UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934
                                    For the fiscal year ended September 30, 2005

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934
                                   For transition period from _____ to _______ .

Commission file number 0-23153

                                 REMOTEMDX, INC.
                 (Name of small business issuer in its charter)

         UTAH                                                    87-0543981
(State or other jurisdiction of                                (IRS Employer
incorporation or organization)                               Identification No.)

150 West Civic Center Drive
Suite 400
Sandy, Utah                                                        84070
(Address of principal executive offices)                         (Zip Code)

Issuer's telephone number: (801) 563-7171
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Securities registered under Section 12(b) of the Act:    Name of each exchange on which registered:
                  <S>                                                     <C>
                  None                                                     None
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Securities registered under Section 12(g) of the Act:     Common Stock, $0.0001
                                                          par value

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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        No    X

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of the  registrant's  knowledge,  in  definitive  proxy or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

Issuer's revenues for the fiscal year ended September 30, 2005 were $861,868.

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant at December 15, 2005 was $37,527,000.

There were 54,195,221 shares of common stock of the registrant outstanding as of
December 15, 2005.

Transitional Small Business Disclosure Format (Check one): Yes ___ No X


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                                TABLE OF CONTENTS


                                                                                                                Page
                                                                                                                 No.
                                                                                                                ----
PART I.

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Item 1.    Description of Business................................................................................3

Item 2.    Description of Property...............................................................................11

Item 3.    Legal Proceedings.....................................................................................12

Item 4.    Submission of Matters to a Vote of Security Holders...................................................12

PART II.

Item 5.    Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of
           Equity Securities.....................................................................................12

Item 6.    Management's Discussion and Analysis or Plan of Operation.............................................14

Item 7.    Financial Statements..................................................................................28

Item 8.    Changes In and Disagreement with Accountants on Accounting and Financial Disclosure...................28

Item 8A.   Controls and Procedures...............................................................................28

Item 8B.   Other Information.....................................................................................29

PART III

Item 9.    Directors and Executive Officers of the Registrant....................................................29

Item 10.   Executive Compensation................................................................................31

Item 11.   Security Ownership of Certain Beneficial Owners and Management and
           Related Stockholder Matters...........................................................................34

Item 12.   Certain Relationships and Related Transactions........................................................36

Item 13.   Exhibits, List and Reports on Form 8-K................................................................36

Item 14.   Principal Accountant Fees and Services................................................................38

Signatures ......................................................................................................39
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                                     PART I

Item 1. Description of Business


General

RemoteMDx, Inc. ("RemoteMDx" or the "Company") markets and sells patented
wireless location technologies and the related monitoring services, and
develops, markets and sells personal security, senior supervision, and health
monitoring devices and monitoring services. The RemoteMDx products and
monitoring services feature wireless products that utilize GPS and cellular
technologies in conjunction with a monitoring center. These devices include a
mobile emergency response device, MobilePAL(TM), which can locate persons in
distress, no matter where they may be, and dispatch the closest emergency
service to their location. The Company has recently developed and has numerous
pre-production models of a tracking device, TrackerPAL, which will be used to
monitor convicted offenders in the criminal justice system. The Company believes
that its technologies and services will benefit the healthcare and penal system
as they allow both care providers and law enforcement officials to respond
immediately to a medical event or criminal activity. Our customers will be able
to better monitor and manage their own chronic disease and medical conditions,
giving peace of mind to them and their loved ones and care providers.

The Company's primary health monitoring market consists of approximately 35
million Americans over the age of sixty-five. Of these 35 million seniors, it is
estimated that 9.7 million currently live alone. However, in most cases, the
Company anticipates that the senior customers will not purchase the Company's
products for themselves. Instead, based on the Company's experience, the Company
believes that it would be more effective to target the children or caregivers of
these seniors. Therefore, the primary target market is children, friends, and
spouses of these individuals.

Additionally, the Company has identified a growing need in the parole/probation
market, which in 2003, consisted of 4.9 million adults in the criminal justice
system at any given time. In order to meet the needs of this growing demand, the
Company has developed TrackerPAL that works in conjunction with our monitoring
center. To date the Company has not received any revenue from this market.

We derive our revenues from the following sources:

         o    Medical Diagnostic Stains - We sell medical diagnostic stains and
              equipment to laboratories throughout the United States. The
              Company anticipates that these sales will decrease in the futures
              as a percentage of total sales.

         o    Monitoring Activation - We sell our MobilePAL(TM) and anticipate
              leasing our TrackerPAL devices as part of a monitoring contract,
              with prepaid activation charges.

         o    Monitoring Services - Following activation, our MobilePAL and
              TrackerPAL customers pay a monthly monitoring fee and fees for
              additional services offered by our contract providers or by us.

In addition to the foregoing sources, we have contractual rights to receive
royalty revenues from a license agreement with Matsushita Electric Works ("MEW")
and from sales of telematic products and services under marketing agreements.
"Telematic" means any wireless communication system designed for the collection
and dissemination of data. To date these royalty agreements have not produced
any royalty income.

Our Strategy

Our goal is to establish the Company as a significant marketer and distributor
of leading technology and services we have developed for the mobile personal
emergency, the parolee and probation market, and the health monitoring
industries. Until the beginning of calendar 2003, most of our revenues were
provided by the distribution of consumer electronics through a business acquired
by a wholly-owned subsidiary, SecureAlert, Inc. ("SecureAlert"), in July 2001.
As of January 1, 2004, we discontinued the consumer electronics business. All
revenues and operations related to the sale of the consumer electronics have
been reflected in the financial statements as discontinued operations. With our
decision to refocus our business and product development efforts on the mobile
health and emergency monitoring and law enforcement industries, which previously
comprised a smaller part of our business, we discontinued the distribution of
consumer electronics and automotive telematic products during 2003.



                                       3
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Background

We have been engaged in our original business of manufacturing and marketing
medical diagnostic stains, solutions and related equipment for over 10 years.
Since 1997 this business has been conducted through a wholly-owned subsidiary,
Volu-Sol Reagents Corporation. Our remote health monitoring and diagnostic
business is conducted under the names "Remote Medical Diagnostics" and
"RemoteMDx." In July 2001, we acquired and now operate the business conducted by
SecureAlert. SecureAlert's business involves manufacturing and marketing mobile
emergency and personal health monitoring systems, and also will focus on the
parolee and probation market.

Our primary founders and owners are David Derrick ("Derrick") and James Dalton
("Dalton"), who are identified in this report under Item 9, Directors and
Executive Officers.

In April 2000, we entered into a research agreement with Battelle Memorial
Institute ("Battelle"), a large research and development firm, to assist us in
developing our technology for remote monitoring and personal medical
diagnostics. Although the agreement with Battelle expired in November, 2002, it
resulted in the development of design and technologies included in our current
MobilePAL and TrackerPAL products today.

In July 2001, we acquired SecureAlert and added its patents and technology to
our business plan. In October 2001, we began developing our telematic monitoring
center in conjunction with Bishop Engineering ("Bishop"), an innovator in
telematic and GPS technologies. By July 2002, this collaboration with Bishop
culminated in the development of a monitoring center jointly operated with
Aradiant Corp ("Aradiant"). In July 2004, we moved the monitoring center from
its location in the San Diego area to the Company's headquarters in Salt Lake
City. This move allows the Company to better manage and control the monitoring
center and its employees. This monitoring center enables our PAL Services
Network to offer location, concierge services, medical triage advice, emergency
response, call switching and health monitoring to our subscribers. This
monitoring center and its related services will also help us serve our customers
in the criminal justice industry. To date we have not sold any products or
services to the criminal justice industry. There can be no assurance that our
products will be accepted or that we will be able to obtain customers in this
industry.

In April 2002, we entered into a manufacturing and product development agreement
with MEW. This strategic alliance included an equity investment in the Company
by MEW and an arrangement under which MEW was designated our preferred
manufacturer, and the Company agreed to act as MEW's preferred worldwide service
provider for GPS products. During 2002 and 2003, working with MEW and another
manufacturer, we successfully designed and began to market products that combine
cellular technology, including our patented single-button emergency feature, and
GPS, allowing the two systems to work simultaneously in a single unit. No
services were performed by MEW during fiscal year 2005.

Marketing

Over the past three years, we have developed our menu of services and core
technology, which we refer to as the Personal Assistant Link ("PAL(TM)")
Services Network. Gross revenues for the year ended September 30, 2005, were
$861,868. We look to expand our sales of these products and services by relying
on and establishing our distribution network. In fiscal year 2004, approximately
46% of our revenues were derived from the sale of PAL products and services. In
fiscal year 2005, approximately 29% of our revenues were derived from the sale
of PAL products and services. We expect to see this percentage to increase in
the future as we pursue our business plan to emphasize these services. This
sales effort will be focused on the homebound Personal Emergency Response System
("PERS") industry and the parole/probation market.

During the fiscal year ended September 30, 2004, the Company began to implement
a direct-to-consumer marketing strategy, which it has since abandoned. This
campaign employed a variety of media including radio, print, online marketing,
and direct mail to reach our target customers. Our target market was the
estimated 35 million Americans that are over the age of sixty-five. Of these 35
million seniors, we estimate that approximately 9.7 million currently live
alone, with approximately 1.3 million of these homebound. Our experience with
direct-to-consumer marketing shows that the senior customers do not personally
make the decision to purchase our products and services. Instead, we have
learned that the children or caregivers of these seniors make the purchase
decisions. We have also learned that a direct to consumer marketing campaign is
very expensive and that our efforts would be better rewarded by focusing on
distributors and dealers selling our products and services.

                                       4
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Under our current business model, our customers own our devices. We hope to
implement in the future a model where customers do not own the devices. The
customer would rent our device on a month-to-month contract. The customer can
terminate the service by simply returning the device to us. We charge the
customer a one-time activation fee and a monthly monitoring fee for as long as
the customer keeps the device. We may also pay a monthly fee to the dealer or
distributor for each contract originated through that dealer or distributor.

To further expand the viability of our distribution and marketing plan, we are
working with state Medicaid agencies, insurance companies, and correctional
agencies to pursue reimbursement for our products and services. The MobilePAL
product is Medicaid-approved in Colorado and Maryland and we hope to replicate
this success in other states. In addition, we are working with insurers to
obtain private reimbursement approval. There can be no assurance that these
efforts will be successful.

In addition to the PERS market, we will also focus our efforts in the parole and
probation market. According to 2003 Bureau of Justice Statistics, in the United
States there are a record number 4.9 million adult men and women who are on
supervised probation or parole. This number is expected to continue to grow as
state budget deficits are requiring prisons to be closed, putting additional
pressure on the already swelling parole and probation market. In 2003 the total
adult correctional population, including those incarcerated and those being
supervised in the community, was 6.9 million and growing at the rate of 2.4% per
year. This equaled 3.2% of the U.S. population or about 1 in every 32 adults.

This increase has strained the ability of parole officers and supervisors to
manage the burgeoning growth in parolees. RemoteMDx has created a product and
service to answer this problem called PAL Services Offender Tracking Network
(the "Network").

We believe the Network and its accompanying products that will be marketed and
sold by RemoteMDx will create a shift in the parole/probation market. The
Network strategy transforms the current market to one that provides offender
monitoring products and services. The Network allows a supervisor to manage
dozens of parolees simultaneously. Under the Network program, a parolee is
required to wear the device twenty-four hours a day, seven days a week, which
allows the PAL monitoring center to track where the parolee is in real time
(active monitoring). The computer at the monitoring center automatically checks
to make sure that the parolee is within inclusion areas and does not enter any
exclusionary zones. At any sign of problems, the monitoring center can contact
directly the parolee and if necessary put the parole officer in direct contact
with the parolee. The parole officer can also access a secured web site that
shows where the parolee is and where he has been, allowing the supervisor to
better manage the parolee.

The PAL Operator can provide a multitude of services for the offender and the
supervising officer. The various services offered are as follows:

         o    24/7 nationwide two-way voice communication;
         o    Automated reporting of location and alarms (breadcrumbs);
         o    Inclusion and exclusion alarms;
         o    Proximity alarm;
         o    Automated alert notification;
         o    Tamper resistant band and alarm;
         o    Battery status alerts (rechargeable/replaceable);
         o    Web-based real-time tracking;
         o    Active monitoring; and
         o    Enhanced GPS/GSM locate.

Research and Development Program

The PAL Products

In 2000, as a direct result of our strategic relationship with Battelle, we
began our efforts to develop a mobile solution to the PERS market. We eventually
determined that combining cellular and GPS technologies could expand the PERS
market from approximately 1.3 million homebound patients to more than 10 million
seniors living alone in the United States. We began by reviewing patents and
products previously developed that might be utilized in this market. Our
research led us to SecureAlert, owner of patents and circuitry that we believed
could help accelerate our move into the market.

                                       5
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Our first product line utilizing these patents was MobilePAL, a cellular-based
emergency and concierge device with one-button access to our PAL Services
Operators. The first version of the MobilePAL unit was an analog cell device. We
used analog technology because of its more expansive coverage in North America
at that time. Our first unit could be configured to call 911 Emergency only, or
could accept a Mobile Identification Number (MIN) and make outbound calls to
either of two predetermined phone numbers.

Our second version of the MobilePAL device incorporates GPS technology. GPS
technology utilizes the highly accurate clocks on 24 satellites orbiting the
earth owned and operated by the U.S. Department of Defense. These satellites are
designed to transmit their identity, orbital parameters and the correct time to
earthbound GPS receivers at all times. Supporting the satellites are several
radar-ranging stations maintaining exact orbital parameters for each satellite
and transmitting that information to the satellites for rebroadcast at
frequencies between 1500 and 1600 MHz.

A GPS receiver (or engine) scans the frequency range for GPS satellite
transmissions. If the receiver can detect three satellites, the algorithms
within the engine deduce its location, usually in terms of longitude and
latitude, on the surface of the earth as well as the correct time. If the
receiver can detect four or more GPS satellite transmissions, it can also deduce
its own elevation above sea level. The effectiveness of GPS technology is
limited by obstructions between the device and the satellites and, therefore,
service can be interrupted or may not be available at all if the user is located
in the lower floors of high-rise buildings or underground.

Shortly after commencing sales of the new GPS-enabled MobilePAL, MEW began
working with us to develop an improved MobilePAL device complete with an
improved GPS engine, speakerphone, and cellular chipset. The result was the
MobilePAL GPS2000. The GPS2000 has several advantages over the earlier versions.
The first is the improved quality of the GPS engine. MEW partnered with Sirf, a
leading GPS technology company, to create a new, smaller GPS device with greater
sensitivity and acquisition times of less than one minute. The GPS2000 is able
to use the GPS engine concurrently with the cellular circuitry in the device,
unlike the GPS1000 which temporarily drops the cellular signal during the time
that the GPS engine is operating, and then automatically redials the PAL
Services Center once the location data has been obtained. Using the GPS2000, the
PAL Services Center operators are able to continuously communicate with the
subscriber while simultaneously determining the caller's location.

Recently, we have developed two working prototypes of our next generation of the
MobilePAL, the GPS 3000. This device has several improvements over the GPS 2000.
The device is always powered on and it can receive incoming calls. No launch
date has been set for this device, and the device is not yet ready for
commercial distribution.

During the year ended September 30, 2005, we spent $1,766,791 on research and
development. This compares to $205,341 spent on research and development for the
year ended September 30, 2004.

TrackerPAL

nexAira, Inc. ("nexAira") is developing our TrackerPAL product. nexAira is a
Canadian firm that specializes in hardware and software development in the areas
of GPS, GSM and GPRS. It is the preferred distributor of GPS chip sets
manufactured by Motorola. nexAira is recognized for its rapid development cycles
and expertise in both the cellular and GPS areas.

The Parolee Tracking Device ("PTD") System requires the design and development
of four devices:

         o    Ankle electronics, a wireless body worn tracking device;
         o    PTD-Cuff, a single use band used to fasten the ankle electronics
              to the offender;
         o    Fixture for charging up to 2 batteries at once; and
         o    Rechargeable battery pack, a custom tooled battery used to power
              the ankle device.

The PTD allows a monitoring center to detect the location of an offender and the
offender's attempts to tamper with the device. When the device is attached to an
offender's ankle and activated, it makes use of a GPS receiver to determine the
offender's position and a cellular wireless link to communicate these
coordinates to the monitoring center. The center can contact an offender
whenever the device has adequate cellular signal, using the integrated cellular
speakerphone. Automatic alerts can be sent to the server when the wearer travels
outside a specified area or attempts to enter an "off limits" area. The PTD will
be water resistant to 3 meters.

                                       6
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The ankle strap or PTD-Cuff is a reinforced band used to secure the device to
the offender. The strap is permanently fixed to the offender and requires the
destruction of the strap for removal. The strap incorporates a metal strip to
ensure the strap does not shrink or stretch as well as electrical and optic
continuity detection circuits/paths for tamper detection. The strap is made to
be inexpensive yet strong while the optical continuity assists in making it very
difficult to circumvent and remove without detection.

Development of PAL Services Network

As we developed the MobilePAL product line, we simultaneously worked to create
the PAL Services Center. In contrast to a typical PERS monitoring center, the
PAL Services Center is equipped with hardware and software that pinpoints the
location of the incoming caller by utilizing GPS technology. This capability is
referred to as telematic. The operator's computer screen can identify the caller
as well as locate the caller's precise location on a detailed map. In addition,
the computer must be able to give directions to various sites from the caller's
location, such as directions to the nearest hospital, police station, or
emergency service and also be able to guide emergency services to the caller's
location.

With the MobilePAL products developed and the PAL Services Center in place, we
have the ability to offer the following services:

         o    24/7 nationwide one-button access to a live Personal Assistant;

         o    Mobile access to immediate dispatch of police, fire or ambulance
              services;

         o    Access and dispatch of roadside assistance such as tow trucks,
              etc.;

         o    Location of nearest hospital and veterinary services;

         o    Auto-accident assistance including direct connection to the
              client's insurance company;

         o    Nurse triage service in case of medical questions or concerns;

         o    Personal calling to any phone number of customer's choosing
              including family, friends, caregivers, etc.;

         o    Mobile directory assistance to any U.S. phone number;

         o    Step-by-step driving instructions to virtually anywhere in the
              United States;

         o    Location services;

         o    Medical Data Link to store customer's critical personal medical
              information and communicate the customer's needs to emergency
              personnel;

         o    Daily monitoring of chronically ill customers with data and
              compliance information forwarded to care providers and loved ones;

         o    Location of lost or injured loved ones;

         o    Ability to immediately notify insurers and care providers during a
              medical emergency;

         o    Ability of monitoring center to initiate a call to the subscriber
              to check the subscriber's condition;

         o    Update immediate caregiver weekly on status of subscriber and any
              calls the operators may have received that week;

         o    Ability to track device online;

         o    Waterproof;

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         o    Active Monitoring;

         o    Enhanced GPS/GSM location;

         o    Web based real-time tracking;

         o    Inclusion and exclusion alarms; and

         o    Proximity alarms.

MobilePAL Development

We believe that the next generation of MobilePAL products will revolutionize the
PERS market. This next generation product further miniaturizes the technology,
making MobilePAL a wearable device (such as a watch or pendant). nexAira is in
the process of designing and developing for the Company a watch-type device that
contains a single button and fall detection mechanism that communicates with a
pager-size companion device. Activated manually by pushing a button on the watch
or automatically by sensing a sudden movement such as a fall, the device
immediately transmits a radio frequency ("RF") signal that is picked up by the
companion device that then triggers a call to the monitoring center. From there,
the wearer can talk to the center on the speakerphone while the GPS system
pinpoints his or her location.

While the capabilities of MobilePAL will grow with each development cycle, we
anticipate that all models of future generations of MobilePAL, including the
watch/pendant device, will have the following features:

         o    Wearable watch or pendant with an emergency button for contacting
              the PAL Services Operator regardless of the location of the
              wearer.

         o    GPS engine for locating the subscriber.

         o    Fall detection that will alert the service in the event of a fall.

         o    Communication with small pager size device that talks to the
              customer and the PAL Services Center.

         o    Dual band cellular technology utilizing GSM and AMPS.

         o    Rechargeable units.

         o    Alarm when not in proximity of base unit.

         o    Although no functioning prototypes yet exist for this
              watch/pendant device, the research and development of this next
              generation of MobilePAL is currently underway and is being
              performed by nexAira. Continuation of this research by nexAira on
              behalf of the Company is contingent upon the Company obtaining
              adequate funding. There can be no assurances given that the
              Company will obtain the necessary funding.

WatchPAL Development Program

We are working to combine remote health monitoring services with mobile
communication and security services by launching the WatchPAL line of products.

Each WatchPAL product will be specifically designed to monitor a specific
chronic illness. The first chronic disease we have targeted for the WatchPAL
product is diabetes. This WatchPAL product is designed to monitor diabetic
patients remotely and unobtrusively. The patient wears a watch that will not
only act as a fall detection device, but will also monitor on a preprogrammed
basis the glucose level of the patient. This is done unobtrusively and without
the patient's participation. The information is then transmitted to the
monitoring center. If the monitoring center detects that the glucose reading is
outside of that patient's given parameters, it will immediately contact the
patient or care provider. If there is an emergency, the monitoring center can
locate the user and respond by sending assistance.

The WatchPAL line of products is in the early phases of research and
development. We have not yet developed a working prototype of this product. Our

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ability to develop a working line of products in this area is largely contingent
on our ability to obtain the necessary funding for the research and development.
There can be no assurance that we will be able to obtain the funding necessary
to design, develop, and manufacture this line of products.

Intellectual Property

We own seven patents and we have five patents pending and four applications in
process to be filed. The following table contains information regarding our
patents and patent applications; there is no assurances that the applications
will be granted or that they will, if granted, contain all of the claims
currently included.
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                                                         Application /Patent
        Patent Title                                          Number            Filing / Issue Dates        Status

<S>                                                         <C>                     <C>                     <C>
Panic Button Phone                                          6,044,257               3/28/2000               Issued

Emergency Phone for Automatically                           6,226,510 B1             5/1/2001               Issued
Summoning Multiple Emergency
Response Services

Combination Emergency Phone and Personal
Audio Device                                                6,285,867                9/4/2001               Issued

Remotely Controllable Thermostat                            6,260,765               7/17/2001               Issued

Radiotelephone for Emergency Use Only (Design)               D440,954 S             4/24/2001               Issued

Interference Structure for Emergency
Response System Wristwatch                                  6,366,538              04/02/2001               Issued

Emergency Phone with Single-Button Activation               6,630,732              10/21/2003               Issued

                                                          China - 01807350.6          10/5/05               Issued

Emergency Phone with Alternate Number                                                                  Awaiting Office
Calling Capability                                         09/684,831              10/10/2000              Action

                                                                                                       Examination in
Remote Tracking and Communication Device                US 11/202,427                08/10/05             Progress

Emergency Phone with Single-Button                      PCT/US0109871             3/28/2001             Entered
Activation                                                                                             National phase

                                                                                                       Examination in
                                                         EPC- 01924386.4           09/27/2002             Progress

                                                                                                       Examination in
                                                         Japan-2001-571568         09/25/2002             Progress
</TABLE>

Strategic Relationships

We believe one of the Company's strengths is the high quality of our strategic
alliances. Our primary alliances are described below.

         Matsushita Electric Works, Ltd

MEW grew out of a company founded by Konosuke Matsushita in 1918. This
forerunner of MEW was incorporated as a public company in 1935, as the successor
of the wiring device business initiated by the original firm. MEW shares the
same origin with Matsushita Electric Industrial Co., Ltd. ("MEI"), which also
owns the Panasonic(R) brand name. According to its published reports filed with

                                       9
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the Securities and Exchange Commission, MEI's revenues in 2004 were
approximately $81 billion. The Matsushita Group of companies is recognized as
one of the world's largest corporate groups. This strategic alliance included an
equity investment in the Company by MEW and an arrangement under which MEW was
designated our preferred manufacturer, and the Company agreed to act as MEW's
preferred worldwide service provider for GPS products. No services were provided
by MEW during fiscal year 2005.

         nexAira, Inc.

nexAira, Inc., "(nexAira") is a Canadian firm that specializes in hardware and
software development in the areas of GPS, GSM and GPRS. It is the preferred
distributor of GPS chip sets manufactured by Motorola. They are recognized for
their rapid development cycles and expertise in both the cellular and GPS areas.
nexAira performs research and development for the Company on a contractual
basis.

