**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**







**FORM
      10-KSB**




**(Mark
      One)**


**ý**
            
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                OF 1934****FOR
                THE FISCAL YEAR ENDED DECEMBER 31, 2006****OR****o**
            
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                OF 1934****For
                the transition period
                from       to**




**COMMISSION
      FILE NUMBER 0-26140**







**Remote
      Dynamics, Inc.**


(Exact
      name of registrant as specified in its charter)




**DELAWARE**
            
            **51-0352879**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)**200
                CHISHOLM PLACE, SUITE 120     PLANO,
                TEXAS**
            
            **75075**(Address
                of principal executive offices)
            
            (Zip
                Code)




Registrant’s
      telephone number, including area code:
**(972) 395-5579**




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


**None**




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




**Common
      Stock, $0.01 par value**


(Title
      of
      class)







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  ý   No  o







Check
      if
      disclosure of delinquent filers in response to Item 405 of Regulation S-B
      is not contained herein, and will not 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.   ý




State
      the
      issuer’s revenues for its most recent fiscal year:  $663,000




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





State
      the aggregate market value of the voting and non-voting equity held by
      non-affiliates of the Registrant computed by reference to the price at which
      the
      common equity was last sold, or the average bid and asked price of such common
      equity, as of April 11, 2007:  $189,685.





Check
      whether the issuer filed all documents and reports required to be filed by
      Section 12, 13 or 15(d) of the Exchange Act after the distribution of
      securities under a plan confirmed by a court.  Yes  ý   No  o





As
      of April 11, 2007, 63,228,182 shares
      of the Registrant’s Common Stock were outstanding.







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









**Remote
      Dynamics, Inc.**





**FORM
      10-KSB**


**For
      the Fiscal Year Ended December 31, 2006**





**INDEX**




**Page****PARTI**
            
            
            1Item1.
            
            Description
                of
                Business
            1Item2.
            
            Description
                of
                Properties
            22Item3.
            
            Legal
                Proceedings
            22Item4.
            
            Submission
                of Matters to a Vote
                of Security Holders
            23**PARTII**
            
            
            23Item5.
            
            Market
                for Common Equity and
                Related Stockholder Matters
            23Item6.
            
            Management’s
                Discussion and
                Analysis or Plan of Operations
            24Item7.
            
            Financial
                Statements
            33Item8.
            
            Changes
                In and Disagreements with
                Accountants on Accounting and Financial Disclosure
            33Item8A.
            
            Controls
                and
                Procedures
            33Item8B.
            
            Other
                Information
            33**PARTIII**
            
            
            34Item9.
            
            Directors
                and Executive Officers
                of Remote Dynamics, Inc.
            34Item10.
            
            Executive
                Compensation
            37Item11.
            
            Security
                Ownership of Certain
                Beneficial Owners and Management and Related Stockholder
                Matters
            39Item12.
            
            Certain
                Relationships and Related
                Transactions
            40Item13.
            
            Exhibits
            41Item14.
            
            Principal
                Accountant Fees and
                Services
            43Signatures
            
            
            44









**PARTI**




**Item1.Description of Business.**




In
      addition to the historical information contained herein, the discussion in
      this
      Form 10-KSB contains certain forward-looking statements, within the meaning
      of Section 27A of the Securities Act of 1933 and Section 21E of the
      Securities Exchange Act of 1934, that involve risks and uncertainties, such
      as
      statements concerning: growth and anticipated operating results; developments
      in
      our markets and strategic focus; new products and product enhancements;
      potential acquisitions and the integration of acquired businesses, products
      and
      technologies; strategic relationships and future economic and business
      conditions. The cautionary statements made in this Form 10-KSB should be
      read as being applicable to all related forward-looking statements whenever
      they
      appear in this Form 10-KSB. Our actual results could differ materially from
      the results discussed in the forward-looking statements. Factors that could
      cause or contribute to such differences include, but are not limited to, those
      discussed under the section captioned “Factors That May Affect Future
      Results of Operations” in Item 1 of this Form 10-KSB as well as those
      cautionary statements and other factors set forth elsewhere herein.





**General**




We
      market, sell and support automatic vehicle location (“AVL”) and mobile resource
      management solutions targeting companies that operate private vehicle fleets.
      Our AVL solutions are designed for metro, short-haul fleets within diverse
      industry vertical markets such as field services, distribution, courier,
      limousine, electrical/plumbing, waste management, and government.  Our
      core technology, telematics, combines wireless communications, GPS location
      technology, geospatial solutions and vehicle data integration with a
      web-accessible application that aids in the optimization of remote business
      solutions.  We believe our fleet management solution contributes to
      increased operator efficiency by improving the productivity of mobile workers
      through real-time position reports, route-traveled information, and exception
      based reporting designed to highlight mobile workforce inefficiencies. This
      in-depth reporting enables our customers to correct those inefficiencies and
      deliver cost savings to the bottom line.






We
      commercially introduced our next generation AVL product, REDIview, in January
      of
      2005.  REDIview was designed with a flexible architecture to
      accommodate expected additional functional requirements that will be required
      to
      effectively compete in the marketplace.






Our
      REDIview product line forms the basis of our business plan for 2007 and
      beyond.  We expect this product line to provide the foundation for a
      growth in revenues and, if our revenues grow as we anticipate, ultimately
      profitability.   In implementing our new business plan, we are
      completing a significant cost and operational-based restructuring, including
      rightsizing our workforce.  We are focusing our efforts on enhancing
      the existing REDIview product line.  As a result, in addition to
      significantly reducing projected operational costs, we have reduced our
      projected sales targets and associated cash flows from our previous business
      plan which included multiple product offerings sold through both a direct sales
      force and third-party distributors.




We
      do not
      expect to achieve profitability or positive cash flow for 2007.  Our plans
      for 2007 include increasing our sales staff and sales channel development in
      an
      effort to build recurring revenue and continuing to identify additional
      operating cost reductions.  However, there can be no assurance that we will
      achieve our sales targets or our targeted operating cost levels for 2007. 
Failure to do so may have a material adverse effect on our business, financial
      condition and results of operations.  Moreover, despite actions to
      increase revenue, reduce operating costs and to improve profitability and cash
      flow, our operating losses and net operating cash outflows will continue into
      at
      least the third quarter of 2007.





We
      currently are not in compliance with certain of our obligations relating to
      our
      secured convertible notes and our convertible preferred stock, including our
      failure to maintain sufficient authorized shares to permit conversion of the
      securities and our failure to register the resale of the shares of common stock
      issuable upon conversion of the securities.  Although, to date, no
      security holder has sent us a notice of acceleration of amounts owed under
      or
      redemption of these securities, there can be no assurance that the security
      holders will not take such action in the future.  Our failure to comply
      with our obligations relating to these securities also exposes us to liquidated
      damages claims by the security holders.  In the event of an
      acceleration of amounts owed under or redemption of these securities (or a
      claim
      for liquidated damages), or if we are unable to raise enough money to cover
      the
      amounts payable, we may be forced to restructure, file for bankruptcy, sell
      assets or cease operations.





**1**




We
      had a
      working capital deficit of $4.7 million as of December 31, 2006.  We
      believe that with the expected proceeds from our November 2006 private placement
      we will have sufficient capital to fund our ongoing operations through the
      remainder of 2007, assuming that we are able to meet our sales targets and
      operating cost reduction plans and to negotiate acceptable payment arrangements
      with our senior security holders, vendors and other creditors.  The
      sufficiency of our cash resources depends to a certain extent on general
      economic, financial, competitive or other factors beyond our
      control.  We do not currently have any arrangements for additional
      financing and we may not be able to secure additional debt or equity financing
      on terms acceptable to us, or at all, at the time when we need such financing.
       Furthermore, our ability to secure certain types of additional financings
      is restricted under the terms of our existing financing arrangements. 
There can be no assurance that we will be able to consummate a transaction
      for
      additional capital prior to substantially depleting our available cash reserves,
      and our failure to do so may force us to restructure, file for bankruptcy,
      sell
      assets or cease operations.




Our
      principal
      executive offices are located at 200 Chisholm Place, Suite 120, Plano, Texas
      75075, and our telephone number is (972) 395-5579.  Our website URL is
      www.remotedynamics.com.  References to “we”, “us”, “our”, “Remote Dynamics,
      Inc.”, or “REDI” refer to Remote Dynamics, Inc. and its subsidiaries. 
REDIviewTM is a registered trademark of Remote Dynamics, Inc.




**Company
      History**





We
      were originally incorporated in
      February, 1994. Our initial product offering, the Series 5000, was developed
      for, and sold to, companies operating in the long-haul trucking
      market.





In
      June, 2001, we affected a 1-for-5
      reverse stock split of our common stock.





In
      June, 2001, we issued 30,000,000
      shares of our common stock (shares not adjusted for our December 2003,
      1-for-5 reverse stock split) in a change of control transaction to Minorplanet
      Systems PLC, a United Kingdom public limited company which was our majority
      stockholder prior to the October 2003 stock transfer to The Erin Mills
      Investment Corporation discussed below. In exchange for this stock issuance,
      Minorplanet Systems PLC paid us $10 million in cash and transferred to us all
      of
      the shares of its wholly-owned subsidiary, Minorplanet Limited and its
      wholly-owned subsidiary, Mislex (302) Limited, now known as Minorplanet
      Systems USA Limited, which held certain licensing rights to Minorplanet Systems
      PLC’s vehicle management information technology.





