<PAGE>



PAGE 1                                                            EXHIBIT (99.1)


                                  ANNUAL REPORT



                        Pursuant to Section 15(d) of the
                             Securities Act of 1934



                               For the Year Ended
                                December 31, 2001


                          ____________________________



               THE LIFELINE EMPLOYEES' SAVINGS AND INVESTMENT PLAN
               ---------------------------------------------------

<PAGE>

The Lifeline Employees' Savings
and Investment Plan
Financial Statements and Supplemental Schedule
To Accompany 2001 Form 5500
Annual Report of Employee Benefit Plan
Under ERISA of 1974
For the Years Ended December 31, 2001 and 2000

<PAGE>

The Lifeline Employees' Savings and Investment Plan
Index to Financial Statements and Supplemental Schedule
For the Years Ended December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                         Page(s)
<S>                                                                                      <C>
Report of Independent Accountants                                                           2

Financial Statements:
   Statements of Net Assets Available for Plan Benefits,
     December 31, 2001 and 2000                                                             3

   Statements of Changes in Net Assets Available for Plan Benefits
     for the years ended December 31, 2001 and 2000                                         4

   Notes to Financial Statements                                                          5-9

Supplemental Schedule:
   Schedule of Assets (Held at End of Year) as of December 31, 2001                        10
</TABLE>

Other supplemental schedules required by 29 CFR 2550.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 have been omitted because they are not
applicable.

                                       1

<PAGE>

                        Report of Independent Accountants

To the Participants and Administrator of
The Lifeline Employees' Savings and Investment Plan:

In our opinion, the accompanying statements of net assets available for plan
benefits and the related statements of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
plan benefits of the Lifeline Employees' Savings and Investment Plan (the
"Plan") at December 31, 2001 and 2000, and the changes in net assets available
for plan benefits for the years then ended in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Plan's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of Assets Held
at End of Year is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.

/s/ PricewaterhouseCoopers LLP

June 7, 2002


<PAGE>

The Lifeline Employees' Savings and Investment Plan
Statements of Net Assets Available for Plan Benefits
December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                             2001               2000
<S>                                                                      <C>                <C>
Assets
Investments (Notes C and D)                                              $14,433,420        $12,435,398

Receivables:
    Employer contributions receivable                                              -             38,125
    Participants' contributions receivable                                         -            100,537
                                                                         -----------        -----------

        Total receivables                                                          -            138,662
                                                                         -----------        -----------

        Total assets and net assets available for plan benefits          $14,433,420        $12,574,060
                                                                         ===========        ===========
</TABLE>

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

                                       3

<PAGE>

The Lifeline Employees' Savings and Investment Plan
Statements of Changes in Net Assets Available for Plan Benefits
For the Years Ended December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                     2001           2000
<S>                                                              <C>            <C>
Additions:
    Investment income (loss):
      Interest and dividend income                               $   220,843    $   506,151
      Net appreciation (depreciation) in fair value of
        investments (Note D)                                         420,577     (1,069,673)
                                                                 -----------    -----------
                                                                     641,420       (563,522)
                                                                 -----------    -----------

    Contributions:
      Participants'                                                1,568,206      1,429,139
      Participants' rollovers                                         20,158         77,863
      Employer                                                       520,814        471,814
                                                                 -----------    -----------

                                                                   2,109,178      1,978,816
                                                                 -----------    -----------

        Total additions                                            2,750,598      1,415,294
                                                                 -----------    -----------
Deductions:
    Benefits and withdrawals paid to participants                    888,888      1,057,159
    Administrative expenses                                            2,350          2,650
                                                                 -----------    -----------

        Total deductions                                             891,238      1,059,809
                                                                 -----------    -----------

        Net increase                                               1,859,360        355,485

Net assets available for plan benefits:
    Beginning of year                                             12,574,060     12,218,575
                                                                 -----------    -----------

    End of year                                                  $14,433,420    $12,574,060
                                                                 ===========    ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                        4

<PAGE>

The Lifeline Employees' Savings and Investment Plan
Notes to Financial Statements

A.   Description of the Plan

     The following description of the Lifeline Employees' Savings and Investment
     Plan (the "Plan") provides only general information. Participants should
     refer to the plan document for a more complete description of the Plan's
     provisions.