Competition in PERS Industry

We have identified several companies we believe are developing products and
services that in time could affect, or compete in, the same developing areas of
the PERS industry targeted by RemoteMDx. As these products and services take
hold, we expect our competition likely will increase and intensify. We believe
that we can maintain some advantages over our competition due in large part to
our alliance with MEW and other strategic partners. In addition, we believe that
several components in our product family might enjoy significant intellectual
property protection from competition.

We believe our primary competitors are as follows:

         o    Lifeline Systems, Inc., Framingham, MA- We believe that Lifeline
              may be the largest PERS company in the United States, reporting
              over 350,000 subscribers. Lifeline claims that at the touch of a
              button, the customer can be connected to help 24 hours a day from
              their home or yard. Lifeline is a public company that operates its
              own monitoring facility, reportedly handling over 10,000 calls per
              day. Unlike RemoteMDx, however, Lifeline markets solely to the
              non-mobile or homebound customer, limiting its potential customer
              base. In addition, it does not appear that Lifeline has any
              ongoing research and development leading to new products.

         o    Wherify Wireless, Inc., Redwood City, CA- A publicly held
              developer of patented wireless location products and services for
              child safety, parental supervision, personal protection,
              Alzheimer's and memory loss, supervision, law enforcement,
              security, animal identification and property asset tracking. The
              company's proprietary integration of the U.S. government's GPS,
              Wherify patented back-end location service engine, and wireless
              communication technologies will enable customers to obtain
              real-time location information on individuals and property
              directly through the Internet or any phone.

Competition in Parolee/Probation Market

         o    ProTech Monitoring Inc., Odessa, FL- This company has satellite
              tracking software technology that operates in conjunction with
              global positioning system (GPS) and wireless communication
              networks. ProTech's internet based technology enables its
              customers to monitor the exact location of criminal offenders or
              individuals anywhere in the world using its satellite monitoring
              and remote tracking system. The product is not associated with a
              monitoring center and is bulky.

         o    ISecuretrac Inc., Omaha, NE - This company supplies electronic
              monitoring equipment for tracking and monitoring persons on
              pretrial release, probation, parole, or work release. ISecuretrac
              utilizes tracking and monitoring applications via global
              positioning system (GPS) and wireless communication technologies.
              This product does not have a monitoring center associated with it
              and does not have active monitoring.

         o    Sentinel Security and Communications, Inc., Rochester NY- This
              company supplies monitoring and supervision solutions for the
              offender population. Their services include GPS tracking, RF
              monitoring and case management monitoring. This product is bulky
              and requires separate devices for voice communication.

                                       10
<PAGE>

The Company faces intense competition, including competition from entities that
are more established and have greater financial resources than it does, which
may make it difficult for it to establish and maintain a viable market presence.

Our current and expected markets are rapidly changing. Existing products and
services and emerging products and services will compete directly with the
products we are seeking to develop and market. Our technology will compete
directly with other technologies, and, although we believe our technology has or
will have advantages over these competing systems, there can be no assurance
that our technology will have advantages that are significant enough to cause
users to adopt its use. Competition is expected to increase.

Many of the companies currently in the remote medical monitoring and diagnostic
market may have significantly greater financial resources and expertise in
research and development, marketing, manufacturing, pre-clinical and clinical
testing, obtaining regulatory approvals and marketing than those available to
us. Smaller companies may also prove to be significant competitors, particularly
through collaborative arrangements with large third parties. Academic
institutions, governmental agencies, and public and private research
organizations also conduct research, seek patent protection, and establish
collaborative arrangements for product and clinical development and marketing in
the medical diagnostic arena. Many of these competitors have products or
techniques approved or in development and operate large well-funded research and
development programs in the field. Moreover, these companies and institutions
may be in the process of developing technology that could be developed more
quickly or be ultimately more effective than our planned products.

The Company faces competition based on product efficacy, the timing and scope of
regulatory approvals, availability of supply, marketing and sales capability,
reimbursement coverage, price and patent position. There can be no assurance
that its competitors will not develop more effective or more affordable
products, or achieve earlier patent protection or product commercialization.

Dependence on Major Customers

During fiscal year 2005, one customer accounted for more than 10% of sales.
Fisher Scientific accounted for approximately 17% ($148,500) of sales. The loss
of this customer may result in lower revenues and limit the cash available to
grow our business and to achieve profitability. We have no arrangements or
contracts with this customer that would require them to purchase a specific
amount of product from us.

Dependence on Major Suppliers

During 2004, the Company entered into a cellular agreement with a national
cellular carrier. If this significant supplier were to cease providing product
or services to it, the Company would be required to seek alternative sources.
There is no assurance that alternate sources could be located or that the delay
or additional expense associated with locating alternative sources for these
products or services would not materially and adversely affect its business and
financial condition.

Employees

As of December 2005, the Company had 22 full time employees and 4 part-time
employees. None of the employees are represented by a labor union or subject to
a collective bargaining agreement. The Company has never experienced a work
stoppage and management believes that the relations with employees are good.

Item 2.  Description of Property

Company headquarters are located in leased premises consisting of approximately
11,500 square feet of laboratory and office facilities located at 5095 West 2100
South, West Valley City, Utah. These premises also serve as the manufacturing,
warehouse and shipping facilities for Volu-Sol Reagents Corporation. This lease
has been renewed and now expires in November 2010 with monthly base rent of
$5,750, subject to annual adjustments according to changes in the Consumer Price
Index.

The Company has entered into a 40 month lease for approximately $11,750 per
month, in March 2005, consisting of approximately 7,500 square feet of office
space at 150 West Civic Center Drive, Sandy Utah. This facility will initially
serve as our monitoring center and will eventually serve as corporate
headquarters of SecureAlert, Inc., a wholly-owned subsidiary of RemoteMDx, Inc.
The Company moved into these facilities during the fourth fiscal quarter of
2005.

                                       11
<PAGE>


Management believes the facilities described above are adequate to accommodate
presently expected growth and needs of our operations. As the Company continues
to grow, additional facilities or the expansion of existing facilities likely
will be required.

Item 3.  Legal Proceedings

On November 15, 2002, Oakwood Homes Corporation and certain of its affiliates
(collectively "OHC") commenced a voluntary case under Chapter 11 of Title 11,
United States Code, in the United States Bankruptcy Court for the District of
Delaware, Case No. 02-13396 (the "Bankruptcy Action"). In these actions the
Trust claims that OHC made preferential payments totaling approximately six
hundred nine thousand dollars ($609,000) during the 90 days preceding the
commencement of the Bankruptcy Action. The Trust seeks a judgment against
SecureAlert for recovery and avoidance of these payments. SecureAlert has
vigorously defended these claims and has settled the entire amount for three
payments of $9,000 each. The first payment was made in September 2005 and the
final two payments were made subsequent to September 30, 2005.

SecureAlert is party to litigation incidental to its distribution business.
However, we do not believe the potential liability, if any, of SecureAlert or
the costs incurred in connection with those matters will be material.

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

None

                                     PART II


Item 5.  Market for Common Equity and Related Stockholder Matters

Market Information. Our common stock is traded on the OTC Bulletin Board of the
National Association of Securities Dealers, Inc., under the symbol "RMDX.OB."
The following table sets forth, for the fiscal periods indicated, the range of
high and low sales bid prices for our common stock. Bid prices reflect
inter-dealer prices and may not represent actual transactions. The sales
information is available online at http://otcbb.com.


                              Ask Price                 Bid Price

2004
----                       High     Lows                High    Lows
First Quarter              N/A *    N/A *               N/A *   N/A *
Second Quarter             N/A *    N/A *               N/A *   N/A *
Third Quarter              N/A *    N/A *               N/A *   N/A *
Fourth Quarter             N/A *    N/A *               N/A *   N/A *


2005
-----
First Quarter              N/A *    N/A *               N/A *   N/A *
Second Quarter             N/A *    N/A *               N/A *   N/A *
Third Quarter              N/A *    N/A *               N/A *   N/A *
Fourth Quarter             $1.64    $0.89              $1.45    $0.30

*  The Company's common stock began trading on August 25, 2005.

Holders. As of December 15, 2005, there were approximately 1,300 holders of
record of the common stock and approximately 54,195,221 shares of common stock
outstanding. We also have 26,007 shares of Series A preferred stock outstanding,
held by 42 shareholders, convertible into a minimum of approximately 9,622,000
shares of common stock, as well as 369,157 shares of Series B preferred stock
outstanding held by 49 shareholders, that at present are convertible into
approximately 2,768,000 shares of common stock. We also have granted options and
warrants for the purchase of approximately 13,766,043 shares of common stock. As
discussed elsewhere in this report, we may be required to issue additional
shares of common stock or preferred stock to pay accrued dividends, or to comply
with anti-dilution adjustments to the conversion rights of present or former
preferred shareholders.

                                       12
<PAGE>

Dividends. Since incorporation, we have not declared any dividends on our common
stock. We do not anticipate declaring a dividend on the common stock for the
foreseeable future. The Series A Preferred Stock accrues dividends at the rate
of 10% annually, which may be paid in cash or additional shares of preferred or
common stock, at our option. To date all such dividends have been paid by
issuance of preferred stock, valued at $200 per share of preferred. We are not
required to pay and do not pay dividends with respect to the Series B Preferred
Stock.

Dilution. We have a large number of shares of common stock authorized in
comparison to the number of shares issued and outstanding. The board of
directors determines when and under what conditions and at what prices to issue
stock. In addition, a significant number of shares of common stock are reserved
for issuance upon exercise of purchase or conversion rights.

The issuance of any shares of common stock for any reason will result in
dilution of the equity and voting interests of existing shareholders.

Transfer Agent and Registrar. The transfer agent and registrar for our common
stock is American Stock Transfer & Trust Company, 40 Wall Street, New York City,
NY 10005.

Recent Sales of Unregistered Securities

The following information summarizes certain information for all securities we
have sold during the fiscal year covered by this report without registration
under the Securities Act.

In each of these transactions the securities were issued to individuals or
entities that were "accredited investors" as that term is used in Rule 501 under
Regulation D of the Securities Act, and the issuance of the securities was
accomplished without registration under the Securities Act in reliance on the
exemptions from the registration requirements of the Securities Act afforded by
Section 4(2), including Rule 506 of Regulation D under the Securities Act.

Subsequent to September 30, 2005, the Company entered into various different
financing transactions. These transactions are described in the Current Report
on Form 8-K of the Company filed with the Commission on November 2, 2005 and
November 23, 2005.

On December 27, 2005, the Company entered into $500,000 principal amount of
convertible bridge notes with two entities. These notes bear interest at 8% and
are convertible into a proposed new series of preferred stock of the Company to
be established by the Board of Directors. The rights and preferences of this new
series of preferred stock are under negotiation.

Fiscal Year 2005

During the year ended September 30, 2005, we issued 13,733,804 shares of common
stock without registration of the offer and sale of the securities under the
Securities Act of 1933, as amended, as follows:

         o    3,995,154 shares were exchanged for debt and accrued interest of
              $2,626,522;

         o    1,043,519 shares were issued in consideration of reduction in
              related-party debt of $563,500 plus $77,554 of accrued interest;

         o    5,148,641 shares were issued for services in the amount of
              $2,822,911;

         o    953,895 shares were issued upon the conversion of 2,578 shares of
              Series A Preferred Stock of the Company; and

         o    2,592,595 shares were issued upon the conversion of 466,667 shares
              of Series B Preferred Stock of the Company.

         o    See footnote 16 to the financial statements for a discussion of
              financing activities subsequent to September 30, 2005.

                                       13
<PAGE>
Item 6.  Management's Discussion and Analysis or Plan of Operation

The following discussion should be read in conjunction with our consolidated
financial statements and notes thereto included elsewhere in this Report.

THIS REPORT ON FORM 10-KSB CONTAINS, IN ADDITION TO HISTORICAL INFORMATION,
FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. ALL
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE DEEMED BY REMOTE MDX TO BE
COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY SECTION 21E
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED BY REMOTE MDX AND DISCUSSED IN
THE FORWARD-LOOKING STATEMENTS. WHEN USED IN THIS REPORT, WORDS SUCH AS
"BELIEVES," "EXPECTS," "INTENDS," "PLANS," "ANTICIPATES," "ESTIMATES," AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS,
ALTHOUGH THERE MAY BE CERTAIN FORWARD-LOOKING STATEMENTS NOT ACCOMPANIED BY SUCH
EXPRESSIONS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES ARE
DISCUSSED BELOW IN THE SECTION ENTITLED "INFORMATION CONCERNING FORWARD-LOOKING
STATEMENTS" AND UNDER THE HEADING "CERTAIN SIGNIFICANT RISK FACTORS" BELOW.

The following table summarizes our results of operations for the last two
completed fiscal years.

                     Summary Consolidated Statements of Operations Data

                                                   Year Ended September 30,
                                                     2005              2004
                                              ---------------------------------
Net sales                                      $     861,868      $   1,117,520
Cost of goods sold                                   823,752          1,134,535
                                              ---------------------------------
       Gross profit (loss)                            38,116            (17,015)

Research and development expenses                  1,766,791            205,341

Impairment of goodwill and inventory                       -          1,351,164

Selling, general, and administrative expenses      7,230,222          4,189,669
                                              ---------------------------------
       Loss from operations                       (8,958,897)        (5,763,547)
                                              ---------------------------------
Other income (expenses):
      Derivative valuation gain (loss)              (580,626)                 -
      Interest and other income                        4,570             74,900
      Interest expense                            (1,448,736)          (817,579)
                                              ---------------------------------
       Net loss before discontinued operations $ (10,983,689)    $   (6,506,226)
       Income (loss) on discontinued
       operations, net of tax                              -             99,515
                                              ---------------------------------
       Net loss                                $ (10,983,689)    $   (6,406,711)
                                              =================================

Discontinued Operations

During the year ended September 30, 2004, management determined to discontinue
the Company's operating activities of consumer electronics distribution. The
Company's activities included wholesale distribution to home manufacturers
through December 31, 2002. On January 1, 2003, the Company entered into an
agreement with SecureAlert Entertainment, LLC ("SAE"), an unaffiliated company,
granting it exclusive distribution rights to the Company's consumer electronics
products to the manufactured homes marketing channel in North America. In
exchange for this grant of distribution rights, the Company received a 7%
royalty fee in connection with consumer electronic products sold by SAE under
the distribution rights agreement. This agreement expired on December 31, 2003.
Because of the Company's decision to pursue a business model to sell and service
mobile security devices, and the significant market expansion costs required to
continue its consumer electronic products distribution, the Company has
discontinued its consumer electronics operations. The discontinued operations
for the year ended September 30, 2005 and 2004 were as follows:

                                       14
<PAGE>

                                                               Year Ended
                                                              September 30,
                                                       -------------------------
                                                            2005          2004
                                                       -------------------------
Net sales and royalties from consumer electronics         $    -      $ 101,337
product distribution
Costs associated with consumer electronics operations          -          1,822
                                                       -------------------------

Net  income (loss ) from discontinued operations          $   -        $ 99,515
                                                       =========================

Continued Operations

The Company's focus is on building the mobile emergency and personal security
systems market, rather than the consumer electronics market. The following
discussion and analysis is therefore based only upon the continued operations of
the Company.

Fiscal Year Ended September 30, 2005 Compared to Fiscal Year Ended September 30,
2004

Results of Operations

Net Sales

In the fiscal year ended September 30, 2005, the Company had net sales of
$861,868 compared to net sales of $1,117,520 for the fiscal year ended September
30, 2004, a decrease of $255,652. This decrease is due primarily to shifting the
Company's focus from selling the MobilePAL to developing the TrackerPAL. During
the year ended September 30, 2005, SecureAlert provided net sales of $281,208
compared to net sales of $556,338 for the year ended September 30, 2004. Net
sales by Volu-Sol Reagents Corporation ("Reagents") for the fiscal year ended
September 30, 2005 were $572,632 compared to $561,182 in fiscal year 2004, an
increase of approximately 2%. As the Company's focus continues to shift to the
monitoring business, the Company anticipates Reagents' sales will decrease in
the future as a percentage of total sales.

Cost of Goods Sold

In the fiscal year ended September 30, 2005, cost of goods sold totaled
$823,752, compared to cost of goods sold in fiscal 2004 of $1,134,535. This
decrease is due primarily to the decrease in net sales. SecureAlert's cost of
goods sold totaled $437,224, or 155% of its net sales in 2005, compared to
$796,565, or 143% for fiscal 2004. Reagents' cost of goods sold totaled $386,528
in fiscal 2005, compared to $337,970 for the year ended September 30, 2004, an
increase of $48,558 or approximately 14% from the prior fiscal year. The
increase in overall margins of the Company from negative 2% in fiscal year 2004
to 4% in fiscal year 2005 is attributable primarily to the Company now having an
established distributor network.

Research and Development Expenses

In the fiscal year ended September 30, 2005, the Company incurred research and
development expenses of $1,766,791 compared to similar expenses in 2004 totaling
$205,341. This increase is due primarily to expenses associated with the
development of the TrackerPAL device for the parolee market. We anticipate
higher research and development expenses in the future due to ongoing research
and development related to our TrackerPAL, WatchPAL, and MobilePAL 3000
products.

Selling, General and Administrative Expenses

In the fiscal year ended September 30, 2005, the Company's selling, general and
administrative expenses totaled $7,230,222, compared to $4,189,669 for the
fiscal year ended September 30, 2004. This increase of $3,040,553 is

                                       15
<PAGE>

attributable primarily to an increase in non-cash compensation expense in
connection with the grant of options and issuance of shares in lieu of cash
compensation to consultants and employees, including officers and directors of
the Company. In fiscal year 2005 these non-cash expense items totaled
approximately $2,750,000 compared to approximately $1,670,000 during the fiscal
year 2004. The $7,230,222 of selling, general and administrative expenses for
fiscal year ended September 30, 2005 primarily consists of the following
expenses: advertising ($145,400), consulting ($2,945,000), insurance ($248,000),
investment banking fees ($237,000), legal, accounting, and professional fees
($450,000), payroll ($2, 053,000), and travel expenses ($395,000).

Other Income and Expense

In the fiscal year ended September 30, 2005, interest expense was $1,448,736,
compared to $817,579 in fiscal year 2004. The increase of $631,157 resulted
primarily from the issuance of common stock and options granted in connection
with debt instruments . During the year ended September 30, 2005, the Company
incurred $1,400,683 of non-cash interest expense. We had interest income of
$1,720 and other income of $2,850 during fiscal year 2005, compared to interest
income of $7,077 and other income of $67,823 during fiscal year 2004. This
decrease in other income is due to settling debts in fiscal year 2004 at less
than the expense incurred and a recovery of bad debt previously allowed for.

During the year ended September 30, 2005, the Company entered into convertible
notes containing embedded derivatives. The Company recognized an initial expense
of $780,733 related to these derivatives. The derivative valuation decreased by
$200,107 for the year ended September 30, 2005, for a net derivative valuation
loss of $580,626.

Net Loss

We had a net loss for the year ended September 30, 2005 totaling $10,983,689,
compared to a net loss of $6,406,711 for fiscal year 2004. This increase is due
primarily to expenses associated with the development of the TrackerPAL device
for parolees.

Liquidity and Capital Resources

September 30, 2005

The Company has not historically financed operations entirely from cash flows
from operating activities. During the year ended September 30, 2005, the Company
supplemented cash flows with borrowings from the sale of equity securities and
borrowings from a related party.

At September 30, 2005 the Company had unrestricted cash of $416,036, compared to
cash of $62,103 at September 30, 2004. At September 30, 2005, the Company had a
working capital deficit of $5,217,466, compared to a working capital deficit of
$2,269,202 at September 30, 2004. The increase in working capital deficit is the
result of losses from operations and use of cash in addition to increased
borrowings.

During fiscal year 2005, the Company's operating activities used cash of
$3,839,236, compared to $2,035,052 cash used in 2004.

Investing activities for the year ended September 30, 2005, used cash of
$303,273, compared to $100,005 of cash used by investing activities in the year
ended September 30, 2004. Cash used in 2004 was expended primarily for property
and equipment purchases.

Financing activities for the year ended September 30, 2005, provided $4,496,442
of net cash compared to $2,060,266 of net cash provided from those activities in
the year ended September 30, 2004.

The Company had net payments of $782,639 on a related-party line of credit and
payments of $197,889 on long and short-term notes payable. In addition, the
Company had proceeds from the sale of SecureAlert Series A preferred stock of
$2,607,746 and $2,869,224 from the issuance of debt.

In fiscal year 2005, the Company incurred a net loss of $10,983,689 and negative
cash flows from operating activities of $3,839,236, compared to a net loss of
$6,406,711 and negative cash flow of $2,035,052 for the year ended September 30,
2004. As of September 30, 2005, the Company's working capital deficit was
$5,217,466 and the Company had a net tangible stockholders' deficit of
$8,213,444 and accumulated deficit of $80,463,694.

                                       16
<PAGE>

These factors, as well as the risk factors set out elsewhere in this report,
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements included in this report do not include any
adjustments that might result from the outcome of this uncertainty. Our plans
with respect to this uncertainty include the conversion of a significant portion
of our outstanding debt and other obligations into common stock, as well as
raising capital from the sale of our common stock and other debt and equity
securities. There can be no assurance that the debt holders will be willing to
convert the debt obligations to equity securities or that the Company will be
successful in raising additional capital from the sale of equity or debt
securities. If the Company is unable to obtain additional financing, it will be
unable to continue the development of its products and may have to cease
operations.

The Company has 32,000 common shares outstanding which are redeemable at the
option of the shareholder and which have been recorded at a value of $96,000.
These shares represent a total future potential obligation of the Company in the
amount of $96,000. The shares outstanding have all the rights of the Company's
common stock and are redeemable at $3.00 per share.

The following chart includes principal balances and interest rates applicable to
borrowings (net of any applicable debt discounts) as of September 30, 2005. See
footnote 16 of the financial statements for a complete discussion of financing
transactions subsequent to September 30, 2005.

Description of           Annual Interest     Maturity Date           Amount
 Obligation                    Rate                             Owing at 9/30/05

Advances from ADP
Management                      5%            July 31, 2006      $    17,615 (1)
Bank Line of Credit       Prime plus .25%     March 11, 2006     $   174,898
Note to Shareholder             5%             January 2004      $    84,838
Note to Shareholder             5%             January 2004      $    84,838
Series B & C Debentures         10%              Various         $ 1,262,366
                                                                 $         -
                                                                 $         -
                                                                 $         -
Related party Note              17%         December 27, 2005    $   237,857 (2)
Promissory Note                 5%          December 20, 2005    $    95,830
Promissory Note                 0%          September 18,2006    $    21,837
Promissory Note                 18%         September 16, 2008   $     5,042
Promissory Note                 18%            May 3, 2008       $    17,709
Promissory Note                 18%              Various         $    75,834
Promissory Note                 18%              Various         $   308,402
Promissory Note                 18%              Various         $    14,583
                                                                 ---------------
Totals                          N/A                N/A           $ 2,401,649
                                                                 ===============
--------------------------------------------------------------------------------

Notes:

         (1)  By agreement dated August 19, 2004, ADP Management Corporation
              ("ADP Management"), an entity owned and controlled by Derrick and
              Dalton, provided a $500,000 line-of-credit to the Company. During
              the year ended September 30, 2005, the line-of-credit decreased by
              $204,931. ADP Management assumed $563,500 of debt plus $77,554 of
              accrued interest owed by the Company to various note holders, in
              exchange for 1,043,519 shares of common stock. All the note
              holders released the Company from all obligations from the debt.

                                       17
<PAGE>

         (2)  During the year ended September 30, 2005, the Company borrowed
              $245,000 from an entity controlled by an employee of the Company.
              As of September 30, 2005, the balance net of the debt discount was
              $237,857. The note was due November 13, 2005, but subsequent to
              year end the note was extended.