In
      March, 2002, we completed the sale
      to Aether Systems, Inc. of certain assets and licenses related to our long-haul
      trucking and asset-tracking businesses.  In addition, we agreed to
      form a strategic relationship with Aether, with respect to our long-haul
      customer products, pursuant to which we assigned to Aether all service revenues
      generated post-closing from our HighwayMaster Series 5000 customer base.
      Aether, in turn, agreed to reimburse us for the network and airtime service
      costs related to providing the HighwayMaster Series 5000
      service.   In the Aether transaction, we received $3 million in
      cash and a note for $12 million.





In
      July, 2002, we amended our
      Certificate of Incorporation to change our corporate name to Minorplanet Systems
      USA, Inc.





In
      October, 2003, Minorplanet Systems
      PLC transferred 42.1% (approximately 4,100,000 shares) of our outstanding common
      shares beneficially owned by Minorplanet Systems PLC to Erin Mills Investment
      Corporation, ending Minorplanet Systems PLC’s majority ownership of our common
      stock. Following the share transfer, Erin Mills beneficially owned 46%
      (approximately 4,400,000 shares) of our outstanding common stock, while
      Minorplanet Systems PLC retained 19.9% (approximately 1,900,000 shares) of
      our
      outstanding common stock.




**2**


In
      December, 2003, we affected a
      1-for-5 reverse stock split of our common stock.




*Voluntary
      Bankruptcy Filing and Reorganization*




In
      February, 2004, we and two of our
      wholly-owned subsidiaries, Caren (292) Limited and Minorplanet Systems USA
      Limited, filed voluntary petitions for relief under Chapter 11 of the
      United States Bankruptcy Code in the United States Bankruptcy Court for the
      Northern District of Texas, in order to facilitate the restructuring of our
      debt, trade liabilities, and other obligations. During the bankruptcy, we
      remained in possession of our assets and operated as “debtors-in-possession”
under the jurisdiction of the Bankruptcy Court and in accordance with the
      applicable provisions of Bankruptcy Code, the Federal Rules of Bankruptcy
      Procedure and applicable court orders.





In
      June, 2004, the Bankruptcy Court
      entered an order confirming our Third Amended Joint Plan of Reorganization,
      as
      modified. The Bankruptcy Court set our enterprise value at $25.3 million for
      purposes of distributions of new common stock under the plan of reorganization.
      We set the effective date of the plan of reorganization as July 2, 2004.
      Caren (292) Limited and Minorplanet Systems USA Limited, as a matter of
      law, were merged with and into Remote Dynamics, Inc., ceasing to exist as
      separate entities as of July 2, 2004. The plan of reorganization was
      substantially consummated on July 8, 2004. On August 25, 2005, the
      Bankruptcy Court signed the final decree and closed our bankruptcy case. In
      connection with our Chapter 11 reorganization, we applied “Fresh Start
      Accounting” which resulted in approximately $19.7 million of excess
      reorganizational value which we recorded as goodwill.





In
      July 2004,
      we changed our name to “Remote Dynamics, Inc.” in connection with our exit from
      bankruptcy.




*2005
      Financings*






On
      October 1, 2004, we closed the sale
      of 5,000 shares of Series A convertible preferred stock, with each preferred
      share having a face value of $1,000, for a total purchase price of $5
      million.  Net cash proceeds were $4.7 million after payment of
      expenses.  The Series A convertible preferred stock was convertible
      into shares of our common stock at a conversion price of $2.00 per share. We
      sold the Series A convertible preferred stock to SDS Capital Group SPC, Ltd
      (“SDS”).






On
      May
      31, 2005, we consummated a bridge loan and security agreement with SDS in which
      we issued a promissory note in the amount of $1.75 million to SDS (the “Bridge
      Note”). The Bridge Note was secured by our assets, accrued interest at 8% per
      annum and was due and payable on September 30, 2005.  The Bridge Note
      automatically exchanged into a common stock purchase warrant with a 5-year
      term
      to purchase 1,666,667 shares of common stock at an exercise price of $0.01
      per
      share and a common stock purchase warrant with a 5-year term to purchase 700,000
      shares of common stock at an exercise price of $1.75 per share (the “Bridge
      Warrants”) upon approval of our stockholders. Our stockholders approved the
      exchange of the Bridge Note into the Bridge Warrants, and on September 2, 2005,
      the Bridge Note was extinguished and exchanged for the Bridge
      Warrants.






On
      September 2, 2005, we closed the sale of $6.5 million of preferred stock and
      common stock purchase warrants in a private placement transaction with SDS
      previously entered into on May 31, 2005.  In consideration for the
      issuance of the Series B convertible preferred stock, SDS paid us $.75 million
      and returned to us all of the outstanding Series A convertible preferred stock
      with a face value of $5 million which was held by SDS.  We incurred an
      early redemption penalty of $.75 million related to the Series A convertible
      preferred stock.  Net cash proceeds received by us were approximately
      $.4 million after deduction of brokers’ commissions, accrued interest on the
      bridge note and other expenses.  The Series B convertible preferred
      stock is convertible into common stock at an original conversion price of $1.55
      per share. SDS also received a common stock purchase warrant with a 5-year
      term
      to purchase 2 million shares at an exercise price of $1.75 per share. We used
      the net proceeds from the financing transaction to fund our business
      plan.  We are obligated to register the common stock issuable upon
      conversion of the Series B convertible preferred stock or exercise of the common
      stock purchase warrants for public resale under the Securities and Exchange
      Act
      of 1933.






**3**




On
      December
      16, 2005, in consideration of our reducing the exercise price on certain
      warrants held by SDS from $0.67 to $0.30 per share, SDS exercised the warrants
      for the purchase of 1,125,000 shares of our common stock resulting in the
      receipt by us of cash proceeds in the amount of $.3 million.  This
      repricing resulted in an increase in the net loss attributable to common
      shareholders of approximately $69,000.




On
      December
      23, 2005, we consummated the sale and assignment of certain of our patents
      and
      pending patent applications to Vehicle IP LLC in exchange for the payment by
      Vehicle IP LLC to us of $.5 million.






***Series
      A Note Financing***




On
      February 24, 2006, we closed a Note and Warrant Purchase Agreement with certain
      institutional investors pursuant to which we sold $5.75 million of our series
      A
      senior secured convertible notes and original issue discount series A notes
      (collectively, “Series A Notes”) in a private placement
      transaction.   In the private placement, we received proceeds of
      approximately $4.1 million in cash (after deducting brokers’ commission but
      before payment of legal and other professional fees, the 15% original issue
      discount of $.8 million and the tendering of 50 shares of their 650 shares
      Series B preferred convertible stock with an aggregate face value of $.5 million
      by our sole series B preferred convertible stockholder).




The
      Series A Notes are secured by substantially all of our assets. The Series A
      Notes mature 24 months from issuance and are convertible at the option of the
      holder into our common stock at a fixed conversion price of $0.20 per share
      (which adjusted to $0.016 per share upon the issuance of series B subordinated
      secured convertible notes discussed below).  Beginning on September 1,
      2006 and continuing thereafter on the first business day of each month, we
      must
      pay an amount to each holder of a Series A Note equal to 1/18th of the original
      principal payment of the note; provided, that if on any principal payment date
      the outstanding principal amount of the note is less than such principal
      installment amount, then we must pay to the holder of the note the lesser
      amount. We may make such principal installment amounts in cash or in registered
      shares of its common stock. If paid in common stock, certain conditions must
      be
      satisfied, and the number of registered shares to be paid to the holder must
      be
      an amount equal to the principal installment amount divided by eighty percent
      (80%) of the average of the closing bid price for the ten (10) trading days
      immediately preceding the principal payment date.




The
      purchasers of the Series A Notes (and the placement agent in the transaction)
      received the following common stock purchase warrants:





·
            Series A-7
                warrants to purchase 20,625,000 million shares in the aggregate of
                common stock at an initial exercise price of $0.40 per share subject
                to
                adjustment for stock splits and combinations, certain dividends and
                distributions, reclassification, exchange or substitution, reorganization,
                merger, consolidation or sales of assets; issuances of additional
                shares
                of common stock, and issuances of common stock equivalents.  The
                exercise price of the series A-7 warrants adjusted to $0.016 per
                share
                upon the issuance of the Company’s series B subordinated secured
                convertible notes as discussed below.  The series A-7 warrants
                can be exercised on a cashless basis beginning one year after issuance
                if
                (i) the per share market value of a share of our common stock (either
                the
                volume the weighted average price or the fair market value as determined
                by an independent appraiser) is greater than the warrant price; and
                (ii) a
                registration statement for the warrant stock is not then in
                effect.  The series A-7 warrants are exercisable for a
                seven-year period from the date of issuance.  1.9 million of
                these warrants are exercisable over 5
                years.





**4**


·
            Series B-4
                warrants to purchase 13,750,000 million shares in the aggregate of
                common stock at an initial exercise price of $0.90 per share subject
                to
                adjustment for stock splits and combinations, certain dividends and
                distributions, reclassification, exchange or substitution, reorganization,
                merger, consolidation or sales of assets; issuances of additional
                shares
                of common stock, and issuances of common stock equivalents.  The
                exercise price of the series B-4 warrants adjusted to $0.016 per
                share
                upon the issuance of the Company’s series B subordinated secured
                convertible notes as discussed below. The series B-4 warrants can
                be
                exercised on a cashless basis beginning one year after issuance if
                (i) the
                per share market value of a share of our common stock (either the
                volume
                the weighted average price or the fair market value as determined
                by an
                independent appraiser) is greater than the warrant price; and (ii)
                a
                registration statement for the warrant stock is not then in effect.
                The
                series B-4 warrants are exercisable for a four-year period beginning
                on
                the date a resale registration statement for the shares underlying
                the
                warrants is declared effective by the Securities and Exchange
                Commission.  1.3 million of these warrants are exercisable over
                5 years.





