------------------------|--------|--------|--------------------------------------------|--------|
|                                                                                          |   |   |      |   |                                                       |   |   |                                                                 |   |   |                                       |   |
| Outstanding                  Balance, December 31, 2006                                       |   |   | 6,052,700 |   |                                                       | $      | 5.58   |                                                                 |   |   |                                       |   |   |   |
| Granted                                                                                       |   |   | 1,030,000 |   |                                                       |   | 2.81   |                                                                 |   |   |                                       |   |   |   |
| Exercised                                                                                     |   |   | (584,200  | )      |                                                       |   | 2.46   |                                                                 |   |   |                                       |   |   |   |
| Expired                                                                                       |   |   | (574,200  | )      |                                                       |   | 6.41   |                                                                 |   |   |                                       |   |   |   |
| Forfeitures                                                                                   |   |   | (30,000   | )      |                                                       |   | 2.86   |                                                                 |   |   |                                       |   |   |   |
| Outstanding                  Balance, September 30, 2007                                      |   |   | 5,894,300 |   |                                                       | $      | 5.36   |                                                                 |   |   | 5.8                                        |   |   |   | - |   |
|                                                                                          |   |   |      |   |                                                       |   |   |                                                                 |   |   |                                       |   |   |   |   |   |
| Options                  exercisable – September 30, 2007                               |   |   | 3,696,800 |   |                                                       | $      | 6.83   |                                                                 |   |   | 4.6                                        |   |   |   | - |   |

**Note        5:  Discontinued Operations**

----

|                                   |   | Three                  Months Ended September 30, |   |   | Nine                  Months Ended September 30, |   |
|----------------------------------------|--------|---------------------------------------------------|--------|--------|--------------------------------------------------|--------|
| (In                  thousands)        |   | 2007                                              |   |   | 2006                                             |   |   | 2007 |   |   | 2006 |   |
|                                   |   |                                              |   |   |                                             |   |   |   |   |   |   |   |
| Revenues                               |   | $                                                 | 10,360 |   |                                             | $      | 9,530 |   |   | $ | 29,678 |   |   | $ | 28,409 |   |
|                                   |   |                                              |   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Pre-tax                  income (loss) |   | $                                                 | 426    |   |                                             | $      | (369 | ) |   | $ | 351 |   |   | $ | (243 | ) |
|                                   |   |                                              |   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |

| (In                  thousands)                           |   | September                  30, 2007 |   |   | December                  31, 2006 |   |
|-----------------------------------------------------------|--------|-------------------------------------|--------|--------|------------------------------------|--------|
| Assets                  of subsidiary held for sale:      |   |                                |   |   |                               |   |
| Accounts                  receivable, net                 |   | $                                   | 7,845  |   |                               | $      | 7,159 |   |
| Other                  current assets                     |   |                                | 800    |   |                               |   | 2,495 |   |
| Property,                  plant, and equipment, net      |   |                                | 1,146  |   |                               |   | 1,137 |   |
| Intangible                  assets                        |   |                                | 2,029  |   |                               |   | 2,236 |   |
| Other                  assets                             |   |                                | 323    |   |                               |   | 310 |   |
| Total                                                     |   | $                                   | 12,143 |   |                               | $      | 13,337 |   |
|                                                      |   |                                |   |   |                               |   |   |   |
| Liabilities                  of subsidiary held for sale: |   |                                |   |   |                               |   |   |   |
| Accounts                  payable                         |   | $                                   | 1,643  |   |                               | $      | 2,339 |   |
| Accrued                  expenses                         |   |                                | 4,923  |   |                               |   | 5,381 |   |
| Other                  long-term liabilities              |   |                                | 521    |   |                               |   | 601 |   |
| Total                                                     |   | $                                   | 7,087  |   |                               | $      | 8,321 |   |