Contractual Obligations

The following table summarizes the Company's outstanding borrowings (at face
value) and long-term contractual obligations at September 30, 2005, and the
periods in which these obligations are scheduled to be paid in cash:

                                             Payments Due By Period
                          ------------------------------------------------------

                                      Less Than 1      1 - 3   3 - 5   More than
Contractual Obligations       Total       Year         Years   Years    5 Years
--------------------------------------------------------------------------------


Notes from schedule above $2,401,649  $1,980,079     $421,570         -      -
Accretion & Amortization
of Debt Discount           2,098,930           -    2,098,930         -      -

Operating leases             911,983     110,249      627,853   173,881      -

                          ------------------------------------------------------
Total
                          $5,412,562  $2,090,328   $3,148,353  $173,881      -
                          ======================================================
Inflation

The Company does not believe inflation has had a material adverse impact on its
business or operating results during the periods presented nor is it expected to
in the next year.

Critical Accounting Policies

In Note 2 to the audited financial statements for the fiscal year ended
September 30, 2005 included in this Form 10-KSB, the Company discusses those
accounting policies that are considered to be significant in determining the
results of operations and its financial position. The Company believes the
accounting principles utilized by it conform to generally accepted accounting
principles in the United States of America.

The preparation of consolidated financial statements requires management to make
significant estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. By their nature, these judgments are subject
to an inherent degree of uncertainty. On an on-going basis, we evaluate our
estimates, including those related to bad debts, inventories, intangible assets,
warranty obligations, product liability, revenue, and income taxes. We base our
estimates on historical experience and other facts and circumstances that are
believed to be reasonable, and the results form the basis for making judgments
about the carrying value of assets and liabilities. The actual results may
differ from these estimates under different assumptions or conditions.

With respect to inventory reserves, revenue recognition, impairment of
long-lived assets, and accounting for stock-based compensation, the Company
applies the following critical accounting policies in the preparation of its
financial statements:

                                       18
<PAGE>

Inventory Reserves

The nature of the Company's business requires maintenance of sufficient
inventory on hand at all times to meet the requirements of its customers. The
Company records finished goods inventory at the lower of standard cost, which
approximates actual costs (first-in, first-out) or market. Raw materials are
stated at the lower of cost (first-in, first-out), or market. General inventory
reserves are maintained for the possible impairment of the inventory. Impairment
may be a result of slow moving or excess inventory, product obsolescence or
changes in the valuation of the inventory. In determining the adequacy of
reserves, management analyzes the following, among other things:

         o    Current inventory quantities on hand;

         o    Product acceptance in the marketplace;

         o    Customer demand;

         o    Historical sales;

         o    Forecast sales;

         o    Product obsolescence; and

         o    Technological innovations.

Any modifications to these estimates of reserves are reflected in the cost of
goods sold within the statement of operations during the period in which such
modifications are determined necessary by management.

Revenue Recognition

The Company derives revenue primarily from the sale of its mobile medical
emergency products with service contracts, and reagent stains. Under applicable
accounting principles, revenue, less reserves for returns, is recognized upon
shipment to the customer. For the two fiscal years ended September 30, 2005 and
2004 the provision for sales returns was not material. Revenue from products
sold with long-term service contracts are recognized ratably over the life of
the expected life of the contract. Amounts received in advance of shipment are
recorded as deferred revenue. Shipping and handling fees are included as part of
net sales. The related freight costs and supplies directly associated with
shipping products to customers are included as a component of cost of goods
sold.

Impairment of Long-lived Assets

The Company reviews its long-lived assets, other than goodwill, for impairment
when events or changes in circumstances indicate the book value of an asset may
not be recoverable. An evaluation is made at each balance sheet date, to
determine whether events and circumstances have occurred which indicate possible
impairment. An estimate is made of future undiscounted net cash flows of the
related asset or group of assets over the estimated remaining life of in
measuring whether the assets are recoverable.

Accounting for Stock-based Compensation

The Company accounts for stock-based compensation issued to employees and
directors under Accounting Principles Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. Under APB No. 25,
compensation related to stock options, if any, is recorded if an option's
exercise price on the measurement date is below the fair value of the Company's
common stock and amortized to expense over the vesting period. Compensation
expense for stock awards or purchases, if any, is recognized if the award or
purchase price on the measurement date is below the fair value of the common
stock and is recognized on the date of award or purchase. Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock Based
Compensation," requires pro forma information regarding net loss and net loss
per common share as if the Company had accounted for its stock options granted
under the fair value method. This pro forma disclosure is presented in Note 11
to the audited financial statements.

The Company accounts for stock-based compensation issued to persons other than
employees using the fair value method in accordance with SFAS No. 123 and
related interpretations. Under SFAS No. 123, stock-based compensation is
determined as either the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable.

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The measurement date for these issuances is the earlier of either the date at
which a commitment for performance by the recipient to earn the equity
instruments is reached or the date at which the recipient's performance is
complete.

Allowance for Doubtful Accounts

The Company must make estimates of the collectibility of accounts receivables.
In doing so, we analyze accounts receivable and historical bad debts, customer
credit-worthiness, current economic trends and changes in customer payment
patterns when evaluating the adequacy of the allowance for doubtful accounts.

Recent Accounting Pronouncements

In December 2004, the FASB issued FASB Statement No. 123 (revised 2004),
"Shared-Based Payment." Statement 123(R) addresses the accounting for
share-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise of (b)
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity instruments.
Statement 123(R) requires an entity to recognize the grant-date fair value of
stock options and other share-based compensation issued to employees in the
statement of operations. The revised Statement generally requires that an entity
account for those transactions using the fair-value-based method, and eliminates
the intrinsic value method of accounting in APB Opinion No. 25, "Accounting for
Stock Issued to Employee", which was permitted under Statement 123, as
originally issued.

The revised Statement requires entities to disclose information about the nature
of the share-based payment transactions and the effects of those transactions on
the financial statements.

Statement 123(R) is effective as of October 1, 2006 for the Company. All public
companies must use either the modified prospective or the modified retrospective
transition method. The Company has not yet evaluated the impact of adoption of
this pronouncement, but believes it may have a material impact on the
consolidated financial statements.

In November 2004, the FASB issued Statement No. 151, "Inventory Costs", to amend
the guidance in Chapter 4, "Inventory Pricing", of FASB Accounting Research
Bulletin No. 43, "Restatement and Revision of Accounting Research Bulletins."
Statement No. 151 clarifies the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). The Statement
requires that those items be recognized as current-period charges. Additionally,
Statement 151 requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. Statement No. 151 is effective for fiscal years beginning after June
15, 2005. The Company is currently evaluating the impact of the adoption of this
Statement which is required to be adopted in the fiscal year 2006.

As part of its short-term international convergence project with the IASB, on
December 16, 2004, the FASB issued Statement 153 to address the accounting for
non-monetary exchanges of productive assets. Statement 153 amends APB No. 29,
"Accounting for Non-Monetary Exchanges", which established a narrow exception
for non-monetary exchanges of similar productive assets from fair value
measurement. This Statement eliminates that exception and replaces it with an
exception for exchanges that do not have commercial substance. Under Statement
153 non-monetary exchanges are required to be accounted for at fair value,
recognizing any gains or losses, if their fair value is determinable within
reasonable limits and the transaction has commercial substance.

The Statement specifies that a non-monetary exchange has commercial substance if
future cash flows of the entity are expected to change significantly as a result
of the exchange. The Company has adopted this Statement in fiscal year 2005 and
adoption is not expected to have a material impact on the financial position or
results of operations.

Risk Factors

Caution Regarding Forward-looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of the Company. The Company may
from time to time make written or oral statements that are forward-looking,
including statements contained in this report and other filings with the
Securities and Exchange Commission and in reports to our shareholders. Such
statements may, for example, express expectations or projections about future
actions that we may take including restructuring or strategic initiatives or
about developments beyond our control. The terms "anticipate", "believe",
"estimate", "expect", "objective", "plan", "might," "should," "may," "project,"

                                       20
<PAGE>

and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are subject to inherent risks and uncertainties
that may cause actual results or events to differ materially from those
contemplated by the forward-looking statements. These statements are made on the
basis of management's views and assumptions as of the time the statements are
made and we undertake no obligation to update these statements. There can be no
assurance however that our expectations will necessarily come to pass. The
factors that could materially affect future developments and performance include
those set forth below.

The financial statements contained in our annual report on Form 10-KSB for the
years ended September 30, 2005 have been prepared on the basis that the Company
will continue as a going concern, notwithstanding the fact that its financial
performance and condition during the past few years raise substantial doubt as
to our ability to do so. There is no assurance the Company will ever be
profitable.

In fiscal year 2005, the Company incurred a net loss of $10,983,689, negative
cash flow from operating activities of $3,839,236, and an accumulated deficit of
$80,463,694.

These factors, as well as the risk factors set out below raise substantial doubt
about our ability to continue as a going concern. The financial statements and
the report of our independent registered public accounting firm included in this
report do not include any adjustments that might result from the outcome of this
uncertainty. Our plans with respect to this uncertainty include the conversion
of a significant portion of our outstanding debt and other obligations, to
common stock as well as raising capital from the sale of our securities. There
can be no assurance that the debt holders will be willing to convert the debt
obligations to equity securities or that the Company will be successful in
raising additional capital from the sale of equity or debt securities. If the
Company is unable to obtain additional financing, it will be unable to continue
the development of its products and may have to cease operations.

As a result of our increased focus on a new business market our business is
subject to many of the risks of a new or start-up venture.

The change in our business goals and strategy subjects us to the risks and
uncertainties usually associated with start-ups. Our business plan involves
risks, uncertainties and difficulties frequently encountered by companies in
their early stages of development. If the Company is to be successful in this
new business direction, it must accomplish the following, among other things:

         o    Develop and introduce functional and attractive product and
              service offerings;
         o    Increase awareness of our brand and develop consumer loyalty;
         o    Respond to competitive and technological developments;
         o    Build an operational structure to support our business; and
         o    Attract, retain and motivate qualified personnel.

If the Company fails to achieve these goals, that failure would have a material
adverse effect on its business, prospects, financial condition and operating
results. Because the market for its new product and service offerings is new and
evolving, it is difficult to predict with any certainty the size of this market
and its growth rate, if any. There is no assurance that a market for these
products or services will ever develop or that demand for our products and
services will emerge or be sustainable. If the market fails to develop, develops
more slowly than expected or becomes saturated with competitors, our business,
financial condition and operating results would be materially adversely
affected.

Our management group owns or controls a significant number of our outstanding
shares.

Certain of our directors, executives and principal shareholders or persons
associated with them beneficially own approximately 26-28% of our outstanding
common stock. In addition, these individuals are the beneficial owners of
preferred stock convertible into a significant number of shares of common stock.
As a result, these persons have the ability, acting as a group, to effectively
control our affairs and business, including the election of our directors and,
subject to certain limitations, approval or preclusion of fundamental corporate
transactions. This concentration of ownership may also have the effect of
delaying or preventing a change of control or making other transactions more
difficult or impossible without their support. See Item 9 "Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act," and Item 11 "Security Ownership of Certain Beneficial Owners and
Management."

There is no certainty that the market will accept our new products and services.

                                       21
<PAGE>

Our targeted markets may never accept our new products or services. Insurance
companies, physicians, nurses, patients and consumers may not use our products
unless they determine, based on experience, clinical data, advertising or other
factors, that those products are a preferable alternative to currently available
methods of diagnosis. In addition, decisions to adopt new medical devices can be
influenced by government administrators, regulatory factors, and other factors
largely outside our control. No assurance can be given that key decision-makers
or third party payors will accept our new products, which could have a material
adverse effect on our business, financial condition and results of operations.

Our relationship with our majority shareholders presents potential conflicts of
interest, which may result in decisions that favor them over our other
shareholders.

Our principal beneficial owners, David Derrick and James J. Dalton, provide
management and financial services and assistance to the Company. Substantially
all of our financing over the past twelve months has come from entities
affiliated with these two shareholders and directors, who also serve as
executive officers of the Company. When their personal investment interests
diverge from our interests, they and their affiliates may exercise their
influence in their own best interests. Some decisions concerning our operations
or finances may present conflicts of interest between us and these shareholders
and their affiliated entities.

During the two most recent fiscal years the Company has been dependent upon
certain major customers, the loss of which would adversely affect its results of
operations and business condition. Certain of these customers now purchase
product from distributors owned and controlled by our former executives and
consultants, which will reduce our revenues from consumer electronics in future
operating periods.

During fiscal year 2005, two customers accounted for more than 10% of sales.
Fisher Scientific accounted for approximately 17% ($148,500) of sales. The loss
of this customer would result in lower revenues and limit the cash available to
grow our business and to achieve profitability. We have no arrangements or
contracts with this customer that would require them to purchase a specific
amount of product from us.

The Company purchases a significant amount of inventory of consumer electronics
products annually from a single supplier under an agreement that expires next
year. The Company also relies on significant suppliers for other key products
and cellular access. If the Company does not renew these agreements when they
expire it may not continue to have access to these suppliers' products or
services at favorable prices or in volumes as it has in the past, which would
reduce revenues and could adversely affect results of operations or financial
condition.

During the fall of 2001, the Company entered into a cellular switching access
agreement under which it purchases substantially all of its cellular access
requirements. That agreement expired in 2004. However the Company has entered
into an agreement with a national cellular access company for these services. If
any of these significant suppliers were to cease providing product or services
to us, we would be required to seek alternative sources. There is no assurance
that alternate sources could be located or that the delay or additional expense
associated with locating alternative sources for these products or services
would not materially and adversely affect our business and financial condition.

Our proposed business plan subjects our research, development and ultimate
marketing activities to current and possibly to future government regulation.
The cost of compliance or the failure to comply with this regulation could
adversely affect our business, results of operations and financial condition.

The products we currently distribute and sell are not subject to specific
approvals from any governmental agency, although our products using cellular and
GPS products must be manufactured in compliance with applicable rules and
regulations of the Federal Communications Commission. Under our new business
plan we are developing and intend to market medical devices that are or that may
become regulated by a number of governmental agencies, including the United
States Food and Drug Administration ("FDA"). The FDA requires governmental
clearance of all medical devices and drugs before they can be marketed in the
United States. Similar approvals are required from other regulatory agencies in
most foreign countries. The regulatory processes established by these government
agencies are lengthy, expensive, and uncertain and may require extensive and
expensive clinical trials. There can be no assurance that any future products
developed by us that are subject to the FDA's authority will prove to be safe
and effective and meet all of the applicable regulatory requirements necessary
to be marketed. The results of testing activities could be susceptible to varied

                                       22
<PAGE>

interpretations that could delay, limit or prevent required regulatory
approvals. In addition, we may encounter delays or denials of approval based on
a number of factors, including future legislation, administrative action or
changes in FDA policy made during the period of product development and FDA
regulatory review. We may encounter similar delays in foreign countries.
Furthermore, approval may entail ongoing requirements for, among other things,
post-marketing studies. Even if we obtain regulatory approval of a marketed
product, our manufacturer and its manufacturing facility are subject to on-going
regulation and inspections. Discovery of previously unknown problems with a
product, manufacturer or facility could result in FDA sanctions, restrictions on
a product or manufacturer, or an order to withdraw and/or recall a specific
product from the market. There can also be no assurance that changes in the
legal or regulatory framework or other subsequent developments will not result
in limitation, suspension or revocation of regulatory approvals granted to us.
Any such events, were they to occur, could have a material adverse effect on our
business, financial condition and results of operations.

We may also be required to comply with FDA regulations for manufacturing
practices, which mandate procedures for extensive control and documentation of
product design, control and validation of the manufacturing process and overall
product quality. Foreign regulatory agencies have similar manufacturing
standards. Any third parties manufacturing our products or supplying materials
or components for such products may also be subject to these manufacturing
practices and mandatory procedures. If we, our management or our third party
manufacturers fail to comply with applicable regulations regarding these
manufacturing practices, we could be subject to a number of sanctions, including
fines, injunctions, civil penalties, delays, suspensions or withdrawals of
market approval, seizures or recalls of product, operating restrictions and, in
some cases, criminal prosecutions.

Our products and related manufacturing operations may also be subject to
regulation, inspection and licensing by other governmental agencies, including
the Occupational Health and Safety Administration.

The Company faces intense competition, including competition from entities that
are more established and have greater financial resources than it does, which
may make it difficult for it to establish and maintain a viable market presence.

Our current and expected markets are rapidly changing. Existing products and
services and emerging products and services will compete directly with the
products we are seeking to develop and market. Our technology will compete
directly with other technology, and, although we believe our technology has or
will have advantages over these competing systems, there can be no assurance
that our technology will have advantages that are significant enough to cause
users to adopt its use. Competition is expected to increase.

Many of the companies currently in the remote medical monitoring and diagnostic
market may have significantly greater financial resources and expertise in
research and development, marketing, manufacturing, pre-clinical and clinical
testing, obtaining regulatory approvals, and marketing than those available to
us. Smaller companies may also prove to be significant competitors, particularly
through collaborative arrangements with large third parties. Academic
institutions, governmental agencies, and public and private research
organizations also conduct research, seek patent protection, and establish
collaborative arrangements for product and clinical development and marketing in
the medical diagnostic arena. Many of these competitors have products or
techniques approved or in development and operate large, well-funded research
and development programs in the field. Moreover, these companies and
institutions may be in the process of developing technology that could be
developed more quickly or be ultimately more effective than our planned
products.

We face competition based on product efficacy, the timing and scope of
regulatory approvals, availability of supply, marketing and sales capability,
reimbursement coverage, price and patent position. There can be no assurance
that our competitors will not develop more effective or more affordable
products, or achieve earlier patent protection or product commercialization.

Our business plan is subject to the risks of technological uncertainty, which
may result in our products failing to be competitive or readily accepted by our
target markets.

We may not realize revenues from the sale of any of our new products or services
for several years, if at all. Some of the products we are currently evaluating
likely will require further research and development efforts before they can be
commercialized. There can be no assurance that our research and development
efforts will be successful or that we will be successful in developing any
commercially successful products. In addition, the technology which we integrate
or that we may expect to integrate with our product and service offerings is
rapidly changing and developing. We face risks associated with the possibility
that our technology may not function as intended and the possible obsolescence
of our technology and the risks of delay in the further development of our own
technologies. Cellular coverage is not uniform throughout our current and
targeted markets and GPS technology depends upon "line-of-sight" access to
satellite signals used to locate the user. This limits the effectiveness of GPS
if the user is in the lower floors of a tall building, underground or otherwise
located where the signals have difficulty penetrating. Other difficulties and
uncertainties normally associated with new industries or the application of new
technologies in new or existing industries also threaten our business, including

                                       23
<PAGE>

the possible lack of consumer acceptance, difficulty in obtaining financing for
untested technologies, increasing competition from larger well-funded
competitors, advances in competing or other technologies, and changes in laws
and regulations affecting the development, marketing or use of our new products
and related services.

The Company is dependent upon its strategic alliances, the loss of which would
limit its success.

Our strategy for the identification, development, testing, manufacture,
marketing and commercialization of our products and services includes, entering
into various collaborations through corporate alliances. We have entered into
collaborative relationships with a significant engineering and product
commercialization firm and a multi-national manufacturing corporation, and we
believe that these relationships provide us with strong strategic alliances for
the design and engineering of our products. MEW, our manufacturing partner, is a
large Japanese multinational with significant operations and holdings in several
industries, including electronics. There can be no assurance, however, that
these relationships will succeed or that we will be able to negotiate strategic
alliances with other parties on acceptable terms, if at all, or that any of
these collaborative arrangements will be successful. To the extent we choose or
are unable to establish or continue such arrangements we could experience
increased capital requirements as a result of undertaking such activities. In
addition, we may encounter significant delays in introducing products currently
under development into the marketplace or find that the development, manufacture
or sale of our proposed products is adversely affected by the absence of
successful collaborative agreements.

The Company has a history of losses and anticipates significant future losses
and may be unable to project its revenues and expenses accurately.

The Company expects to incur net operating losses and negative cash flows for
the foreseeable future. It will incur significant expenses associated with the
development and deployment of our new products and promoting our brand. It
intends to enter into additional arrangements through current and future
strategic alliances that may require it to pay consideration in various forms
and in amounts that may significantly exceed current estimates and expectations.
The Company may also be required to offer promotional packages of hardware and
software to end-users at subsidized prices in order to promote its brand,
products and services. These guaranteed payments, promotions and other
arrangements would result in significant expense. If it does achieve
profitability, it cannot be certain that it will be able to sustain or increase
profitability in the future. In addition, because of its limited operating
history in its newly targeted markets, the Company may be unable to project
revenues or expenses with any degree of certainty. Management expects expenses
to increase significantly in the future as the Company continues to incur
significant sales and marketing, product development and administrative
expenses. The Company cannot guarantee that it will be able to generate
sufficient revenues to offset operating expenses or the costs of the promotional
packages or subsidies described above, or that it will be able to achieve or
maintain profitability. If revenues fall short of projections, our business,
financial condition and operating results would be materially adversely
affected.

Our business plan anticipates significant growth through sales and acquisitions;
to manage the expected growth the Company will require capital and there is no
assurance it will be successful in obtaining necessary additional funding.

If we are successful in implementing our business plan, we may be required to
raise additional capital to manage anticipated growth. Our actual capital
requirements will depend on many factors, including but not limited to, the
costs and timing of our ongoing development activities, the number and type of
clinical or other tests we may be required to conduct in seeking government or
agency approval of these products, the success of our development efforts, the
cost and timing of establishing or expanding our sales, marketing and
manufacturing activities, the extent to which our products gain market
acceptance, our ability to establish and maintain collaborative relationships,
competing technological and market developments, the progress of our
commercialization efforts and the commercialization efforts of our marketing
alliances, the costs involved in preparing, filing, prosecuting, maintaining and
enforcing and defending patent claims and other intellectual property rights,
developments related to regulatory issues, and other factors, including many
that are outside our control. To satisfy our capital requirements, we may seek
to raise funds through public or private financings, collaborative relationships
or other arrangements. Any arrangement that includes the issuance of equity
securities or securities convertible into our equity securities may be dilutive
to shareholders (including the purchasers of the shares), and debt financing, if
available, may involve significant restrictive covenants that limit our ability
to raise capital in other transactions. Collaborative arrangements, if necessary
to raise additional funds, may require that we relinquish or encumber our rights
to certain of our technologies, products or marketing territories. Any inability

                                       24
<PAGE>

or failure to raise capital when needed could also have a material adverse
effect on our business, financial condition and results of operations. There can
be no assurance that any such financing, if required, will be available on terms
satisfactory to us, if at all.

The Company currently lacks experienced sales and marketing capability for all
of its product and service lines.

We currently have limited staff with experience in sales, marketing or
distribution in our intended markets. We will be required to develop a marketing
and sales force with technical expertise and with supporting distribution
capability. Alternatively, we may obtain the assistance of other companies with
established distribution and sales forces, in which case we would be required to
enter into agreements regarding the use and maintenance of these distribution
systems and sales forces. There can be no assurance that we will be able to
establish in-house sales and distribution capabilities, or that we will be
successful in gaining market acceptance for our products through the use of
third parties. There can be no assurance that we will be able to recruit, train
and maintain successfully the necessary sales and marketing personnel, or that
the efforts of such personnel will be successful.

Our products are subject to the risks and uncertainties associated with the
protection of intellectual property and related proprietary rights.

We believe that our success depends in part on our ability to obtain and enforce
patents, maintain trade secrets and operate without infringing on the
proprietary rights of others in the United States and in other countries. We
have applied for several patents and those applications are awaiting action by
the Patent Office. There is no assurance those patents will issue or that when
they do issue they will include all of the claims currently included in the
applications. Even if they do issue, those new patents and our existing patents
must be protected against possible infringement. The enforcement of patent
rights can be uncertain and involve complex legal and factual questions. The
scope and enforceability of patent claims are not systematically predictable
with absolute accuracy.

The strength of our own patent rights depends, in part, upon the breadth and
scope of protection provided by the patent and the validity of our patents, if
any. Our inability to obtain or to maintain patents on our key products could
adversely affect our business. We own five patents and have filed and intend to
file additional patent applications in the United States and in key foreign
jurisdictions relating to our technologies, improvements to those technologies
and for specific products we may develop. There can be no assurance that patents
will issue on any of these applications or that, if issued, any patents will not
be challenged, invalidated or circumvented. The prosecution of patent
applications and the enforcement of patent rights are expensive, and the expense
may adversely affect our profitability and the results of our operations. In
addition, there can be no assurance that the rights afforded by any patents will
guarantee proprietary protection or competitive advantage.

