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

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 base expansion to decrease its reliance on a single product line by marketing complementary call center and monitoring services to the healthcare community.

The Company diversified its products/service mix to include telephony based communication services ("TBCS") for professionals in the healthcare community. The rationale to enter this segment had several components. These include targeting existing customer relationships, leveraging existing infrastructure capability, and establishing an additional significant revenue source. The Company's entry into the TBCS market was accomplished initially through 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.

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

The Company believes that the overall mix of cash flow generating businesses from 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

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.

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.

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.

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.

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.

† 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.

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.

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.

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