**Note        6:  Impairment of Goodwill and Intangibles**

***Intangibles***

| ·   | declining                  revenues and operating profits during the second and third quarters                  of                  2007 compared to 2006 and the expectation that this the decline                  will                  continue into the fourth quarter; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 2007                  quarterly and year-to-date revenues and operating income are significantly                  below budget and the expectation of below budget revenues and operating                  income continuing for the remainder of                  2007; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | continued                  contraction of the principle markets served by the CED;                  and |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | reduced                  revenues from three of CED’s largest customers who have expanded their                  vendor base resulting in fewer cases referred to the                  CED. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                        |   | Weighted                     |   |   |     |   |   |         |   |   |    |   |
|---------------------------------------------|--------|------------------------------|--------|--------|----------|--------|--------|--------------|--------|--------|---------|--------|
|                                        |   | Average                      |   |   | Gross    |   |   |         |   |   |    |   |
|                                        |   | Useful                  Life |   |   | Carrying |   |   | Accumulated  |   |   | Net     |   |
| *(in                  thousands)*           |   | (years)                      |   |   | Amount   |   |   | Amortization |   |   | Balance |   |
| At                  September 30, 2007      |   |                         |   |   |     |   |   |         |   |   |    |   |
| Non-Competition                  agreements |   |                         | 4.7    |   |     | $      | 8,763  |         |   | $      | 8,612   |   |   | $ | 151 |   |
| Customer                  relationships     |   |                         | 9.5    |   |     |   | 12,922 |         |   |   | 10,101  |   |   |   | 2,821 |   |
| Contractor                  network         |   |                         | 7.0    |   |     |   | 5,700  |         |   |   | 5,700   |   |   |   | - |   |
| Trademarks                  and tradenames  |   |                         | 7.7    |   |     |   | 2,053  |         |   |   | 385     |   |   |   | 1,668 |   |
|                                        |   |                         |   |   |     | $      | 29,438 |         |   | $      | 24,798  |   |   | $ | 4,640 |   |
| At                  December 31, 2006       |   |                         |   |   |     |   |   |         |   |   |    |   |   |   |   |   |
| Non-Competition                  agreements |   |                         | 4.6    |   |     | $      | 8,939  |         |   | $      | 8,525   |   |   | $ | 414 |   |
| Customer                  relationships     |   |                         | 9.6    |   |     |   | 13,351 |         |   |   | 9,597   |   |   |   | 3,754 |   |
| Contractor                  network         |   |                         | 7.0    |   |     |   | 5,700  |         |   |   | 5,700   |   |   |   | - |   |
| Trademarks                  and tradenames  |   |                         | 10.9   |   |     |   | 2,862  |         |   |   | 545     |   |   |   | 2,317 |   |
|                                        |   |                         |   |   |     |   |   |         |   |   |    |   |   |   |   |   |
|                                        |   |                         |   |   |     | $      | 30,852 |         |   | $      | 24,367  |   |   | $ | 6,485 |   |

***Goodwill***

----

*(in        thousands)*

|                                              |   |   |   |
|---------------------------------------------------|--------|--------|--------|
| Balance                  as of December 31, 2006  |   | $      | 5,702  |   |
| Goodwill                  impairment              |   |   | (5,702 | ) |
| Balance                  as of September 30, 2007 |   | $      | 0      |   |

**Note        7: Acquisitions**

|                                                                     |   |   |   | Weighted                  Average |
|--------------------------------------------------------------------------|--------|--------|--------|-----------------------------------|
|                                                                     |   | Amount |   | Useful                  Life      |
| Current                  assets                                          |   | $      | 301    |                              |   |
| Intangible                  assets (customer relationship and tradename) |   |   | 882    |                              | 9.2                  years |
| Goodwill                                                                 |   |   | 598    |                              |   |
| Current                  liabilities                                     |   |   | (674   | )                                 |   |
| Total                                                                    |   | $      | 1,107  |                              |   |

----

|                                             |   | 2006   |   |   |
|--------------------------------------------------|--------|--------|--------|--------|
| Michigan                  Evaluation Group, Inc. |   |   | 500    |   | (a) |
|                                             |   |   | 100    |   | (b) |
|                                             |   |   | 50     |   | (c) |
| Allegiance                  Health, Inc.         |   |   | 56     |   | (d) |
| Medimax,                  Inc.                   |   |   | 250    |   | (e) |
| Heritage                  Labs, Inc.             |   |   | 2,827  |   | (f) |
| Total                                            |   | $      | 3,783  |   |   |

|   | (a)                  –  Represents additional consideration that was recorded as                  additional purchase price during the three months ended June 30,                  2006 upon                  the achievement of certain performance                  criteria. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b)                  – Represents the scheduled payment of seller financed debt which                  was                  recorded as additional purchase price in 2004 upon                  acquisition. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c)                  –  Represents additional consideration that was recorded as                  additional purchase price in 2005 upon the achievement of certain                  performance criteria. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d)                  – Represents additional purchase price recorded in 2005 to reimburse                  the seller for certain tax consequences of the                  acquisition. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e)                  – Represents additional consideration that was recorded as additional                  purchase price in 2004 upon the achievement of certain performance                  criteria. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f)                  – Represents the scheduled payment of seller financed debt which                  was                  recorded as additional purchase price in 2003 upon                  acquisition. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Note        8: Operating Segments**

----

|                                           |   | Three                  Months Ended |    |   | Three                  Months Ended |   |
|------------------------------------------------|--------|-------------------------------------|---------|--------|-------------------------------------|--------|
| *(In                  thousands)*              |   | September                  30, 2007 |    |   | September                  30, 2006 |   |
|                                           |   | HID                                 |    |   | CED                                 |   |   | Total |   |   | HID |   |   | CED |   |   | Total |   |
| Revenues                                       |   | $                                   | 49,434  |   |                                | $      | 6,826 |   |   | $ | 56,260 |   |   | $ | 52,880 |   |   | $ | 7,693 |   |   | $ | 60,573 |   |
| Depreciation                  and amortization |   |                                | 962     |   |                                |   | 160 |   |   |   | 1,122 |   |   |   | 1,262 |   |   |   | 126 |   |   |   | 1,388 |   |
| Operating                  income (loss)       |   |                                | (11,229 | )      |                                |   | 164 |   |   |   | (11,065 | ) |   |   | (10,379 | ) |   |   | 514 |   |   |   | (9,865 | ) |
| Capital                  expenditures          |   |                                | 1,029   |   |                                |   | 0 |   |   |   | 1,029 |   |   |   | 1,303 |   |   |   | 92 |   |   |   | 1,395 |   |
| Total                  assets                  |   |                                | 56,075  |   |                                |   | 5,060 |   |   |   | 61,135 |   |   |   | 95,916 |   |   |   | 6,585 |   |   |   | 102,501 |   |