Our success will also depend, in part, on our ability to avoid infringing the
patent rights of others. We must also avoid any material breach of technology
licenses we may enter into with respect to our new products and services.
Existing patent and license rights may require us to alter the designs of our
products or processes, obtain licenses or cease certain activities. In addition,
if patents have been issued to others that contain competitive or conflicting
claims and such claims are ultimately determined to be valid and superior to our
own, we may be required to obtain licenses to those patents or to develop or
obtain alternative technology. If any licenses are required, there can be no
assurance that we will be able to obtain any necessary licenses on commercially
favorable terms, if at all. Any breach of an existing license or failure to
obtain a license to any technology that may be necessary in order to
commercialize our products may have a material adverse impact on our business,
results of operations and financial condition. Litigation that could result in
substantial costs may also be necessary to enforce patents licensed or issued to
us or to determine the scope or validity of third party proprietary rights. If
our competitors prepare and file patent applications in the United States that
claim technology also claimed by us, we may have to participate in proceedings
declared by the U.S. Patent and Trademark Office to determine priority of
invention, which could result in substantial costs, even if we eventually
prevail. An adverse outcome could subject us to significant liabilities to third
parties, require disputed rights to be licensed from third parties or require
that we cease using such technology.

We rely on trade secrets laws to protect portions of our technology for which
patent protection has not yet been pursued or is not believed to be appropriate
or obtainable. These laws may protect us against the unlawful or unpermitted
disclosure of any information of a confidential and proprietary nature,
including but not limited to our know-how, trade secrets, methods of operation,
names and information relating to vendors or suppliers and customer names and
addresses.

                                       25
<PAGE>

We intend to protect this unpatentable and unpatented proprietary technology and
processes, in addition to other confidential and proprietary information in
part, by entering into confidentiality agreements with employees, collaborative
partners, consultants and certain contractors. There can be no assurance that
these agreements will not be breached, that we will have adequate remedies for
any breach, or that our trade secrets and other confidential and proprietary
information will not otherwise become known or be independently discovered or
reverse-engineered by competitors.

The existence of certain anti-dilution rights applicable to our Series B
Preferred Stock might result in increased dilution inasmuch as the Company has
offered and sold shares of common stock or securities convertible into shares of
common stock at prices below the initial conversion rate of $3.00 per common
share, unless those rights are waived.

The investors in our Series B preferred stock and MEW have the right to an
automatic adjustment of the conversion price of the Series B preferred shares
held by them in the event we sell shares of common stock or securities
convertible into common stock at a price below the original conversion price of
$3.00 per share. We have issued shares and options to purchase shares to certain
creditors to convert debt to equity at prices that are below the $3.00
conversion price. We have also issued promissory notes that are convertible into
shares of common stock at conversion prices below the original Series B
conversion price of $3.00. Certain holders of the Series B preferred stock,
including MEW, have waived their right to receive the adjustment for such
issuances through December 11, 2003, but there is no assurance that any holder
of Series B preferred stock will waive those rights as to issuances of common
stock subsequent to December 11, 2003. Accordingly, we may be required to issue
additional shares of common stock to comply with anti-dilution adjustments to
the conversion rights of present or former preferred shareholders. Any increase
in the number of shares of common stock issued upon conversion of Series B
preferred shares would compound the risks of dilution to existing shareholders.

The obligation to issue shares of common stock upon the exercise of outstanding
options and warrants or upon conversion of outstanding shares of preferred stock
or conversion of outstanding notes or debentures, increases the potential for
short sales.

Downward pressure on the market price of our common stock that likely would
result from issuances of common stock upon conversion of preferred stock or
convertible debentures, or upon the exercise of options and warrants, could
encourage short sales of common stock by the holders of the preferred stock or
others. A significant amount of short selling could place further downward
pressure on the market price of the common stock, reducing the market value of
the securities held by our shareholders.

Payment of dividends in additional shares of Series A preferred stock or in
shares of common stock will result in further dilution.

Under the terms of the Series A preferred stock, our board of directors may
elect to pay dividends by issuing additional shares of Series A preferred stock
or common stock. Dividends accrue from the date of the issuance of the preferred
stock, subject to any intervening payments in cash. Each share of Series A
preferred stock is convertible into 370 shares of common stock. The issuance of
additional shares of Series A preferred stock or common stock as dividends could
result in a substantial increase in the number of shares issued and outstanding
and could result in a decrease of the relative voting control of the holders of
the common stock issued and outstanding prior to such payment of dividends and
interest.

The Company has and will continue to have significant future capital needs and
there is no assurance it will be successful in obtaining necessary additional
funding.

We will be required to raise additional capital to fully implement our business
plan. Our actual capital requirements will depend on many factors, including but
not limited to, the costs and timing of our ongoing development activities, the
number and type of clinical or other tests we may be required to conduct in
seeking government or agency approval of these products, the success of our
development efforts, the cost and timing of establishing or expanding our sales,
marketing and manufacturing activities, the extent to which our products gain
market acceptance, our ability to establish and maintain collaborative
relationships, competing technological and market developments, the progress of
our commercialization efforts and the commercialization efforts of our marketing
alliances, the costs involved in preparing, filing, prosecuting, maintaining and
enforcing and defending patent claims and other intellectual property rights,
developments related to regulatory issues, and other factors, including many
that are outside our control. To satisfy our capital requirements, we may seek
to raise funds through public or private financings, collaborative relationships
or other arrangements. Any arrangement that includes the issuance of equity
securities or securities convertible into our equity securities may be dilutive
to shareholders (including the purchasers of the shares), and debt financing, if
available, may involve significant restrictive covenants that limit our ability

                                       26
<PAGE>

to raise capital in other transactions. Collaborative arrangements, if necessary
to raise additional funds, may require that we relinquish or encumber our rights
to certain of our technologies, products or marketing territories. Any inability
or failure to raise capital when needed could also have a material adverse
effect on our business, financial condition and results of operations. There can
be no assurance that any such financing, if required, will be available on terms
satisfactory to us, if at all.

The Company relies on third parties to manufacture its products. Therefore, it
does not have direct control over the quality or other aspects of the
manufacturing process, which could result in a loss of customer acceptance of
its products and increased expense related to warranty claims or defective
product returns.

We do not directly control the manufacturing facilities where our products are
made and we must depend on third parties to make our products according to our
standards for quality and reliability. We do not own any manufacturing
facilities or equipment and do not employ any manufacturing personnel. We use
third parties to manufacture our products on a contract basis. There is no
assurance that we will be able to obtain qualified contract manufacturing
services on reasonable terms. In addition, the manufacture of our products
involves complex and precise processes. Changes in manufacturing processes by
our contract manufacturer or our suppliers, or the use of defective components
or materials, could significantly reduce our manufacturing yields and product
reliability. For example, during the year ended September 30, 2003, we
voluntarily recalled approximately 200 GPS devices that contained a defect
causing the battery to drain power at an unacceptable rate. The problem was
quickly resolved and the units replaced at the expense of our manufacturer.
There is no assurance, however, that similar problems will not arise in the
future with these other products.

Penny stock regulations may impose certain restrictions on marketability of the
Company's securities.

The Securities and Exchange Commission (the "Commission") has adopted
regulations which generally define a "penny stock" to be any equity security
that has a market price (as defined) of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exceptions. As a result,
the common stock is subject to rules that impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse). For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the transaction
prior to the purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the transaction,
of a risk disclosure document mandated by the Commission relating to the penny
stock market. The broker-dealer must also disclose the commission payable to
both the broker-dealer and the registered representative, current quotations for
the securities and, if the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Finally, monthly statements must be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell the Company's securities and may
affect the ability of investors to sell the Company's securities in the
secondary market and the price at which such purchasers can sell any such
securities.

Investors should be aware that, according to the Commission, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include:

         o    Control of the market for the security by one or a few
              broker-dealers that are often related to the promoter or issuer;
         o    Manipulation of prices through prearranged matching of purchases
              and sales and false and misleading press releases;
         o    "Boiler room" practices involving high pressure sales tactics and
              unrealistic price projections by inexperienced sales persons;
         o    Excessive and undisclosed bid-ask differentials and markups by
              selling broker-dealers; and
         o    The wholesale dumping of the same securities by promoters and
              broker-dealers after prices have been manipulated to a desired
              level, along with the inevitable collapse of those prices with
              consequent investor losses.

The Company's management is aware of the abuses that have occurred historically
in the penny stock market.

The holders of our Series B preferred stock have voting rights that are the same
as the voting rights of holders of our common stock, which effectively dilutes
the voting power of the holders of the common stock.

                                       27
<PAGE>

Holders of shares of Series B preferred stock are entitled to one vote per share
of Series B preferred stock on all matters upon which holders of the common
stock of the Company are entitled to vote. Therefore, without converting the
shares of Series B preferred stock, the holders thereof enjoy the same voting
rights as if they held an equal number of shares of common stock, as well as the
liquidation preference described above. In addition, without the approval of
holders of a majority of the outstanding shares of Series B preferred stock
voting as a class, we are prohibited from (i) authorizing, creating or issuing
any shares of any class or series ranking senior to the Series B preferred stock
as to liquidation rights; (ii) amending, altering or repealing our Articles of
Incorporation if the powers, preferences or special rights of the Series B
preferred stock would be materially adversely affected; or (iii) becoming
subject to any restriction on the Series B preferred stock other than
restrictions arising solely under the Utah Act or existing under our Articles of
Incorporation as in effect on June 1, 2001.

Item 7.  Financial Statements

Our audited financial statements and associated notes are included and set forth
on pages 3 through 42 of this report.

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None

Item 8A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure
controls and procedures designed to ensure that information required to be
disclosed in our reports filed under the Securities Exchange Act of 1934, as
amended (the Exchange Act), is recorded, processed, summarized, and reported
within the required time periods, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow for timely decisions regarding
disclosure.

As required by Rule 13a-15(b) under the Exchange Act, we conducted an
evaluation, under the supervision of our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures as of September 30, 2005. In our evaluation we identified
deficiencies that existed in the design or operation of our internal control
over financial reporting that we and our independent registered public
accounting firm considered to be "material weaknesses." A material weakness is a
significant deficiency or combination of significant deficiencies that results
in more than a remote likelihood that a material misstatement of the annual or
interim financial information will not be prevented or detected.

The deficiencies in our internal control over financial reporting related to the
failure to properly disclose equity and debt transactions. The deficiencies were
detected in the evaluation process and the transactions have been appropriately
recorded and disclosed in this Form 10-KSB. We are in the process of improving
our internal control over financial reporting in an effort to resolve these
deficiencies through improved supervision and training of our accounting staff,
but additional effort is needed to fully remedy these deficiencies. Our
management, audit committee, and directors will continue to work with our
auditors and outside advisors to ensure that our controls and procedures are
adequate and effective.

Based on the matters identified above, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were not
effective. These deficiencies have been disclosed to our Audit Committee.

Changes in Internal Control over Financial Reporting. There were no changes in
our internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that
occurred during our last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

Limitations on Effectiveness of Controls. A system of controls, however well
designed and operated, can provide only reasonable, and not absolute, assurance
that the system will meet its objectives. The design of a control system is
based, in part, upon the benefits of the control system relative to its costs.
Control systems can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the control. In
addition, over time, controls may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may
deteriorate. In addition, the design of any control system is based in part upon
assumptions about the likelihood of future events.

                                       28
<PAGE>
Item 8B.  Other Information

None
                                    PART III


Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act

The following table sets forth information concerning our executive officers and
directors and their ages as at September 30, 2005:

      Name             Age           Position
      ----             ---           --------
David G. Derrick       53        Chief Executive Officer and Chairman (Director)
James J. Dalton        63        President and Vice Chairman (Director)
Michael G. Acton       42        Chief Financial Officer, Secretary-Treasurer
Bruce G. Derrick       48        Chief Technology Officer
Randy E. Olshen        42        President of SecureAlert, Inc.
Peter McCall           48        Director
Robert E. Childers     61        Director

David Derrick - CEO and Chairman

Mr. Derrick has been our CEO and Chairman since February 2001. Previously he
served as CEO and Chairman of the Board of Directors of Biomune Systems Inc.
between 1989 and 1998. Biomune was a biotechnology company and was the former
parent corporation of RemoteMDx, Inc. From 1996 to 1999, Mr. Derrick was
Chairman of the Board of Directors of Purizer Corporation; during 2000 he served
as a director of Purizer Corporation. From 1979 to 1982, Mr. Derrick was a
faculty member at the University of Utah College of Business. Mr. Derrick
graduated from the University of Utah with a Bachelor of Arts degree in
Economics in 1975 and a Masters in Business Administration degree with an
emphasis in Finance in 1976. Mr. Derrick has been a principal financier and
driving force in many new businesses. During the early 1980's he helped create
the community of Deer Valley, an exclusive ski resort outside of Park City,
Utah. In 1985 he founded and funded a company that pioneered the Smart Home
concept - the computerized home. The company is known as Vantage Systems and is
today a leader in this field.

James Dalton - President and Vice Chairman

Mr. Dalton joined us as a director in 2001. He was named President of the
Company in August 2003. From 1987 to 1997, Mr. Dalton was the owner and
President of Dalton Development, a real estate development company. He served as
the President and coordinated the development of The Pinnacle, an 86-unit
condominium project located at Deer Valley Resort in Park City, Utah. Mr. Dalton
also served as the President and equity owner of Club Rio Mar in Puerto Rico, a
680-acre beach front property that includes 500 condominiums, beach club,
numerous restaurants, pools and a Fazio-designed golf course. He was also a
founder and owner of the Deer Valley Club, where he oversaw the development of a
high-end, world-class ski project that includes 25 condominiums with a "ski-in
and ski-out" feature. From 1996 to 2000, Mr. Dalton served as an officer and
director of Biomune Systems, Inc. Prior to joining us and following his
resignation from Biomune Systems, Mr. Dalton managed his personal investments.

Michael Acton - Secretary, Treasurer and Chief Financial Officer

Mr. Acton joined us as Secretary-Treasurer in March 1999. He has also served as
our CFO since March 2001. From June 1998 until November 2000, Mr. Acton was
Chief Executive Officer of Biomune Systems, Inc., where he also served as
Principal Accounting Officer and Controller from 1994 to 1997. From 1989 through
1994, Mr. Acton was employed by Arthur Andersen, LLP in Salt Lake City, Utah,
where he performed various tax, audit, and business advisory services. He is a
Certified Public Accountant in the State of Utah.


                                       29
<PAGE>

Bruce G. Derrick - Chief Technology Officer

Mr. Derrick has extensive experience in management of custom solutions
development and customer management in the wireless telecom marketplace. From
2001 to 2004 was a senior product development manager for WatchMark Corporation.
WatchMark collects cellular network performance data for quality assurance and
capacity planning. From 1997 to 2001, Mr. Derrick was responsible for forming
and managing the Professional Services team for Marconi's MSI division. From
1996 to 1997, Mr. Derrick provided technical project management of application
scalability testing and quality control at Boeing and Western Wireless. From
1989 to 1996, Mr. Derrick built and managed the Corporate Computer and Network
Operations department for Avaya's Mosaix division. From 1983 to 1989, he served
as Senior Programmer in applied research at the University of Utah's Department
of Medical Informatics where he developed and implemented medical informatics
and physiological monitoring services for ICU care. He also participated in
development of IEEE standards for automated physiological monitoring for Nasa's
Space Station program. Mr. Derrick holds a Bachelor's Degree in Computer Science
from the University of Utah. Bruce Derrick is the brother of David Derrick, the
Chairman and CEO of the Company.

Peter McCall - Director

Mr. McCall joined our board of directors in July 2001. Mr. McCall began his
career in the mortgage finance business in 1982. As a Vice President of GE
Mortgage Securities, he oversaw the first mortgage securities transactions
between GE Capital Corporation and Salomon Brothers. For fifteen years, Mr.
McCall structured and sold both mortgage and asset backed security transactions.
In 1997 Mr. McCall founded McCall Partners LLC. McCall Partners is an investment
vehicle for listed and non-listed equity securities. Mr. McCall is also a member
of the Board of Directors of Premium Power Corporation of North Andover, MA. Mr.
McCall is a member of the Audit Committee and the Compensation Committee of the
board of directors.

Robert Childers - Director

Mr. Childers joined our board in July 2001. Since 1977, he has served as the
Chief Executive Officer of Structures Resources Inc., a firm which he founded in
1972, and has more than 30 years of business experience in construction and real
estate development. Mr. Childers has served or is currently serving as General
Partner in 16 Public Limited Partnerships in the Middle Atlantic States.
Partners include First Union Bank and Fannie Mae. Structures Resources has
successfully completed over 300 projects (offices, hotels, apartments, and
shopping centers) from New York to North Carolina. Recently Mr. Childers has
been a partner for various projects in Baltimore and Philadelphia. He is a
co-founder of Life Science Group, a boutique biotech investment-banking firm.
Mr. Childers was also the founding President of Associated Building Contractors
for the State of West Virginia and served as a director of The Twentieth Street
Bank until its merger with City Holding Bank. He is a former naval officer
serving in Atlantic fleet submarines. Mr. Childers is a member of the Audit
Committee and Compensation Committee of the board of directors.

Randy E. Olshen - President SecureAlert, Inc.

Prior to joining SecureAlert, Inc., Mr. Olshen was the Executive Vice President
for Elan Nutrition from 2001 to 2004. From 1998 to 2001, Mr. Olshen was the
President of Optim Nutrition, a wholly-owned subsidiary of Biomune Systems
(NASDAQ: BIME). From 1992 to 1998, Mr. Olshen was the Executive Vice President
of Sales, Marketing and Operations at Nellson Nutraceutical. From 1987 to 1992
Mr. Olshen was the General Manager of the specialty products division of a $500
million pharmaceutical company, McGaw, Inc. He currently serves as a director
and a member of the compensation committee for two companies, Helios Nutrition
and Dr. Soy Nutrition. Mr. Olshen earned his Bachelor's degree from Chapman
College.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our officers,
directors and persons who beneficially own more than 10% of a registered class
of our equity securities to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater
than 10% shareholders are required by regulation of the Securities and Exchange
Commission to furnish us with copies of all Section 16(a) forms they file.

Based solely upon its review of the copies of such forms furnished to it, and
representations made by certain persons subject to this obligation that such
filings were not required to be made, RemoteMDx believes that all reports

                                       30
<PAGE>

required to be filed by these individuals and persons under Section 16(a) were
timely filed, except as follows: Mr. Derrick and Mr. Dalton filed late Form 4's
but all transactions we disclosed in the filing of a Form 5.

The Board of Directors

Directors hold office until the next annual meeting of the shareholders and
until their successors have been elected or appointed and duly qualified.
Executive officers are elected by the board of directors and hold office until
their successors are elected or appointed and duly qualified. Vacancies on the
board which are created by the retirement, resignation or removal of a director
may be filled by the vote of the remaining members of the board, with such new
director serving the remainder of the term or until his successor shall be
elected and qualify.

Meetings and Committees

The board of directors met two times during fiscal year 2005. No director
attended fewer than 75% of the meetings during the fiscal year. The board also
acted eight times during fiscal year 2005 by unanimous written consent in lieu
of a meeting, as permitted by Utah law and our bylaws. The board has an Audit
Committee, currently comprised of Mr. McCall and Mr. Childers.

The functions of the Audit Committee are (1) to review and approve the selection
of, and all services performed by, our independent auditors, (2) to review our
internal controls, and (3) to review and report to the board of directors with
respect to the scope of our audit procedures, accounting practices and internal
accounting and financial controls. Mr. Childers and Mr. McCall are independent
directors within the meaning of that term under applicable Securities and
Exchange Commission rules.

Audit Committee Financial Expert

Peter McCall, a director of the Company, is the financial expert serving on the
Audit Committee of the Board of Directors within the meaning of that term under
applicable rules promulgated by the Securities and Exchange Commission.

Compensation Committee

Bob Childers, a director of the Company, is serving as the head of the Company's
compensation committee. Peter McCall is also a member of the Compensation
Committee.

Remuneration

Non-employee directors are entitled to receive $5,000 per month and receive a
grant of an option to acquire 30,000 shares of common stock for each completed
year of service on the board. We also reimburse the reasonable travel expenses
of members for their attendance at the meetings of the board and meetings of the
shareholders.

Code of Ethics

The Company has established a Code of Business Ethics that applies to its
officers, directors and employees. The Code of Business Ethics contains general
guidelines for conducting the business of the Company consistent with the
highest standards of business ethics, and is intended to qualify as a "code of
ethics" within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and
the rules promulgated thereunder. The Code of Business Ethics is attached as
Exhibit 14 to this Annual Report on Form 10-KSB.

Item 10.  Executive Compensation

The following table sets forth the compensation paid in each of the past three
fiscal years to all individuals serving as our chief executive officer during
the year ended September 30, 2005 as well as our three most highly compensated
executive officers other than the CEO who were serving as executive officers at
the end of the year ended September 30, 2004, whose total annual salary and
bonus for the year then ended exceeded $100,000 (the "Named Executive
Officers").

                                       31
<PAGE>
<TABLE>
<CAPTION>
                                                   Summary Compensation Table

                                                                     Annual Compensation                Long Term
                                                                                                      Compensation
                                                                                                         Awards

                                                                                                     Securities
                                                                                  Other Annual       Underlying       All other
                 Name and                       Fiscal                 Bonus     Compensation     Options/SARs     compensation
            Principal Position                   Year    Salary ($)     ($)          ($)               (#)            ($)
----------------------------------------------- -------- ----------- ---------- ----------------- ---------------------------------

<S>                                               <C>     <C>       <C>             <C>          <C>                  <C>
David G. Derrick, Chief Executive Officer         2003    $120,000  $       0       $53,910       45,628/0            $     0
 Chairman of the Board of Directors (1)           2004    $120,000  $       0       $     0            0/0            $     0
                                                  2005    $240,000  $ 300,000(4)    $     0            0/0            $     0

James J. Dalton                                   2003    $120,000  $       0       $     0            0/0            $     0
 President and Vice Chairman (2)                  2004    $120,000  $       0       $     0            0/0            $     0
                                                  2005    $240,000  $ 300,000(4)    $     0            0/0            $     0

Michael G. Acton, Chief Financial Officer (3)     2003    $100,000  $  25,000       $ 4,192            0/0            $     0
                                                  2004    $100,000  $  25,000       $     0            0/0            $     0
                                                  2005    $100,000  $  54,000       $25,000            0/0            $35,000

</TABLE>

         (1)  Mr. Derrick became Chief Executive Officer in February 2001.
              Amounts reported in the table do not include amounts recorded by
              the Company under applicable accounting principles for non-cash
              compensation paid to ADP Management, a company controlled by Mr.
              Derrick, in connection with financing transactions that were
              entered into by the Company and ADP Management during the years
              2003, 2004 or 2005. Salary was accrued and included in amounts
              owed to ADP Management under various financing agreements.
              Outstanding amounts owed ADP Management under all such agreements
              were converted to common stock in June 2003. Mr. Derrick is the
              principal owner and control person of ADP Management. See "Certain
              Relationships and Related Party Transactions."

         (2)  During 2003, 2004 and 2005, Mr. Dalton was paid $120,000, $120,000
              and $240,000 a year under a consulting agreement. Mr. Dalton's
              annual salary as President is $240,000. The consulting fees and
              salary owed to Dalton have historically been accrued as part of
              the ADP Management financing arrangements. Other amounts have been
              paid or accrued during 2005. See "Certain Relationships and
              Related Transactions."

         (3)  Mr. Acton has served as an executive officer since March 2001.

         (4)  These payments were made by issuing restricted common stock.

Employment Agreements

We have no employment agreements with any executive officers at this time.

Stock Option Grants in Fiscal Year 2005

During fiscal year 2005, the Company granted 2,500,000 warrants to each Mr.
Derrick and Mr. Dalton with an exercise price of $0.54 per share. All of these
warrants are five-year warrants and expire in 2010.