·
            Series C-3
                warrants to purchase 27,500,000 million shares in the aggregate of
                common stock at an initial exercise price of $0.21 per share subject
                to
                adjustment for stock splits and combinations, certain dividends and
                distributions, reclassification, exchange or substitution, reorganization,
                merger, consolidation or sales of assets; issuances of additional
                shares
                of common stock, and issuances of common stock equivalents.  The
                exercise price of the series C-3 warrants adjusted to $0.016 per
                share
                upon the issuance of our series B subordinated secured convertible
                notes
                as discussed below. The series C-3 warrants can be exercised on a
                cashless
                basis beginning one year after issuance if (i) the per share market
                value
                of a share of our common stock (either the volume the weighted average
                price or the fair market value as determined by an independent appraiser)
                is greater than the warrant price; and (ii) a registration statement
                for
                the warrant stock is not then in effect. The series C-3 warrants
                are
                exercisable for a three-year period from the date of
                issuance.  2.5 million of these warrants are exercisable over 5
                years.





**·**
            Series
                D-1 warrants (callable only at our option) to purchase 19,250,000
                shares
                in the aggregate of common stock at an exercise price per share equal
                to
                the lesser of: (a) $0.35 and (b) 90% of the average of the 5 day
                volume weighted average price of our common stock on the OTC Bulletin
                Board preceding the call notice, as defined in the
                warrant.





**·**
            Warrants
                issued to the placement agents in the financing to purchase 2.5 million
                shares of common stock at an exercise price per share equal to $0.20
                with
                a term of 5 years following the
                closing.





Under
      the Series A Note and Warrant
      Purchase Agreement, we made certain covenants to the investors, including,
      as
      long as any notes or warrants remain outstanding, to have  authorized
      and reserved for issuance 120% of the aggregate number of shares of our common
      stock needed for issuance upon conversion of the notes and exercise of the
      warrants. We also agreed to prepare and file resale registration statements
      with
      the SEC for the shares of common stock underlying the notes and warrants. If
      the
      registration statements are not filed or declared effective within specified
      time frames or we fail to meet other specified deadlines, the investors are
      entitled to monetary liquidated damages equal to 1.5% of the total amount
      invested by such investor in the private placement, plus an additional 1.5%
      liquidated damages for each 30-day period thereafter. We are obligated to
      maintain the effectiveness of the registration statements until the earlier
      of
      (a) the date when the underlying securities have been sold or (b) the date
      on
      which the underlying shares of common stock can be sold without restriction
      under Rule 144(k).






***Series
      B Note Financing***




On
      November 30, 2006, we entered into a Note and Warrant Purchase Agreement with
      Bounce Mobile Systems, Inc. (“BMSI”) and other accredited
      investors.  Pursuant to the Note and Warrant Purchase Agreement, we
      will receive up to $1,754,000 in gross proceeds (of which BMSI has committed
      to
      provide $1,200,000) from the sale of up to (i) $1,754,000 principal amount
      of
      our series B subordinated secured convertible promissory notes (“Series B
      Notes’), (ii) $701,600 principal amount of our original issue discount series B
      subordinated secured convertible promissory notes (“Series B OID Notes”), (iii)
      our series E-7 warrants (“E-7 Warrants”) to purchase 82,218,750 shares of the
      Company’s common stock and (iv) our series F-4 warrants (“F-4 Warrants”) to
      purchase 82,218,750  shares of our common stock.







**5**


·
            The
                Series B Notes and the Series B OID Notes are secured by all of our
                assets, subject to existing liens, are due December 4, 2009 and begin
                amortization of principal (in nine quarterly installments) on August
                1,
                2007.  We may make principal installment payments in cash or in
                registered shares of its common stock. If paid in common stock, certain
                conditions must be satisfied, and the number of registered shares
                to be
                paid to the holder must be an amount equal to the principal installment
                amount divided by the greater of (i) $0.02 and (ii) 90% of the average
                of
                the volume weighted average trading prices of the common stock for
                the ten
                trading days immediately preceding the principal payment.  The
                Series B Notes and Series B OID Notes are convertible into our common
                stock at an initial conversion price of $0.016 per share, subject
                to
                reduction if we fail to achieve specified financial and operating
                milestones and subject to adjustment for stock splits and combinations,
                certain dividends and distributions, reclassification, exchange or
                substitution, reorganization, merger, consolidation or sales of assets;
                issuances of additional shares of common stock, and issuances of
                common
                stock equivalents.





·
            The
                E-7 Warrants have an exercise price of $0.02 per share, subject to
                adjustment for stock splits and combinations, certain dividends and
                distributions, reclassification, exchange or substitution, reorganization,
                merger, consolidation or sales of assets; issuances of additional
                shares
                of common stock, and issuances of common stock equivalents.  The
                E-7 Warrants are exercisable for a seven-year period from the date
                of
                issuance.





·
            The
                F-4 Warrants have an exercise price of $0.03 per share, subject to
                adjustment for stock splits and combinations, certain dividends and
                distributions, reclassification, exchange or substitution, reorganization,
                merger, consolidation or sales of assets; issuances of additional
                shares
                of common stock, and issuances of common stock equivalents. The F-4
                Warrants are exercisable for a four-year period beginning on the
                date a
                resale registration statement for the shares underlying the warrants
                is
                declared effective by the Securities and Exchange
                Commission.





The
      Series B Note financing is structured to occur in four closings, each providing
      $438,500 in gross proceeds to us.  The first closing occurred on
      December 4, 2006, the second closing occurred on January 10, 2007, and the
      third
      closing occurred on March 26, 2007.The third round closing
      conditions of filing an amendment to our Certificate of Incorporation increasing
      the number of our authorized shares of common stock to 575,000,000 and a
      one-for-fifty reverse stock split of our common stock were both waived by BMSI
      and the other accredited investors.  The fourth closing will occur
      within five business days after the date that an initial resale registration
      statement for the shares underlying the notes and warrants issued in the private
      placement is declared effective by the Securities and Exchange
      Commission.  Each closing is subject to certain other conditions being
      satisfied, including (i) our representations and warranties in the agreement
      being true and correct in all material respects as of each closing date, (ii)
      our having performed, satisfied and complied in all material respects with
      all
      covenants, agreements and conditions required by the agreement to be performed,
      satisfied or complied with by us at or prior to each closing date, and (iii)
      no
      material adverse effect on the business, operations, properties, prospects,
      or
      financial condition of us and our subsidiaries having occurred.





As
      a
      result of the financing and pursuant to the terms of "most favored nations"
      rights granted to investors in our February 2006 private placement of the Series
      A Notes, we agreed to issue certain of our February 2006 private placement
      investors, in exchange for $1,013,755 principal amount of the Series A Notes,
      an
      additional (i) $1,146,755 principal amount of Series B Notes, (ii) $458,702
      principal amount of Series B OID Notes, (iii) E-7 Warrants to purchase
      77,191,646 shares of our common stock and (iv) F-4 Warrants to purchase
      77,191,646 shares of our common stock.  In addition, we agreed to
      issue, in exchange for 50 shares of our Series B convertible preferred stock
      with an aggregate face value of $500,000 (held by SDS) an additional (i)
      $500,000 principal amount of Series B Notes, (ii) $200,000 principal amount
      of
      Series B OID Notes, (iii) E-7 Warrants to purchase 23,437,500 shares of our
      common stock and (iv) F-4 Warrants to purchase 23,437,500 shares of our common
      stock.  We will receive no additional proceeds from the
      exchange.





**6**




In
      connection with the private placement, we agreed to pay to the placement agent
      for the transaction consideration consisting of (a) a cash sales commission
      of
      $150,480, (b) warrants to purchase 16,443,750 shares of our common stock, with
      each warrant having an exercise price of $0.016 per share and being exercisable
      for ten years, (c) E-7 Warrants to purchase 12,332,813 shares of our common
      stock, and (d) F-4 Warrants to purchase 12,332,813 shares of our common
      stock.     The Company also agreed to pay
      $119,816  in consulting and legal counsel fees as part of the private
      placement.






The
      issuance of the Series B Notes triggered anti-dilution adjustments to the
      conversion price of the Series A Notes and the exercise price of the common
      stock purchase warrants issued in connection with the Series A Notes as
      follows:  (a) the conversion price of the Series A Notes changed from
      $0.20 to $0.016 per share, (b) the exercise price of the Series A-7 warrants
      changed from $0.40 to $0.016 per share, (c) the exercise price of the Series
      B-4
      warrants changed from $0.90 to $0.016, and (d) the exercise price of our Series
      C-3 warrants changed from $0.21 to $0.016 per share. In addition, the
      transaction triggered an anti-dilution adjustment to certain warrants issued
      to
      SDS in September 2005 in connection with the Series B preferred stock
      transaction, by changing the exercise price from $1.75 to $0.0966 per share
      and
      increasing the number of shares of common stock for which the warrants can
      be
      exercised from 700,000 to 12,683,191.




