10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2008.

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 1-8635

AMERICAN MEDICAL ALERT CORP.

(Exact name of registrant as specified in its charger)

New York	11-2571221
(State or Other Jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
3265 Lawson Boulevard, Oceanside, New York	11572
(Address of Principal Executive Offices)	(Zip Code)

(516) 536-5850

(Registrant’s Telephone Number, Including Area Code) 

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.01 per share	NASDAQ Capital Market

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

The aggregate market value of the voting common equity held by non-affiliates of the registrant, computed by reference to the price at which the common equity was last sold, as of the last day of the registrant's most recently completed second fiscal quarter, was $39,656,264.

Aggregate number of shares of Common Stock outstanding as of March 24, 2009: 9,487,579

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PART I

Statements contained in this Annual Report on Form 10-K include “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including, in particular and without limitation, statements contained herein under the headings “Description of Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause the Company’s actual results, performance and achievements, whether expressed or implied by such forward-looking statements, not to occur or be realized. These include uncertainties relating to government regulation, technological changes, our contract with the City of New York, and product liability risks.  Such forward-looking statements generally are based upon the Company’s best estimates of future results, performance or achievement, based upon current conditions and the most recent results of operations.  Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “continue” or similar terms, variations of those terms or the negative of those terms.

You should carefully consider such risks, uncertainties and other information, disclosures and discussions which contain cautionary statements identifying important factors that could cause actual results to differ materially from those provided in the forward-looking statements. Readers should carefully review the risk factors described herein and any other cautionary statements contained in this Annual Report on Form 10-K.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 1.    BUSINESS

Overview:

American Medical Alert Corp. (“AMAC” or the “Company”) was formed in 1981 as a New York corporation. The Company’s principal business is the provision of healthcare communication and monitoring services.  These services are reported through two operating segments. The first segment, Health Safety and Monitoring Services (“HSMS”), is comprised of the development and marketing of remote patient monitoring technologies that include personal emergency response systems, medication reminder and dispensing systems, telehealth/disease management technologies and safety monitoring systems to pharmacies. The second segment, Telephony Based Communication Services (“TBCS”), includes the provision of centralized call center solutions primarily to the healthcare community including traditional after hours services, “Daytime Services” applications, and clinical trial recruitment call center services and administration.  The Company’s products and services are primarily marketed to the healthcare community, including hospitals, home care, durable medical equipment, medical facility, hospice, pharmacy, managed care and other healthcare oriented organizations.  The Company also offers certain products and services directly to consumers.

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HSMS

Until 2000, the Company’s principal business was the marketing of personal emergency response systems (“PERS”), a device that allows a patient to signal an emergency response center for help in the event of a debilitating illness or accident.  The PERS business was the entry point for the Company into the healthcare field, permitting the Company to establish a network of customers and strategic alliances which served as the foundation for the Company's expansion remote patient monitoring.

As part of its expansion strategy, in 1999, the Company secured certain exclusive rights to a medication reminder appliance which is marketed by the Company under the name Med-Time®. This natural adjunct to PERS proved to be strategically advantageous. Medication non-adherence currently costs an estimated $100 billion annually in the United States and accounts for 10 percent of hospital admissions.  The Company marketed an early version of Med-Time for several years.  Realizing the greater opportunity to expand upon our monitoring capabilities, the Company embarked upon the development of a new system that would allow for greater medication adherence oversight.  In 2008, the Company pre-launched MedSmart™ its next generation solution. MedSmart improves adherence to medication regimens and reduces the risk of dosing errors improving clinical outcomes and quality of life.

Rounding out AMAC’s remote patient monitoring portfolio, in 2001, the Company entered the telehealth market, a market in its embryonic stage, after consideration of the opportunity to provide new technologies to assist healthcare professionals in home-based, health management activities. As a distributor of the Health Buddy® System, many of the Company’s customers have successfully demonstrated the value proposition associated with incorporating disease management technologies into a patient’s plan of care. In 2008, The Company added to its telehealth offering by becoming the first US channel market distributor of the Intel® Health Guide. The Intel® Health Guide is a comprehensive personal health system that promotes greater patient engagement and more efficient care by combining an in-home patient device with an online interface, thus allowing clinicians to monitor patients and remotely manage care. The Company believes the telehealth market will continue to provide opportunities for AMAC’s expansion as a full source provider of remote patient monitoring technologies and first line support services.

TBCS

Beginning in 2000, the Company began a program of product diversification and customer baseexpansion to decrease its reliance on a single product line by marketing complementary call center and monitoring services to the healthcare community.  This diversification program began with the acquisition of the Company's first telephone answering service business, known as HCI in 2000.  Since that time the Company has expanded its telephone answering service business through nine (9) acquisitions and internally generated growth.

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In order to accommodate the planned growth of this business, the Company has built or acquired nine communication centers. The Company has since consolidated its TBCS operation on to three equipment hubs and six satellite offices. The purpose of this effort is to link each of the locations in order to leverage the Company’s overall scope, scale and capability.  The Company’s acquisition strategy has allowed it to become a national provider of healthcare communication services.

In 2006, the Company broadened its capabilities to service specialized allied healthcare providers including hospitals, home care, hospice and other healthcare subspecialties. The Company believes it has identified other communication needs as expressed by its TBCSclient base. In response to these expressed needs, the Company developed and implemented various specialized healthcare communication solutions that have resulted in the execution of numerous multi-year service contracts for the provision of these services. These solutions continue to create significant opportunities for long-term revenue growth.

In 2008, the Company focused special attention to revamp its PhoneScreen operation and business development efforts. This effort resulted in embedding this operation into the Company’s consolidated call center and IT infrastructure. This service specialty is now poised to accept greater volumes of work and is being well received by large pharmaceutical companies and clinical trial recruitment organizations.

For the fiscal year ended December 31, 2008, HSMS accounted for 51% of the Company’s revenue and TBCS accounted for 49% of the Company’s revenue.

The Company believes that the overall mix of cash flow generating businesses from HSMS and TBCS, combined with its emphasis on developing products and services to support demand from customers and the emerging, home-based monitoring market, provides the correct blend of stability and growth opportunity.  The Company believes this strategy will enable it to maintain and increase its role in the healthcare communications field.  Moreover, based on the Company’s aggressive growth strategy, management believes its TBCS business will allow the Company to become the largest provider of these specialized healthcare communication services in the United States.

COMPREHENSIVE BUSINESS DESCRIPTION:

A.           General

AMAC is a corporation incorporated under the laws of the State of New York in 1981.  As previously defined herein, the terms “AMAC” or “Company” mean, unless the context requires otherwise, American Medical Alert Corp. and its wholly owned subsidiaries, HCI Acquisition Corp., LMA Acquisition Corp., SafeCom, Inc., North Shore Answering Services, Answer Connecticut Acquisition Corp., MD OnCall Acquisition Corp., American Mediconnect Acquisition Corp. and NM Call Center, Inc.

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AMAC is a healthcare communications company, with two reporting segments: (i) Health and Safety Monitoring Systems (previously defined as “HSMS”) and (ii) Telephony Based Communication Services (previously defined as “TBCS”).  AMAC’s primary business objective is to continually achieve higher levels of capital efficient profitable growth. To accomplish this, the Company’s management operates the Company’s businesses consistent with certain strategic principles to leverage various healthcare communication and monitoring services through centralized call centers to enhance and diversify the Company’s revenue stream and earning capacity. The Company is committed to attaining leadership positions in the market it services through the incorporation of monitored appliances and systems and the development of innovative call center solutions.

The Company’s financial model is the generation of monthly recurring revenues (“MRR”). Under this model, each operating segment generates prescribed monthly fees for services and equipment rendered throughout the duration of a service agreement.  For the year ended December 31, 2008, approximately 92% of the Company’s revenue was generated from MRR.  The remaining 8% of revenue was derived from its clinical trial projects, installation charges and product sales.

B.           Products and Services

1. Health and Safety Monitoring Systems (HSMS)

This operating segment focuses on the marketing of health monitoring systems and monitoring services to enhance healthcare delivery and provide 24/7 medical emergency communications.

The ongoing objective of the HSMS division is to create a compelling value proposition through a single monitoring dashboard. This RPM dashboard provides a single source for AMAC’s customers to access a broad spectrum of technologies, from rudimentary to sophisticated, to deliver individualized, cost effective monitoring as a patient’s needs evolve.

Personal Emergency Response Systems (PERS)

Marketed primarily as the VoiceCare® System, PERS is the Company’s core product and service offering. The system consists of a console unit and a wireless transmitter generally worn as a pendant or on the wrist by the subscriber. In the event of an emergency, the client is able to summon immediate assistance via the two-way voice system that connects their home telephone with the Company’s Response Center.

The PERS product line is distributed to the subscriber base through five primary marketing channels: AMAC’s Private Pay Program; Third Party Reimbursed Programs; the Distributor Network, made up of Direct Service Providers; the Purchase and Monitoring Program; and SafeCom, Pharmacy Security Systems.

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Private Pay Program:  Individuals from the community can access the VoiceCare System through AMAC’s corporate sales office, via any regional office or by mail order. AMAC has referral arrangements with home care agencies and case managers throughout the United States who introduce and recommend VoiceCare to clients and generate an ongoing source of new consumer interest.

In February of 2007, the Company announced it had entered into an exclusive relationship with Walgreen Co. (“Walgreen”) to provide the Company’s flagship personal emergency response systems under the Walgreen brand. Walgreens Ready Response™ Medical Alert system is currently being offered at Walgreen stores throughout the United States and Puerto Rico.  The Company believes the Walgreen relationship will provide a significant opportunity for AMAC to increase its PERS market share through Walgreen’s direct to consumer distribution channel.

Third Party Reimbursed Programs:  The Company’s PERS are on the Centers for Medicare and Medicaid list of approved monitoring devices. Payment for PERS equipment and monitoring services is available through various state Medicaid Home and Community Based Services waivers programs and other Medicaid funded home care services programs. AMAC believes that the use of home care as an alternative to institutional care will continue to increase, representing an ongoing opportunity for broader use of the Company’s current and future products. In 2008, 11% of AMAC’s revenue was derived from contracts with Medicaid reimbursed programs for PERS services. These programs operate under a rental and monitoring agreement under which there is an installation fee and monthly service fee per subscriber billed to the appropriate agency.

Distributor Network:  AMAC has developed a network of Direct Service Providers (“DSPs”) to establish and manage VoiceCare programs in their local communities. A DSP may be a hospital system, home health care agency, hospice, senior living facility, durable medical equipment vendor or one of several other types of entities that interact with elderly, infirm or disabled individuals.

In 2004, AMAC introduced ProviderLink, a secure PERS management web tool for DSPs to directly access and manage their PERS programs from any internet ready computer. During 2005 the Company recognized certain operational efficiencies as a result of its customers migrating to a paper-light program management tool.  The Company continues to refine and update this provider tool to further support DSP growth activities.

Purchase and Monitoring Program (“PMP”):  AMAC’s VoiceCare system is also utilized by assisted living and senior housing facilities to offer additional protection to elderly residents. Facilities operate under a PMP Agreement whereby all necessary equipment is purchased. The facilities provide primary monitoring for their residents and some employ AMAC’s ERC to serve as their back-up center. In 2006 the Company released ResiLink, an enhanced software package for its facility monitoring platform.  The software supports senior living facility personnel in managing residential monitoring activities. Enhancements include new reporting capabilities, detailed identification of PERS signals, and support utilities.  Additionally, in 2007, the Company commenced research and development related to improving its facility-based PERS product hardware offerings.  The Company launched the Model 1100 residential system in November 2007.

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SAFECOM, INC. - Pharmacy Security Monitoring Systems

SafeCom, Inc. (previously defined as “SafeCom”) offers monitoring technology products and safety monitoring to drug stores, 24-hour pharmacies and national and regional retailers. In 2008, SafeCom represented 2% of the Company’s gross revenue. Under the Silent Partner brand, the Company provides safety, environmental and device functionality monitoring systems and services integrating key aspects of audio technology and access control.

Medication Adherence Appliances

Med-Time®

Complementary to the Company’s PERS is the MED-TIME device, an electronic medication reminder and dispensing unit marketed under an exclusivelicensing, manufacturing and distribution agreement which began in 1999.  This agreement originates from PharmaCell AB, a Swedish company, with licensing rights extending throughout the United States, Canada and Mexico. The initial term of the agreement was five years requiring the Company to achieve certain purchase minimums to maintain exclusivity. Thereafter, the agreement converted to an evergreen with annual purchase minimums of 1,500 units. The Company has met all the minimums with PharmaCell to date and continues to maintain exclusivity.

MedSmart™

One in two patients do not take their medications as prescribed, costing the United States $300 billion per year in unnecessary healthcare costs and lost revenue. 84% cite simple forgetfulness as the reason. MedSmart is a powerful solution that organizes, reminds and dispenses pills in accordance with prescribed treatment regimens.

Easy to set up and use, MedSmart improves adherence to medication regimens and reduces the risk of missed doses and overdosing errors to improve clinical outcomes and quality of life. At prescribed times during the day; MedSmart will beep, flash and rotate, making the proper pills available for consumption. Just flip the device over and the correct pills will be dispensed, while all other doses remain safe and secure.

With MedSmart‘s innovative event reporting and notification option, family caregivers and healthcare professionals can proactively support independent living. MedSmart’s docking base serves as the gateway for remote programming and event reporting. When connected to a household phone, MedSmart transmits device and dispensing history to a secure server supported with a web application for review by authorized individuals. Through AMAC’s personalized notification system, alerts can be sent to track adherence, address dosing errors and predict refill requirements. The ability to communicate these events creates a new capability easily track adherence, proactively modify behavior and improve compliance. The value proposition of this high touch enhancement can be experienced by all stakeholders in healthcare delivery. With proper prescription adherence:

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· individuals have better outcomes;

· treatments plans are more effective;

· pharmaceutical companies and pharmacies have improve operating results; and

· payors reduce claims exposure because diseases are managed more effectively.

In 2009, the Company is planning to commence a comprehensive communications strategy to increase national awareness of medication non-adherence, its negative financial and sociological impact on managing care and AMAC’s MedSmart solution. The Company believes it can demonstrate a value proposition including, but not limited to reducing costs associated with non adherence related hospitalizations, improving disease management outcomes and increasing pharmacy script yield to every stakeholder in the care delivery system.

Medication adherence appliances are currently marketed through DSP relationships. The Company intends to expand it marketing footprint through its primary marketing channels and is reviewing retail and direct to consumer opportunities.

2.           Telephony Based Communication Services (TBCS)

The Company provides TBCS to physicians, hospitals, homecare providers, hospices and other healthcare organizations at two communication centers under the brand names H-LINK® OnCall, Live Message America (“LMA”), North Shore Answering Service ("NSAS"), Answer Connecticut Acquisition Corp. ("ACT"), MD OnCall Acquisition Corp. (“MD OnCall”) and American Mediconnect Acquisition Corp. (“AMI”) which includes the brands American Mediconnect and PhoneScreen.  At 2008 year end, the TBCS segment accounted for 49% of the Company’s gross revenue.

Services offered by TBCS include message desk services, appointment making, referral services, voice-mail and wireless communications. As part of our business development strategy, management continues to employ the most advanced telephony technology and information systems to develop value added customizable services to minimize staffing and increase revenue.  In addition to technology, a critical component for successful expansion is a professionally trained call agent staff.  The Company has allocated additional resources to enhance contact agent training and staff development to support TBCS’s expansion efforts, new communication technology, and continuous quality control.

Traditionally, the primary focus of TBCS was to manage clinically-urgent and time-sensitive after-hours calls. In addition to those primary telephone answering services, TBCS markets daytime services solutions as H-LINK“Interactive Intelligence Center”. This service provides healthcare organizations with solutions to manage patient/provider interactions that maximize service performance, increase productivity, and enhance quality control with fee schedules that are materially less than existing in-sourced solutions.

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The TBCS service line is marketed and distributed through four primary channels: Individual and multiple physician; integrated hospital networks; homecare agencies; and healthcare group purchasing organizations.

Over the last twelve months several significant healthcare organizations have executed agreements with the Company to provide daytime solutions and services.  TBCS daytime services are geared primarily towards hospitals and managed care organizations. The MRR associated with these contracts significantly exceed the average MRR of traditional answering service clients and is now providing significant increases within this reporting segment.  Management believes its daytime services will continue to contribute material increases in revenue and earnings throughout 2008 as the efficacy of these programs become more fully validated and documented.

In December 2006 the Company acquired the PhoneScreen brand (“PhoneScreen”) through the acquisition of AMI. PhoneScreen specializes in the recruitment of patients for clinical trials.  PhoneScreen’s customers are pharmaceutical companies and Contract Research Organizations (“CROs”).  CROs offer pharmaceutical companies and medical entities a wide range of pharmaceutical research services which include the development and execution of clinical trials.

There are two components of this business – the first aspect of the business consists of traditional call center functions.  Advertisements are placed to recruit participants who are afflicted with a particular ailment, condition or symptom. Those individuals responding to the ad are directed to call a toll free number.  PhoneScreen personnel receive those calls and screen the caller based on a set of directives provided by the CRO or pharmaceutical company.  Callers who meet the criteria are forwarded to the medical entity for final clinical screening and possible acceptance into the clinical trial.  The second aspect of this business relates to developing the screening criteria, granular reporting, Q&A compliance and trend analysis.

The Company has completed ten acquisitions to date. For 2009, the Company will primarily focus on growing this segment through internally driven sales and marketing efforts.

3.           Production/Purchasing

The Company outsources the manufacturing and final assembly of its core product lines.  Sources are selected through competitive bids, past performance and accessibility to the engineering process.  Although the Company currently maintains favorable relationships with its vendors, the Company believes that, in the event any such relationship were to be terminated, the Company would be able to engage the services of alternative vendors as required to fulfill its needs without any material adverse effect to the Company’s operations.  With the exception of several proprietary components, which are manufactured to the Company’s specifications, the manufacturing of the Company’s product lines requires the use of generally available electronic components and hardware.  Product and technology currently provided by Health Hero Network Inc. (“HHN”) related to the Company's telehealth business are considered a sole source supply arrangement, and the Company could require the use of significant funds and resources in the event HHN did not continue to provide these supplies to the Company.

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4. Call Centers

As of March 2009, the Company operates nine (9) call centers:

· Long Island City, New York

The Company’s primary communications center is located at 36-36 33rd Street, Long Island City, New York.  In April 2003, the Company opened a one-hundred seat state-of-the-art call center to centralize the full scope of communication services offered by AMAC.  The call center was built with system-wide redundancy and can accommodate growth up to three (3) times its current volume. Phone service to the call center is provided by three separate carriers and is configured to provide continuous service in the event of disruption.  Phone circuit entry to the building is provided through a reinforced steel conduit built to UL Central Station Standards. The call center’s electricity supply is maintained by a comprehensive, three tiered back-up system. The system consists of dual power supplies at the telephone switch, an uninterruptible power supply and a diesel generator.

The Company’s call center is staffed by full time Information System (“IS”) professionals charged with the responsibility to maintain, refine and report on all data and communications system requirements. Critical systems are equipped with secure remote access and diagnostic abilities, enabling offsite as well as on-site access to IS system support 24/7.

· Audubon, New Jersey

This site serves as the call center for telephone answering services provided by the Company’s LMA subsidiary and services the Company’s Southern New Jersey and Philadelphia customer base.  Upon completion of the 2006 upgrade, this center is compatible with the Long Island City, New York call center.  This upgrade allows for significant additional service capability, providing eventual redundancy and overflows as well as single site operational capability during selected time periods to further realize operational efficiencies.

· Port Jefferson, New York

This site serves as the call center for telephone answering services provided by the Company’s NSAS subsidiary and services the Company’s Long Island TBCS customer base.

· Newington, Connecticut

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This site serves as the one of the two call centers for telephone answering services provided by the Company’s ACT subsidiary and services the Company’s Connecticut TBCS customer base.  This site also serves as the back-up center for the Company’s PERS Emergency Response Center and Client Services.

· Springfield, Massachusetts

This site serves as the one of the two call centers for telephone answering services provided by the Company’s ACT subsidiary and services the Company’s Massachusetts TBCS customer base.

· Cranston, Rhode Island

This site serves as the call center for telephone answering services provided by the MD OnCall subsidiary and services the Company’s Rhode Island TBCS customer base.

· Rockville, Maryland

This site serves as the call center for telephone answering services provided by MD OnCall subsidiary and services the Company’s Maryland TBCS customer base.

· Chicago, Illinois

This site serves as the call center for telephone answering services provided by the Company’s AMI subsidiary, the latest TBCS acquisition and services the Company’s Illinois TBCS customer base.

· Clovis, New Mexico

This site serves as a second call center location primarily to support AMAC’s ERC center, H-LINK OnCall and Phone Screen client base.

C.           Marketing/Customers

The Company markets its portfolio of healthcare communication services and monitoring devices to integrated hospital systems, home healthcare providers, community service organizations, government agencies, third party insurers, as well as private pay clients.  The Company believes there are several compelling industry and population trends that will continue to drive utilization of its products and services. Within our HSMS segment, the aging population and percentage of individuals with chronic disease conditions will continue to provide significant opportunity to utilize our monitoring solutions to achieve cost control and improve quality of life.

With respect to our TBCS segment, we continue to observe increased opportunity with integrated hospital systems and regional home health agencies. Specifically, healthcare organizations are seeking to achieve cost savings by consolidating services through single source vendor relationships. The Company’s advanced telephony, call center infrastructure and specialization in healthcare uniquely positions the Company to effectively compete for new business.

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While the Company generates organic growth in each reporting segment, customer retention is equally important. The Company’s customer service, provider relations and accounts services teams focus on account maintenance and business development from existing customers.

The Company’s products and services may be acquired on a single line or bundled basis and are highly complementary. As demand for our products and services continue to develop, the Company will add additional sales and marketing personnel to enhance our national presence throughout its respective businesses.

D.           Trademarks

The Company considers its proprietary trademarks with respect to the development, manufacturing and marketing of its products to be a valuable asset.  The Company believes that continued development of new products and services with trademark protection is vital to maintaining a competitive advantage.  The Company’s trademarks include “AMERICAN MEDICAL ALERT®”, “THE RESPONSIVE COMPANY®”, “WHERE PATIENT AND PROVIDERS CONNECT®” “VOICECARE®”,  “THE VOICE OF HELP®”, “MED-TIME®”, “H-LINK®”,  “MED PASS®”, “MEDSMART®”, “ROOM MATE®”,  “SECURE-NET”, “CARERING®”, “PERS BUDDY®”, “HEALTH PARTNER®” “HEALTH MESSENGER®”, “HELP LINK®” “I-LINK®”, CONNECTED AND PROTECTED ® and “CARE-NET®”, each of which is registered with the United States Patent and Trademark Office.

E.           Research and Development

In a continuing effort by the Company to maintain state-of-the-art technology, the Company conducts research and development through the ongoing efforts of its employees and consulting groups. During 2008, the Company plans to continue to enhance its disease management monitoring platform and medication management solution.  Expenditures for research and development for the years ended December 31, 2008, 2007 and 2006 were $329,707 $304,365 and $240,487, respectively, and are included in selling, general and administrative expenses.  In addition to this, the Company continues to focus its research and development activities on enhancement of its HSMS products as well as the development of new products and services specifically addressing disease management.

F.           Impact of Government Regulations

The Company derives approximately 11% of its revenues from various Medicaid programs.  Government legislative initiatives, if enacted, could impose pressures on the pricing structures applicable to the Company’s PERS services. On the other hand, new reimbursement programs such as those described in TH/DMM section could provide significant additional sources of reimbursement from government entitlements. Depending on the nature and extent of any new laws and/or regulations, or possible changes in the interpretation of existing laws and/or regulations, any such changes could affect revenue, operating margins, and profitability.  At the present time, the Company is unaware of any such government legislative initiatives.

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The Privacy Rule under the Health Insurance Portability and Accountability Act (“HIPAA”) went into effect in April 2003. These regulations relate to the privacy of patient health information. To comply with the Privacy Rule, the Company executed required Business Associate Agreements with its business partners and vendors, appointed a Privacy Officer, established policies, procedures and training standards, and began to assess its preparedness for the HIPAA Security Standards.

The Company’s PERS and related equipment is subject to approvals under the rules of the Federal Communications Commission (“FCC”) pertaining to radio frequency devices (Part 15) connected to the telephone system (Part 68).  The Company submits all new product models for approval as required under the rules of the FCC.

G.          Competition

In each business segment, AMAC faces competition, both in price and service from national, regional and local service providers of PERS, TH/DMM, telephone answering service and security monitoring systems.  Price, quality of services and, in some cases, convenience are generally the primary competitive elements in each segment.

HSMS

The Company’s competition within the HSMS segment includes manufacturers, distributors and providers of personal emergency response equipment and services, disease management and biometric carve out companies and a small number of security companies.  The Company’s market research estimates that approximately 20-30 companies are providers of competitive PERS products, 15-20 companies are providers of TH/DMM and 5-10 companies are providers of medication management systems.    We believe PERS competitors serve in aggregate approximately 800,000 individuals under the PERS product line. As of December 31, 2008, AMAC monitored approximately 66,000 subscribers. Because TH/DMM is a new field of healthcare services, clear data of actual number of users is unavailable. Some of the Company’s competitors may have more extensive manufacturing and marketing capabilities as well as greater financial, technological and personnel resources.  The Company’s competition focuses its marketing and sales efforts in the following areas: hospitals, home care providers, physicians, ambulance companies, medical equipment suppliers, state social services agencies, health maintenance organizations, and direct marketing to consumers.

We believe the competitive factors when choosing a HSMS provider include the quality of monitoring services, product flexibility and reliability, and customer support. The Company believes it competes favorably with respect to each of these factors. The Company believes it will continue to compete favorably by creating technological enhancements to the core systems that are expected to establish meaningful differentiation from its competitors.

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TBCS

The Company believes that it is one of the larger medical-specific telephone answering service providers competing with more than 3,300 call centers across the United States, of which fewer than 10 percent are medical-only. The Company considers its scope of services more diverse than those of traditional sole proprietorships that make up the greatest portion of the competitive landscape. While many TBCS organizations compete for after-hours business, AMAC is offering new services catering to daytime work for large health systems and believes this application is scalable nationwide.

H.           Employees

As of March 24, 2009, the Company employed 528 persons who perform functions on behalf of the Company in the areas of administration, marketing, sales, engineering, finance, purchasing, operations, quality control and research.  The Company is not a party to any collective bargaining agreement with its employees.  The Company considers its relations with its employees to be good.

I.           Financial Information about Segments

Financial information about our operating segments can be found in Note 13 to the financial statements included as part of this annual report on Form 10-K, beginning on page F-27.

Item 1A.  RISK FACTORS

Risks associated with our business

Our business may be adversely impacted by new government regulations or changes to current government regulations.

We derive approximately 11% of our revenues from Medicaid reimbursed programs.  Government legislative initiatives, if enacted, could impose pressures on the pricing structures applicable to our PERS.  Our revenue, operating margin and profitability could be adversely affected by new laws and/or regulations, or changes in the interpretation of existing laws and/or regulations, or reductions in funding or imposition of additional limits on reimbursements.

In addition, as a provider of services under Medicaid reimbursed programs, we are subject to the federal fraud and abuse and the so-called “Stark” anti-referral laws, violations of which may result in civil and criminal penalties and exclusion from participation in Medicaid programs.  Also, several states have enacted their own statutory analogs of the federal fraud and abuse and anti-referral laws.  While we at all times attempt to comply with the applicable federal and state fraud and abuse and anti-referral laws, there can be no assurance that administrative or judicial interpretations of existing statutes or regulations or enactments of new laws or regulations will not have a material adverse effect on our operations or financial condition.

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Technological changes may negatively affect our business.

The telecommunications industry, on which our business is dependent, is subject to significant changes in technology.  These technological changes, including changes relating to emerging wireline and wireless transmission technologies, may require us to make changes in the technology we use in our products in order to remain competitive.  This may require significant outlays of capital and use of personnel, which may adversely affect our results of operations and financial condition in the short term.

Changes in the general economic environment may impact our future business and results of operations.

Current economic conditions, including the credit crisis affecting global financial markets and the possibility of a global recession, could adversely impact the Company’s future business and financial results. These conditions could result in reduced demand for some of the Company’s products, increased order cancellations and returns, increased pressure on the prices of the Company’s products, increased number of days to collect outstanding receivables and/or increased bad debts on outstanding receivables, and greater difficulty in obtaining necessary financing on favorable terms.

Product liability and availability of insurance.