Stock Options Outstanding and Options Exercised in Fiscal Year 2005

The following table sets forth certain information, including the fiscal
year-end value of unexercised stock options held by the Named Executive
Officers, as of September 30, 2005. We have not granted any stock appreciation
rights ("SAR's").


                                       32
<PAGE>
<TABLE>
<CAPTION>
                                                           Number of Securities
                                                               Underlying          Value of Unexercised
                                                           Unexercised Options     In-the-Money Options/
                          Shares                               At 9/30/2005        SARs at 9/30/2005(5)
                        Acquired on     Value Realized         Exercisable/           Exercisable/
        Name            Exercise (#)            ($)            Unexercisable         Unexercisable (1)
-----------------------------------------------------------------------------------------------------

<S>                             <C>             <C>        <C>                     <C>
David G. Derrick (2)            -               -          2,886,155/1,250,000     $1,275,132/$575,000
James Dalton (2)                -               -          2,886,155/1,250,000     $1,275,132/$575,000
Michael G. Acton (3)            -               -            246,894/200,000         $113,571/$60,000
</TABLE>

         (1)  Value is based on the fair market value of our common stock on
              December 15, 2005, estimated to be $1.00 per share. Values
              indicated reflect the difference between the exercise price of the
              unexercised options and the market value of shares of common stock
              on November 30, 2005.

         (2)  The exercise price of 2,636,155 options is $.54 per share. The
              exercise price of 250,000 options is $0.75 per share.

         (3)  The exercise prices of these options are 146,894 at $1.00 and
              100,000 at $0.54 per share.

Stock Plans

The 1997 Volu-Sol, Inc. Stock Incentive Plan

Immediately prior to the spin-off in August 1997, the Company adopted the 1997
Volu-Sol, Inc. Stock Incentive Plan ("1997 Plan"). The 1997 Plan was approved by
our board of directors and by action of Biomune, then our sole shareholder.
Under the 1997 Plan, we may issue stock options, stock appreciation rights,
restricted stock awards, and other incentives to our employees, officers and
directors.

The 1997 Plan provides for the award of incentive stock options to our key
employees and directors and the award of nonqualified stock options, stock
appreciation rights, bonus rights, and other incentive grants to employees and
certain non-employees who have important relationships with us or our
subsidiaries. A total of 5,000,000 shares are authorized for issuance pursuant
to awards granted under the 1997 Plan. During fiscal year 2005, options were
granted to purchase common stock under the 1997 Plan and no options were
exercised. As of September 30, 2005, options for the purchase of 1,465,000
shares of common stock were outstanding and exercisable under the 1997 Plan.

The 2004 RemoteMDx, Inc. Stock Incentive Plan

On February 17, 2004 the Board of Directors approved the 2004 RemoteMDx, Inc
Stock Incentive Plan ("2004 Plan"). The shareholders approved this plan on May
19, 2004. Under the 2004 Plan, the Company may issue stock options, stock
appreciation right, restricted stock awards and other incentives to our
employees, officers and directors. The 2004 Plan provides for the award of
incentive stock options to our key employees and directors and the award of
nonqualified stock options, stock appreciation rights, bonus rights, and other
incentive grants to employees and certain non-employees who have important
relationships with us or our subsidiaries. A total of 6,000,000 shares are
authorized for issuance pursuant to awards granted under the 2004 Plan. During
fiscal year 2005 5,000,000 options were awarded under this plan.

Item 11.    Security Ownership of Certain Beneficial Owners and Management

This Item 11 sets forth information known to us with respect to the beneficial
ownership of our common stock as of December 10, 2005. We have determined
beneficial ownership in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, we include shares of common stock
subject to options, warrants, or convertible securities held by that person that

                                       33
<PAGE>

are currently exercisable or will become exercisable within 60 days after
December 10, 2005, while those shares are not included for purposes of computing
percentage ownership of any other person. Unless otherwise indicated, the
persons and entities named in the table have sole voting and investment power
with respect to all shares beneficially owned, subject to community property
laws where applicable.

Security Ownership of Certain Beneficial Owners

The following table sets forth information for any person (including any
"group") who is known to us to be the beneficial owner of more than 5% of our
common stock.
<TABLE>
<CAPTION>

Title of Class   Name and Address of Beneficial Owner (1)   Amount Owned       Percent of Class

<S>                        <C>                               <C>                <C>
    Common                 David G. Derrick (2)              8,221,212          16.32%

    Common                   James Dalton (3)                7,934,014          16.50%

    Common                   J. Lee Barton (4)
                            196 No. Forest Ave.
                            Hartwell, GA 30643               4,299,481          9.54%

    Common                ADP Management Corp.(5)            4,442,549          9.30%
________________
</TABLE>


         (1)  Unless otherwise indicated, the business address of the
              shareholder is the address of the Company, 150 West Civic Center
              Drive, Suite 400, Sandy, Utah 84070.

         (2)  Includes shares owned of record as follows: 1,526,194 shares held
              of record by ADP Management, 1,221,228 shares owned of record by
              Mr. Derrick, 1,280,200 shares issuable upon conversion of Series A
              preferred stock owned of record by ADP Management, 24,102 shares
              issuable upon conversion of Series A preferred stock owned of
              record by MK Financial 33,333 shares issuable upon conversion of
              Series B preferred stock owned of record by Mr. Derrick, 1,636,155
              shares issuable upon exercise of stock options held by ADP
              Management, and 2,500,000 shares issuable upon exercise of stock
              options held by Mr. Derrick. Mr. Derrick is the secretary and
              treasurer of ADP Management and the managing member of MK
              Financial.

         (3)  Includes shares owned of record as follows: 1,221,228 shares held
              of record by ADP Management (by agreement with Mr. Derrick, Mr.
              Dalton shares control and beneficial ownership of the shares owned
              of record by ADP Management), 1,015,693 shares owned of record by
              Mr. Dalton, 280,738 shares issuable upon conversion of Series A
              preferred stock owned of record by Mr. Dalton, 1,280,200 shares
              issuable upon conversion of Series A preferred stock owned of
              record by ADP Management, 1,636,155 shares issuable upon exercise
              of stock options held by ADP Management, and 2,500,000 shares
              issuable upon exercise of stock options held by Mr. Dalton.

         (4)  Includes 3,282,723 shares owned directly by Mr. Barton, 816,757
              shares owned of record by Lintel, Inc., an entity owned and
              controlled by Mr. Barton, and 200,001 shares issuable upon
              conversion of 200,001 shares of Series B preferred stock owned of
              record by Lintel, Inc.

         (5)  Includes 1,526,194 shares owned of record, 1,280,200 shares
              issuable upon conversion of Series A preferred stock, and
              1,636,155 shares issuable upon exercise of stock options held by
              ADP Management.

Security Ownership of Management

We have two classes of voting equity securities, the common stock and the Series
B preferred stock. In addition, we have a class of nonvoting preferred stock
that is convertible into common stock. The following table sets forth
information as of May 1, 2005, as to the voting securities beneficially owned by
all directors and nominees named therein, each of the named executive officers,
and directors and executive officers as a group.

                                       34
<PAGE>


                        Name and
Title of Class    Address of Beneficial Owner    Amount Owned   Percent of Class

Common            David G. Derrick (1)              8,221,212           16.32%

                  James Dalton (2)                  7,934,014            16.5%

                  Michael G. Acton (4)                385,496               *

                  Peter McCall (5)                  1,334,686            2.90%

                  Robert Childers (6)                 655,420            1.45%

                  Officers and Directors
                   as a Group (6 persons) (7)      14,393,246           26.28%

         (1)  Derrick's beneficial ownership of these shares is summarized in
              note (2) above.

         (2)  Dalton's beneficial ownership of these shares is summarized in
              note (3) above.

         (3)  ADP's beneficial ownership of these shares is summarized in note
              (5) above.

         (4)  Mr. Acton is the Chief Financial Officer of the Company. Includes
              100,000 shares issuable under options granted to Mr. Acton, and
              285,496 shares owned of record by Mr. Acton.

         (5)  Mr. McCall is a director. Includes (a) 250,000 shares of common
              stock owned of record by Mr. McCall, 630,000 shares issuable upon
              exercise of stock options held by Mr. McCall, and 454,686 shares
              issuable upon conversion of shares of Series A preferred stock
              owned by Mr. McCall.

         (6)  Mr. Childers is a director. Includes (a) 50,000 shares of common
              stock owned of record by the Robert E. Childers Living Trust, (b)
              230,000 shares issuable upon exercise of stock options held by Mr.
              Childers, (c) 219,906 shares issuable upon conversion of Series A
              preferred stock, and (d) 155,514 shares held directly by Mr.
              Childers.

         (7)  Duplicate entries eliminated.

                  *Less than 1% ownership percentage.


Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information as of the September 30, 2005, our
most recently completed fiscal year, with respect to compensation plans
(including individual compensation arrangements) under which equity securities
are authorized for issuance, aggregated as follows:

         o    All compensation plans previously approved by security holders;
              and

         o    All compensation plans not previously approved by security
              holders.


Equity Compensation Plan Information
<TABLE>
<CAPTION>

                                          Number of securities to       Weighted average
                                          be issued upon exercise      exercise price of        Number of securities
                                          of outstanding options,     outstanding options,    remaining available for
             Plan category                  warrants and rights       warrants and rights         future issuance
<S>                                              <C>                         <C>                     <C>
Equity compensation plans approved by
security holders                                 6,465,000                   $0.73                   4,535,000

Equity compensation plans not approved
by security holders                              3,376,043                   $1.41                      N/A

Total                                            9,841,043                   $0.74                   4,535,000
</TABLE>

                                       35
<PAGE>

Item 12.  Certain Relationships and Related Transactions

The following discussion summarizes transactions between the Company and related
parties.

ADPManagement Line of Credit Arrangement

As of September 30, 2005, the Company had owed $17,615 to ADP Management, an
entity owned and controlled by two of the Company's officers and directors,
under a line-of-credit agreement. These advances bear interest at 5.0% and are
due on July 31, 2006. During the year ended September 30, 2005, the net decrease
in the related party line-of-credit was $204,931. The net decrease consisted of
cash repayments during the year of $782,639, net increases of $752,708 related
to a monthly management fee owed to ADP Management and expenses incurred by ADP
Management that are reimbursable by the Company, and a decrease of $175,000 for
the purchase of SecureAlert (PAL Services) preferred stock. If the Company is
unable to pay the management fee and the reimbursable expenses in cash, the
amount of the related party line-of-credit owed to ADP is increased by the
amount of the unpaid management fees and expenses.

During the year ended September 30, 2005, ADP Management assumed $563,500 of
debt plus $77,554 of accrued interest from various Company note holders for
1,043,519 shares of common stock. All note holders released the Company from all
obligations from the debt.

In addition, the Company entered into a loan with an entity controlled by an
employee of the Company. The loan bears interest at 17%. An origination fee of
$10,000 was added to the principal balance owed under the note. Principal and
interest are due November 13, 2005. The first four months are interest only and
the last three months are interest and principal. This loan is secured by the
stock and assets of Volu-Sol Reagents, a wholly-owned subsidiary of RemoteMDx,
Inc. As of September 30, 2005, the balance net of the debt discount was
$237,857. Subsequent to year end, the note was extended.

Item 13.  Exhibits

The following exhibits are filed herewith or are incorporated by reference to
exhibits previously filed with the Commission:

(a)      Exhibits

Exhibit Number             Title of Document
--------------             -----------------

      3.01(1)        Articles of Incorporation dated July 27, 1995 and Articles
                     of Amendment dated September 8, 1997 (incorporated by
                     reference to Exhibit 3 to the Company's Registration
                     Statement and Amendments thereto on Form 10-SB, filed
                     October 1, 1997).


      3.01(2)        Articles of Amendment dated July 31, 2001to Articles of
                     Incorporation, and changing name of Company to RemoteMDx,
                     Inc. (filed herewith).


      3.01(3)        Certificate of Amendment to Designation of Rights and
                     Preferences dated June 15, 2001, adopting Amended and
                     Restated Designation of Rights and Preferences of Series A
                     10% Convertible Non-Voting Preferred Stock (filed
                     herewith).

      3.01(4)        Articles of Amendment dated July 31, 2001 to Articles of
                     Incorporation adopting Designation of Rights and
                     Preferences of Series B Convertible Preferred Stock (filed
                     herewith).

      3.01(5)        Certificate of Amendment dated January 16, 2002 to
                     Designation of Rights and Preferences Related to Series A
                     10% Cumulative Convertible Preferred Stock of RemoteMDx,
                     Inc., adopting Third Amended and Restated Designation of
                     Rights and Preferences of Series A 10% Convertible
                     Non-Voting Preferred Stock (incorporated by reference to
                     Exhibit 3 to the Annual Report on Form 10-KSB of the
                     Company filed January 22, 2002).

      3.01(6)        Certificate of Amendment dated December 16, 2003 to
                     Designation of Rights and Preferences Related to Series A
                     10% Cumulative Convertible Preferred Stock of RemoteMDx,
                     Inc., increasing number of shares of Series A Preferred to
                     40,000 (filed herewith).

                                       36
<PAGE>

      3.01(7)        Articles of Amendment to the Articles of Incorporation of
                     the Company dated October 3, 2005, increasing number of
                     shares of Common Stock to 100,000,000 (filed herewith).

      3.02           Bylaws of the Company adopted August 28, 1995 (incorporated
                     by reference to Exhibit 3 to our Registration Statement on
                     Form 10-SB, filed October 1, 1997)

      10.01          Form of Senior Secured Convertible Promissory Note in
                     aggregate principal amount of $500,000 dated December 27,
                     2005 (filed herewith).

      10.02          1997 Stock Incentive Plan (incorporated by reference to our
                     Registration Statement and Amendments thereto on Form
                     10-SB, effective December 1, 1997).

      10.03          2004 RemoteMDx Stock Option Plan (incorporated by reference
                     to the definitive proxy statement of the Company filed on
                     May 19, 2004).

      10.04          Agreement for cellular service with AT&T dated October 14,
                     2004(filed herewith).

      10.05          Loan Agreement (as amended and extended) dated March 5,
                     2002 between ADP Management and the Company, effective
                     December 31, 2001 (filed as an exhibit to the Company's
                     quarterly report on Form 10-QSB for the quarter ended
                     December 31, 2001).

      10.06          License Agreement between RemoteMDx, Inc. and SecureAlert,
                     Inc. as licensor and Matsushita Electric Works, Ltd., as
                     licensee (April 12, 2002; previously filed as an exhibit 10
                     to the Company's Quarterly Report on Form 10-QSB for the
                     quarter ended March 31, 2002).

      10.07          Agreement with ADP Management, Derrick and Dalton (April
                     2003; previously filed as an exhibit 10 to the Company's
                     Quarterly Report on Form 10-QSB for the quarter ended March
                     31, 2003).

      10.08          Form of Convertible Note Purchase Agreement between the
                     Company and certain investors, together with exhibits
                     including form of Convertible Note (previously filed as an
                     exhibit to the Company Current Report on Form 8-K filed on
                     November 2, 2005).

      10.09          Form of Convertible Bridge Note purchase agreement between
                     the Company and certain investors, together with exhibits
                     including form of Convertible Bridge Note (previously filed
                     as an exhibit to the Company Current Report on Form 8-K
                     filed on November 2, 2005).

      10.10          Form of Debenture Purchase Agreement between the Company
                     and certain investors, together with exhibits including
                     form of Debenture and Debenture Registration Rights
                     Agreement (previously filed as an exhibit to the Company
                     Current Report on Form 8-K filed on November 2, 2005).

      14             Code of Ethics (filed herewith).

      31.1           Certification of President and Chief Executive Officer
                     under Section 302 of Sarbanes-Oxley Act of 2002 (filed
                     herewith).

      31.2           Certification of Chief Financial Officer under Section 302
                     of Sarbanes-Oxley Act of 2002 (filed herewith).

      32             Certification under Section 906 of the Sarbanes-Oxley Act
                     of 2002 (18 U.S.C. SECTION 1350) (filed herewith).


                                       37
<PAGE>

Item 14.  Principal Accountant Fees and Services

For the years ended September 30, 2005, Hansen, Barnett and Maxwell (HBM)
provided audit services for the Company.

Audit Fees

Audit services consist of the audit of the annual consolidated financial
statements of the Company, and other services related to SEC filings and
registration statements filed by the Company and its subsidiaries and other
pertinent matters. Audit fees paid to HBM for fiscal years 2005 and 2004 totaled
approximately $50,000 and $0, respectively.

Tax Fees, Audit Related Fees, and All Other Fees

HBM has not provided any consulting services to the Company in fiscal years 2004
and 2005, including tax consultation and related services, nor did HBM perform
any financial information systems design and implementation services for the
Company in either period.

The Audit Committee of the Board of Directors considered and authorized all
services provided by HBM and considered that the provision of non-audit services
was compatible with maintaining auditor independence.

Audit services consist of the audit of the annual consolidated financial
statements of the Company, review of the quarterly financial statements,
stand-alone audits of subsidiaries, accounting consultations and consents and
other services related to SEC filings and registration statements filed by the
Company and its subsidiaries and other pertinent matters. Audit fees paid to
Tanner LC for fiscal years 2005 and 2004 totaled $47,600 and $127,200,
respectively.

Tax Fees, Audit Related Fees, and All Other Fees

Tanner LC did not provide any consulting services to the Company in fiscal years
2004 and 2005, including tax consultation and related services, nor did Tanner
LC perform any financial information systems design and implementation services
for the Company in either period while retained as the Company's auditor.
However, upon the Company retaining HBM as its principal accountant, Tanner LC
provided approximately $15,000 of consulting services in fiscal year 2005
related to reviewing subsequent filings and providing accounting research
subsequent to the change in auditors.


                                       38
<PAGE>

                                   SIGNATURES

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

                                          RemoteMDx, Inc.


                                          By: /s/David G. Derrick,
                                             --------------------------------
                                             David G. Derrick, Chief
                                             Executive Officer

                                             Dated:   December 29, 2005

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.

Signature                          Title                         Date
---------                          -----                         ----
/s/David G. Derrick
-------------------     Director, Chairman, and                December 29, 2005
David G. Derrick        Chief Executive Officer
                        (principal executive officer)

/s/James Dalton
---------------         Director, Vice Chairman, President     December 29, 2005
James Dalton

/s/Peter McCall
---------------         Director                               December 29, 2005
Peter McCall

/s/Robert E. Childers
---------------------   Director                               December 29, 2005
Robert E. Childers

/s/Michael G. Acton
-------------------     Chief Financial Officer                December 29, 2005
Michael G. Acton        (principal financial officer)




                                       39
<PAGE>
RemoteMDx, Inc.
Consolidated Financial Statements
September 30, 2005 and 2004
<PAGE>

Index to Consolidated Financial Statements

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


                                                                           Page
                                                                           ----


Reports of Independent Registered Public Accounting Firm                      3


Consolidated Balance Sheet                                                    5


Consolidated Statements of Operations                                         7


Consolidated Statements of Stockholders' Deficit                              8


Consolidated Statements of Cash Flows                                        12


Notes to Consolidated Financial Statements                                   15
<PAGE>


HANSEN, BARNETT & MAXWELL
  A Professional Corporation
  CERTIFIED PUBLIC ACCOUNTANTS                Registered with the Public Company
  5 Triad Center, Suite 750                           Accounting Oversight Board
  Salt Lake City, UT 84180-1128
  Phone: (801) 532-2200
  Fax: (801) 532-7944
  www.hbmcpas.com


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying  consolidated balance sheet as of September 30,
2005  and the  related  consolidated  statements  of  operations,  stockholders'
deficit and cash flows of  RemoteMDx,  Inc.,  (the  Company),  for the year then
ended.  These  consolidated  financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audit.

We conducted  our audit 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  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
RemoteMDx,  Inc. as of September 30, 2005 and the consolidated  results of their
operations  and cash  flows  for the year  then  ended in  conformity  with U.S.
generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements,  the Company has incurred recurring operating
losses,  has a working  capital  deficit and has an accumulated  deficit.  These
conditions  raise  substantial  doubt  about its  ability to continue as a going
concern.  Management's  plans regarding those matters also are described in Note
1. The  consolidated  financial  statements do not include any adjustments  that
might result from the outcome of this uncertainty.




                                              /s/ HANSEN, BARNETT & MAXWELL


Salt Lake City, Utah
December 22, 2005
                                       3
<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and
Stockholders of RemoteMDx, Inc.


We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders' deficit and cash flows of RemoteMDx,  Inc., (the Company), for the
year ended September 30, 2004. These consolidated  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted  our audit 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  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the consolidated  results of operations and
cash  flows  of  RemoteMDx,  Inc.  for the  year  ended  September  30,  2004 in
conformity with U.S. generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements,  the Company has incurred recurring operating
losses,  has a working  capital  deficit and has an accumulated  deficit.  These
conditions  raise  substantial  doubt  about its  ability to continue as a going
concern.  Management's  plans regarding those matters also are described in Note
1. The  consolidated  financial  statements do not include any adjustments  that
might result from the outcome of this uncertainty.