Under
      the terms of the Series B Note
      and Warrant Purchase Agreement, we have agreed to use commercially reasonable
      efforts to obtain stockholder approval for an increase in the number of its
      authorized shares of common stock to at least 575,000,000 and a one-for-fifty
      reverse stock split of its common stock.    We also have
      agreed to prepare and file one or more resale registration statements with
      the
      SEC for the shares of common stock underlying the notes and warrants issued
      in
      the private placement. Specifically, we are obligated to (a) file an initial
      registration statement with the SEC on or before the earlier of (i) March 4,
      2007 and (ii) the 30th day following
      the
      date our stockholders approve the increase in authorized shares and reverse
      stock split described above and (b) have the initial registration statement
      declared effective not later than the 60th day after
      the
      registration statement is filed (or 90 days if the registration statement
      receives a full review by the SEC). If the initial registration statement is
      not
      filed or declared effective within these time frames or we fail to meet other
      specified deadlines, the investors will be entitled to monetary liquidated
      damages equal to 1.5% of the total amount invested by such investor in the
      private placement, plus an additional 1.5% liquidated damages for each 30-day
      period thereafter, up to a maximum liquidated damages amount of not more than
      9%
      of the amount invested by each investor. We are obligated to maintain the
      effectiveness of the registration statements until the earlier of (a) the date
      when the underlying securities have been sold or (b) the date on which the
      underlying shares of common stock can be sold without restriction under Rule
      144(k), or the effectiveness period.






*BounceGPS
      Acquisition / Share Exchange Agreement*




On
      November 30, 2006, we entered into
      a Share Exchange Agreement with BMSI. Pursuant to the Share Exchange Agreement,
      we agreed to acquire from BMSI 100% of the capital stock of BounceGPS, Inc.
      (“BounceGPS”), a provider of mobile asset management solutions, in exchange
      for:





·
            5,000
                shares of our newly authorized series C convertible preferred
                stock


·
            A
                Series B Note in the principal amount of
                $660,000


·
            A
                Series B OID Note in the principal amount of
                $264,000


·
            An
                E-7 Warrant to purchase 30,937,500 shares of our common
                stock


·
            An
                F-4 Warrant to purchase 30,937,500 shares of our common
                stock








**7**




The
      series C convertible preferred stock issued under the Share Exchange Agreement
      has a face amount of $1,000 per share ($5,000,000 in the aggregate), ranks
      junior to our series B convertible preferred stock and senior to its common
      stock with respect to payment of dividends and amounts upon any liquidation,
      dissolution or winding up of the Company, and is entitled to receive cumulative
      dividends in an amount equal to 8% per year (payable at the election of the
      holder in cash or additional shares).




The
      series C convertible preferred stock issued under the Share Exchange Agreement
      is initially convertible into 51% of the number of our fully diluted shares,
      as
      defined to include, without limitation:




·
            Shares
                of common stock outstanding on the date of issuance of the Series
                C
                Preferred Stock;




·
            Shares
                of common stock issuable upon conversion, exercise or exchange of
                any
                convertible security or purchase right outstanding on the date
                of  issuance (including, without limitation, the series C
                convertible preferred stock, our series B convertible preferred stock,
                the
                Series A Notes, the Series B Notes, the Series B OID Notes, the E-7
                Warrants and the F-4 Warrants);




·
            Shares
                of common stock issuable upon conversion, exercise or exchange of
                any
                convertible security or purchase right issued after the issuance
                date of
                the series C convertible preferred stock in conversion, exercise
                or
                exchange of securities outstanding as of the issuance date or as
                a
                dividend, interest payment, liquidated damages, penalty, compromise,
                settlement or other payment of certain securities or  pursuant
                to or in connection with any agreement, indebtedness or other obligation
                of the Company existing as of the issuance date, or with respect
                to any
                amendment, waiver or modification thereto or extension
                thereof;




·
            Shares
                of common stock issued after the issuance date of the series C convertible
                preferred stock as a dividend, interest payment, liquidated damages,
                penalty, compromise, settlement or other payment of certain securities
                or  pursuant to or in connection with any agreement,
                indebtedness or other obligation of the Company existing as of the
                issuance date, or with respect to any amendment, waiver or modification
                thereto or extension thereof; and




·
            Shares
                of common stock authorized for issuance from time to time under our
                equity
                incentive plans.




The
      holders of shares of Series C convertible preferred stock have the right to
      cause us to redeem any or all of its shares at a price equal to 100% of face
      value, plus accrued but unpaid dividends in the following events:




·
            We
                fail to remove any restrictive legend on any certificate or any shares
                of
                common stock issued to the holders of Series B convertible preferred
                stock
                upon conversion of the Series B convertible preferred stock as and
                when
                required and such failure continues uncured for five business
                days;




·
            We
                provide written notice (or otherwise indicate) to any holder of Series
                B
                convertible preferred stock, or state by way of public announcement
                distributed via a press release, at any time, of our intention not
                to
                issue, or otherwise refuse to issue, shares of common stock to any
                holder
                of Series B convertible preferred stock upon conversion in accordance
                with
                the terms of the certificate of designation for our Series B convertible
                preferred stock;




·
            We
                or any of our subsidiaries make an assignment for the benefit of
                creditors, or applies for or consents to the appointment of a receiver
                or
                trustee for us or for a substantial part of our property or
                business;




·
            Bankruptcy,
                insolvency, reorganization or liquidation proceedings or other proceedings
                for the relief of debtors shall be instituted by or against us or
                any of
                our subsidiaries which shall not be dismissed within 60 days of their
                initiation;




·
            We
                sell, convey or dispose of all or substantially all of our
                assets;




·
            We
                merge or consolidate with or into, or engage in any other business
                combination with, any other person or entity, in any case which results
                in
                either (i) the holders of our voting securities immediately prior
                to such
                transaction holding or having the right to direct the voting of fifty
                percent (50%) or less of our total outstanding voting securities
                of or
                such other surviving or acquiring person or entity immediately following
                such transaction or (ii) the members of our board of directors comprising
                fifty percent (50%) or less of the members of our board of directors
                or
                such other surviving or acquiring person or entity immediately following
                such transaction;






**8**




·
            We
                have fifty percent (50%) or more of the voting power of our capital
                stock
                owned beneficially by one person, entity or
                “group”;




·
            We
                experience any other change of control not otherwise addressed above;
                or




*·*
            We
                otherwise breach any material term under the private placement transaction
                documents, and if such breach is curable, shall fails to cure such
                breach
                within 10 business days after we have been notified thereof in writing
                by
                the holder.




The
      series C
      convertible preferred stock generally has the right to vote on all matters
      before the common stockholders on an as-converted basis voting together with
      the
      common stockholders as a single class. In addition, the holders of a majority
      of
      the Series C convertible preferred stock, voting as a separate class, have
      the
      right to appoint a majority of the members of our Board of Directors (as long
      as
      we have not exercised our limited rights to redeem series C convertible
      preferred stock).




As
      a
      result of the securities issued to BMSI in the Share Exchange Agreement and
      Note
      and Warrant Purchase Agreement transactions, BMSI obtained and currently has
      effective control of our board of directors, management, 94.5% of the voting
      power of our common stock outstanding, and beneficial ownership of approximately
      61.1% of our common stock (on a as-converted, fully diluted basis).




Accordingly,
      our financial statements reflect the historical operations of BounceGPS as
      the
      acquisition has been treated as a reverse merger in accordance with FAS 141
      “Accounting for Business Combinations” with BounceGPS considered the accounting
      acquirer. Accordingly, BounceGPS is deemed to be the purchaser and surviving
      company for accounting purposes and its net assets are included in the balance
      sheet at their historical book values and the results of operations of BounceGPS
      have been presented for the comparative prior period.  The results of
      operations of Remote Dynamics, Inc. are included in our financial statements
      subsequent to December 4, 2006 with the purchase price allocated to the acquired
      assets and liabilities of Remote Dynamics, Inc. as of December 4, 2006. Since
      the historical operations of Remote Dynamics, Inc. will comprise substantially
      all of our ongoing operations, we have provided the historical financial
      statements of Remote Dynamics, Inc. (prior to the BounceGPS acquisition) for
      the
      fiscal years ended August 31, 2006 and 2005 and the three months ended November
      30, 2006 and 2005 for information purposes as Exhibit 15.1 and 15.2 to this
      Form
      10-KSB.






**Products
      and Services**




We
      market
      and sell products and services in the AVL market in the United States. Our
      AVL
      products are designed to maximize the productivity of a mobile workforce as
      well
      as reduce vehicle mileage and fuel-related expenses.




*REDIview
      Product Line*




We
      commercially launched our current product offering, REDIview, during January
      of
      2005.  REDIview is an Internet and service bureau-based software
      application that provides an extensive array of real-time and accurate mapping,
      trip replay, and vehicle activity reports.  REDIview includes a series
      of exception-based reports designed to highlight inefficiencies in the
      operations of a vehicle fleet.  Utilizing GPRS technology and our
      proven, high-capacity network service center, customers may access their
      information securely through the Internet from any personal computer or certain
      other devices.




REDIview
      incorporates technologies that allow for fast and effective integration into
      legacy applications operated by companies with vehicle fleets and mobile
      workers.  This design allows companies to easily extend their existing
      supply chain management systems to the mobile workforce for transaction
      processing and customer fulfillment.  REDIview was also designed to be
      hardware and network agnostic to provide the maximum flexibility in designing
      solutions that best fit the customer’s specific needs.