Because our business involves responding to personal emergencies, failures of our products or errors in the delivery of our services carry a risk of liability claims.  We manage this risk through contractual limits on liability and damages, and by carrying insurance.  However, the contractual limits may not be enforceable in all jurisdictions or under all circumstances.  While historically we have not incurred significant liabilities due to such claims, a successful claim may be made for damages which exceed the coverage under any insurance policy.  In the future, our insurance may become more expensive, and there can be no assurance that additional insurance will be available on acceptable terms.  If one or more of these occur, it could have an adverse effect on our results of operations and financial condition.

We rely on the contract with New York City for a significant portion of our business.

Since 1983, the Company has provided Personal Emergency Response Systems (“PERS”) services to the City of New York’s Human Resources Administration Home Care Service Program ("HCSP").  The contract term with the HCSP is for two years, commencing September 21, 2007, with two options to renew in favor of HRA for two additional two year terms.  Under the terms of the agreement, a downward rate adjustment was made in conjunction with reduced equipment requirements from previous years. The impact of this lower rate resulted in a reduced contribution to gross revenues of approximately $265,000 and $70,000, and a reduced contribution to net income of approximately $160,000 and $40,000 in 2008 and 2007, respectively.

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During the years ended December 31, 2008, 2007 and 2006, the Company’s revenue from the contract related to HCSP represented 6%, 7% and 8% respectively, of its total revenue.

There are no other contracts that represent greater than 6% of the Company’s gross revenue.

Risks associated with our securities

We do not anticipate the payment of dividends.

We have never declared or paid cash dividends on our common stock.  We currently anticipate that we will reinvest all available funds in the operation of our business.  Thus, we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Shares that are eligible for sale in the future may affect the market price of our common stock.

As of March 24, 2009, an aggregate of 2,614,743 of the outstanding shares of our common stock are “restricted securities,” as that term is defined in Rule 144 under the federal securities laws.  These restricted securities may be sold only pursuant to an effective registration statement under the securities laws or in compliance with the exemption provisions of Rule 144 or other securities laws provisions.  Rule 144 permits the sale of restricted securities by any person (whether or not an affiliate of the Company) after six months, at which time the sales by affiliates can be made subject to Rule 144’s volume and other limitations and the sales by non-affiliates can be made without regard to Rule 144’s volume and other limitations, other than the limitation regarding public information set forth in Rule 144(c) for an additional six months.  In general, an “affiliate” is a person that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with the Company.  The SEC has stated that generally, executive officers and directors of an entity are deemed affiliates of the entity. In addition, 877,235 shares are issuable pursuant to currently exercisable options which, upon exercise, would further add to the number of outstanding shares of common stock.  Future sales of substantial amounts of shares in the public market, or the perception that such sales could occur, could negatively affect the price of our common stock.

Item 1B.  UNRESOLVED STAFF COMMENTS

None.

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Item 2.  PROPERTIES

As described below, the Company leases multiple facilities that the Company believes are satisfactory and suitable for their intended uses.

The Company’s executive offices are located in a 5,600 square foot facility at 3265 Lawson Boulevard, Oceanside, New York.  On January 1, 1995, the Company entered into a five-year operating lease with Howard M. Siegel, Chairman of the Board and Chief Advisor of the Company, who owns this facility.  In February 1998, the lease for this facility and the adjoining 8,000 square foot parking lot was extended until September 30, 2007 (the “1995 Lease”).  The 1995 Lease was subsequently amended through December 31, 2009 under the same terms and conditions.  The 1995 Lease provides for a base annual rent of $74,600, subject to a 5% annual increase plus reimbursements for real estate taxes and other operating expenses.

During 2005, the Company entered into two operating lease agreements with an unaffiliated third party to lease additional spaces of approximately 10,000 square feet and 5,000 square feet, respectively, at its facility in Long Island City, New York, for the purpose of further consolidating its warehouse and distribution center and accounting department into the location which currently houses its principal New York HSMS and TBCS call center.  The leases expire in March 2018, call for minimal annual rentals of $220,000 and $115,000, respectively, and are subject to increases in accordance with the term of the agreements.  The Company is also responsible for the reimbursement of real estate taxes.  The Company and the building are eligible for significant Relocation and Employment Assistance Program (“REAP”) credits and other tax incentive and cost savings benefits.

The Company entered into a 15-year lease with an unaffiliated third party on January 14, 2002, for an 11,000 square foot property at 36-36 33rd Street, Long Island City, New York, which it occupied in April 2003.  This location is the home for the Company’s primary communication center. The Company and the building are eligible for significant Relocation and Employment Assistance Program (“REAP”) credits and other tax incentive and cost savings benefits.  The lease calls for minimum annual rentals of $269,500, subject to annual increases of 3% plus reimbursement for real estate taxes.

The Company maintains a marketing and administrative office in Decatur, Georgia.  The Company leases approximately 1,200 square feet of space from an unaffiliated third party on a month to month basis at a charge of $1,750 per month.

The Company maintains a marketing and administrative office in Tinley Park, Illinois.  The Company leases approximately 1,700 square feet of space from an unaffiliated third party pursuant to a five-year lease, which expired on April 30, 2005.  In May 2005, the Company renewed its lease for an additional three years through April 30, 2008 and subsequently extended the lease through April 30, 2009.  The lease currently calls for minimum annual rentals of $28,280.

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The Company maintains a marketing and administrative office in Centennial, Colorado.  The Company leased approximately 775 square feet of space from an unaffiliated party pursuant to a six month lease, which expired on April 30, 2008.  The Company currently leases this space on a month to month basis at a charge of $1,050 per month.

The Company maintains a marketing and administrative office in Redondo Beach, California.  The Company leases approximately 1,500 square feet of space from an unaffiliated party pursuant to a month to month lease.  The lease provides for monthly rents of $2,695.

The Company maintains a telephony based call center in Audubon, New Jersey.  The Company leases approximately 2,000 square feet of space from an unaffiliated party pursuant to a lease which expired on December 31, 2006 and was subsequently amended for an additional three years.  The lease currently calls for minimum annual rentals of $31,476 throughout the amended term of the lease.

The Company maintains a telephony based call center in Port Jefferson, New York.  The Company leases approximately 1,500 square feet of space from an unaffiliated party pursuant to a five-year lease, which expires on September 30, 2010.  The lease calls for minimum annual rentals of $78,000 subject to annual increases of 3%.

The Company maintains a telephony based call center in Newington, Connecticut.  The Company leases approximately 3,000 square feet of space from an unaffiliated party pursuant to a four-year lease, which expires on December 31, 2009.  The lease calls for minimum annual rentals of $48,000 throughout the term of the lease.

The Company maintains a telephony based call center in Springfield, Massachusetts.  The Company leases approximately 1,500 square feet of space from an unaffiliated party pursuant to a lease which expires on July 31, 2009.  The lease calls for minimum rentals of $850 per month throughout the term of the lease.

In 2007, the Company entered into a new lease for the maintenance of its telephony based call center in Cranston, Rhode Island.  The lease, which has approximately $3,900 square feet, commenced on January 1, 2008 and expires on December 31, 2012. The lease calls for minimal annual rentals of $70,200, and is subject to increases in accordance with the term of the agreement.  The Company previously leased approximately 2,000 square feet of space through two separate agreements from an unaffiliated party pursuant to leases.

The Company maintains a telephony based call center in Rockville, Maryland.  The Company leases approximately 2,500 square feet of space from an unaffiliated party pursuant to a lease which expired on December 31, 2006 and was subsequently amended through September 30, 2008.  The Company is now on a month to month basis at a charge of $3,250 per month.

The Company maintains a telephony based call center in Chicago, Illinois.  The Company leases approximately 4,500 square feet of space from an affiliated party pursuant to a lease which expires on November 30, 2008 and was subsequently amended through November 30, 2009.  The lease calls for minimum annual rentals of $71,760.

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The Company opened and maintains a telephony based call center, primarily to support H-LINK OnCall and Phone Screen client base, in Clovis, New Mexico.  They are currently leasing space on a month to month basis for $2,000 per month.  During 2007, the Company entered into an operating lease agreement with an unaffiliated third party to lease new space of approximately 6,600 square feet in Clovis, New Mexico.  The lease term is for three years and commenced on April 17, 2008, the date in which the Company took possession of the premises.  The lease calls for minimal annual rentals of $27,000.

Item 3 LEGAL PROCEEDINGS.

The Company is aware of various threatened or pending litigation claims against the Company relating to its products and services and other claims arising in the ordinary course of its business.  The Company has given its insurance carrier notice of such claims and it believes there is sufficient insurance coverage to cover any such claims.  Currently, there are no litigation claims for which an estimate of loss, if any, can be reasonably made as they are in the preliminary stages and therefore, no liability or corresponding insurance receivable has been recorded.  In any event, the Company believes the disposition of these matters will not have a material adverse effect on the results of operations and financial condition of the Company.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

No matters were submitted during the fourth quarter of the year covered by this report to a vote of the security holders through the solicitation of proxies or otherwise.

PART II

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

Market Information

The Company's Common Stock is traded on NASDAQ (Symbol:  AMAC).  The high and low sales prices of the Common Stock, as furnished by NASDAQ, are shown for the fiscal years indicated.

		High		Low
2008	First Quarter	$	7.83	$	5.26
	Second Quarter		7.03		5.77
	Third Quarter		6.51		5.05
	Fourth Quarter		5.15		3.15
2007	First Quarter	$	6.74	$	5.83
	Second Quarter		8.16		5.70
	Third Quarter		9.94		8.43
	Fourth Quarter		9.73		6.79

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Holders

As of March 24 2009, there were 283 record holders of the Company's Common Stock.

Dividends

The Company did not pay dividends on its Common Stock during the two years ended December 31, 2008 and 2007 and does not anticipate paying dividends in the foreseeable future. Pursuant to the Company’s credit facility arrangement, the Company is prohibited from declaring and paying any dividends until such time that the loans under the credit facility have been satisfied in full.

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by Item 201(d) of Regulation S-K is presented in Item 12 of Part III of this annual report on Form 10-K.

Performance Graph

Set forth below is a line graph comparing the annual percentage change in the cumulative total return on the Company's Common Stock with the cumulative total return of the NASDAQ Composite Market Index (U.S. Companies) and the NASDAQ Healthcare Index for the period commencing on December 31, 2003 and ending on December 31, 2008.

Comparison of Cumulative Total Return from December 31, 2003 through December 31, 2008:

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Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 6.  SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial data for the Company. This data should be read in conjunction with the Consolidated Financial Statements and related Notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations, included herein.

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Years Ended December 31,	2008		2007		2006		2005		2004
Selected Statement of Operations Data
Revenue:
Service	$	37,317,274	$	35,054,093	$	30,406,636	$	22,176,799	$	18,852,925
Product		1,269,546		591,172		387,752		270,843		275,078
Total Revenue	$	38,586,820	$	35,645,265	$	30,794,388	$	22,447,642	$	19,128,003
Net Income	$	1,439,601	$	1,514,232	$	1,262,529	$	932,436	$	410,606
Net Income Per Share - Basic	$	0.15	$	0.16	$	0.14	$	0.11	$	0.05
Net Income Per Share - Diluted	$	0.15	$	0.16	$	0.13	$	0.10	$	0.05
Weighted Average Number of Common Shares:
Basic		9,426,912		9,276,712		8,948,328		8,452,435		7,903,267
Diluted		9,670,563		9,732,386		9,386,142		9,124,905		8,478,824
Selected Balance Sheet Data as of December 31
Total Assets	$	34,366,264	$	34,953,221	$	32,607,745	$	26,595,336	$	19,501,016
Long-term Liabilities	$	4,646,708	$	6,211,663	$	7,233,964	$	3,715,626	$	1,887,416
Shareholders’ Equity	$	25,551,177	$	23,670,665	$	21,345,190	$	18,383,926	$	15,277,899

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

Overview:

The Company’s primary business is the provision of healthcare communication services through (1) the development, marketing and monitoring of health and safety monitoring systems (“HSMS”) that include personal emergency response systems, telehealth/disease management monitoring systems, medication management systems and pharmacy security monitoring systems, and (2) telephony based communication services and solutions primarily for the healthcare community (“TBCS”).  The Company’s products and services are primarily marketed to the healthcare community, including hospitals, home care, durable medical equipment, medical facility, hospice, pharmacy, managed care and other healthcare oriented organizations.  The Company also offers certain products and services directly to consumers.

Until 2000, the Company’s principal business was the marketing of personal emergency response systems (“PERS”), a device that allows a patient to signal an emergency response center for help in the event of a debilitating illness or accident.   The Company provides PERS nationwide to private pay customers, Medicaid programs and healthcare related entities. In February of 2007, the Company announced it had entered into an exclusive relationship with Walgreen Co. (“Walgreen”) to provide the Company’s flagship personal emergency response systems under the Walgreen brand. Walgreens Ready Response™ Medical Alert system is currently being offered at Walgreen stores throughout the United States and Puerto Rico.  The Company believes the Walgreen relationship will provide a significant opportunity for AMAC to increase its PERS market share through Walgreen’s direct to consumer distribution channel.

In 1999, the Company secured certain exclusive rights to a medication reminder appliance which is marketed by the Company under the name Med-Time®. The Company marketed this version of Med-Time® for several years. Realizing the greater opportunity to expand upon our monitoring capabilities the Company embarked upon the development of a new system that would allow for greater medication adherence oversight.  In 2008 the Company pre-launched MedSmart™, its next generation solution. MedSmart improves adherence to medication regimens and reduces the risk of dosing errors improving clinical outcomes and quality of life

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In 2001, the Company entered the telehealth market, a market in its embryonic stage, after consideration of the opportunity to provide new technologies to assist healthcare professionals in home-based, health management activities. As a distributor of the Health Buddy® System, many of the Company’s customers have successfully demonstrated the value proposition associated with incorporating disease management technologies into a patient’s plan of care. In 2008, The Company added to its telehealth offering by becoming the first US channel market distributor of the Intel® Health Guide. The Intel® Health Guide is a comprehensive personal health system that promotes greater patient engagement and more efficient care by combining an in-home patient device with an online interface, thus allowing clinicians to monitor patients and remotely manage care.The Company believes the telehealth market will continue to provide opportunities for AMAC’s expansion as a full source provider of remote patient monitoring technologies and first line support services.

Beginning in 2000, the Company began a program of product diversification and customer baseexpansion to decrease its reliance on a single product line by marketing complementary call center and monitoring services to the healthcare community.

The Company diversified its products/service mix to include telephony based communication services (“TBCS”) for professionals in the healthcare community.  The rationale to enter this segment had several components.  These include targeting existing customer relationships, leveraging existing infrastructure capability, and establishing an additional significant revenue source.  The Company’s entry into the TBCS market was accomplished initiallythrough acquisition and later through internally generated sales growth coupled with acquisitions.

The Company has since further expanded its communication infrastructure and capacity and now operates a total of nine communication centers in Long Island City and Port Jefferson, New York, New Jersey, Maryland, Connecticut, Massachusetts, Rhode Island, Illinois and New Mexico. The TBCS segment accounts for 49% of the Company’s revenues for the year ended December 31, 2008.

In December 2006 the Company acquired the PhoneScreen brand (“PhoneScreen”) through the acquisition of AMI. PhoneScreen specializes in the recruitment of patients for clinical trials.  PhoneScreen’s customers are pharmaceutical companies and Contract Research Organizations (“CROs”). CROs are organizations that offer pharmaceutical companies and medical entities a wide range of pharmaceutical research services which include the development and execution of clinical trials.

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The Company believes it has identified other communication needs as expressed by the expanded TBCSclient base. In response to these expressed needs, the Company has developed specialized healthcare communication solutions. These solutions are creating additional opportunities for long-term revenue enhancement.  The Company has broadened its service offerings and is in the process of significantly expanding the TBCS reporting segment.

The Company believes that the overall mix of cash flow generating businesses from HSMS and TBCS, combined with its emphasis on developing products and services in the telehealth field, provides the correct blend of stability and growth opportunity.  The Company believes this strategy will enable it to maintain and increase its role in the healthcare communications field.

Components of Statements of Income by Operating Segment

The following table shows the components of the Statement of Income for the years ended December 31, 2008, 2007 and 2006.

In thousands (000’s)	Year Ended Dec 31,
	2008			%			2007			%			2006			%
Revenues
HSMS		19,599			51	%		17,353			49	%		16,045			52	%
TBCS		18,988			49	%		18,292			51	%		14,749			48	%
Total Revenues		38,587			100	%		35,645			100	%		30,794			100	%
Cost of Services & Goods Sold
HSMS		8,588			44	%		7,869			45	%		7,491			47	%
TBCS		10,069			53	%		9,733			53	%		7,491			51	%
Total Cost of Services & Goods Sold		18,657			48	%		17,602			49	%		14,982			49	%
Gross Profit
HSMS		11,011			56	%		9,484			55	%		8,554			53	%
TBCS		8,919			47	%		8,559			47	%		7,258			49	%
Total Gross Profit		19,930			52	%		18,043			51	%		15,812			51	%
Selling, General & Administrative		16,652			43	%		15,992			45	%		13,865			45	%
Interest Expense		280			1	%		481			1	%		394			1	%
Loss on abandonment		887			2	%		-			-			-			-
Other Income		(335	)		(1	)%		(1,090	)		(3	)%		(578	)		(2	)%
Income before Income Taxes		2,446			6	%		2,660			7	%		2,132			7	%
Provision for Income Taxes		1,007						1,146						869
Net Income		1,439						1,514						1,263

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Results of Operations:

The Company has two operating business segments, HSMS and TBCS.   Prior to January 1, 2007, the Company reported three reportable segments; HSMS, TBCS and SafeCom.  Since the business activities of SafeCom fall within the Health and Safety monitoring line of business, the Company now includes the activities of its SafeCom division in its HSMS segment.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Revenues:

HSMS

Revenues, which consist primarily of monthly rental revenues, increased approximately $2,246,000, or 13%, for the year ended December 31, 2008 as compared to the same period in 2007.  The increase is primarily attributed to:

§ In 2007, the Company entered into an exclusive arrangement with Walgreen to provide the Company’s PERS product under the Walgreen brand name directly to the consumer. In 2008, as compared to 2007, the Company recognized increased net revenue of approximately $830,000 from this arrangement.  The Company anticipates it will continue to see increased growth under this arrangement with Walgreen.

§ The Company continues to realize increased revenues from the sale of its products, primarily from its enhanced senior living products offered to retirement communities. During 2008, the Company generated an increase in product sales of approximately $678,000. The Company anticipates it will continue to see some growth from product sales, including from the launch of its new medication management system and event reporting platform (MedSmart).

§ In late 2006, the Company executed a new agreement with a third party agency whereby PERS were placed online. Since inception, the subscriber base associated with this agreement has grown and accounted for an approximate $265,000 increase in net revenue in 2008 as compared to prior year.

The remaining increase in revenue is primarily from the execution of other new agreements as well as growth within its existing subscriber base.  The Company anticipates that it will continue to grow its subscriber base and corresponding revenue through its continued sales and marketing efforts.

These increases were partially offset by a decrease of approximately $265,000 in revenues related to a contract executed with the Human Resource Administration (HRA) in 2007 in which a downward rate adjustment was made.

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 TBCS

The increase in revenues of approximately $696,000, or 4%, for the year ended December 31, 2008 as compared to 2007 was primarily due to the following:

§ The Company continues to experience revenue growth within its existing telephone answering service businesses and realized increased revenue of approximately $696,000, as compared to the same period in 2007.  This growth is due to the diversification of the Company’s customer base to provide business process improvements to the healthcare sector as well as increased business from its existing customer base.  The Company believes that it will see increased growth from this segment in 2009, primarily through its patient appointment concierge solutions and its clinical trial recruitment call center services.

Based on the demand for US based healthcare communication services and on some of the work which is currently in process, the Company anticipates that there will be continued growth in this business segment with further expansion into healthcare and hospital organizations, clinical trial recruitment pharmacies and to physicians through its marketing strategies.

Costs Related to Services and Goods Sold:

HSMS

Costs related to services and goods sold increased by approximately $719,000 for the year ended December 31, 2008 as compared to the same period in 2007, an increase of 9%, primarily due to the following:

§ In relation to the increase in the sales of its enhanced senior living products to retirement communities and sales of its pill dispenser, the Company incurred additional costs to purchase products of approximately $237,000.

§ The Company incurred increased payroll and related costs of approximately $380,000.  The increase in these costs was primarily due to the increase in service and call volume.  As the Company subscriber base continues to increase, the Company has experienced corresponding increases in the level of services, including installations and removals, and call volume.

This increase in costs was partially offset by a write down of fixed assets related to the PERS Buddy device in the amount of approximately $111,000 in the third quarter of 2007.  No such write-down was recorded in 2008.

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TBCS:

Costs related to services and goods sold increased by approximately $336,000 for the year ended December 31, 2008 as compared to the same period in 2007, an increase of 3%, primarily due to the following:

§ In 2008, the Company incurred additional labor and telephone service costs of approximately $388,000 with the majority of these costs relating to an increase of its bandwidth capacity and to non-recurring charges incurred in the consolidation of its call center infrastructure.  As part of operating nine call centers, in 2007 the Company engaged in a consolidation strategy to leverage its call center infrastructure in an effort to maximize operational efficiencies.  During the first half of 2008, the Company substantially completed the consolidation.  As part of this initiative, the Company incurred these additional costs to ensure a seamless transition.  Moving into 2009, the Company believes this call center consolidation strategy will produce operational and financial efficiencies.

This increase was partially offset by a reduction in depreciation of approximately $62,000.  The reduction is due to the majority of the furniture and equipment at the Long Island City call center becoming fully depreciated during 2008.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses increased by approximately $660,000 for the year ended December 31, 2008 as compared to the same period in 2007, an increase of 4%.  The increase is primarily attributable to the following:

§ In conjunction with various new programs and agreements, the Company increased its internet and television advertising.  As a result of this, the Company recorded an increase in these expenses of approximately $727,000.  The Company reduced the level of advertising during the first quarter of 2009 and will re-evaluate the advertising levels for the remainder of 2009.

§ The Company has recorded approximately $149,000 of increased depreciation as compared to the same period in the prior year.  This is primarily the result of the build out of its new call center in New Mexico as well as additional purchases of new telephone systems and computer hardware and software.

This increase was partially offset by a reduction in the following:

§ A decrease in the Company’s accounting fees of approximately $170,000.  The majority of this reduction related to work performed with respect to our internal controls evaluation under Section 404 of the Sarbanes Oxley Act and related sales tax work that was incurred in 2007.

§ A reduction in stock compensation of approximately $124,000 relating to certain performance criteria.  As part of certain officers’ compensation, if certain EBIT thresholds are met they would be eligible to receive stock compensation.  In 2008, these thresholds were not met and therefore no stock compensation was awarded.  In 2007, these thresholds were met and stock compensation was awarded.

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There were other increases in selling, general and administrative expenses which arose out of the normal course of business such as utility, commission and consulting expense which were partially offset by a decrease in medical, and computer communications expense.

Interest Expense:

Interest expense for the year ended December 31, 2008 and 2007 was approximately $280,000 and $481,000, respectively.  The decrease was primarily due to the Company continuing to pay down its term loan as well as a reduction in the interest rate.

Loss on Abandonment:

Loss on abandonment of approximately $887,000 in 2008 represents the write-off of assets encompassing prepaid licensing fees and associated products relating to a technology, licensing, development, distribution and marketing agreement with a technology entity for the engineering and production of certain advanced telehealth products.  The technology provider on this initiative experienced a funding shortfall and has filed for bankruptcy protection and will not be able to complete the project.

Other Income:

Other income for the year ended December 31, 2008 and 2007 was approximately $335,000 and $1,090,000, respectively. Other Income for the year ended December 31, 2008 includes a training incentive received from the State of New Mexico for hiring and training employees within the State and an economic development incentive through the City of Clovis aggregating approximately $298,000.  In 2007, the Company opened a network operating call center in New Mexico and hired employees to serve as operators for the telephone answering service.  In 2008, the Company continued its further expansion into this facility by also hiring employees to serve as emergency response operators for the HSMS segment.  These amounts were partially offset by an adjustment to the Relocation and Employment Assistance Program credit due from New York City.  Other income for the year ended December 31, 2007 includes a Relocation and Employment Assistance Program (“REAP”) credit in the approximate amount of $530,000.  In connection with the relocation of certain operations to Long Island City, New York in April 2003, the Company became eligible for the REAP credit which is based upon the number of employees relocated to this designated REAP area. The REAP is in effect for a twelve year period commencing in April 2003; during the first five years the Company was refunded the full amount of the eligible credit and, thereafter, the benefit will be available only as a credit against New York City income taxes.  As of 2008, the Company is eligible to only receive a credit against New York City income taxes, which is reflected within the Company’s tax provision.  Additionally, Other Income for the year ended December 31, 2007 includes approximately $425,000 with respect to a settlement agreement for matters related to certain product and warranty disputes.

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Income Before Provision for Income Taxes:

The Company’s income before provision for income taxes for the year ended December 31, 2008 was approximately $2,446,000 as compared to $2,660,000 for the same period in 2007.  The decrease of $214,000 for the year ended December 31, 2008 resulted from an increase in the Company’s costs related to services and product sales, selling, general and administrative costs, loss on abandonment due to the write-off of certain assets and a decrease in other income due to a REAP credit and a one-time non-recurring credit recognized in 2007.  This decrease was partially offset by an increase in the Company's service and product revenues.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Revenues:

HSMS

Revenues, which consist primarily of monthly rental revenues, increased approximately $1,308,000, or 8%, for the year ended December 31, 2007 as compared to the same period in 2006.  The increase is primarily attributed to:

§ In 2007, the Company entered into an exclusive arrangement with Walgreen to provide the Company’s PERS product which it believes will positively impact the revenues generated from the HSMS services being provided directly to the consumer. In 2007, the Company recognized revenue of $367,000 from this arrangement.  The Company anticipates they will continue to see increased growth under this arrangement with Walgreen.

§ In late 2006, the Company executed a new agreement with a customer whereby PERS were placed online.  In 2007, the subscriber base associated with this agreement grew and accounted for an approximate $340,000 increase in revenue during 2007 as compared to the same period in the prior year.  The Company anticipates that the growth from this new agreement will continue into 2008.

§ The Company continued to experience growth primarily in its existing customer base. The largest growth in 2007 continued to be as a result of an agreement with a west coast managed care organization, which was executed in November 2003. The number of Personal Emergency Response Systems (“PERS”) in service under this agreement has more than doubled since its inception and has resulted in approximately $270,000 more revenue in 2007 as compared to the same period in 2006.  The growth within this program has stabilized and the Company anticipates the number of subscribers under this agreement in 2008 to remain consistent with those achieved at the end of 2007.

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§ In the second half of 2006, the Company increased its product sales to retirement communities.  During 2006, the Company developed new software and is now selling this in conjunction with hardware to retirement communities for the purposes of monitoring their residents.  This resulted in approximately a $206,000 increase in product sales in 2007 as compared to the same period in 2006.  The Company anticipates it will continue to see growth from these product sales in 2008.

The remaining increase in revenue is from the execution of other new agreements as well as the acquisition of certain subscriber bases from companies which were providing the PERS service.  The Company anticipates that it will continue to grow its subscriber base and corresponding revenue through its continued sales and marketing efforts.

TBCS

The increase in revenues of approximately $3,543,000, or 24%, for the year ended December 31, 2007 as compared to 2006 was primarily due to the following:

§ During 2006, the Company purchased the assets of two separate telephone answering services businesses which resulted in additional revenue for 2007, as compared to the same period in 2006, of approximately $3,300,000.  The acquisitions were as follows:

o In March 2006, the Company purchased the assets of MD OnCall and Capitol Medical Bureau (collectively, “MD OnCall”).  As a result of this acquisition, the Company realized approximately $721,000 of additional revenue in 2007 as compared to the same period in 2006. The Company completed this acquisition to facilitate its expansion into the Northeast geographical area.

o In December 2006, the Company purchased the assets of American Mediconnect, Inc. and PhoneScreen, Inc.  As a result of this acquisition, the Company realized approximately $2,579,000 of revenue in 2007.  The Company completed this acquisition to further facilitate the expansion of its telephone answering services businesses and allow it to increase its market base outside the Northeast geographical area.

In 2007, with regard to the TBCS segment, the Company shifted its focus from an acquisition driven growth strategy, to one that placed primary emphasis on consolidating the Company’s call center systems and infrastructure. For 2008, the Company will focus its efforts primarily increasing revenue through internally driven sales and marketing efforts.

