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, 2003

[ ]      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.)

5095 West 2100 South
Salt Lake City, Utah                                              84120
(Address of principal executive offices)                        (Zip Code)

Issuer's telephone number: (801) 974-9474

Securities registered under                       Name of each exchange on which
Section 12(b) of the Act:                                 registered:
        None                                                  None

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. [X]

Issuer's revenues for the fiscal year ended September 30, 2003 were $4,163,526.

Registrant's  common  stock has not traded and there is no market for the common
stock at this time.  Based solely on the price per share of $1.50 paid in recent
sales of shares by the  registrant in the past 60 days, it is estimated that the
aggregate  market  value of the  voting and  non-voting  common  equity  held by
non-affiliates is approximately $10,437,090.

There were 25,309,252 shares of common stock of the registrant outstanding as of
January 9, 2004.

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


                                       1
<PAGE>
                                TABLE OF CONTENTS

                                                                           Page
                                                                            No.
                                                                           ----
PART I.

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

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

Item 3.    Legal Proceedings..................................................11

Item 4.    Intentionally Omitted

PART II.

Item 5.    Market for Common Equity and Related Stockholder Matters...........11

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

Item 7.    Financial Statements...............................................30

Item 8.    Changes In and Disagreement With Accountants on Accounting
           and Financial Disclosure...........................................30

Item 8A. Controls and Procedures..............................................31

PART III

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange Act..................31

Item 10.   Executive Compensation.............................................34

Item 11.   Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters.........................35

Item 12.   Certain Relationships and Related Transactions.....................37

Item 13.   Exhibits and Reports on Form 8-K...................................39

Item 14.   Principal Accountant Fees and Services.............................40

Signatures ...................................................................41


                                       2
<PAGE>
                                     PART I

Item 1.    Description of Business


General


RemoteMDx is a technology-based remote personal safety, medical, health
monitoring and diagnostic services company. When used in this report, the terms
"RemoteMDx," "Remote" and the "Company" refer to RemoteMDx, Inc. and its
subsidiaries, unless the context requires otherwise.

We specialize in creating solutions for real-time monitoring of personal safety,
security, and health needs. We are developing technologies and systems that
provide personal security and health monitoring products and services. Our
products and services are designed to meet the needs of a growing elderly
population. The RemoteMDx(TM) family of products and services manufactured by
our equity and technology partner Matsushita Electric Works Ltd. ("MEW")
features wireless products that are among the first to utilize global
positioning satellite ("GPS") technology and unobtrusive vital sign monitoring
in conjunction with a monitoring center that can locate persons in distress and
dispatch the closest emergency service to their location.

Although our products are subject to limitations that are peculiar to the
technologies they incorporate, we expect this technology and service to
revolutionize healthcare; they allow care providers immediate response and in
some cases, advance notice of an acute medical event. 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.

We derive our revenues from the following sources:

o        Consumer Electronics - we sell consumer electronics, including security
         and personal emergency response system ("PERS") devices to a variety of
         channels.

o        Medical Diagnostic Stains -we sell medical diagnostic stains and
         equipment to laboratories throughout the United States.

o        Monitoring Activation - we lease our MobilePAL(TM) devices as part of a
         monitoring contract, with prepaid activation charges.

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

o        Royalties - we derive royalty revenues from a license agreement with
         MEW and from sales of telematics products and services under marketing
         agreements.

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 and health monitoring industry. 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. With our decision to refocus our business and
product development efforts on the mobile health and emergency monitoring
industry which previously comprised a smaller part of our business, we
outsourced our distribution of consumer electronics and automotive telematics
products during 2003 and are in the process of establishing and will expect to
establish and manage our primary business from our sales and marketing office in
Salt Lake City.

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 distributing consumer
electronics products.


                                       3
<PAGE>

Our primary founders and owners are David Derrick ("Derrick") and James Dalton
("Dalton"). After examining other potential markets, in April 2000, we entered a
research agreement with Battelle Memorial Institute ("Battelle"), a large
research and development firm, to assist us to develop our technology for remote
monitoring and personal medical diagnostics.

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, an innovator in telematic and GPS
technologies. By July of 2002 this collaboration culminated in the development
of a monitoring center jointly operated with Aradiant Corp ("Aradiant"). This
service center is one of the largest in the United States with over 600
operators, 24 hours a day, seven days a week coverage, and the capacity to
handle up to 200 million calls per year. This center enables our PAL Services
Network to offer location, concierge services, medical triage advice, emergency
response, call switching and health monitoring to our subscribers.

In April 2002, we entered into a manufacturing and product development agreement
with MEW, one of the largest corporations in the world. 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 are now marketing products that combine cellular technology, including our
patented single-button emergency feature, and GPS, allowing the two systems to
work simultaneously in the single unit.

We specialize in developing technologies and systems that provide personal
security and health monitoring products and services that meet the needs of a
growing elderly population. Our RemoteMDx family of products and services,
primarily manufactured by MEW, features wireless products that are among the
first to utilize GPS technology and unobtrusive vital sign monitoring in
conjunction with a world-class monitoring center that can locate persons in
distress and dispatch the closest emergency service to their location. Our
products are subject to basic limitations on cellular and GPS technology.
Cellular coverage is not uniform throughout the United States and other
countries and calls can be dropped or fail to connect. GPS technology relies on
line-of-sight access to signals from satellites; those signals are used to
provide the location information to the monitoring center. GPS is less effective
and sometimes not effective at all when the user is located in the lower floors
of high-rise buildings, below ground or in other places that prevent
communication with the required satellite signals. However, despite these
limitations we believe that the combination of these two technologies into a
single easy-to-use device is a powerful tool for providing personal security and
safety, particularly to our targeted elderly market.

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, 2003 were
approximately $4.2 million. We look to expand our distribution network of these
products and services by implementing a sales and marketing program developed
through market tests over the past year. In fiscal year 2003, approximately 6%
of our revenues were derived from the sale of PAL products and services. We
expect to see this percentage increase dramatically as we pursue our revised
business plan to emphasize this product line. This sales and marketing plan is
focused on duplicating the success of the homebound PERS industry. This industry
is 25 years old and markets a service through the medical channel for the
elderly who live alone and who suffer from an acute or chronic illness that
requires them to be homebound. The service allows them to contact a monitoring
center whenever in need of help, in case of a medical emergency or a fall from
which they cannot get up.

We have developed and are beginning to implement a direct-to-consumer marketing
strategy. This campaign will employ a variety of media including radio, print,
online marketing and direct mail to reach our target customers. The marketing
campaign will be focused on driving leads to our call center and creating brand
awareness. Our target market is 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. In addition, published reports indicate that approximately
19 million suffer from coronary and congestive heart diseases and 18.2 million
suffer from one form or another of diabetes. In many cases we anticipate that
the senior customer will not personally make the purchase of our product and
service menu for himself or herself. Instead, we believe it is important to
target our campaign to the children or caregivers of these seniors. Our primary
target market is the children, friends and spouses of the homebound senior who
will more than likely be female, since women are more likely to make decisions
regarding the care of their parents than men.


                                       4
<PAGE>

We believe that our planned direct-to-consumer marketing approach contains an
excellent mix of messages, implementing several media to reach our targeted
audience. By breaking up this marketing plan into phases we expect to be able to
closely monitor each channel and make any necessary adjustments at the lowest
possible cost to us. If we feel one channel is outperforming the other, we
believe this approach will allow us to push more resources to that channel and
move away from channels that are not performing to our standards. Full
implementation of this plan is dependent upon receiving additional capital;
however we can give no assurance that we will be successful in obtaining
additional capital.

To begin implementation of this marketing strategy, we have entered into
strategic marketing arrangements with Universal American Financial Corporation
(UAFC), Hanger Orthopedic Group, Inc. ("Hanger"), and ADT. UAFC is an insurance
company specializing on the senior market. Hanger is the largest and oldest
prosthetics company in the United States with approximately 600 stores in 42
states. ADT is the largest security company in the United States with
approximately 6 million customers in the United States.

Under our marketing plan, patients do not own our devices. The patient rents a
device on a month-to-month contract. The patient can terminate the service by
simply returning the device to us. We charge the patient a one-time activation
fee and a monthly monitoring fee for as long as the patient keeps the device. We
might also pay a monthly fee to the home healthcare agency for each contract
originating with that agency.

To further expand the viability of our distribution and marketing plan, we are
working with state Medicaid agencies and insurance companies, pursuing
reimbursement for our products and services. The MobilePAL product is
Medicaid-approved in Colorado 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 given that these efforts will
be successful.

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. We acquired SecureAlert and have
developed a technological base of products and services utilizing cellular and
GPS that now includes five patents issued, five patents pending, and four in the
process of being filed. There is no assurance that any or all of the
applications now pending or filed will result in the issuance of patents or that
the patents ultimately issued will include all of the claims now contained in
the applications.

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.
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. In the 911 emergency-only mode the device was
programmed with a MIN, which according to FCC regulations was required to be
routed to the Public Safety Access Point (PSAP) local to the cellular tower. In
the concierge mode, the device is programmed to call the PAL Services Center and
contains a standard cellular MIN; it operates like a normal cellular phone. This
design does not permit receiving incoming calls; the unit is only powered when
the user is testing it or using it to make an outbound emergency call or to
contact the call center. This results in a considerable savings on the power
requirements and allows for use of ordinary alkaline batteries as the power
supply for the device.

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.

                                       5
<PAGE>

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. GPS satellites are designed only to output a
continuous stream of identification, orbital parameters, and clock values. They
are not able to receive any signals from GPS receivers on the earth. The entire
calculation for determining location takes place within the GPS engine itself.
The effectiveness of GPS technology is limited by obstructions 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.

With the assistance of our manufacturers, we succeeded in resolving conflicts
and interference that typically result from the simultaneous use of cellular and
GPS technologies and we reduced the size of our GPS receiver from that of a back
pack to that of a small matchbox; these developments made us among the first
companies to offer a GPS unit incorporated into a handheld cell phone. The
GPS1000 includes a speakerphone that is sensitive enough for the PAL Services
Operator to hear a customer from within a quiet room. This change in hardware
allows for hands-free use of the device at any time.

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
RemoteMDx GPS2000. The GPS2000 has several advantages over the earlier versions.
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 that 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.

Use of a different power source in the GPS2000 increased talk time to two hours,
which is two to three times that of the earlier versions. The new batteries also
withstand greater temperature extremes, have reduced power leak rates, and do
not physically deteriorate like their alkaline equivalents. The enhanced
speakerphone on the GPS2000 allows for much clearer, better quality than the
GPS1000, making it more useful as a PERS device. A recent software improvement
corrected a problem that caused undesired levels of battery drain on the device.
We are completing the voluntary recall and replacement of a total of
approximately 200 units with the upgraded devices. The recalled devices can be
reprogrammed and sold as new devices after the upgrade.

Our most recent addition to the RemoteMDx product line is TravelPAL. Designed
with the same chip set as the speakerphone and GPS engine in the RemoteMDx GPS
2000, the TravelPAL has constant power supplied by a cord connected to a car's
power supply through the cigarette lighter or auxiliary power port. The device
sits on the car's dash and is always programmed in the "on" mode.

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. We do not anticipate that we would launch the GPS 3000 until sales
of the GPS 2000 have reached levels agreed to with our manufacturer.

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 telematics; the operator's computer screen must 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 service and also be able to guide emergency services to the caller's
location.

Our PAL Services Center is located in a facility owned and operated by a
division of Aradiant Corporation. Designed to handle several hundred million
calls per year, this center has full redundancy and security capabilities. The
hardware is maintained around the clock and operators are able to field any
anticipated surges in service. We own all telephony hardware required to service
the PAL Services customers at this center and maintain the hardware jointly with
Aradiant.

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

                                       6
<PAGE>

     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 stores customer's critical personal medical
         information and communicates your 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, kidnapped 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 in
         order to see how the subscriber is feeling that particular day

     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

MobilePAL Development

The next generation of MobilePAL products is anticipated to revolutionize the
PERS market. This next generation product further miniaturizes the technology
making MobilePAL a wearable device (such as a watch). While the capabilities of
MobilePAL will grow with each development cycle, all models of future
generations of MobilePAL will have the following features:

     o   Wearable watch 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
         Access to PAL Services Center.

     o   Dual band cellular technology utilizing GSM and AMPS.

     o   Rechargeable units.

We have designed 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.


                                       7
<PAGE>

The research and development of this next generation of MobilePAL is currently
underway. In addition to GPS capability, speakerphone and other features found
in our earlier PAL products, this watch-size product will include the following
features:

     o   Watch with emergency button and fall detection

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

     o   Cradle to recharge companion device

     o   Dual band AMPS and GSM

     o   Alarm when not in proximity of base unit

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 designed to monitor 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.

Other WatchPAL products will focus on monitoring disease indications such as
heart disease.

Intellectual Property

We own five 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 assurance that the applications
will be granted or that they will, if granted, contain all of the claims
currently included.
<TABLE>
<CAPTION>

                                                         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                                                                      Awaiting Office
Response System Wristwatch                                   09/651,523               8/29/2000               Action

Emergency Phone with Single-Button Activation                09/538,364               3/29/2000           Awaiting Office
                                                                                                              Action

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

Emergency Phone with Single-Button                                                                        Awaiting Office
Activation                                                PCT/US0109871               3/28/2001               Action

Emergency Medicine and Acute Care                           VOL 0001 MA               8/13/2001           Awaiting Office
Diagnostic Input Method and System                                                                            Action
</TABLE>

                                       8
<PAGE>

Strategic Relationships

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

Battelle Memorial Institute

Our first significant strategic alliance was forged in 2000 with Battelle, a
not-for-profit research organization located in Columbus, Ohio, initially for
assistance in the research and development of remote health monitoring and
diagnostic systems. We selected Battelle because of its extensive medical
diagnostic experience, as well as its experience in electronic information
capture and transfer technologies. This relationship was key to the development
of the WatchPAL prototype and related technologies.

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. In January 2004, MEI announced its intent to
increase its ownership of the outstanding shares of MEW from approximately 32%
to more than 51%. According to its published reports filed with the Securities
and Exchange Commission, MEI's revenues in 2003 were approximately $61 billion.
The Matsushita Group of companies is recognized as one of the world's largest
corporate groups.

We entered into an alliance with MEW in April 2002. At that time, MEW invested
$3,000,000 and acquired shares of our Series B preferred stock. In addition, we
entered into a license agreement with MEW at that time under which MEW has the
right to use our patents in consideration of payment of royalties. The agreement
also names MEW as our preferred manufacturer and RemoteMDx as MEW's preferred
service provider worldwide. Under our agreement with MEW, MEW has the right to
appoint a member to our board of directors, which to date it has declined to
exercise.

Royal Philips Electronics

According to its published reports, Philips is the third largest consumer
electronics manufacturer in the world with revenues in the United States of
approximately $2 billion and worldwide revenues in excess of $35 billion. As the
owner of the Magnavox(R) brand and the creator of some of the security products
we market through SecureAlert, Philips has played a supportive role in the early
development of our security products. We pay Philips a royalty of 4.5% on the
cost of those items we market under the Magnavox brand. Philips also provides
quality control and logistic services for those products, providing us with
greater resources in that area than normally would be found in a company of our
size.

Aradiant Corp.

Aradiant, formerly known as the National Dispatch Center (NDC), is one of the
largest communications messaging centers in the United States, handling in
excess of 180,000,000 calls per year and generating over $40 million in
revenues. It is estimated that Aradiant controls approximately 85% of the
communications messaging market. Designed by John MacLeod, a former NASA
executive, Aradiant has numerous back-up and redundancy systems from two
separate monitoring centers, thus insuring constant monitoring no matter what
catastrophe may happen.

The alliance between Aradiant and the Company has been forged in the unified
development of a monitoring center specializing in telematics (the ability to
locate the caller). We are enthusiastic about this alliance because it gives us
the capability to move forward in developing the PAL Services Network without
incurring the infrastructure costs of developing, equipping, staffing and
operating our own monitoring center at this time.

Competition

We have identified several companies that 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 will likely rise 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.


                                       9
<PAGE>

We believe our primary competitors are as follows:

     o   Lifeline Systems, Inc. - 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   Card Guard Scientific Survival Ltd. - This company was originally
         organized in 1990 and has been focused on developing telemedicine
         systems using state-of-the-art technology to provide a solution for
         healthcare service providers seeking to deliver high-quality care in
         face of rising costs and declining budgets for healthcare services. Two
         recent acquisitions now provide Card Guard access to the cardiac
         telemedicine monitoring market. Unlike us, Card Guard appears to be
         narrowly focused on cardiac patient follow-up and providing information
         to the patient's cardiologist. Card Guard patients must be able to take
         their own vitals and then upload the information to the monitoring
         center. These relays are not as sophisticated as our real-time
         monitoring and monitoring center communication.

     o   Digital Angel Corporation - Digital Angel claims to enable collection,
         organization, analysis, warehousing, and dissemination of information
         for a wide variety of customers, including commercial operations,
         governments, and individual consumers worldwide. Digital Angel
         technology offers a watch-sized device, accompanied by a pager-sized
         companion that is equipped with GPS, heart rate and temperature
         monitoring, fall detection, and a "911" panic button. Patient location
         is available through a web-enabled computer or wireless device in real
         time. By comparison, our products offer voice communication, which
         results in dramatically increased speed of care. Digital Angel relies
         heavily on the user to locate the person in need instead of trained
         emergency personnel dispatched by a monitoring center like ours. In
         addition, the current version of the Digital Angel watch device and
         pager companion is large and bulky in comparison to the product we are
         now developing.

     o   SHL Telemedicine Ltd. - SHL Telemedicine was originally organized in
         1989 under the name Shahal and was primarily in the business of
         Personal Emergency Response Systems until SHL Telemedicine was formed
         in late 1997. Since 1997, SHL Telemedicine has specialized in
         developing and marketing advanced personal telemedicine systems as well
         as providing medical monitoring center services to subscribers. The
         subscriber transmits medical data via telephone line to a 24-hour
         medical monitoring center, which provides immediate guidance and
         consultation based on that data and the patient's medical history. In
         contrast to our business, SHL's primary focus is on cardiac patient
         follow-up as well as patients with chronic obstructive pulmonary
         disease and in home PERS that is combined with a chronic disease
         monitor. SHL's device requires the patient to be near a phone in an
         emergency situation and then be able to dial a phone and then hold the
         device to the phone to transmit the vital sign information. By
         comparison, our products transmit information in real time and
         wirelessly at the touch of a single red button.