**9**




The
      REDI
      2000TM mobile data logging unit combines global positioning system (GPS)
      technologies along with the latest in wireless, Internet protocol-based
      communications to deliver real-time location, speed, and other conditions of
      the
      vehicle on a minute-by-minute basis. In addition, the units may be configured
      to
      accept additional sensor inputs regarding operations of the vehicle and vehicle
      equipment.






*Vehicle
      Management Information (VMI)*





On
      June
      21, 2001, we acquired an exclusive, royalty-free, 99-year license to market,
      sell and operate Minorplanet System PLC’s VMI technology in the United States,
      Canada and Mexico. VMI is designed to maximize the productivity of a mobile
      workforce as well as reduce vehicle mileage and fuel related expenses. The
      VMI
      technology consists of: (i) a data control unit (“DCU”) that continually
      monitors and records a vehicle’s position, speed and distance traveled; (ii) a
      command and control center (“CCC) which receives and stores in a database
      information downloaded from the DCU’s; and (iii) software used for
      communication, messaging and detailed reporting. VMI uses satellite-based GPS
      location technology to acquire a vehicle location on a minute-by-minute basis,
      and a global system for mobile communications based cellular network to transmit
      data between the DCU’s and the CCC. Global System for Mobile Communications
      (“GSM”) is a digital technology developed in Europe and has been adapted for
      North America. GSM is the most widely used digital standard in the world. The
      VMI application was targeted to small and medium sized fleets based in major
      metropolitan areas.






VMI
      provides minute-by-minute
      visibility into the activities of a mobile workforce via an extensive reporting
      system that provides real-time and exception-based reporting. Real-time reports
      provide information regarding a vehicle’s location, idling, stop time, speed and
      distance traveled. With real-time reporting, the customer can determine when
      an
      employee starts or finishes work, job site arrival times and site visit
      locations. In addition, exception reports allow the customer to set various
      parameters within which vehicles must operate, and the system will report
      exceptions including speeding, extended stops, unscheduled stops, route
      deviations, visits to barred locations and excessive idling.






During
      our bankruptcy proceedings, we notified Minorplanet Systems PLC that we intended
      to reject the VMI license as part of our Plan of Reorganization. In order to
      ensure a smooth transition to its REDIview products and services, we initiated
      negotiations with Minorplanet Systems PLC for a temporary use license to market
      and sell the VMI product until our REDIview products and services were
      commercially available.




On
      June
      14, 2004, the Bankruptcy Court approved a compromise and settlement agreement
      between Remote Dynamics, Minorplanet Limited and Minorplanet Systems PLC
      regarding the license agreement for the VMI technology which allowed Remote
      Dynamics to use, market and sell the VMI technology until December 31, 2004.
      The
      material terms of the settlement agreement include the following:




·
            On
                June 30, 2004, the VMI license agreement converted to a nonexclusive
                license until December 31, 2004 when it would
                terminate.




·
            From
                the period beginning June 30, 2004 through December 31, 2004, the
                territory in which Remote Dynamics could market, sell and use the
                VMI
                system was reduced to the following metropolitan areas: Los Angeles,
                California; Atlanta, Georgia; Dallas, Texas; and Houston,
                Texas.




·
            On
                July 31, 2004, we could no longer use the name, “Minorplanet,” nor any
                derivative thereof, and shall remove and refrain from using any references
                to said name.




·
            We
                provided Minorplanet Limited, at no cost, 100 AEM 3000 VMI units
                to USA
                specifications with accompanying special tariff SIM’s for
                T-Mobile.




·
            Subsequent
                to December 31, 2004, we retained the right to use the VMI software
                internally for the sole purpose of satisfying its warranty, service
                and
                support obligations to our existing VMI customer
                base.






**10**




·
            Minorplanet
                Limited was allowed a general unsecured claim in the amount of $1,000,000
                in Limited’s bankruptcy case no. 04-3 1202-SAF-11. On the effective date,
                Minorplanet Limited released and waived its administrative claim
                and, as
                of such date, waived any future research and development fees due
                under
                Section 16.4 of the VMI license
                agreement.




·
            We
                provided to Minorplanet Limited and Minorplanet UK a general release
                of
                any and all claims which could have been asserted against Minorplanet
                Limited or Minorplanet Systems PLC by Remote
                Dynamics.




On
      January 6, 2005, Remote Dynamics and Minorplanet Limited entered into an
      Addendum to Compromise and Settlement Agreement which granted us the right
      to
      continue to market and sell the VMI product line to our existing VMI customers.
      We have ceased marketing and selling the VMI product




**Competition**




We
      believe that our primary competitors in the automatic vehicle location market
      include:




·
            **Trimble**
                - In addition to providing advanced GPS components, Trimble augments
                GPS
                with other positioning technologies as well as wireless communications
                and
                software to create complete customer solutions. Trimble focuses on
                emerging applications including surveying, automobile navigation,
                machine
                guidance, asset tracking, wireless platforms, and telecommunications
                infrastructures.  In February 2007, Trimble acquired @Road,
                Inc., another of our competitors.  @Road's mobile resource
                management system enables vehicle location, wireless voice and text
                communications, and remote transaction processing with signature
                capture
                using a PDA.




·
            **Teletrac
                -** Teletrac currently sells an Internet-based solution and
                offers
                service on GPRS, CDPD, and Cellemetry wireless networks as well as
                Teletrac’s own proprietary TDOA
                network.




·
            **Other
                Regional Competitors**- There are numerous smaller regional
                companies vying for a local
                presence.






**Employees**




At
      December 31, 2006, we had 19 employees.  Our employees are not
      represented by a collective bargaining agreement.  None of our
      employees are represented by a labor organization, and we are not a party to
      any
      collective bargaining agreement. We have not experienced any work stoppages
      and
      consider our relations with our employees to be good.




Competition
      in the recruiting of personnel in the AVL industry is intense. We believe that
      our future success will depend in part on our continued ability to hire,
      motivate and retain qualified management, sales and marketing, and technical
      personnel. To date, we have not experienced significant difficulties in
      attracting or retaining qualified employees.




**Infrastructure
      And Operations**




***Networks****.*We
      use wireless data and/or voice technologies, combined with GPS satellite
      technology, for all of our products.  Our strategy is to select and
      use wireless networks that provide the “best fit” for each product and
      application or specific customer need.




***REDIview
      and VMI Products***.  The VMI technology uses a GSM digital
      network.  The REDIview product utilizes the general packet radio
      service (“GPRS”) bearer channel of the GSM network to provide Internet protocol
      based wireless data transmission.  Currently, there are two major
      carriers providing GSM/GPRS coverage in the United States: T-Mobile and
      Cingular, both of which provide coverage in the major metropolitan areas in
      the
      United States.  These carriers have announced joint arrangements to
      continue to expand GSM/GPRS coverage in the United States, including
      interoperability among the two carriers.  We believe the coverage,
      bandwidth and price of the GSM/GPRS network make it best suited for the next
      generation technology.








**11**




***Navigation
      Technology****.* GPS technology allows customers to identify
      the location of any mobile asset at any time via satellite. GPS is operated
      by
      the United States government, and broadcasts navigational information from
      a
      network of dedicated satellites orbiting the earth. GPS navigational receivers
      interpret signals from multiple satellites to determine the receiver’s
      geographical coordinates, elevation and velocity.  GPS navigational
      signals can be received worldwide, without adaptation of the receiver unit
      to
      foreign standards. The Company believes that the network of GPS navigational
      satellites will be maintained by the United States Defense Department in an
      operational status for the foreseeable future. Although stand-alone GPS units
      are available for purchase by any consumer at relatively low cost, the Company
      believes that raw navigational information is of little use in tracking assets
      unless the GPS receiver is integrated with a computer system, such as the
      Company’s mobile communication units, to record routes traveled relative to
      mapped roadways or to transmit position reports to a central
      dispatcher.






**Strategic
      Service Alliances of the Company**




***T-Mobile***.
      The Company also resells T-Mobile GSM data services to the Company’s VMI
      customers pursuant to a reseller agreement with T-Mobile. The reseller agreement
      had an initial term of one year which continues on a month-to-month basis
      following the expiration of such initial term unless terminated by either party
      on written notice.  The initial term of the reseller agreement has
      expired and the reseller agreement is currently on a month-to-month term.
      T-Mobile is making ongoing changes to their network to support circuit-switched
      data which is causing significant support issues to the VMI product line, which
      may accelerate the product’s end of life.  If the Company is unable to
      renew such agreements with T-Mobile and other U.S. wireless carriers refuse
      to
      support circuit-switched data on their GSM networks for our VMI units, such
      failures would not have a material adverse effect on the Company’s business,
      financial condition and results of operations.




***Cingular
      Wireless LLC****.*The Company provides GSM/GPRS data services
      to its REDIview customers pursuant to a data reseller agreement with AT&T
      Wireless now known as Cingular Wireless LLC (“Cingular”) effective as of
      November 1, 2004 and a messaging agreement effective September 27, 2004. The
      data reseller agreement and messaging agreement have an initial term of two
      years and automatically renews for successive one year terms unless either
      party
      provides the other party with written notice of termination at least 30 days
      prior to the end of the initial term or any renewal term.  However,
      the data reseller agreement and the messaging agreement may be terminated by
      Cingular or the Company for convenience upon 90 days prior written
      notice.