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Costs Related to Services and Goods Sold:

HSMS

Costs related to services and goods sold increased by approximately $378,000 for the year ended December 31, 2007 as compared to the same period in 2006, an increase of 5%, primarily due to the following:

§ During 2006 and into 2007, the Company has increased the number of personnel working in its Emergency Response Center (“ERC”) department which accounted for increased costs of approximately $248,000 in 2007 as compared to the same period in 2006.  The Company hired additional personnel due to the increased volume of calls which is directly correlated to the increased subscriber base, as well as to prepare for the rollout of the Walgreen’s Ready Response™ Program, which is now in progress.  In 2008, the Company anticipates the ratio of ERC operators to the aggregate number of signals received will decrease.

§ In the second quarter of 2006, the Company relocated its fulfillment and warehouse distribution center into Long Island City, New York from Mt. Laurel, New Jersey. As part of this relocation process, the Company also took the upgrade and repairs of its PERS units in-house, which required the Company to hire additional employees, including a Manager of Engineering and Fulfillment. These items accounted for approximately $106,000 of increased costs as compared to the same period in the prior year, which were offset by the reduction in costs related to repairs and upgrades of approximately $100,000 which were previously performed by a third party vendor.

§ During the third quarter the Company recorded a write down of fixed assets of its PERS Buddy device in the approximate amount of $111,000.  The Company determined that the PERS Buddy would only be used on a minimal basis due to matters regarding product and warranty disputes relating to some of the boards associated with these devices.

§ The Company has incurred additional depreciation expense of approximately $219,000 primarily due to the increased purchases made during the latter part of 2006 and 2007.  The increased purchases are a result of the increase in the number of subscribers online.

These increases were offset by the Company capitalizing labor and overhead costs in 2007 as compared to the same period in 2006 resulting in a decrease in expense by approximately $279,000.  The Company has increased purchases of its PERS devices and associated components requiring additional labor to properly prepare these products, including quality assurance, programming and packaging, to be shipped.  The Company has increased its purchases due to the increased volume as a result of new agreements with various customers.

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TBCS:

Costs related to services and goods sold increased by approximately $2,242,000 for the year ended December 31, 2007 as compared to the same period in 2006, an increase of 30%, primarily due to the following:

§ During 2006, as discussed above, the Company purchased the assets of two separate telephone answering service businesses which resulted in additional costs related to services for 2007 of approximately $1,924,000.  The increased costs related to services in regard to the acquisitions were as follows: MD OnCall approximated $419,000 and AMI approximated $1,505,000.

§ In July 2007 the Company opened a new call center.  During the third quarter the Company hired call center operators which resulted in payroll and related payroll costs of approximately $228,000.  The Company plans to continue to expand this call center throughout 2008. In connection with opening this new call center, the Company is eligible to receive certain incentives going forward which will help to offset some of these costs.

§ During the latter part of 2006 and into 2007, the Company reduced the number of telephone answering service operators at its existing call centers. This has been accomplished through overall efficiencies which are being realized by the Company throughout its TBCS segment.  Additionally, the Company is now utilizing its newly established call center and has allocated some of the call volume to this location.  This accounted for a reduction in costs of approximately $176,000 at its existing call centers for the period ended December 31, 2007 as compared to the same period in 2006.  As the Company continues to realize these operational efficiencies and utilize its new call center, it will continue to evaluate personnel levels and continue to evaluate the consolidation strategy of its communications infrastructure, yielding greater per seat through-put with an associated reduction in overall labor expense.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses increased by approximately $2,127,000 for the year ended December 31, 2007 as compared to the same period in 2006, an increase of 15%.  The increase is primarily attributable to the following:

§ The Company incurred approximately $1,599,000 of additional selling, general and administrative expenses in 2007, as compared to the same period in 2006, as a result of the acquisition of two telephone answering service businesses during 2006.  The more significant expenses relate to salaries and related payroll taxes, commissions expense and amortization relating to customer lists and non-compete agreements.

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§ In conjunction with various new programs and agreements, the Company has hired additional marketing and sales personnel, increased its advertising and incurred additional travel expense.  As a result of this, the Company recorded an increase in this expense of approximately $334,000.  In an effort to grow and expand these programs, the Company anticipates to incur increased marketing, advertising and travel expenses in 2008.

§ In 2007, the Company incurred approximately $258,000 of additional costs as compared to the same period in 2006.  The majority of the increased costs related to the Company incurring expenses relating to the evaluation of its internal controls under Sarbanes Oxley Section 404 and tax related work. The Company anticipates the fees relating to this matter will be less in 2008.

§ The Company purchased subscriber accounts utilizing PERS from a third party in December 2006.  As part of this transaction, it was agreed that the third party would continue to manage and service these accounts on behalf of the Company.  As a result of this arrangement, the Company paid an administrative fee to this third party amounting to approximately $128,000.

These increases in selling, general and administrative expenses were partially offset by decreases in legal, consulting and bad debt expense.

Interest Expense:

Interest expense for the year ended December 31, 2007 and 2006 was approximately $481,000 and $394,000, respectively.  The increase was primarily due to the Company borrowing additional funds in December 2006 of $1,600,000 for the purpose of financing its acquisition of AMI.

Other Income:

Other income for the year ended December 31, 2007 and 2006 was approximately $1,090,000 and $578,000, respectively. Other Income for the year ended December 31, 2007 and 2006 includes a Relocation and Employment Assistance Program (“REAP”) credit in the approximate amounts of $530,000 and $458,000, respectively.  In connection with the relocation of certain operations to Long Island City, New York in April 2003, the Company became eligible for the REAP credit which is based upon the number of employees relocated to this designated REAP area. The REAP is in effect for a twelve year period; during the first five years the Company will be refunded the full amount of the eligible credit and, thereafter, the benefit will be available only as a credit against New York City income taxes.  Additionally, Other Income for the year ended December 31, 2007 includes approximately $425,000 with respect to a settlement agreement for matters related to certain product and warranty disputes.

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Income Before Provision for Income Taxes:

The Company’s income before provision for income taxes for the year ended December 31, 2007 was approximately $2,660,000 as compared to $2,132,000 for the same period in 2006. The increase of $528,000 for the year ended December 31, 2007 primarily resulted from an increase in the Company's service revenues and other income offset by an increase in the Company’s costs related to services and selling, general and administrative costs.

Liquidity and Capital Resources:

As of January 1, 2006 the Company had a credit facility arrangement for $4,500,000 which included a revolving credit line that permitted borrowings of $1,500,000 (based on eligible receivables as defined) and a $3,000,000 term loan payable.  The term loan is payable in equal monthly principal installments of $50,000 over five years, commencing January 2006.

In March 2006 and December 2006, the credit facility was amended whereby the Company obtained an additional $2,500,000 and $1,600,000 of term loans, the proceeds of which were utilized to finance the acquisitions of MD OnCall and American Mediconnect, Inc.  These term loans are payable over five years in equal monthly principal installments of $41,666.67 and $26,666.67, respectively. Additionally, certain of the covenants were amended.

In December 2006, the credit facility was amended to reduce the interest rates charged by the bank such that borrowings under the term loan will bear interest at either (a) LIBOR plus 2.00% or (b) the prime rate or the federal funds effective rate plus .5%, whichever is greater, and the revolving credit line will bear interest at either (a) LIBOR plus 1.75% or (b) the prime rate or the federal funds effective rate plus .5%, whichever is greater.  The LIBOR interest rate charge shall be adjusted in .25% intervals based on the Company’s ratio of Consolidated Funded Debt to Consolidated EBITDA. In the third quarter of 2007, the interest rate was reduced by .25% based on this ratio.  The Company has the option to choose between the two interest rate options under the amended term loan and revolving credit line.  Borrowings under the credit facility are collateralized by substantially all of the assets of the Company.

On April 30, 2007, the Company amended its credit facility whereby the term of the revolving credit line was extended through June 2010 and the amount of credit available under the revolving credit line was increased to $2,500,000.

The term loans are payable in equal monthly principal payments of $50,000, $41,667 and $26,667, respectively, over five years while the revolving credit line is available through June 2010.  The outstanding balance on the term loans and revolving credit line at December 31, 2008 was $3,166,667 and $1,400,000, respectively.  In March 2009, the Company paid down $450,000 on its revolving credit line.

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 As of December 31, 2008 the Company was in compliance with the financial covenants in its loan agreement. As of December 31, 2007, the Company was not in compliance with one of its financial covenants in its loan agreement.  The lender waived the non-compliance as of such date and entered into an amendment to the credit facility.

The following table is a summary of the Company’s contractual obligations as of December 31, 2008:

	Payments Due by Period
Contractual  Obligations	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Revolving Credit Line	$	1,400,000	$	450,000	$	950,000
Debt  (a)	$	3,169,949	$	1,304,949	$	1,865,000
Operating Leases (b)	$	7,853,856	$	1,136,701	$	2,440,874	$	1,552,107	$	2,724,174
Purchase Commitments (c)	$	1,029,818	$	1,029,818
Interest Expense (d)	$	226,144	$	156,305	$	69,839
Acquisition related Commitment (e)	$	20,390	$	20,390
Total Contractual Obligations	$	13,700,157	$	4,098,163	$	5,325,713	$	1,552,107	$	2,724,174

(a) – Debt includes the Company’s aggregate outstanding term loans which mature in 2010 and 2011, as well as loans associated with the purchase of automobiles.

(b) –Operating leases include rental of facilities at various locations within the United States.  These operating leases include the rental of the Company’s call center, warehouse and office facilities.  These operating leases have various maturity dates.  The Company currently leases office space from the Chairman and principal shareholder pursuant to a lease. This lease expires in September 2009.  The Company also leases office space from certain telephone answering service managers.  The leases with these managers expire in December 2009 and December 2012, respectively.

(c)  – Purchase commitments relate to orders for the Company’s traditional PERS system and its MedSmart pill dispenser.

(d) - Interest expense relates to interest on the Company’s revolving credit line and debt at the Company’s current rate of interest.

(e)  - Acquisition related commitment represents payments due based on collections of the clinical trial business relating to the American Mediconnect, Inc acquisition in December 2006.

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The primary sources of liquidity are cash flows from operating activities.  Net cash provided by operating activities was approximately $6.5 and $6.2 million for the years ended December 31, 2008 and 2007, respectively.  During 2008, increases in cash provided by operating activities were primarily from depreciation and amortization of approximately $4.4 million, net earnings of approximately $1.4 million and loss on abandonment of approximately $0.9 million.  These increases were partially offset by an increase in trade receivables of approximately $0.6 million and a decrease in accounts payable and accrued expenses of approximately 1.1 million.  The components of depreciation and amortization primarily relate to the purchases of the Company’s traditional PERS product and the customer lists associated with the acquisition of telephone answering service businesses.  The loss on abandonment relates to the write-off of certain assets associated with a telehealth endeavor.The increase in trade receivables is primarily due tothetiming of when clinical trial projects occurred, as well as the Company increasing its customer base through its sales and marketing effort.  The Company had approximately $300,000 more of clinical trial business in the fourth quarter of 2008 as compared to the same period in 2007, therefore creating a larger receivable balance at December 31, 2008.  The decrease in accounts payable and accrued expenses is primarily due to a decrease in the purchase of its PERS product in 2008, as compared to previous year and the timing of payments of other expenses in the ordinary course of business.  In 2007, increases in cash provided by operating activities was from depreciation and amortization of approximately $4.3 million, net earnings of approximately $1.5 million and an increase in accounts payable and accrued expenses of approximately 1.1 million which were partially offset by an increase in trade receivables of approximately $0.9 million.

Net cash used in investing activities for the year ended December 31, 2008 was approximately $3.4 million as compared to $5.4 million in the same period in 2007. The primary components of net cash used in investing activities in 2008 was capital expenditures of approximately $2.5 million and $0.5 million of deposits on open purchase orders.  Capital expenditures for 2008 primarily relate to the continued production and purchase of the traditional PERS system as well as the build-out of the Company’s new call center in New Mexico.  The deposits primarily relate to the Company’s next generation medication management system and monitoring platform (MedSmart), which was commercialized in early 2009.  The primary component of net cash used in investing activities in 2007 was capital expenditures of approximately $4.5 million for the continued production and purchase of the traditional PERS system.

Net cash used in financing activities for the year ended December 31, 2008 were $1.5 million as compared to $0.7 million for the year ended December 31, 2007.  The primary component of cash flow used in financing activities in 2008 was the payments of long-term debt of approximately $1.6 million.  This was partially offset by proceeds received from the exercise of the Company’s stock options of approximately $0.1 million and the proceeds received from long-term debt of $0.1 million. The primary component of cash flow used by financing activities in 2007 was the payment of long-term debt of approximately $1.6 million, which was partially offset by the proceeds received on the exercise of stock options of approximately $0.4 million and the proceeds received from long-term debt of approximately $0.6 million.

During the next twelve months, the Company anticipates it will make capital expenditures of approximately $2.75 – $3.25 million for the production and purchase of the traditional PERS systems, MedSmart pill dispensers, and telehealth systems, as well as enhancements to its computer operating systems.  This amount is subject to fluctuations based on customer demand. The Company also anticipates incurring approximately $0.1 - $0.3 million of costs relating to research and development of its telehealth product and MedSmart pill dispenser.

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As of December 31, 2008 the Company had approximately $2.5 million in cash and the Company’s working capital was approximately $5.9 million.  The Company believes that, with its present cash and with operations of the business generating positive cash flow, the Company can meet its working capital and capital expenditure needs for at least the next 12 months. The Company also has a revolving credit line, which expires in June 2010 that permits borrowings up to $2.5 million, of which $1.4 million was outstanding at December 31, 2008.

Inflation:

The levels of inflation in the general economy have not had a material impact on our Company’s historical results of operations.  In March 2009, the Company paid down $450,000 of the amount outstanding on the revolving credit line.

Off-Balance Sheet Arrangements:

As of December 31, 2008, the Company has not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Other Factors:

During 2008, the Company recorded a loss on abandonment of $886,504, which represents the write-off of assets encompassing prepaid licensing fees and associated products paid or acquired in connection with a technology provider obtaining and completing certain new remote telehealth monitoring products and services.  The technology provider on this initiative experienced a funding shortfall and has filed for bankruptcy protection and will not be able to complete the project.  Although the Company has abandoned this particular project, the Company plans to continue its efforts within the telehealth sector. In 2008 the Company added to its telehealth offering by becoming the first US channel market distributor of the Intel® Health Guide. The Company believes the telehealth market will continue to provide opportunities for AMAC’s expansion as a full source provider of remote patient monitoring technologies and first line support services.

In August 2007 the Company entered into a settlement agreement whereby a third party has agreed to reimburse the Company in a net amount of $425,000 for matters related to certain product and warranty disputes.  This reimbursement is associated with costs that have primarily been incurred in previous years relating to engineering, payroll and related costs and depreciation pertaining to the affected assets.  The Company anticipates receiving this reimbursement over approximately two years.  The Company has received approximately $277,000 through December 31, 2008 and anticipates receiving the remaining portion in 2009.  As a result of the agreement, the Company recorded an amount of $425,000 to Other Income in 2007.  The Company has also recorded a write-down on the assets affected of approximately $111,000 in 2007 which was reflected in the Cost of Services.

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On December 21, 2006, the Company acquired substantially all of the assets of American Mediconnect, Inc. and PhoneScreen, Inc.,Illinois based companies under common ownership (collectively “AMI”). AMI is a provider of telephone after-hour answering services primarily focused on hospitals, physicians and other health care providers and PhoneScreen, Inc. is a provider of call center and compliance monitoring services to hospitals, pharmaceutical companies and clinical resource organizations.  The purchase price was $2,028,830 and consisted of an initial cash payment of $1,493,730, common stock valued at $229,324 and a future cash payment of $305,776, which was paid in December 2007.  In addition, for the following three years the Company shall pay the Seller an amount equal to twenty-five (25%) percent of the cash receipts collected by the Company, excluding sales taxes, from the PhoneScreen business. Since the date of acquisition, the Company has recorded $455,669 of additional purchase price, of which $229,958 was recorded in 2008, based on PhoneScreen cash receipts and $20,390 was not paid as of December 31, 2008.  The Company also incurred professional fees of approximately $65,000.  A potential exists for the payment of additional purchase price consideration if certain thresholds concerning revenues and earnings of the acquired business are met as of December 31, 2007, 2008 and 2009.  The threshold was not met in 2007 and 2008.

On March 10, 2006, the Company acquired substantially all of the assets of MD OnCall, a Rhode Island based company and Capitol Medical Bureau,a Maryland based company (collectively "MD OnCall"), providers of telephone after-hour answering services and stand-alone voice mail services.  The purchase price was $3,382,443 and consisted of an initial cash payment of $2,696,315, common stock valued at $343,064, and future cash payments of $343,064, which was paid in full as of March 2007.  The Company also recorded finder and professional fees of approximately $181,000.  A potential exists for payments of additional purchase price consideration if certain thresholds concerning revenue and earnings of the acquired business are met as of March 31, 2007, 2008 and 2009.  The threshold as of March 31, 2007 and 2008 were not met.

During 2005, the Company entered into two operating lease agreements for additional space at its Long Island City, New York, location in order to consolidate its warehouse and distribution center and accounting department into this location.  The leases, which commenced in January 2006 and expire in March 2018, call for minimum annual rentals of $220,000 and $122,000, respectively, and are subject to increases in accordance with the term of the agreements.  The Company is also responsible for the reimbursement of real estate taxes.

On January 14, 2002, the Company entered into an operating lease agreement for space in Long Island City, New York in order to consolidate its HCI TBCS and PERS ERC/ Customer Service facilities.  The centralization of the ERC, Customer Service and H-LINK® OnCall operations has provided certain operating efficiencies and allowed for continued growth of the H-LINK and PERS divisions.  The fifteen (15) year lease term commenced in April 2003.  The lease calls for minimum annual rentals of $307,900, subject to a 3% annual increase plus reimbursement for real estate taxes.  

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Since 1983, the Company has provided Personal Emergency Response Systems (“PERS”) services to the City of New York’s Human Resources Administration Home Care Service Program ("HCSP").  The contract term with the HCSP is for two years, commencing September 21, 2007, with two options to renew in favor of HRA for two additional two year terms.  Under the terms of the agreement, a downward rate adjustment was made in conjunction with reduced equipment requirements from previous years. The impact of this lower rate resulted in a reduced contribution to gross revenues of approximately $265,000 and $70,000, and a reduced contribution to net income of approximately $160,000 and $40,000 in 2008 and 2007, respectively.

During the years ended December 31, 2008, 2007 and 2006, the Company’s revenue from the contract related to HCSP represented 6%, 7% and 8% respectively, of its total revenue.

Projected Versus Actual Results:

The Company’s revenues for the year ended December 31, 2008 of $38,586,820 was short of the Company’s revenue projections of $39,200,000.  The shortfall was primarily due to certain contracts within the TBCS segment being executed at a later date than originally projected. The Company’s net income of $1,439,601 for the year ended December 31, 2008 was lower than the projected net income of $1,900,000.  The shortfall was due to the write-off of certain assets relating to a technology, licensing, development, distribution and marketing agreement with a technology entity for the engineering and production of certain advanced telehealth products.  The technology provider on this initiative experienced a funding shortfall and has filed for bankruptcy protection and will not be able to complete the project.

Recent Accounting Pronouncements:

In December 2007, the FASB issued SFAS No. 141(R) (revised 2007), “SFAS 141(R),” “Business Combinations,” which replaces SFAS 141. The statement provides a broader definition of the “Acquirer” and establishes principles and requirements of how the Acquirer recognizes and measures in its financial statements the identifiable assets acquired and liabilities assumed as well as how the acquirer recognizes and measures the goodwill acquired in the business combination.  SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after beginning of the first annual reporting period beginning on or after December 15, 2008.

In April 2008, the FASB issued FSP SFAS 142-3, “Determination of the Useful Life of Intangible Assets.” FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” The intent of FSP SFAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R) and other generally accepted accounting principles. The provisions of FSP SFAS 142-3 are effective for the Company’s fiscal year 2010, and are currently not expected to have a material effect on its consolidated financial statements.

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Critical Accounting Policies:

In preparing the financial statements contained herein, the Company makes estimates, assumptions and judgments that can have a significant impact on our revenue, operating income and net income, as well as on the reported amounts of certain assets and liabilities on the balance sheet.  The Company believes that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on its financial statements due to the materiality of the accounts involved, and therefore, considers these to be its critical accounting policies.  Estimates in each of these areas are based on historical experience and a variety of assumptions that the Company believes are appropriate. Actual results may differ from these estimates.

Reserves for Uncollectible Accounts Receivable

The Company makes ongoing assumptions relating to the collectability of its accounts receivable.  The accounts receivable amount on the balance sheet includes a reserve for accounts that might not be paid.  In determining the amount of the reserve, the Company considers its historical level of credit losses.  The Company also makes judgments about the creditworthiness of significant customers based on ongoing credit evaluations, and it assesses current economic trends that might impact the level of credit losses in the future. The Company recorded reserves for uncollectible accounts receivables of $646,000 as of December 31, 2008, which is equal to approximately 10% of total accounts receivable.  While the Company believes that the current reserves are adequate to cover potential credit losses, it cannot predict future changes in the financial stability of its customers and the Company cannot guarantee that its reserves will continue to be adequate.  For each 1% that actual credit losses exceed the reserves established, there would be an increase in general and administrative expenses and a reduction in reported net income of approximately $66,000. Conversely, for each 1% that actual credit losses are less than the reserve, this would decrease the Company’s general and administrative expenses and increase the reported net income by approximately $66,000.

Fixed Assets

Fixed assets are stated at cost.  Depreciation for financial reporting purposes is being provided by the straight-line method over the estimated useful lives of the related assets.  The valuation and classification of these assets and the assignment of useful depreciable lives involves significant judgments and the use of estimates.  Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Historically, impairment losses have not been required.  Any change in the assumption of estimated useful lives could either result in a decrease or increase the Company’s financial results.  A decrease in estimated useful life would reduce the Company’s net income and an increase in estimated useful life would increase the Company’s net income.  If the estimated useful lives of the PERS medical device were decreased by one year, the cost of goods related to services would increase and net income would decrease by approximately $160,000.  Conversely, if the estimated useful lives of the PERS medical device were increased by one year, the cost of goods related to services would decrease and net income would increase by approximately $135,000.

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Valuation of Goodwill

Pursuant to Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” goodwill and indefinite life intangible assets are no longer amortized, but are subject to annual impairment tests.  To date, the Company has not been required to recognize an impairment of goodwill. The Company tests goodwill for impairment annually or more frequently when events or circumstances occur, indicating goodwill might be impaired. This process involves estimating fair value using discounted cash flow analyses. Considerable management judgment is necessary to estimate discounted future cash flows. Assumptions used for these estimated cash flows were based on a combination of historical results and current internal forecasts.  The Company cannot predict certain events that could adversely affect the reported value of goodwill, which totaled $9,996,152 at December 31, 2008 and $9,766,194 at December 31, 2007.  If the Company were to experience a significant adverse impact on goodwill, it would negatively impact the Company’s net income.

Accounting for Stock-Based Compensation

Stock based compensation is recorded in accordance with FASB Statement No. 123 (revised 2004), “Share-Based Payment”(“Statement No. 123(R)”), which requires the measurement and recognition of compensation expense for all share-based payments to employees, including grants of stock and employee stock options, based on estimated fair values.

Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Stock-based compensation expense recognized in the Company's consolidated statements for the years ended December 31, 2008, 2007 and 2006 includes compensation expense for share-based payment awards granted prior to, but not yet vested as of December 31, 2005 based on the grant date fair value estimated in accordance with the pro forma disclosure provisions of Statement No. 123 and compensation expense for the share-based payment awards granted subsequent to December 31, 2005 based on the grant date fair value estimated in accordance with the provisions of Statement No. 123(R). As a result of adopting SFAS No. 123R, the Company recorded a pre-tax expense of approximately $325,000 and $384,000 for stock-based compensation for the year ended December 31, 2008 and 2007, respectively.

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The determination of fair value of share-based payment awards to employees and directors on the date of grant using the Black-Scholes model is affected by the Company's stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

Item 7A.    Quantitative and Qualitative Disclosure About Market Risk

Market Risk Disclosure

The Company does not hold market risk-sensitive instruments entered into for trading purposes, nor does it hold market risk sensitive instruments entered into for other than trading purposes. All sales, operating items and balance sheet data are denominated in U.S. dollars; therefore, the Company has no significant foreign currency exchange rate risk.

In the ordinary course of its business the Company enters into commitments to purchase raw materials and finished goods over a period of time, generally six months to one year, at contracted prices. At December 31, 2008 these future commitments were not at prices in excess of current market, or in quantities in excess of normal requirements. The Company does not utilize derivative contracts either to hedge existing risks or for speculative purposes.

Interest Rate Risk

We are exposed to market risk from changes in interest rates primarily through our financing activities.  Interest on our outstanding balances on our term loan and revolving credit line under our credit facility accrues at a rate of LIBOR plus 1.75% and LIBOR plus 1.50%, respectively.  Our ability to carry out our business plan to finance future working capital requirements and acquisitions of TBCS businesses may be impacted if the cost of carrying debt fluctuates to the point where it becomes a burden on our resources.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements required hereby are located on pages F-1 through F-30. The supplementary data required hereby can be found in Note 15 to the financial statements included as part of this annual report on Form 10-K, on page F-30.

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

None.

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ITEM 9A(T). CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”).  Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial offers, as appropriate to allow timely decisions regarding required disclosure.

Internal Controls Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting.  The internal control process has been designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008, utilizing the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2008 is effective.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and dispositions of assets; and provide reasonable assurances that: (1) transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States; (2) receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) unauthorized acquisitions, use, or disposition of the Company’s assets that could have a material effect on the Company’s financial statements are prevented or timely detected.

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All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparations and presentations.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes to Internal Control Over Financial Reporting

Except as indicated herein, there were no changes in the Company’s internal control over financial reporting during the three months ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B.  OTHER INFORMATION

None

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The directors and executive officers of the Company, their ages and present positions with the Company are as follows:

Name	Age	Position with the Company
Howard M. Siegel	75	Chairman of the Board, Senior Advisor and Director
Jack Rhian	54	Chief Executive Officer, President and Director
Frederic S. Siegel	39	Executive Vice President and Director
Ronald Levin	74	Director
Yacov Shamash, PhD.	59	Director
John S.T. Gallagher Gregory Fortunoff Richard Rallo	77 38 44	Director Director Chief Financial Officer, Chief Operating Officer – HSMS division
Randi Baldwin	40	Senior Vice President – Marketing and Program Development

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Information about Directors

The following is a brief summary of the background of each director:

HOWARD M. SIEGEL, 75, has been the Company's Chairman of the Board and a director for the past five years.  Mr. Siegel served as the Company’s Chief Executive Officer until December 31, 2006, at which time he resigned his position and became a Senior Advisor for the Company.  Mr. Siegel also served as the Company's President prior to July 2004 and Chief Financial Officer prior to September 1996.

JACK RHIAN, 54, was named the Company’s Chief Executive Officer effective January 1, 2007.  He has been a director of the Company since October 2002 and has been the Company’s President since July 2004.  Up until January 1, 2007, Mr. Rhian also served as the Chief Operating Officer, and was Executive Vice President from August 2002 and prior to becoming the President.  He joined the Company in January 2000 as Vice President and Chief Operating Officer.  From November 1994 until February 1999, he served as Executive Vice President and Chief Operating Officer of Transcare New York, Inc., a medical transportation company.  From March 1988 through November 1994 he served as Chief Operating Officer of Nationwide Ambulance Service.  Previously, Mr. Rhian held senior management positions in companies which deliver healthcare services.  Mr. Rhian holds a Masters degree in Public Administration from New York University.

FREDERIC S. SIEGEL, 39, has been a director of the Company since September 1998, and the Company’s Executive Vice President since January 2007.  Prior to that he was the Company’s Senior Vice President – Business Development and prior to that served as Vice President of Sales and Marketing for the Company since July 1998.  Mr. Siegel joined the Company in April 1994 and has held various sales and marketing positions with the Company.  From October 1991 to October 1994, Mr. Siegel served as a benefits consultant for J.N. Savasta Corp.  Mr. Siegel also serves as a director of Nursing Sister Homecare, a division of Catholic Health Services of Long Island.