/s/Tanner LC
Salt Lake City, Utah
June 7, 2005

                                       4
<PAGE>
<TABLE>
<CAPTION>

                                                                                 RemoteMDx, Inc.
                                                                      Consolidated Balance Sheet
                                                                              September 30, 2005
------------------------------------------------------------------------------------------------

        Assets
        ------
<S>                                                                             <C>
Current Assets:
       Cash                                                                     $       416,036
       Restricted cash                                                                  180,103
       Accounts receivable, net of allowance for doubtful
           accounts of  $29,000                                                          96,781
       Inventories, net of reserve of $180,977 (note 1)                                  46,576
       Prepaid and other assets                                                          41,356
                                                                                ----------------

                   Total current assets                                                 780,852

       Property and equipment, net of accumulated depreciation
       and amortization of $496,911 (note 1)                                            380,715
       Other assets                                                                      34,877
                                                                                ----------------

                   Total assets                                                     $ 1,196,444
                                                                                ----------------


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

See accompanying notes to consolidated financial statements.                                   5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                                 RemoteMDx, Inc.
                                                                      Consolidated Balance Sheet
                                                                              September 30, 2005
                                                                                       Continued
------------------------------------------------------------------------------------------------

        Liabilities and Stockholders' Deficit
        -------------------------------------
<S>                                                                             <C>
Current liabilities:
       Bank line of credit                                                      $       174,898
       Related party line of credit and note (note 12)                                  255,472
       Accounts payable                                                               1,355,050
       Accrued expenses (note 3)                                                        689,024
       Deferred revenues                                                                 17,539
       Notes payable (note 5)                                                           287,343
       Redeemable stock subject to mandatory redemption (note 6)                         96,000
       Convertible debentures, net of debt discount of $56,173 (note 7)               1,262,366
       Embedded derivative liability (note 8)                                         1,860,626
                                                                                ----------------
            Total current liabilities                                                 5,998,318

Long-term liabilities:
       Convertible notes, net of debt discount $894,764 (note 5)                        421,570
                                                                                ---------------
            Total liabilities                                                         6,419,888

Commitments and contingencies (note 14)
Series A Preferred stock of SecureAlert, Inc. (note 9)                                2,990,000
Stockholders' deficit:
       Series A convertible preferred stock; 10% dividend, non-voting,
            non-participating; $.0001 par value, $200 stated value; 40,000
            shares designated; 26,007 shares issued and outstanding
            (aggregate liquidation preference of $69,179)                                     3
       Series B convertible preferred stock; $.0001 par value; 2,000,000
            shares designated; 1,369,157 shares issued and outstanding
            (aggregate liquidation preference of $4,107,471)                                137
       Common stock, $.0001 par value, 100,000,000 shares
            authorized; 45,129,042 shares issued and outstanding                          4,513
       Additional paid-in capital                                                    76,113,623
       Deferred compensation                                                         (3,363,126)
       Subscription receivable                                                         (504,900)
       Accumulated deficit                                                          (80,463,694)
                                                                                ---------------
            Total stockholders' deficit:                                             (8,213,444)
                                                                                ---------------
            Total liabilities and stockholders' deficit                         $     1,196,444
                                                                                ---------------

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

See accompanying notes to consolidated financial statements.                                   6

</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                                                                RemoteMDx, Inc.
                                                                           Consolidated Statement of Operations
                                                                                      Years Ended September 30,
---------------------------------------------------------------------------------------------------------------

<S>                                                                      <C>                    <C>
Sales, net                                                               $          861,868     $    1,117,520
Cost of goods sold                                                                  823,752          1,134,535
                                                                         --------------------------------------
            Gross profit (loss)                                                      38,116            (17,015)
                                                                         --------------------------------------

Operating expenses:
       Research and development                                                   1,766,791            205,341
       Selling, general and administrative
          (including $2,742,837 and $966,780 of compensation expense
          paid in stock or stock option / warrants, respectively)                 7,230,222          4,189,669
       Impairment of inventory                                                            -             30,358
       Impairment of goodwill                                                             -          1,321,164
                                                                         --------------------------------------
            Loss from operations                                                 (8,958,897)        (5,763,547)
                                                                         --------------------------------------

Other income (expense):
      Derivative valuation gain (loss)                                             (580,626)                 -
       Interest income                                                                1,720              7,077
       Interest expense
        (including $1,387,143 and $639,911 paid in stock
        and warrants, respectively)                                              (1,448,736)          (817,579)
       Other income                                                                   2,850             67,823
                                                                         --------------------------------------
            Loss before income taxes and discontinued operations                (10,983,689)        (6,506,226)
Income tax benefit                                                                        -                  -
                                                                         --------------------------------------
       Loss before discontinued operations                                      (10,983,689)        (6,506,226)
       Income on discontinued operations, net of tax                                      -             99,515
                                                                         --------------------------------------
            Net loss                                                            (10,983,689)        (6,406,711)
Series A preferred stock dividends                                                 (512,547)          (525,800)
                                                                         --------------------------------------
Net loss applicable to common shareholders                               $      (11,496,236)    $   (6,932,511)
                                                                         --------------------------------------
            Net loss per common share from continuing operations
                 - basic and diluted                                     $            (0.33)    $        (0.25)
            Net income (loss) per common share from discontinued
                 operations - basis and diluted                          $                -     $            -
                                                                         --------------------------------------
Net loss per common share - basic and diluted                            $            (0.33)    $        (0.25)
                                                                         --------------------------------------

Weighted average shares - basic and diluted                                      34,318,000         28,217,000

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

See accompanying notes to consolidated financial statements.                                                  7

</TABLE>



<PAGE>
<TABLE>
<CAPTION>
                                                                                                     RemoteMDx, Inc.
                                                                     Consolidated Statement of Stockholders' Deficit
                                                                             Years Ended September 30, 2004 and 2005
--------------------------------------------------------------------------------------------------------------------

                                                                  Preferred Stock
                                                                  ---------------
                                                           Series A              Series B          Common Stock
                                                           --------              --------          ------------
                                                      Shares       Amount    Shares     Amount   Shares      Amount
                                                    ----------------------------------------------------------------

<S>                                                     <C>       <C>       <C>         <C>     <C>          <C>
Balance at October 1, 2003                              30,446    $     3   1,835,824   $  184  23,917,032   $ 2,392

Issuance of common stock upon expiration
of put options on manditorily redemmable
common stock (reclassified from liabilities)                 -          -           -        -     963,333        96

Issuance of common stock for:
    Cash                                                     -          -           -        -   1,066,043       106
    Offering costs for convertible debentures                -          -           -        -     205,530        21
      (recorded as debt discount)
    Conversion of debt and interest                          -          -           -        -      22,427         2
    Conversion of related party debt                         -          -           -        -     740,741        74
    Exercise of stock options; options were
      exercised through reduction of related party
      line of credit                                         -          -           -        -     689,229        69
    Conversion of Series A preferred stock              (7,097)        (1)          -        -   2,633,403       264
    Services                                                 -          -           -        -   1,157,500       116

Stock options issued for consulting services                 -          -           -        -           -         -

Amortization of deferred consulting services                 -          -           -        -           -         -

Subscription receivable reduction:                           -          -           -        -           -         -

Preferred stock dividend                                     -          -           -        -           -         -

Net loss                                                     -          -           -        -           -         -

                                                    ----------------------------------------------------------------
Balance at September  30, 2004                          23,349    $     2   1,835,824   $  184  31,395,238   $ 3,140
                                                    ================================================================


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

See accompanying notes to consolidated financial statements.                                                       8
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                                                                RemoteMDx, Inc.

                                                                Consolidated Statement of Stockholders' Deficit
                                                                        Years Ended September 30, 2004 and 2005
                                                                                                      Continued
---------------------------------------------------------------------------------------------------------------

                                                                       Deferred    Preferred
                                                                      Financing      Stock        Consolidated
                                                                         and       Subscriptions   Accumulated
                                                            APIC      Consulting    Receivable      Deficit
                                                       --------------------------------------------------------
<S>                                                    <C>            <C>          <C>            <C>
Balance at October 1, 2003                             $ 62,128,166   $ (120,000)  $   700,000    $ (63,073,294)
Issuance of common stock upon expiration
of put options on manditorily redemmable
common stock (reclassified from liabilities)              2,048,570            -             -                -

Issuance of common stock for:
    Cash                                                    480,546            -             -                -
    Offering costs for convertible debentures
       (recorded as debt discount)                          110,965            -             -                -
    Conversion of debt and interest                          33,638            -             -                -
    Conversion of related party line of credit              399,926            -             -                -
    Exercise of stock options; options were
       exercised through reduction of related party
       line of credit                                       372,115            -             -                -
    Conversion of Series A preferred stock                     (263)           -             -                -
    Services                                                600,334     (461,700)            -                -

Stock options issued  for consulting services               681,142            -

Amortization of deferred consulting services                      -      250,388             -                -

Subscription receivable reduction:                                -            -      (700,000)               -

Preferred stock dividend                                   (525,800)           -             -                -

Net loss                                                          -            -             -       (6,406,711)
                                                       --------------------------------------------------------
Balance at September 30, 2004                          $ 66,329,339   $ (331,312)  $         -    $ (69,480,005)
                                                       ========================================================

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

See accompanying notes to consolidated financial statements.                                                  9
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                                                                     RemoteMDx, Inc.
                                                                     Consolidated Statement of Stockholders' Deficit
                                                                             Years Ended September 30, 2004 and 2005
--------------------------------------------------------------------------------------------------------------------

                                                                  Preferred Stock
                                                                  ---------------
                                                           Series A              Series B          Common Stock
                                                           --------              --------          ------------
                                                      Shares       Amount    Shares     Amount   Shares      Amount
                                                    ----------------------------------------------------------------

<S>                                                     <C>       <C>       <C>         <C>     <C>          <C>

Balance at October 1, 2004                              23,349    $     2   1,835,824   $  184  31,395,238   $ 3,140

Issuance of common stock for:
    Conversion of Series A preferred stock              (2,578)         -           -        -     953,895        95
    Conversion of Series B preferred stock                   -          -    (466,667)     (47)  2,592,595       259
    Debt and accrued interest                                -          -           -        -   3,995,154       400
    Services                                                 -          -           -        -   5,148,641       514
    Assumption of $563,500 of debt and accrued
      interest by related party                              -          -           -        -   1,043,519       104
    Issuance of warrants for:
      Debt                                                   -          -           -        -           -         -
      Services                                               -          -           -        -           -         -

Amortization of deferred consulting and financing
    fees                                                     -          -           -        -           -         -

Preferred stock dividend                                     -          -           -        -           -         -

Record beneficial conversion feature on notes                -          -           -        -           -         -

Issuance of Series A preferred stock for accrued
    dividends                                                -          -           -        -           -         -

Preferred stock dividends paid with Series A
    preferred stock                                      5,236          1           -        -           -         -

Subscription receivable                                      -          -           -        -           -         -

Net loss                                                     -          -           -        -           -         -

                                                    ----------------------------------------------------------------
Balance at September  30, 2005                          26,007    $     3   1,369,157   $  137  45,129,042   $ 4,513
                                                    ================================================================



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

See accompanying notes to consolidated financial statements.                                                      10
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                                                                RemoteMDx, Inc.
                                                                Consolidated Statement of Stockholders' Deficit
                                                                        Years Ended September 30, 2004 and 2005
                                                                                                      Continued
---------------------------------------------------------------------------------------------------------------

                                                                       Deferred    Preferred
                                                                      Financing      Stock        Consolidated
                                                                         and       Subscriptions   Accumulated
                                                            APIC      Consulting    Receivable      Deficit
                                                       --------------------------------------------------------
<S>                                                    <C>            <C>          <C>            <C>
Balance at October 1, 2004                             $ 66,329,339   $  (331,312) $         -    $ (69,480,005)

Issuance of common stock for:
    Conversion of Series A preferred stock                      (95)           -             -                -
    Conversion of Series B preferred stock                     (213)           -             -                -
    Debt and accrued interest                             2,645,499    (1,970,910)           -                -
    Services                                              2,822,395    (1,755,000)           -                -
    Assumption of $563,500 of debt and accrued
       interest by related party                            641,054            -             -                -
    Issuance of warrants for:
       Debt                                                 267,174             -            -                -
       Services                                           1,582,171      (214,776)           -                -

Amortization of deferred consulting and financing
    fees                                                          -       908,872            -                -

Preferred stock dividend                                   (512,547)            -            -                -

Record beneficial conversion feature on notes             1,300,500             -            -                -

Issuance of Series A preferred stock for accrued
dividends                                                 1,038,346             -            -                -

Preferred stock dividend paid with Series A                       -             -            -                -
    preferred stock

Subscription receivable                                           -             -     (504,900)               -

Net loss                                                          -             -            -      (10,983,689)

                                                       --------------------------------------------------------
Balance at September  30, 2005                         $ 76,113,623   $(3,363,126) $  (504,900)   $ (80,463,694)
                                                       ========================================================


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

See accompanying notes to consolidated financial statements.                                                 11
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                                                                 RemoteMDx, Inc.
                                                                            Consolidated Statement of Cash Flows
                                                                               For the Years Ended September 30,
----------------------------------------------------------------------------------------------------------------

                                                                                    2005              2004
                                                                                --------------------------------
<S>                                                                             <C>               <C>
Cash flows from operating activities:
     Net loss                                                                   $  (10,983,689)   $   (6,406,711)
     Adjustments to reconcile net loss to net cash used in
         operating activities:
               Depreciation and amortization                                            36,632           156,604
               Amortization of debt discount                                           262,427            52,752
               Amortization of deferred financing and consulting services              908,872           250,388
               Amortization of interest expense related to redeemable common
                   stock payable                                                             -           483,659
               Beneficial conversion feature recorded as interest expense              340,000                 -
               Derivative liability valuation                                          580,626                 -
               Common stock issued for services and interest                         1,347,768           138,750
               Common stock options and warrants issued to
                   board of directors                                                  170,138                 -
               Options issued to consultants for services                              392,380           498,832
               Options issued to related party for services                          1,072,051           182,310
               Impairment of goodwill                                                        -         1,321,164
               Interest income on restricted cash                                       (3,742)           (2,016)
               Increase in related party line of credit for services                   752,708           598,918
               Changes in operating assets and liabilities:
                   Accounts receivable                                                 163,694          (175,559)
                   Inventories                                                          31,711           286,151
                   Prepaid expenses and other assets                                   (58,729)           13,021
                   Accounts payable                                                    649,042           427,645
                   Accrued liabilities                                                 494,770           140,048
                   Deferred revenues                                                     4,105            (1,008)
                                                                                --------------------------------

                                    Net cash used in operating activities           (3,839,236)       (2,035,052)
                                                                                --------------------------------

Cash flows from investing activities:
     Purchase of property and equipment                                               (311,730)         (102,740)
     Proceeds from the disposal of fixed assets                                          8,457             2,735
                                                                                --------------------------------

                                    Net cash used in investing activities             (303,273)         (100,005)
                                                                                --------------------------------


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

See accompanying notes to consolidated financial statements.                                                  12
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                                                                 RemoteMDx, Inc.
                                                                            Consolidated Statement of Cash Flows
                                                                               For the Years Ended September 30,
                                                                                                       Continued
----------------------------------------------------------------------------------------------------------------

                                                                                    2005              2004
                                                                                --------------------------------
<S>                                                                             <C>               <C>
Cash flows from financing activities:
       Net (payments) borrowings under a related-party line of
          credit / advances                                                           (782,639)          313,136
       Net payments on a bank line of credit                                              (102)             (105)
       Payment on short-term notes payable                                             (33,787)          (45,759)
       Payment on notes payable                                                       (164,000)                -
       Payment on related party convertible notes payable                                    -           (98,794)
       Proceeds from sale of manditorily redeemable common stock                             -           225,000
       Proceeds from the issuance of SecureAlert Series A preferred stock            2,607,746                 -
       Proceeds from issuance of debt                                                2,869,224           144,500
       Proceeds from sale of common stock                                                    -           480,546
       Proceeds from sale of equity and convertible debenture                                -         1,041,742
                                                                                --------------------------------

                                      Net cash provided by financing activities      4,496,442         2,060,266
                                                                                --------------------------------

Net increase (decrease) in cash                                                        353,933           (74,791)

Cash, beginning of year                                                                 62,103           136,894
                                                                                --------------------------------

Cash, end of year                                                               $      416,036    $       62,103
                                                                                --------------------------------



Supplemental Cash Flow Information:
                                                                                      2005              2004
                                                                                --------------------------------
Cash paid for interest and taxes:
Cash paid for income taxes                                                                   -                 -
Cash paid for interest                                                          $       48,053    $       38,774


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

See accompanying notes to consolidated financial statements.                                                  13
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                                                                 RemoteMDx, Inc.
                                                                            Consolidated Statement of Cash Flows
                                                                               For the Years Ended September 30,
                                                                                                       Continued
----------------------------------------------------------------------------------------------------------------

                                                                                    2005              2004
                                                                                --------------------------------
<S>                                                                             <C>               <C>
 Supplemental schedule of non-cash investing and
 financing activities:
 Issuance of 953,895 and 2,633,403 common shares, respectively, in exchange for
     2,578 and 7,097 shares of Series A preferred stock, respectively                       95               264
 Issuance of 5,870,500 and 1,157,500 common shares, respectively, for deferred
     consulting and financing services                                               3,590,910           461,700
 Issuance of 205,530 common shares for offering costs                                        -           110,986
 Utilization of borrowings under a related-party line of credit as payment for
      exercise of common stock options                                                       -           372,184
 Preferred Series A stock dividends accrued                                            512,547           525,800
 Conversion of related party line-of-credit into 740,741 common shares                       -           400,000
 Subscription receivable reduction for $600,000 reduction of notes
      payable and $100,000 reduction of accrued liabilities                                  -           700,000
 Notes payable and accrued interest converted into 750,000 and 22,427
     shares of common stock, respectively                                              318,301            33,640
 Related party line of credit increased in exchange for related party
     consulting services of $480,000, assumption of Company notes payable
     of $563,500, and $77,658 of accrued interest                                    1,097,988                 -
 Use of restricted cash to pay bank line-of-credit                                           -          (375,681)
 Series A preferred stock issued in settlement of related party note                   175,000                 -


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

See accompanying notes to consolidated financial statements.                                                  14
</TABLE>


<PAGE>

                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                     September 30, 2005 and 2004
--------------------------------------------------------------------------------

1.   Organization       RemoteMDx,  Inc. was originally  incorporated in Utah in
     and Nature         July 1995 under the name Volu-Sol, Inc. ("Volu-Sol"), as
     of Operations      a wholly  owned  subsidiary  of  Biomune  Systems,  Inc.
                        ("Biomune").  Biomune spun off Volu-Sol by  distributing
                        shares of Volu-Sol's common stock as a stock dividend to
                        the  holders  of  the  common   stock  of  Biomune  (the
                        "Distribution").  As a consequence of the  Distribution,
                        Volu-Sol commenced operations as a separate, independent
                        company  in  October  1997.  Effective  July  27,  2001,
                        Volu-Sol changed its name to RemoteMDx,  Inc. RemoteMDx,
                        Inc. and its subsidiaries  are collectively  referred to
                        as the "Company".

                        Historically,  the Company's  strategy was to capitalize
                        on the global medical  diagnostic  industry by providing
                        "building  block"  stains  and  reagents.  Although  the
                        Company  continues  to conduct  its  medical  stains and
                        solutions business,  over the past two years, management
                        has begun to pursue a more expanded role engaging in the
                        business of manufacturing and marketing mobile emergency
                        and personal security systems, and tracking devices used
                        to monitor  convicted  offenders in the criminal justice
                        system.  The  Company's  revenues  for  the  year  ended
                        September 30, 2005,  were  generated  primarily from the
                        sale of  personal  security  products  and from  medical
                        stains and reagents.

                        Going Concern
                        The Company  incurred a net loss and has  negative  cash
                        flows  from  operating  activities  for the  year  ended
                        September  30,  2005.  As of  September  30,  2005,  the
                        Company has a working capital  deficit,  a stockholders'
                        deficit and an accumulated deficit.  These factors raise
                        substantial   doubt  about  the  Company's   ability  to
                        continue as a going concern. The financial statements do
                        not include any  adjustments  that might result from the
                        outcome of this uncertainty.

                        In order for the  Company  to remove  substantial  doubt
                        about its ability to continue  as a going  concern,  the
                        Company   must   generate   positive   cash  flows  from
                        operations,  obtain positive working capital, and obtain
                        the  necessary  funding  to meet its  projected  capital
                        investment requirements.

--------------------------------------------------------------------------------
                                                                              15


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

1.   Organization       Going Concern - Continued
     and Nature         Management's  plans  with  respect  to this  uncertainty
     of Operations      include  converting debt obligations to equity,  raising
     Continued          additional  capital  from the sale of equity  securities
                        and  expanding  its market for its mobile  emergency and
                        tracking  products.  There can be no assurance  that the
                        Company will be able to raise sufficient capital to meet
                        its working capital needs. In addition,  there can be no
                        assurance  that the  operations  will generate  positive
                        cash  flows or that  the  Company  will be  economically
                        successful,  whether by increasing its marketing efforts
                        or  otherwise.  Further,  the  Company  may be unable to
                        complete     the      development     and     successful
                        commercialization of any new remote health monitoring or
                        tracking products.

                        Principles of Consolidation
                        The  accompanying   consolidated   financial  statements
                        include  the  accounts  of   RemoteMDx,   Inc.  and  its
                        wholly-owned  subsidiaries,  Volu-Sol Reagents, Inc. and
                        SecureAlert,   Inc.   All   intercompany   balances  and
                        transactions have been eliminated upon consolidation.

2.   Summary of         Use  of  Estimates  in  the   Preparation  of  Financial
     Significant        Statements
     Accounting         The  preparation  of financial  statements in conformity
     Policies           with  U.S.  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 revenues and expenses during the
                        reporting period. Actual results could differ from these
                        estimates.

                        Fair Value of Financial Statements
                        The  carrying   amounts  reported  in  the  accompanying
                        consolidated  financial  statements  for cash,  accounts
                        receivable,   notes   payable   and   accounts   payable
                        approximate  fair  values  because of the  immediate  or
                        short-term  maturities of these  financial  instruments.
                        The carrying  amounts of the Company's debt  obligations
                        approximate fair value.

--------------------------------------------------------------------------------
                                                                              16


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


2.   Summary of         Concentration of Credit Risk
     Significant        The Company has cash in bank that, at times,  may exceed
     Accounting         federally   insured   limits.   The   Company   has  not
     Policies           experienced  any losses in such  accounts.  The  Company
     Continued          believes  it is not  exposed to any  significant  credit
                        risk on cash and short-term investments.

                        In the normal course of business,  the Company  provides
                        credit terms to its customers.  Accordingly, the Company
                        performs  ongoing  credit  evaluations of its customers'
                        financial  condition and requires no collateral from its
                        customers.   The  Company  maintains  an  allowance  for
                        uncollectable   accounts   receivable   based  upon  the
                        expected collectability of all accounts receivable.

                        The Company had sales to entities  which  represent more
                        than 10% as follows for the years ended September 30:

                                                       2005           2004
                                                     --------------------------

                            Company A                $        -      $  170,000

                            Company B                $  148,500      $  163,395

                        Cash and Cash Equivalents
                        Cash  and   cash   equivalents   consist   of  cash  and
                        investments  with original  maturities to the Company of
                        three months or less.

                        Accounts Receivable
                        Accounts  receivable  are  carried at  original  invoice
                        amount less an estimate  made for  doubtful  receivables
                        based  on a  review  of  all  outstanding  amounts  on a
                        monthly  basis.   Specific  reserves  are  estimated  by
                        management  based on certain  assumptions and variables,
                        including the customer's financial condition, age of the
                        customer's receivables and changes in payment histories.
                        Trade   receivables   are   written   off  when   deemed
                        uncollectible.    Recoveries   of   trade    receivables
                        previously written off are recorded when received.

                        A trade  receivable  is considered to be past due if any
                        portion of the receivable  balance has not been received
                        by the contractual pay date.  Interest is not charged on
                        trade receivables that are past due.

                        Inventories
                        Inventories are recorded at the lower of cost or market,
                        cost being determined on a first-in,  first-out ("FIFO")
                        method.


--------------------------------------------------------------------------------
                                                                              17


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

2.   Summary of         Substantially   all  items  included  in  inventory  are
     Significant        finished goods and consist of the following:
     Accounting
     Policies
     Continued

                             Mobile security                     $    198,085
                             Reagent stains raw materials              26,741
                             Reagents stains finished goods             2,727
                             Reserve for inventory obsolescence      (180,977)
                                                                 ------------
                                                                 $     46,576
                                                                 ------------

                        Provisions, when required, are made to reduce excess and
                        obsolete  inventories to their  estimated net realizable
                        values.  Due to competitive  pressures and technological
                        innovation,  it is possible  that  estimates  of the net
                        realizable value could change in the near term.

                        Property and Equipment
                        Property  and  equipment   are  stated  at  cost,   less
                        accumulated depreciation and amortization.  Depreciation
                        and amortization are determined using the  straight-line
                        method over the  estimated  useful  lives of the assets,
                        typically three to seven years.  Leasehold  improvements
                        are amortized  over the shorter of the estimated  useful
                        lives  of  the   asset   or  the  term  of  the   lease.
                        Expenditures  for  maintenance  and repairs are expensed
                        while renewals and improvements  are  capitalized.  When
                        property and equipment are disposed, any gains or losses
                        are included in the results of operations.

                        Property and equipment  consisted of the following as of
                        September 30, 2005:

                             Equipment                              $  372,923
                             Leasehold improvements                    316,147
                             Furniture and fixtures                    188,556
                                                                    ----------
                                                                       877,626

                                Accumulated depreciation              (496,911)
                                                                    ----------
                                                                    $  380,715
                                                                    ----------

--------------------------------------------------------------------------------
                                                                              18


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


2.   Summary of         Depreciation  expense for the years ended  September 30,
     Significant        2005 and 2004 was $36,632 and $156,603, respectively.
     Accounting
     Policies           Impairment of Long-Lived Assets and Goodwill
     Continued          The Company reviews its long-lived assets for impairment
                        when events or changes in  circumstances  indicate  that
                        the book value of an asset may not be  recoverable.  The
                        Company  evaluates,  at each balance sheet date, whether
                        events and  circumstances  have occurred  which indicate
                        possible  impairment.  The  Company  uses an estimate of
                        future  undiscounted net cash flows of the related asset
                        or group of assets over the estimated  remaining life in
                        measuring  whether  the assets are  recoverable.  If the
                        carrying amount of an asset exceeds its estimated future
                        cash flows,  an impairment  charge is recognized for the
                        amount  by  which  the  carrying   amount   exceeds  the
                        estimated  fair  value  of  the  asset.   Impairment  of
                        long-lived  assets is assessed at the lowest  levels for
                        which  there  are  identifiable   cash  flows  that  are
                        independent  of other  groups  of  assets.  Assets to be
                        disposed of are  reported  at the lower of the  carrying
                        amount or fair value,  less the estimated costs to sell.
                        During the years ended  September 30, 2005 and 2004, the
                        Company  recorded  impairment  of  goodwill  of  $0  and
                        $1,321,164, respectively.