If
      Cingular terminates the data reseller agreement and messaging agreement and
      ceases to provide GSM/GPRS services to the Company for resale to its customers,
      the REDIview units in the Company’s base of installed REDIview customers would
      no longer be able to send or receive data messages until the Company could
      reach
      an agreement with another provider and retrofit such units to utilize the
      GSM/GPRS service of such alternative provider.  There can be no
      assurances that the Company would be able to reach an agreement with another
      wireless carrier for GSM/GPRS service and/or retrofit its existing REDIview
      customer base to utilize the GSM/GPRS service of such alternative provider
      the
      failure to do so would have a material adverse effect on the Company’s business,
      financial condition and results of operations.





*****Key
      Manufacturers****.*  The Company does not
      manufacture or assemble its products but subcontracts for the manufacture of
      its
      products from various suppliers. The Company depends upon Enfora, Inc. as its
      sole source of manufacturing for its REDIview product line.  The
      Company does not have a long-term manufacturing agreement with Enfora, Inc.
      If
      Enfora, Inc. fails to perform its obligations under the Company’s outstanding
      purchase orders issued to Enfora, Inc. for the manufacture of the Company’s
      REDIview product line, or if Enfora, Inc. ceases to manufacture the Company’s
      REDIview products, the Company would have to immediately engage an alternative
      manufacturer to manufacture the Company’s REDIview product line. There can be no
      assurances that the Company would be able to engage an alternative manufacturer
      before the Company would deplete its existing inventory for the REDIview product
      line, or that the Company would be able to engage an alternative manufacturer
      on
      commercially reasonable terms or at all and the failure to do so would have
      a
      material adverse effect on the Company’s business, results of operation and
      financial condition.





**Factors
      That May Affect Future Results of Operations**




In
      addition to the other information in this Form 10-KSB, the following
      factors should be considered in evaluating Remote Dynamics, Inc. and our
      business.




**12**




***We
      have operated at a significant loss in recent periods, have a substantial
      working capital deficit,  and may not have adequate funds to continue
      as a going concern.***





We
      have
      incurred significant operating losses since our inception, and these losses
      will
      continue for the near future. We may not ever achieve profitability. Even if
      we
      do achieve profitability, we may not be able to sustain or increase profits
      on a
      quarterly or annual basis.  For 2006, our independent registered
      public accounting firm issued an opinion on our financial statements which
      included an explanatory paragraph expressing substantial doubt about our ability
      to continue as a going concern.




We
      do not
      expect to achieve profitability or positive cash flow for 2007.  Our plans
      for 2007 include increasing our sales staff and sales channel development in
      an
      effort to build recurring revenue and continuing to identify additional
      operating cost reductions.  However, there can be no assurance that we will
      achieve our sales targets or our targeted operating cost reductions for 2007.
      Failure to do so may have a material adverse effect on our business, financial
      condition and results of operations.  Moreover, despite actions to
      increase revenue, to reduce operating costs and to improve profitability and
      cash flow, our operating losses and net operating cash outflows will continue
      into the third quarter of 2007.




Critical
      success factors in our plans to achieve positive cash flow from operations
      include:




·
            Ability
                to increase sales of the
                REDIview product line.




·
            Ability
                to further reduce our
                operating costs in accordance with our latest revised business
                plan.




·
            Significant
                market acceptance of
                our product offerings from new customers, including our REDIview
                product
                line, in the United States.




·
            Maintaining
                and expanding our direct sales
                channel.




·
            Training
                and development of new
                sales staff.




·
            Maintenance
                and expansion of
                indirect distribution channels for our REDIview product
                line.




There
      can be
      no assurances that any of these success factors will be realized or
      maintained.




We
      had a
      working capital deficit of $4.7 million as of December 31, 2006.  We
      believe that with the expected proceeds from our November 2006 private
      placement, we will have sufficient capital to fund our ongoing operations
      through the remainder of 2007, assuming that we are able to meet our sales
      targets and operating cost reduction plans and to negotiate acceptable payment
      arrangements with our senior security holders, vendors and other
      creditors.  The sufficiency of our cash resources depends to a certain
      extent on general economic, financial, competitive or other factors beyond
      our
      control. We do not currently have any arrangements for additional financing
      and
      we may not be able to secure additional debt or equity financing on terms
      acceptable to us, or at all, at the time when we need such financing. Further,
      our ability to secure certain types of additional financings is restricted
      under
      the terms of our existing financing arrangements. There can be no assurance
      that
      we will be able to consummate a transaction for additional capital prior to
      substantially depleting our available cash reserves, and our failure to do
      so
      may force us to restructure, file for bankruptcy, sell assets or cease
      operations.







**13**





***We
      are currently not in compliance with our obligations under our senior securities
      and, as a result, our senior security holders may declare the
      securities  immediately due and payable,  we may be required
      to pay monetary liquidated damages and/or  amounts in excess of the
      outstanding amount due under of the securities, and we may be forced to sell
      all
      of our assets or cease operations.***




We
      currently are not in compliance with
      certain of our obligations relating to our secured convertible notes and our
      convertible preferred stock, including (a) with respect to our series A senior
      secured convertible notes, our failure to make required amortization payments,
      to maintain sufficient authorized shares to permit conversion of the notes
      and
      to register the resale of the shares of common stock issuable upon conversion
      of
      the notes, and (b) with respect to our series B senior secured convertible
      notes, our failure to file a registration statement with respect to the resale
      of the shares of common stock issuable upon conversion of the
      notes.





Our
      secured convertible notes become
      immediately due and payable upon an event of default including:




·
            our
                failure to make the principal installment amount on a designated
                principal
                payment date;




·
            our
                failure to comply with our registration obligations with respect
                to shares
                of our common stock issuable upon conversion of the note or exercise
                of
                warrants issued to the note
                investors;




·
            the
                suspension from listing or failure of our common stock to be listed
                on the
                OTC Bulletin Board or one of the major
                exchanges;




·
            our
                notice to the holder of our inability to comply or intention not
                to comply
                with proper requests for conversion of the
                notes;




·
            our
                default in the performance of any material covenant in the notes,
                the
                purchase agreement for the notes, the registration rights agreement
                relating to the notes or any other ancillary documents relating to
                the
                notes;




·
            our
                making of a false or incorrect representation or warranty in the
                purchase
                agreement for the notes, the registration rights agreement relating
                to the
                notes or any other ancillary documents relating to the
                notes;




·
            our
                default in any payment of principal or interest on the indebtedness
                represented by the notes, or default in the observance or performance
                of
                any other agreement relating to such indebtedness in excess of
                $100,000;




·
            our
                application for appointment of a receiver or liquidator or filing
                a
                petition in bankruptcy or other similar relief which is not dismissed
                within 30 days; and




·
            the
                filing of a proceeding against us seeking the liquidation, reorganization,
                or dissolution of us or similar relief which is not dismissed within
                30
                days.




Upon
      the occurrence of an event
      of default on our secured convertible notes, the holders may (a) declare the
      entire unpaid principal balance of the notes due and it will be accelerated;
      (b)
      demand prepayment of the notes as described below, (c) demand that the principal
      amount of the notes then outstanding be converted into shares of our common
      stock at the conversion price discussed in more detail below; and/or (d)
      exercise any of the holder’s other rights or remedies under the transaction
      documents or applicable law.





If
      the holders require us to prepay all
      or a portion of the notes, the prepayment price would equal the greater of
      (x)
      125% of the principal amount of the notes and (y) if the holder cannot get
      the
      benefit of its conversion rights and the ability to effect the resale of shares
      of our common stock issuable upon conversion, (i) the aggregate principal amount
      of the notes divided by (ii) the conversion price on: the date the prepayment
      price is demanded or due, or the date the prepayment price is paid in full,
      whichever is less, multiplied by (iii) the volume weighted average price
      on:  the date the prepayment price is demanded or otherwise due;
      or  the date the prepayment price is paid in full, whichever is
      greater.  The holders would also recover all other costs or expenses
      due in respect of the notes and the other transaction documents.







The
      holders of shares of convertible preferred stock have the right to cause us
      to
      redeem any or all of their shares at a price equal to 100% of face value, plus
      accrued but unpaid dividends, upon the occurrence of specified events, including
      our breach of any material term under the related financing documents (subject
      to applicable notice and cure periods).




Our
      failure to comply with our obligations relating to our secured convertible
      notes
      and convertible preferred stock also exposes us to liquidated damages claims
      by
      the security holders. For example, our failure to meet specified deadlines
      to
      register the resale of the shares of common stock issuable upon conversion
      of
      the notes exposes us to claims for monetary liquidated damages from the note
      holders equal to 1.5% of the total amount invested by the note holders, plus
      an
      additional 1.5% liquidated damages for each 30-day period
      thereafter.




**14**





We
      do not
      currently have the cash on hand to repay amounts due under our secured
      convertible notes or convertible preferred stock if the security holders elected
      to exercise their repayment, redemption or liquidated damages
      remedies.  To date, we have obtained waivers of compliance of certain
      of our obligations under the securities from some of our security
      holders.  If we continue to be unable to comply with our obligations
      in the future, there can be no assurance that we will be able to obtain waivers
      from the security holders on acceptable terms or at all.




Although,
      to date, no security holder
      has sent us a notice of acceleration of amounts owed under or redemption of
      these securities, there can be no assurance that the security holders will
      not
      take such action in the future.   In the event of an acceleration
      of amounts owed under or redemption of these securities (or a claim for
      liquidated damages), if we are unable to raise enough money to cover the amounts
      payable, we may be forced to restructure, file for bankruptcy, sell assets
      or
      cease operations.