RONALD LEVIN, 74, has been a director of the Company since August 2001.  He has also been the President of Ron Levin Associates, a financial consulting firm, since 1984.  Since 1997, Mr. Levin has been a member at Eye Contact LLC, a Cohen’s Fashion Optical franchise and since 1996, a member at Bayshore Eyes LLC, a Sterling Optical franchise.  Mr. Levin is currently a licensed stock broker with Investec Ernst & Co.  He served as Executive Vice President of D.A. Campbell Co., an international institutional stock brokerage firm, through 1998.

YACOV SHAMASH, PH.D., 59, has been director of the Company since August 2001.  He also serves as the Dean of the College of Engineering of the State University of New York at Stony Brook, a position he has held since 1992.  Dr. Shamash has been a member of the Board of Directors of KeyTronic Corporation, a contract manufacturer, since 1989, of NetSmart Technologies, a software solutions provider to the healthcare market, since January 2004, and applied DNA Sciences Inc., a provider of DNA encryption for authentication solutions, since March 2006.

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JOHN S.T. GALLAGHER, 77, has been a director of the Company since May 2005.  He was recently appointed as the Chief Executive Officer of medical center at Stony Brook. He is also the deputy county executive for health and human services in Nassau County, New York. He has been a senior executive officer of North Shore University Hospital and North Shore - Long Island Jewish Health System since 1982, having served as executive vice president of North Shore from 1982 until 1992, president from 1992 until 1997 and chief executive officer of the combined hospital system from 1997 until January 2002. In January 2002, he became co-chairman of the North Shore—Long Island Jewish Heath System Foundation. Mr. Gallagher is also a director of Perot Systems Corporation, a worldwide provider of information technology services and a director of Netsmart Technologies, a software solutions provider to the healthcare market.

GREGORY FORTUNOFF, 38, has been a director of the Company since April 2006. Mr. Fortunoff is currently a self employed investor. Mr. Fortunoff was a portfolio manager at X Mark Funds, a health care hedge fund, from November 2004 to September 2005. Prior to that, from December 1993 to August 2004, Mr. Fortunoff was a partner and group manager of First New York Securities, an equity trading firm.

Non-Director-Executive Officers

RICHARD RALLO, 44, joined the Company in February 2001 as the Controller and became Chief Financial Officer in April 2003.  In January 2009, Mr. Rallo was also named the Chief Operating Officer of the HSMS division.  From May 1997 to February 2001, Mr. Rallo served as the Chief Financial Officer of Tradewell, Inc., a barter company.  From October 1994 to April 1997, Mr. Rallo served as the Controller of Connoisseur Communications Partners L.P., a company that owned and operated radio stations.  From 1986 to 1994 Mr. Rallo worked in public accounting for Touche Ross & Co. and Margolin, Winer & Evens LLP.  Mr. Rallo is a Certified Public Accountant and has a BS in accounting from the University of Denver.

JOHN ROGERS, 62, joined the Company in 1984 as the Manager of the Emergency Response, Installation and Service Center.  He became the Company's Vice President, Operations in July 1993.  Additionally, he has been the Secretary of the Company since July 1993.  Prior to joining the Company he was employed at Technical Liaison Corporation, a burglar alarm Company from 1969 through May 1984 as Installation & Service Manager.

RANDI BALDWIN, 40, is the Company’s Senior Vice President, Marketing and Program Development since January 2007.  Prior to that, she was the Company’s Vice President – Marketing and Communications. Ms. Baldwin joined the Company in March 1999 as the Director of Marketing. Prior to joining the Company, she held executive level positions at various advertising agencies in the NY metropolitan area.

Family Relationships

There are no family relationships between any of the directors, executive officers or significant officers of the Company, with the exception of Howard M. Siegel and Frederic S. Siegel.  Howard M. Siegel is the father of Frederic S. Siegel.

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who beneficially own more than 10% of the Company's Common Stock, to file initial reports of ownership and reports of changes of ownership with the Securities and Exchange Commission and furnishcopies of those reports to the Company.

Specific due dates for such reports have been established by the SEC and the Company is required to disclose any failure to file reports by such dates.  Based solely upon the review of the Forms 3 and 4 and amendments thereto furnished to the Company, there were two late reports for transactions that were not reported on a timely basis during fiscal year 2008. Richard Rallo, the Chief Financial Officer, filed a Form 4 on December 1, 2008 for a transaction that occurred on November 21, 2008.  Randi Baldwin, the Senior Vice President – Marketing and Program Development, filed a Form 4 on November 17, 2008 for a transaction that occurred on November 12, 2008.  The Company knows of no other failure to timely file a required Form by any person required to do so.

Code of Ethics

The Company has adopted a Code of Ethics which applies to all of the Company’s directors, executive officers and employees.  The Code of Ethics is available to any person without charge upon written request to the Company’s Chief Executive Officer at 36-36 33rd Street, Long Island City, NY 11106.

Material Changes to the Procedures by which Security Holders may Recommend Nominees to the Board of Directors

Since the Company’s most recent quarterly report, there have been no changes to the procedures by which security holders may recommend nominees to Board of Directors of the Company.

Audit Committee

The Company’s Board of Directors has a separate audit committee.  The Audit Committee currently consists of Mr. Shamash, Mr. Levin, Mr. Gallagher and Mr. Fortunoff, each of whom are independent directors as defined in Rule 4200(a)(15) of the Nasdaq Stock Market’s Marketplace Rules and in Rule 10A-3 of the Securities Exchange Act of 1934.

The Board of Directors has determined that Mr. Gallagher meets the standard of an "audit committee financial expert," as defined by SEC regulations.  Mr. Gallagher is independent, as independence for audit committee members is defined in Rule 4200(a) of the Nasdaq Stock Market’s Marketplace Rules.

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ITEM 11.  EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview of Compensation Policy

The Company's Compensation Committee is responsible for establishing, implementing, and monitoring the Company's compensation strategy and policy and reviewing and recommending for the approval of the full Board of Directors the compensation for the named executive officers of the Company.  Among its principal duties, the Compensation Committee ensures that the total compensation of the named executive officers is fair, reasonable and competitive.  For purposes herein, “named executive officers” shall have the meaning given to such term in the Summary Compensation Table.

Objectives and Policies of Compensation

The primary objective of the Company's compensation policy, including the executive compensation policy, is to help attract and retain qualified, energetic managers who are enthusiastic about the Company's mission and products. The policy is designed to reward the achievement of specific annual and long-term strategic goals, aligning executive remuneration with company growth and shareholder value. In addition, the Board of Directors strives to promote an ownership mentality among key managers.

Setting Executive Compensation

The compensation policy is designed to reward the named executive officers based on both individual and Company performance.  In measuring named executive officers' contribution to the Company, the Compensation Committee considers numerous factors including the named executive officer’s individual efforts, Company's growth and financial performance as measured by revenue and earnings before interest and taxes of named executive officers among other key performance indicators.

Regarding most compensation matters, management provides recommendations to the Compensation Committee; however, the Compensation Committee does not delegate any of its functions to others in recommending compensation of executive officers to the Board of Directors.  The Compensation Committee periodically engages outside compensation consultants with respect to executive and/or director compensation matters.

Stock price performance has not been a factor in determining annual compensation because the price of the Company's common stock is subject to a variety of factors outside of management's control. The Company does not subscribe to an exact formula for allocating between cash and non-cash compensation or allocating between incentive or performance based compensation and non-performance compensation, each of which is determined on a case by case basis, balancing the need to offer competitive base salaries, with the goal of incentivizing executives to contribute to the Company’s growth.  A portion of total compensation for each named executive officer, other than the Chief Financial Officer and the Senior Vice President– Marketing and Program Development, is performance-based, taking into consideration the nature of each executive’s position and the opportunity to contribute to realizing the Company’s performance targets.  Historically, the majority of the performance based compensation for executives has been in the form of equity incentives in order to better align the goals of executives with the goals of shareholders.

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Elements of Company's Compensation Plan

The principal components of compensation for the Company's named executive officers are:

· base salary

· nonperformance-based stock compensation

· performance-based incentive stock compensation

Base Salary

The Company provides named executive officers and other employees with base salaries to compensate them for services rendered during the fiscal year. Base salary ranges for named executive officers are determined for each executive based on his or her position and responsibility.

During its review of base salaries for executives, the Compensation Committee primarily considers:

· Comparable salaries of executives of similar positions employed by companies of similar size as the Company;

· Internal review of the executives' compensation, both individually and relative to other officers; and

· Past performance of the executive.

Salary levels are typically evaluated annually as part of the Company's performance review process, as well as upon a promotion or other change in job responsibility, but are usually set at the time of execution of the applicable employment contracts.  Employment contracts for named executive officers range between 3-5 years in length and usually provide for a graduated increase in base salary.

Non Performance-Based Stock Compensation

As part of executing employment agreements with its named executive officers, the Company granted stock options and stock grants to its named executives.  The stock grant shares vest over time, subject to the condition that the executive is employed by the Company at particular yearly intervals.  These grants are made to encourage longevity of service and to provide the executives with an ownership interest in the Company.  The amount of shares granted is determined based on revenue and EBIT thresholds.

The majority of the stock options granted by the Board of Directors vest immediately and have terms anywhere from five to ten years. Vesting and exercise rights cease 90 days after the termination of employment for executives.  Prior to the exercise of an option, the holder has no rights as a shareholder, including voting rights, with respect to the shares subject to such option.

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Performance-Based Incentive Stock Compensation

The Company’s stock and option plans give the Compensation Committee the ability to design stock-based incentive compensation programs to promote high performance and achievement of corporate goals, encourage the growth of shareholder value and allow key employees to participate in the long-term growth and profitability of the Company.

For stock-based programs, the Compensation Committee may recommend granting to participants stock, stock options and stock appreciation rights, which are the only non-cash incentives currently approved by the shareholders of the Company. In granting these stock, stock options and stock appreciation rights, the Compensation Committee recommends parameters such as vesting schedules and terms of the grants.

Equity award levels are determined based on the Company’s assessment of the named executive officer’s contribution to the achievement of the Company’s performance targets, and vary among executives based on their positions within the Company.  These awards are granted or approved at the Board of Directors’ regularly or special scheduled meeting.  Stock options are awarded at the closing price of the Company's Common Stock as reported by NASDAQ on the date of the grant.

Equity awards to executives are generally granted or determined at the time of the execution of the applicable employment agreement.

Individual Compensation Considerations

With respect to each of the named executive officers, in additional to the general considerations described above, the Compensation Committee evaluated the following criteria in determining such executive's compensation structure:

Howard M. Siegel

In 2006, the Compensation Committee based its recommendations with respect to Mr. Siegel’s compensation, who was the long time Chief Executive Officer, based on Mr. Siegel's anticipated resignation from such position effective as of January 1, 2007, and increasingly reduced role in the management of the operations of the Company.  The Compensation Committee recommended that Mr. Siegel be employed as Senior Adviser and devote his full time to the Company for one year, with a reduced time commitment over the final two years of a three year employment contract.  As a result, the Compensation Committee recommended that Mr. Siegel's base salary be reduced, in each of the three years covered by his employment agreement in light of the reduced role and time commitment expected of Mr. Siegel.   The Compensation Committee also believed that Mr. Siegel’s continued contributions to the Company in his new role were important and could impact the Company’s overall performance and, therefore, recommended that equity incentive compensation be awarded based on performance targets related to the overall performance of the Company and based on Mr. Siegel's contribution to the achievement of such targets.  In recommending the specific performance criteria, the committee determined that the award should primarily be based on earnings before interest and taxes (“EBIT”), which it believes is the best indicator of the Company’s overall performance.

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In determining the compensation structure, the compensation committee considered the following metrics:

· Evaluation of past individual performance and expected future contribution.

· Use of an outside third party consultant

· Overall past performance and desired future performance of the Company

Jack Rhian

In 2005, the Compensation Committee recommended that Mr. Rhian’s pay structure, who was then the President and Chief Operating Officer, should be comprised of a (i) base salary, (ii) performance based stock compensation and (iii) non-performance stock compensation. In light of Mr. Rhian’s past and future position with the Company as President and Chief Operating Officer, the committee felt that since Mr. Rhian would be responsible for overseeing the Company’s overall performance, a significant portion of his compensation should be based on Company performance criteria.  In recommending the specific performance criteria, the Compensation Committee determined that the award should primarily be based on EBIT, which it believes is the best indicator of the Company’s overall performance. In addition, to provide incentive to Mr. Rhian to remain with the Company, the Compensation Committee also recommended compensating Mr. Rhian with non-performance shares which would vest annually over his employment agreement.

In determining the various levels of performance targets, the Compensation Committee considered the following metrics:

· Evaluation of past individual performance and expected future contribution.

· A review of compensation packages with comparable companies.

· Use of an outside third party consultant

· Overall past performance and desired future performance of the Company

Frederic S. Siegel

In 2007, the Compensation Committee recommended that Mr. Siegel's pay structure, who is the Executive Vice President, be comprised of a (i) base salary, (ii) performance based stock and cash compensation and (iii) non-performance stock compensation.  Due to Mr. Siegel’s overall responsibility for the operating results of the Company's HSMS segment, including delivery of top line and pre-tax profit, the Compensation Committee believed that a portion of his compensation should be based on Company performance targets. As part of this structure, the Compensation Committee also recommended to reduce the base salary earned by Mr. Siegel over the past two years in order to appropriately balance the allocation between performance based and non-performance based compensation. In recommending the specific performance criteria, the Compensation Committee determined that the performance incentives should be broken out into three areas; (i) HSMS revenue growth, (ii) HSMS EBIT growth and (iii) total Company EBIT growth, with the majority of the performance incentive being weighted towards the first two criteria.  In addition, to provide incentive to Mr. Siegel to remain with the Company, the Compensation Committee recommended compensating Mr. Siegel with non-performance shares which would vest annually over his employment agreement.  This recommendation is currently being evaluated by the Board of Directors.

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In determining the various levels of performance targets, the Compensation Committee considered the following metrics:

· Evaluation of past individual performance and expected future contribution.

· A review of compensation packages with comparable companies.

· Use of an outside third party consultant

· Overall past performance and desired future performance in the HSMS segment as well as the Company

Richard Rallo

In 2005, and again in 2008, in connection with the Company’s entry into a new employment agreement with Mr. Rallo (which is described below in more detail), the Compensation Committee recommended that Mr. Rallo’s pay structure, who is the Chief Financial Officer and the Chief Operating Officer of the HSMS division, be comprised of a base salary and non-performance stock compensation.  Due to his unique position as Chief Financial Officer, the Compensation Committee did not believe it was appropriate to provide performance based compensation as part of Mr. Rallo’s pay structure. In addition, to provide incentive to Mr. Rallo to remain with the Company, the Compensation Committee recommended compensating Mr. Rallo with non-performance shares which would vest annually over his employment agreement.

In determining the structure of Mr. Rallo’s compensation, the Compensation Committee considered the following metrics:

· Evaluation of past individual performance and expected future contribution.

· A review of compensation packages with comparable companies.

· Use of an outside third party consultant

Randi Baldwin

In 2006, the Compensation Committee recommended that Ms. Baldwin’s pay structure, who is the Vice President, Communications and Marketing, be comprised of a base salary and non-performance stock option compensation.  Due to her position as Senior Vice President, Marketing and Program Development, the Compensation Committee did not believe it was appropriate to provide performance based compensation as part of Ms. Baldwin’s pay structure.

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In determining the structure of Ms. Baldwin’s compensation, the Compensation Committee considered the following metrics:

· Evaluation of past individual performance and expected future contribution.

· A review of compensation packages with comparable companies.

· Use of an outside third party consultant

Retirement and Other Benefits

All employees in the United States are eligible to participate in the Company's 401(k) Retirement Plan.

401(k) Retirement Plan

In 1997, the Company instituted a 401(k) Plan covering substantially all full-time employees with six months of service. Under the Plan, employees may elect to defer up to 15% of compensation (subject to certain limitations). Matching contributions are discretionary and may be contributed at the option of the Company.  The Company currently matches 15% of up to 4% of the employee contributions. In addition, the Company may make an annual discretionary profit-sharing contribution. Employee contributions, Company matching contributions and related earnings are always 100% vested.

Accounting and Tax Considerations

Beginning on January 1, 2006, the Company began accounting for stock-based payments in accordance with the requirements of FASB Statement 123(R).

The Company's equity grant policy has been impacted by the implementation of SFAS No. 123R.  Under this accounting pronouncement, the Company is required to value unvested stock options granted prior to the adoption of SFAS 123 under the fair value method and expense those amounts in the income statement over the stock option's remaining vesting period.

Section 162(m) of the Internal Revenue Code restricts deductibility of executive compensation paid to the Company’s chief executive officer and each of the four other most highly compensated executive officers holding office at the end of any year to the extent such compensation exceeds $1,000,000 for any of such officers in any year and does not qualify for an exception under Section 162(m) or related regulations. The Board of Directors’ policy is to qualify its executive compensation for deductibility under applicable tax laws to the extent practicable. Income related to stock and stock options generally qualifies for an exemption from these restrictions imposed by Section 162(m). In the future, the Board of Directors will continue to evaluate the advisability of qualifying its executive compensation for full deductibility.

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SUMMARY COMPENSATION TABLE

The following table includes information concerning compensation for the year ended December 31, 2008, 2007 and 2006 with respect to our Chief Executive Officer and Chief Financial Officer, our Senior Advisor, and two other of our most highly compensated executive officers for such period (the “named executive officers”).

Name And Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards(1) ($)		Non-Equity Incentive Plan Compensation ($)		All Other Compen- sation ($)			Total ($)
Howard Siegel,	2008	$	225,000		-		-		-	$	1,359	(2)	$	226,359
Senior Advisor	2007	$	300,000		-		-		-	$	1,459	(2)	$	301,459
	2006	$	347,288		-		-		-	$	1,441	(2)	$	348,729
Jack Rhian, President and	2008	$	280,000		-	$	60,000		-	$	13,688	(3)	$	353,688
Chief Executive Officer	2007	$	260,000		-	$	98,935		-	$	13,558	(3)	$	372,493
	2006	$	240,000		-	$	168,000		-	$	13,463	(3)	$	421,463
Frederic Siegel, Executive	2008	$	200,000		-	$	44,275	$	30,929	$	12,599	(4)	$	287,803
Vice President	2007	$	190,000		-	$	86,538	$	5,253	$	12,046	(4)	$	293,837
	2006	$	200,000		-		-		-	$	12,000	(4)	$	212,000
Richard Rallo,	2008	$	200,000		-	$	20,000		-	$	10,773	(5)	$	230,773
Chief Financial Officer	2007	$	185,000	$	5,000	$	41,390		-	$	10,708	(5)	$	237,098
	2006	$	170,000		-	$	20,000		-	$	10,686	(5)	$	205,686
Randi Baldwin, Senior Vice	2008	$	147,667		-		-		-	$	9,288	(6)	$	156,955
President, Marketing and	2007	$	141,167	$	10,100	$	21,390		-	$	9,247	(6)	$	181,904
Program Development	2006	$	127,500		-	$	7,500		-	$	7,200	(6)	$	142,200

(1) The amounts in the “Stock Awards” column reflect the dollar amounts recognized as compensation expense for financial statement reporting purposes for stock grants for the fiscal year ended December 31, 2008, 2007 and 2006 in accordance with SFAS 123R.  The assumptions we used to calculate these amounts are discussed in Note 1 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2008.

(2) Includes employer 401(k) contribution of $1,359, $1,459 and $1,441 for 2008, 2007 and 2006, respectively.

(3) Includes auto stipend of $12,000, for 2008, 2007 and 2006 and employer 401(k) contribution of $1,668, $1,558 and $1,463 in 2008, 2007 and 2006, respectively.

(4) Includes auto stipend of $11,400 for 2008, 2007 and 2006 and employer 401(k) contribution of $1,199, $646 and $600 in 2008, 2007 and 2006, respectively.

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(5) Includes auto stipend of $9,600 for 2008 and 2007 and 2006 and employer 401(k) contribution of $1,173, $1,086 and $1,086 in 2008, 2007 and 2006, respectively.

(6) Includes auto stipend of $8,400, $8,400 and $7,200 for 2008, 2007 and 2006 and employer 401(k) contribution of $888 and $847 in 2008 and 2007, respectively.

Narrative Disclosure to Summary Compensation Table

On December 13, 2006, we entered into an employment agreement with Howard M. Siegel, whereby he is employed for a period of three years beginning January 1, 2007 as our Senior Advisor.  Until December 31, 2006, Mr. Siegel was our Chief Executive Officer.  Mr. Siegel’s new employment agreement provides for the following base salary amounts: $300,000 in 2007, $225,000 in 2008 and $175,000 in 2009.

In connection with his employment agreement, Mr. Siegel will be granted, subject to a determination by the Board of Directors of Mr. Siegel’s contribution to the Company’s performance, the following bonus compensation grants of up to 23,500 shares based on earnings before deduction of interest and taxes (“EBIT”), as set forth in our audited financial statements for the applicable fiscal year, meeting or exceeding the EBIT performance goals as follows: (i) for 2007, 6,000 shares if we achieve 15% year over year earnings before deduction of interest and taxes ("EBIT") growth (over 2006 results), plus a proportional number of additional shares for each 1% above 15%, up to a maximum of 10,000 shares in the aggregate on 25% EBIT growth; (ii) for 2008, 4,500 shares if we achieve 15% year over year EBIT growth (over 2007 results), plus a proportionate number of additional shares, for each 1% above 15%, up to a maximum of 7,500 shares in the aggregate on 25% EBIT growth and (iii) for 2009, 3,600 shares if we achieve 15% year over year EBIT growth (over 2008 results) plus a proportional number of additional shares for each 1% above 15%, up to a maximum of 6,000 shares in the aggregate on 25% EBIT growth.

In addition, the Board of Directors may in its discretion grant Mr. Siegel additional shares, not to exceed an aggregate total of 50,000 shares currently reserved for Mr. Siegel pursuant to our 2005 Stock Incentive Plan (inclusive of any shares granted pursuant to the EBIT growth targets above), based on significant contributions made by Mr. Siegel as determined by our Compensation Committee and approved by the Board of Directors. Any shares granted pursuant to the above arrangements would be issued from our 2005 Stock Incentive Plan.

In 2008 and 2007, no shares were awarded by the Board of Directors to Mr. Siegel in connection with any of the foregoing arrangements.

On November 11, 2005, we entered into an employment agreement with Jack Rhian, whereby he is employed for a period of five years beginning on January 1, 2006 as our President and Chief Operating Officer.  Subsequently, effective January 1, 2007, Mr. Rhian was appointed as our Chief Executive officer.  Mr. Rhian’s employment agreement provides for the following base salary amounts: $240,000 per annum, for the period beginning January 1, 2006 and ending December 31, 2006; $260,000 per annum, for the period beginning January 1, 2007 and ending December 31, 2007; $280,000 per annum, for the period beginning January 1, 2008 and ending December 31, 2008; $300,000 per annum, for the period beginning January 1, 2009 and ending December 31, 2009; and $300,000 per annum, for the period beginning January 1, 2010 and ending December 31, 2010.

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In connection with his employment agreement, on January 20, 2006, we entered into a stock purchase agreement with Mr. Rhian.  Pursuant to this stock purchase agreement, Mr. Rhian was granted 50,000 shares of restricted common stock subject to a repurchase right in our favor.  We have the right to repurchase the shares for $.01 per share if Mr. Rhian ceases to be employed by us. The repurchase right lapsed with respect to (i) 10,000 shares on December 31, 2006, (ii) 10,000 shares on December 31, 2007, (iii) 10,000 shares on December 31, 2008, and lapses with respect to  10,000 shares on December 31, 2009, and 10,000 shares on December 31, 2010, subject to the condition that Mr. Rhian remains employed by us on each such applicable date; provided, however, that in the event of a change in control (as defined in Mr. Rhian’s employment agreement) if we or our successor pursuant to such change in control, as applicable, and Mr. Rhian either agree to continue the employment agreement or to enter into a new employment agreement mutually acceptable to us or our successor and Mr. Rhian in lieu of his current employment agreement, then any such shares which remain unvested, shall vest immediately upon our or our successor’s mutual agreement with Mr. Rhian to continue his current employment agreement or to enter into a new employment agreement.

In addition, Mr. Rhian is entitled to the following bonus compensation stock grants: (i) up to 80,000 shares based on our earnings before deduction of interest and taxes ("EBIT"), as set forth in our audited financial statements for the applicable fiscal year, meeting or exceeding the EBIT performance goals set forth below, and (ii) 2,000 shares of common stock per year, for a total of up to 10,000 shares of common stock over the employment period, based on our total revenues, as set forth in our audited financial statements for the applicable fiscal year, meeting or exceeding an amount equal to at least 115% of the Company's total revenues for the prior fiscal year.

EBIT Targets For 2006 – 2010

EBIT growth over prior fiscal year	# of Shares
15.0 – 17.49%	8,000 shares
17.5 – 19.99%	9,000 shares
20.0 – 22.49%	10,500 shares
22.5 – 24.99%	13,000 shares
25.0% - or more	16,000 shares

For the fiscal year ended December 31, 2008, 2007 and 2006, our EBIT growth (reduction) was (13)%, 22% and 36%, respectively and our year over year revenue growth for 2007 and 2006 exceeded 115%, while in 2008 it did not exceed this threshold, and therefore, Mr. Rhian was not entitled to any bonus shares in 2008.  Based upon 2007 results, Mr. Rhian was entitled to 12,500 bonus shares.  On December 27, 2007, Mr. Rhian elected to forfeit 6,000 of these shares.  Mr. Rhian was entitled to and was issued 18,000 bonus shares related to the 2006 results.

On March 30, 2009, the Company and Mr. Rhian entered into an amendment to Mr. Rhian's employment agreement. The amendment clarified certain computations in connection with the calculation of the performance based formula for certain stock awards by which Mr. Rhian could make up, in a subsequent year, a failure to have met the performance threshold in a prior year. It also clarified the effect of certain non-operational adjustments on the formula. The amendment is filed with this Annual Report on Form 10-K as Exhibit 10(a)(iii).

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On May 29, 2007, we entered into a four year employment agreement, commencing as of January 1, 2007, pursuant to which Mr. Frederic Siegel is employed as our Executive Vice President. Under the terms of the agreement, Mr. Siegel will be paid a base salary of $190,000 in 2007, $200,000 in 2008, $210,000 in 2009 and $220,000 in 2010. Mr. Siegel will also be granted 5,500 shares of our common stock for each year of service under the agreement as a retention bonus. In addition, Mr. Siegel will be eligible to receive additional bonuses payable in cash and shares of our common stock based on certain revenue and earnings before deduction of interest and taxes (“EBIT”) targets, as set forth below:

(i) a cash bonus equal to one of the following percentages of the dollar amount of yearly revenue growth in excess of 7% in the our Health and Safety Monitoring Systems (“HSMS”) segment for each of the fiscal years ending December 31, 2007, 2008, 2009 and 2010: 2%, if the HSMS revenue grows by more than 7% but less than 10%; 3%, if the HSMS revenue grows by 10 % or more but less than 13%; 4.25%, if the HSMS revenue grows by 13% or more but less than 16%; 5.75%, if the HSMS revenue grows by 16% or more but less than 19%; 7.5%, if the HSMS revenue grows by 19% or more.

(ii) a cash bonus equal to one of the following percentages of the our EBIT from our HSMS segment for each of the fiscal years ending December 31, 2007, 2008, 2009 and 2010, plus one of the following number of shares: 2% plus 500 shares, if the HSMS EBIT equals to 5% or more but less than 6% of the HSMS revenues for the applicable year; 2.5% plus 1,000 shares, if the HSMS EBIT equals to 6% or more but less than 7% of the HSMS revenues for the applicable year; 3.0% plus 1,500 shares, if the HSMS EBIT equals to 7% or more but less than 8% of the HSMS revenues for the applicable year; 3.5% plus 2,000 shares, if the HSMS EBIT equals to 8% or more but less than 9% of the HSMS revenues for the applicable year; 4.0% plus 2,500 shares, if the HSMS EBIT equals to 9% or more but less than 10% of the HSMS revenues for the applicable year; 4.5% plus 3,000 shares, if the HSMS EBIT equals to 10% or more of the HSMS revenues for the applicable year; and

(iii) one of the following number of shares based on the year-over-year growth of our  EBIT on a consolidated basis for each of the fiscal years ending December 31, 2007, 2008, 2009 and 2010: 3,000 shares, if EBIT grows by 15% or more but less than 17.5%; 4,000 shares, if EBIT grows by 17.5% or more but less then 20%; 5,250 shares, if EBIT grows by 20% or more but less than 22.5%; 6,500 shares, if EBIT grows by 22.5% or more but less than 25%; and 8,500 shares, if EBIT grows by 25% or more.