                        Revenue Recognition
                        The Company derives its revenue  primarily from the sale
                        of its mobile  medical  emergency  products with service
                        contracts,  and reagent stains.  Revenue,  less reserves
                        for  returns,   is  recognized   upon  shipment  to  the
                        customer.  Revenue  from  products  sold with  long-term
                        service  contracts  are  recognized   ratably  over  the
                        expected  life  of the  contract.  Amounts  received  in
                        advance of shipment are recorded as deferred revenue.

                        Shipping and  handling  fees are included as part of net
                        sales.  The related freight costs and supplies  directly
                        associated  with  shipping  products  to  customers  are
                        included as a component of cost of goods sold.

--------------------------------------------------------------------------------
                                                                              19


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

2.   Summary of         Research and Development Costs
     Significant        All   expenditures  for  research  and  development  are
     Accounting         charged to expense as incurred.  These  expenditures  in
     Policies           both  2004  and  2005  were  for  the   development   of
     Continued          SecureAlert's TrackerPAL device and associated services.
                        For the years ended September 30, 2005 and 2004 research
                        and  development  expenses were $1,766,791 and $205,341,
                        respectively.

                        Stock-Based Compensation
                        The Company  accounts for its  stock-based  compensation
                        issued  to  employees  and  directors  under  Accounting
                        Principles Board Opinion ("APB") No. 25, "Accounting for
                        Stock Issued to Employees," and related interpretations.
                        Under APB No. 25, compensation related to stock options,
                        if any, is recorded if an option's exercise price on the
                        measurement   date  is  below  the  fair  value  of  the
                        Company's common stock and amortized to expense over the
                        vesting period.

                        An alternative  method to the intrinsic  value method of
                        accounting  for  stock-based  compensation  is the  fair
                        value based method  prescribed by Statement of Financial
                        Accounting  Standards  (SFAS) No. 123,  "Accounting  for
                        Stock-Based  Compensation,"  as amended by SFAS No. 148,
                        "Accounting  for  Stock-Based  Compensation - Transition
                        and  Disclosure."  If the  Company  used the fair  value
                        based  method,  the Company  would be required to record
                        deferred  compensation  based on the  fair  value of the
                        stock  option at the date of grant as computed  using an
                        option-pricing  model, such as the Black-Scholes  option
                        pricing  model.  The  deferred  compensation  calculated
                        under  the  fair  value  based   method  would  then  be
                        amortized over the vesting period of the stock option.

--------------------------------------------------------------------------------
                                                                              20


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


2.   Summary of         The following  table  illustrates the effect on net loss
     Significant        and net loss per share as if the  Company had elected to
     Accounting         use the fair  value  based  method  to  account  for its
     Policies           employee stock-based compensation.
     Continued
                                                  Years Ended September 30,
                                              --------------------------------
                                                    2005           2004
                                              --------------------------------

Net loss applicable to common
  shareholders - as reported                    $ (11,496,236) $  (6,932,511)

Deduct:  total stock based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects                                   (10,835)      (112,647)
                                              --------------------------------

Net loss - pro forma                            $ (11,507,071) $  (7,045,158)
                                              --------------------------------

Basic and diluted loss per share - as reported  $        (.33) $      ( 0.25)
                                              --------------------------------

Basic and diluted loss per share - pro forma    $        (.34) $      ( 0.25)
                                              --------------------------------

                        The  fair  value  of each  option  or  warrant  grant is
                        estimated  on the date of grant using the  Black-Scholes
                        option pricing model with the following weighted average
                        assumptions:

                                                    Years Ended
                                                   September 30,
                                         ----------------------------------
                                               2005            2004
                                         ----------------------------------

 Expected dividend yield                                -                -
 Expected stock price volatility                    106 %              95%
 Risk-free interest rate                           3.66 %            3.87%
 Expected life of options                         5 years          5 years

                        The weighted  average fair value of options and warrants
                        granted  during the years ended  September  30, 2005 and
                        2004, were $ 0.47 and $0.38, respectively.

                        The Company  accounts for its  stock-based  compensation
                        issued  to  non-employees,  other  than  members  of the
                        Company's  Board of  Directors,  using  the  fair  value
                        method  in  accordance  with  SFAS No.  123 and  related

--------------------------------------------------------------------------------
                                                                              21


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

2.   Summary of         interpretations.   Under  SFAS  No.   123,   stock-based
     Significant        compensation  is  determined as either the fair value of
     Accounting         the  consideration  received  or the  fair  value of the
     Policies           equity  instruments  issued,  whichever is more reliably
     Continued          measurable.

                        Income Taxes
                        The  Company  recognizes  deferred  income tax assets or
                        liabilities for the expected future tax  consequences of
                        events  that  have  been  recognized  in  the  financial
                        statements  or income tax returns.  Deferred  income tax
                        assets or  liabilities  are  determined  based  upon the
                        difference between the financial statement and tax bases
                        of  assets  and  liabilities  using  enacted  tax  rates
                        expected to apply when the  differences  are expected to
                        be settled or realized.  Deferred  income tax assets are
                        reviewed  periodically for  recoverability and valuation
                        allowances are provided as necessary.

                        Net Loss Per Common Share
                        Basic  net  loss  per  common  share  ("Basic  EPS")  is
                        computed  by  dividing  net  loss  available  to  common
                        stockholders  by the weighted  average  number of common
                        shares outstanding during the period.

                        Diluted  net loss per common  share  ("Diluted  EPS") is
                        computed  by  dividing  net  loss  by  the  sum  of  the
                        weighted-average number of common shares outstanding and
                        the  weighted-average  dilutive common share equivalents
                        then  outstanding.  The  computation of Diluted EPS does
                        not assume  exercise or conversion  of  securities  that
                        would have an anti-dilutive effect.

                        Common share equivalents consist of shares issuable upon
                        the exercise of common stock options and  warrants,  and
                        shares issuable upon  conversion of preferred  stock. As
                        of September 30, 2005 and 2004, there were approximately
                        20,833,000  and  18,297,000   outstanding  common  share
                        equivalents, respectively, that were not included in the
                        computation  of  diluted  net loss per  common  share as
                        their  effect would be  anti-dilutive.  The common share
                        equivalents  listed  above  do not  include  the  shares
                        issuable  upon  conversion  of  convertible   notes  and
                        debentures with embedded conversion features.


--------------------------------------------------------------------------------
                                                                              22


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


2.   Summary of         Recent Accounting Pronouncements
     Significant        In December 2004, the FASB issued FASB Statement No. 123
     Accounting         (revised 2004), "Shared-Based Payment." Statement 123(R)
     Policies           addresses  the   accounting  for   share-based   payment
     Continued          transactions  in which an enterprise  receives  employee
                        services in exchange for (a) equity  instruments  of the
                        enterprise or (b) liabilities that are based on the fair
                        value of the enterprise's equity instruments or that may
                        be settled by the  issuance of such equity  instruments.
                        Statement  123(R)  requires an entity to  recognize  the
                        grant-date  fair value of stock  options and share based
                        compensation  issued to  employees  in the  statement of
                        operations.  The revised  Statement  generally  requires
                        that an entity account for those  transactions using the
                        fair value method,  and eliminates  the intrinsic  value
                        method of  accounting  in APB Opinion No. 25,  which was
                        permitted under Statement 123, as originally issued.

                        The  revised  Statement  requires  entities  to disclose
                        information about the nature of the share-based  payment
                        transactions  and the effects of those  transactions  on
                        the financial statements.

                        Statement 123(R) is effective as October 1, 2006 for the
                        Company.  All  public  companies  must  use  either  the
                        modified  prospective  or  the  modified   retrospective
                        transition method. The Company has not yet evaluated the
                        impact of adoption of this  pronouncement,  but believes
                        it  may  have a  material  impact  on  the  consolidated
                        financial statements.

                        In November  2004,  the FASB issued  Statement  No. 151,
                        "Inventory  Costs",  to amend the guidance in Chapter 4,
                        "Inventory   Pricing",   of  FASB  Accounting   Research
                        Bulletin No. 43, "Restatement and Revision of Accounting
                        Research  Bulletins."  Statement  No. 151  clarifies the
                        accounting   for  abnormal   amounts  of  idle  facility
                        expense,  freight,  handling costs,  and wasted material
                        (spoilage).  The Statement  requires that those items be
                        recognized  as  current-period  charges.   Additionally,
                        Statement   151  requires   that   allocation  of  fixed
                        production overheads to the costs of conversion be based
                        on the normal  capacity  of the  production  facilities.
                        Statement   No.  151  is  effective   for  fiscal  years
                        beginning  after June 15, 2005. The Company is currently
                        evaluating  the impact of the adoption of this Statement
                        which is required to be adopted in the Company's  fiscal
                        year ending September 30, 2006.


--------------------------------------------------------------------------------
                                                                              23


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


2.   Summary of         As  part  of its  short-term  international  convergence
     Significant        project with the IASB,  on December  16, 2004,  the FASB
     Accounting         issued  Statement  153 to  address  the  accounting  for
     Policies           non-monetary  exchanges of productive assets.  Statement
     Continued          15  amends  APB No.  29,  "Accounting  for  Non-monetary
                        Exchanges",  which  established  a narrow  exception for
                        non-monetary exchanges of similar productive assets from
                        fair value measurement.  This Statement  eliminates that
                        exception   and  replaces  it  with  an  exception   for
                        exchanges that do not have commercial  substance.  Under
                        Statement 153 non-monetary  exchanges are required to be
                        accounted  for at fair value,  recognizing  any gains or
                        losses,  if  their  fair  value is  determinable  within
                        reasonable  limits and the  transaction  has  commercial
                        substance.

                        The Statement specifies that a non-monetary exchange has
                        commercial  substance if future cash flows of the entity
                        are expected to change  significantly as a result of the
                        exchange.

                        The Company has adopted  this  Statement  in fiscal year
                        2005 and did not  experience  a  material  impact on the
                        financial statements.

3.   Accrued            Accrued expenses consisted of the following at September
     Expenses           30, 2005:

                        Accrued tooling                            $     116,000
                        Accrued interest                                  38,638
                        Accrued compensation and payroll taxes           172,168
                        Accrued vacation                                  27,583
                        Accrued property taxes                            28,800
                        Funds held in escrow for third parties           270,000
                        Other                                             35,835
                                                                   -------------
                                                                   $     689,024
                                                                   -------------

4.   Bank Line of       As of  September  30,  2005,  the Company  had  $174,898
     Credit             outstanding  under a line of  credit  with  Zions  First
                        National  Bank. The line of credit bears interest at 6%,
                        matures on April 11, 2006,  is limited to $175,000  plus
                        fees,  and is secured by  certificates  of deposit which
                        the Company holds as restricted cash of $180,103.


--------------------------------------------------------------------------------
                                                                              24


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

5.   Notes Payable      Notes  payable at  September  30, 2005  consisted of the
                        following:

                        Current liabilities:

                        Unsecured note payable to a corporation
                        with interest at 5%.  The note was due
                        December 20, 2005.  This note is
                        currently in default.                       $    95,830

                        Unsecured notes payable to former
                        SecureAlert shareholders, with interest
                        at 5%, payable in installments of $80,000
                        per month until paid in full. These notes
                        are currently in default.                       169,676

                        Unsecured note payable to an entity.
                        The note has a monthly payment of $1,985.
                        The loan bears no interest, but has been
                        imputed at 8%.  The note is due
                        September 18, 2006.                              21,837
                                                                    ------------
                                                                    $   287,343
                                                                    ------------
                         Long term liabilities:

                        Unsecured convertible note payable with
                        interest at 18% (effective interest rate
                        of 29.83%), maturing on September 16, 2008.
                        Three years of prepaid interest has been
                        paid through the issuance of 363,000 shares
                        of restricted common stock valued at
                        $515,460.  The holder of the note may
                        convert any  portion of the outstanding
                        balance at the lower of 50% of the fair
                        value of the Company's common stock or
                        $0.40 per share. A beneficial conversion
                        feature of $363,000 was recorded.
                        As of September 30, 2005, the remaining
                        debt discount was $357,958.                 $     5,042

                        Unsecured convertible note payable
                        with interest at 18% (effective interest
                        rate of 26.17%), maturing on May 3, 2008.
                        Three years of prepaid interest has been
                        paid through the issuance of 127,500
                        shares of restricted common stock valued
                        at $68,850. The holder of the note may
                        convert any portion of the outstanding
                        balance at the lower of 50% of  the fair
                        value of the Company's common stock or
                         $0.40 per share. A beneficial conversion

--------------------------------------------------------------------------------
                                                                              25


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

5.   Notes Payable      feature of $127,500 was recorded.
     Continued          As of September 30, 2005, the remaining
                        debt  discount was $109,791.                     17,709

                        Unsecured convertible notes payable
                        with interest at 18% (effective interest
                        rate of 39.72%), and maturity dates of
                        June 15, 2008 and September 15, 2008.
                        Three years of prepaid interest has been
                        paid through the issuance of 1,280,000
                        shares of restricted common stock valued
                        at $883,600.  The holder of the note
                        may convert any portion of the  outstanding
                        balance at the lower of 50% of the fair
                        value of the Company's common stock or $
                        0.40 per share. These note have conversion
                        features that are considered embedded
                        derivatives; and therefore, are subject
                        to derivative accounting. (See Note 8)           75,834

                        Unsecured convertible notes payable with
                        interestat 18% (effective interest rate
                        of 26.15%), and maturity dates of March 7,
                        2008, April 7, 2008, and August 14, 2008.
                        Three years of prepaid interest has been
                        paid through the issuance of 600,000
                        restricted shares of common stock valued at
                        $324,000. The holder of the note may convert
                        any portion of the outstanding balance at the
                        lower of 50% of the fair value of the
                        Company's common stock or $0.40 per share.
                        A beneficial conversion feature of $320,000
                        was recorded. As of September 30, 2005, the
                        remaining debt discount was $291,598.           308,402

                        Unsecured convertible notes payable
                        with interest at 18% (effective interest
                        rate of 54.24%), and maturity dates of
                        May 2, 2008 and September 15, 2008.
                        Three years of prepaid interest has been
                        paid through the issuance of 150,000
                        shares of restricted common stock valued
                        at $125,000.  The holder of the note may
                        convert any portion of the outstanding
                        balance at the lower of 50% of the fair

--------------------------------------------------------------------------------
                                                                              26


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

5.   Notes Payable      value of the Company's common stock or
     Continued          $0.40 per share.  A beneficial conversion
                        feature of $150,000 was recorded.  As
                        of September 30, 2005, the remaining debt
                        discount was $135,417.                           14,583
                                                                    ------------
                                                                    $   421,570
                                                                    ============

                        The following  schedule shows the principal payments due
                        under notes payable as of September 30, 2005:

                             Year Ending September 30:                 Amount
                             ------------------------               ------------
                                 2006                               $   287,343
                                 2007                                         -
                                 2008                                 2,520,500
                                 2009                                         -
                                 2010                                         -
                                                                    ------------
                                                                    $  2,807,843
                                                                    ============

6.   Redeemable         The Company has 32,000  common shares  outstanding  that
     Common             are  redeemable  at  the  option  of the  holder  with a
     Stock              redeemable  value of  $96,000.  The  Company has not yet
                        been   released   from  the  $96,000   obiligation.   In
                        accordance  with SFAS No.  150,  Accounting  for Certain
                        Financial   Instruments  with  Characteristics  of  both
                        Liabilities  and  Equity,  the  redemption  value of the
                        redeemable shares has been recorded as a liability.

7.   Convertible        During the year ended  September  30, 2004,  the Company
     Debentures         sold  $1,450,000 of Series B Convertible  Debentures and
                        $350,000  of  Series  C  Convertible   Debentures.   The
                        Debentures are convertible  automatically into shares of
                        the  Company's  common  stock  upon  the  closing  of  a
                        qualified equity or debt offering with gross proceeds of
                        at least  $5,000,000.  Under the terms,  the  conversion
                        price will equal 80% of the fair value  prior to closing
                        the offering.  The Debentures bear interest at an annual
                        rate of 10%, not including any original issue  discount,
                        with  interest  during  the first six  months of $47,954
                        added  to the  principal  amount.  Thereafter,  interest
                        payments  will be made  monthly  in cash or, at the sole
                        option of the  Company,  in shares of Common  Stock at a
                        price of $0.54 per share. The Debentures  mature and are
                        payable  two years  from each  Closing,  subject  to the
                        conversion as indicated above. As of September 30, 2005,
                        the  convertible  debentures  net of debt  discount  was
                        $1,262,366.


--------------------------------------------------------------------------------
                                                                              27


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


8.   Derivatives        The   Company   does  not   hold  or  issue   derivative
                        instruments for trading purposes.  However,  the Company
                        has  convertible  notes  payable that  contain  embedded
                        derivatives  that require  separate  valuation  from the
                        convertible   notes.   The  Company   recognizes   these
                        derivatives  as  liabilities  in its  balance  sheet and
                        measures  them  at  their  estimated  fair  value,   and
                        recognizes  changes  in their  estimated  fair  value in
                        earnings  (losses) in the period of change.  The Company
                        has   estimated   the  fair  value  of  these   embedded
                        derivatives using the  Black-Scholes  model based on the
                        historical  volatility of its common stock over the past
                        three years.  The fair value of  derivative  instruments
                        are re-measured each quarter.

                        During the year ended  September  30, 2005,  the Company
                        issued  convertible notes payable containing an embedded
                        derivative.  The Company received  $1,280,000 from these
                        convertible  notes and issued 1,280,000 shares of common
                        stock  valued at  $883,600  for three  years of  prepaid
                        interest.  The carrying value of these convertible notes
                        payable  as of  September  30,  2005  was  $75,834.  The
                        carrying  value will be increased  each quarter over the
                        three  year  period  as  the  accretion  related  to the
                        embedded derivative is recorded until the carrying value
                        equals the face value of $1,280,000. As of September 30,
                        2005,  the  derivative  instruments  had a fair value of
                        $1,860,626.

9.   Preferred          The  Company  is  authorized  to issue up to  10,000,000
     Stock              shares of preferred stock,  $0.0001 par value per share.
                        The  Company's  Board of Directors  has the authority to
                        amend the Company's  Articles of Incorporation,  without
                        further   stockholder   approval,   to   designate   and
                        determine,   in  whole  or  in  part,  the  preferences,
                        limitations  and relative  rights of the preferred stock
                        before any issuance of the preferred stock and to create
                        one or more series of preferred stock.

                        Series A 10 % Convertible Non-Voting Preferred Stock
                        The Company has  designated  40,000  shares of preferred
                        stock as Series A 10% Convertible  Non-Voting  Preferred
                        Stock ("Series A Preferred Stock").  As of September 30,
                        2005,  there were  26,007  shares of Series A  Preferred
                        Stock outstanding.

                        Dividends
                        The  holders of the Series A  Preferred  Stock,  some of
                        which are entities  controlled by officers and directors
                        of the Company, are entitled to dividends at the rate of
                        10 percent per year on the stated value of the Series A

--------------------------------------------------------------------------------
                                                                              28


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

9.   Preferred          Preferred  Stock (or $200 per  share),  payable in cash,
     Stock              additional shares of Series A Preferred Stock, or common
     Continued          shares  at the  discretion  of the  Board of  Directors.
                        Dividends are fully  cumulative and accrue from the date
                        of original issuance to holders of record as recorded on
                        the books of the  Company at the record  date or date of
                        declaration  if no record date is set.  During the years
                        ended September 30, 2005 and 2004, the Company  recorded
                        $512,547 and $525,800 in dividends on Series A Preferred
                        Stock, respectively.

                        Convertibility
                        Series A Preferred Stock is convertible at 370 shares of
                        common stock for each share of Series A Preferred Stock.
                        During the year ended  September 30, 2005,  2,578 shares
                        of Series A Preferred  Stock were converted into 953,895
                        shares of common stock.  During the year ended September
                        30, 2004,  7,097 shares of Series A Preferred Stock were
                        converted into 2,633,403 shares of common stock.

                        Voting Rights and Liquidation Preference
                        The holders of Series A  Preferred  Stock have no voting
                        rights and are entitled to a  liquidation  preference of
                        $2.00 per share plus unpaid dividends  multiplied by 133
                        percent.

                        Optional Redemption
                        The Company may, at its option,  redeem up to two-thirds
                        of the total  number  of  shares  of Series A  Preferred
                        Stock  at  any  time.  As of  September  30,  2005,  the
                        redemption price was 133 percent of the conversion price
                        of Series A Preferred  Stock;  however,  the Company may
                        designate a different and lower conversion price for all
                        shares of Series A Preferred Stock called for redemption
                        by the Company.  Through September 30, 2005, the Company
                        has not  exercised its option to redeem shares of Series
                        A Preferred Stock.

                        Issuances of Series A Preferred Stock
                        During the year ended  September  30, 2005,  the Company
                        had  recorded  and  issued  5,236  shares  of  Series  A
                        Preferred   Stock  for   payment  of  Series  A  accrued
                        dividends.

--------------------------------------------------------------------------------
                                                                              29


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

9.   Preferred          Series B Convertible Preferred Stock
     Stock              On June 7, 2001,  the holders of the Company's  Series A
     Continued          Preferred  Stock  approved the  designation of 2,000,000
                        shares of a new series of preferred  stock, the Series B
                        Convertible Preferred Stock ("Series B Preferred Stock")
                        previously approved by the Board of Directors.

                        Dividends
                        The  Company  will  not pay  dividends  on the  Series B
                        Preferred  Stock  unless  dividends  are declared by the
                        Board of Directors, in which case the Series B Preferred
                        Stock would be paid dividends prior and in preference to
                        any  declaration  or  payment  of any  dividends  on the
                        common  stock,  and  subject to the  preferences  of the
                        holders of the Series A Preferred Stock.

                        Convertibility
                        Each share of Series B Preferred Stock is convertible at
                        any time into shares of common  stock at an initial rate
                        of $3.00 per  share of  common.  Each  share of Series B
                        Preferred Stock will  automatically  convert into shares
                        of common stock at the then effective conversion rate on
                        the  closing of a firm  commitment  underwritten  public
                        offering with an aggregate  public offering price of not
                        less than $20,000,000.  The Company has issued shares of
                        common stock or securities convertible into common stock
                        for  consideration  per share less than $3.00 per share.
                        The conversion rate in effect  immediately  prior to the
                        issuance  of those  shares,  the  conversion  rate  will
                        automatically  be  adjusted  to a  price  equal  to  the
                        aggregate consideration received by the Company for that
                        issuance divided by the number of shares of common stock
                        so issued.

                        Voting Rights and Liquidation Preference
                        Holders  of  shares  of  Series B  Preferred  Stock  are
                        entitled  to one vote per  share of  Series B  Preferred
                        Stock on all  matters  upon which  holders of the common
                        stock of the Company are entitled to vote. Generally the
                        holders of Series B  Preferred  Stock are  entitled to a
                        liquidation  preference  of $3.00  per  share,  plus all
                        accrued  and  unpaid  dividends.  For  purposes  of this
                        liquidation  preference,  the Series A  Preferred  Stock
                        ranks on a parity with the Series B Preferred Stock.

                        Optional Redemption
                        The Company  may redeem the Series B Preferred  Stock at
                        its option at any time. The  redemption  price will be a
                        minimum of 110  percent of the  conversion  price at the
                        date of  redemption.