Dependence on Major Customers

During the fiscal year 2003, two customers accounted for more than 10% of sales.
Fleetwood Homes accounted for approximately 35% ($1,459,000) of sales and Secure
Alert Entertainment which accounted for approximately 13% ($559,000). In January
2003, we outsourced the distribution of products purchased by these customers to
SecureAlert Entertainment, LLC ("SAE"), an entity owned and controlled by former
SecureAlert employees and officers. Our agreement with SAE expires December 31,
2003 and we have no intention of extending or renewing it. The expiration of the
SAE agreement will result in lower revenues and limit the cash available to grow
our business and to achieve profitability. We have no ongoing arrangements or
contracts with these customers that would require them to purchase a specific
amount of product from us.

Dependence on Major Suppliers

We purchase a significant amount of inventory of consumer electronics products
annually from Philips. In addition, under our agreement with MEW, we purchase
most of our mobile and cellular device products from MEW. During the fall of
2001, we entered into a cellular switching access agreement under which we

                                       10
<PAGE>

purchase substantially all of our cellular access requirements. That agreement
expires in 2004; although we are in the process of negotiating an extension of
the agreement, there is no assurance we will be successful in extending or
renewing the agreement. If any of these significant suppliers were to cease
providing product or services to us or if we are unable to extend the agreements
beyond their current terms 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.

Employees

As of September 30, 2003, the Company had 12 full time employees. None of our
employees is represented by a labor union or subject to a collective bargaining
agreement. We have never experienced a work stoppage and we believe that our
relations with employees are good.

Item 2.  Description of Property

Our 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 Reagents. The lease expires in November
2005 with monthly base rent of $5,550, subject to annual adjustments according
to changes in the Consumer Price Index. During fiscal year 2003 we closed our
offices in Knoxville, Tennessee, which had been the headquarters of our
SecureAlert subsidiary.

We believe the facilities described above are adequate to accommodate presently
expected growth and needs of our operations. As we continue to grow, additional
facilities or the expansion of existing facilities will likely be required.

Item 3.  Legal Proceedings

We are not a party to, and none of our property is subject to, any pending or
threatened legal proceedings, which, in the opinion of management, are likely to
have a material adverse impact on our financial condition, results of operations
or cash flows. 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.

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

Market. There is presently no market for the common stock and there is no
assurance that a market will ever develop. Our securities are not listed for
trading on any exchange and there can be no assurance that we will ever be able
to satisfy the listing criteria or that an application for inclusion or listing
on the Nasdaq Stock Market or any other securities exchange would be accepted.

Holders. As of December 12, 2003, there were approximately 1,136 holders of
record of the common stock and approximately 25,309,252 shares of common stock
outstanding; we also have 28,311 shares of Series A preferred stock outstanding,
convertible into a minimum of approximately 10,475,155 shares of common stock,
as well as 1,835,824 shares of Series B preferred stock outstanding that are
convertible into 1,835,824 shares of common stock. We also have granted options
and warrants for the purchase of 7,219,043shares of common stock. As discussed
elsewhere in this report, we may be required to issue additional shares of
preferred stock to pay accrued dividends or to comply with anti-dilution
adjustments to the conversion rights of the preferred shareholders.

Dividends. Since incorporation, we have not declared any dividend on the 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
stock at our option. To date all such dividends have been paid by issuance of
preferred stock. 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.

                                       11
<PAGE>

In addition to shares initially issued to Biomune shareholders at the time of
the spin-off in October 1997, we agreed with the NASD to issue additional shares
of common stock in connection the distribution to those Biomune shareholders of
record on February 11, 1998. We have issued additional shares of common stock
under this agreement from time to time since February 1998. No shares were
issued under this agreement in fiscal years 2002 or 2003.

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 past two fiscal years without registration under the
Securities Act.

Fiscal Year 2002

During the year ended September 30, 2002, we issued 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   32,000 redeemable common shares were issued for cash proceeds of
         $96,000

     o   35,735 shares were exchanged for debt and accrued interest of $107,314

     o   40,000 shares were issued in connection with the redemption and
         exchange of redeemable common stock

     o   1,712,844 shares were issued upon exercise of options for cash and for
         reduction in related-party debt

     o   145,000 shares were issued in connection with discounts related to
         outstanding debt

     o   303,885 shares were issued for services rendered or to be rendered

     o   2,537,486 shares were issued upon the conversion of 6,872 shares of
         Series A Preferred Stock

We also sold 1,135,823 shares of voting convertible Series B preferred stock,
convertible on a one-for-one share basis into common stock.

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 or 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.

Fiscal Year 2003

During the year ended September 30, 2003, we issued 11,760,422 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   2,038,446 shares were issued for cash proceeds of $1,258,700

     o   302,668 shares were exchanged for debt and accrued interest of $442,750

     o   15,000 shares were issued in connection with financing transactions as
         inducement to provide financing, these shares are redeemable at the
         option of the holder at $3.00 per share

     o   135,701 shares were issued upon exercise of options in consideration of
         reduction in related-party debt

     o   517,256 shares were issued for services

                                       12
<PAGE>

     o   652,352 shares were issued upon the conversion of 2,097 shares of
         Series A Preferred Stock

     o   8,113,999 shares were issued to ADP Management and other creditors in
         connection with the debt restructuring plan implemented during 2003
         (see Item 6. Management's Discussion and Analysis or Plan of Operation,
         "Recent Developments")

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 or 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.

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.

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,
                                                     2003              2002
                                              ----------------------------------
Net sales                                      $   4,163,526     $   11,013,147

Cost of goods sold                                 3,702,003          9,558,264
                                              ----------------------------------
       Gross profit                                  461,523          1,454,883

Research and development expenses                    113,428            514,329

Impairment of goodwill and inventory               2,248,000          4,314,987

Selling, general, and administrative expenses      5,151,860         26,847,767
                                              ----------------------------------

       Loss from operations                       (7,051,765)       (30,222,200)
                                              ----------------------------------
Other income (expenses):

      Interest and other income                        1,959              9,987

      Interest expense                              (839,531)        (3,263,653)
                                              ----------------------------------
       Net loss                                $  (7,889,337)    $  (33,475,866)
                                              ==================================

Fiscal Year Ended September 30, 2003 Compared to Fiscal Year Ended September 30,
2002

Results of Operations

Net Sales

In the fiscal year ended September 30, 2003, we had net sales of $4,163,526
compared to net sales of $11,013,147 for the fiscal year ended September 30,
2002, a decrease of $6,849,621. This decrease is due primarily to the
outsourcing of distribution of our consumer electronics and automotive
telematics products beginning in January 2003. During the year ended September
30, 2003, sales at SecureAlert provided net sales of $3,611,746, compared to net
sales of $10,470,970 for September 30, 2002. Sales of consumer electronics
products provided approximately 89% of our total net sales in 2002 and
approximately 78% of total net sales in fiscal year 2003. Reagents net sales for
the fiscal year ended September 30, 2003 were $551,780 compared to $542,177 in
fiscal year 2002, an increase of approximately 2%. As our focus continues to
shift to our remote health monitoring and diagnostics business, we anticipate
that Reagents' sales will decrease in the future as a percentage of total sales.


                                       13
<PAGE>

Cost of Goods Sold

In the fiscal year ended September 30, 2003, cost of goods sold totaled
$3,702,003, compared to cost of goods sold in 2002 of $9,558,264. This decrease
is due to the outsourcing of distribution of our consumer electronics and
automotive telematics products during the first and second quarters of fiscal
2003. SecureAlert's cost of goods sold totaled $3,370,968, or 81% of its net
sales in 2003, compared to $9,210,535, or 88% for September 30, 2002. Reagents'
cost of goods sold totaled $331,035 in 2003, compared to $347,729 for the year
ended September 30, 2002, a decrease of $16,694 or approximately 5% from the
prior fiscal year. The decrease in overall margins of the Company from 13% in
fiscal year 2002 to 11% in fiscal year 2003 related primarily to a write-off of
$116,000 of capitalized tooling costs charged by a supplier from which the
Company no longer purchases. The effect of the write-off on gross margin was
partially reduced by Reagents' gross margin increase for the fiscal year ended
September 30, 2003 over 2002 because of reduction of direct labor costs.

Research and Development Expenses

In the fiscal year ended September 30, 2003, we incurred research and
development expenses of $113,428, compared to similar expenses in 2002 totaling
$514,329. The decrease was primarily due to terminating the SecureAlert
Telematics agreement. We anticipate higher research and development expenses in
the future due to ongoing research and development related to our WatchPAL
products.

Selling, General and Administrative Expenses

In the fiscal year ended September 30, 2003, our selling, general and
administrative expenses totaled $5,151,860, compared to $26,847,767 for the
fiscal year ended September 30, 2002. This decrease relates primarily to a
decrease 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, based on the
estimated value of $3.00 per share in fiscal year 2002 compared to fiscal year
2003 in which stock prices ranged from $.54 per share to $3.00 per share. The
high stock compensation in fiscal year 2002 primarily related to expenses
incurred to ADP Management for consulting and financing services. In fiscal year
2002 these non-cash expense items totaled $20,326,882, compared to $2,080,338 in
fiscal year 2003, a reduction of approximately 90%. In addition to the reduction
of expenses related to consulting and financing services, the following expenses
decreased by the indicated amounts from the prior year due to the outsourcing of
distribution of the Company's consumer electronics products: advertising
($418,700), legal ($537,922), payroll ($607,628), and travel ($491,808).

Interest Income and Expense

In the fiscal year ended September 30, 2003, interest expense was $839,531,
compared to $3,263,653 in fiscal year 2002. In fiscal year 2002 this amount
consisted primarily of expense allocated to interest from non-cash consideration
(including preferred stock and stock purchase options) issued in lieu of cash to
reduce or repay debt to ADP and to third parties. We had interest income of
$1,099 and other income of $860 during fiscal year 2003, compared to interest
income of $5,562 and other income of $4,425 during fiscal year 2002.

Net Loss

We had a net loss in the year ended September 30, 2003 totaling $7,889,337,
compared to a net loss of $33,475,866 in fiscal year 2002. The decrease in net
loss in fiscal year 2003 was due primarily to the elimination of certain
stock-based consulting and financing compensation which occurred in fiscal year
2002. In addition the Company recognized impairment in goodwill of $2,248,000 in
fiscal year 2003 compared an impairment of $4,207,045 in 2003.

Liquidity and Capital Resources

September 30, 2003

We have not historically financed operations entirely from cash flows from
operating activities. During the year ended September 30, 2003 we supplemented
cash flows with borrowings from a related party and the sale of equity
securities.


                                       14
<PAGE>

At September 30, 2003 we had cash of $136,894, compared to cash of $51,390 at
September 30, 2002. We had a working capital deficit of $1,826,996, compared to
a working capital deficit of $5,150,881 at September 30, 2002. The decrease in
working capital deficit is the result of the debt restructuring in the third
quarter of fiscal year 2003 and decreasing operational expenses of approximately
$2,100,000 from outsourcing consumer electronics.

During fiscal year 2003, our operating activities used cash of $2,371,811,
compared to $7,382,894 cash used in 2002.

Investing activities for the year ended September 30, 2003 used cash of $2,345,
compared to $101,118 of cash used by investing activities in the year ended
September 30, 2002. Cash used in 2003 was expended primarily for property and
equipment purchases.

Financing activities for the year ended September 30, 2003 provided $2,459,660
of net cash compared to $7,475,425 of net cash provided from those activities in
the year ended September 30, 2002.

We had net payments of $704,051 on a related-party line of credit and related
party advances and borrowed $1,915,908 from the issuance of short-term notes
payable during the year ended September 30, 2003. Net borrowings from our
related party line of credit provided cash of $1,860,224 in fiscal year 2002;
short-term borrowings during the year ended September 30, 2002 totaled
$4,249,695.

In fiscal year 2003, we incurred a net loss of $7,889,337 and negative cash
flows from operating activities of $2,371,811, compared to a net loss of
$33,475,866 and negative cash flow of $7,382,894 for the year ended September
30, 2002. As of September 30, 2003, our working capital deficit was $1,826,996
and we had a net tangible stockholders' deficit of $3,223,713 and accumulated
deficit of $63,073,294.

These factors, as well as the risk factors set out elsewhere in this report
raise substantial doubt about our 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, as well as raising capital from the sale
of our common stock and other debt and equity securities.

The Company has 1,013,851 redeemable common shares outstanding which have been
recorded at a value of $1,536,006. These shares represent a total future
potential obligation of the Company in the amount of $1,952,666. The shares
outstanding have all the rights of the Company's common stock and are redeemable
as detailed in the following table:

                                                              Redeemable
                                            Number of        Value (Aggregate
        Description of Obligation            Shares         Redemption Price)

    Common shares redeemable at $3.00         45,000              $135,000
    per share (1)

    Common shares redeemable at $3.00        110,000             $330,000
    per share (2)

    Common shares redeemable at $0.54        185,185             $100,000
    per share (3)

    Common shares redeemable at $2.00        483,333             $966,666
    per share (4)

    Common shares redeemable at $3.00        58,333              $175,000
    per share (5)

    Common shares redeemable at $1.50        100,000             $150,000
    per share (6)

    Common shares redeemable at $3.00        32,000              $96,000
    per share (7)

    Totals                                   1,013,851           $1,952,666

                                       15
<PAGE>

Notes:

     (1) The shares are redeemable after December 31, 2003.

     (2) The shares are redeemable after December 31, 2003.

     (3) The shares are redeemable after December 31, 2003 if the stock is not
         listed on a national exchange and if the shares have not been
         registered or otherwise made freely tradable.

     (4) The shares are redeemable at $2.00 per share after December 31, 2003;
         provided, however, that the put option may not be exercised if (a) the
         shares are registered or otherwise freely tradable without
         restrictions; (b) the company is listed on a national stock exchange,
         and (c) the closing market price for a period of at least 15
         consecutive trading days is $2.00 or higher.

     (5) The shares are redeemable at $3.00 per share after December 31, 2003
         because the closing market price of the common stock of RemoteMDx stock
         was not at least $3.00 per share on each of December 26th, 29th, and
         30th, 2003 and the shares are not listed on a national stock exchange.

     (6) The shares are redeemable at $1.50 per share after December 31, 2003 if
         the stock is not listed on a national stock exchange and is not trading
         at a price per share equal to or greater than $1.50.

     (7) The shares are redeemable at $3.00 per share after December 31, 2003.

The following chart includes principal balances and interest rates applicable to
borrowings as of September 30, 2002 and 2003. As a result of the restructuring
agreement and related transactions entered into from April through September
2003, the outstanding debt of the Company has been significantly reduced, as
follows:
<TABLE>
<CAPTION>

                                                                                   Amount Owing at        Amount
     Description of Obligation    Annual Interest Rate        Maturity Date            9/30/02       Owing at 9/30/03
<S>                               <C>                         <C>                  <C>               <C>
     Advances from ADP
     Management                      Prime Rate (1)               Demand           $    951,290      $      82,676 (2)

     Bank Line of Credit          LIBOR plus 2.15% (3)        March 15, 2003       $  1,100,000      $           0 (4)

     Bank Line of Credit             Prime plus .25%          March 11, 2004           N/A (5)       $     550,786

     Note to Shareholder (6)                 5%                   March 2004       $    250,000      $     134,235

     Note to Shareholder (6)                 5%                   March 2004       $    250,000      $     134,235

     Promissory Note                        12%                March 31, 2003      $    100,720      $           0 (7)

     Note to officer                        12%                    Demand          $     25,000      $           0 (8)

     Promissory Note                      22.5%             September 30, 2002     $    800,000      $           0 (7)

     Promissory Note                        18%             September 30, 2002     $    600,000      $     600,000 (9)

     Promissory Note                      14.5%               June 30, 2003        $    350,000      $           0 (7)

     Promissory Note                        10%              December 31, 2002     $    270,795      $           0

     Promissory Note                        18%              September 30, 2002    $    200,000      $           0 (10)

     Promissory Note                        18%              September 30, 2002    $    150,000      $           0 (11)

     Promissory Note                        18%              September 30, 2002    $     50,000      $           0 (12)

     Promissory Note                        18%              September 30, 2002    $     50,000      $      25,000

     Promissory Note                        12%                March 30, 2004      $          0      $     300,000 (13)

     Promissory Note                        12%                March 30, 2004      $          0      $     175,000

     Promissory Note                        20%                March 22, 2004             N/A        $      45,759

     Totals                                N/A                     N/A             $  5,147,805      $   2,047,691
</TABLE>


                                       16
<PAGE>

     (1)    The prime rate at September 30, 2002 was 4.75%.

     (2)    By agreement dated April 2, 2003, ADP Management Corporation ("ADP
            Management"), an entity owned and controlled by Derrick and Dalton,
            converted all amounts owing under this obligation as of June 30,
            2003 into common stock.

     (3)    At September 30, 2002 this rate was 4.75%.

     (4)    This note was refinanced by a note at another bank (next entry in
            table) subsequent to September 30, 2002.

     (5)    This note was entered into after September 30, 2002 to refinance the
            original bank line of credit described in the preceding entry on the
            table.

     (6)    A note entered into in December 2002 with monthly payments of
            $40,000, commencing March 31, 2003 until paid in full, replaced this
            note.

     (7)    This obligation was assumed by ADP Management in June 2003 and
            converted to common stock but the Company remains the guarantor of
            the note.

     (8)    The Company paid this obligation in full in November 2002.

     (9)    Derrick and Dalton guarantee this note personally. In June 2003, ADP
            Management agreed to assume this note and will pay it off on behalf
            of the Company. The note is secured by a lien on the assets,
            including inventory and accounts receivable, of the Company. The
            lender has not agreed to release the Company as a primary obligor
            under the note. Under the April 2, 2003 agreement with ADP
            Management, ADP Management, Derrick, and Dalton released the Company
            from any liability for their assumption of this obligation and
            converted into common stock the amounts that would otherwise be
            payable to them for their payment of the note. Notwithstanding the
            assumption of this note by Messrs. Derrick and Dalton and their
            affiliate ADP Management, in the event they fail to pay the note on
            our behalf the lender retains its rights to proceed against us and
            our assets as a secured creditor to satisfy any amount outstanding
            on the note, as well as the costs of collection. The Company's
            financial statements reflect a $700,000 subscription receivable from
            ADP Management for the issuance of the related common stock. This
            subscription will be satisfied as ADP Management pays the note.
            After September 30, 2003, the amount owing under this obligation was
            reduced by payments totaling $200,000.

     (10)   On June 30, 2003, this lender converted all amounts owing under this
            note into 151,334 shares of common stock as payment in full.

     (11)   On June 30, 2003, this lender converted all amounts owing under this
            note into 113,500 shares of common stock as payment in full.

     (12)   On June 30, 2003, this lender converted all amounts owing under this
            note into 37,834 shares of common stock as payment in full.

     (13)   The borrower has an exchange option to covert the principal sum
            outstanding and any unpaid interest to common stock at $1.50 per
            share.