To the extent that the number of shares earned pursuant to paragraph (ii) and (iii) above exceed 37,500 (the number of shares in the Company’s 2005 Incentive Plan currently reserved for Mr. Siegel’s performance based grants), the grant of any such excess shares shall be subject to shareholder approval prior to issuance.

For the year ended December 31, 2008, our HSMS segment revenue grew 12.9 percent; therefore, Mr. Siegel is entitled to a cash bonus of $30,929. Based on agreed to methodologies, the EBIT target for HSMS was not realized in 2008 and Mr. Siegel is not entitled to a cash bonus or bonus shares in 2008 in connection with the EBIT target for HSMS. In 2008, Mr. Siegel was not entitled to any bonus shares as our year over year consolidated EBIT growth for 2008 over 2007 did not exceeded the 115% threshold.

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For the fiscal year ended December 31, 2007, our HSMS segment revenue grew 8.7 percent; therefore, Mr. Siegel was entitled to a cash bonus of $5,253.  Additionally, for the fiscal year ended December 31, 2007 our EBIT growth was 22%; therefore, Mr. Siegel is entitled to 5,250 bonus shares in 2007.  However, based on agreed to methodologies, the EBIT target for HSMS was not realized in 2007 and Mr. Siegel is not entitled to a cash bonus or bonus shares in 2007 in connection with the EBIT target for HSMS.

On March 30, 2009, the Company and Mr. Frederic Siegel entered into an amendment to Mr. Siegel's employment agreement. The amendment provided for the disregarding of one-time non-operational events in the year following the year in which the one-time non-operational event occurred, in calculating the amounts due under certain of Mr. Siegel's performance based stock awards. The amendment is filed with this Annual Report on Form 10-K as Exhibit 10 (c)(v).

On January 20, 2006, we entered into an employment agreement with Richard Rallo (the “2006 Rallo Agreement”), whereby he was employed for a period of three years, beginning on January 1, 2006, as our Chief Financial Officer.  The 2006 Rallo Agreement expired on December 31, 2008, and provided for the following base salary amounts: $170,000 per annum, for the period beginning January 1, 2006 and ending December 31, 2006; $185,000 per annum, for the period beginning January 1, 2007 and ending December 31, 2007; and $200,000 per annum, for the period beginning January 1, 2008 and ending December 31, 2008. The 2006 Rallo Agreement was terminable upon certain specified events constituting cause, and in certain circumstances upon a change in control.  In addition, Mr. Rallo received a $5,000 cash bonus in connection with the execution of the 2006 Rallo Agreement.

In connection with the 2006 Rallo Agreement, on January 20, 2006, we entered into a stock purchase agreement with Mr. Rallo.  Pursuant to this stock purchase agreement, Mr. Rallo was granted 10,000 shares of restricted common stock subject to a repurchase right in our favor. We have the right to repurchase the shares for $.01 per share if Mr. Rallo ceases to be employed by us.  The repurchase right lapsed with respect to (i) 2,500 shares on December 31, 2006, (ii) 3,500 shares on December 31, 2007, and (iii) 4,000 shares on December 31, 2008, subject to the condition that Mr. Rallo remains employed by us on each such applicable date; provided, however, that in the event of a change in control (as defined in the 2006 Rallo Agreement) if we or our successor pursuant to such change in control, as applicable, and Mr. Rallo either agree to continue his employment agreement or to enter into a new employment agreement mutually acceptable to us or our successor and Mr. Rallo in lieu of his employment agreement, then any such shares which remain unvested, shall vest immediately upon our or our successor’s mutual agreement with Mr. Rallo to continue his employment agreement or to enter into a new employment agreement.

The 2006 Rallo Agreement was replaced on January 19, 2009, when we entered into an employment agreement with Richard Rallo (the “2009 Rallo Agreement”), whereby Mr. Rallo’s employment will be continued for a term of 3 years, commencing January 1, 2009.  Mr. Rallo will continue in his current role as the Company’s Chief Financial Officer and has also assumed the role of the Chief Operating Officer of the HSMS Division.

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Under the 2009 Rallo Agreement, Mr. Rallo is entitled to receive the following base salary amounts: $215,000 per annum, for the period beginning January 1, 2009 and ending December 31, 2009; $232,500 per annum, for the period beginning January 1, 2010 and ending December 31, 2010; and $250,000 per annum, for the period beginning January 1, 2011 and ending December 31, 2011.  The 2009 Rallo Agreement is terminable upon certain specified events constituting Cause (as defined in the employment agreement) and in certain circumstances upon a Change in Control (as defined in the employment agreement).  The 2009 Rallo Agreement is also terminable by the Company without Cause, in which case Mr. Rallo shall be entitled to receive all of the salary and stock compensation provided for in the 2009 Rallo Agreement, as described below.

In connection with the 2009 Rallo Agreement, on January 19, 2009, we entered into a stock purchase agreement with Mr. Rallo. Pursuant to this stock purchase agreement, Mr. Rallo was granted 21,500 shares of restricted common stock subject to a repurchase right in our favor.  We have the right to repurchase the shares for $.01 per share if Mr. Rallo ceases to be employed by us. The repurchase right lapses with respect to (i) 6,500 shares on December 31, 2009, (ii) 7,000 shares on December 31, 2010 and (iii) 8,000 shares on December 31, 2011, subject to the condition that Mr. Rallo remains employed by us on each such applicable date; provided, however, that in the event of a change in control (as defined in the 2009 Rallo Agreement) if we or our successor pursuant to such change in control, as applicable, and Mr. Rallo either agree to continue his current employment agreement or to enter into a new employment agreement mutually acceptable to us or our successor and Mr. Rallo in lieu of his current employment agreement, then any such shares which remain unvested, shall vest immediately upon our or our successor’s mutual agreement with Mr. Rallo to continue is current employment agreement or to enter into a new employment agreement.

On November 15, 2006, we entered into an employment agreement with Randi Baldwin, whereby she is employed for a period of three years, beginning on November 1, 2006, as our Vice President, Communications and Marketing. Ms. Baldwin’s employment agreement provides for  the following base salary amounts: $140,000 per annum, for the period beginning November 1, 2006 and ending October 31, 2007; $147,000 per annum, for the period beginning November 1, 2007 and ending October 31, 2007; and $155,000 per annum, for the period beginning November 1, 2008 and ending October 31, 2008. Ms. Baldwin’s employment agreement is only terminable upon certain specified events constituting cause, and in certain circumstances upon a change in control.

As part of this agreement, Ms. Baldwin was also granted 7,500 stock options as a one-time sign on award.  The stock option grant was awarded on November 15, 2006 at the value of the Company’s common stock on the close of business on November 15, 2006.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table shows the number of shares covered by exercisable and unexercisable stock options and stock grants held by our named executive officers on December 31, 2008.

	Option Awards					Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable (1)		Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock that Have Not Vested (#)(2)		Market Value of Shares or Units of Stock that Have Not Vested ($)(3)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3)
Howard Siegel		-	$	-
Jack Rhian							20,000	$	96,000		54,000	$	259,200
		4,343	$	2.87	12/31/11
		30,000	$	3.25	1/30/12
		25,000	$	3.50	1/30/13
		25,000	$	4.00	1/30/14
		3,856	$	2.30	8/12/12
		5,000	$	2.29	1/27/13
Frederic Siegel							11,000	$	52,800		34,500	$	165,600
		25,000	$	2.87	12/31/11
		8,252	$	2.87	12/31/11
		4,827	$	2.30	8/12/12
		6,400	$	2.29	1/27/13
		13,917	$	1.98	4/08/13
		65,530	$	4.24	5/27/14
Richard Rallo		5,088	$	2.87	12/31/11
		10,000	$	3.25	1/30/12
		3,038	$	2.30	8/12/12
		3,800	$	2.29	1/27/13
		30,000	$	2.50	11/14/13
		5,000	$	4.24	5/27/14
		25,000	$	5.96	12/07/10
Randi Baldwin		1,845	$	2.87	12/31/11
		25,000	$	3.64	3/12/12
		2,135	$	2.30	8/12/12
		2,200	$	2.29	1/27/13
		4,000	$	3.98	3/25/14
		12,500	$	6.20	12/29/10
		7,500	$	6.09	11/14/11

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(1)    All stock options were fully vested at December 31, 2008.

(2)    The stock grants for Mr. Rhian and Mr. Siegel vest on a yearly basis on each December 31 at 10,000 and 5,500 shares, respectively, per year for the next two years.

(3)    Based on the closing market price of the Company's common stock at the end of the last completed fiscal year ($4.80), multiplied by the number of shares reported.

(4)    Mr. Rhian may earn up to a potential maximum of 18,000 shares per year based on certain performance criteria as described in the Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards.  Mr. Siegel may earn to a potential maximum of 11,500 shares per year based on certain performance criteria as described in the Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards.

OPTION EXERCISES AND STOCK VESTED

The following table provides information on stock option exercises and vesting of stock grants with respect to each of our named executive officers during the fiscal year ended December 31, 2008.

	2008
	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise  (#)		Value Realized On Exercise  ($)(1)		Number of Shares Acquired on Vesting  (#)		Value Realized on Vesting  ($)(2)
Howard Siegel		-		-		-		-
Jack Rhian		50,000	$	100,000		10,000	$	48,000
		-		-		6,500	$	37,505
Fred Siegel		-		-		5,500	$	26,400
		-		-		5,250	$	30,293
Rich Rallo		10,000	$	20,000		4,000	$	19,200

(1) Based on the difference between the market price of the underlying securities at exercise and the exercise price of the options.

(2) Based on the market value of the shares on the day of vesting.

Potential Payment Upon Termination or Change-in-Control

Unless Mr. Rhian is terminated for cause (as defined in his employment agreement), in the event that we do not offer Mr. Rhian to enter into a written employment agreement with terms and conditions no less favorable than substantially the same terms and conditions as his current employment agreement to begin immediately following the expiration of his current employment agreement, Mr. Rhian shall receive payment of base salary, based on the then applicable salary level, for a period of twelve (12) months from the date of the expiration of his current employment agreement.

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In the event of his death during the term of the employment agreement, Mr. Rhian’s estate or such other person as he designated will be entitled to receive his base salary for a period of one year from the date of his death.

In the event that Mr. Rhian should become disabled and be unable to perform his duties for a period of one hundred eighty (180) consecutive days or an aggregate of more than one hundred eighty (180) consecutive days in any 12 month period, we may terminate the his employment agreement after the expiration of such period.

In addition, in the event there is a change in control (as defined in his employment agreement) and Mr. Rhian’s employment with us is terminated within 180 days following such change in control without cause or through a constructive termination, then Mr. Rhian will be entitled to a lump sum cash payment equal to 2.99 times his average annual total compensation, as measured for the past 5 years, in lieu of any remaining obligations from us under his employment agreement.  Had such termination occurred on December 31, 2008, Mr. Rhian would have been entitled to receive a $705,640 payment as a result of such termination.

Unless Mr. Frederic Siegel is terminated for cause (as defined in his employment agreement), in the event that the Company does not offer Mr. Siegel to enter into a written employment agreement with terms and conditions no less favorable that substantially the same terms and conditions as his current employment agreement to begin immediately following the expiration of his current employment agreement, Mr. Siegel shall receive payment of base salary, based on the then applicable salary level, for a period of twelve (12) months from the date of the expiration of his current employment agreement.

In the event of his death during the term of the employment agreement, Mr. Siegel’s estate or such other person as he designated will be entitled to receive his base salary for a period of one year from the date of his death.

In the event that Mr. Siegel should become disabled and be unable to perform his duties for a period of one hundred eighty (180) consecutive days or an aggregate of more than one hundred eighty (180) consecutive days in any 12 month period, the Company may terminate the employment agreement after the expiration of such period.

In addition, in the event there is a change in control (as defined in his employment agreement) and Mr. Siegel’s employment with us is terminated within 180 days following such change in control without cause or through constructive termination, Mr. Siegel will be entitled to a lump sum payment equal to 2.99 times his average annual total compensation, as measured for the past 5 years, in lieu of any remaining obligations of the Company under his employment agreement.  Had such termination occurred on December 31, 2008, Mr. Siegel would have been entitled to receive a $580,296 payment as a result of such termination.

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Under the 2006 Rallo Agreement, unless Mr. Rallo was terminated for cause (as defined in the 2006 Rallo Agreement), in the event that we did not offer Mr. Rallo to enter into a written employment agreement with terms and conditions no less favorable than substantially the same terms and conditions as the 2006 Rallo Agreement to begin immediately following the expiration of the 2006 Rallo Agreement, Mr. Rallo was entitled to receive payment of base salary, based on the then applicable salary level, for a period of twelve (12) months from the date of the expiration of his current employment agreement.

In addition, under the 2006 Rallo Agreement, in the event of his death during the term of the 2006 Rallo Agreement, Mr. Rallo’s estate or such other person as he designated was entitled to receive his base salary for a period of one year from the date of his death. In the event that Mr. Rallo became disabled and was unable to perform his duties for a period of one hundred eighty (180) consecutive days or an aggregate of more than one hundred eighty (180) consecutive days in any 12 month period, we had the right to terminate his employment agreement after the expiration of such period.

In addition, under the 2006 Rallo Agreement, in the event there was a change in control (as defined in the 2006 Rallo Agreement) and Mr. Rallo’s employment with us was terminated within 180 days following such change in control without cause or through a constructive termination, then Mr. Rallo was entitled to a lump sum payment equal to 2.99 times his average annual total compensation, as measured for the past 5 years, in lieu of any remaining obligations from us under his employment agreement.

Under the 2009 Rallo Agreement, unless Mr. Rallo is terminated for Cause, in the event that the Company does not offer Mr. Rallo to enter into a written employment agreement with terms and conditions no less favorable than substantially the same terms and conditions as the 2009 Rallo Agreement to begin immediately following the expiration of the 2009 Rallo Agreement, Mr. Rallo shall receive payment of base salary, based on the then applicable salary level, for a period of twelve (12) months, commencing seven (7) months following the date of the expiration of the 2009 Rallo Agreement.

Under the 2009 Rallo Agreement, in the event of Mr. Rallo’s death during the term of the 2009 Rallo Agreement, Mr. Rallo’s estate or such other person as he designated will be entitled to receive his base salary for a period of one year from the date of his death.  In the event that Mr. Rallo is to become disabled and be unable to perform his duties for a period of one hundred eighty (180) consecutive days or an aggregate of more than one hundred eighty (180) consecutive days in any 12 month period, we are entitled to terminate the 2009 Rallo Agreement after the expiration of such period

 In addition, under the 2009 Rallo Agreement in the event that there is a Change in Control and Mr. Rallo’s employment with the Company is terminated following such Change in Control under certain conditions, Mr. Rallo shall be entitled to receive a lump sum payment equal to 2.99 times his average annual total compensation, as measured for the past 5 years, in lieu of any remaining obligations of the Company under the Employment Agreement.  Had such termination occurred on December 31, 2008, Mr. Rallo would have been entitled to receive a $496,340 payment as a result of such termination.

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Unless Ms. Baldwin is terminated for cause (as defined in her employment agreement), in the event that we do not offer Ms. Baldwin to enter into a written employment agreement with terms and conditions no less favorable than substantially the same terms and conditions as her current employment agreement to begin immediately following the expiration of her current employment agreement, Ms. Baldwin shall receive payment of base salary, based on the then applicable salary level, for a period of twelve (12) months from the date of the expiration of her current employment agreement.

In the event of her death during the term of his employment agreement, Ms. Baldwin’s estate or such other person as she designated will be entitled to receive her base salary for a period of one year from the date of her death.   In the event that Ms. Baldwin should become disabled and be unable to perform her duties for a period of one hundred eighty (180) consecutive days or an aggregate of more than one hundred eighty (180) consecutive days in any 12 month period, we may terminate her employment agreement after the expiration of such period.

In addition, in the event there is a change in control (as defined in the Ms. Baldwin’s employment agreement) and Mr. Baldwin’s employment with us is terminated within 180 days following such change in control without cause or through a constructive termination, then Ms. Baldwin will be entitled to the greater of (i) an amount equal to the remainder of Ms. Baldwin’s salary which would be payable through the expiration of her employment agreement or (ii) an amount equal to twelve (12) months of the salary in effect under this agreement at the time of such termination. Had such termination occurred on December 31, 2008, Ms. Baldwin would have been entitled to receive a $155,000 payment as a result of such termination.

DIRECTOR COMPENSATION

The table below shows the annual compensation for the Company’s non-employee directors during 2008.

Name	Fees Earned or Paid In Cash($)		Stock Awards(1)  ($)		Option Awards  ($)		Total ($)
Ronald Levin		-	$	37,497		-	$	37,497
Yacov Shamash Ph.D.		-	$	37,497		-	$	37,497
John S.T. Gallagher		-	$	37,497		-	$	37,497
Gregory Fortunoff		-	$	32,098		-	$	32,098

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(1) Represents the compensation expense recognized for the fiscal year ended December 31, 2008 in accordance with SFAS 123R for restricted stock awards granted as long-term incentives pursuant to our Equity Compensation Plan.

(3) Mr. Fortunoff’s compensation reflects his membership on fewer committees of the Board of Directors than Mr. Levin, Mr. Shamash and Mr. Gallagher.

Narrative Disclosure to Directors Compensation Table

We do not compensate our Directors who are also employees for their service as Directors.  Our non-employee Directors receive restricted stock for their service as Directors, as determined on a yearly basis by our Board of Directors.

In April 2007, the Company’s Board of Directors adopted a new compensation plan for its non-employee directors. Under the plan, each non-employee director receives quarterly stock grants, in lieu of cash payments which existed under the prior plan.  Each non-employee director will receive common stock ranging in value from $15,000 up to $24,000 per year, depending on the number of committee memberships, to be granted for each quarter of service, based on the closing price of the stock at the end of the relevant quarter.

In addition, each non-employee Director was granted 2,444 restricted shares of common stock upon their election at the annual meeting of shareholders.

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Compensation Committee Interlocks and Insider Participation

Each of Mr. Shamash, Mr. Levin, Mr. Gallagher and Mr. Fortunoff served as members of the compensation committee during 2008, and none of them (i) was during such fiscal year, an officer or employee of the Company, (ii) formerly an officer of the Company, or (iii) had any relationship requiring disclosure under any paragraph of Item 404 of Regulation S-K.

During the fiscal year ended December 31, 2008, no executive officer of the Company served as a member of a compensation committee (or other board committee performing similar functions) of another entity, one of whose executive officers served on the Company’s compensation committee.

During the fiscal year ended December 31, 2008, no executive officer of the Company served as a director of another entity, one of whose executive officers served on the compensation committee of the Company.

During the fiscal year ended December 31, 2008, no executive officer of the Company served as a member of the compensation committee (or other board committee performing similar functions) of another entity, one of whose executive officers served as a director of the Company.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section included in this annual report on Form 10-K with management of the Company.  Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis section be included in this annual report on Form 10-K.

                                                                                                                          Yacov Shamash

                                                                                                                      Ronald Levin

                                                                                                                                 John S.T. Gallagher

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table contains a summary of the number of shares of Common Stock of the Company to be issued upon the exercise of options, warrants and rights outstanding at December 31, 2008, the weighted-average exercise price of those outstanding options, warrants and rights, and the number of additional shares of Common Stock remaining available for future issuance under the Company’s Equity Compensation Plans as at December 31, 2008.

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EQUITY COMPENSATION PLAN INFORMATION

Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights			Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for the future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity Compensation plans approved by security holders		908,235	(1)	$	4.27	(2)		390,697
Equity Compensation plans  not approved by security holders		-			-			-

(1) This amount includes 877,235 shares subject to outstanding stock options and 31,000 shares subject to future vesting measures.

(2) This amount combines the shares subject to outstanding stock options at a weighted average price of $4.25 and the shares subject to future vesting measures at a weighted average price of $4.80.

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as to the ownership of shares of the Company's Common Stock, as of March 21, 2009, with respect to (a) holders known to the Company to beneficially own more than five percent of the outstanding Common Stock of the Company, (b) each director, (c) the named executive officers in the Summary Compensation Table and (d) all directors and named executive officers of the Company as a group.  The Company understands that, except as noted below, each beneficial owner has sole voting and investment power with respect to all shares attributable to such owner.

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	Name and Address	Amount and Nature of			Percent of
Title of Class	Beneficial Owner(1)	Beneficial Ownership			Class(2)
Common Stock	Howard M. Siegel		1,080,669	(3)		11.5	%
Common Stock	Ronald Levin 184 Greenway Road Lido Beach, NY 11561		177,767	(3)		1.9	%
Common Stock	John S.T. Gallagher 26 Woodfield Road Stony Brook, NY 11790		32,467	(4)		*
Common Stock	Frederic S. Siegel		377,642	(5)		4.0	%
Common Stock	Yacov Shamash, PH.D. 7 Quaker Hill Road Stony Brook, NY 11790		61,567	(6)		*
Common Stock	Jack Rhian		345,953	(7)		3.6	%
Common Stock	Richard Rallo		120,226	(8)		1.3	%
Common Stock	Randi Baldwin		58,451	(9)		*
Common Stock	Gregory Fortunoff 200 East 72nd Street New York, NY 10021		824,232	(10)		8.8	%
Common Stock	Discovery Group 191 North Wacker Drive Suite 1685 Chicago, IL  60606		933,747			9.9	%
	All directors and executive officers as a group (9 persons)		3, 078,974	(11)		31.2	%

__________________________________________________

(1)	Except as otherwise indicated, the address of each individual listed is c/o the Company at 3265 Lawson Boulevard, Oceanside, New York 11572.
(2)	Asterisk indicates less than 1%.  Shares subject to options are considered outstanding only for the purpose of computing the percentage of outstanding Common Stock which would be owned by the optionee if the options were so exercised, but (except for the calculation of beneficial ownership by all directors and executive officers as a group) are not considered outstanding for the purpose of computing the percentage of outstanding Common Stock owned by any other person.
(3)	Includes 19,500 shares held as custodian for his son.  Mr. Siegel disclaims beneficial ownership of the shares owned by his daughter, son and spouse
(4)	Includes 40,000 shares subject to currently exercisable stock options.  Includes 15,200 shares owned by Mr. Levin's wife, to which Mr. Levin disclaims beneficial ownership.

69

(5)	Consists of 20,000 shares subject to currently exercisable stock options.
(6)	Includes 123,926 shares subject to currently exercisable stock options.
(7)	Includes 40,000 shares subject to currently exercisable stock options.
(8)	Includes 93,199 shares subject to currently exercisable stock options, and 48,000 shares owned by Mr. Rhian's wife.
(9)	Includes 81,926 shares subject to currently exercisable stock options.
(10)	Includes 55,180 shares subject to currently exercisable stock options.
(11)	Includes 10,000 shares subject to currently exercisable stock options. Includes 10,700 shares owned by Mr. Fortunoff’s son, for which Mr. Fortunoff is the custodian.
(12)	Includes currently exercisable options indicated in notes (3), (4), (5), (6), (7), (8), (9), (10) and (11).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

The Company's executive offices and back-up Emergency Response Center are located in a 5,600 square foot facility at 3265 Lawson Boulevard, Oceanside, New York.  On January 1, 1995, the Company entered into a five-year operating lease with Howard M. Siegel, Chairman of the Board and Senior Advisor.  In February 1998 the lease for this space and the adjoining 8,000 square foot parking lot was extended until September 30, 2007 (the "Lease") and subsequently through additional extensions has been extended through December 2009.  The Lease provides for a base annual rent of $74,600, subject to a 5% annual increase plus reimbursements for real estate taxes and other operating expenses.

The Company also currently leases office space from certain telephone answering service managers pursuant to leases.  The leases with these managers expire in December 2009 and December 2012, respectively.

Howard M. Siegel owed the Company $123,532 at December 31, 2001 for certain advances made to him.  In July 2002, the amount owned by Mr. Siegel, plus accrued interest, was converted into a term promissory note. The term promissory note bears interest at a rate of 5% per annum and is payable in monthly installments of principal and interest through September 1, 2009.  The amounts outstanding at December 31, 2008 and 2007 were $21,117 and $48,071, respectively.

Review, Approval or Ratification of Transactions with Related Persons

The Compensation Committee has an established procedure for reviewing and recommending for approval to the Board of Directors any compensation-related transaction with a related party that would require disclosure under Item 404 of Regulation S-K.  The Audit Committee has an established procedure for reviewing and recommending for approval to the Board of Directors any non-compensation-related transaction with a related party that would require disclosure under Item 404 of Regulation S-K.

70

Family relationships

The Company employs Howard M. Siegel as Senior Advisor.  In 2008, he earned compensation of $226,359.  Howard M. Siegel is the father of Frederic S. Siegel.

The Company employs Frederic S. Siegel as Executive Vice President.  In 2008, he earned a salary of $200,000.  Frederic S. Siegel is the son of Howard M. Siegel.

The Company employs Joy Siegel as Vice President of Provider Relations.  In 2008, Ms. Siegel earned a salary of $100,334.  Ms. Siegel is the daughter of Howard M. Siegel and the sister of Frederic S. Siegel.

Director Independence

Each of the following Directors of the Company is independent as defined in Rule 4200(a) of the Nasdaq Stock Market's Marketplace Rules: Mr. Shamash, Mr. Levin, Mr. Gallagher and Mr. Fortunoff.  All of the members of the Board of Directors' Audit Committee and Compensation Committee meet the applicable independence requirements.

Item 14. Principal Accounting Fees and Services

The firm of Margolin, Winer & Evens, LLP has served as the independent auditors of the Company since 1995. The Audit Committee of the Board of Directors has appointed Margolin, Winer & Evens, LLP to continue as the independent auditors of the Company for the fiscal year ending December 31, 2008 and 2007.  In addition, the Company engaged Eisner LLP to assist management with its performance of itsevaluation of its internal controls under Sarbanes Oxley Section 404.

	Fiscal Year Ended
	December 31, 2008		December 31, 2007
Audit Fees (a)	$	248,000	$	238,000
Audit-Related Fees (b)		18,500		55,000
Tax Fees (c)		62,000		58,000
All Other Fees (d)		25,479		172,713
Total Fees	$	353,979	$	523,713

(a) Audit fees include the audit of the Company’s annual consolidated financial statement and review of the quarterly consolidated financial statements.

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(b) Audit-related fees include services for employee benefit plan audits, and consultations concerning financial accounting and reporting.

(c) Tax fees include services for the preparation of Company’s tax returns.

(d) Other fees include fees incurred for an evaluation of the Company’s internal controls under Sarbanes Oxley Section 404 and other tax related matters.

Audit Committee Pre-Approval Policies

The Audit Committee has adopted a procedure under which all fees charged by Margolin, Winer & Evens, LLP must be pre-approved by the Audit Committee, subject to certain permitted statutory de minimus exceptions.  In 2008, the Audit Committee pre-approved all Audit-Related Fees, Tax Fees and All Other Fees paid to Margolin, Winer & Evens LLP.

Item 15.          EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)	Financial Statements	1. Financial Statements:      Report of Independent Registered Accounting Firm      Consolidated Balance Sheets      Consolidated Statements of Income      Consolidated Statements of Shareholders' Equity      Consolidated Statements of Cash Flows      Notes to Financial Statements 2. Financial Statements Schedules: None. 3. Exhibits: The required exhibits are included at the end of this report and are described in the Exhibit Index below.
	Exhibit Index
	Exhibit No.	Identification of Exhibit
	3(a)(i)	Articles of Incorporation of Company, as amended. (Incorporated by reference to Exhibit 3(a) to the Company's Form S-1 Registration Statement under the Securities Act of 1933, filed on September 30, 1983 – File No. 2-86862)
	3(a)(ii)	Certificate of Amendment to the Company’s Articles of Incorporation.  (Incorporated by reference to Exhibit 3.1 of the Company’s Form 10-QSB filed with the SEC on November 14, 2002).
	3(b)	Amended and Restated By-Laws of Company, as further amended.  (Incorporated by reference to Exhibit 3(b) of the Company’s Form 10-K for year ended December 31, 2007).