|                                           |   | Nine                  Months Ended  |    |   | Nine                  Months Ended  |   |
|------------------------------------------------|--------|-------------------------------------|---------|--------|-------------------------------------|--------|
| *(In                  thousands)*              |   | September                  30, 2007 |    |   | September                  30, 2006 |   |
|                                           |   | HID                                 |    |   | CED                                 |   |   | Total |   |   | HID |   |   | CED |   |   | Total |   |
| Revenues                                       |   | $                                   | 157,260 |   |                                | $      | 22,148 |   |   | $ | 179,408 |   |   | $ | 169,842 |   |   | $ | 24,100 |   |   | $ | 193,942 |   |
| Depreciation                  and amortization |   |                                | 3,147   |   |                                |   | 519 |   |   |   | 3,666 |   |   |   | 3,682 |   |   |   | 479 |   |   |   | 4,161 |   |
| Operating                  income (loss)       |   |                                | (15,234 | )      |                                |   | 1,065 |   |   |   | (14,169 | ) |   |   | (14,596 | ) |   |   | 1,249 |   |   |   | (13,347 | ) |
| Capital                  expenditures          |   |                                | 2,851   |   |                                |   | 64 |   |   |   | 2,915 |   |   |   | 3,989 |   |   |   | 103 |   |   |   | 4,092 |   |
| Total                  assets                  |   |                                | 56,075  |   |                                |   | 5,060 |   |   |   | 61,135 |   |   |   | 95,916 |   |   |   | 6,585 |   |   |   | 102,501 |   |

**Note        9: Comprehensive Loss**

|                                                |   |                                                                           |    |   |                                                                     |   |    |   |   |   |    |   |
|-----------------------------------------------------|--------|--------------------------------------------------------------------------------|---------|--------|--------------------------------------------------------------------------|--------|---------|--------|--------|--------|---------|--------|
|  *(In                  thousands)*             |   | For                  the three months endedSeptember                  30, |    |   | For                  the nine months endedSeptember                  30, |   |
|                                                |   | 2007                                                                           |    |   | 2006                                                                     |   |    | 2007   |   |   | 2006    |   |
| Net                  loss                           |   | $                                                                              | (10,641 | )      |                                                                     | $      | (42,140 | )      |   | $      | (14,183 | )      |   | $ | (44,089 | ) |
| Other                  comprehensive income (loss): |   |                                                                           |    |   |                                                                     |   |    |   |   |   |    |   |   |   |   |   |
| Foreign                  currency translation       |   |                                                                           | (212    | )      |                                                                     |   | 479     |   |   |   | (187    | )      |   |   | 1,110 |   |
| Total                  comprehensive loss           |   | $                                                                              | (10,853 | )      |                                                                     | $      | (41,661 | )      |   | $      | (14,370 | )      |   | $ | (42,979 | ) |

**Note        10: Restructuring and Other Charges**

|                               |   |    |   |   |                        |   |
|------------------------------------|--------|---------|--------|--------|-----------------------------|--------|
| *(In                  millions)*   |   | 2007    |   |   | Balance                  at |   |
|                               |   | Charges |   |   | Payments                    |   |   | September                  30, 2007 |   |
| Severance                          |   | $       | 1.1    |   |                        | $      | (0.4 | ) |   | $ | 0.7 |   |
| Lease                  Obligations |   |    | 1.0    |   |                        |   | (0.4 | ) |   |   | 0.6 |   |
|     Total      |   | $       | 2.1    |   |                        | $      | (0.8 | ) |   | $ | 1.3 |   |

----

| ·   | restructuring                  charges totaling $2.3 million; |
|--------------------|---------------------------------------------------------------|

| ·   | a                  contract cancellation fee related to early termination of a software                  resale agreement totaling $0.5                  million; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                  fee payable to outside consultants of $5.6 million based on the                  results of                  the cost saving opportunities identified in the Company’s 2006 strategic                  review; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                  litigation settlement charge of $1.2 million related to a lawsuit                  filed                  against the Company (See Note 12);                  and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | outside                  legal and audit fees of $0.9 million associated with the restatement                  of                  the Company’s 2004 and 2005 consolidated financial                  statements. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(In                  millions)*   |   | Balance                  at        |   |   |     |   |   | Balance                  at         |   |
|------------------------------------|--------|------------------------------------|--------|--------|----------|--------|--------|-------------------------------------|--------|
|                               |   | December                  31, 2006 |   |   | Payments |   |   | September                  30, 2007 |   |
| Severance                          |   | $                                  | 0.3    |   |     | $      | (0.3   | )                                   |   |   | - |   |
| Lease                  Obligations |   |                               | 0.5    |   |     |   | (0.5   | )                                   |   |   | - |   |
|     Total      |   | $                                  | 0.8    |   |     | $      | (0.8   | )                                   |   |   | - |   |

|  *(In                  millions)*             |   | Balance                  atDecember                  31, 2006 |   |   |  Payments |   |   | Balance                  atSeptember                  30, 2007 |   |
|----------------------------------------------------|--------|---------------------------------------------------------------|--------|--------|----------------|--------|--------|----------------------------------------------------------------|--------|
| Severance                  Obligations – HID |   | $                                                             | 0.7    |   |           | $      | (0.4   | )                                                              |   | $ | 0.3 |   |
| Total                                              |   | $                                                             | 0.7    |   |           | $      | (0.4   | )                                                              |   | $ | 0.3 |   |