Recent Developments

Agreements with former Employees and Consultants

After determining that we would focus our business on remote medical and
personal security monitoring products and services, we entered into an agreement
with Brian Boling, Tim Welch, Jim Steinmeyer and Ron Bishop and their respective
affiliates to provide for the termination of employment and consulting
agreements, the assignment of property and other rights. Under this agreement,
effective January 1, 2003, these parties agreed to terminate their respective
employment and consulting agreements with the Company and its affiliates,
returned 400,000 shares of common stock issued in the acquisition of
SecureAlert, forfeited payments under the merger agreement totaling $300,000,
and forfeited accrued vacation and sick pay. We transferred to a newly formed
entity owned and controlled by these former employees and consultants, equipment
and inventory and we assigned accounts receivable to cover assumed liabilities
in connection with the distribution of product under a distribution agreement
described below.


                                       17
<PAGE>

Bishop Agreement

Effective December 31, 2002, we entered into an agreement with a consultant, Ron
Bishop, to terminate consulting agreements pursuant to which he had agreed to
assist in the development of GPS and monitoring technology and related services.
We agreed to issue 65,000 restricted shares of common stock and we granted an
option to Mr. Bishop for the purchase of 20,000 common shares at $3.00 per
share. Bishop agreed to complete programming on product interfaces and other
products for the Company and granted the Company a perpetual royalty-free
license to certain software used in the Company's GPS products and monitoring
centers.

Natale Agreement

On February 28, 2003, we entered into an agreement with Tom Natale, who had been
serving as our President. Under the terms of the agreement, which was
subsequently amended and extended through October 2003, Mr. Natale and the
Company mutually agreed to terminate Mr. Natale's employment contract. Mr.
Natale was paid a monthly consulting fee of $5,000 and received health benefits
from the Company through November 2003. A bonus payment of $30,000 was paid in
October 2003. Mr. Natale also entered into a nondisclosure and confidentiality
agreement relating to the Company's technology, including trade secrets and
other intellectual property. In a separate agreement entered into June 30, 2003,
Mr. Natale assigned to the Company a $100,000 certificate of deposit previously
pledged as collateral for the Company's line of credit at a bank. In
consideration of the assignment, the Company agreed to release and indemnify Mr.
Natale from further liability under the line of credit and agreed to pay back
interest of $8,000 and to issue to Mr. Natale 7,500 shares of common stock and
warrants to purchase 7,500 shares of common stock at a price of $3.00 per share.
Mr. Natale also received a $100,000 promissory note payable to him jointly and
severally by Derrick, Dalton, and ADP Management. ADP Management has assumed all
obligations to Mr. Natale and the Company is under no further obligation.

Liady Agreement

In an agreement entered into June 30, 2003, Ms. Liady assigned to the Company a
$100,000 certificate of deposit previously pledged as collateral for the
Company's line of credit at a bank. In consideration of the assignment, the
Company agreed to release and indemnify Ms. Liady from further liability under
the line of credit and agreed to pay back interest of $2,500 and to issue to Ms.
Liady 5,000 shares of common stock and warrants to purchase 5,000 shares of
common stock at a price of $3.00 per share. Ms. Liady also received a $100,000
promissory note payable to her jointly and severally by Derrick, Dalton, and ADP
Management. ADP Management assumed the liability associated with this note and
the Company is under no further obligation to Ms. Liady.

Consumer Electronics Distribution

On January 1, 2003, the Company entered into an agreement with SecureAlert
Entertainment LLC ("SAE") granting it exclusive distribution rights to the
Company's consumer electronics products to the manufactured homes marketing
channel in North America. In consideration of the grant of exclusive rights in
the agreement, SAE agreed to make all payments to Mr. Bishop under his several
agreements with the Company and to purchase inventory from the Company. In
addition, former SecureAlert shareholders waived their right to and returned to
the Company for cancellation 400,000 shares of common stock issued in the merger
with SecureAlert. SAE is barred from marketing or distributing products to the
PERS and home medical or personal health monitoring markets and is bound by a
five-year post-termination covenant against competing with the Company in any
market. The agreement was subsequently amended in June 2003 to clarify the
pricing of products as well as policies regarding the Company's responsibility
for warranty service, returns, and delivery of product; purchases are made only
by submission of orders to the Company and title to products passes upon
shipment. The agreement expired December 31, 2003 and the Company expects
revenues from the sale of consumer electronics products to decline substantially
after December 31, 2003.

Telematics Distribution

The Company entered into an agreement with SecureAlert Telematics Corporation
for the distribution of the Company's telematics and mobile GPS products. In
connection with this agreement, the Company acknowledged Mr. Bishop's role in
the development of the underlying GPS technology included in the MobilePAL
products and agreed to assign a patent application relating to that technology
to Mr. Bishop (Patent App. 10/202,769). SecureAlert Telematics will pay the
Company a royalty in the amount of 10% of net revenue from all customer sales
and services for a period of seven years from the date of activation of all
products and services sold by SecureAlert Telematics during the three-year term
of the agreement. The parties also agreed that during the first six months of
the agreement SecureAlert Telematics would have use of the Company's monitoring
center without additional charge and that the parties would share in the cost of
the monitoring center thereafter during the balance of the term of the agreement

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until such time as SecureAlert Telematics could establish its own center. The
products that are subject to this agreement are the MobilePAL and TravelPAL
products sold to specific channels identified by the agreement. SecureAlert
Telematics is barred from selling in the PERS and personal and home health
monitoring markets.

PFK Development Corporation

In June 2003, the Company entered into an agreement with PFK Development Group,
Ltd. ("PFK"), to extend through April 2004 a consulting agreement originally
entered into in September 2002. The agreement requires PFK to provide consulting
services to the Company relating to the acquisition of new technologies. The
Company agreed to issue 100,000 shares of common stock to PFK and to pay cash
consulting fees of $3,900 per month during the term of the agreement.

Related Party Debt Restructuring

During the year ended September 30, 2003, the Audit Committee of the board of
directors approved a debt-restructuring package proposed by ADP Management,
Derrick and Dalton. By agreement dated April 2, 2003, the Company and ADP
Management, Derrick and Dalton agreed to the following primary terms:

     o      Derrick and Dalton agreed to negotiate with significant creditors of
            the Company to restructure outstanding debt.

     o      We would issue a total of 8,900,000 shares of common stock for the
            purpose of restructuring debt under this package.

     o      The preferred method of restructuring the debt would be the
            conversion of the debt into common shares at prices negotiated on
            behalf of the Company by Derrick and Dalton.

     o      If and to the extent that ADP Management, Derrick and Dalton would
            assume certain debt held by creditors unwilling to convert such
            obligations directly into equity the shares otherwise issuable in
            conversion of the assumed debt would be issued to ADP Management,
            Derrick and Dalton in consideration of their assumption of the debt
            and the release of the Company of all liability for such debt by the
            creditor.

     o      ADP Management would convert all amounts owing to it after all other
            creditors have either converted or assigned their notes as described
            above for the remaining shares, if any.

     o      We would compensate Derrick and Dalton for personal guarantees and
            assumptions of corporate debt and obligations.

     o      Derrick would assign certificates of deposit to the Company securing
            a line of credit with a bank.

During the year ended September 30, 2003, in connection with the raising of
equity funds for the Company, the Company entered into an agreement with
Derrick, Dalton, and ADP Management wherein ADP Management agreed to continue to
assist the Company in its financing activities by assuming the following debt
Company into the ADP line of credit:

     o      $1,086,628 of short-term notes payable of $1,086,628

     o      $503,387 of Sun Trust line of credit

     o      $550,000 of Certificates of deposit owed to individuals used to
            secure the Zion's line of credit.

ADP also agreed to assume certain debt and contingent obligations for which the
Company has not been released by the holder of the instrument which obligates
the Company and is therefore still recorded on the Company's books as follows:

     o      $600,000 note payable, and associated accrued interest of
            approximately $100,000 due to an individual

     o      Redeemable common stock recorded at $725,000 with a redemption
            obligation of $966,666 (See note 7)

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<PAGE>


After assuming the above debt and contingent liabilities and assuming an
additional $800,000 note (see below), ADP converted its line of credit and these
assumed obligations into 8,113,999 of the Company's common stock and exchanged
subscription receivables as follows:

     o      Converted $2,373,961 of the ADP line of credit, including $27,346 of
            accrued interest on notes assumed by ADP

     o      Assumed an $800,000 note payable due to an individual. The Company
            was released as the primary obligor on the note by the individual
            but remains a guarantor for the full amount.

     o      The Company assigned a subscription receivable of $338,300 due from
            MK financial to ADP Management

     o      The Company recorded a subscription receivable of $700,000 for the
            $600,000 note payable, and associated accrued interest of
            approximately $100,000 due to an individual which was assumed by ADP
            but which the Company has not been released.

As part of this conversion and exchange the Company recognized a non-cash
expense of $845,628 based on the excess of the value of the stock issued over
the debt relieved and subscription receivable recorded.

The total debt relief provided to us as a result of these transactions was
approximately $3,173,961. ADP Management also committed to assume an additional
$700,000 of debt upon release of the Company by the note holder. The total
number of shares issued in connection with this agreement with ADP Management
was 8,113,999 shares in connection with its assumption of debt, guarantees, and
agreement to indemnify the Company. The number of shares ultimately retained by
ADP Management is not known at this time as ADP Management will continue to
negotiate settlement of debts and obligations assumed by it and use the shares
allocated to it as consideration for such settlements.

Critical Accounting Policies

In Note 1 to the audited financial statements for the fiscal year ended
September 30, 2003 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 that 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 and allowance for
doubtful accounts, we apply the following critical accounting policies in the
preparation of its financial statements:

Inventory Reserves

The nature of our business requires us to maintain sufficient inventory on hand
at all times to meet the requirements of its customers. We record 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 its reserves, we analyze the
following, among other things:

     o      Current inventory quantities on hand;

     o      Product acceptance in the marketplace;

     o      Customer demand;

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<PAGE>

     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

We derive revenue primarily from the sale of consumer electronics, 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, 2003 and 2002, 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

Under applicable accounting principles, we do not amortize goodwill. Goodwill is
subject to an impairment test, which is performed at least annually. Our
goodwill is related to the acquisition of SecureAlert in July 2001. During the
year ended September 30, 2003 we tested goodwill for impairment by comparing the
carrying value of the assets of our wholly owned subsidiary SecureAlert, to the
estimated fair value of those assets. The fair value was determined using an
income approach of estimated future cash flows. The estimated future cash flows
include those primarily related from mobile medical alert devices. The carrying
amount including goodwill was determined to exceed the estimated fair value.
Therefore we recognized an impairment of goodwill in 2003.

We review our long-lived assets, other than goodwill, for impairment when events
or changes in circumstances indicate that the book value of an asset may not be
recoverable. We evaluate, at each balance sheet date, whether events and
circumstances have occurred which indicate possible impairment. We use an
estimate 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

We account 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.

We account 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. 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

                                       21
<PAGE>

We 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 April 2002, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections." This statement requires the
classification of gains or losses from the extinguishments of debt to meet the
criteria of Accounting Principles Board Opinion No. 30 before they can be
classified as extraordinary in the income statement. As a result, companies that
use debt extinguishment as part of their risk management cannot classify the
gain or loss from that extinguishment as extraordinary. The statement also
requires sale-leaseback accounting for certain lease modifications that have
economic effects similar to sale-leaseback transactions. The adoption of SFAS
No. 145 did not have a material impact on the Company's financial position or
operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This standard, which is effective for exit or
disposal activities initiated after December 31, 2002, provides new guidance on
the recognition, measurement and reporting of costs associated with these
activities. The standard requires companies to recognize costs associated with
exit or disposal activities when they are incurred rather than at the date the
Company commits to an exit or disposal plan. The adoption of SFAS No. 146 did
not have a material impact on the Company's financial position or operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" (FIN No. 45). FIN No. 45 requires certain guarantees to
be recorded at fair value, which is different from current practice to record a
liability only when a loss is probable and reasonably estimable, as those terms
are defined in FASB Statement No. 5, "Accounting for Contingencies." FIN No. 45
also requires us to make significant new disclosures about guarantees. The
disclosure requirements of FIN No. 45 are effective for the first quarter of
fiscal year 2003. FIN No. 45's initial recognition and initial measurement
provisions are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. Our previous accounting for guarantees issued
prior to the date of the initial application of FIN No. 45 will not be revised
or restated to reflect the provisions of FIN No 45. The adoption of FIN No. 45
did not have a material impact on our consolidated financial position, results
of operations or cash flows.

In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123," which is effective for all fiscal years ending after December 15, 2002.
SFAS No. 148 provides alternative methods of transition for a voluntary change
to the fair value based method of accounting for stock-based employee
compensation under SFAS No. 123 from the intrinsic value based method of
accounting prescribed by APB Opinion No. 25. SFAS 148 also changes the
disclosure requirements of SFAS 123, requiring a more prominent disclosure of
the pro-forma effect of the fair value based method of accounting for
stock-based compensation. The adoption of SFAS No. 148 did not have a material
impact on our financial position or operations.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN No. 46), which addresses consolidation by
business enterprises of variable interest entities. FIN No. 46 clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN No. 46 applies
immediately to variable interest entities created after January 31, 2003, and to
variable interest entities in which an enterprise obtains an interest after that
date. It applies in the first fiscal year or interim period beginning after June
15, 2003, to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. We do not expect to identify
any variable interest entities that must be consolidated. In the event a
variable interest entity is identified, the requirements of FIN No. 46 may have
a material impact on our financial condition or results of operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
Statement is effective for contracts entered into or modified after June 30,
2003, with certain exceptions, and for hedging relationships designated after
June 30, 2003, with certain exceptions. Management is currently evaluating the
effect that the adoption of SFAS No. 149 may have, but believes it will not have
a material effect on its results of operations and financial position.


                                       22
<PAGE>

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This new
statement changes the accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity or classifications
between liabilities and equity in a section that has been known as "mezzanine
capital." It requires that those instruments be classified as liabilities in
balance sheets. Most of the guidance in SFAS 150 is effective for all financial
instruments entered into or modified after May 31, 2003. Adoption of SFAS No.
150 did require us to present certain redeemable common stock previously
classified as mezzanine capital as a liability and may in the future require
additional reclassifications of redeemable instruments from mezzanine capital to
liabilities.

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. We 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," 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 June 30, 2003 have been prepared on the basis that we will continue
as a going concern, notwithstanding the fact that our financial performance and
condition during the past few years raise substantial doubt as to our ability to
do so. There is no assurance we will ever be profitable.

In fiscal year 2003, we incurred a net loss of $5,598,928, negative cash flow
from operating activities of $2,263.786, and an accumulated deficit of
$63,036,294.

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 accountants 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, as well as raising capital from
the sale of our securities.

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 we are to be successful in this new
business direction, we 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;

                                       23
<PAGE>

     o      Build an operational structure to support our business; and

     o      Attract, retain and motivate qualified personnel.

If we fail to achieve these goals, that failure would have a material adverse
effect on our business, prospects, financial condition and operating results.
Because the market for our 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 61% 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.

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 we have been dependent upon certain
major customers, the loss of which would adversely affect our 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 in future operating periods.

During fiscal year 2003, two customers accounted for more than 10% of sales.
Fleetwood Homes accounted for approximately 35% ($1,459,000) of sales and Secure
Alert Entertainment accounted for approximately 13% ($558,549). In January 2003,
we outsourced the distribution of products purchased by these customers to
SecureAlert Entertainment, LLC ("SAE"), an entity owned and controlled by former
SecureAlert employees and officers. Our agreement with SAE expires December 31,
2003 and we have no intention of extending or renewing it. The expiration of the
SAE agreement will result in lower revenues and limit the cash available to grow
our business and to achieve profitability. We have no ongoing arrangements or
contracts with these customers that would require them to purchase a specific
amount of product from us.

The loss of one or more of these customers 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 these customers that would require them
to purchase a specific amount of product from us. In addition, certain of these
customers purchase products in market channels we have now outsourced or
licensed to third-party distributors. This arrangement expires at December 31,
2003. Following the expiration of this agreement, there is no assurance these
customers will continue to purchase products at historic levels.

                                       24
<PAGE>

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

Our principal supplier of consumer electronics products is Philips, under an
agreement that expires in 2004. In addition, under our agreement with Matsushita
Electric Works, Ltd. ("MEW"), we purchase most of our mobile and cellular device
products from MEW. During the fall of 2001, we entered into a cellular switching
access agreement under which we purchase substantially all of our cellular
access requirements. That agreement expires in 2004. 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
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.

                                       25
<PAGE>

We face intense competition, including competition from entities that are more
established and have greater financial resources than we do, which may make it
difficult for us 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
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.

We are dependent upon our strategic alliances, the loss of which would limit our
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 are adversely affected by the absence of
successful collaborative agreements.

                                       26
<PAGE>

We have a history of losses and anticipate significant future losses and may be
unable to project our revenues and expenses accurately.

As a development stage company, we expect to incur net operating losses and
negative cash flows for the foreseeable future. We will incur significant
expenses associated with the development and deployment of our new products and
promoting our brand. We intend to enter into additional arrangements through
current and future strategic alliances that may require us to pay consideration
in various forms and in amounts that may significantly exceed current estimates
and expectations. We may also be required to offer promotional packages of
hardware and software to end-users at subsidized prices in order to promote our
brand, products and services. These guaranteed payments, promotions and other
arrangements would result in significant expense. If we do achieve
profitability, we cannot be certain that we will be able to sustain or increase
profitability in the future. In addition, because of our limited operating
history in our newly targeted markets, we may be unable to project revenues or
expenses with any degree of certainty. We expect expenses to increase
significantly in the future as we continue to incur significant sales and
marketing, product development and administrative expenses. We cannot guarantee
that we will be able to generate sufficient revenues to offset operating
expenses or the costs of the promotional packages or subsidies described above,
or that we 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 we will require capital and there is no assurance
we 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
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.

We currently lack experienced sales and marketing capability for all of our
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.


                                       27
<PAGE>

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.

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 if we were to offer and sell
shares of common stock at prices below the conversion rate of $3.00 per common
share unless those rights are waived.

The original 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 were to sell shares of common stock at a price
below the original conversion price of $3.00 per share. We have issued shares to
certain creditors to convert debt to equity at prices that are below the $3.00
conversion price. 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 future issuances. 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
increases the potential for short sales.


                                       28
<PAGE>

Downward pressure on the market price of our common stock that likely would
result from sales of common stock issued on conversion of the preferred stock or
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 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.
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 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.

We have and will continue to have significant future capital needs and there is
no assurance we will be successful in obtaining necessary additional funding.

We may 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
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.

We rely on third parties to manufacture our products. Therefore, we do not have
direct control over the quality or other aspects of the manufacturing process,
which could result in a loss of customer acceptance of our 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

                                       29
<PAGE>

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.