***We
      have pledged all of our assets to existing creditors.***




Our
      secured convertible notes are secured by a lien on substantially all of our
      assets.  A default by us under the secured convertible notes would
      enable the holders of the notes to take control of substantially all of our
      assets.  The holders of the secured convertible notes have no
      operating experience in our industry and if we were to default and the note
      holders were to take over control of our Company, they could force us to
      substantially curtail or cease our operations.   If this happens,
      an investor could lose their entire investment in our common stock.





In
      addition, the existence of our asset
      pledges to the holders of the secured convertible notes will make it more
      difficult for us to obtain additional financing required to repay monies
      borrowed by us, continue our business operations and pursue our growth strategy.








***Potential
      future offerings could dilute the interest of our common
      stockholders.***





We
      expect
      in the future to increase our capital resources by making additional offerings
      of equity and debt securities, including classes of preferred stock and common
      stock. However, there can be no assurances that we will be able to obtain any
      such financing on terms acceptable to us or at all. The effect of additional
      equity offerings may be the dilution of the equity of our stockholders or the
      reduction of the price of shares of our common stock, or both. We are unable
      to
      estimate the amount, timing or nature of additional offerings as they will
      depend upon market conditions and other factors.







***BMSI
      can vote an aggregate of 94.5% of the voting power of our common stock and
      can
      exercise control over corporate decisions including the appointment of
      directors.***




BMSI
      can vote an aggregate of
      1,135,619,915 shares (or 94.5%) of the voting power of our common
      stock.  Accordingly, BMSI will exercise control in determining the
      outcome of all corporate transactions or other matters, including the election
      of directors, mergers, consolidations, the sale of all or substantially all
      of
      our assets, and also the power to prevent or cause a change in
      control.  Our other stockholders will be minority shareholders and as
      such will have little to no say in the direction of the Company and the election
      of directors.  Additionally, it will be difficult if not impossible
      for investors to remove designees of BMSI as directors of the Company, which
      will mean BMSI will remain in control of who serves as officers of the Company
      as well as whether any changes are made in the Board of
      Directors.  Potential investors in the Company should be aware that
      even if they own shares of our common stock and wish to vote them at annual
      or
      special shareholder meetings, their shares will likely have little effect on
      the
      outcome of corporate decisions.






**15**





***The
      certificates of designation for our Series C and Series B convertible
      preferred stock contain restrictions on our ability to take certain actions
      without the approval of the Series C and Series B convertible preferred
      stockholders, including entering into mergers or issuing additional debt or
      equity, and also contains certain mandatory redemption events which could force
      us to redeem shares when we do not have the funds to do
      so.***





We
      are
      prohibited from taking numerous actions without the approval of the holders
      of
      at least a majority of our series C and, in certain cases, our series B
      convertible preferred stock, including, without limitation:





·  amending
      our certificate of incorporation or bylaws;




·  redeeming
      securities;




·  entering
      into an asset sale, merger or similar transaction;




·  creating
      or issuing senior or pari passu securities; or




·  issuing
      equity or debt securities.







Accordingly,
      we may not be able to obtain the approval of our convertible preferred
      stockholders needed to complete a necessary or advisable financing transaction,
      or necessary to effect any other transaction that our board of directors deems
      to be in the best interests of our stockholders.





The
      certificate of designations for our convertible preferred stock also contain
      numerous redemption events, including any breach by us of any of the transaction
      documents pursuant to which we issued the securities. If any of these redemption
      events were to occur, the holders of our convertible preferred stock could
      force
      us to redeem their shares. We may not have the funds available to effect a
      forced redemption and the holders could take further actions such as forcing
      us
      into involuntary bankruptcy.





***We
      face significant competition in the automatic vehicle location
      marketplace.***





Our
      REDIview product faces significant competition from internal development teams
      of customers and potential customers and from several other suppliers of similar
      products, many of which may have greater name recognition and greater financial
      and technological resources. As the demand by business for mobile tracking
      services increase, the quality, functionality and breadth of competing products
      and services will likely improve and new competitors may enter the market.
      Further, the adoption of widespread industry standards may make it easier for
      new market entrants or existing competitors to improve their existing services,
      to offer some or all of the services we presently offer or may offer in the
      future, or to offer new services that we do not offer. We can provide no
      assurance that our products will compete successfully with the products of
      our
      competitors or that we will adapt to changes in the business, regulatory or
      technological environment as successfully as our competitors. If we are unable
      to compete successfully, our ability to acquire or retain customers may be
      limited which could result in a material adverse effect on our business,
      financial condition and results of operations.





***We
      may be unable to adapt to shifts in technology in the wireless communications
      industry.***





Technology
      in the wireless communications industry is in a rapid and continuing state
      of
      change as new technologies and enhancements to existing technologies continue
      to
      be introduced. Our future success will depend upon our ability to develop and
      market products and services that meet changing customer needs and that
      anticipate or respond to technological changes on a timely and cost-effective
      basis. We can offer no assurance that we will be able to keep pace with
      technological developments. Our failure to develop and market products and
      services that meet changing customer needs and that anticipate or respond to
      technological changes on a timely and cost-effective basis could result in
      a
      material adverse effect on our business, financial condition and results of
      operations.







**16**




***If
      wireless carriers on which we depend for services decide to abandon or do not
      continue to expand their wireless networks, we may lose subscribers and our
      revenues could decrease.***





Currently,
      our automatic vehicle location products rely on GSM/GPRS networks. GPRS is
      the
      internet protocol-based dedicated high speed wireless data channel for the
      GSM wireless network. If wireless carriers abandon these protocols in favor
      of other types of wireless technology, we may not be able to provide services
      to
      our customers. In addition, if wireless carriers do not expand their coverage
      areas, we will be unable to meet the needs of our customers who may wish to
      use
      some of our services outside the current coverage area.








***We
      rely primarily on Cingular Wireless for the provision of GSM/GPRS data services
      to our REDIview customers and our inability to renew our agreements with
      Cingular Wireless may require us to retrofit our installed base of REDIview
      units.***





We
      provide GSM/GPRS data services to our REDIview customers pursuant to a data
      reseller agreement with AT&T Wireless now known as Cingular Wireless LLC
      effective as of November 1, 2004 and a messaging agreement effective
      September 27, 2004. The data reseller agreement and messaging agreement
      have an initial term of 2 years and automatically renews for successive one
      year terms unless either party provides the other party with written notice
      of
      termination at least 30 days prior to the end of the initial term or any
      renewal term. However, the data reseller agreement and the messaging agreement
      may be terminated by Cingular or by us for convenience upon 90 days prior
      written notice.





If
      Cingular terminates the data reseller agreement and messaging agreement and
      ceases to provide GSM/GPRS services to us for resale to our customers, the
      REDIview units in our base of installed REDIview customers would no longer
      be
      able to send or receive data messages until we could reach an agreement with
      another provider and retrofit such units to utilize the GSM/GPRS service of
      this
      alternative provider. There can be no assurances that we would be able to reach
      an agreement with another wireless carrier for GSM/GPRS service and/or retrofit
      our existing REDIview customer base to utilize the GSM/GPRS service of the
      alternative provider. The failure to do so would have a material adverse effect
      on our business, financial condition and results of operations.




***We
      depend on Global Positioning System technology owned and controlled by others.
      If we do not have continued access to GPS technology or satellites, our REDIview
      product line will cease to function.***





Our
      REDIview products depend upon signals from GPS satellites built and maintained
      by the U.S. Department of Defense. GPS satellites and their ground support
      systems are subject to electronic and mechanical failures and sabotage. If
      one
      or more satellites malfunction, there could be a substantial delay before they
      are repaired or replaced, if at all, and our products and services may cease
      to
      function.





**17**


In
      addition, the U.S. government could decide not to continue to operate and
      maintain GPS satellites over a long period of time or to charge for the use
      of
      GPS. Furthermore, because of ever-increasing commercial applications of GPS
      and
      international political unrest, U.S. government agencies may become increasingly
      involved in the administration or the regulation of the use of GPS signals
      in
      the future. If factors such as these affect GPS by affecting the availability,
      quality, accuracy or pricing of GPS technology, these factors could have a
      material adverse effect on our business, financial condition and results of
      operations.





***Any
      natural disaster, terrorist attack or other occurrence that renders our network
      service center inoperable could significantly hinder the delivery of our
      services to our customers because we lack an effective remote back-up
      communications system.***





Currently,
      our disaster recovery systems focus on internal redundancy and diverse routing
      within the network services center operated by us. We do not currently have
      a
      remote back-up communications system that would enable us to continue to provide
      mobile communications services to our customers in the event of a natural
      disaster, terrorist attack or other occurrence that rendered our network
      services center inoperable. Accordingly, our business is subject to the risk
      that this disaster, attack, security intrusion by a computer hacker or other
      occurrence could hinder or prevent us from providing services to some or all
      of
      our customers. The delay in the delivery of our services could cause some of
      our
      customers to discontinue business with us which could have a material adverse
      effect on our business, financial condition and results of
      operations.





***We
      depend on our key personnel, and the loss of one or more of these individuals
      could have a material adverse effect on our business, financial condition and
      results of operations.***





We
      are
      dependent on the efforts of Gary Hallgren, our Chief Executive Officer, and
      Greg
      Jones, our Senior Vice President, Operations.  We maintain employment
      agreements with these executives which expire in February, 2009.





In
      addition, we are also dependent upon a group of our employees possessing
      valuable technical skills.





The
      loss
      of services of one or more of these individuals could materially and adversely
      affect our business and future prospects. We do not maintain key-man life
      insurance on any of our officers or employees. We can provide no assurance
      that
      we will be able to attract and retain additional management and technical
      personnel required in connection with the growth and development of our
      business.