----

**Note        11: Revolving Credit Facility**

|   | (i) | 90%                  of “Eligible Receivables” (as that term is defined in the Loan and                  Security Agreement) of the Company and the Company’s subsidiaries                  providing guarantees of the indebtedness under the                  facility;  plus |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | 65%                  of the fair market value of the Company’s corporate headquarters located                  in Basking Ridge, New Jersey – |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | pay                  any dividends or distributions on, or purchase, redeem or retire                  any                  shares of any class of its capital stock or other equity                  interests; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | incur                  additional indebtedness; |
|--------------------|-------------------------------------------------|

| ·   | sell                  or otherwise dispose of any of its assets, other than in the ordinary                  course of business; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | create                  liens on its assets; and |
|--------------------|--------------------------------------------------|

| ·   | enter                  into transactions with any of its affiliates on other than an arm’s-length                  or no less favorable basis. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

**Note        12: Commitments and Contingencies**

----

----

**Note        13: Income Taxes**

*Accounting for        Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109*
*Definition of Settlement in FASB        Interpretation 48*

**Note        14: Recently Issued Accounting Standards**

----

**Note        15 — Related Party Transactions (in dollars)**

**Note        16 — Subsequent Event**

----

| **ITEM                  2** | **Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations** |
|-----------------------------|-----------------------------------------------------------------------------------------------------------------------------------|

**Cautionary        Statement Regarding Forward-Looking Statements**

|   | · | our                  ability to implement the                  strategic plans in connection with management’s strategic review of all                  aspects of the Company’s operations completed                  in September                  2006; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                  ability to effect several expense management initiatives, including                  (i)                  aligning our costs with existing, and possibly continued declining                  levels                  of revenues, (ii) making better use of our assets, particularly                  our branch                  offices and branch office personnel within our Portamedic paramedical                  examination business, and (iii) generating cost efficiencies through                  an                  enhanced information technology platform and realizing the anticipated                  cost savings from such initiatives; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                  ability to finance our operations: |
|--------|--------|---------------------------------------------------------|

|   | · | our                  ability to reverse the decline in revenues and profitability we                  are                  experiencing in each of our two                  divisions; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                  success in generating additional operating income from new revenue                  initiatives; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | · | our                  meeting or exceeding our                  customers’ expectations with respect to the quality and timeliness of our                  services on a consistent                  basis; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                  ability to enhance and expand our technology and network                  infrastructure; |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

|   | · | our                  ability to leverage                  our core capabilities to                  generate revenues in the wellness and disease management markets;                  and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                  ability to anticipate key trends and developments affecting our                  businesses, and proactively position ourselves to seize opportunities                  presented by these trends and                  developments. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Overview**

***Business        Description***

**Health Information Division (HID)**

|   | · | arranging                  paramedical and medical examinations of individual life insurance                  policy                  applicants throughout the United States (under the Portamedic brand                  name)                  and conducting paramedical examinations (i.e. health screenings)                  for                  wellness, disease management and managed care                  companies; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | performing                  telephone interviews of applicants and collecting applicants’ medical                  records; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | · | testing                  the blood, urine and other specimens obtained in connection with                  a portion                  of the paramedical examinations we coordinate for life insurance                  and                  wellness companies, as well as specimens provided by third-party                  health                  information service providers; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | underwriting                  life insurance policies on an outsourced basis for life insurance                  and                  reinsurance companies. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Claims Evaluation Division (CED)**

----

***Financial        Results and Business Summary for the Third Quarter and Nine Months Ended        September 30, 2007***