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 F-1 through F-43 of this report.


REMOTEMDX, INC.
Consolidated Financial Statements
September 2003 and 2002


<PAGE>


                                                                 REMOTEMDX, INC.
                                      Index to Consolidated Financial Statements

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




                                                                            Page
                                                                            ----

Reports of Independent Public Accountants                                    F-2


Consolidated Balance Sheet                                                   F-4


Consolidated Statements of Operations                                        F-5


Consolidated Statements of Stockholders' Equity (Deficit)                    F-6


Consolidated Statements of Cash Flows                                        F-8


Notes to Consolidated Financial Statements                                  F-11



<PAGE>
                                                                 REMOTEMDX, INC.
                                                    INDEPENDENT AUDITORS' REPORT



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


We have audited the accompanying  consolidated balance sheet as of September 30,
2003 and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows of RemoteMDx,  Inc., (the Company), for the years ended
September 30, 2003 and 2002.  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 audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
RemoteMDx,  Inc. as of September 30, 2003 and the consolidated  results of their
operations  and cash flows for the years  ended  September  30, 2003 and 2002 in
conformity with accounting principles generally accepted in the United States of
America.

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.




Salt Lake City, Utah
November 26, 2003
except for notes 7 and
16 which are dated
January 5, 2004


<PAGE>

                                                                 REMOTEMDX, INC.
                                                      Consolidated Balance Sheet

                                                              September 30, 2003
--------------------------------------------------------------------------------


        Assets
        ------

Current assets:
  Cash                                                          $       136,894
  Restricted cash                                                       550,026
  Accounts receivable, net of allowance for
    doubtful accounts of $233,000                                        84,916
  Inventories                                                           364,437
  Prepaids and other assets                                               2,331
                                                                ----------------

        Total current assets                                          1,138,604

Property and equipment, net                                              30,672
Core technology, net of amortization of $420,000                        140,000
Goodwill                                                              1,321,164
Other assets                                                             12,617
                                                                ----------------

                                                                $     2,643,057
                                                                ----------------



        Liabilities and Stockholders' Deficit
        -------------------------------------

Current liabilities:
  Bank line of credit                                           $       550,786
  Related party convertible notes payable                               268,470
  Related party advances                                                 82,676
  Accounts payable                                                      385,794
  Accrued expenses                                                      421,673
  Deferred revenues                                                      14,442
  Short-term notes payable                                            1,145,759
  Redeemable stock subject to mandatory redemption
    (see note 7)                                                         96,000
                                                                ----------------

        Total current liabilities                                     2,965,600

Commitments and contingencies                                                 -


Redeemable common stock (see note 7)                                  1,440,006

Stockholders' deficit:
  Series A convertible preferred stock; 10% dividend,
   non-voting, non-participating; $.0001 par value,
   $200 stated value; 40,000 shares designated;
   30,446 shares issued and outstanding (aggregate
   liquidation preference of $88,176)                                         3
  Series B convertible preferred stock; $0.0001 par
   value; 2,000,000 shares designated; 1,835,824 shares
   issued and outstanding (aggregate liquidation
   preference of $6,058,219)                                                184
  Common stock, $.0001 par value, 50,000,000 shares
   authorized; 23,917,032 shares issued and outstanding                   2,392
  Additional paid-in capital                                         62,128,166
  Series A preferred stock subscription receivable                     (700,000)
  Deferred consulting fees and financing costs                         (120,000)
  Accumulated deficit                                               (63,073,294)
                                                                ----------------

        Total stockholders' deficit:                                 (1,762,549)
                                                                ----------------

                                                                $     2,643,057
                                                                ----------------



--------------------------------------------------------------------------------
See accoumpanying notes to consolidated financial statements.                F-1

<PAGE>
<TABLE>
<CAPTION>

                                                                                     REMOTEMDX, INC.
                                                                Consolidated Statement of Operations

                                                                           Years Ended September 30,
----------------------------------------------------------------------------------------------------


                                                                       2003               2002
                                                                ------------------------------------
<S>                                                             <C>                 <C>
Sales, net                                                      $     4,163,526     $    11,013,147
Cost of goods sold                                                    3,702,003           9,558,264
                                                                ------------------------------------

        Gross profit                                                    461,523           1,454,883
                                                                ------------------------------------

Operating expenses:
  Research and development                                              113,428             514,329
  Selling, general and administrative (including
    $2,080,338 and $20,326,882 of compensation expense
    paid in stock or stock option/warrants, respectively)             5,151,860          26,847,767
  Impairment of inventory                                                     -             107,942
  Impairment of goodwill                                              2,248,000           4,207,045
                                                                ------------------------------------

        Total operating expenses                                      7,513,288          31,677,083
                                                                ------------------------------------

        Loss from operations                                         (7,051,765)        (30,222,200)
                                                                ------------------------------------

Other income (expense):
  Interest income                                                         1,099               5,562
  Interest expense (including $0 and
   $2,776,465 paid in stock and warrants, respectively)                (839,531)         (3,263,653)
  Other income                                                               860               4,425
                                                                ------------------------------------

        Total other expense                                            (837,572)         (3,253,666)

        Income tax benefit                                                    -                   -
                                                                ------------------------------------

        Net loss                                                     (7,889,337)        (33,475,866)

Beneficial conversion feature on Series A preferred
  stock and Series A Preferred stock dividends                       (2,372,810)           (501,000)
                                                                ------------------------------------

        Net loss applicable to common shareholders              $   (10,262,147)    $   (33,976,866)
                                                                ------------------------------------

Net loss per common share - basic and diluted                   $         (0.58)    $         (3.50)
                                                                ------------------------------------

Weighted average shares - basic and diluted                          17,817,000           9,707,000
                                                                ------------------------------------

----------------------------------------------------------------------------------------------------
See accoumpanying notes to consolidated financial statements.                                    F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                                                                                     REMOTEMDX, INC.
                                                                            Consolidated Statement of Stockholders' Equity (Deficit)

                                                                                             Years Ended September 30, 2003 and 2002
------------------------------------------------------------------------------------------------------------------------------------


                               Preferred Stock                                                  Deferred
                      ----------------------------------------------------------               Financing
                          Series A           Series B           Common Stock       Additional      and         Stock
                      ----------------------------------------------------------  Paid-In     Consulting Subscriptions   Accumulated
                      Shares  Amount     Shares    Amount     Shares      Amount    Capital       Fees      Receivable       Deficit
                      --------------------------------------------------------------------------------------------------------------
<S>                    <C>       <C>   <C>          <C>       <C>        <C>     <C>            <C>         <C>        <C>
Balance at September
30, 2001               24,181      2     700,001       70   7,841,585        784   27,652,020            -   (338,300)  (21,708,091)

Issuance of redeemable
 common stock for
 deferred financing
 services                   -      -           -        -              -       -            -     (375,000)         -             -

Issuance of common
stock for:
  Exercise of stock
  options;
     options were
     exercised through
     reduction of
     related party
     line-of- credit        -      -           -        -      1,712,844     171      924,763            -          -             -
   Debt and accrued
    interest                -      -           -        -         35,735       4      107,310            -          -             -
   Prepaid consulting
    fees                    -      -           -        -        224,000      23      671,978     (648,000)         -             -
   Discounts related
    to debt                 -      -           -        -        145,000      15      434,985            -          -             -
   Consulting services      -      -           -        -         79,885       8      239,647            -          -             -
   Conversion of
    Series A
    preferred stock    (6,872)    (1)          -        -      2,537,846     254         (253)           -          -             -
   Exchange of
     redeemable
     common stock           -      -           -        -         40,000       4      119,996            -          -             -

Issuance of Series B
preferred stock and
common stock warrants
for cash                    -      -   1,135,823      114              -       -    3,366,159            -          -             -

Warrants to purchase
Series A preferred
stock granted to a
related party in
connections with
borrowings to the
Company resulting in
$1,445,525 interest
expense and $332,488
compensation expense        -      -           -        -              -       -    1,778,013            -          -             -

Issuance of Series A
preferred stock for:
   Related party
     cashless exercise
     of warrants to
     purchase Series A
     preferred stock
     resulting in
     additional
     compensation
     expense of
     $5,416,812         6,688      1           -        -              -       -    5,416,811            -          -             -
   Services from
     related party      2,094      1           -        -              -       -    2,324,340            -          -             -

Warrants to purchase
common stock granted
to related party in
connection with loans
to the Company
resulting in $895,940
interest expense and
$8,770,499
compensation expense        -      -           -        -              -       -    9,666,439            -          -             -

Stock option
compensation for
consulting services         -      -           -        -              -       -    2,236,072            -          -             -

Amortization of
deferred consulting
and financing costs         -      -           -        -              -       -            -      668,000          -             -

Preferred stock
dividend accrued            -      -           -        -              -       -     (501,000)           -          -             -

Preferred stock
dividend paid with
Series A preferred
stock                      39      -           -        -              -       -        7,803            -          -             -

Net loss                    -      -           -        -              -       -            -            -          -   (33,475,866)
                      --------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                                                                     F-3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                                                                                     REMOTEMDX, INC.
                                                                            Consolidated Statement of Stockholders' Equity (Deficit)
                                                                                                                           Continued

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


                               Preferred Stock                                                  Deferred
                      ----------------------------------------------------------               Financing
                          Series A           Series B           Common Stock       Additional      and         Stock
                      ----------------------------------------------------------  Paid-In     Consulting Subscriptions   Accumulated
                      Shares  Amount     Shares    Amount     Shares      Amount    Capital       Fees      Receivable       Deficit
                      --------------------------------------------------------------------------------------------------------------

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

Balance at September
30, 2002               26,130      3   1,835,824      184     12,616,895   1,262   54,445,083     (355,000)  (338,300)  (55,183,957)

Issuance of redeemable
common stock for:
   Financing services       -      -           -        -              -       -            -      (45,000)         -             -
   Conversion of
    common stock            -      -           -        -        (58,333)     (6)           -            -          -             -

Common Stock issued
 for
  Cash                      -      -           -        -      2,038,446     204    1,258,496            -          -             -
  Exercise of stock
   options;
     options were
     exercised
     through reduction
     of related party
     line-of-credit         -      -           -        -        135,701      14       73,265            -          -             -
   Debt and accrued
     interest               -      -           -        -        302,668      30      442,720            -          -             -
   Services                 -      -           -        -        517,256      52      679,881     (165,000)         -             -
   Conversion of
     Series A
     preferred stock   (2,097)     -           -        -        652,352      65          (65)           -          -             -

Conversion of related
party line-of-credit
and other notes
payable and rescission
of warrants resulting
in additional
compensation expense
of $845,628                 -      -           -        -      8,113,999     811    4,380,478            -   (361,700)            -

Amortization of
deferred consulting
and financing fees          -      -           -        -              -       -            -      445,000          -             -

Preferred stock
dividend accrued            -      -           -        -              -       -     (803,784)           -          -             -

Stock option
compensation for
consulting services         -      -           -        -              -       -      274,777            -          -             -

Preferred stock
dividend paid with
Series A preferred
stock                   6,413      -           -        -              -       -    1,282,556            -          -             -

Shares received and
retired from
distribution of
subsidiary                  -      -           -        -       (401,952)    (40)      94,759            -          -             -

Net loss                    -      -           -        -              -       -            -            -          -    (7,889,337)
                      --------------------------------------------------------------------------------------------------------------

Balance at September
30, 2003               30,446    $ 3   1,835,824    $ 184     23,917,032 $ 2,392 $ 62,128,166   $ (120,000) $(700,000) $(63,073,294)
                      --------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                                                                     F-4

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                                                                    REMOTEMDX, INC.
                                                                               Consolidated Statement of Cash Flows

                                                                                          Years Ended September 30,
-------------------------------------------------------------------------------------------------------------------

                                                                                      2003               2002
                                                                                -----------------------------------
<S>                                                                             <C>                 <C>
Cash flows from operating activities:
 Net loss                                                                       $     (7,889,337)   $   (33,475,866)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
      Depreciation and amortization                                                      225,460            305,099
      Related party line of credit increased for consulting services                      60,000                  -
      Loss on disposal of property charged to cost of sales                               86,515                  -
      Amortization of debt discount                                                        5,825            513,234
      Amortization of deferred financing and consulting services                         445,000            668,000
      Interest expense related to preferred stock warrants
        issued with borrowings under a related-party line of credit                            -          2,341,465
      Common stock issued for services                                                 1,360,561            263,656
      Redeemable common stock issued for services                                              -            315,000
      Common stock options and warrants issued primarily to
        related parties for services                                                     274,777         16,755,870
      Preferred stock issued to related parties for services
        and financing costs                                                                    -          2,324,341
      Impairment of inventory                                                                  -            107,942
      Impairment of goodwill                                                           2,248,000          4,207,045
      Changes in operating assets and liabilities:
        Accounts receivable                                                              535,230           (654,593)
        Inventories                                                                      476,220           (488,529)
        Prepaid expenses                                                                  (1,464)            53,033
        Accounts payable                                                                (296,532)          (106,419)
        Accrued liabilities                                                              164,922           (510,442)
        Deferred revenues                                                                (66,988)            (1,730)
                                                                                -----------------------------------

                Net cash used in operating activities                                 (2,371,811)        (7,382,894)
                                                                                -----------------------------------

Cash flows used in investing activities-
  purchase of property and equipment                                                      (2,345)          (101,118)
                                                                                -----------------------------------

-------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                                                    F-5

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                                                                    REMOTEMDX, INC.
                                                                               Consolidated Statement of Cash Flows
                                                                                                          Continued

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

                                                                                      2003               2002
                                                                                -----------------------------------
<S>                                                                             <C>                 <C>
Cash flows from financing activities
  Payments on purchase obligation to former SecureAlert
    shareholders                                                                               -           (800,000)
  Net (payments) borrowings under a related-party line of credit
    - advances                                                                          (704,051)         1,860,224
  Net payments on a bank line of credit                                                  254,173            506,413
  Borrowings under short-term notes payable                                            1,580,101          4,249,695
  Payment on short-term notes payable                                                   (258,540)        (1,653,180)
  Proceeds from issuance of redeemable common stock                                      250,000             96,000
  Payment for redemption of redeemable common stock                                            -           (150,000)
  Payments on related party convertible notes payable                                   (231,530)                 -
  Payments on Related Party short-term notes payable                                     (25,000)                 -
  Proceeds from Related Party short-term notes payable                                   335,807                  -
  Proceeds from sale of common stock                                                   1,258,700                  -
  Proceeds from issuance of Series B preferred stock, net of
    cash offering costs                                                                        -          3,366,273
                                                                                -----------------------------------

        Net cash provided by financing activities                                      2,459,660          7,475,425
                                                                                -----------------------------------

Net increase (decrease) in cash                                                           85,504             (8,587)

Cash, beginning of year                                                                   51,390             59,977
                                                                                -----------------------------------

Cash, end of year                                                               $        136,894    $        51,390
                                                                                -----------------------------------



Supplemental Cash Flow Information:
                                                                                      2003               2002
                                                                                -----------------------------------
Cash paid for interest and taxes:
Cash paid for income taxes                                                      $              -    $             -
Cash paid for interest                                                          $        195,035    $       322,085



-------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                                                    F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                                                                    REMOTEMDX, INC.
                                                                               Consolidated Statement of Cash Flows
                                                                                                          Continued

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

                                                                                      2003                  2002
                                                                                -----------------------------------
<S>                                                                             <C>                 <C>
Supplemental schedule of non-cash investing and
financing activities:
Issuance of 652,352 and 2,537,846 common shares, respectively,
  in exchange for 1,763 and 6,872 shares of Series A preferred
  stock, respectively                                                                         65                254
Redeemable common stock exchanged for 40,000 shares of
  common stock                                                                                 -            120,000
Debt exchanged for 483,333 shares of redeemable common stock                             725,000                  -
Issuance of 115,000 and 216,000 common shares, respectively,
  for deferred consulting and financing services                                         165,000            648,000
Utilization of borrowings under a related-party line of credit
  as payment for exercise of common stock options                                         73,279            924,934
Preferred Series A stock dividends accrued                                               803,784            501,000
Deferred financing costs paid for by issuance of 15,000 and 125,000
  shares of redeemable common stock, respectively.                                        45,000            375,000
Series A convertible debentures and related accrued interest
  of $12,314 converted into shares of common stock                                             -            107,314
Conversion of 58,333 common shares into 58,333 redeemable common shares                        6                  -
Notes payable including accrued interest of $42,750 converted into
  302,668 shares of common stock                                                         442,750                  -
Issuance of 6,413 and 39 shares of Series A preferred stock, respectively,
  for accrued dividends and preferential dividends in lieu of cash dividends           1,282,556              7,803
Series A preferred stock beneficial conversion features                                2,276,615                  -
Disposal of $149,015 of capitalized tooling costs with its corresponding
  liability of $149,015                                                                  149,015                  -
Related party line of credit increased in exchange for related party consulting
  services of $60,000, assumption of Company note payable of $71,496,                          -                  -
   assumption of accrued interest of $2,147 and payment of dividends of $9,019           142,662                  -

Distribution of net assets for stock repurchase:
  Accounts payable and accrued liabilities                                              (488,410)                 -
  Bank line-of-credit                                                                   (300,000)                 -
  Obligation to SecureAlert                                                             (400,000)                 -
  Accounts receivable                                                                    370,501                  -
  Inventory                                                                              539,706                  -
  Property and equipment, net of $80,331 accumulated
    depreciation                                                                         183,484                  -
  Common stock repurchased (401,952 shares)                                               94,759                  -

Assumption of debt and liabilities by related party for
 issuance of 8,113,999 common shares:
  Short-term notes payable                                                              (800,000)                 -
  Subscriptions receivable                                                              (361,700)                 -
  Related party line-of-credit                                                        (2,373,961)                 -
  Common stock                                                                         4,381,289                  -
  Consulting expense recognized                                                         (845,628)                 -

Refinancing of short-term debt:
  Short-term notes payable                                                            (1,086,628)                 -
  Bank line-of-credit                                                                   (503,387)                 -
  Related party line-of-credit                                                         2,140,015                  -
  Restricted cash                                                                       (550,000)                 -


-------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                                                    F-7
</TABLE>
<PAGE>
                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements

                                                     September 30, 2003 and 2002
--------------------------------------------------------------------------------

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 distributing consumer
                        electronics  products.  The  Company's  revenues for the
                        year ended  September 30, 2003 and 2002,  were generated
                        primarily  from the  sale of  consumer  electronics  and
                        personal  security  products and to a lesser extent 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,  2003.  As of  September  30,  2003,  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.


--------------------------------------------------------------------------------
                                                                             F-8
<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
                        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 and that the  Company  will be  economically
                        successful   from   increasing   selling  and  marketing
                        efforts.  Further, the Company may be unable to complete
                        the development and successful  commercialization of any
                        new remote health monitoring products.