72

3(c)	Articles of Incorporation of Safe Com Inc.  (Incorporated by reference to Exhibit 3(c) to the Company's Form 10-KSB for the year ended December 31, 1999).
3(d)	Certificate of Incorporation of HCI Acquisition Corp.  (Incorporated by reference to Exhibit 3(d) of the Company’s Form 10-KSB for the year ended December 31, 2000).
3(e)	Certificate of Incorporation of Live Message America Acquisition Corp.  (Incorporated by reference to Exhibit 3(e) of the Company’s Form 10-KSB/A filed with the SEC on November 17, 2004)
3(f)	Certificate of Incorporation of North Shore Answering Service, Inc.  (incorporated by reference to Exhibit 3(f) to the Company’s Form 10-KSB for the year ended December 31, 2005)
3(g)	Certificate of Incorporation of Answer Connecticut Acquisition, Corp.  (incorporated by reference to Exhibit 3(g) to the Company’s Form 10-KSB for the year ended December 31, 2005)
3(h)	Certificate of Incorporation of MD OnCall Acquisition Corp.  (incorporated by reference to Exhibit 3(h) to the Company’s Form 10-KSB for the year ended December 31, 2005)
3(i)	Certificate of Incorporation of American Mediconnect Acquisition Corp. (incorporated by reference to Exhibit 3(i) to the Company’s Form 10-K for the year ended December 31, 2006)
4.1	Stock and Warrant Purchase Agreement, dated as of March 27, 2002, between the Company and certain investors. (Incorporated by reference to the Company’s Registration Statement on Form S-3 filed with the SEC on May 14, 2002).
4.2	Form of Warrant to purchase shares of Common Stock, issued to certain investors. (Incorporated by reference to the Company’s Registration Statement on Form S-3 filed with the SEC on May 14, 2002).
10(a)(i)+	Employment Agreement dated November 11, 2005, between the Company and Jack Rhian  (Incorporated by reference to Exhibit 10.1 of the Company's Form 10-QSB for the quarter ended September 30, 2005).
10(a)(ii)+	Stock Purchase Agreement dated January 20, 2006, between the Company and Jack Rhian (Incorporated by reference to Exhibit 10.3 of the Company's Form 8-K filed on January 26, 2006).
10(a)(iii)+*	Amendment to Employment Agreement, dated March 30, 2009, between the Company and Jack Rhian

73

10(b)+	Employment Agreement dated December 13, 2006 between the Company and Howard M. Siegel.  (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 19, 2006).
10(c)(i)+	Employment Agreement dated as of June 15, 2004, between the Company and Frederic S. Siegel. (Incorporated by reference to Exhibit 10(c)(i) of the Company’s Form 10-QSB for the quarter ended June 30, 2004).
10(c)(ii)+	Letter dated July 16, 2004 confirming waiver of certain commissions by Frederic Siegel. (Incorporated by reference to Exhibit 10(c)(ii) of the Company’s Form 10-QSB for the quarter ended June 30, 2004).
10(c)(iii)+	Employment Agreement, dated as of December 28, 2006, between the Company and Frederic Siegel.  (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed on May 30, 2007)
10(c)(iv)+	Stock Purchase Agreement, dated as of December 31, 2007, between the Company and Frederic Siegel.  (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed on January 7, 2008)
10(c)(v)+*	Amendment to Employment Agreement, dated as of March 30. 2009, between the Company and Frederic Siegel.
10(d)(i)+	Employment Agreement dated January 20, 2006, between the Company and Richard Rallo (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on January 26, 2006).
10(d)(ii)+	Stock Purchase Agreement dated January 20, 2006, between the Company and Richard Rallo (Incorporated by reference to Exhibit 10.2 of the Company's Form 8-K filed on January 26, 2006).
10(d)(iii)+	Employment Agreement dated January 19, 2009, between the Company and Richard Rallo (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on January 23, 2009).
10(d)(iv)+*	Stock Purchase Agreement dated as of January 31, 2009, between the Company and Richard Rallo.
10(e)+	Employment Agreement dated December 28, 2006 between the Company and Randi Baldwin.  (Incorporated by reference to Exhibit 10(e) to the Company’s Form 10-K for the year ended December 31, 2006)
10(f)(i)	Lease for the premises located at 3265 Lawson Boulevard, Oceanside, New York.  (Incorporated by reference to Exhibit 10(h) to the Company’s Form 10-KSB for the year ended December 31, 1994).
10(f)(ii)	Amendment to Lease for the premises located at 3265 Lawson Boulevard, Oceanside, New York (Incorporated by reference to Exhibit 10(i) to the Company's Form 10-KSB for the year ended December 31, 1997).

74

10(h)(i)	Lease for the premises located at 910 Church Street, Decatur, Georgia (Incorporated by reference to Exhibit 10(k) to the Company's Form 10-KSB for the year ended December 31, 1997).
10(h)(ii)	Assignment of Rents and Leases dated January 7, 1999 relating to the leased premises at 910 Church Street, Decatur, Georgia (Incorporated by reference to Exhibit 10(x) to the Company’s form 10-KSB for the year ended December 31, 1998).
10(j)	Lease for the premises located at 475 West 55th Street, Countryside, Illinois.  (Incorporated by reference to Exhibit 10(k) to the Company's Form 10-KSB for the year ended December 31, 1995.)
10(k)	Amendment to Lease for the premises located at 475 West 55th Street, Countryside, Illinois (Incorporated by reference to Exhibit 10(n) to the Company's Form 10-KSB for the year ended December 31, 1997).
10(l)	Lease for the premises located at Store Space No. 300, 12543 North Highway 83, Parker, Colorado, dated March 9, 2000. (Incorporated by reference to Exhibit 10(l) of the Company’s Form 10-KSB for the year ended December 31, 2001).
10(m)(i)	Lease for the premises located at 33-36 33rd Street, Long Island City, New York, dated January 14, 2002. (Incorporated by reference to Exhibit 10(m)(i) of the Company’s Form 10-KSB for the year ended December 31, 2001).
10(m)(ii)	Lease Amendment and Modification for the premises located at 33-36 33rd Street, Long Island City, New York. (Incorporated by reference to Exhibit 10(m)(ii) of the Company’s Form 10-KSB for the year ended December 31, 2001).
10(m)(iii)	Lease for premises located at 36-36 33rd Street, Long Island City, NY, dated August 10, 2005, (Incorporated by reference to Exhibit 10.3 of the Company Form 10-QSB/A filed on November 18, 2005)
10(m)(iv)	Lease for premises located at 36-36 33rd Street, Long Island City, NY, dated October 25, 2005 (Incorporated by reference to Exhibit 10.4 of the Company's Form 10-QSB/A filed on November 18, 2005).
10(n)+	Amended 1991 Stock Option Plan.  (Incorporated by reference to Exhibit 10(l) to the Company’s Form 10-KSB for the year ended December 31, 1994).
10(o)+	1997 Stock Option Plan (Incorporated by reference to Exhibit 10(q) to the Company's Form 10-KSB for the year ended December 31, 1997).

75

10(p)+	2000 Stock Option Plan. (Incorporated by reference to Exhibit A of the Company's Definitive Proxy Statement, filed with the Commission and dated June 1, 2000).
10(q)(i)+	2005 Stock Incentive Plan (Incorporated by reference to Exhibit A of the Company's Definitive Proxy Statement, filed on June 30, 2005).
10(q)(ii)+	Text of Amendment to 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.4(iii) of the Company's Form 8-K filed on January 26, 2006).
10(r)	Agreement between the Company and the City of New York, dated February 22, 2002. (Incorporated by reference to Exhibit 10(p)(ii) of the Company’s Form 10-KSB for the year ended December 31, 2001).
10(t)(i)	Credit Agreement, dated as of May 20, 2002, by and between the Company and the Bank of New York (Incorporated by reference to Exhibit 10(t) of the Company’s Form 10-KSB for the year ended December 31, 2002).
10(t)(ii)	Amendment to Credit Agreement dated March 28, 2005, between the Company and the Bank of New York (Incorporated by reference to Exhibit 10(t)(ii) of the Company's Form 10-KSB for the year ended December 31, 2004).
10(t)(iii)	Amendment to Credit Agreement dated December 9, 2005, between the Company and the Bank of New York, (Incorporated by reference to Exhibit 10.2 of the Company's Form 8-K filed on December 14, 2005).
10(t)(iv)	Amendment to Credit Agreement dated March 16, 2006, between the Company and the Bank of New York.  (Incorporated by reference to Exhibit 10(t)(iv) to the Company’s Form 10-KSB for the year ended December 31, 2005)
10(t)(v)	Amendment to Credit Agreement dated December 22, 2006, between the Company and JPMorgan Chase.  (Incorporated by reference to Exhibit 10(t)(v) of the Company’s Form 10-K for year ended December 31, 2006).
10(t)(vi)	Amendment to Credit Agreement dated April 30, 2007, between the Company and JPMorgan Chase.  (Incorporated by reference to Exhibit 10(t)(vi) of the Company’s Form 10-K for year ended December 31, 2007).
10(t)(vii)	Amendment to Credit Agreement dated November 9, 2007, between the Company and JPMorgan Chase.  (Incorporated by reference to Exhibit 10(t)(vii) of the Company’s Form 10-K for year ended December 31, 2007).
10(t)(viii)	Amendment to Credit Agreement dated March 27, 2008, between the Company and JPMorgan Chase.  (Incorporated by reference to Exhibit 10(t)(viii) of the Company’s Form 10-K for year ended December 31, 2007).

76

10(v)	Cooperative Licensing, Development, Services and Marketing Agreement, dated November 1, 2001, between the Company and Health Hero Network, Inc. (Incorporated by reference to Exhibit 10.1 of the Company’s Form 10-QSB filed with the SEC on November 14, 2001).
10(w)	Term Promissory Note, dated June 24, 2002, issued by Howard M. Siegel in favor of the Company. (Incorporated by reference to Exhibit 10(x) of the Company’s Form 10-KSB for the year ended December 31, 2002).
10(x)(i)	Asset Purchase Agreement dated September 28, 2005, with WMR Associates, Inc. (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on October 4, 2005).
10(x)(ii)	Asset Purchase Agreement dated December 9, 2005, with Answer Connecticut, Inc. (Incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed on December 14, 2005).
10(x)(iii)	Asset Purchase Agreement dated March 10, 2006, with Capitol Medical Bureau, Inc. and MD OnCall, LLC.  (Incorporated by reference to Exhibit 10(x)(iii) to the Company’s Form 10-KSB for the year ended December 31, 2005)
10(x)(iv)	Asset Purchase Agreement dated December 22, 2006, with American Mediconnect, Inc. and PhoneScreen, Inc.  (Incorporated by reference to Exhibit 10 (xiv) of the Company’s Form 10-K for year ended December 31, 2006).
21	Subsidiaries of the Company (Incorporated by reference to Exhibit 21 of the Company’s Form 10-K for year ended December 31, 2006).
23.1*	Consent of Margolin, Winer & Evens, LLP.
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

77

32.2* Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*     Filed herewith.

+ Management contract or compensatory plan or arrangement

78

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERICAN MEDICAL ALERT CORP.
By:	/s/Jack Rhian
	Jack Rhian
	Chief Executive Officer and President

Dated: March 31, 2009

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Howard M. Siegel	Chairman of the Board	March 31, 2009
Howard M. Siegel	and Director
/s/ Jack Rhian	Chief Executive Officer	March 31, 2009
Jack Rhian	and President
/s/ Ronald Levin	Director	March 31, 2009
Ronald Levin
/s/John S.T. Gallagher	Director	March 31, 2009
John S.T. Gallagher
/s/ Frederic S. Siegel	Executive Vice President	March 31, 2009
Frederic S. Siegel	and Director
/s/ Yacov Shamash	Director	March 31, 2009
Dr. Yacov Shamash
/s/ Gregory Fortunoff	Director	March 31, 2009
Gregory Fortunoff
/s/ Richard Rallo	Chief Financial Officer	March 31, 2009
Richard Rallo

AMERICAN MEDICAL ALERT CORP.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 2008, 2007 and 2006

AMERICAN MEDICAL ALERT CORP.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 2008, 2007 and 2006

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

CONTENTS

Report of Independent Registered Public Accounting Firm	F-1
Financial Statements:
Consolidated Balance Sheets	F-2 and F-3
Consolidated Statements of Income	F-4
Consolidated Statements of Shareholders’ Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7 - F-29
Schedule II – Valuation and Qualifying Accounts	F-30

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

American Medical Alert Corp. and Subsidiaries

Oceanside, New York

We have audited the accompanying consolidated balance sheets of American Medical Alert Corp. and Subsidiaries as of December 31, 2008 and 2007 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2008.  We have also audited the financial statement schedule listed in the accompanying index.  These consolidated financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Medical Alert Corp. and Subsidiaries as of December 31, 2008 and 2007 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, the related financial statement schedule when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), Share Based Payment.

/s/ Margolin, Winer & Evens LLP

Garden City, New York

March 30, 2009

F-1

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,	2008		2007
ASSETS
Current Assets:
Cash	$	2,473,733	$	911,525
Accounts receivable (net of allowance for doubtful accounts of $646,000 in 2008 and $554,000 in 2007)		6,001,952		5,655,286
Notes receivable		21,117		26,954
Inventory		547,596		552,736
Prepaid income taxes		215,427		309,260
Prepaid expenses and other current assets		436,554		941,601
Deferred income taxes		358,000		275,000
Total Current Assets		10,054,379		8,672,362
Fixed Assets - at cost:
Medical devices		18,983,438		19,003,292
Monitoring equipment		3,649,051		3,322,049
Furniture and equipment		3,038,740		2,536,993
Leasehold improvements		1,433,601		1,073,283
Automobiles		281,841		271,542
Construction in progress		-		66,010
		27,386,671		26,273,169
Less accumulated depreciation and amortization		17,216,764		15,473,856
		10,169,907		10,799,313
Other Assets:
Long-term portion of notes receivable		-		21,117
Intangible assets (net of accumulated amortization of $5,386,262 and $4,393,073 in 2008 and 2007)		3,085,931		4,232,226
Goodwill (net of accumulated amortization of $58,868)		9,996,152		9,766,194
Other assets		1,059,895		1,462,009
		14,141,978		15,481,546
Total Assets	$	34,366,264	$	34,953,221

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

F-2

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,	2008			2007
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	1,754,949		$	1,414,419
Accounts payable		749,335			1,716,179
Accounts payable – acquisitions		20,390			73,896
Accrued expenses		1,348,823			1,550,283
Current portion of capital lease obligations		-			42,015
Deferred revenue		294,882			274,101
Total Current Liabilities		4,168,379			5,070,893
Deferred Income Tax Liability		1,208,000			947,000
Long-Term Debt, Net of Current Portion		2,815,000			4,694,316
Long-Term Portion of Capital Lease Obligations		-			32,425
Customer Deposits		106,196			81,200
Accrued Rental Obligation		507,512			446,722
Other Liabilities		10,000			10,000
Total Liabilities		8,815,087			11,282,556
Commitments and Contingencies		-			-
Shareholders’ Equity:
Preferred stock, $.01 par value -
Authorized, 1,000,000 shares; none issued and outstanding		-			-
Common stock, $.01 par value -
Authorized, 20,000,000
Issued 9,493,402 shares in 2008 and 9,385,880 in 2007		94,934			93,859
Additional paid-in capital		15,871,305			15,421,227
Retained earnings		9,721,515			8,281,914
		25,687,754			23,797,000
Less treasury stock, at cost (48,573 shares in 2008 and 46,798 shares in 2007)		(136,577	)		(126,335	)
Total Shareholders’ Equity		25,551,177			23,670,665
Total Liabilities and Shareholders’ Equity	$	34,366,264		$	34,953,221

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

F-3

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31,	2008			2007			2006
Revenue:
Services	$	37,317,274		$	35,054,093		$	30,406,636
Product sales		1,269,546			591,172			387,752
		38,586,820			35,645,265			30,794,388
Costs and Expenses (Income):
Costs related to services		18,102,883			17,285,906			14,747,743
Cost of products sold		553,593			316,057			234,336
Selling, general and administrative expenses		16,652,255			15,992,153			13,864,522
Interest expense		279,451			481,166			394,613
Loss on abandonment		886,504			-			-
Other expense (income)		(334,467	)		(1,090,249	)		(578,355	)
		36,140,219			32,985,033			28,662,859
Income Before Provision for
Income Taxes		2,446,601			2,660,232			2,131,529
Provision for Income Taxes		1,007,000			1,146,000			869,000
Net Income	$	1,439,601		$	1,514,232		$	1,262,529
Basic Earnings Per Share	$	.15		$	.16		$	.14
Diluted Earnings Per Share	$	.15		$	.16		$	.13

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

F-4

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Years Ended December 31, 2008, 2007 and 2006

	COMMON STOCK
	NUMBER				ADDITIONAL
	OF				PAID-IN		RETAINED		TREASURY
	SHARES		AMOUNT		CAPITAL		EARNINGS		STOCK			TOTAL
Balance - January 1, 2006		8,765,415	$	87,654	$	12,897,151	$	5,505,153	$	(106,032	)	$	18,383,926
Issuance of Common Stock - Employees		31,333		313		187,687		-		-			188,000
Issuance of Common Stock - Acquisitions		92,327		923		571,465		-		-			572,388
Issuance of Stock Options		-		-		61,261		-		-			61,261
Exercise of Stock Options		253,511		2,537		499,049		-		-			501,586
Exercise of Warrants		87,500		875		331,625		-		-			332,500
Income Tax Benefit of Stock Options Exercised		-		-		43,000		-		-			43,000
Net Income for the Year Ended December 31, 2006		-		-		-		1,262,529		-			1,262,529
Balance - December 31, 2006		9,230,086		92,302		14,591,238		6,767,682		(106,032	)		21,345,190
Issuance of Common Stock - Employees		36,584		365		247,888		-		-			248,253
Issuance of Common Stock - Directors		16,471		165		130,770		-		-			130,935
Issuance of Stock Options		-		-		5,000		-		-			5,000
Exercise of Stock Options		80,489		805		335,504		-		-			336,309
Exercise of Warrants		22,250		222		84,327		-		-			84,549
Income Tax Benefit of Stock Options Exercised		-		-		26,500		-		-			26,500
Purchase of Treasury Stock (cost of 2,888 shares)		-		-		-		-		(20,303	)		(20,303	)
Net Income for the Year Ended December 31, 2007		-		-		-		1,514,232		-			1,514,232
Balance - December 31, 2007		9,385,880		93,859		15,421,227		8,281,914		(126,335	)		23,670,665
Issuance of Common Stock - Employees		18,833		188		124,087		-		-			124,275
Issuance of Common Stock - Directors		26,827		268		144,321		-		-			144,589
Issuance of Stock Options		-		-		56,250		-		-			56,250
Exercise of Stock Options		61,862		619		125,420		-		-			126,039
Purchase of Treasury Stock (cost of 1,775 shares)		-		-		-		-		(10,242	)		(10,242	)
Net Income for the Year Ended December 31, 2008		-		-		-		1,439,601		-			1,439,601
Balance - December 31, 2008		9,493,402	$	94,934	$	15,871,305	$	9,721,515	$	(136,577	)	$	25,551,177

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

F-5

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,	2008			2007			2006
Cash Flows from Operating Activities:
Net income	$	1,439,601		$	1,514,232		$	1,262,529
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (benefit) for deferred income taxes		178,000			(81,000	)		91,000
Provision for doubtful receivables		241,096			185,954			210,795
Stock compensation charge		325,113			384,187			249,261
Depreciation and amortization		4,376,317			4,302,118			3,515,262
Loss on abandonment		886,504			-			-
Settlement Agreement		-			(425,000	)		-
Accrued rental obligation		60,790			65,466			191,026
Income tax benefit from stock options exercised		-			26,500			43,000
Decrease (increase) in:
Accounts receivable		(587,761	)		(920,290	)		(626,204	)
Inventory		5,140			(238,885	)		18,472
Prepaid income taxes		93,833			125,371			434,631
Prepaid expenses and other current assets		603,681			161,087			(176,527	)
Increase (decrease) in:
Accounts payable		(966,845	)		911,177			(315,267	)
Accrued expenses		(176,463	)		52,395			(643,466	)
Deferred revenue		20,781			169,586			(6,913	)
Other liabilities		-			(30,000	)		(85,000	)
Net Cash Provided by Operating Activities		6,499,787			6,202,898			4,162,599
Cash Flows from Investing Activities:
Repayments of notes receivable		26,954			25,642			24,394
Purchase of American Mediconnect, Inc.		(209,568	)		(159,337	)		(1,550,136	)
Purchase of MD OnCall		-			-			(2,877,648	)
Purchase of Answer Connecticut, Inc.		-			-			(30,493	)
Purchase - other		(83,731	)		(321,593	)		(70,345	)
Payment of accounts payable - acquisitions		(73,896	)		(477,308	)		(1,489,635	)
Expenditures for fixed assets		(2,544,146	)		(4,543,084	)		(3,563,253	)
(Increase) decrease in other assets		(14,060	)		97,346			(266,425	)
Deposits on equipment		(541,703	)		-			(321,987	)
Payment for account acquisitions and licensing agreement		-			(35,000	)		(438,996	)
Net Cash Used in Investing Activities		(3,440,150	)		(5,413,334	)		(10,584,524	)
Cash Flows from Financing Activities:
Proceeds from long-term debt		100,000			550,000			4,850,000
Repayment of long-term debt		(1,638,786	)		(1,645,660	)		(991,812	)
Principal payments under capital lease obligations		(74,440	)		(39,183	)		(53,084	)
Purchase of Treasury Stock		(10,242	)		(20,303	)		-
Exercise of stock options and warrants		126,039			420,859			834,085
Net Cash Provided by (Used in) Financing Activities		(1,497,429	)		(734,287	)		4,639,189
Net Increase (Decrease) in Cash		1,562,208			55,277			(1,782,736	)
Cash - beginning of year		911,525			856,248			2,638,984
Cash - end of year	$	2,473,733		$	911,525		$	856,248
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the year for:
Interest	$	277,651		$	519,426		$	364,702
Income taxes		863,463			950,095			1,542,774
Supplemental Schedule of Noncash Investing
and Financing Activities:
Common Stock issued in connection with acquisition	$	-		$	-		$	572,388
Accounts payable due sellers in connection with acquisitions		20,390			73,896			648,840
Long-term debt issued in connection with acquisition of PERS subscriber base		-			-			300,000

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

F-6

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of
Significant 
Accounting
Policies Scope of business - The Company’s portfolio of services includes Health and Safety Monitoring Systems (“HSMS”), which encompasses personal emergency response systems (“PERS”), telehealth systems and pharmacy security monitoring systems (Safe Com), and telephony based communication services (“TBCS”). The Company’s PERS business is to sell, rent, install, service and monitor remote communication systems with personal security and smoke/fire detection capabilities, linked to an emergency response monitoring center.  The telehealth system has two main components; the first is a patient home monitoring appliance and the second is a web based care management software program. Safe Com provides personal safety and asset monitoring to retail pharmacy establishments. TBCS provides after-hours telephone answering services as well as “Daytime Service” applications to the healthcare community and clinical trial recruitment call center services to pharmaceutical companies and clinical resource organizations.  The Company markets its products primarily to institutional customers, including long-term care providers, retirement communities, hospitals, and government agencies, physicians and group practices and individual consumers across the United States.   Consolidation policy - The accompanying consolidated financial statements include the accounts of American Medical Alert Corp. and its wholly-owned subsidiaries; together the “Company.”  All material inter-company balances and transactions have been eliminated.   Accounts receivable - Accounts receivable are reported in the balance sheet at their outstanding principal balance net of an estimated allowance for doubtful accounts.  Sales terms usually provide for payment within 30 to 60 days of billing.  An allowance for doubtful accounts is estimated based upon a review of outstanding receivables, historical collection information, and existing economic conditions. During the years ended December 2008, 2007 and 2006, provisions for doubtful accounts of approximately $241,000, $186,000 and $211,000, respectively, were charged to income and included in general and administrative expenses.  Accounts receivable are charged against the allowance when substantially all collection efforts cease.  Recoveries of accounts receivable previously charged off are recorded when received.   Inventory valuation - Inventory, consisting of finished goods held for resale and component parts, is valued at the lower of cost (first-in, first-out) or market.  At December 31, 2008 and 2007, the Company had reserves on certain component parts inventory aggregating approximately $27,000 and $53,000, respectively.   Fixed assets - Depreciation is computed by the straight-line method at rates adequate to allocate the cost of applicable assets over their expected useful lives as follows:

F-7

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Medical devices	3 - 7 years
Monitoring equipment	5 years
Furniture and equipment	5 - 7 years
Automobiles	3 years

Amortization of leasehold improvements is provided on a straight-line basis over the shorter of the useful life of the asset or the term of the lease.

In accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company reviews its fixed assets and intangible assets with finite lives for impairment when there are indications that the carrying amounts of these assets may not be recoverable.  In 2008, the Company wrote-off fixed assets of approximately $37,000 relating to loss on abandonment as described in Note 9.  No other write-down on fixed assets was recorded in 2008.  In 2007, the Company recorded a write-down on fixed assets of approximately $111,000.  No impairment losses were recorded during the year ended December 31, 2006.

Goodwill and other intangible assets - Goodwill represents the cost in excess of the fair value of the tangible and identifiable intangible net assets of businesses acquired.  Goodwill and indefinite life intangible assets are not amortized, but are subject to annual impairment tests.  The Company completes the annual impairment test during the fourth quarter.   As of December 31, 2008 and 2007, no evidence of impairment existed.

Other intangible assets with finite lives are amortized on a straight-line basis over the periods of expected benefit.  The Company's other intangible assets include: (a) trade accounts and trade name (collectively, “account acquisitions”) which are amortized over their estimated lives of three to ten years; (b) noncompete agreements which are being amortized over their contractual lives of five years; (c) customer lists which are being amortized over five to seven years and (d) licensing agreement which is being amortized over the term of the related agreement (Note 2).

Income taxes - The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” pursuant to which deferred taxes are determined based on the differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates, as well as any net operating loss or tax credit carryforwards expected to reduce taxes payable in future years.

Revenue recognition - HSMS revenue principally consists of fixed monthly charges covering the rental of the PERS, telehealth units and Safe Com units as well as the monitoring of the PERS and telehealth units.  With respect to certain agreements, the Company may charge an activation fee.  In instances where this occurs, the Company recognizes revenue on a straight-line basis over the estimated period a subscriber will be online.

F-8

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The remainder of revenue is derived from product sales and the installation of PERS equipment.  The Company recognizes revenue from product sales at the time of delivery.  Installation service revenue is recognized when the service is provided.  Expenses incurred in connection with installation services are also recognized at this time.  Installation services include the actual installation of the monitoring equipment, the testing of the units and instructing the customer how to operate and use the equipment.  Installation services represented approximately 1%, 1% and 2% of total revenues for 2008, 2007 and 2006, respectively.

In the TBCS segment, revenue is primarily derived from monthly services pursuant to contracts.  Certain TBCS customers are billed in advance on a semi-annual and annual basis.  Unearned revenue is deferred and recognized as services are rendered.

None of the Company’s billings are based on estimates.

Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis, and therefore, are excluded from revenues in the consolidated statements of income.

Advertising - The Company expenses advertising costs as incurred.  Advertising costs, which are included in selling, general and administrative expenses, for the years ended December 31, 2008, 2007 and 2006 were approximately $1,134,000, $408,000 and $275,000, respectively.

Research and development costs - Research and development costs, which are expensed and included in selling, general and administrative expenses, were $329,707, $304,365 and $240,487 for the years ended December 31, 2008, 2007 and 2006, respectively.

Income per share - Earnings per share data for the years ended December 2008, 2007 and 2006 are presented in conformity with SFAS No. 128, “Earnings Per Share.”

The following table is a reconciliation of the numerators and denominators in computing earnings per share:

F-9

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Income		Shares		Per-Share
	(Numerator)		(Denominator)		Amounts
2008
Basic EPS -
Income available to common shareholders	$	1,439,601		9,426,912	$	.15
Effect of dilutive securities -
Options		-		243,651
Diluted EPS -
Income available to common shareholders and assumed conversions	$	1,439,601		9,670,563	$	.15
2007
Basic EPS -
Income available to common shareholders	$	1,514,232		9,276,712	$	.16
Effect of dilutive securities -
Options and warrants		-		455,674
Diluted EPS -
Income available to common shareholders and assumed conversions	$	1,514,232		9,732,386	$	.16
2006
Basic EPS -
Income available to common shareholders	$	1,262,529		8,948,328	$	.14
Effect of dilutive securities -
Options and warrants		-		437,814
Diluted EPS -
Income available to common shareholders and assumed conversions	$	1,262,529		9,386,142	$	.13

F-10

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of credit risk - Financial instruments which potentially subject the Company to concentration of credit risk principally consists of accounts receivable from state and local government agencies.  The risk is mitigated by the Company’s procedures for extending credit, follow-up of disputes and receivable collection procedures.  In addition, the Company maintains its cash in a financial institution that is under federal deposit insurance coverage.  On October 14, 2008, the FDIC announced its temporary Transaction Account Guarantee Program providing depositors with unlimited coverage for noninterest-bearing transaction accounts through December 31, 2009, if their bank is a participant in the FDIC’s Temporary Liquidity Guarantee Program.  The bank that the Company uses is a participant of this FDIC program.  The cash that the Company maintains at the bank is fully covered by the FDIC.