     General

     The Plan is a defined contribution profit-sharing plan covering all United
     States employees of Lifeline Systems, Inc. (the "Company") who work at
     least 1,000 hours during the plan year. Employees become eligible to
     participate on the entry date following six months of service. The Plan was
     established in 1984 to provide participants an opportunity to defer
     retirement savings on a pretax basis. The Plan is subject to the provisions
     of the Employee Retirement Income Security Act of 1974 (ERISA).

     Contributions

     Participants may contribute from 1% to 15% of their compensation, as
     defined by the Plan, on a pre-tax basis subject to the annual dollar limits
     established by the Internal Revenue Service (IRS) and plan limitations.
     Participants are immediately vested in their contributions and earnings
     thereon. Rollover contributions from other qualified plans are also
     allowed. Withdrawals are permitted as specified by IRS regulations and plan
     provisions.

     Employer contributions may vary from year to year in such amounts as have
     been voted by the Board of Directors of the Company pursuant to the
     provisions of the Plan. For the years ended December 31, 2001 and 2000, the
     Company matched 100% of the first 2% of participant deferrals and 50% of
     the next 2% of participant deferrals up to a maximum of $600 per quarter,
     or $2,400 per year per participant. Participants are immediately vested in
     Company matched contributions and earnings thereon. The Board of Directors
     has the discretion to make additional contributions.

     Loans

     With the approval of the plan administrator, participants may borrow from
     their vested account balance attributable to participant pre-tax, matching,
     discretionary, and rollover contributions. The maximum amount that may be
     borrowed is 50% of a participant's vested interest or $50,000, whichever is
     less. The minimum loan is $1,000. The interest rate is fixed and will be
     equal to the prime rate plus one and one-half percent. The maximum loan
     period is five years. The interest rate charged on participant loans ranged
     from 6.25% to 10.50% in 2001 and 10.25% to 11.00% in 2000.

     Benefits and Withdrawals

     Upon termination of service due to death, disability or retirement, the
     Plan allows benefits to be paid in the form of a cash payment or an in-kind
     distribution for participants who invest in the Company Stock Fund. Several
     annuity options may be selected by participants (or their beneficiaries)
     with account balances exceeding $3,500 as of December 1, 1990.

     The Plan also provides for a preretirement survivor annuity to participants
     of the Plan with account balances exceeding $3,500 as of December 1, 1990,
     which allows 100% of a married participant's benefits to be used to provide
     benefits to his/her spouse if the participant dies before benefit payments
     commence. This provision may be waived once the participant reaches age 35
     and obtains written consent from his/her spouse. Benefits to participants
     not married who die before retirement will be distributed to designated
     beneficiaries.

     Hardship withdrawals are allowed under the provisions of the Plan.

                                        5

<PAGE>

The Lifeline Employees' Savings and Investment Plan
Notes to Financial Statements

     Vesting

     Plan participants are at all times 100% vested in the value of their own
     contributions, rollovers, employer matching contributions, and earnings
     thereon. Participants become 100% vested in employer discretionary
     contributions following five years of credited service, retirement,
     disability or death.

     Investment Options

     The Plan offers eight investment options including stock of the Company to
     which participants may allocate the investment of their accounts.

B.   Summary of Significant Accounting Policies

     Basis of Presentation

     The financial statements of the Plan have been prepared under the accrual
     basis of accounting.

     Reclassification

     Certain prior year balances have been reclassified to conform to the
     current year presentation.