                        Principles of Consolidation
                        The  accompanying   consolidated   financial  statements
                        include the  accounts  of  RemoteMDx,  Inc.,  its wholly
                        owned   subsidiaries,  Volu-Sol Reagents Corporation 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  accountingprinciples  generally  accepted  in  the
                        United  States of America  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.

--------------------------------------------------------------------------------
                                                                             F-9
<PAGE>


                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


2.   Summary of         Concentration of Credit Risk
     Significant        The Company has cash in bank and short-term  investments
     Accounting         that, at times, may exceed federally insured limits. The
     Policies           Company has not experienced any losses in such accounts.
     Continued          The   Company   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:

                                              2003             2002
                                       ------------------------------------

                         Company A      $       1,459,000 $      5,952,000
                         Company B      $         559,000 $              -
                         Company C      $               - $      1,756,000
                         Company D      $               - $      1,632,000

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

                        Inventories
                        Inventories are recorded at the lower of cost or market,
                        cost being determined on a first-in,  first-out ("FIFO")
                        method.  Substantially  all items  included in inventory
                        are finished goods and consist of the following:

                            Mobile security                $        627,858
                            Reagent stains                           37,315
                            Reserve                               (300,736)
                                                          ------------------

                                                           $        364,437
                                                          ------------------

                        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.

--------------------------------------------------------------------------------
                                                                            F-10
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


2.   Summary of         Concentration of Purchases
     Significant        For the  years  ended  September  30,  2003 and 2002 the
     Accounting         Company, maintained a license agreement as a distributor
     Policies           for  Royal  Philips  Electronics  ("Philips")  in  which
     Continued          purchases  related to the  Company's  sales of  consumer
                        electronics  were  purchased  through  manufacturers  of
                        Philips'  products (see Note 14).  Further,  the Company
                        currently has a single  supplier for cellular  switching
                        access for the  Company's  MobilePal  network  (see Note
                        14).   Management   believes  the  Company's   products,
                        components and services could be obtained from different
                        suppliers.   However,   should  the  Company's   current
                        suppliers  cease to provide the Company with products or
                        services,   the  Company's  ability  to  find  products,
                        components   or  services  at  similar   prices  may  be
                        materially impaired.

                        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, 2003:

                         Equipment                         $        217,344
                         Leasehold improvements                     226,496
                         Furniture and fixtures                      34,405
                                                          ------------------

                                                                    478,245
                         Accumulated depreciation                  (447,573)
                                                          ------------------

                                                           $         30,672
                                                          ------------------

--------------------------------------------------------------------------------
                                                                            F-11
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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



2.   Summary of         Goodwill and Core Technology
     Significant        In connection with the  acquisition of SecureAlert,  the
     Accounting         Company  recorded  goodwill  and  core  technology,   an
     Policies           intangible asset. Core technology  primarily  represents
     Continued          patents in the area of remote security and medical alert
                        devices.   Core   technology  is  amortized   using  the
                        straight-line  method over an  estimated  useful life of
                        three years.

                        Impairment of Long-Lived Assets and Goodwill
                        Goodwill  is  not   amortized   but  is  subject  to  an
                        impairment  test,  which is performed at least annually.
                        Goodwill is related to the acquisition of SecureAlert in
                        July 2001 and was  initially  determined to be valued at
                        $7,776,209 based upon SFAS 141 and 142. During the years
                        ended  September  30, 2003 and 2002 the  Company  tested
                        goodwill for  impairment by comparing the carrying value
                        of its  component  unit to which  goodwill was assigned,
                        namely  the  assets  of  its  wholly  owned   subsidiary
                        SecureAlert, Inc. (referred to as the component unit for
                        purposes of this note),  to the estimated  fair value of
                        the component unit. The fair value of the component unit
                        was  determined  using an income  approach of  estimated
                        future  cash  flows.  The  estimated  future  cash flows
                        include  those   primarily  from  mobile  medical  alert
                        devices of the component  unit.  The carrying  amount of
                        the component unit including  goodwill was determined to
                        exceed  the  estimated   fair  value  by   approximately
                        $2,248,000 and $4,207,000 for the years ended  September
                        30, 2003 and 2002, respectively. Accordingly, during the
                        years ended  September  30,  2003 and 2002,  the Company
                        recognized an impairment of approximately $2,248,000 and
                        $4,207,000, respectively, of its goodwill.

                        The Company  reviews its long-lived  assets,  other than
                        goodwill,  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.

--------------------------------------------------------------------------------
                                                                            F-12
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


2.   Summary of         Revenue Recognition
     Significant        The Company derives its revenue  primarily from the sale
     Accounting         of  consumer  electronics,  sale of its  mobile  medical
     Policies           emergency products with service  contracts,  and reagent
     Continued          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.

                        Research and Development Costs
                        All   expenditures  for  research  and  development  are
                        charged to expense as incurred.

                        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. 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 Company's 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 as follows:

--------------------------------------------------------------------------------
                                                                            F-13
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


2.   Summary of         Stock-Based Compensation - Continue
     Significant
     Accounting
     Policies
     Continued                                       Years Ended September 30,
                                                 -------------------------------
                                                      2003           2002
                                                 -------------------------------

 Net income (loss) applicable to common
   shareholders - as reported                     $ (10,262,147) $ (33,976,866)

 Deduct:  total stock based employee
 compensation expense determined under fair
 value based method for all awards, net of
 related tax effects                                    (68,310)    (3,191,011)
                                                 -------------------------------

 Net loss - pro forma                             $ (10,330,457) $ (37,167,877)
                                                 -------------------------------

 Basic and diluted loss per share - as reported   $        (.58) $       (3.50)
                                                 -------------------------------

 Basic and diluted loss per share - pro forma     $        (.58) $       (3.83)
                                                 -------------------------------

                        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 assumptions:

                                                         Years Ended
                                                         September 30,
                                              ----------------------------------
                                                    2003            2002
                                              ----------------------------------

  Expected dividend yield                               -                -
  Expected stock price volatility                    128%             110%
  Risk-free interest rate                           4.75%            5.75%
  Expected life of options                        5 years          5 years

                        The weighted  average fair value of options and warrants
                        granted  during the years ended  September  30, 2003 and
                        2002, were $1.35 and $2.43, respectively.

--------------------------------------------------------------------------------
                                                                            F-14
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


2.   Summary of         Stock-Based Compensation - Continued
     Significant        The Company  accounts for its  stock-based  compensation
     Accounting         issued to other  than  employees  using  the fair  value
     Policies           method  in  accordance  with  SFAS No.  123 and  related
     Continued          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.  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.

                        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, 2003 and 2002, there were approximately
                        26,078,750  and  18,706,000   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.

--------------------------------------------------------------------------------
                                                                            F-15
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


2.   Summary of         Recent Accounting Pronouncements
     Significant        In April 2002, the FASB issued SFAS No. 145, "Rescission
     Accounting         of FASB Statements No. 4, 44, and 64,  Amendment of FASB
     Policies           Statement  No.  13,  and  Technical  Corrections."  This
     Continued          statement requires the classification of gains or losses
                        from the  extinguishment of debt to meet the criteria of
                        Accounting  Principles  Board Opinion No. 30 before they
                        can  be  classified  as   extraordinary  in  the  income
                        statement.   As  a  result,   companies  that  use  debt
                        extinguishment  as part of their risk management  cannot
                        classify  the gain or loss from that  extinguishment  as
                        extraordinary.     The    statement     also    requires
                        sale-leaseback     accounting    for    certain    lease
                        modifications  that have  economic  effects  similar  to
                        sale-leaseback  transactions.  The  adoption of SFAS No.
                        145 did not  have a  material  impact  on the  Company's
                        financial position or operations.

                        In June 2002, the FASB issued SFAS No. 146,  "Accounting
                        for Costs Associated with Exit or Disposal  Activities."
                        This  standard,  which is effective for exit or disposal
                        activities  initiated after December 31, 2002,  provides
                        new  guidance  on  the   recognition,   measurement  and
                        reporting of costs associated with these activities. The
                        standard   requires   companies   to   recognize   costs
                        associated  with exit or disposal  activities  when they
                        are incurred rather than at the date the company commits
                        to an exit or disposal  plan.  The  adoption of SFAS No.
                        146 by the  Company is not  expected  to have a material
                        impact on the  Company's  financial  position  or future
                        operations.

--------------------------------------------------------------------------------
                                                                            F-16
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


2.   Summary of         Recent Accounting Pronouncements - Continued
     Significant        In January 2003, the FASB issued  Interpretation No. 46,
     Accounting         "Consolidation of Variable  Interest  Entities" (FIN No.
     Policies           46),   which   addresses   consolidation   by   business
     Continued          enterprises of variable  interest  entities.  FIN No. 46
                        clarifies  the   application   of  Accounting   Research
                        Bulletin No. 51, "Consolidated Financial Statements", to
                        certain  entities in which equity  investors do not have
                        the characteristics of a controlling  financial interest
                        or do not have sufficient  equity at risk for the entity
                        to   finance   its   activities    without    additional
                        subordinated  financial support from other parties.  FIN
                        No. 46 applies immediately to variable interest entities
                        created after January 31, 2003, and to variable interest
                        entities  in which an  enterprise  obtains  an  interest
                        after that date.  It applies in the first fiscal year or
                        interim  period   beginning  after  June  15,  2003,  to
                        variable  interest entities in which an enterprise holds
                        a variable  interest that it acquired before February 1,
                        2003.  The  Company  may  identify   variable   interest
                        entities  that  must  be  consolidated.  In the  event a
                        variable interest entity is identified,  the Company may
                        expect the requirements of FIN No. 46 to have a material
                        impact  on  its   financial   condition  or  results  of
                        operations.

                        In November 2002, the FASB issued Interpretation No. 45,
                        "Guarantor's  Accounting and Disclosure Requirements for
                        Guarantees,    Including    Indirect    Guarantees    of
                        Indebtedness  of  Others"  (FIN  No.  45).  FIN  No.  45
                        requires  certain  guarantees  to be  recorded  at  fair
                        value,  which is  different  from  current  practice  to
                        record a  liability  only  when a loss is  probable  and
                        reasonably estimable, as those terms are defined in FASB
                        Statement No. 5, "Accounting for Contingencies". FIN No.
                        45 also  requires  the Company to make  significant  new
                        disclosures    about    guarantees.    The    disclosure
                        requirements of FIN No. 45 are effective for the Company
                        in the first  quarter of fiscal year 2003.  FIN No. 45's
                        initial recognition and initial  measurement  provisions
                        are  applicable  on a  prospective  basis to  guarantees
                        issued  or  modified   after   December  31,  2002.  The
                        Company's  previous  accounting  for  guarantees  issued
                        prior to the date of the initial  application of FIN No.
                        45 will  not be  revised  or  restated  to  reflect  the
                        provisions of FIN No 45.  Adoption of FIN No. 45 did not
                        have a  material  impact on the  Company's  consolidated
                        financial position, results of operations or cash flows.

--------------------------------------------------------------------------------
                                                                            F-17
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


2.   Summary of         Recent Accounting Pronouncements - Continued
     Significant        In April 2003, the FASB issued SFAS No. 149,  "Amendment
     Accounting         of Statement 133 on Derivative  Instruments  and Hedging
     Policies           Activities." SFAS No. 149 amends and clarifies financial
     Continued          accounting  and  reporting for  derivative  instruments,
                        including  certain  derivative  instruments  embedded in
                        other   contracts    (collectively    referred   to   as
                        derivatives)  and for hedging  activities under SFAS No.
                        133, "Accounting for Derivative  Instruments and Hedging
                        Activities".  This  Statement is effective for contracts
                        entered  into or  modified  after  June 30,  2003,  with
                        certain  exceptions,   and  for  hedging   relationships
                        designated after June 30, 2003, with certain exceptions,
                        and for hedging relationships  designated after June 30,
                        2003. Management is currently evaluating the effect that
                        the  adoption of SFAS No. 149 may have,  but believes it
                        will  not  have a  material  effect  on its  results  of
                        operations and financial position.

                        In May 2003,  the FASB issued SFAS No. 150,  "Accounting
                        for Certain Financial  Instruments with  Characteristics
                        of both  Liabilities  and  Equity."  This new  statement
                        changes the accounting for certain financial instruments
                        that, under previous guidance, issuers could account for
                        as equity or  classifications  between  liabilities  and
                        equity in a section  that has been  known as  "mezzanine
                        capital." It requires that those certain  instruments be
                        classified as liabilities in balance sheets. Most of the
                        guidance  in SFAS  150 is  effective  for all  financial
                        instruments entered into or modified after May 31, 2003.
                        Management anticipates that the adoption of SFAS No. 150
                        may have a material impact on the Company's consolidated
                        financial statements if in the future the Company issues
                        mandatorily redeemable preferred stock. Such mandatorily
                        redeemable  preferred  stock,   previously  included  as
                        "mezzanine capital", would be included as a liability in
                        accordance with SFAS 150.

                        Reclassifications
                        Certain  reclassifications  have  been made in the prior
                        year's consolidated financial statements to conform with
                        the current year presentation.

--------------------------------------------------------------------------------
                                                                            F-18
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


3.   Bank Line          As of  September  30,  2003,  the Company  had  $550,786
     of Credit          outstanding  under a line of  credit  with  Zions  First
                        National Bank at September 30, 2003.  The line of credit
                        bears  interest at prime plus .25%  (4.25% at  September
                        30,  2003),  matures  on March 11,  2004,  is limited to
                        $550,000 plus fees,  and is secured by  certificates  of
                        deposit which the Company  holds as  restricted  cash of
                        $550,026.

4.   Related-Party      Prior to June 30, 2003, the Company had a line of credit
     Line of Credit     with ADP Management, Inc. (ADP), an entity controlled by
                        David Derrick,  Chief Executive  Officer and Chairman of
                        the Board of Directors,  and James Dalton, the Company's
                        President  and Vice  Chairman of the Board of Directors.
                        The line of  credit  bore  interest  at the  prime  rate
                        (4.00% at  September  30,  2003).  Borrowings  under the
                        arrangement were due on December 31, 2002.

                        During the year ended  September 30, 2003, in connection
                        with a raising  of equity  funds  for the  Company,  the
                        Company entered into an agreement with Derrick,  Dalton,
                        and ADP  Management  wherein  ADP  Management  agreed to
                        continue  to  assist  the   Company  in  its   financing
                        activities by assuming the following debt of the Company
                        into the ADP line of credit (see  supplemental cash flow
                        information):

                           o        $1,086,628 of short-term notes payable

                           o        $503,387 of Sun Trust line of credit

                           o        $550,000 of  certificates of deposit owed to
                                    individuals  used to secure the Zion's  Bank
                                    line of credit.

                        ADP also agreed to assume  certain  debt and  contingent
                        obligations  for which the Company has not been released
                        by the  holder of the  instrument  which  obligates  the
                        Company and is therefore still recorded on the Company's
                        books as follows:

                           o        $600,000   note  payable,   and   associated
                                    accrued interest of  approximately  $100,000
                                    due to a corporation

                           o        Redeemable common stock recorded at $725,000
                                    with a  redemption  obligation  of  $966,666
                                    (See note 7)

--------------------------------------------------------------------------------
                                                                            F-19
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


4.   Related-Party      After assuming the above debt and contingent liabilities
     Line of Credit     ADP assumed an additional note payable and converted its
     Continued          line of credit and the above  assumed  obligations  into
                        8,113,999 of the  Company's  common stock and  exchanged
                        subscription receivables as follows:

                           o        Converted  $2,373,961  of the  ADP  line  of
                                    credit,   including   $27,346   of   accrued
                                    interest on notes assumed by ADP.

                           o        Assumed an $800,000  note  payable due to an
                                    individual.  The Company was released as the
                                    primary   obligor   on  the   note   by  the
                                    individual  but remains a guarantor  for the
                                    full amount.

                           o        The   Company    assigned   a   subscription
                                    receivable of $338,300 due from MK financial
                                    to ADP Management.

                           o        The   Company    recorded   a   subscription
                                    receivable of $700,000 for the $600,000 note
                                    payable,  and associated accrued interest of
                                    approximately $100,000, due to a corporation
                                    which was  assumed  by ADP but for which the
                                    Company  has not been  released  by the note
                                    holder.

                        As  part  of  this   conversion   and  exchange  and  as
                        compensation for the guarantees the Company recognized a
                        non-cash  expense of $845,628 based on the excess of the
                        value of the stock  issued  over the debt  relieved  and
                        subscription receivable recorded.

                        Through December 31, 2001,  borrowings under the line of
                        credit, including any accrued interest, were convertible
                        at the option of the  holder at any time into  shares of
                        Series  A  Preferred  Stock  at a rate of one  share  of
                        Series A Preferred Stock for each $200  outstanding.  In
                        addition,  the  Company  was  required to issue to ADP a
                        warrant  to  purchase  one share of  Series A  Preferred
                        Stock at a price of $200 per  share  for  every  $200 in
                        principal  loaned  under the line of credit.  During the
                        quarter ended  December 31, 2001,  the Company  borrowed
                        $1,445,526  under the ADP line of credit  agreement.  In
                        connection with these borrowings, during the fiscal year
                        ended  September 30, 2002,  ADP was granted  warrants to
                        purchase 7,228 shares of Series A preferred  stock at an
                        exercise  price of $200 per share.  These  warrants were
                        determined  to have a value of  $1,778,013  based on the
                        Black  Scholes  Option  Pricing  Model  and a $3.00  per
                        common share price.


--------------------------------------------------------------------------------
                                                                            F-20
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


4.   Related-Party      Of this  amount,  $1,445,526  was  recorded  as interest
     Line of Credit     expense  and the  remaining  $332,488  was  recorded  as
     Continued          compensation  expense  due  to  the  fact  that  ADP  is
                        principally owned and controlled by David Derrick, Chief
                        Executive  Officer and Chairman of the Board,  and James
                        Dalton, the Company's President and Vice Chairman of the
                        Board of Directors.

                        On December  31,  2001 the  Company  amended its line of
                        credit  agreement with ADP. This amendment  provided for
                        the following:

                           o        Additional  borrowings or loan guarantees of
                                    up to $2 million were made  available to the
                                    Company by ADP between December 31, 2001 and
                                    March 31, 2002,  with all loan amounts being
                                    extended until December 31, 2002.

                           o        Removed   the  Series  A   Preferred   Stock
                                    conversion  feature  from  amounts  advanced
                                    under the line of credit  subsequent  to the
                                    amendment.

                           o        Removed the  requirement  to issue a warrant
                                    to  purchase  Series A  Preferred  Stock for
                                    each $200 loaned under the line of credit.