Reclassifications - Certain amounts in the 2007 and 2006 consolidated financial statements have been reclassified to conform to the 2008 presentation.

Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Accounting estimates, in part, are based upon assumptions concerning future events.  Among the more significant are those that relate to collectability of accounts receivable, and the estimated lives and recoverability of long-lived assets, including goodwill and other assets.  Accounting estimates reflect the best judgment of management and actual results may differ from those estimates.

Fair value of financial instruments - Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments,” requires all entities to disclose the fair value of certain financial instruments in their financial statements.  The Company estimates that the fair value of its cash, accounts and notes receivable, accounts payable and accrued expenses approximates their carrying amounts due to the short maturity of these instruments.  Substantially all long-term debt bears interest at variable rates currently available to the Company; accordingly, their carrying amounts approximate their fair value.

Accounting for stock-based compensation – Stock based compensation is recorded in accordance with FASB Statement No. 123 (revised 2004), “Share-Based Payment”(“Statement No. 123(R)”), which requires the measurement and recognition of compensation expense for all share-based payments to employees, including grants of stock and employee stock options, based on estimated fair values.

F-11

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Stock-based compensation expense recognized in the Company's consolidated statements for the years ended December 31, 2008, 2007 and 2006 includes compensation expense for share-based payment awards granted prior to, but not yet vested as of December 31, 2005 based on the grant date fair value estimated in accordance with the pro forma disclosure provisions of Statement No. 123 and compensation expense for the share-based payment awards granted subsequent to December 31, 2005 based on the grant date fair value estimated in accordance with the provisions of Statement No. 123(R).

The following table summarizes stock-based compensation expense, which is included in selling, general and administrative expense, related to all share-based payments recognized in the consolidated statements of income.

	2008			2007			2006
Stock options	$	56,250		$	5,000		$	61,261
Stock grants – other		144,589			173,714			-
Service based awards		124,275			124,275			80,000
Performance based awards		-			81,198			108,000
Tax benefits		(133,291	)		(161,400	)		(103,694	)
Stock-based compensation expense, net of tax	$	191,823		$	222,787		$	145,567
Effect on basic and diluted earnings per share	$	0.02		$	0.02		$	0.02

Recent accounting pronouncements - In December 2007, the FASB issued SFAS No. 141(R) (revised 2007), “SFAS 141(R),” “Business Combinations,” which replaces SFAS 141. The statement provides a broader definition of the “Acquirer” and establishes principles and requirements of how the Acquirer recognizes and measures in its financial statements the identifiable assets acquired and liabilities assumed as well as how the acquirer recognizes and measures the goodwill acquired in the business combination.  SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after beginning of the first annual reporting period beginning on or after December 15, 2008.

In April 2008, the FASB issued FSP SFAS 142-3, “Determination of the Useful Life of Intangible Assets.” FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” The intent of FSP SFAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R) and other generally accepted accounting principles. The provisions of FSP SFAS 142-3 are effective for the Company’s fiscal year 2010, and are currently not expected to have a material effect on its consolidated financial statements.

F-12

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.        Intangible
Assets and
Goodwill Intangible assets consist of the following:

	December 31, 2008				December 31, 2007
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
Account acquisitions	$	1,593,525	$	1,026,472	$	1,830,361	$	1,148,513
Noncompete agreements		330,000		218,228		330,000		156,479
Customer lists		5,433,668		3,112,331		5,349,938		2,161,773
Licensing agreement (a)		1,115,000		1,029,231		1,115,000		926,308
Total	$	8,472,193	$	5,386,262	$	8,625,299	$	4,393,073

(a) – On November 1, 2001, the Company entered into a five-year Cooperative Licensing, Development, Services and Marketing Agreement with HHN (the “HHN Agreement”) pursuant to which the Company developed, with the assistance of HHN, a new integrated appliance combining the features of the Company’s PERS product with HHN’s technology.  The agreement was amended on June 30, 2005 and includes an extension of the initial term for an additional three years, through October 31, 2009.

Amortization expense of these intangible assets for the years ended December 2008, 2007 and 2006 was approximately $1,230,000, $1,246,000 and  $1,005,000, respectively, and annual estimated amortization, based on the current amount of intangible assets, is as follows:

Years Ending December 31,
2009	$	1,054,000
2010		864,000
2011		455,000
2012		348,000
2013		167,500
Thereafter		197,000

Changes in the carrying amount of goodwill, all of which relate to the Company’s TBCS segment, for the years ended December 31, 2008 and 2007 are as follows:

F-13

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Balance as of January 1, 2007	$	9,532,961
Additional Goodwill		233,233
Balance as of December 31, 2007		9,766,194
Additional Goodwill		229,958
Balance as of December 31, 2008	$	9,996,152

The additions to goodwill during 2008 and 2007 relate to additional purchase price of American Mediconnect, Inc.based primarily on the cash receipts from the clinical trials portion of the business.

3.        Long-Term
Debt Long-term debt consists of the following:

	December 31,
	2008		2007
Term loans – bank	$	3,166,667	$	4,586,667
Revolving credit line - bank		1,400,000		1,300,000
Note payable - other		-		205,908
Auto loans		3,282		16,160
		4,569,949		6,108,735
Less current portion of long-term debt		1,754,949		1,414,419
	$	2,815,000	$	4,694,316

Term loans payable and revolving credit line - bank – As of January 1, 2006 the Company had a credit facility arrangement for $4,500,000 which included a revolving credit line which permitted borrowings of $1,500,000 (based on eligible receivables as defined) and a $3,000,000 term loan payable. The term loan is payable in equal monthly principal installments of $50,000 over five years commencing January 2006.  The revolving credit line was set to mature in May 2008.

In March 2006 and December 2006, the credit facility was amended whereby the Company obtained an additional $2,500,000 and $1,600,000 of term loans, the proceeds of which were utilized to finance the acquisitions of MD OnCall and American Mediconnect, Inc.  These term loans are payable over five years in equal monthly principal installments of $41,666.67 and $26,666.67, respectively. Additionally, certain of the covenants were amended.

F-14

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2006, the credit facility was amended to reduce the interest rates charged by the bank such that borrowings under the term loan will bear interest at either (a) LIBOR plus 2.00% or (b) the prime rate or the federal funds effective rate plus .5%, whichever is greater, and the revolving credit line will bear interest at either (a) LIBOR plus 1.75% or (b) the prime rate or the federal funds effective rate plus .5%, whichever is greater.  The LIBOR interest rate charge shall be adjusted in .25% intervals based on the Company’s ratio of Consolidated Funded Debt to Consolidated EBITDA. In the third quarter of 2007, the interest rate was reduced by .25% based on this ratio.  The Company has the option to choose between the two interest rate options under the amended term loan and revolving credit line.  Borrowings under the credit facility is collateralized by substantially all of the assets of the Company.

On April 30, 2007, the Company amended its credit facility whereby the term of the revolving credit line was extended through June 2010 and the amount of credit available under the revolving credit line was increased to $2,500,000.

As of December 31, 2008, the Company was in compliance with the financial covenants in its loan agreement.  As of December 31, 2007, the Company was not in compliance with one of the financial covenants in its loan agreement.  The lender waived the non-compliance as of such date and entered into an amendment to the credit facility.

Note payable – other – In December 2006, in connection with the acquisition of certain PERS accounts, the Company executed a note in the amount of $300,000.  The note was payable in twelve equal quarterly installments of $27,515 commencing in February 2007, which includes interest at a fixed rate of 6%.  In June 2008, the Company paid the remaining note payable balance.

Principal payment requirements - Aggregate maturities of long-term debt are as follows:

Years ending December 31,
2009	$	1,754,949
2010		2,370,000
2011		445,000
	$	4,569,949

Covenants - The above agreements provide for negative and affirmative covenants including those related to working capital and other borrowings.

F-15

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.          Acquisitions On December 21, 2006, the Company acquired substantially all of the assets of American Mediconnect, Inc. and PhoneScreen, Inc., Illinois based companies under common ownership (collectively “AMI”). AMI is a provider of telephone after-hour answering services primarily focused on hospitals, physicians and other health care providers and PhoneScreen, Inc. is a provider of call center and compliance monitoring services to hospitals, pharmaceutical companies and clinical resource organizations.  The purchase price was $2,028,830 and consisted of an initial cash payment of $1,493,730, common stock valued at $229,324 and a future cash payment of $305,776, which was paid in December 2007.  In addition, for the following three years the Company shall pay Seller an amount equal to twenty-five (25%) percent of the cash receipts collected by the Company, excluding sales taxes, from the PhoneScreen business. Since the date of acquisition through the year ended December 31, 2008, the Company recorded $455,669 of additional purchase price based on PhoneScreen cash receipts of which $20,390 was not paid as of December 31, 2008.  The Company also incurred professional fees of approximately $65,000.  A potential exists for the payment of additional purchase price consideration if certain thresholds concerning revenue and earnings of the acquired business are met as of December 31, 2007, 2008 and 2009.  The thresholds were not met for 2008 and 2007.  The results of operations of AMI are included in the TBCS segment as of the date of acquisition.   The following table summarizes the fair values of the assets acquired as of December 31, 2008.

Fixed assets	$	175,000
Non-compete agreement		50,000
Customer list		700,000
Goodwill		1,623,427
Cost to acquire AMI	$	2,548,427

On March 10, 2006, the Company acquired substantially all of the assets of MD OnCall, a Rhode Island based company and Capitol Medical Bureau,a Maryland based company (collectively “MD OnCall”), providers of telephone after-hour answering services and stand-alone voice mail services.  The purchase price was $3,382,443 and consisted of an initial cash payment of $2,696,315, common stock valued at $343,064 and future cash payments of $343,064, which was paid in full as of March 2007.  The Company also recorded finder and professional fees of approximately $181,000.  A potential exists for the payment of additional purchase price consideration if certain thresholds concerning revenues and earnings of the acquired business are met as of March 31, 2007, 2008 and 2009.  The thresholds as of March 31, 2007 and 2008 were not met.  The results of operations of MD OnCall are included in the TBCS segment as of the date of acquisition.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

F-16

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts receivable	$	138,798
Fixed assets		260,000
Non-compete agreement		50,000
Customer list		1,050,000
Goodwill		2,255,804
Capital lease obligations		(142,625	)
Customer deposits		(48,200	)
Cost to acquire MD OnCall	$	3,563,777

On December 9, 2005, the Company acquired substantially all of the assets of Answer Connecticut, Inc. (“ACT”), a Connecticut based provider of telephone after-hour answering services and stand-alone voice mail services.  As part of this transaction, a potential existed for the payment of additional purchase price consideration if certain thresholds concerning revenues and earnings of the acquired business were met as of December 31, 2006, 2007 and 2008.  The thresholds were not met for 2008, 2007 and 2006.

In the case of each of the acquisitions, the Company received a third party valuation from Chartered Capital Advisers, Inc. of certain intangible assets in determining the allocation of purchase price.

The purchase price of each acquisition exceeded the fair value of the identifiable net assets acquired inasmuch as these acquisitions were consummated to enable the Company to expand its presence in the telephone answering service business into new regions or to strengthen its position in areas where it was already operating.  Furthermore, the acquisitions were done for the business' future cash flows and net earnings as opposed to solely for the identifiable tangible and intangible assets.  The Company expects all goodwill arising from the above acquisitions will be deductible for tax purposes.

Unaudited pro forma results of operations for the year ended December 31, 2006 as if MD OnCall and American Mediconnect, Inc. had been acquired as of the beginning of 2006 follow.  The pro forma results include estimates which management believes are reasonable.

Years Ended December 31,
	2008		2007		2006
	Actual		Actual		Proforma
Revenue	$	38,586,820	$	35,645,265	$	34,381,000
Net income		1,439,601		1,514,232		1,304,000
Net income per share
Basic	$	.15	$	.16	$	.15
Diluted	$	.15	$	.16	$	.14

F-17

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 

The unaudited pro forma results of operations do not purport to represent what the Company’s results of operations would actually have been had the acquisitions been effected for the periods presented, or to predict the Company’s results of operations for any future period.

5.         Related Party Transactions

Notes receivable at December 31, 2008 and 2007 of $21,117 and $48,071, respectively, represent amounts due from the Chairman and principal shareholder of the Company.  In July 2002, the amount due from this individual, plus accrued interest, was converted into a term loan, which bears interest at a rate of 5% per annum and is payable in monthly installments of principal and interest through September 2009. See Note 7 for other related party transactions.

6.           Income Taxes

The provision (benefit) for income taxes consists of the following:

	Years Ended December 31,
	2008			2007			2006
Current:
Federal	$	601,000		$	915,000		$	575,000
State and local		228,000			312,000			203,000
		829,000			1,227,000			778,000
Deferred:
Federal		185,000			(115,000	)		61,000
State and local		(7,000	)		34,000			30,000
		178,000			(81,000	)		91,000
Total	$	1,007,000		$	1,146,000		$	869,000

The following is a reconciliation of the statutory federal income tax rate and the effective rate of the provision for income taxes:

	Years Ended December 31,
	2008			2007			2006
Statutory federal income tax rate		34	%		34	%		34	%
State and local taxes		6			8			7
Permanent differences		2			1			1
Other		(1	)		-			(1	)
Effective income tax rate		41	%		43	%		41	%

The tax effects of significant items comprising the Company’s deferred taxes at December 31, 2008 and 2007 are as follows:

F-18

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	December 31,
	2008			2007
Deferred tax liabilities:
Difference between book and tax bases of property	$	(1,459,000	)	$	(1,115,000	)
Deferred tax assets:
Reserves and accrued expenses  not currently deductible		609,000			443,000
Net deferred tax liabilities	$	(850,000	)	$	(672,000	)

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. The impact, if any, of adopting FIN 48 is required to be recorded as an adjustment to the January 1, 2007 beginning balance of the Company’s retained earnings rather than in the Company’s consolidated statement of income. The adoption of FIN 48 had no effect on the Company’s retained earnings. The Company recognizes interest and penalties related to uncertain tax positions, if any, in interest expense and general and administrative expenses, respectively.  During the years ended December 31, 2008 and 2007, the Company has not recorded any accrued liability of interest or penalty payments related to uncertain tax provision.

7.       Commitments Capital leases - The Company was obligated under certain capital lease agreements for monitoring equipment and computer software that were set to expire on various dates through 2009.  As of December 31, 2008, the Company has fully paid off the obligation under these capital lease agreements.  As of December 31, 2007, the equipment and computer software under capital leases included in fixed assets were as follows:

	2007
Monitoring equipment and software	$	160,000
Less accumulated depreciation		(48,000	)
	$	112,000

Operating leases - The Company rents an office facility from its Chairman and principal shareholder pursuant to a lease, which expired in September 2007.  The lease called for minimum annual rentals, subject to 5% annual increases, plus reimbursement for real estate taxes.  The Company through contract amendments has extended the term through December 31, 2009 under the same terms and conditions that existed at September 30, 2007.  The Company also currently leases office space from certain telephone answering service managers pursuant to leases.  The leases with these managers expire December 2009 and December 2012, respectively.

F-19

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On January 14, 2002, the Company entered into an operating lease agreement for space in Long Island City, New York in order to consolidate its New York City based telephone answering service facility and Oceanside, New York Emergency Response Center and Customer Service facilities. The fifteen (15) year lease term commenced in April 2003. The lease calls for minimum annual rentals of $269,500, subject to a 3% annual increase, plus reimbursement for real estate taxes.

During 2005, the Company entered into two operating lease agreements for additional space at its Long Island City, New York location in order to consolidate its warehouse and distribution center and accounting department into this location.  The leases, which commenced in January 2006 and expire in March 2018, call for minimum annual rentals of $220,000 and $115,000, respectively, and are subject to increases in accordance with the terms of the agreements. The Company is also responsible for the reimbursement of real estate taxes.

The Company has also entered into various other operating leases for warehouse and office space in Medford, New Jersey,  Decatur, Georgia, Countryside, Illinois, Parker, Colorado and Redondo Beach, California.  Additionally, the Company has entered into operating leases for its TBCS call center operations in Audubon, New Jersey, Port Jefferson, New York, Newington, Connecticut, Springfield, Massachusetts, Rockville, Maryland, Cranston, Rhode Island, Chicago, Illinois and Clovis, New Mexico.

Rent expense was $1,426,748 in 2008, $1,340,506 in 2007 and $1,270,767 in 2006 which includes $133,963, $138,545 and $133,140, respectively, in connection with the above noted leases with the principal shareholder.  In addition, rent expense also includes rent incurred from leases with certain telephone answering service managers, in the amount of $117,600, $48,000 and $48,000 for 2008, 2007 and 2006, respectively.  Rent expense includes real estate taxes of $42,751 in 2008, $34,970 in 2007 and $23,174 in 2006.

The aggregate minimum annual rental commitments under non-cancelable operating leases are as follows:

F-20

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ending December 31,
2009	$	1,136,701
2010		820,957
2011		803,126
2012		816,791
2013		764,585
Thereafter		3,511,696
	$	7,853,856

Approximately 2% of the minimum annual rental commitments relate to the above noted lease with the principal shareholder.  In addition, approximately 4% of minimum annual rental commitments relate to leases with certain telephone answering service managers.

Employment agreements – On November 11, 2005, the Company entered into a five-year employment agreement (which became effective January 1, 2006) with the Company’s President and now Chief Executive Officer.  During the term of the agreement, the base salary will range from $240,000 to $300,000.    In addition, the agreement provides for an annual stock grant and includes incentive compensation, in the form of stock, based on the Company meeting certain operating criteria. (See Note 8)

The Company has also entered into other employment agreements with certain officers and other employees in the ordinary course of business.  The aggregate annual base salaries under these agreements are as follows:

Years ending December 31,
2009	$	2,083,000
2010		1,348,000
2011		599,000
2012		213,000
2013		53,000
	$	4,296,000

In addition, certain of these employees are entitled to receive additional cash and stock compensation if certain performance criteria are met.  During 2008, one officer earned approximately $31,000 in cash compensation.  During 2007, two officers earned approximately $87,000 in cash and stock compensation.  During 2006, one officer earned approximately $108,000 in stock compensation.

Purchase commitments - In the normal course of business the Company issues purchase orders to purchase its traditional PERS systems.  At December 31, 2008 and 2007, the Company had commitments to third party vendors in the amount of approximately $1,030,000 and $1,130,000, respectively.

F-21

AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.       Common Stock
and Options Stock options - The Company has one stock option plan, the 2000 Stock Option Plan (“2000 Plan”).  The Company’s 1991 Stock Option Plan (“1991 Plan”) and 1997 Stock Option Plan (“1997 Plan”) expired in 2001 and 2007, respectively.  Additionally, the Company has a stock incentive plan, the 2005 Stock Incentive Plan (“2005 Plan”).   Under the 1991 Plan, as amended, a maximum of 750,000 shares underlying stock options were available for grant as either Incentive Stock Options or Nonstatutory Stock Options.  The last options granted under this Plan were issued in 2001 and expired in 2006.  All options under this Plan were granted at exercise prices equal to the fair market value of the Company’s common shares at the date of grant.   Under the 1997 Plan a maximum of 750,000 shares underlying stock options were available for grant as either Incentive Stock Options or Nonstatutory Stock Options.  The last options granted under this Plan were issued in 2005 and expire in 2015.  All options under this Plan were granted at exercise prices equal to the fair value of the Company’s common shares at the date of grant.   Under the 2000 Plan, a maximum of 1,250,000 shares underlying stock options may be granted.  Options granted under this Plan may either be Incentive Stock Options (“ISOs”) or Nonqualified Stock Options.   Under the 2005 Plan, a maximum of 750,000 shares of the Company's Common Stock may be granted to employees (including officers and directors who are employees) and non-employee directors of the Company.  No grants may be made pursuant to the 2005 Plan after June 22, 2015.  The Plan provides for the grant of (i) incentive stock options ("ISOs"), (ii) nonqualified stock options, (iii) stock awards, and (iv) stock appreciation rights (“SARS”).   All of the Company's plans are administered by the Board of Directors or a committee of the Board of Directors (the "Administrator"). In general, the Administrator determines all terms for the grant of awards under the plans.  The exercise price of an ISO or SAR may not be less than the fair value of the Company's common stock on the date of grant (110% of such fair market value for an ISO if the optionee owns (or is deemed to own) more than 10% of the voting power of the Company).   Information with respect to options outstanding under plans is as follows:

F-22

						Weighted
						Average
				Weighted		Remaining
	Number			Average		Contractual		Aggregate
	of Options			Exercise Price		Term (years)		Intrinsic Value
Balance - December 31, 2005		1,287,283			3.56		5.13	$	3,393,074
Granted during 2006		66,000			5.37
Forfeitures/expiration during 2006		(46,954	)		4.35
Exercised during 2006		(253,511	)		1.97
Balance - December 31, 2006		1,052,818		$	4.02		5.12	$	2,805,698
Granted during 2007		5,000			7.13
Forfeitures/expiration during 2007		(55,056	)		4.33
Exercised during 2007		(80,489	)		4.18
Balance - December 31, 2007		922,273		$	4.01		4.13	$	2,785,633
Granted during 2008		35,000			6.51
Forfeitures/expiration during 2008		(18,176	)		3.81
Exercised during 2008		(61,862	)		2.04
Balance - December 31, 2008		877,235		$	4.25		3.45	$	883,349

At December 31, 2008, 2007 and 2006, 877,235, 922,273 and 1,052,818 options were exercisable, respectively.

The aggregate intrinsic value of options exercised during the years ended December 31, 2008, 2007 and 2006 was $292,182, $307,465 and $993,080, respectively.  At January 1, 2006 there were 7,500 nonvested stock options outstanding.  During the year ended December 31, 2006, 2,500 options vested and 5,000 options were forfeited. There are no nonvested stock options outstanding as of December 31, 2008, 2007 and 2006.

The following table summarizes information about the stock options outstanding at December 31, 2008:

Options Outstanding							Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted- Average Remaining Contractual Term		Weighted- Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$1.98 - $2.97		243,855		3.87	$	2.52		243,855	$	2.52
$2.97 - $4.46		332,980		4.01		3.82		332,980		3.82
$4.46 - $6.68		250,400		2.38		5.97		250,400		5.97
$6.68 - $10.02		50,000		2.99		6.98		50,000		6.98
		877,235		3.45	$	4.25		877,235	$	4.25

F-23

As of December 31, 2008, 109,145 and 281,552 shares of common stock are available for future grants under the 2000 and 2005 Plans, respectively.

Stock Grants - Other

The outside Board of Directors are granted shares of common stock at the end of each quarter as compensation for services provided as members of the Board of Directors and other committees.  These share grants vest immediately.  In addition, stock grants may be issued to employees at the Board of Directors discretion.  In December 2007, the Board of Directors granted shares of common stock to certain executives.  These share grants vested immediately.

Service Based Awards

In January 2006 and May 2007, the Company granted 60,000 and 22,000 restricted shares, respectively, to certain executives at no cost.  These shares vest over periods ranging from 3 to 5 years, on December 31 of each year.  The Company records the compensation expense on a straight-line basis over the vesting period.  Fair value for restricted stock awards is based on the Company's closing common stock price on the date of grant.  The aggregate grant date fair value of restricted stock grants was $537,100.  As of December 31, 2008 and 2007, the Company had $208,550 and $332,825, respectively, of total unrecognized compensation costs related to unvested restricted stock expected to be recognized over a weighted average period of 2.00 years.

A summary of the status of the Company’s nonvested service shares is as follows:

				Weighted-Average
Nonvested Shares	Shares			Grant-Date Fair Value
Nonvested at  January 1, 2007		47,500		$	6.00
Granted during 2007		22,000			8.05
Vested during 2007		(19,000	)		6.59
Forfeited during 2007		-		-
Nonvested at  December 31, 2007		50,500			6.67
Granted during 2008		-			-
Vested during 2008		(19,500	)		6.58
Forfeited during 2008	-			-
Nonvested at  December 31, 2008		31,000		$	6.73

F-24

Performance Based Awards

In January 2006 and May 2007, respectively, the Company granted share awards for 90,000 shares (up to 18,000 shares per year through December 31, 2010) and 46,000 shares (up to 11,500 shares per year through December 31, 2010) to certain executives.  Vesting of such shares is contingent upon the Company achieving certain specified consolidated gross revenue and Earnings before Interest and Taxes (“EBIT”) objectives in each of the next four fiscal years ending December 31. The fair value of the performance shares (aggregate value of $909,400) is based on the closing trading value of the Company’s stock on the date of grant and assumes that performance goals will be achieved.  The fair value of the shares is expensed over the performance period for those shares that are expected to ultimately vest.  If such objectives are not met, no compensation cost is recognized and any recognized compensation cost is reversed.  As of December 31, 2008, 2007 and 2006, there was $400,790, $601,135 and 432,000, respectively, of total unrecognized compensation costs related to unvested share awards; that cost is expected to be recognized over a period of 2.00 years.

A summary of the status of the Company’s nonvested performance shares is as follows:

				Weighted-Average
Nonvested Shares	Shares			Grant-Date Fair Value
Nonvested at  January 1, 2006		-		$	-
Granted during 2006		90,000			6.00
Vested during 2006		-			-
Forfeited during 2006		-		-
Nonvested at  December 31, 2006		90,000			6.00
Granted during 2007		46,000			8.05
Vested during 2007		(18,000	)		6.00
Forfeited during 2007		(6,000	)	6.00
Nonvested at  December 31, 2007		112,000			6.84
Granted during 2008		-			-
Vested during 2008		(11,750	)		6.91
Forfeited during 2008		(11,750	)	7.09
Nonvested at  December 31, 2008		88,500		$	6.79

The weighted average grant date fair value of options granted in 2008, 2007 and 2006 was $56,250, $5,000 and $61,261, respectively.

The fair value of options at date of grant was estimated by Chartered Capital Advisers, Inc. using the Black-Scholes model with the following weighted average assumptions:

	2008			2007			2006
Expected life (years)		3.33			2			2
Risk free interest rate		2.42	%		3.24	%		4.94	%
Expected volatility		37.62	%		33.11	%		23.26	%
Expected dividend yield		-			-			-

F-25

9.         Loss on  Abandonment

Loss on abandonment of $886,504 in 2008 represents the write-off of assets encompassing prepaid licensing fees and associated products paid or acquired in connection with a technology provider obtaining and completing certain new remote telehealth monitoring products and services.  The technology provider on this initiative experienced a funding shortfall and has filed for bankruptcy protection and will not be able to complete the project.  As of December 31, 2007 there was approximately $815,000 recorded in Other Assets relating to this endeavor.

10.       Other Income              and Expense

Other income and expense for the year ended December 31, 2008 includes a training incentive received from the State of New Mexico for hiring and training employees within the State and an economic development incentive through the City of Clovis aggregating approximately $298,000, as a result of the Company opening a network operating call center in New Mexico and hiring employees to serve as operators for the telephone answering service.  These amounts were partially offset by an adjustment to the Relocation and Employment Assistance Program credit due from New York City. Other income for the years ended December 2007 and 2006 includes Relocation and Employment Assistance Program (“REAP”) credits in the approximate amounts of $530,000 and $458,000, respectively. In connection with the relocation of certain operations to Long Island City, New York, the Company became eligible for the REAP credit which is based upon the number of employees relocated to this designated REAP area. The REAP is in effect for a twelve year period; during the first five year period, ending on December 31, 2007, the Company was refunded the full amount of the eligible credit and, commencing 2008, the benefit is now available only as a credit against New York City income taxes and reduces the tax provision. In addition, other income for 2007 includes $425,000 from a settlement agreement. In August 2007, the Company entered into a settlement agreement whereby a third party has agreed to reimburse the Company a net amount of $425,000 for matters related to certain product and warranty disputes.  This reimbursement is associated with costs that have primarily been incurred in previous years relating to engineering, payroll and related costs and depreciation pertaining to the affected assets.  As of December 31, 2008, the Company has received approximately $277,000 of this reimbursement and anticipates receiving the remaining portion in 2009.  During the third quarter in 2007, the Company has recorded a write-down on the assets affected of approximately $111,000 which is reflected in the Cost of Services.