| ·   | Revenues                  in our Portamedic business totaled $35.0 million in the third quarter                  of                  2007, a decline of approximately 5% from the corresponding prior                  year                  period.  This represents a slight improvement from the 7% year                  over year revenue declines experienced by Portamedic in the first                  half of                  2007.  This reduction in our revenue decline is primarily                  attributable to an improvement in our average revenue per exam                  in the                  third quarter of 2007, which increased 7% compared to the prior                  year,                  along with increased revenue from wellness customers.  Our                  increase in average revenue per exam was offset by a 13% decline                  in the                  number of exams completed during the third quarter in comparison                  to the                  prior year.  Our decline in exam units is primarily attributable                  to two trends in the life insurance                  industry: |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ¾   | the                  rate of decline in the number of applications for life insurance                  policies                  in the United States, as reported by the MIB Life                  Index |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ¾   | the                  growth of “simplified issue” life insurance policies offered by our                  customers, which do not require a medical exam as part of the underwriting                  process.  In 2007, more than 50% of our top 20 customers                  experienced growth in their simplified issue products.  The                  reduction in the number of exams resulting from simplified issue                  policies                  is not factored into in the MIB Life Index decline noted                  above |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ¾   | focusing                  on new sources of revenue, including the growth of our Health and                  Wellness                  business |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ¾   | creating                  new premium services for our customers to meet their future market                  needs,                  including our new service called Portamedic Platinum.  This                  service provides a significantly faster delivery of our services                  and                  allows our customers to make faster underwriting decisions.  In                  addition, we recently introduced our Mature Assessment service                  offering                  which provides our life insurance customers with a proven, standard                  method                  of obtaining additional health information to improve the underwriting                  of                  policies for older applicants |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ¾   | reversing                  past market share declines through investments in local presence,                  sales                  and service |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our                  Health and Wellness business continues to grow, with revenues of                  approximately $1.2 million in the third quarter of 2007 and $2.5                  million                  for the nine months ended September 30, 2007.  We have expanded                  our customer base and currently provide our services to seven disease                  management companies, such as Healthways, Inc.  To date, we have                  completed over 50,000 health screenings in our Wellness business                  and                  expect significant expansion with our current wellness and disease                  management customers, along with new revenue sources with other                  healthcare                  providers.  The wellness health screening market represents a                  $500 million opportunity, based on Boston Consulting Group estimates,                  and                  we believe we are well-positioned to capture a significant portion                  of the                  wellness health screening market by leveraging our existing core                  capabilities, including our ability to conduct a health screening                  anywhere                  in the United States and process the related blood tests at our                  subsidiary, Heritage Labs. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Heritage                  Labs grew approximately 12% in the third quarter of 2007 compared                  to the                  same period of the prior year, primarily a result of more than                  $1.3                  million in new sales in the third quarter, along with increased                  lab                  testing from wellness                  customers. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Underwriting                  Solutions revenues experienced a significant decline during the                  third                  quarter of 2007 in comparison to the prior year.  This decline                  is primarily attributable to the previously disclosed reduction                  in revenue                  from one major customer, resulting from the customer’s decision to                  mitigate risk and move to a multi-vendor strategy (from the previous                  Underwriting Solutions exclusive vendor arrangement).  However,                  as a result of new leadership and an aggressive sales effort, we                  have been                  able to replace a large amount of this lost revenue.  In fact,                  revenue unrelated to the major customer noted previously has grown                  over                  300% in the past 18 months and accounted for over 60% of total                  Underwriting Solutions revenue in the third quarter of                  2007. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our                  Claims Evaluation Division added nine new customer approvals during                  the                  third quarter of 2007 which could potentially result in approximately                  $1.4                  million of new annualized revenue.  We are optimistic that these                  additional revenue opportunities will partially offset the decline                  of our                  core market share. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | declining                  revenues and operating profits during the second and third quarters                  of                  2007 compared to 2006 and the expectation that this the decline                  will                  continue into the fourth quarter; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 2007                  quarterly and year-to-date revenues and operating income are significantly                  below budget and the expectation of below budget revenues and operating                  income continuing for the remainder of                  2007; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | continued                  contraction of the principle markets served by the CED;                  and |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | reduced                  revenues from three of CED’s largest customers who have expanded their                  vendor base resulting in fewer cases referred to the                  CED. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Status        of Our Strategic Review and        Turnaround Program*

*Expense        Management*

*Revenue        Enhancement*

|   | · | seeking                  opportunities to grow and expand our current services by delivering                  new                  and increased value to our                  customers |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increasingour                  number of local sales and                  marketing people calling upon local insurance agents in our Portamedic                  business |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | introducing                  new products and services, such as Portamedic Platinum and Mature                  Assessment, which address the critical business needs of new and                  existing                  customers and, as a result, provide additional revenue opportunities;                  and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | obtaining                  price increases from customers in response to improved service                  levels that                  we provide. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Growth        Investment*

**Key        Factors and Industry Trends Affecting Our Businesses**

***Health        Information Division***

*Decline        in Life Insurance Application Activity*

----

*Pricing        Pressure from Life Insurance Carriers*

***Claims        Evaluation Division***

*Contraction        of the Outsourced Claims Management Market in the United        States*

|   | · | the                  decrease in manufacturing employment levels in the United States                  and the                  associated decline in the rates of workplace injuries and, in turn,                  workers’ compensation claims; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                  reported decline in the number of people injured in automobile                  accidents                  in the United States; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes                  in state laws and regulations that, in general, encourage the use                  of                  managed care techniques in handling workers’ compensation and                  automobile-related personal injury insurance claims.  Managed                  care laws generally channel claimants into provider networks and                  suggest                  treatment protocols and other constraints on the activity of the                  physician                  practitioners in such networks. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Key        Financial and Other Metrics Monitored by Management**

*Health Information Division*

|   | · | the                  number of paramedical examinations performed by                  Portamedic; |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | the                  average revenue per paramedical                  examination; |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | time                  service performance, from examination order to                  completion; |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | the                  MIB Life Index data which represents an indicator of the level                  of life                  insurance application activity; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                  growth of our customers’ simplified issue                  products: |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | the                  number of tele-interviewing/underwriting reports we                  generate; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | the                  number of specimens tested by our Heritage Labs                  subsidiary; |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | the                  average revenue per specimen                  tested; |
|--------|--------|----------------------------------------------------------------------------|

|   | · | budget                  to actual performance at the branch level as well as in the aggregate;                  and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|   | · | customer                  and product line profitability. |
|--------|--------|-----------------------------------------------------------|