                           o        Established  a  maximum  of 6,688  shares of
                                    Series A Preferred  Stock  issuable upon the
                                    exercise  of the line of credit  outstanding
                                    as of the date of the amendment.

                        Also, in conjunction with the amendment,  which provided
                        for additional  borrowings under the line of credit, the
                        Company issued 3,450,000 options to ADP with an exercise
                        price of $.54 per share and an expiration  date of March
                        31, 2007. The value of these options, based on the Black
                        Scholes Option Pricing Model at a $3.00 per common share
                        price, was determined to be $9,666,439.  Of this amount,
                        $895,940,  which equaled the total additional borrowings
                        under the amended  agreement,  was  recorded as interest
                        expense,  and the remaining  $8,770,499  was recorded as
                        compensation  expense due to the related party nature of
                        the transaction.


--------------------------------------------------------------------------------
                                                                            F-21
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


4.   Related-Party      During  the years  ended  September  30,  2003 and 2002,
     Line of Credit     $73,279 and $924,936,  respectively  of borrowings  were
     Continued          utilized as  consideration  for the exercise of existing
                        options to purchase  1,712,844 shares of common stock at
                        an exercise price of $.54 per share.

                        During the years ended  September 30, 2003 and 2002, the
                        Company recorded interest expense related to the line of
                        credit of $31,446 and $2,357,920,  respectively. For the
                        year ended  September  30, 2002 this  expense  primarily
                        related  to the  issuance  of Series A  Preferred  Stock
                        warrants and common stock  warrants  issued  pursuant to
                        the  line-of-credit  agreement  valued  under  the Black
                        Scholes  Option  Pricing  Model  at a $3.00  per  common
                        share.  Because the value under the Black Scholes Option
                        Pricing  Model was greater  than the  proceeds  received
                        from the  borrowings,  an amount equal to the borrowings
                        of $2,341,465 was deemed to be interest expense with the
                        remaining  $9,102,987 of the expense  being  recorded in
                        administrative  expense as  compensation  for  providing
                        various guarantees on other debt obligations, assistance
                        to the Company in obtaining other financial arrangements
                        and services for  obtaining  extended  terms on existing
                        debt arrangements due to the related party nature of the
                        transaction.

                        This additional non-cash interest expense of $2,341,465,
                        based on the Black Scholes Option Pricing Model assuming
                        a $3.00 per common  share  fair  value,  resulted  in an
                        increase of approximately 539% to the effective interest
                        rate,  which when  combined  with the face interest rate
                        resulted in an effective  interest rate of approximately
                        544% for the year ended September 30, 2002.

5.   Related-Party      The Company owes two promissory  notes payable to former
     Convertible        SecureAlert shareholders,  each with a principal balance
     Promissory         of $134,235.  The  promissory  notes bear  interest at a
      Notes             rate of five percent per year.  On December 31, 2002 the
                        former  SecureAlert  shareholders  agreed to modify  the
                        terms of the  notes in which  payments  of  $40,000  per
                        month were required  beginning  March 11, 2003 until the
                        notes are paid in full.


--------------------------------------------------------------------------------
                                                                            F-22
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


6.   Short-term         Short-term  notes  payable consist  of  the following at
     Notes              September 30, 2002:
     Payable
                        Note payable to a corporation with
                        interest at 18% plus $100,000 interest
                        expense for an extension of the note's
                        original terms (incurred in fiscal year
                        2002). At September 30, 2003 the note was
                        in default and due on demand. The note,
                        including accrued interest, is secured
                        by a general lien on the Company's assets
                        and is personally guaranteed by David
                        Derrick and James Dalton. On April 2,
                        2003, David Derrick, James Dalton, and
                        ADP agreed to assume this note, however
                        the note holder has not released the
                        Company of this obligation.                 $   600,000

                        Note payable to an individual with
                        interest at 12% due monthly. The principal
                        on the note is due at the earlier of the
                        Company obtaining equity funding of
                        $2,000,000 or March 30, 2004. The note is
                        unsecured.                                      300,000

                        Convertible note payable to an individual
                        with interest at 12% due monthly. The
                        principal on the note is due at the earlier
                        of the Company obtaining equity funding of
                        $2,000,000 or March 30, 2004. The note is
                        convertible at $1.50 per share which may be
                        adjusted to reflect any dividend, split or
                        consolidation affect on the Company's stock.
                        This note is unsecured.                         175,000

                        Note payable to an entity with payments
                        of $8,000 due monthly, including interest
                        until note is paid in full. The note is
                        guaranteed by David Derrick and Michael
                        Acton.                                           45,759

                        Note payable to an individual with
                        interest at 18%, maturing on September 30,
                        2002 and unsecured. The note is in default
                        and is due on demand.                            25,000
                                                                       --------

                                                                    $ 1,145,759
                                                                    -----------

--------------------------------------------------------------------------------
                                                                            F-23
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


7.   Redeemable         The  Company  has  1,013,851  redeemable  common  shares
     Common             outstanding  of which  32,000  shares with a  redeemable
     Stock              value of $96,000  are subject to  mandatory  redemption.
                        The remaining  981,851 shares of redeemable stock with a
                        recorded value of $1,440,006  and a redemption  value of
                        $1,856,666 are conditionally  redeemable.  Generally, if
                        the  Company's  common stock is being traded at or above
                        the redemption  value on a national  exchange before the
                        redemption  date,  December  31,  2003,  the  redemption
                        option becomes void. The redeemable  shares are assessed
                        each reporting period to be classified as liabilities if
                        within the reporting  period the condition of redemption
                        is satisfied or the date of redemption  becomes  certain
                        to  occur.  These  shares  have  all the  rights  of the
                        Company's common stock and are redeemable as follows: As
                        disclosed in note 16, the Company's stock was not listed
                        on a national  exchange and therefore will be classified
                        as liabilities in the first quarter of fiscal year 2004.

8.   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,
                        2003,  there were  30,446  shares of Series A  Preferred
                        Stock outstanding.

--------------------------------------------------------------------------------
                                                                            F-24
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


8.   Preferred          Dividends
     Stock              The  holders of the Series A  Preferred  Stock,  some of
     Continued          which are  controlled  by officer's 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
                        Preferred Stock (or $200 per share),  payable in cash or
                        in additional  shares of Series A Preferred Stock 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,  2003  and  2002,  the  Company  recorded
                        $1,282,556   and  $501,000  in  dividends  on  Series  A
                        Preferred  Stock.  The Company  paid  substantially  all
                        dividends  during  the year by issuing  6,413  shares of
                        series A shares.

                        Convertibility
                        Series A Preferred Stock is convertible at 370 shares of
                        common stock for each share of Series A Preferred Stock.
                        During the years ended  September 30, 2003 and 2002, the
                        Company recorded a total of approximately $1,090,000 and
                        $0, respectively,  related to the beneficial  conversion
                        feature of the Series A Preferred  Stock. The beneficial
                        conversion  is  recorded  as an  off-set  to  additional
                        paid-in-capital  because  of the  retained  deficit  and
                        therefore has a net effect of $0 in equity.

                        During the year ended September 30, 2003, 2097 shares of
                        Series A Preferred  Stock were  converted  into  652,352
                        shares of common stock.  During the year ended September
                        30, 2002,  6,872 shares of Series A Preferred Stock were
                        converted into 2,537,846 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.

--------------------------------------------------------------------------------
                                                                            F-25
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


8.   Preferred          Optional Redemption
     Stock              The Company may, at its option,  redeem up to two-thirds
     Continued          of the total  number  of  shares  of Series A  Preferred
                        Stock. As of September 30, 2003, the redemption price is
                        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, 2003, 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, 2003,  the Company
                        issued 6,413 shares of series A shares payment of Series
                        A  dividends  and  converted  2,097  shares  of Series A
                        Preferred Stock into 652,352 shares of common stock.

                        During the year ended  September  30, 2002,  the Company
                        issued 8,821 shares of Series A Preferred  Stock to ADP,
                        a company  controlled by David Derrick,  Chief Executive
                        Officer and Chairman of the Board of Directors and James
                        Dalton, the Company's President and Vice Chairman of the
                        Board of Directors. Of these shares 6,688 were issued in
                        connection with a cashless exercise of Series A warrants
                        received from providing  loans through a  line-of-credit
                        (see  Note  5).  This  cashless   exercise  resulted  in
                        additional  compensation  expense of $5,416,812 based on
                        the common stock  conversion rate of Series A shares and
                        a $3.00 per common  share  price.  An  additional  2,094
                        Series A shares  were also  issued to ADP in  connection
                        with obtaining financing and consulting arrangements for
                        the Company.  These  shares  resulted in  $2,324,340  of
                        compensation   expense   based  on  the   common   stock
                        conversion  rate of  Series  A  shares  and a $3.00  per
                        common share price.  The remaining 39 shares were issued
                        in  lieu  of  Preferred  Series  A  cash  dividend.  ADP
                        converted  6,872 of its Series A shares  into  2,537,846
                        shares of common stock.


--------------------------------------------------------------------------------
                                                                            F-26
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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



8.   Preferred          Warrants to Purchase Series A Preferred Stock
     Stock              On June 1, 2001, the Company amended its  line-of-credit
     Continued          agreement with ADP (see Note 4) and increased the amount
                        available  to borrow by the Company  from ADP to a total
                        of $3 million with the line of credit due and payable on
                        December  31,  2001.  As  part of  that  amendment,  the
                        Company  granted ADP the right to purchase  one share of
                        Series A Preferred  Stock at an  exercise  price of $200
                        for  each  $200  advanced  under  the  line  of  credit.
                        Originally  the warrants  were to expire on December 31,
                        2002. The Company issued 7,228 Series A warrants  during
                        the three  months ended  December  31, 2001,  as part of
                        this  arrangement.  These  warrants were valued based on
                        the  Black  Scholes  Option  Pricing  Model at $3.00 per
                        common   share,   which   resulted   in  an  expense  of
                        $1,778,013,   of  which   $1,445,525  was  allocated  to
                        interest expense under the line of credit,  and $332,488
                        was allocated to compensation  expense.  On December 31,
                        2001, the Company amended its agreement with ADP whereby
                        ADP  agreed  to  loan  or  guarantee  loans  of up to an
                        additional  $2 million  between  December  31,  2001 and
                        March 31,  2002,  with all loans  being  extended  until
                        December 31, 2002. In connection  with this amendment to
                        the  line-of-credit   agreement,   ADP  was  allowed  to
                        exercise  8,158 Series A Preferred  Stock  warrants on a
                        cashless  method into 6,688 Shares of Series A Preferred
                        Stock during the year ended  September  30,  2002.  This
                        cashless  exercise  resulted in $5,416,812 of additional
                        compensation expense during the year ended September 30,
                        2002. All remaining  warrants resulting from the line of
                        credit  agreement that were  outstanding as of that date
                        were terminated.

                        Series B Convertible Preferred Stock
                        On June 7, 2001,  the holders of the Company's  Series A
                        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 dividend on the common
                        stock,  and subject to the preferences of the holders of
                        the Series A Preferred Stock.


--------------------------------------------------------------------------------
                                                                            F-27
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


8.   Preferred          Convertibility
     Stock              During the year ended  September  30, 2002,  the Company
     Continued          issued  1,135,823 shares of Series B Preferred Stock. Of
                        these issuances 1,000,000 shares were sold to Matsushita
                        Electric Works,  Ltd., a Japanese  corporation  ("MEW").
                        The  Series B  Preferred  stockholders  were  granted an
                        anti-dilution  right  on  the  common  stock  conversion
                        feature of the  1,000,000  Series B shares it purchased.
                        If the  Company  shall  at any time  during  a  two-year
                        period  (beginning  April 2002) issue or sell its common
                        stock or any security  exercisable into common stock for
                        an equivalent  value of less than $3.00 per share,  then
                        the  conversion  price of the 1,000,000  Series B shares
                        into common  stock will be adjusted to the common  stock
                        equivalent   value  of  those   securities   sold.   The
                        anti-dilution  right was waived by MEW and certain other
                        Series B Preferred  stockholders  through  December  12,
                        2003.

                        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 stock. 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.   If,  with  certain   limited
                        exceptions,  the  Company  issues  any  shares of common
                        stock  or  securities   convertible  into  common  stock
                        without  consideration or for a consideration  per share
                        less  than 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 $3.30  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.

--------------------------------------------------------------------------------
                                                                            F-28
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


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

                        Issuance of Series B Preferred Stock
                        During the year ended  September  30, 2002,  the Company
                        issued  1,135,823  shares of Series B Preferred Stock in
                        exchange for net cash proceeds of  $3,366,273.  Of these
                        shares   purchased   1,000,000  shares  were  sold  with
                        1,000,000 common stock warrants attached.

9.   Common             Authorized Shares
     Stock              The Company  is  authorized to  issue up  to  50,000,000
                        shares of common stock.

                        Divestiture Add-On Shares
                        In February 1997,  Biomune declared that it would divest
                        itself of the Company by  distributing  the common stock
                        of the  Company as a dividend  by which one share of the
                        Company's common stock was issued for every 10 shares of
                        Biomune common stock held by the  shareholders of record
                        of Biomune as of March 5, 1997.  The  divestiture of the
                        Company  was  effective  October  1,  1997.  On or about
                        February 1, 1998,  the dividend  shares of the Company's
                        common stock were delivered to the Biomune  stockholders
                        who had been shareholders of record as of March 5, 1997.

                        Both the Company and Biomune were  unaware  however that
                        the National  Association of Securities Dealers ("NASD")
                        had  announced  to its  members an  ex-dividend  date of
                        February  11,  1998  for  the   spin-off   distribution,
                        notwithstanding  the fact that  Biomune  had  previously
                        notified the NASD and publicly  announced an ex-dividend
                        and record date of March 5, 1997. NASD informed  holders
                        of Biomune  common  stock as of  February  11, 1998 that
                        they would receive the dividend based on their ownership
                        of Biomune common stock as of February 11, 1998.


--------------------------------------------------------------------------------
                                                                            F-29
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


9.   Common             Divestiture Add-On Shares - Continued
     Stock              After  consultation  with  the  NASD,  Biomune  and  the
     Continued          Company  agreed to issue  additional  shares of  Company
                        common stock as part of the original dividend  announced
                        March 5, 1997,  to cover (a) the dividend in the Company
                        that technically inured to the benefit of the holders of
                        Biomune's  common stock issued between March 5, 1997 and
                        February  11, 1998 by reason of the NASD's  action;  and
                        (b) short  positions  held by accounts  which  purchased
                        Biomune  common stock between March 5, 1997 and February
                        11, 1998,  from accounts not then held in "street name".
                        Street name accounts were  electronically  credited with
                        the dividend  shares during the year ended September 30,
                        2001.

                        During the years ended  September 30, 2003 and 2002, the
                        Company  issued no shares of common stock as  additional
                        distribution  shares under its agreement  with the NASD.
                        The Company may be required to issue  additional  shares
                        in the future.

                        Common Stock Issuances
                        During the year ended  September  30, 2003,  the Company
                        issued  11,760,422  shares  of  common  stock.  Of these
                        shares,  135,701 were issued  related to the exercise of
                        stock  options  whereby  the  exercise  price  was  paid
                        through the  extinguishment  of  $135,701 in  borrowings
                        under the line of  credit  with ADP (see Note 5). Of the
                        remaining 11,624,721 shares issued,  517,256 shares were
                        issued for services, 15,000 shares were issued to induce
                        financing,   652,352   shares   were   issued  upon  the
                        conversion of 2,097 shares of Series A Preferred  Stock,
                        2,038,446 issued for cash of $1,258,700,  302,668 shares
                        were issued for debt and accrued  interest of  $442,750,
                        and the remaining 8,113,999 were issued to ADP (see Note
                        4).

                        During the year ended  September  30, 2002,  the Company
                        issued  4,775,310  shares  of  common  stock.  Of  these
                        shares, 1,712,844 were issued related to the exercise of
                        stock  options  whereby  the  exercise  price  was  paid
                        through the  extinguishment  of  $924,934 in  borrowings
                        under the line of  credit  with ADP (see Note 5). Of the
                        remaining 2,969,466 shares issued, 2,537,846 shares were
                        issued  for  conversion  of  6,872  shares  of  Series A
                        preferred shares; 303,885 for services,  valued at $3.00
                        per share;  145,000 for interest expense valued at $3.00
                        per share;  35,735 for debt and accrued  interest valued
                        at $3.00 per share,  and 40,000  shares  were  issued in
                        exchange for redeemable common stock.

--------------------------------------------------------------------------------
                                                                            F-30
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


10.  Common             Stock Incentive Plan
     Stock              The Company has adopted the 1997  Volu-Sol,  Inc.  Stock
     Options and        Incentive  Plan  (the  "1997  Plan").  The 1997 Plan was
     Warrants           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, 2003,  1,440,000  shares have
                        been granted under the 1997 Plan.

                        A summary of stock  option and warrant  activity for the
                        years ended September 30, 2003 and 2002 is as follows:

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

 Outstanding at October 1, 2001               2,079,477   $   1.00 to 7.00
     Granted                                  6,683,161        .54 to 3.00
     Expired or cancelled                      (14,250)               5.80
     Exercised                              (1,712,844)                .54
                                        -----------------------------------

 Outstanding at September 30, 2002            7,035,544        .54 to 7.00
     Granted                                    307,500        .54 to 3.00
     Expired                                          -                  -
     Exercised                                (140,701)        .54 to 1.00
                                        -----------------------------------

 Outstanding at September 30, 2003            7,202,343   $    .54 to 7.00
                                        -----------------------------------


--------------------------------------------------------------------------------
                                                                            F-31
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


10.  Common             Stock Incentive Plan - Continued
     Stock              The Company has adopted the  disclosure-only  provisions
     Options and        of Statement of Financial  Accounting  Standards  (SFAS)
     Warrants           No.  123,   Accounting  for  Stock-Based   Compensation.
     Continued          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.  Had  compensation  cost  for  the
                        Company's  stock option plans been  determined  based on
                        the fair  value at the grant  date for  awards in fiscal
                        year 2003 and 2002  consistent  with the  provisions  of
                        SFAS No. 123,  the  Company's  approximate  net loss and
                        loss per share  would  have  been the pro forma  amounts
                        indicated below:

                        The following table summarizes  information  about stock
                        options and warrants outstanding at September 30, 2003:

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

 $  .54 - 1.00    2,113,399    3.33      $        .65    2,113,399  $       .65
          3.00    3,988,944    3.07              3.00    3,988,944         3.00
   5.00 - 7.00    1,100,000    1.63              6.00    1,100,000         6.00
 -------------------------------------------------------------------------------

 $  .54 - 7.00    7,202,343    2.93      $       2.77    7,202,343  $      2.77
 -------------------------------------------------------------------------------

                        As of September 30, 2003,  all  outstanding  options and
                        warrants are exercisable.