F-26

11.      Employee           Savings Plan	The Company sponsors a 401(k) savings plan that is available to all eligible employees.  Participants may elect to defer a portion of their compensation, subject to an annual limitation provided by the Internal Revenue Service.  The Company may make matching and/or profit sharing contributions to the plan at its discretion.  The Company contributed $32,112, $27,010 and $21,682 for the years ended December 31, 2008, 2007 and 2006, respectively.
12.      Major Customers	Since 1983, the Company has provided Personal Emergency Response Systems (“PERS”) services to the City of New York’s Human Resources Administration Home Care Service Program ("HCSP").  The contract term with the HCSP is for two years, commencing September 21, 2007, with two options to renew in favor of HRA for two additional two year terms.  Under the terms of the agreement, a downward rate adjustment was made in conjunction with reduced equipment requirements from previous years. The impact of this lower rate resulted in a reduced contribution to gross revenues of approximately $265,000 and $70,000, and a reduced contribution to net income of approximately $160,000 and $40,000 in 2008 and 2007, respectively. During the years ended December 31, 2008, 2007 and 2006, the Company’s revenue from the contract related to HCSP represented 6%, 7% and 8% respectively, of its total revenue.
13.     Segment Reporting	Effective January 1, 2007, the Company has two reportable segments, (i) Health and Safety Monitoring Systems (“HSMS”) and (ii) Telephone Based Communication Services (“TBCS”).  Prior to January 1, 2007, the Company reported three reportable segments; HSMS, TBCS and Safe Com.  Since the business activities of Safe Com fall within Health and Safety monitoring, the Company included the activities of Safe Com in its HSMS segment. The table below provides a reconciliation of segment information to total consolidated information for the years ended 2008, 2007 and 2006:

			2008
	HSMS		TBCS		Consolidated
Revenue	$	19,598,947		18,987,873	$	38,586,820
Interest expense		70,452		208,999		279,451
Depreciation and amortization		2,749,828		1,626,489		4,376,317
Income tax expense		455,632		551,368		1,007,000
Net income		718,492		721,109		1,439,601
Total assets		10,951,398		23,414,866		34,366,264
Additions to fixed assets		1,591,601		952,545		2,544,146
Additions to goodwill and intangible assets		-		313,689		313,689

F-27

			2007
	HSMS		TBCS		Consolidated
Revenue	$	17,353,241	$	18,292,024	$	35,645,265
Interest expense		94,851		386,315		481,166
Depreciation and amortization		2,788,298		1,513,820		4,302,118
Income tax expense		763,149		382,851		1,146,000
Net income		906,835		607,397		1,514,232
Total assets		16,447,638		18,505,583		34,953,221
Additions to fixed assets		4,237,782		305,302		4,543,084
Additions to goodwill and intangible assets		35,000		554,826		589,826
			2006
	HSMS		TBCS		Consolidated
Revenue	$	16,044,971	$	14,749,417	$	30,794,388
Interest expense		38,118		356,495		394,613
Depreciation and amortization		2,358,392		1,156,870		3,515,262
Income tax expense		171,081		697,919		869,000
Net income		204,656		1,057,873		1,262,529
Total assets		14,818,050		18,224,326		33,042,376
Additions to fixed assets		3,238,164		760,088		3,998,252
Additions to goodwill and intangible assets		738,996		5,354,878		6,093,874

The accounting polices of the operating segments are the same as those described in the summary of significant accounting policies.

14.       Contingencies

The Company is aware of various threatened or pending litigation claims against the Company relating to its products and services and arising in the ordinary course of its business.  At December 31, 2008 and 2007, no liability has been recorded in the accompanying financial statements as the conditions for an accrual have not been met. The Company has given its insurance carrier notice of such claims and the Company believes there is sufficient insurance coverage to cover any such claims.  In any event, the Company believes the disposition of these matters will not have a material adverse effect on the results of operations and financial condition of the Company.

F-28

15.     Quarterly Financial            Data (Unaudited) The following information has been derived from unaudited financial statements that, in the opinion of management, include all recurring adjustments necessary for a fair presentation of such information.

	Three Months Ended
	March 31,		June 30,		September 30,		December 31,
	2008		2008		2008			2008(*)
Revenue	$	9,635,745	$	9,539,321	$	9,671,087	$	9,740,667
Gross Profit	$	4,903,790	$	4,948,312	$	5,117,865	$	4,960,377
Net Income	$	452,357	$	458,026	$	461,534	$	67,684
Basic EPS	$	0.05	$	0.05	$	0.05	$	0.01
Diluted EPS	$	0.05	$	0.05	$	0.05	$	0.01
	* - The 4th quarter results include a one-time write-off in the amount of approximately $887,000 (See Note 9)
	Three Months Ended
	March 31,		June 30,		September 30,		December 31,
	2007		2007		2007		2007
Revenue	$	8,702,836	$	8,898,806	$	8,771,670	$	9,271,953
Gross Profit	$	4,375,382	$	4,573,922	$	4,370,663	$	4,723,335
Net Income	$	366,708	$	407,260	$	422,929	$	317,335
Basic EPS	$	0.04	$	0.04	$	0.05	$	0.03
Diluted EPS	$	0.04	$	0.04	$	0.04	$	0.03

F-29

Schedule II
Valuation and Qualifying Accounts
	Column B		Column C - Additions				Column D			Column E
	Balance at		Charge to		Charged to					Balance
	Beginning		Costs and		Other					at end of
	of Period		Expenses		Accounts		Deductions			Period
					(1)
Year Ended December 31, 2006
Allowance for doubtful accounts	$	450,771	$	210,795	$	11,706	$	(125,949	)	$	547,323
Allowance for inventory obsolescence		336,539		-		-		(313,506	)		23,033
Year Ended December 31, 2007
Allowance for doubtful accounts		547,323		185,954		-		(179,277	)		554,000
Allowance for inventory obsolescence		23,033		30,294		-		-			53,327
Year Ended December 31, 2008
Allowance for doubtful accounts		554,000		241,096		-		(149,096	)		646,000
Allowance for inventory obsolescence	$	53,327		-		-		(26,374	)	$	26,953

(1) – Acquisitions

F-30

EX-10.A.III

AMENDMENT TO EMPLOYMENT AGREEMENT DATED

NOVEMBER 11, 2005 BETWEEN AMERICAN MEDICAL ALERT CORP. AND JACK RHIAN

The parties hereto hereby enter into this Amendment to the original Employment Agreement dated November 11, 2005 whereby:

1. Section 4 (b) (i) is deleted from the Agreement and replaced with the following:

(i)Up to 80,000 shares over the Employment Period based on the Company's earnings before deduction of interest and taxes ("EBIT"), as set forth in the Company's audited financial statements for the applicable fiscal year, meeting or exceeding the following targets:

For 2006 – 2010

EBIT growth over prior fiscal year	# of Shares
15.0 – 17.49%	8,000 shares
17.5 – 19.99%	9,000 shares
20.0 – 22.49%	10,500 shares
22.5 – 24.99%	13,000 shares
25.0% - or more	16,000 shares

In the event that the minimum EBIT growth percentage is not met for a particular fiscal year, Employee will have the opportunity, at his option, to earn back the minimum performance bonus grant for such fiscal year as follows: by deducting the EBIT dollar amount from the subsequent fiscal year sufficient so when added to the prior fiscal year EBIT dollar amount increase, the EBIT growth percentage for such prior fiscal year shall equal 15%. Such deducted amount shall reduce the subsequent fiscal year EBIT dollar amount for purposes of determining the growth rate in such subsequent fiscal year. (Note: If in any year there is a one-time non-operating adjustment and the EBIT threshold is not met, in the following year the Employee will be required to apply the portion of the increased EBIT growth in the following year to the previous year to earn the minimum EBIT performance bonus, if any or to disregard the one time adjustment for the purposes of comparison to the subsequent year).  A similar adjustment will be made to disregard one-time upward non-operating adjustments.  There can be no “borrowing” for a subsequent year if it would reduce the subsequent year’s restated growth such that there would be no award for that subsequent year.

For clarity purposes examples are shown below:

Example:

Assumptions:

Year	EBIT	% Inc.
2005	$2,700,000	-
2006	$3,000,000	11.11%
2007	$3,200,000	6.67%
2008	$4,400,000	37.50%

Under the following example, Employee would be deemed (i) not to have met the fiscal year 2006 EBIT growth percentage, (ii) to have met the minimum (15%) 2007 EBIT growth percentage (by virtue of deducting $250,000 from the fiscal year 2008 EBIT growth amount and adding that amount back to the 2007 fiscal year EBIT growth amount to arrive at the minimum 15% growth percentage), and (iii) to have met the 20.0 – 22.49% EBIT growth percentage for fiscal 2008 (($4,150,000 – 3,450,000)/3,450,000)= 20.29%.  The $4,150,000 is comprised of the $4,400,000 of EBIT achieved in 2008 less the add back of $250,000 for 2007 and the $3,450,000 is comprised of the $3,200,000 of EBIT achieved in 2007 plus the add back of $250,000 from the 2008 EBIT amount to meet the minimum 15% requirement for 2007. The Employee would earn a total 18,500 shares of common stock (8,000 shares relating to 2007 and 10,500 shares relating to 2008);

Except as hereinabove set forth, the terms and provisions of the aforementioned Employment Agreement executed by and between the parties shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused the Amendment to the Employment Agreement dated November 11, 2005 to be executed on March 30, 2009.

EMPLOYEE:
By:	/s/ Jack Rhian
	Jack Rhian

COMPANY: AMERICAN MEDICAL ALERT CORP
By:	/s/ Richard Rallo
	Richard Rallo

EX-10.C.V

AMENDMENT TO EMPLOYMENT AGREEMENT DATED MAY 29, 2007

BETWEEN AMERICAN MEDICAL ALERT CORP. AND FREDERIC SIEGEL

The parties hereto hereby enter into this Amendment to the original Employment Agreement dated May 29, 2007 whereby:

1. Section 4 (c) (iii) deleted from the Agreement and replaced with the following:

(iii) one of the following number of shares based on the year-over-year growth of the Company’s EBIT on a consolidated basis for each of the fiscal years ending December 31, 2007, 2008, 2009 and 2010. However, if within any year there is a non-operational write-up or write-down which impacts the results of operations, the effect of such non-operational write-up or write-down will be excluded when calculating the EBIT year over year growth in the following year (i.e. If the Company had EBIT of $3,000,000 for 2007, which includes a non-operational write-down of $500,000, the following year growth would be based off $3,500,000 ($3,000,000 of EBIT plus the addback of the $500,000 for the non-operational expense).

3,000 shares, if EBIT grows by 15% or more but less than 17.5%; 4,000 shares, if EBIT grows by 17.5% or more but less then 20%; 5,250 shares, if EBIT grows by 20% or more but less than 22.5%; 6,500 shares, if EBIT grows by 22.5% or more but less than 25%; or 8,500 shares, if EBIT grows by 25% or more.

Except as hereinabove set forth, the terms and provisions of the aforementioned Employment Agreement executed by and between the parties shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused the Amendment to the Employment Agreement to be executed on March 30, 2009.

EMPLOYEE:
By:	/s/ Frederic Siegel
	Frederic Siegel

COMPANY: AMERICAN MEDICAL ALERT CORP
By:	/s/ Richard Rallo
	Richard Rallo

EX-10.D.IV

AMERICAN MEDICAL ALERT CORP.

2005 STOCK INCENTIVE PLAN

STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT dated as of January 31, 2009 by and between American Medical Alert Corp., a New York corporation (the "Company"), and Richard Rallo, having an address at 3 Byfield Place, Melville, NY 11747 (the "Holder").

W I T N E S S E T H:

WHEREAS, the Company has adopted the 2005 Stock Incentive Plan (the "Plan");

WHEREAS, the Company regards Holder as a valuable contributor to the Company and has determined that it would be in the interest of the Company and its shareholders to grant the shares provided for in this Stock Purchase Agreement ("Agreement") to Holder in consideration of the services he has or will perform for the Company;

WHEREAS, pursuant to the Plan, the Administrator has determined that the Holder is entitled to a grant of shares, subject to the terms of the Plan and this Agreement (the defined terms in such Plan shall, except as otherwise provided herein, also be applicable to such terms as utilized herein); and

WHEREAS, the parties now desire to enter into the Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.           Award of Restricted Shares.  (a) Subject to the restrictions, terms and conditions of this Agreement, the Company hereby awards to the Holder Twenty One Thousand Five Hundred (21,500) shares (the "Restricted Shares") of Common Stock of the Company in consideration of services actually rendered and to be rendered to the Company by Holder. Such Restricted Shares shall be subject to the Repurchase Right set forth in Section 4, below.  The Company and Holder acknowledge and agree that the value of the services actually rendered to the Company prior to the date hereof by the Holder as consideration for the issuance of the Restricted Shares, exceeds $215.00.

(b)           The Restricted Shares, when issued pursuant to the provisions hereof, shall constitute issued and outstanding shares for all corporate purposes.  Subject to the restrictions set forth herein, the Holder will have the right to exercise all rights, powers and privileges of a holder of Common Stock with respect to the Restricted Shares, including the right to vote, receive stock or cash dividends (but subject to the Repurchase Right with respect to Unvested Shares (as hereinafter defined)), participate in stock splits or other recapitalizations and exchange such shares in a merger, consolidation or other reorganization. The term "Restricted Shares" in addition to the shares received pursuant to this Agreement, also refers to all securities received in replacement of the Restricted Shares, as a stock dividend or as a result of any stock split, recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties to Holder is entitled by reason of Holder’s ownership of the Restricted Shares.

(c)           The Company shall hold the certificates representing any Restricted Shares which are subject to the Repurchase Right (as defined below) in escrow, provided that, any Restricted Shares held in escrow shall be released from escrow and delivered to Holder as and when such shares are no longer subject to the Repurchase Right.  In addition, Holder shall execute an assignment in the form attached hereto as Exhibit A, with respect to the Restricted Shares.

2.           Legends.

(a)           The Restricted Shares shall be represented by a stock certificate or certificates registered in the name of the Holder.

(b)           From and after the date of original issuance, until the Repurchase Right has lapsed, stock certificates representing the Restricted Shares shall bear a legend in substantially the following form:

"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE SUBJECT TO CERTAIN REPURCHASE RIGHTS GRANTED TO THE AMERICAN MEDICAL ALERT CORP. ("COMPANY") AND ACCORDINGLY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER DISPOSED OF EXCEPT IN CONFORMITY WITH THE TERMS OF A STOCK PURCHASE AGREEMENT, DATED AS OF JANUARY 31, 2009, BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). A COPY OF SUCH AGREEMENT IS MAINTAINED AT THE COMPANY'S PRINCIPAL CORPORATE OFFICES."

3.           Transfer Restrictions

(a)           Restriction on Transfer.   Except for any Permitted Transfer, Holder shall not transfer, assign, encumber or otherwise dispose of any of the Restricted Shares which are subject to the Repurchase Right.

(b)           Transferee Objections. Each Person (other than the Company) to whom the Restricted Shares are transferred by means of a Permitted Transfer must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Company that such Person is bound by the provisions of this Agreement and that the transferred shares are subject to the Repurchase Right.

4.           Repurchase Right.

(a)           Grant. The Company is hereby granted the right (the "Repurchase Right"), exercisable at any time during the ninety (90)-day period following the date Holder ceases for any reason to remain in Service, to repurchase at the Per Share Purchase Price all or any portion of the Restricted Shares in which Holder is not, at the time of his or her cessation of Service, vested in accordance with the Vesting Schedule (such shares to be hereinafter referred to as the "Unvested Shares").

(b)           Exercise of the Repurchase Rights. The Repurchase Right shall be exercisable by written notice delivered to each Owner of the Unvested Shares prior to the expiration of the ninety (90)-day exercise period. The notice shall indicate the number of Unvested Shares to be repurchased and the date on which the repurchase is to be effected, such date to be not more than thirty (30) days after the date of such notice. In order to effect any such repurchase, the Company shall pay to Owner, in cash or cash equivalents, an amount equal to the Per Share Purchase Price multiplied by the number of Unvested Shares which are to be repurchased from Owner.

(c)           Termination of the Repurchase Right. The Repurchase Right shall terminate with respect to any Unvested Shares for which it is not timely exercised under Paragraph 4(b). In addition, the Repurchase Right shall terminate and cease to be exercisable with respect to any and all Restricted Shares in which Holder vests in accordance with the Vesting Schedule.

(d)           Recapitalization. Any new, substituted or additional securities or other property (including cash paid as a dividend or otherwise) which is by reason of any Recapitalization distributed with respect to or in exchange for the Restricted Shares shall be immediately subject to the Repurchase Right, but only to the extent the Restricted Shares are at the time covered by such right. Appropriate adjustments to reflect such distribution shall be made to the number and/or class of Restricted Shares subject to this Agreement and to the Per Share Purchase Price to be paid upon the exercise of the Repurchase Right in order to reflect the effect of any such Recapitalization upon the Company's capital structure; provided, however, that the aggregate of the Per Share Purchase Price applicable to all Unvested Shares shall remain the same. Any securities or other property (including cash) distributed with respect to the Restricted Shares as a dividend or otherwise which are subject to the Repurchase Right shall be held in escrow.

(e)           Special Tax Election. The grant of the Restricted Shares may result in adverse tax consequences which may be avoided or mitigated by filing an election under Code Section 83(b). Such election must be filed within thirty (30) days after the date of this Agreement. The form for making the Code Section 83(b) election are set forth in Exhibit B hereto.  HOLDER SHOULD CONSULT WITH HIS OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE RESTRICTED SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(B) ELECTION.  HOLDER ACKNOWLEDGES THAT IT IS HOLDER'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(B), EVEN IF EMPLOYEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.

5.           Securities Law Compliance

(a)           Registration of Securities. The Restricted Shares have been registered under the 1933 Act and are being issued to Holder pursuant to a Form S-8 registration statement.

(b)           Restrictions on Disposition of Restricted Shares.  Holder shall make no disposition of the Restricted Shares (other than a Permitted Transfer) unless and until there is compliance with all of the following requirements:

(i) Holder shall have provided the Company with a written summary of the terms and conditions of the proposed disposition; and

(ii) Holder shall have complied with all requirements of this Agreement applicable to the disposition of the Restricted Shares.

(c)           In addition, Holder shall make no disposition of the Restricted Shares unless Holder shall have provided the Company with written assurances, in form and substance satisfactory to the Company in its sole discretion, that (a) the proposed disposition does not require registration of the Restricted Shares under the 1933 Act or (b) all appropriate action necessary for compliance with the registration requirements of the 1933 Act or any exemption from registration available under the 1933 Act (including Rule 144) has been taken in connection with the proposed disposition.

(d)           The Company shall not be required (i) to transfer on its books any Restricted Shares which have been sold or transferred in violation of the provisions of this Agreement or (ii) to treat as the owner of the Restricted Shares, or otherwise to accord voting, dividend or liquidation rights to, any transferee to whom the Restricted Shares have been transferred in contravention of this Agreement.

6.           No Right to Employment.  Nothing in this Agreement shall be construed to give the Holder any right to be awarded any additional awards of shares or options under the Plan, or to confer on the Holder any right to continue in the employ of the Company or to be evidence of any agreement or understanding, express or implied, that the Company or any of its Subsidiaries or Parent will employ the Holder in any particular position or at any particular rate of remuneration, or for any particular period of time or to interfere in any way with or otherwise restrict in any way the rights of the Company or of the Holder, other as set forth in the Employment Agreement.

7.           Amounts Not Salary or Bonus.  The Holder agrees that the award of the Restricted Shares hereunder is special incentive compensation and that it will not be taken into account as "salary" or "compensation" or "bonus" in determining the amount of any payment under any pension, retirement, profit-sharing, savings or stock ownership plan of the Company, its Parent or any of its Subsidiaries, unless expressly provided pursuant to the terms of such plan.

8.           Forfeiture for Violation of Employment Agreement.  In the event that Holder violates any of his or her Confidentiality or Non-Competition obligations arising under the Employment Agreement or other agreement with the Company, then all profits or gains realized by Holder as a result of the sale of any of the Restricted Shares, shall be forfeited and returned to the Company.

9.           Amendments.  Except as otherwise provided in the Plan, this Agreement may only be amended or modified by written agreement of the Company and the Holder.

10.           Successor and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and shall be binding upon and inure to the benefit of the Holder and his legatees, distributees and Legal Representatives.  The Company may assign the Repurchase Right to any Person selected by the Board, including (without limitation) one or more shareholders of the Company.

11.           Governing Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York, other than those laws which would defer to the substantive laws of another jurisdiction.

12.           Shares Award Subject to Plan.  By entering into this Agreement, the Holder agrees and acknowledges that the Holder has received and read a copy of the Plan. The Restricted Shares are subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. Capitalized terms used herein and not otherwise defined herein shall have the meaning provided for such terms in the Plan. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

13.           Signature in Counterparts.  This Agreement may be signed in one or more counterparts and delivered by facsimile, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

14.           Definitions. As used herein, the following definitions shall apply:

(a)           "Agreement" shall mean this Stock Purchase Agreement.

(b)           "Board" shall mean the Company's Board of Directors.

(c)           "Change in Control" shall have the same meaning as defined in the Employment Agreement.

(d)           "Code" shall mean the Internal Revenue Code of 1986, as amended.

(e)           "Common Stock" shall mean the Company's common stock, $.01 par value per share, as well as all securities received in replacement of the Company's common stock, as a stock dividend, or as a result of any stock split, recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties that a holder of common stock is entitled to by reason of the holder's ownership of the common stock.

(f)           "1933 Act" shall mean the Securities Act of 1933, as amended.

(g)           "Employment Agreement" shall mean that certain Employment Agreement dated January 1, 2009, between the Company and Holder.

(h)           "Owner" shall mean Holder and all subsequent holders of the Restricted Shares who derive their chain of ownership through a Permitted Transfer from Holder.

(i)           "Permitted Transfer" shall mean (i) a gratuitous transfer of the Restricted Shares to any “family member” as such term is defined in Section 1(a)(5) of the General Instructions to Form S-8 under the 1933 Act, provided and only if Holder obtains the Company's prior written consent to such transfer, or (ii) a transfer of title to the Restricted Shares effected pursuant to Holder's will or the laws of descent and distribution following Holder's death.

(j)           "Person" means an individual, a partnership, a corporation, a trust, a joint venture, a limited liability company, an unincorporated organization, a government or any department or agency thereof or any other entity.

(k)           "Per Share Purchase Price" means $.01.

(l)           "Recapitalization" shall mean any stock split, stock dividend, recapitalization, combination of shares, merger, consolidation, exchange of shares or other change affecting the Company's outstanding Common Stock as a class.

(m)           "SEC" shall mean the Securities and Exchange Commission.

(n)           "Service" shall mean Holder's provision of services to the Company (or a Parent or Subsidiary) pursuant to the Employment Agreement.

(o)           "Vesting Schedule" shall mean the vesting schedule specified Section 4(b) in the Employment Agreement pursuant to which Holder is to vest in the Restricted Shares in a series of installments over his period of Service, subject to certain acceleration events in the event of a "Change in Control."

15.           Notices. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon delivery through the U. S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice at the address indicated below such party's signature line on this Agreement or at such other address as such party may designate by ten (10) days' advance written notice under this paragraph to all other parties to this Agreement.

16.           No Waiver. The failure of the Company in any instance to exercise the Repurchase Right shall not constitute a waiver of any other repurchase rights that may subsequently arise under the provisions of this Agreement or any other agreement between the Company and Holder. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature.

17.           Cancellation of Restricted Shares. If the Company shall make available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Restricted Shares to be repurchased in accordance with the provisions of this Agreement, then from and after such time the person from whom such shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such shares shall be deemed purchased in accordance with the applicable provisions hereof, and the Company shall be deemed the owner and holder of such shares, whether or not the certificates therefor have been delivered as required by this Agreement.

18.           Holder Undertaking. Holder hereby agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either Holder or the Restricted Shares pursuant to the provisions of this Agreement.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its agent thereunto duly authorized, and the Holder has hereunto set his hand, all as of the date first above written.

AMERICAN MEDICAL ALERT CORP.
By:	/s/ Jack Rhian
	Name: Jack Rhian
	Title: President and Chief Executive Officer
	/s/ Richard Rallo
	Holder: Richard Rallo

EXHIBIT A

ASSIGNMENT SEPARATE FROM CERTIFICATE

         FOR VALUE RECEIVED _________________________ hereby sell(s), assign(s)and transfer(s) unto American Medical Alert Corp. (the "Company"), _________________________ (__________) shares of the Common Stock of the Company standing in his or her name on the books of the Company represented by Certificate No. _________________________ herewith and do(es) hereby irrevocably constitute and appoint _________________________ Attorney to transfer the said stock on the books of the Company with full power of substitution in the premises.

Dated: _________________________

                                            Signature: _________________________

INSTRUCTION: Please do not fill in any blanks other than the signature line.

Please sign exactly as you would like your name to appear on the issued stock

certificate. The purpose of this assignment is to enable the Company to exercise

the Repurchase Right without requiring additional signatures on the part of

Holder.

EXHIBIT B

SECTION 83(B) ELECTION

This statement is being made under Section 83(b) of the Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2.

(1)            The taxpayer who performed the services is:

Name:

Address:

Taxpayer Ident. No.:

(2)            The property with respect to which the election is being made is ____________ shares of the common stock of American Medical Alert Corp. (the "Company")

(3)           The property was issued on [_____ __], 2009.

(4)           The taxable year in which the election is being made is the calendar year 2009.

(5)           The property is subject to a repurchase right pursuant to which the issuer has the right to acquire the property at the original purchase price if taxpayer's employment with the issuer is terminated under certain circumstances.

(6)           The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is [$ ] per share.

(7)           The amount paid for such property is [$   ] per share.

(8)           A copy of this statement was furnished to the Company.

(9)            This statement is executed [____ __], 200__.

------------------------------                                                                           ------------------------------------------

Spouse (if any)                                                                Taxpayer

THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER WITH WHICH TAXPAYER FILES HIS OR HER FEDERAL INCOME TAX RETURNS AND MUST BE MADE WITHIN THIRTY (30) DAYS AFTER THE EXECUTION DATE OF THE STOCK PURCHASE AGREEMENT. THIS FILING SHOULD BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED.  TAXPAYER MUST RETAIN TWO (2) COPIES OF THE COMPLETED FORM FOR FILING WITH HIS OR HER FEDERAL AND STATE TAX RETURNS FOR THE CURRENT TAX YEAR AND AN ADDITIONAL COPY FOR HIS OR HER RECORDS.

EX-23.1

Exhibit 23.1

INDEPENDENT AUDITORS’ CONSENT

We consent to the incorporation by reference in Registration Statement Nos. 33-48385, 33-91806, 333-53029, 333-70626 and 333-130811 on Form S-8 and Registration Statement No. 333-88192 on Form S-3 of American Medical Alert Corp. of our report dated March 30, 2009, appearing in this Annual Report on Form 10-K of American Medical Alert Corp. for the year ended December 31, 2008.

/s/ Margolin, Winer Evens LLP

Garden City, New York

March 30, 2009

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Jack Rhian, certify that:

1.           I have reviewed this annual report on Form 10-K of American Medical Alert Corp.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)         Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)         Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s  fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s control over financial reporting; and

5.           The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2009	/s/ Jack Rhian
	Jack Rhian
	Chief Executive Officer
	and President
	(principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Richard Rallo, certify that:

1.           I have reviewed this annual report on Form 10-K of American Medical Alert Corp.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)         Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)         Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s  fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s control over financial reporting; and

5.           The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2009	/s/ Richard Rallo
	Richard Rallo
	Chief Financial Officer
	(principal financial officer)

EX-32.1

Exhibit 32.1                       

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Annual Report on Form 10-K for the Year Ended December 31, 2008 (the “Report) by American Medical Alert Corp. (“Registrant”), the undersigned hereby certifies that:

1.           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

Dated: March 31, 2009	/s/Jack Rhian
	Jack Rhian
	Chief Executive Officer
	and President

A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO AMERICAN MEDICAL ALERT CORP. AND WILL BE RETAINED BY AMERICAN MEDICAL ALERT CORP. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Annual Report on Form 10-K for the Year Ended December 31, 2008 (the “Report) by American Medical Alert Corp. (“Registrant”), the undersigned hereby certifies that:

1.           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

Dated: March 31, 2009	/s/ Richard Rallo
	Richard Rallo
	Chief Financial Officer

A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO AMERICAN MEDICAL ALERT CORP. AND WILL BE RETAINED BY AMERICAN MEDICAL ALERT CORP. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.