     Investment Valuation and Income Recognition

     Investments in mutual funds, common collective trusts and the Company's
     common stock are stated at fair value using net asset value or market
     prices, as appropriate. Participant loans are valued at cost which
     approximates fair value. Investment transactions are record on the trade
     date. Interest is recorded as earned on the accrual basis. Dividends are
     recorded on the ex-dividend date. The Plan presents in the statement of
     changes in net assets available for plan benefits the net appreciation
     (depreciation) in the fair value of its investments which consists of the
     realized gains or losses and the unrealized appreciation (depreciation) on
     those investments.

     Contributions

     Participant and employer matching contributions are recorded in the period
     in which the participant payroll deductions are made.

     Payment of Benefits

     Benefit payments are recorded when paid.

     Expenses

     All administrative expenses and fees are paid by the Company except for
     loan fees which are paid by the participants of the Plan.

     Use of Estimates

     The preparation of the Plan's financial statements in conformity with
     generally accepted accounting principles requires the plan administrator to
     make significant estimates and assumptions that affect the reported amounts
     of net assets available for plan benefits at the date of the financial
     statements and the changes in net assets available for plan benefits during
     the reporting period and, when applicable, disclosures of contingent assets
     and liabilities at the date of the financial statements. Actual results
     could differ from those estimates.

                                        6

<PAGE>

The Lifeline Employees' Savings and Investment Plan
Notes to Financial Statements

     Risks and Uncertainties

     The Plan provides for various investment options that may include any
     combination of stocks, bonds, fixed income securities, and other investment
     securities. Investment securities are exposed to various risks, such as
     interest rate, market, and credit risks. Due to the level of risk
     associated with certain investment securities, it is at least reasonably
     possible that changes in the values of investment securities will occur in
     the near term and that such changes could materially affect participants'
     account balances and the amounts reported in the statement of net assets
     available for plan benefits.

C.   Investment Contracts with Insurance Company and Bank

     In January 1992 the Plan entered into an investment agreement with Bankers
     Trust Company to enter into the Bankers Trust Pyramid Guaranteed Investment
     Contracts Fund, a common collective trust established and managed by
     Bankers Trust Company. The Fund invests primarily in Guaranteed Investment
     Contracts ("GICs") and Bank Investment Contracts issued by life insurance
     companies, banks or other financial institutions, and any of the Bankers
     Trust Commingled short-term investments funds. The Fund's assets are valued
     at fair value; however, assets for which there is no readily ascertainable
     market value are valued at fair value determined in good faith by the
     trustee of the Fund. The Fund expects to maintain a constant unit value of
     $1.00. The average yield and crediting interest rates were approximately 5
     percent for 2001 and 6 percent for 2000. The crediting interest rate is
     determined on a daily basis. Withdrawals are permitted and are subject to a
     deferred payout schedule.

     In February 1997, the Plan terminated its participation in the Bankers
     Trust Pyramid Guaranteed Investment Contracts Fund and entered into an
     Investment Management Agreement with Bankers Trust Company. The Plan
     received payouts of its remaining balance in six installments from February
     1, 1997 through October 1, 2001.

                                        7

<PAGE>

The Lifeline Employees' Savings and Investment Plan
Notes to Financial Statements

D.       Investments

         Investments held by the Plan at December 31, 2001 and 2000 are
         summarized as follows:

<TABLE>
<CAPTION>
                                                                                2001                  2000
          Description                                                         Fair value            Fair value
          <S>                                                                 <C>                   <C>
          Lifeline Fixed Fund
             SSGA Stable Value Fund                                            $ 1,358,859 *        $ 1,117,941 *
             Bankers Trust Pyramid GIC Fund                                              -              184,958
                                                                               -----------          -----------
             Total common collective trusts                                      1,358,859            1,302,899