                        During the year ended  September  30, 2003,  the Company
                        issued 307,500 common stock options of which 25,000 were
                        issued to employees  with an exercise price of $1.00 and
                        282,500 were issued to consultants at a weighted average
                        price of $1.73 per share.


--------------------------------------------------------------------------------
                                                                            F-32
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


10.  Common             Stock Incentive Plan - Continued
     Stock              During the year ended  September  30, 2002,  the Company
     Options and        issued 3,450,000 options at an exercise price of $.54 to
     Warrants           ADP, a company  under common  control by David  Derrick,
     Continued          Chief  Executive  Officer  and  Chairman of the Board of
                        Directors, and James Dalton, the Company's President and
                        Vice  Chairman  of the Board of  Directors.  The options
                        were  issued in  connection  with a $2  million  line of
                        credit provided to the Company, and extension of current
                        debts owed by the Company to ADP.  The issuance of these
                        options  resulted in  $895,940  of interest  expense and
                        $8,770,499  of  compensation  expense based on the Black
                        Scholes  Option  Pricing Model with an estimated  common
                        share price of $3.00.

                        During the year ended  September  30,  2002 the  Company
                        issued 920,361 options to purchase the Company's  common
                        stock at an exercise  price of $3.00 to  consultants  or
                        outside  parties for  services.  The Company  recognized
                        approximately  $2,236,072  of  expense  related to these
                        issuances based on a $3.00 common share price.

                        During the year ended  September  30, 2002,  the Company
                        issued  1,000,000  common stock  warrants at an exercise
                        price of $3.00 in conjunction with the sale of 1,000,000
                        shares of Series B Preferred Stock.

11.  Distribution       On  December  31,  2002  the  Company  entered  into  an
     of Net Asset       agreement in which the Company  modified its approach to
     for Stock          its consumer electronics  business component.  Under its
     Repurchase         modified   approach,   the  Company   sold  a  right  of
                        distribution  of consumer  electronic  products it holds
                        under an agreement  with Philips and MemCorp and certain
                        related assets to SecureAlert Entertainment,  LLC, (SAE)
                        an  entity  controlled  by the  former  shareholders  of
                        SecureAlert, Inc. In exchange for this right and assets,
                        SAE assumed the following  liabilities  and  surrendered
                        401,952 shares of the Company's common stock as follows:


--------------------------------------------------------------------------------
                                                                            F-33
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


11.  Distribution
     of Net Asset
     for Stock
     Repurchase
     Continued


 Accounts payable and accrued liabilities assumed by SAE           $    488,410
 Bank line-of-credit assumed by SAE                                     300,000
 Purchase obligation to former SecureAlert shareholders assumed
   by SAE                                                               400,000
 Common stock (401,952 shares) surrendered by SAE shareholders               40
 Accounts receivable purchased by SAE                                  (370,501)
 Inventory purchased by SAE                                            (539,706)
 Property and equipment, net of $80,331 accumulated depreciation
   purchased by SAE                                                    (183,484)
                                                                   -------------

                                                                   $     94,759
                                                                   -------------

                        The value of the net liabilities relieved of $94,759 was
                        recognized  as a gain on the  repurchase of the stock as
                        an increase to additional paid in capital.

                        As part  of this  transaction,  the  Company  acts as an
                        agent in selling  products to SAE but has recognized all
                        sales relating to consumer electronic products beginning
                        January 1, 2003,  on a net basis as the Company does not
                        act as a principal in the purchase transactions with the
                        suppliers of consumer electronic products. The agreement
                        with SAE expires on December 31, 2003.

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

                        Related Party Advances Payable
                        As of September  30, 2003 the Company had related  party
                        advances  payable of $82,676 due to ADP.  These advances
                        are interest free and due on demand.

                        Financing Transactions
                        During the year ended  September  30, 2003,  the Company
                        restructured  a substantial  portion of its debt through
                        the ADP line of credit.  This  transaction  included ADP
                        assuming and converting  various debt  instruments.  See
                        Note 4.


--------------------------------------------------------------------------------
                                                                            F-34
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


12.  Related Party      Financing Transactions - Continued
     Transactions       During the year ended  September  30, 2002,  the Company
     Continued          had gross increases of approximately  $4.7 million under
                        a line of  credit  with ADP (see  Note 5).  The  Company
                        recognized  interest expense related to these borrowings
                        of $2,357,920 of which  $2,341,465 was from the issuance
                        of  options  as  part  of  the  financing  agreement  to
                        purchase common stock and warrants to purchase Preferred
                        Series A stock (see Notes 8 and 10). The value of theses
                        warrants  and  options  was based on the  Black  Scholes
                        Option  Pricing  Model with an  estimated  common  share
                        value of $3.00.

                        During the year ended  September  30, 2002,  the Company
                        issued 2,094  shares of Series A Preferred  Stock valued
                        at  $2,324,340  for services  and  expenses  rendered by
                        Messrs.  Derrick and Dalton (see Note 8). ADP  exercised
                        8,158  Series A  Preferred  Stock  warrants  to purchase
                        6,688  shares  of  Series A  Preferred  Stock  through a
                        cashless  exercise  (see Note 8),  and  converted  6,872
                        shares of Series A Preferred Stock into 2,537,846 shares
                        of common stock (see Note 8).

                        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  $10,000  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.

--------------------------------------------------------------------------------
                                                                            F-35
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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



12.  Related Party      Consulting Arrangements - Continued
     Transactions       During the year ended September 30, 2003 and 2002, under
     Continued          the consulting and line-of-credit arrangements described
                        above,  the Company  recorded  compensation  expenses of
                        $2,181,822 and $18,871,003,  respectively.  For the year
                        ended  September 30, 2002 $2,324,340 was paid by issuing
                        2,094 shares of Series A Preferred  Stock to ADP and Mr.
                        Dalton,  the  Company's  President  and Vice Chairman or
                        their respective assignees.  In addition during the year
                        ended  September  30, 2002,  $15,312,031  of  consulting
                        expense  was paid by  issuing  options  or  warrants  to
                        purchase  common  stock  and  preferred  Series  A stock
                        valued based on the Black Scholes  Option  Pricing Model
                        assuming a $3.00 per common share market value.

                        Personal Guarantees
                        As of September  30, 2003,  the Company has entered into
                        approximately  $745,759  of  promissory  notes which are
                        personally  guaranteed  by Derrick and Dalton and are in
                        some  cases  collateralized  by shares of the  Company's
                        common stock held by them (see Note 8).

                        Related-Party Sales
                        During the year ended  September 30, 2003 and 2002,  the
                        Company   recorded   sales  of  $3,990   and   $253,108,
                        respectively,  to an entity  owned by the  relative of a
                        former officer of the Company.


--------------------------------------------------------------------------------
                                                                            F-36
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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



12.  Related Party      License Agreement
     Transactions       During the year ended  September  30, 2002,  the Company
     Continued          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, under the terms of the License Agreement. 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, 2003
                        and 2002, the Company paid MEW $384,625 and $310,000 for
                        GPS products and related services.

13.  Income             For the years ended  September  30,  2003 and 2002,  the
     Taxes              Company  incurred net operating  losses of approximately
                        $5,524,000 and  $7,945,000 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.


--------------------------------------------------------------------------------
                                                                            F-37
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


13.  Income             At  September  30, 2003,  the Company has net  operating
     Taxes              loss  carryforwards  available to offset future  taxable
     Continued          income of approximately  $23,050,000 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, 2003:


                                                                     2003
                                                              ------------------

                        Net operating loss carryforwards       $      8,598,000
                        Depreciation and reserves                     2,408,000
                        Core technology                                 157,000
                        Accruals and reserves                           208,000
                        Valuation allowance                         (11,371,000)
                                                              ------------------

                                                               $              -
                                                              ------------------


--------------------------------------------------------------------------------
                                                                            F-38
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


13.  Income             Reconciliations  between the benefit for income taxes at
     Taxes              the federal  statutory income tax rate and the Company's
     Continued          benefit for income  taxes for the years ended  September
                        30, 2003 and 2002 are as follows:

                                                      2003             2002
                                              ----------------------------------

 Federal income tax benefit at
   statutory rate                              $      2,670,000  $   11,381,000
 State income tax benefit, net of
   federal income tax effect                            259,000       1,105,000
 Beneficial conversion features and
   preferred stock warrants
   associated with borrowings under
   a related-party line of credit                             -        (663,000)
 Conversion inducement for Series A
   convertible debenture                                      -               -
 Stock valuation for services                                        (3,091,000)
 Stock warrants and options for
   services                                                   -      (4,440,000)
 Other                                                   30,000          14,000
 Change in valuation allowance                      (2,959,000)      (4,306,000)
                                              ----------------------------------

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

14.  Commitment         Legal Matters
     and                The  Company is  involved  in  various  claims and legal
     Contingencies      actions arising in the ordinary  course of business.  It
                        is the opinion of  management,  after  discussions  with
                        legal  counsel,  that the ultimate  disposition of these
                        matters will not have a material  adverse  effect on the
                        Company's financial position or results of operations.



--------------------------------------------------------------------------------
                                                                            F-39
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


14.  Commitment         Lease Obligations
     and                The  Company  leases a facility  under a  noncancellable
     Contingencies      operating  lease that expires in November  2005.  Future
     Continued          minimum  rental   payments   under  the   non-cancelable
                        operating   lease   as  of   September   30,   2003  are
                        approximately as follows:

                         Year Ending September 30:               Amount
                         -------------------------        ------------------

                             2004                          $         66,000
                             2005                                    11,000
                                                          ------------------

                                                           $         77,000
                                                          ------------------

                        Rent expense  related to this  non-cancelable  operating
                        lease was  approximately  $69,000  and  $62,000  for the
                        years ended September 30, 2003 and 2002, 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
                        In October 2001,  the Company  entered into an agreement
                        with a vendor for cellular  switching access.  Under the
                        agreement,  the vendor will provide a software interface
                        and a  dedicated  circuit  for  the  Company's  MobilPal
                        network.  The cost to the Company during the years ended
                        September 30, 2003 and 2002 were approximately  $115,000
                        and $180,000. In Fiscal years 2004, the minimum required
                        monthly payments will be $15,000.

--------------------------------------------------------------------------------
                                                                            F-40
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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



14.  Commitment         Purchase and Royalty Agreement
     and                On July 1, 2001,  the Company  entered into an agreement
     Contingencies      with Philips,  a manufacturer  of consumer  electronics.
     Continued          Under the  agreement,  the  Company has  committed  to a
                        minimum amount of purchases.  This agreement  expires on
                        June  30,  2006,  provided  however,  that  Philips  can
                        terminate the agreement if the Company fails to maintain
                        cumulative  purchase  volumes of $5,750,000,  $8,250,000
                        and  $11,250,000 in years ending June 2004 through 2006,
                        respectively. If purchase volumes are not maintained the
                        distribution  right of the  Company  may be  terminated.
                        During the year ended  September  30,  2003 the  Company
                        fulfilled its purchase  obligation  through  SecureAlert
                        Entertainment  (SAE), a Company owned by former officers
                        of SecureAlert, Inc. The SAE is maintaining the purchase
                        volume and a 4.5 percent  royalty to Phillips on certain
                        products sold.

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   distributing   consumer   electronics
                        products  to  the   manufactured   home  market.   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).


--------------------------------------------------------------------------------
                                                                            F-41
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


15.  Segment            The   following   table   reflects   certain   financial
     Information        information relating to each reportable segment for each
     Continued          of the years ended September 30, 2003 and 2002.

                                                     2003             2002
                                             ----------------------------------

 Net sales:
      SecureAlert
         Consumer electronics                $      3,264,961   $     9,669,650
         Mobile emergency and personal
           security systems                           346,785           801,320
                                             ----------------------------------

                                                    3,611,746        10,470,970
 Reagents                                             551,780           542,177
                                             ----------------------------------

                                             $      4,163,526   $    11,013,147
                                             ----------------------------------

 Operating income (loss):
      SecureAlert                            $     (3,229,753)  $    (6,826,139)
      Reagents                                         50,084            33,728
      Other (unallocated)                          (3,872,096)      (23,429,789)
                                             ----------------------------------

                                             $     (7,051,765)  $   (30,222,200)
                                             ----------------------------------

                                                   2003             2002
                                             ----------------------------------

 Depreciation and amortization:
      SecureAlert                            $        214,405   $      287,059
      Reagents                                          2,767           11,437
      Other (unallocated)                               8,288            6,603
                                             ----------------------------------

                                             $        225,460   $      305,099
                                            ----------------------------------

 Capital expenditures:
      SecureAlert                            $              -   $       93,824
      Reagents                                              -            1,357
      Other (unallocated)                               2,345            5,937
                                             ----------------------------------

                                             $          2,345   $      101,118
                                             ----------------------------------

 Interest income:
      SecureAlert                            $              -   $          348
      Reagents                                             22              327
      Other (unallocated)                               1,077            4,887
                                             ---------------------------------

                                             $          1,099   $        5,562
                                             ----------------------------------


--------------------------------------------------------------------------------
                                                                            F-42
<PAGE>

                                                                 REMOTEMDX, INC.
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


15.  Segment
     Information
     Continued

 Interest expense:
      SecureAlert                            $         65,088   $      178,053
      Reagents                                            621                -
      Other (unallocated)                             773,822        3,085,600
                                             ----------------------------------

                                             $        839,531   $    3,263,653
                                             ----------------------------------


 Identifiable assets:
      SecureAlert (including goodwill and
        intangibles of $1,461,164)           $      1,827,902
      Reagents                                        117,606
      Other (unallocated)                             697,549
                                             ----------------

                                             $      2,643,057
                                             ----------------

16.  Subsequent         On  October  27,  2003,  the  Company  entered  into  an
     Events             agreement  with a corporation  to settle an  outstanding
                        debt of $600,000 plus accrued interest of $153,468.  The
                        corporation  agreed  to accept  as  payment  in full the
                        following  terms:  a) Cash  payment  of  $125,000  on or
                        before  October 31, 2003, b) Conversion of $253,468 into
                        168,979  shares of the  Company,  Inc.  common  stock (a
                        conversion rate of $1.50 per share), and c) Cash payment
                        of $375,000 on or before  November 15, 2003. The Company
                        has paid  $200,000  toward this note and is currently in
                        default.  As part of the Company's debt restructure with
                        ADP (see note 4), ADP  agreed to assume this obligation;
                        however, the  corporation has  not released  the Company
                        from this obligation.

                        On December 12, 2003 the Company,  by a written  consent
                        and waiver, the majority of shareholders of Series A and
                        B  Convertible  Preferred  Stock  resolved that Series A
                        shares  dividends  may  be  paid  in  common  stock.  In
                        addition,  MEW  and  certain other Series B shareholders
                        waived  their  Series  B  anti-dilution  rights  through
                        December 12, 2003.

                        On  December  31,  2003  the  Company  had  not  met the
                        conditions  to  void  the  redemption   options  of  its
                        redeemable  common stock.  The  redeemable  stock may be
                        exercised  at the  option  of  the  holders  at a  total
                        redeemable value of $1,952,666.


--------------------------------------------------------------------------------
                                                                            F-43
<PAGE>


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

On May 13, 2002, we dismissed Arthur Andersen LLP as the independent public
accountant to audit our consolidated financial statements. The decision to
dismiss Arthur Andersen LLP was approved by the board of directors and the Audit
Committee.

The Audit Committee has engaged Tanner + Co. as our independent public
accountant. During the period from the date of Andersen's engagement as our
independent public accountants to and through the date of this Report, we did
not consult with Tanner + Co. on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.


                                       30
<PAGE>

Arthur Andersen's report on the financial statements for the fiscal year ended
September 30, 2001 (the last fiscal year for which a report was filed) did not
contain an adverse opinion or a disclaimer of opinion. However, Arthur
Andersen's report was modified for uncertainty as to whether we would continue
as a going concern. There was no qualification or modification as to audit scope
or accounting principles. During our most recent fiscal year and the subsequent
interim period preceding Arthur Andersen's dismissal on May 13, 2002, there were
no disagreements with Arthur Andersen on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Arthur Andersen, would
have caused them to make a reference to the subject matter of the disagreements
in connection with its report. No disagreements have arisen in the period since
the date of Arthur Andersen's dismissal.

None of the reportable events described under Item 304(a)(1)(iv) of Regulation
S-B occurred during the fiscal year ended September 30, 2001 or within the
interim period through the date of this report.

We have provided Arthur Andersen with a copy of the foregoing disclosures. A
letter from Arthur Andersen addressed to the Securities and Exchange Commission
pursuant to Regulation S-B, Item 304(a)(3) was included as Exhibit 16 to this
Form 8-K as originally filed. Arthur Andersen has advised us that they will not
update that letter.

We have provided Arthur Andersen with a copy of the foregoing disclosures. A
letter from Arthur Andersen addressed to the Securities and Exchange Commission
pursuant to Regulation S-B, Item 304(a)(3) has been included as Exhibit 16 to
Form 8-K filed on May 15, 2002, amended July 3, 2003.

Item 8A.  Controls and Procedures

As required by SEC rules, we have evaluated the effectiveness of the design and
operation of our disclosure controls and procedures within 90 days of the filing
date of this quarterly report. This evaluation was carried out under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer. Based on this
evaluation, these officers have concluded that the design and operation of our
disclosure controls and procedures are effective. There were no significant
changes to our internal controls or in other factors that could significantly
affect internal controls subsequent to the date of their evaluation.

Disclosure controls and procedures are our controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by us in the reports that we file under the Exchange Act is
accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure.

                                    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 December 31, 2003:

        Name                      Age              Position


David G. Derrick                  51           Chief Executive Officer and
                                               Chairman (Director)
James J. Dalton                   60           President and Vice Chairman
                                               (Director)
Wilford W. Kirton, III            42           Director and President of
                                               Medical Products
Michael G. Acton                  40           Chief Financial Officer,
                                               Secretary-Treasurer
Jonathan Barnes                   29           Chief Technical Officer
Peter McCall                      44           Director
Robert E. Childers                57           Director

                                       31
<PAGE>


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. From 1996 to 1999, 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, 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, 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, Dalton served as an officer and
director of Biomune Systems, Inc. Prior to joining us and following his
resignation from Biomune Systems, Dalton managed his personal investments.

Wilford W. Kirton III - Vice President of PAL Services and Director

Mr. Kirton joined us as a director and as an executive officer in January 1998,
currently serving as our Vice President of PAL Services. He was our CEO from
1998 until 2001. Prior to joining us, Mr. Kirton was the proprietor and
President of Travel Systems Network, a travel agency and tour operator from 1987
to 1994. From February 1994 to June 1996, Mr. Kirton was Vice President of Old
Republic Title, a real estate title company. Mr. Kirton then became an officer
of Optim Nutrition, a subsidiary of Biomune Systems, Inc. until joining us in
January 1998. Mr. Kirton is David Derrick's brother-in-law.