--------------------------------------------------------------------------------
                                                                              30


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


9.   Preferred          SecureAlert,  Inc.  (PAL  Services)  Series A  Preferred
     Stock              Shares
     Continued          During the year ended  September 30, 2005,  and pursuant
                        to Board of Director  approval,  the Company amended the
                        articles   of    incorporation   of   its   wholly-owned
                        subsidiary,   SecureAlert,   Inc.   (PAL   Services)  to
                        establish 3,500,000 shares of preferred stock designated
                        as Series A Convertible  Redeemable Non-Voting Preferred
                        Stock. The holders of shares of Series A Preferred Stock
                        shall be entitled to receive quarterly  dividends out of
                        any of the  SecureAlert's  (PAL Services) assets legally
                        available  therefore,  prior  and in  preference  to any
                        declaration  or  payment of any  dividend  on the Common
                        Stock  of  SecureAlert,  (PAL  Services)  at the rate of
                        $1.50 per day times the number of the SecureAlert's (PAL
                        Services)  parolee  contracts  calculated in days during
                        the quarter.  For  example,  if there were an average of
                        10,000 parolee contracts outstanding during the quarter,
                        the total dividend would be $1,350,000  ($1.50 x 90 days
                        x 10,000  contracts)  or  $0.385  per  share of Series A
                        Preferred  Stock.  In no case will a dividend be paid if
                        the gross  revenue per contract  per day to  SecureAlert
                        (PAL Services) averages less than $4.50.  Dividends will
                        be paid in cash to the  holders  of  record of shares of
                        Series A Preferred Stock as they appear on the books and
                        records of  SecureAlert  (PAL  Services)  on such record
                        dates not less  than ten (10)  days nor more than  sixty
                        (60) days preceding the payment dates thereof, as may be
                        fixed by the Board of  Directors  of the  Company.  As a
                        group,  all Series A Preferred Stock may be converted at
                        the holder's option at any time into an aggregate of 20%
                        ownership of the common shares of the SecureAlert,  Inc.
                        (PAL Services).

                        During the year ended  September  30, 2005,  the Company
                        sold  2,990,000  of these  shares for  consideration  of
                        $2,990,000.  Included  in the  total  consideration  was
                        $382,254  issued as settlement of  liabilities  and cash
                        proceeds of $2,607,746.  The Company is currently in the
                        process of closing  approximately  $500,000  to complete
                        this  offering.  Because  the  preferred  stock sold was
                        Series A Preferred  Stock of the  Company's  subsidiary,
                        SecureAlert,  Inc., the consideration  received from the
                        sale in the  amount  of  $2,990,000  has  been  recorded
                        similar to minority interest as a separate  component of
                        the balance sheet outside of permanent equity.

10.  Common             Authorized Shares
     Stock              The Company is  authorized  to issue  up to  100,000,000
                        shares of common stock.

--------------------------------------------------------------------------------
                                                                              31


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


10.  Common Stock       Common Stock Issuances
     Continued          During the year ended  September  30, 2005,  the Company
                        issued  13,733,804  shares  of common  stock.  5,148,641
                        shares  were  issued  for  services  in  the  amount  of
                        $2,822,911,   953,895   shares   were  issued  upon  the
                        conversion of 2,578 shares of Series A Preferred  Stock,
                        2,592,595  shares  were issued  upon the  conversion  of
                        466,667  shares of Series B Preferred  Stock,  3,995,154
                        shares  were  issued for debt and  accrued  interest  of
                        $2,626,522,  and the remaining  1,043,519 were issued to
                        ADP for assuming $563,500 of debt and $77,554 of accrued
                        interest (See Note 12).

                        During the year ended  September  30, 2004,  the Company
                        issued  7,478,206  shares  of  common  stock.  Of  these
                        shares,  689,229 were issued  related to the exercise of
                        stock  options  whereby  the  exercise  price  was  paid
                        through the  extinguishment  of  $372,184 in  borrowings
                        under the line of  credit  with  ADP.  Of the  remaining
                        6,788,977  shares issued,  1,157,500  shares were issued
                        for  services,  2,633,403  shares  were  issued upon the
                        conversion of 7,097 shares of Series A preferred  stock,
                        1,271,573  issued for cash of  $591,638,  22,427  shares
                        were  issued for debt and  accrued  interest of $33,640,
                        963,333  shares  were  issued  upon  expiration  of  put
                        options, and the remaining 740,741 were issued to ADP to
                        reduce the ADP line of credit (See Note 12).

11.  Options and        Stock Incentive Plan
     Warrants           The Company has adopted the 1997  Volu-Sol,  Inc.  Stock
                        Incentive  Plan  (the  "1997  Plan").  The 1997 Plan was
                        approved by action of Biomune,  the original stockholder
                        of the Company, in August 1997. Under the 1997 Plan, the
                        Company  may issue  stock  options,  stock  appreciation
                        rights, restricted stock awards, and other incentives to
                        employees,  officers  and  directors  of the Company and
                        award  nonqualified  stock  options and other  awards to
                        employees and certain  non-employees  who have important
                        relationships  with the  Company.  A total of  5,000,000
                        shares were initially available for grant under the 1997
                        Plan.  As of September 30, 2005,  1,465,000  shares have
                        been granted under the 1997 Plan.

--------------------------------------------------------------------------------
                                                                              32


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


11.  Options and        Stock Incentive Plan - Continued
     Warrants           On February 17, 2004 the Board of Directors approved the
     Continued          2004 RemoteMDx, Inc. Stock incentive Plan ("2004 Plan").
                        The  shareholders  approved  this plan on May 19,  2004.
                        Under  the  2004  Plan,  the  Company  may  issue  stock
                        options,  stock  appreciation  rights,  restricted stock
                        awards and other  incentives to employees,  officers and
                        directors.  The 2004 Plan also provides for the award of
                        nonqualified stock options,  stock appreciation  rights,
                        bonus rights,  and other  incentive  grants to employees
                        and   certain    non-employees    who   have   important
                        relationships  with the  Company.  A total of  6,000,000
                        shares are  authorized  for issuance  pursuant to awards
                        granted  under the 2004 Plan.  During  fiscal year 2005,
                        5,000,000 shares have been granted under this plan.

                        A  summary  of  stock   option  and  warrant   activity,
                        including stock options and warrants  granted inside and
                        outside the plans discussed  above,  for the years ended
                        September 30, 2005 and 2004 is as follows:

                                            Number of
                                           Options and       Price Per
                                            Warrants           Share
                                        -----------------------------------

Outstanding at October 1, 2003                  7,202,343   $  .54 to 7.00
    Granted                                     2,085,000      .54 to 1.00
    Expired or cancelled                                -                -
    Exercised                                  (1,465,300)     .54 to 1.00
                                        -----------------------------------

Outstanding at September 30, 2004               7,822,043      .54 to 7.00
                                                7,849,000      .54 to 3.00
    Expired or cancelled                       (1,905,000)     .54 to 7.00
                                        -----------------------------------
Outstanding at September 30, 2005              13,766,043   $  .54 to 3.00
                                        -----------------------------------

                        The Company has adopted the  disclosure-only  provisions
                        of Statement of Financial  Accounting  Standards  (SFAS)
                        No.  123,   Accounting  for  Stock-Based   Compensation.
                        Accordingly, no compensation cost has been recognized in
                        the financial statements for employees,  except when the
                        exercise price is below the market price of the stock on
                        the date of grant.


--------------------------------------------------------------------------------
                                                                              33


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


11.  Options and        Stock Incentive Plan - Continued
     Warrants           The following table summarizes  information  about stock
     Continued          options and warrants outstanding at September 30, 2005:

                      Options and Warrants             Options and Warrants
                          Outstanding                      Exercisable
            -------------------------------------------------------------------
                             Weighted
                              Average
                             Remaining     Weighted                  Weighted
  Range of                  Contractual     Average                    Average
  Exercise       Number         Life       Exercise       Number      Exercise
   Prices      Outstanding    (Years)        Price     Exercisable      Price
--------------------------------------------------------------------------------
$  .50 - 1.00   10,854,477    2.50       $      .64    6,929,477     $    .64
         3.00    2,911,566    1.50             3.00    2,911,566         3.00
-------------------------------------------------------------------------------

$  .50 - 3.00   13,766,043    2.93       $     0.74    9,841,043     $   0.74
-------------------------------------------------------------------------------

                        As of September  30, 2005,  9,841,043 of the  13,766,043
                        outstanding options and warrants are vested.

                        During the year ended  September  30, 2005,  the Company
                        issued   7,849,000  common  stock  options  as  follows:
                        1,450,000 to employees, 599,000 to consultants,  400,000
                        to the Board of Directors,  5,000,000 to related parties
                        (David Derrick and James Dalton),  and 400,000 for debt.
                        The exercise prices range from $0.54 to $3.00 per share.
                        During the year ended  September  30, 2004,  the Company
                        issued   2,085,000  common  stock  options  as  follows:
                        225,000 to employees, 300,000 to consultants,  60,000 to
                        the Board of  Directors,  1,000,000  to related  parties
                        (ADP),   and  500,000  to  related  parties  (ADP).  The
                        exercise prices range from $0.54 to $1.00 per share.

12.  Related            The Company has entered into certain  transactions  with
     Party              related parties.  These  transactions  consist mainly of
     Transactions       financing transactions and consulting arrangements.

                        Related Party Advances Payable
                        As of September  30,  2005,  the Company owed $17,615 to
                        ADP Management, an entity owned and controlled by two of
                        the   Company's   officers   and   directors,   under  a
                        line-of-credit  agreement.  Outstanding  amounts  on the
                        line of  credit  accrue  at 5% and  are due on July  31,
                        2006.  During the year ended September 30, 2005, the net
                        decrease  in  the  related  party   line-of-credit   was
                        $204,931.  The net decrease consisted of cash repayments
                        during  the  year of  $782,639,  increases  of  $752,708
                        related  to  a  monthly   management  fee  owed  to  ADP
                        Management and expenses  incurred by ADP Management that
                        are  reimbursable  by the  Company,  and a  decrease  of
                        $175,000 for the purchase of SecureAlert  (PAL Services)
                        preferred  stock.  If the  Company  is unable to pay the

--------------------------------------------------------------------------------
                                                                              34


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------



12. Related             management  fee and the  reimbursable  expenses in cash,
    Party               the related  party  line-of-credit  is increased for the
    Transactions        amount owed to ADP Management.
    Continued
                        During the year ended September 30, 2005, ADP Management
                        assumed   $563,500  of  debt  plus  $77,554  of  accrued
                        interest from various note holders for 1,043,519  shares
                        of common stock.  All note holders  released the Company
                        from these obligations.

                        During the year ended  September  30, 2004,  the Company
                        converted  $400,000  of amounts  owed to ADP  Management
                        under the  line-of-credit  agreement into 740,741 shares
                        of  common  stock at a  conversion  price  of $0.54  per
                        share.

                        Financing Transactions
                        The  Company   entered   into  a  loan  with  an  entity
                        controlled by an employee of the Company. The loan bears
                        interest at 17%. An origination fee of $10,000 was added
                        to the principal balance owed under the note.  Principal
                        and interest were due November 13, 2005.  The first four
                        months are  interest  only and the last three months are
                        interest  and  principal.  This loan is  secured  by the
                        stock and assets of Volu-Sol  Reagents,  a  wholly-owned
                        subsidiary of RemoteMDx,  Inc. As of September 30, 2005,
                        the  balance  net of the  debt  discount  was  $237,857.
                        Subsequent to year end, the note was extended.

                        Consulting Arrangements
                        In March 2000, the Company agreed to pay consulting fees
                        to ADP for  assisting  the  Company to  develop  its new
                        business  direction  and  business  plan and to  provide
                        introductions  to  strategic   technical  and  financial
                        partners.  Under  the terms of this  agreement,  ADP was
                        paid a  consulting  fee of  $20,000  per  month  and the
                        Company agreed to reimburse the expenses incurred by ADP
                        in  the  course  of   performing   services   under  the
                        consulting arrangement.  The ADP agreement also requires
                        ADP to pay  the  salaries  of  David  Derrick  as  Chief
                        Executive Officer and Chairman of the Board of Directors
                        of  the  Company  and  James  Dalton  as  president  and
                        Vice-Chairman  of the Board of Directors of the Company.
                        The  Board  of  Directors,  which  at the  time  did not
                        include  either of these  individuals,  approved both of
                        these arrangements.  In May 2005, the Board of Directors
                        approved to increase the amount of compensation  paid to
                        ADP  Management   from  $20,000  to  $40,000  per  month
                        effective  October  1,  2004.  The  Board  of  Directors
                        approved this  compensation  increase with David Derrick
                        and James Dalton abstaining.



--------------------------------------------------------------------------------
                                                                              35


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


12.  Related            During the year ended September 30, 2005 and 2004, under
     Party              the consulting and line-of-credit arrangements described
     Transactions       above,  the Company  recorded  compensation  expense and
     Continued          other  reimbursable  expenses  incurred in behalf of the
                        Company of $752,708 and $817,583 respectively.

                        License Agreement
                        During the year ended  September  30, 2003,  the Company
                        entered  into  a  License   Agreement  with   Matsushita
                        Electric Works,  Ltd., a Japanese  corporation  ("MEW").
                        Under the License  Agreement,  the Company granted MEW a
                        nontransferable,   worldwide,  exclusive  license  under
                        certain of the  Company's  patents to use,  manufacture,
                        have  manufactured,  market,  distribute  and  sell  the
                        Company's   one-button   emergency   wireless  telephone
                        device,  with and without global  positioning  satellite
                        technology.   In  connection   with  the  new  strategic
                        alliance   created  by  the  execution  of  the  License
                        Agreement,  MEW also  made an equity  investment  in the
                        Company.  MEW  purchased  1,000,000  shares  of Series B
                        Preferred  Stock  at a price  of  $3.00  per  share.  In
                        conjunction  with  the sale of the  Series  B  Preferred
                        Stock,  and  as an  indication  of the  parties'  mutual
                        interest in a long-term  relationship,  the Company also
                        granted  MEW a warrant to purchase  1,000,000  shares of
                        common  stock at a price of $3.00 per share.  During the
                        fiscal  year  ended  September  30,  2005 and 2004,  the
                        Company  paid MEW $0 and  $292,796  for GPS products and
                        related services.

13.  Income Taxes       For the years ended  September  30,  2005 and 2004,  the
                        Company incurred net operating losses of approximately $
                        10,984,000 and  $5,051,000 for income tax purposes.  The
                        amount of and ultimate  realization of the benefits from
                        the net operating losses is dependent, in part, upon the
                        tax laws in effect,  the Company's future earnings,  and
                        other  future  events,  the  effects of which  cannot be
                        determined.  The  Company  has  established  a valuation
                        allowance for all deferred  income tax assets not offset
                        by   deferred   income  tax   liabilities   due  to  the
                        uncertainty of their realization.  Accordingly, there is
                        no  benefit  for  income   taxes  in  the   accompanying
                        consolidated statements of operations.


--------------------------------------------------------------------------------
                                                                              36


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


13.  Income  Taxes      At  September  30, 2005,  the Company has net  operating
     Continued          loss  carryforwards  available to offset future  taxable
                        income of approximately  $37,239,000 which will begin to
                        expire in 2018.  The  utilization  of the net  operating
                        loss  carryforwards  is  dependent  upon the tax laws in
                        effect at the time the net operating loss  carryforwards
                        can be  utilized.  The Internal  Revenue  Code  contains
                        provisions   that  likely  could  reduce  or  limit  the
                        availability and utilization of these net operating loss
                        carryforwards.  For example,  limitations are imposed on
                        the utilization of net operating loss  carryforwards  if
                        certain  ownership changes have taken place or will take
                        place.  Due  to the  frequency  of  equity  transactions
                        within  the  Company,  it is likely  that the use of net
                        operating  loss  carry  forwards  will be  limited.  The
                        Company will  perform an analysis to  determine  whether
                        any such  limitations have occurred as the net operating
                        losses are utilized.

                        Deferred  income  taxes  are  determined  based  on  the
                        estimated  future  effects of  differences  between  the
                        financial  statement and income tax  reporting  bases of
                        assets and liabilities given the provisions of currently
                        enacted  tax laws and the tax  rates  expected  to be in
                        place.

                        The  deferred  income  tax  assets   (liabilities)   are
                        comprised of the following at September 30, 2005:


                                                                  2005

                        Net operating loss carryforwards          $  13,890,000
                        Depreciation and reserves                        75,000
                        Accruals and reserves                            19,000
                        Impairment of goodwill                          460,000
                        Valuation allowance                         (14,444,000)
                                                                  -------------
                                                                  $           -
                                                                  -------------



--------------------------------------------------------------------------------
                                                                              37


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


13.  Income Taxes       Reconciliations  between the benefit for income taxes at
     Continued          the federal  statutory income tax rate and the Company's
                        benefit for income  taxes for the years ended  September
                        30, 2005 and 2004 are as follows:

                                                   2005             2004
                                            ----------------------------------

Federal income tax benefit at
  statutory rate                             $      3,740,000  $    2,180,000
State income tax benefit, net of
  federal income tax effect                           550,000         321,000
Other                                                  30,000          30,000
Change in valuation allowance                      (4,320,000)     (2,531,000)
                                            ----------------------------------

Benefit for income taxes                     $              -  $            -
                                            ----------------------------------


14.  Commitment         Legal Matters
     and                On October  28,  2004,  a  complaint  was filed  against
     Contingencies      SecureAlert,  Inc.,  a wholly  owned  subsidiary  of the
                        Company,  by the  OHC  Liquidation  Trust  ("OHC").  OHC
                        claimed that Oakwood  Homes made  preferential  payments
                        totaling   approximately   six  hundred  nine   thousand
                        ($609,000) to SecureAlert,  a wholly owned subsidiary of
                        RemoteMDx,  during the 90 days  preceding its filing for
                        bankruptcy.  In August 2005,  the lawsuit was settled in
                        the amount of $27,000. Subsequent to September 30, 2005,
                        $18,000 was paid to settle the remaining balance owed to
                        OHC

                        Lease Obligations
                        In March 2005, the Company  entered into an agreement to
                        lease a facility under a noncancellable  operating lease
                        that expires in November  2008.  Future  minimum  rental
                        payments under the non-cancelable  operating lease as of
                        September 30, 2005 are approximately as follows:

                         Year Ending September 30:                  Amount
                        -------------------------             ------------------
                          2006                                 $         135,263
                          2007                                           138,992
                          2008                                           142,721
                          2009                                            24,201
                                                              ------------------
                                                               $         441,177
                                                              ==================

--------------------------------------------------------------------------------
                                                                              38


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


14.  Commitment         Rent expense  related to this  non-cancelable  operating
     and                lease  was  approximately  $45,000  and $0 for the years
     Contingencies      ended September 30, 2005 and 2004, respectively.
     Continued
                        In  addition,  the  Company's  wholly-owned  subsidiary,
                        Volu-Sol Reagents Corporation, leases a facility under a
                        non-cancelable  operating lease that expires in November
                        2010.   Future   minimum   rental   payments  under  the
                        non-cancelable  operating lease as of September 30, 2005
                        are approximately as follows:

                         Year Ending September 30:                  Amount
                        -------------------------             ------------------
                          2006                                 $         68,650
                          2007                                           70,206
                          2008                                           72,020
                          2009                                           73,884
                          2010                                           75,796
                                                              ------------------
                                                               $        360,556
                                                              ==================

                        Rent expense  related to this  non-cancelable  operating
                        lease was  approximately  $68,000  and  $75,000  for the
                        years ended September 30, 2005 and 2004 respectively.

                        Indemnification Agreements
                        In  November  2001,  the  Company's  Board of  Directors
                        agreed that the Company  would  indemnify  officers  and
                        directors  of the  Company  against  personal  liability
                        incurred by them in the conduct of their  duties for the
                        Company.  In the  event  that  any of  the  officers  or
                        directors  of the  Company are sued or claims or actions
                        are  brought   against  them  in  connection   with  the
                        performance  of  their  duties  and  the  individual  is
                        required to pay an amount,  the Company will immediately
                        repay the obligation  together with interest  thereon at
                        the greater of 10 percent per year or the interest  rate
                        of any funds borrowed by the individual to satisfy their
                        liability.

                        Cellular Access Agreement
                        During the year ended  September  30, 2004,  the Company
                        cancelled   its  agreement   with  the  prior   cellular
                        organization  and entered into an  agreement  with a new
                        cellular company.  The costs to the Company during years
                        ended  September  30,  2005 and  2004 was  approximately
                        $103,900 and $140,200 respectively.

--------------------------------------------------------------------------------
                                                                              39


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

15.  Segment            The  Company is  organized  into two  business  segments
     Information        based primarily on the nature of the Company's products.
                        The  Company's   Reagents  segment  is  engaged  in  the
                        business  of   manufacturing   and   marketing   medical
                        diagnostic  stains,  solutions and related  equipment to
                        hospitals  and  medical   testing  labs.  The  Company's
                        SecureAlert  segment  is  engaged  in  the  business  of
                        developing,  distributing and marketing mobile emergency
                        and  personal   security  systems  to  distributors  and
                        consumers, and tracking devices for monitoring offenders
                        in the criminal justice system. Other (unallocated) loss
                        consists of research and development,  selling,  general
                        and  administrative  expenses  related to the  Company's
                        corporate activities, including remote health monitoring
                        and market and business development activities.

                        The accounting policies of the business segments are the
                        same as those  described  in the summary of  significant
                        accounting policies (see Note 2).

                        The   following   table   reflects   certain   financial
                        information relating to each reportable segment for each
                        of the years ended September 30, 2005 and 2004:

                                                  2005             2004
                                            ----------------------------------

Net sales:
        SecureAlert                                   289,236         556,338
        Reagents                                      572,632         561,182
                                            ----------------------------------

                                             $        861,868  $    1,117,520
                                            ----------------------------------

Operating income (loss):
     SecureAlert                             $     (3,631,458) $   (2,812,314)
     Reagents                                          36,455          84,893
     Other (unallocated)                           (5,363,894)    ( 3,036,126)
                                            ----------------------------------

                                             $     (8,958,897) $   (5,763,547)
                                            ----------------------------------

Depreciation and amortization:
     SecureAlert                             $         21,144  $      140,000
     Reagents                                           1,397           1,149
     Other (unallocated)                               14,091          15,454
                                            ----------------------------------

                                             $         36,632  $      156,603
                                            ----------------------------------

--------------------------------------------------------------------------------
                                                                              40


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


15.  Segment
     Information
     Continued                                  2005             2004
                                            ----------------------------------

Capital expenditures:
     SecureAlert                             $        310,770  $        2,229
     Reagents                                             960         100,511
     Other (unallocated)                                    -               -
                                            ----------------------------------

                                             $        311,730  $      102,740
                                            ----------------------------------

Interest income:
     SecureAlert                             $          -      $            -
     Reagents                                           -                   -
     Other (unallocated)                                1,720           7,077
                                            ----------------------------------

                                             $          1,720  $        7,077
                                            ----------------------------------

Interest expense:
     SecureAlert                             $         13,540  $        8,077
     Reagents                                               -               -
     Other (unallocated)                            1,435,196         809,502
                                            ----------------------------------

                                             $      1,448,736  $      817,579
                                            ----------------------------------

Identifiable assets:

     SecureAlert                             $        676,867
     Reagents                                         267,309
     Other (unallocated)                              252,268
                                            ------------------

                                             $      1,196,444
                                            ------------------


--------------------------------------------------------------------------------
                                                                              41


<PAGE>
                                                                 RemoteMDx, Inc.
                                      Notes to Consolidated Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------




16. Subsequent          Subsequent  to  September  30,  2005,  the  Company  has
     Events             entered into several agreements:

                           a)      The  Board  of  Directors  has  approved  the
                                   private placement with a corporation of up to
                                   1,050,000 shares of the Company's  restricted
                                   common  stock at a price of $0.70 per  share.
                                   Subsequent  to  year  end,  the  Company  has
                                   raised $700,000.
                           b)      The Company  entered into  convertible  notes
                                   with  several  entities  totaling   $575,000.
                                   These notes bear interest of 18%. Three years
                                   of prepaid interest has been paid through the
                                   issuance  of  575,000  shares  of  restricted
                                   common stock  valued at $621,000.  The holder
                                   of the note may  convert  any  portion of the
                                   outstanding  balance  at the  lower of 50% of
                                   the fair value of the Company's  common stock
                                   or $0.60 per share.  These  convertible notes
                                   payable  have  conversion  features  that are
                                   considered    embedded    derivatives;    and
                                   therefore,    are   subject   to   derivative
                                   accounting. The estimated derivative value is
                                   approximately $972,000.
                           c)      At  September  30,  2005,   the  Company  had
                                   $504,900   of    subscription    receivables.
                                   Subsequent  to year  end,  these  funds  were
                                   received by the Company.
                           d)      The Company issued 554,530 shares pursuant to
                                   consulting agreements.
                           e)      The Company issued 6,886,649 shares of common
                                   stock from conversions of preferred stock.


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                                                                              42