* Claims Evaluation Division*

|   | · | the                  number of incoming cases by client and by insurance                  adjuster; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | time                  of service, which measures the time to complete a claim, from receipt                  to issuing a report; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | budget                  to actual financial performance, including customer and product                  line                  profitability. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

----

**Results        of Operations**

***Comparative        Discussion and Analysis of Results of Operations for the three and nine months        ended September 30, 2007 and 2006, respectively***

*Revenues        by Component Businesses and Reporting Segments*

| *(in                    thousands)*       |   | For                    the Three Months Ended September 30, |   |   | For                    the Nine Months Ended September 30, |   |
|-------------------------------------------|--------|-------------------------------------------------------------|--------|--------|------------------------------------------------------------|--------|
|                                      |   | 2007                                                        |   |   | 2006                                                       |   |   | %                    Change |   |   | 2007 |   |   | 2006 |   |   | %                    Change |   |
|                                      |   |                                                        |   |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HID                                       |   |                                                        |   |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Portamedic                                |   | $                                                           | 35,011 |   |                                                       | $      | 36,925 |   |   |   | -5.2 | % |   | $ | 111,827 |   |   | $ | 120,161 |   |   |   | -6.9 | % |
| Infolink                                  |   |                                                        | 6,561  |   |                                                       |   | 7,646 |   |   |   | -14.2 | % |   |   | 21,060 |   |   |   | 24,481 |   |   |   | -14.0 | % |
| Heritage                  Labs            |   |                                                        | 4,767  |   |                                                       |   | 4,270 |   |   |   | 11.6 | % |   |   | 14,172 |   |   |   | 13,543 |   |   |   | 4.6 | % |
| Underwriting                    Solutions |   |                                                        | 3,095  |   |                                                       |   | 4,039 |   |   |   | -23.4 | % |   |   | 10,201 |   |   |   | 11,657 |   |   |   | -12.5 | % |
| Total                  HID                |   |                                                        | 49,434 |   |                                                       |   | 52,880 |   |   |   | -6.5 | % |   |   | 157,260 |   |   |   | 169,842 |   |   |   | -7.4 | % |
| CED                                       |   |                                                        | 6,826  |   |                                                       |   | 7,693 |   |   |   | -11.3 | % |   |   | 22,148 |   |   |   | 24,100 |   |   |   | -8.1 | % |
| Total                                     |   | $                                                           | 56,260 |   |                                                       | $      | 60,573 |   |   |   | -7.1 | % |   | $ | 179,408 |   |   | $ | 193,942 |   |   |   | -7.5 | % |

***Revenues***

*Health        Information Division*

----

*Portamedic*

| ·   | fewer                  paramedical examinations performed in the third quarter (466,000                  in 2007                  vs.  535,000 in 2006) and in the nine month period ended September                  30,  (1,530,000 in 2007 vs. 1,723,000 in 2006); and was                  partially offset by |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | higher                  average revenue per paramedical examination in the third quarter                  ($77.84                  in 2007 vs. $72.65 in 2006) and in the nine month period ended                  September                  30,  ($76.32 in 2007 vs. $72.65 in                  2006). |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *Infolink* |
|--------|------------|

----

*Heritage        Labs*

*Underwriting        Solutions*

*Claims        Evaluation        Division*

| ·   | In                  early 2007, CED was notified by a significant customer that in                  order to                  mitigate risk, one of the customer’s major branch offices will migrate to                  a multi-vendor supply chain.  CED’s loss of the customer’s                  exclusive business negatively impacted revenues in the first nine                  months                  of 2007 and is estimated to potentially reduce 2007 CED annual                  revenues by                  $1.2 million (approximately 4% of the CED’s 2006 annual                  revenues); |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                  reduction in peer reviews in New York State, which we believe reflects                  increased cost consciousness on the part of property and casualty                  insurance carriers, self-insureds and third-party administrators                  and the                  perception that such reviews have been of limited value in litigating                  claims; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                  decrease in the number of independent medical exams (IMEs) ordered                  by our                  customers when evaluating a claim;                  and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                  decrease in the number of claims referred to the division by its                  existing                  customer base. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