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.

Jonathan Barnes - Chief Technical Officer

Mr. Barnes joined us as a part time technical advisor in October 2000, and was
hired full time as our CTO in November 2001. Previous to working with RemoteMDx,
Mr. Barnes was an independent technical consultant for various clients in
science and information technology. Mr. Barnes is responsible for all technology
coordination for the Company. Mr. Barnes has a Masters Degree in Physics and
Astronomy from Brigham Young University. He has headed numerous research and
development projects in coordination with Brigham Young University and NASA. Mr.
Barnes has an extensive background in science, computers, data gathering, and
telematics.

Peter McCall - Director

Mr. McCall joined our board of directors in July 2001. From 1998 to 2002, Mr.
McCall was Vice President for General Electric Capital Corp. where he was
responsible for whole loan mortgages and private label pass-through. From 1988
to 1998, he served as a Vice President of Financial Security Assurance, and
Managing Director of the residential mortgage purchase program for Nomura
Securities International. Mr. McCall is currently the owner of McCall Inc., a
privately held company that focuses on investments in start up companies. Mr.
McCall is a member of the Audit Committee of the board of directors.

                                       32
<PAGE>

Robert Childers - Director

Mr. Childers joined our board in July 2001. He is Chief Executive Officer of
Structures Resources Inc. 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. In
1972, Mr. Childers founded Structures Resources Inc. a design build construction
firm, and has been president of that company for 28 years. 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 of the board of directors.

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
required to be filed by these individuals and persons under Section 16(a) were
timely filed.

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 three times during fiscal year 2003. No director
attended fewer than 75% of the meetings during the fiscal year. The board also
acted during fiscal year 2003 by unanimous written consent in lieu of a meeting,
as permitted by Utah law and our bylaws. The board has no formal Nominating
Committee. The board has an Audit Committee, currently comprised of Mr. McCall
and Mr. Childers. The Audit Committee held no separate meetings in fiscal year
2003.

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.

Remuneration

Non-employee directors are paid $1,500 per meeting 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. No options have been granted or compensation paid under this
arrangement as of the date of this report.


                                       33
<PAGE>

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, 2003 as well as our four most highly compensated
executive officers other than the CEO who were serving as executive officers at
the end of the year ended September 30, 2003, whose total annual salary and
bonus for the year then ended exceeded $100,000 (the "Named Executive
Officers").
<TABLE>
<CAPTION>

                           Summary Compensation Table

                                                                        Annual Compensation                Long Term
                                                                                                         Compensation
                                                                                                            Awards

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

<S>                                               <C>      <C>         <C>         <C>                <C>             <C>
David G. Derrick, Chief Executive Officer         2001     $100,000    $  63,000   $    110,000       579,924/0       $   125,000
   Chairman of the Board of Directors (1)         2002     $120,000    $       0   $    180,000          0/0          $         0
                                                  2003     $120,000    $       0   $     53,910       845,628         $         0

James J. Dalton                                   2001     $100,000    $       0   $          0       579,924/0       $         0
   President and Vice Chairman (2)                2002     $100,000    $       0   $          0          0/0          $         0
                                                  2003     $100,000    $       0   $          0          0/0          $         0

Michael G. Acton, Chief Financial Officer (3)     2001     $ 62,180    $  12,500   $    100,000       240,496/0       $         0
                                                  2002     $100,000    $  28,750   $          0          0/0          $         0
                                                  2003     $100,000    $  25,000   $      4,092          0/0          $         0

Wilford Kirton III                                2001     $107,654    $  21,500   $     10,650       400,000/0       $         0
   Vice President PAL Services (4)                2002     $108,000    $       0   $          0          0/0          $         0
                                                  2003     $108,000    $       0   $          0          0/0          $         0
</TABLE>

(1)      Mr. Derrick became Chief Executive Officer in February 2001. Amounts
         indicated in table do not include amounts recorded by the Company under
         applicable accounting principles for non-cash compensation paid to ADP
         Management in connection with financing transactions that were entered
         into by the Company and ADP Management during the years 2001, 2002 or
         2003. 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)      James J. Dalton who also serves as the Vice Chairman of our Board of
         Directors. During 2001, 2002 and 2003, Dalton was paid $100,000 a year
         under a consulting agreement. His annual salary as President is
         $100,000. The consulting fees and salary owed to Dalton have
         historically been accrued as part of the ADP Management financing
         arrangements. Outstanding amounts have been converted to common stock
         as of June 2003. See "Certain Relationships and Related Transactions."

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

(4)      Mr. Kirton served as Chief Executive Officer from January 1998 until
         February 2001. He was Chief Operating Officer from February 2001 until
         July 2001. He has served in the current executive position since July
         2001.

Employment Agreements

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

                                       34
<PAGE>

Stock Option Grants in Fiscal Year 2003

We did not grant stock options during the fiscal year ended September 30, 2003
to the Named Executive Officers.

Stock Options Outstanding and Options Exercised in Fiscal Year 2003

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, 2003. We have not granted any stock appreciation rights
("SAR's").
<TABLE>
<CAPTION>

                 Aggregated Option Exercises in Last Fiscal Year
                       and Fiscal Year End Option Values

                                                                 Number of Securities     Value of Unexercised In-
                                                                     Underlying             the-Money Options/
                                                                Unexercised Options At      SARs At 9/30/2003 ($)
                           Shares Acquired    Value Realized    9/30/2003 Exercisable           Exercisable/
         Name              on Exercise (#)          ($)            Unexercisable (1)            Unexercisable
----------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>                   <C>            <C>                             <C>
David G. Derrick (2)             135,701                              1,601,455                       -
Michael G. Acton                   5,000               -                146,894                       -
Wilford W. Kirton, III                 -               -                150,000                       -
James J. Dalton                        -               -                      -
</TABLE>

(1)      Value is based on the fair market value of our common stock on
         September 30, 2003, 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 September 30,
         2003.

(2)      Options granted to ADP Management in connection with a financing
         arrangement. The exercise price of these options is $.54 per share. See
         "Certain Relationships and Related Transactions."

Stock Plans

The 1997 Volu-Sol, Inc. Stock Incentive Plan

Immediately prior to the divestiture in August 1997 we 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 our subsidiaries or
us. A total of 5,000,000 shares are authorized for issuance pursuant to awards
granted under the 1997 Plan. During fiscal year 2003, no options were granted to
purchase common stock under the 1997 Plan and no options were exercised. As of
September 30, 2003, options for the purchase of 1,440,000 shares of common stock
were outstanding and exercisable under the 1997 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 31, 2003. 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
are currently exercisable or will become exercisable within 60 days after
December 15, 2003, 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.

                                       35
<PAGE>

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 as of December 31, 2003.
<TABLE>
<CAPTION>

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

    <S>                <C>                                 <C>                  <C>
    Common             David G. Derrick (2)                13,194,898           46.7%

    Common             James Dalton (3)                    13,038,690           46.1%

    Common             J. Lee Barton (4)
                       196 No. Forest Ave.
                       Hartwell, GA 30643                   1,384,002            5.4%
</TABLE>

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

(1)      Unless otherwise indicated, the business address of the shareholder is
         the address of the Company, 5095 W. 2100 S., Salt Lake City, Utah
         84120.

(2)      Includes shares owned of record as follows: 9,577,486 shares held of
         record by ADP Management, 704,924 shares owned of record by Derrick,
         1,167,350 shares issuable upon conversion of Series A preferred stock
         owned of record by ADP Management, 20,350 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 Derrick, and 1,601,455 shares issuable upon exercise
         of stock options held by ADP Management.

(3)      Includes shares owned of record as follows: 9,577,486 shares held of
         record by ADP Management (by agreement with Derrick, Dalton shares
         control and beneficial ownership of the shares owned of record by ADP
         Management), 458,929 shares owned of record by Dalton, 233,470 shares
         issuable upon conversion of Series A preferred stock owned of record by
         Dalton, 1,167,350 shares issuable upon conversion of Series A preferred
         stock owned of record by ADP Management, and 1,601,455 shares issuable
         upon exercise of stock options held by ADP Management.

(4)      Includes 690,667 shares owned directly by Mr. Barton, 493,334 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.

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,
the Series A, that is convertible into common stock. The following table sets
forth information as of December 15, 2003, as to each class of our equity
securities beneficially owned by all directors and nominees named therein, each
of the named executive officers, and directors and executive officers as a
group.
<TABLE>
<CAPTION>

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

<S>                    <C>                                                         <C>                   <C>
Common                 David G. Derrick (1)                                        13,194,898            46.7%
                       James Dalton (2)                                            13,038,690            46.1%
                       Wilford W. Kirton, III (3)                                     150,015              *
                       Michael G. Acton (4)                                           237,401              *
                       Peter McCall (5)                                               830,360             3.2%
                       Robert Childers (6)                                            364,600             1.4%
                       Officers and Directors as a Group (6 persons) (7)           18,298,915            55.5%

Series B Preferred     David G. Derrick                                                33,333             1.8%
                       Michael G. Acton                                                45,000             2.5%
                       Officers and Directors as a Group                               78,333             4.3%

</TABLE>


                                       36
<PAGE>

(1)      Derrick's beneficial ownership of these shares is summarized in note
         (2) on the previous page.

(2)      Dalton's beneficial ownership of these shares is summarized in note (3)
         on the previous page.

(3)      Mr. Kirton is an executive officer and director. Of the shares
         indicated, 150,000 are issuable upon exercise of stock options held by
         Mr. Kirton.

(4)      Includes 146,894 shares issuable under options granted to Mr. Acton,
         45,507 shares owned of record by Mr. Acton, and 45,000 shares issuable
         upon conversion of the Series B preferred stock owned by Mr. Acton.

(5)      Mr. McCall is a director. Includes (a) 150,000 shares of common stock
         owned of record by Mr. McCall, 300,000 shares issuable upon exercise of
         stock options held by Mr. McCall, and 380,360 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) 100,000
         shares issuable upon exercise of stock options held by Mr. Childers,
         and (c) 214,600 shares issuable upon conversion of Series A preferred
         stock.

(7)      Duplicate entries eliminated.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of the September 30, 2003, 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                                 1,440,000                   $2.85                   3,560,000

Equity compensation plans not approved
by security holders                              5,762,343                   $2.75                      N/A

Total                                            7,202,343                   $2.77                   3,560,000
</TABLE>

Item 12.  Certain Relationships and Related Transactions

The following discussion summarizes transactions during the last two fiscal
years between the Company and related parties not disclosed elsewhere in this
report.


                                       37
<PAGE>

Fiscal Year 2002

As of September 30, 2002, $338,300 related to a Series A Preferred Stock
subscription receivable was outstanding from MK Financial, an entity owned by
Derrick. ADP Management assumed this obligation, MK Financial assigned the
shares to ADP Management and the receivable was extinguished as part of the
agreement entered into between the Company and ADP Management, David Derrick and
James Dalton in April 2003.

During the year ended September 30, 2002, under consulting arrangements with ADP
Management to provide the services of Derrick to the Company and to assist in
financing through loans, guarantees and other services, we recorded consulting
fees and expenses of $18,871,003, respectively. These amounts include the
valuation under applicable accounting principles of non-cash consideration paid
to ADP Management under these contracts. For the years ended September 30, 2002,
of these amounts, $2,324,340 was recorded as the value of 2,094 shares of Series
A preferred stock issued to ADP Management and Dalton, or their respective
assignees.

During fiscal year 2002, we entered into promissory notes totaling $1,400,000
which were personally guaranteed by Derrick and Dalton and collateralized by
1,000,000 shares of common stock held by them.

During the year ended September 30, 2002, the Company recorded sales of $253,108
to an entity owned by the relative of an officer of the Company.

Fiscal Year 2003

During the year ended September 30, 2003, in connection with the raising of
equity funds for the Company, the Company entered into an agreement with
Derrick, Dalton, and ADP Management wherein ADP Management agreed to continue to
assist the Company in its financing activities by assuming the following
obligations of the Company into an existing related-party line of credit:

      o  $1,086,628 of short-term notes payable of $1,086,628

      o  $503,387 under a bank line of credit

      o  $550,000 of certificates of deposit owed to individuals used to secure
         a bank line of credit

ADP Management also agreed to assume certain debt and contingent obligations for
which the Company has not been released by the holder of the instrument which
obligates the Company and is therefore still recorded on the Company's books as
follows:

      o  $600,000 note payable and associated accrued interest of approximately
         $100,000 due to an individual

      o  Redeemable common stock recorded at $725,000 with a redemption
         obligation of $966,666

After assuming the above debt and contingent liabilities and assuming an
additional $800,000 note (see below), ADP Management converted its line of
credit and these assumed obligations into 8,113,999 of the Company's common
stock and exchanged subscription receivables as follows:

      o  Conversion of $2,373,961 of the related-party line of credit, including
         $27,346 of accrued interest on notes assumed by ADP Management

      o  Assumption of an $800,000 note payable due to an individual. The
         Company was released as the primary obligor on the note by the
         individual but remains a guarantor for the full amount.

      o  Assignment to ADP Management by the Company of a subscription
         receivable of $338,300 due from MK Financial

      o  Recording a subscription receivable of $700,000 for the $600,000 note
         payable, and associated accrued interest of approximately $100,000 due
         to an individual, which was assumed by ADP Management but under which
         the Company has not been released.

As part of this conversion and exchange the Company recognized a non-cash
expense of $845,628 based on the excess of the value of the stock issued over
the debt relieved and subscription receivable recorded.

                                       38
<PAGE>

In June 2003, we entered into agreements with former shareholders of SecureAlert
pursuant to which the shareholders assigned to the Company two certificates of
deposit in the aggregate amount of $200,000 pledged as security for the line of
credit with SunTrust Bank, which was subsequently refinanced by Zion's Bank.
This assignment of the certificates of deposit, along with a letter of credit
from a trust, whose trustee is related to an officer of the Company, replaced
the personal guarantees of four former SecureAlert shareholders. In June 2003
these certificates of deposit were assigned to the Company and the obligation to
repay these individuals was assumed by ADP Management.

During the year ended September 30, 2003, under the consulting agreement with
ADP Management and the related-party line-of-credit arrangement, the Company
recorded consulting fees and expenses of $2,181,822.

The Company has entered into approximately $745,759 of promissory notes, which
are personally guaranteed by Derrick and Dalton and are in some cases
collateralized by shares of the Company's common stock owned by them.

Item 13.  Exhibits and Reports on Form 8-K

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        Articles of Incorporation and Amendments thereto (incorporated by
               reference to the Company's Registration Statement and Amendments
               thereto on Form 10-SB, effective December 1, 1997).

   3.01(1)     Amendment to Articles of Incorporation for Change of Name
               (previously filed)


   3.01(2)     Amendment to Articles of Incorporation Amending Rights and
               Preferences of Series A Preferred Stock (previously filed)

   3.01(3)     Amendment to Articles of Incorporation Adopting Designation of
               Rights and Preferences of Series B Preferred Stock (previously
               filed)

   3.01(4)     Certificate of Amendment to the Designation of Rights and
               Preferences Related to Series A 10% Cumulative Convertible
               Preferred Stock of RemoteMDx, Inc.

   3.02        Bylaws (incorporated by reference to our Registration Statement
               on Form 10-SB, effective December 1, 1997)

   10.01       Distribution and Separation Agreement (incorporated by reference
               to our Registration Statement and Amendments thereto on Form
               10-SB, effective December 1, 1997).

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

   10.04       Securities Purchase Agreement for $1,200,000 of Series A
               Preferred Stock (incorporated by reference to the Company's
               Registration Statement and Amendments thereto on Form 10-SB,
               effective December 1, 1997).

   10.05       Securities Purchase Agreements with ADP Management and James
               Dalton (previously filed)

   10.06       Agreement and Plan of Merger (SecureAlert) (previously filed as
               exhibit to Current Report on Form 8-K)

                                       39
<PAGE>

   10.07       Amended and Restated Loan and Security Agreement (SunTrust Bank
               and SecureAlert), dated January 24, 2002 (filed as an exhibit to
               the Company's quarterly report on Form 10-QSB for the quarter
               ended December 31, 2001)

   10.08       Amended and Restated Loan and Security Agreement (SunTrust Bank
               and SecureAlert) dated March 1, 2002 (filed as an exhibit to the
               Company's quarterly report on Form 10-QSB for the quarter ended
               December 31, 2001)

   10.09       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)

   10.10       License Agreement between RemoteMDx, Inc. and SecureAlert, Inc.
               as licensor and Matsushita Electric Works, Ltd., as licensee,
               (April 12, 2002)

   10.11       Agreement with SecureAlert Entertainment, LLC, with amendments
               (January and June 2003)

   10.12       Agreement with SecureAlert Telematics, Inc. (January 2003)

   10.13       Agreement with ADP Management, Derrick and Dalton (April 2003)

   31.1        Certification of President and Chief Executive Officer under
               Section 302 of Sarbanes-Oxley Act of 2002

   31.2        Certification of Chief Financial Officer under Section 302 of
               Sarbanes-Oxley Act of 2002

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

(b)      Reports on Form 8-K

During the quarter ended September 30, 2003, we filed no current reports on Form
8-K.

Item 14.  Principal Accountant Fees and Services

For the year ended September 30, 2001, Arthur Andersen LLP provided audit and
other services for the Company. We terminated our relationship with Arthur
Andersen in March 2002. For the years ended September 30, 2002 and 2003, Tanner
+ Co., LLP provided audit and other services for the Company.

Audit Services

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 + Co. for fiscal years 2003 and 2002 totaled $121,000 and $135,000,
respectively.

Tax Services

Tanner + Company did not provide any consulting services to the Company in
fiscal years 2002 and 2003, including tax consultation and related services, nor
did Tanner + Company perform any financial information systems design and
implementation services for the Company in either period. Non-audit-related
services consist primarily of tax consultation and related services.

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

                                       40
<PAGE>
                                   SIGNATURES

         In accordance with Section 13 and/or 15(d) of the Securities Exchange
Act, the registrant caused this report, as amended, 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: January 13, 2004


         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           January 13, 2004
David G. Derrick              Chief Executive Officer

/s/James Dalton
-------------------------     Director, Vice Chairman           January 13, 2004
James Dalton

/s/Wilford W. Kirton, III
-------------------------     Director                          January 13, 2004
Wilford W. Kirton, III

/s/Peter McCall
-------------------------     Director                          January 13, 2004
Peter McCall

/s/Robert E. Childers
-------------------------     Director                          January 13, 2004
Robert E. Childers

/s/Michael G. Acton
-------------------------     Chief Financial Officer           January 13, 2004
Michael G. Acton


                                       41