          SSGA S&P 500 Fund                                                      1,449,744 *          1,302,979 *
          Scudder International Fund                                               534,417              524,421
          Strong Government Securities Fund                                        688,978              357,900
          SSGA Growth & Income Fund                                              3,359,264 *          3,629,058 *
          INVESCO Total Return Fund                                              1,958,917 *          1,877,310 *
          Dreyfus Emerging Leaders Fund                                          1,615,032 *          1,581,558 *
                                                                               -----------          -----------

             Total mutual funds                                                  9,606,352            9,273,226

          Lifeline Systems, Inc. Common Stock                                    3,031,409 *          1,315,528 *
          Participant Loans                                                        436,800              543,745
                                                                               -----------          -----------
                                                                               $14,433,420          $12,435,398
                                                                               ===========          ===========
</TABLE>

         * Investment represents 5% or more of net assets available for plan
           benefits.

         During 2001 and 2000, the Plan's investments (including gains and
         losses on investments bought and sold, as well as held during the year)
         appreciated (depreciated) as follows:

<TABLE>
<CAPTION>
                                                                                   2001                 2000
          <S>                                                                  <C>                  <C>
          Mutual funds                                                         $(1,014,970)         $  (881,503)
          Common collective trusts                                                  94,640               63,014
          Lifeline Systems, Inc. Common Stock                                    1,340,907             (251,184)
                                                                               -----------          -----------
                                                                               $   420,577          $(1,069,673)
                                                                               ===========          ===========
</TABLE>




E.       Tax Status

         The Internal Revenue Service has determined and informed the Company by
         a letter dated July 10, 1995 that the Plan and related trust are
         designed in accordance with applicable sections of the Internal Revenue
         Code (IRC). The Plan has been amended since receiving the determination
         letter. However, the plan administrator and the Plan's tax counsel
         believe that the Plan is designed and is currently being operated in
         compliance with the applicable requirements of the IRC. Therefore, no
         provision for income taxes has been included in the Plan's financial
         statements.

                                        8

<PAGE>

The Lifeline Employees' Savings and Investment Plan
Notes to Financial Statements

F.   Plan Termination

     The Company intends to continue the Plan indefinitely but reserves the
     right to terminate the Plan at any time without any liability whatsoever
     for such discontinuance or termination. After payment of expenses by the
     trustee, the Plan would be liquidated and each participant would receive
     his or her interest in the form of a lump-sum payment.

G.   Related Party Transactions

     State Street Bank and Trust Company is the Trustee for the Plan. The Plan
     invests in mutual funds managed by State Street Global Advisors, a related
     entity to the Trustee. Therefore, State Street Global Advisors is a
     party-in-interest. In addition, purchases and sales of the Company's common
     shares and participant loans are considered party-in-interest transactions.

                                       9

<PAGE>

The Lifeline Employees' Savings and Investment Plan
Supplemental Schedule
Form 5500, Schedule H, Part IV, Item 4: Schedule of Assets (Held at End of Year)
December 31, 2001

<TABLE>
<CAPTION>
Identity of issue, borrower,                                                               Current
lessor or similar party                         Description of investment                   value
<S>                                             <C>                                    <C>
 *  SSGA Stable Value Fund                      Common Collective Trust                 $ 1,358,859

 *  SSGA Growth & Income Fund                   Mutual Fund                               3,359,264

 *  SSGA S&P 500 Index Fund                     Mutual Fund                               1,449,744

    Strong Government Securities Fund           Mutual Fund                                 688,978

    INVESCO Total Return Fund                   Mutual Fund                               1,958,917

    Dreyfus Emerging Leaders Fund               Mutual Fund                               1,615,032

    Scudder International Fund                  Mutual Fund                                 534,417

 *  Lifeline Systems, Inc. Common Stock         Shares of Common Stock                    3,031,409

 *  Participant Loans                           Participant Loans; rates
                                                  ranging from 6.25% to 11.00%              436,800
                                                                                        -----------

                                                                                        $14,433,420
                                                                                        ===========
</TABLE>

*  Party-in-interest

                                       10