----

***Cost        of Operations***

|                                    |   |                                              |   |   |                                             |   |   |   |   |   |                              |   |   |   |   |   |                                   |   |    |   |   |   |                                   |   |
|-----------------------------------------|--------|---------------------------------------------------|--------|--------|--------------------------------------------------|--------|--------|--------|--------|--------|-----------------------------------|--------|--------|--------|--------|--------|----------------------------------------|--------|---------|--------|--------|--------|----------------------------------------|--------|
|                                    |   | Three                  months ended September 30, |   |   | Nine                  months ended September 30, |   |
| *(in                  thousands)*       |   | 2007                                              |   |   | As                  % of Revenues                |   |   | 2006   |   |   | As                  % of Revenues |   |   | 2007   |   |   | As                  % of Revenues |   |    | 2006   |   |   | As                  % of Revenues |   |
|                                    |   |                                              |   |   |                                             |   |   |   |   |   |                              |   |   |   |   |   |                                   |   |    |   |   |   |                                   |   |
| HID                                     |   |                                              |   |   |                                             |   |   |   |   |   |                              |   |   |   |   |   |                                   |   |    |   |   |   |                                   |   |
| Portamedic/Infolink                     |   | $                                                 | 32,948 |   |                                             |   | 79.3   | %      |   | $      | 36,294                            |   |   |   | 81.4   | %      |                                   | $      | 103,939 |   |   |   | 78.2                                   | %      |   | $ | 115,656 |   |   |   | 80.0 | % |
| Heritage                  Labs          |   |                                              | 2,553  |   |                                             |   | 53.6   | %      |   |   | 2,595                             |   |   |   | 60.8   | %      |                                   |   | 7,732   |   |   |   | 54.6                                   | %      |   |   | 7,881 |   |   |   | 58.2 | % |
| Underwriting                  Solutions |   |                                              | 2,540  |   |                                             |   | 82.1   | %      |   |   | 2,794                             |   |   |   | 69.2   | %      |                                   |   | 7,949   |   |   |   | 77.9                                   | %      |   |   | 8,014 |   |   |   | 68.8 | % |
| Total                  HID              |   |                                              | 38,041 |   |                                             |   | 77.0   | %      |   |   | 41,683                            |   |   |   | 78.8   | %      |                                   |   | 119,620 |   |   |   | 76.1                                   | %      |   |   | 131,551 |   |   |   | 77.5 | % |
| CED                                     |   |                                              | 5,008  |   |                                             |   | 73.4   | %      |   |   | 5,538                             |   |   |   | 72.0   | %      |                                   |   | 16,138  |   |   |   | 72.9                                   | %      |   |   | 17,275 |   |   |   | 71.7 | % |
| Total                                   |   | $                                                 | 43,049 |   |                                             |   | 76.5   | %      |   | $      | 47,221                            |   |   |   | 78.0   | %      |                                   | $      | 135,758 |   |   |   | 75.7                                   | %      |   | $ | 148,826 |   |   |   | 76.7 | % |
|                                    |   |                                              |   |   |                                             |   |   |   |   |   |                              |   |   |   |   |   |                                   |   |    |   |   |   |                                   |   |   |   |   |   |   |   |   |   |

*Health        Information Division*

|   | · | reduced                  branch operating expenses and fewer branch offices resulting from                  our                  continued restructuring of the Portamedic                  organization; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                  higher average revenue per Portamedic                  examination. |
|--------|--------|------------------------------------------------------------------------------------------|

*Claims        Evaluation Division*

----

***Selling,        General and Administrative        Expenses***

| *(in                  thousands)* |   | For                    the three months ended September 30, |   |   | Increase(Decrease) |   |   | For                    the nine months ended September 30, |   |   | Increase(Decrease) |   |
|-----------------------------------|--------|-------------------------------------------------------------|--------|--------|--------------------|--------|--------|------------------------------------------------------------|--------|--------|--------------------|--------|
|                              |   | 2007                                                        |   |   | 2006               |   |   | 2007                    vs. 2006                           |   |   | 2007               |   |   | 2006 |   |   | 2007                    vs. 2006 |   |
| HID                               |   | $                                                           | 14,699 |   |               | $      | 15,025 |                                                       |   | $      | (326               | )      |   | $ | 43,706 |   |   | $ | 44,531 |   |   | $ | (825 | ) |
| CED                               |   |                                                        | 1,655  |   |               |   | 1,641  |                                                       |   |   | 14                 |   |   |   | 4,946 |   |   |   | 5,648 |   |   |   | (702 | ) |
| Total                             |   | $                                                           | 16,354 |   |               | $      | 16,666 |                                                       |   | $      | (312               | )      |   | $ | 48,652 |   |   | $ | 50,179 |   |   | $ | (1,527 | ) |

*Health        Information        Division*

|   | · | decreased  legal                  fees and general insurance resulting from less use of outside counsel                  and                  favorable insurance renewal rates, totaling $0.2 million and $0.5                  million,                  respectively; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | decreased                  amortization expense due to the impairment of certain intangible                  assets                  recorded in the fourth quarter of 2006, totaling $0.2 million and                  $0.7                  million, respectively; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | decreased                  recruiting fees, benefits consulting fees and shareholder services                  fees                  totaling $0.2 million and $0.5 million,                  respectively; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | decreased                  Portamedic and Regional administration personnel and consulting                  fees and                  expenses associated with a software resale agreement totaling $0.6                  million                  and $0.9 million, partially offset                  by, |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increased                  IT depreciation costs and consulting costs resulting from our new                  branch                  operating systems, and  branch data transmission expense                  totaling $0.3 million and $0.7                  million: |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | increased                  marketing and promotional materials and business development expenses                  associated with the Company’s corporate marketing and product branding                  initiatives, totaling $0.1 million and $0.8 million, respectively,                  and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increased                  cost at Heritage Labs associated with the hiring of additional                  administration personnel, sales personnel and increased leased                  lab                  equipment costs totaling $0.2 million and $0.6                  million. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *Claims                  Evaluation Division* |
|--------|-----------------------------------------------|

***Impairment        of  Goodwill and        Intangibles***

*Intangible        Assets*

*Goodwill*

*, *

----

***Restructuring        and Other Charges***

|   | ***Operating                  Loss*** |
|--------|---------------------------------------|

*Health        Information        Division.*

*Claims        Evaluation Division*

***Income        Taxes***

----

***Loss        from continuing operations***

***Liquidity        and Financial Resources***

| ·   | restructuring                  payments related to employee severance and branch office closure                  costs                  totaling $2.0 million; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | capital                  expenditures of $3.3 million; |
|--------------------|--------------------------------------------------------|

| ·   | an                  increase in accounts receivable of $4.5 million;                  and |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | payment                  of a contract cancellation fee and fees to outside consultants                  related to                  cost saving opportunities identified in our 2006 strategic review,                  totaling $1.9 million. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Cash        Flows used in Operating Activities***

|   | · | an increase                  in accounts receivable of $4.5 million, primarily due to a reduction                  in                  Portamedic cash collections resulting from slower than expected                  collections, partially attributable to increased documentation                  required by                  customers to process payments.  We continue to improve our                  internal processes/resources to address these customer requirements                  and                  expect our accounts receivable to decline in future quarters. Consolidated                  days sales outstanding (DSO), measured on a rolling 90-day basis                  was 56                  days at September 30, 2007, compared to 49 days at September 30,                  2006 and                  46 days at December 31, 2006; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | the                  receipt of a $2.4 million federal income tax refund in September                  2007,                  and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                  decrease in accounts payable and accrued expenses of $3.6                  million. |
|--------|--------|--------------------------------------------------------------------------------------------------------|

***Cash        Flows provided by Investing Activities***

***Cash        Flows used in Financing Activities***

**Our        Credit Facility**

|   | (i) | 90%                  of “Eligible Receivables” (as that term is defined in the loan and                  security agreement) of the Company and the Company’s subsidiaries                  providing guarantees of the indebtedness under the facility;                  plus |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | 65%                  of the fair market value of our corporate headquarters located                  in Basking                  Ridge, New Jersey – |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Off-Balance        Sheet Arrangements**

**Share        Repurchases**

----

**Dividends**

**Contractual        Obligations**

**Inflation**

**Critical        Accounting Policies**

----

| **ITEM                  3** | **Quantitative                  and Qualitative Disclosures About Market                  Risk** |
|-----------------------------|--------------------------------------------------------------------------------------------------|

----

| **ITEM                  4** | **Controls                  and Procedures** |
|-----------------------------|----------------------------------------------|

**(a)        Evaluation of Disclosure Controls and Procedures**

**(b)        Changes in Internal Control over Financial Reporting**

----

**PART        II – Other Information**

| **ITEM                  1** | **Legal                  Proceedings** |
|-----------------------------|----------------------------------------|

----

| **ITEM                  1A** | **Risk                  Factors** |
|------------------------------|-----------------------------------|

| **ITEM                  2** | **Unregistered                  Sales of Equity Securities and Use of                  Proceeds** |
|-----------------------------|---------------------------------------------------------------------------------------------------|

| **ITEM                  3** | **Defaults                  Upon Senior Securities** |
|-----------------------------|------------------------------------------------------|

| **ITEM                  4** | **Submission                  of Matters to a Vote of Security                  Holders** |
|-----------------------------|-------------------------------------------------------------------------------------------|

| **ITEM                  5** | **Other                  Information** |
|-----------------------------|----------------------------------------|

----

| **ITEM                  6** | **Exhibits** |
|-----------------------------|--------------|

| Exhibit                  No. |   | Description                  of Exhibit                                                                                                                                                                       |
|------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |   |                                                                                                                                                                                                          |
| 31.1                         |   | Certification                  of Chief Executive Officer pursuant to Rule 13a-14(a) under the                  Securities                  Exchange Act of 1934.                                             |
|                         |   |                                                                                                                                                                                                          |
| 31.2                         |   | Certification                  of Chief Financial Officer pursuant to Rule 13a-14(a) under                  the Securities Exchange Act of 1934.                                                         |
|                         |   |                                                                                                                                                                                                          |
| 32.1                         |   | Certification                  of Chief Executive Officer pursuant to Rule 13a-14(b) under the                  Securities                  Exchange Act of 1934 and 18 U.S.C. Section 1350.                  |
|                         |   |                                                                                                                                                                                                          |
| 32.2                         |   | Certification                  of Chief Financial Officer pursuant to Rule 13a-14(b) under the                  Securities                  Exchange Act of 1934 and 18 U.S.C. Section                  1350. |

----

**SIGNATURES**

|   |   | By:                  /s/ James D. Calver                           |   |
|--------|--------|--------------------------------------------------------------------|--------|
|   |   | James                  D. Calver                                   |   |
|   |   | Chief                  Executive Officer and President             |   |
|   |   |                                                               |   |
|   |   |                                                               |   |
|   |   |                                                               |   |
|   |   | By:                  /s/ Michael J. Shea                           |   |
|   |   | Michael                  J. Shea                                   |   |
|   |   | Senior                  Vice President and Chief Financial Officer |   |

----