***Increases
      in the wholesale rates for digital wireless service could reduce our service
      margin.***





We
      currently purchase digital wireless service at wholesale rates to operate
      certain parts of our business. While we presently have no reason to belief
      that
      these rates will increase, these rates are outside of our control and any
      increase in the digital wireless serviced may have a material adverse effect
      on
      our costs which could decrease our profit margins and revenues.





***Product
      liability claims could have a material adverse effect on our business by
      creating additional costs related to the payment or settlement of these
      claims.***





It
      is
      possible that the operation of our products may give rise to product liability
      claims. Product liability claims present a risk of protracted litigation,
      substantial money damages, attorney’s fees, costs and expenses and diversion of
      our management’s attention. Product liability claims that exceed policy limits
      applicable to our liability insurance or that are excluded from the policy
      coverage could result in a material adverse effect on our business, financial
      condition and results of operations.






**18**


***We
      are aware of a potential claim involving us and our prior inventory
      vendor.***





We
      are
      aware of a potential claim involving us and our prior inventory
      vendor.  This claim has not been asserted, but we have discussed the
      possibility of a dispute arising out of disposition of inventory manufactured
      by
      this vendor.  We do not believe we are liable for future inventory
      purchases from this vendor.  However, should this vendor be successful
      in asserting their potential claim, it may have a material adverse affect on
      our
      financial position, operating results and cash flows.





***Changes
      in industry-specific government regulations could require us to materially
      increase our expenses to pay compliance fees.***





We
      believe that our products and services are currently exempt from both Federal
      Communications Commission and state regulations. We rely on our long-distance
      providers and wireless providers to comply with any applicable regulatory
      requirements. In the event that our services are reclassified as
“telecommunications services,” we could be forced to expend substantial time,
      money and resources to comply with the applicable regulations and contribute
      to
      applicable universal services funds mandated by federal regulations. An event
      like this could result in a material adverse effect on our business, financial
      condition and results of operations owing to this increase in
      expenses.





***We
      may not be able to adequately protect our patents and other proprietary
      technology, and our intellectual property rights may be challenged by
      others.***





Our
      products and services are highly dependent upon our technology and the scope
      and
      limitations of our proprietary intellectual property rights. In order to protect
      our technology, we rely on a combination of patents, copyrights and trade secret
      laws, as well as certain customer licensing agreements, employee and third-party
      confidentiality and non-disclosure agreements and other similar arrangements.
      If
      our assertion of proprietary intellectual property rights is held to be invalid,
      or if another party’s use of our technology were to occur to any substantial
      degree, our business, financial condition and results of operations could be
      materially adversely affected.





Several
      of our competitors have obtained and can be expected to obtain patents that
      cover products or services directly or indirectly related to those which we
      offer. Our management attempts to be aware of patents containing claims that
      may
      pose a risk of infringement by our products or services. In addition, patent
      applications in the United States are confidential until a patent is issued;
      accordingly, our management cannot evaluate the extent to which our products
      or
      services may infringe on future patent rights being sought by others. In
      general, if it were determined that any of our products, services or planned
      enhancements infringed valid patent rights held by others, we would be required
      to obtain licenses to develop and market these products, services or
      enhancements from the holders of the patents, to redesign such products or
      services to avoid infringement, or to cease marketing such products or services
      or developing the enhancements. In this event, we also might be required to
      pay
      past royalties or other damages. We can provide no assurance that, should it
      become necessary, we would be able to obtain licenses on commercially reasonable
      terms, or that we would be able to design or redesign our products to
      incorporate alternative technologies, without a material adverse effect on
      our
      business, financial condition and results of operations.





***Our
      adoption of “Reverse Merger Accounting” makes comparisons of our financial
      position and results of operations with those of prior fiscal periods more
      difficult.***







In
      connection with our acquisition of BounceGPS in December 2006, we implemented
      “Reverse Merger Accounting” in accordance with FAS 141 “Accounting for Business
      Combinations” whereby our financial statements reflect the historical operations
      of BounceGPS as they are the accounting acquirer.  Accordingly,
      BounceGPS is deemed to be the purchaser and surviving company for accounting
      purposes and its net assets are included in the balance sheet at their
      historical book values and the results of operations of BounceGPS have been
      presented for the comparative prior period. The results of operations of Remote
      Dynamics, Inc. are included in our financial statements subsequent to December
      4, 2006 with the purchase price allocated to the acquired assets and liabilities
      of Remote Dynamics, Inc. as of December 4, 2006.  As a result, the
      consolidated financial statements for periods after our reverse merger are
      not
      comparable to our consolidated financial statements for the periods prior to
      our
      reverse merger. The application of “Reverse Merger Accounting” makes it more
      difficult to compare our post-merger operations and results to those in
      pre-merger periods and could therefore adversely affect trading in and the
      liquidity of our common stock.  We have provided Remote Dynamics, Inc.
      historical financial statements prior to the acquisition for the years ending
      August 31, 2006 and 2005 and the three months ending November 30, 2006 for
      information purposes as Exhibit 15.1 and 15.2 to this Form 10-KSB.







**19**


***Our
      certificate of incorporation and bylaws and state law contain provisions that
      could discourage a takeover.***





We
      have
      adopted a certificate of incorporation and bylaws, which in addition to state
      law, may discourage, delay or prevent a merger or acquisition that any one
      of
      our stockholders may consider favorable. These provisions include the
      following:





·  authorizing
      the board to issue blank check preferred stock on terms it deems
      advisable;




·  prohibiting
      cumulative voting in the election of directors; and




·  limiting
      the persons who may call special meetings of stockholders;







We
      have
      adopted a certificate of incorporation that permits our board to issue shares
      of
      preferred stock without stockholder approval (other than approvals of the series
      B and series C convertible preferred stockholders currently required), which
      means that our board could issue shares with special voting rights or other
      provisions that could deter a takeover. In addition to delaying or preventing
      an
      acquisition, the issuance of a substantial number of shares of preferred stock
      could adversely affect the price of our common stock and dilute existing
      stockholders.




***There
      are a large number of shares of common stock underlying our convertible
      preferred stock, secured convertible notes and warrants that may be available
      for future sale and the sale of these shares may depress the market price of
      our
      common stock.***





As
      of April 11, 2007, we had
      outstanding (i) 522 shares of our series B convertible preferred stock (which
      were convertible into 3,367,742 shares of common stock), (ii) 5,000 shares
      of
      our series C convertible preferred stock (which were convertible into
      1,135,619,915 shares of common stock), (iii) $4,209,847 principal amount of
      our
      series A senior secured convertible promissory notes (which were convertible
      into 263,115,438 shares of common stock), (iv) $4,870,451 principal amount
      of
      our series B subordinated secured convertible promissory notes (which were
      convertible into 304,403,188 shares of common stock), (v) series A-7 warrants
      exercisable for 20,625,000 shares of common stock, (vi) series B-4 warrants
      exercisable for 13,750,000 shares of common stock, (vii) series C-3 warrants
      exercisable for 27,500,000 shares of common stock, (viii) series D-1 warrants
      exercisable for 19,250,000 shares of common stock, (ix) series E-7 warrants
      exercisable for 172,322,768 shares of common stock, (x) series F-4 warrants
      exercisable for 172,322,768 shares of common stock, and (xi) other warrants
      exercisable for 30,551,365 shares of common stock.





We
      have previously registered the
      resale of
      40,000,000 shares of common stock, which includes shares issuable upon
      conversion of our series A senior secured convertible notes, upon exercise
      of
      certain of our warrants and upon conversion of the series B convertible
      preferred stock.  We are obligated to register the resale of
      additional shares of common stock issuable upon conversion of our series A
      senior secured convertible notes, our series B secured convertible notes and
      our
      series C convertible preferred stock, and upon exercise of our outstanding
      warrants.  Once registered for resale, these shares of common stock
      may therefore be sold into the public market without restriction upon their
      issuance.





**20**


Sales
      of significant amounts of common
      stock in the public market, or the perception that such sales may occur, could
      materially affect the market price of our common stock. These sales might also
      make it more difficult for us to sell equity or equity-related securities in
      the
      future at a time and price that we deem appropriate





***The
      issuance of shares of common stock upon conversion of our secured convertible
      notes and our convertible preferred stock and upon exercise of outstanding
      warrants may cause immediate and substantial dilution to our existing
      stockholders.***





As
      of April 10, 2007, we had
      outstanding 63,228,182 shares of our common stock, which would represent only
      3%
      of our total issued and outstanding common stock upon conversion of all of
      our
      secured convertible notes, convertible preferred stock and upon exercise of
      all
      of our outstanding warrants. Although certain holders may not convert their
      secured convertible notes and/or exercise their warrants if such conversion
      or
      exercise would cause such holder to own more than 4.99% of our outstanding
      common stock, this restriction does not prevent any holder from converting
      and/or exercising and selling some of its holdings and then converting the
      rest
      of its holdings. In this way, any such holder could sell more than this limit
      while never holding more than this limit at any one time. The issuance of shares
      of common stock upon conversion of our secured convertible notes, our
      convertible preferred stock and upon exercise of our outstanding warrants may
      result in substantial dilution to the interests of other
      stockholders.





***Because
      our secured convertible notes may be repaid, at our discretion, in shares of
      common stock valued at a discount of the common stock’s trading price, should
      the value of our common stock decrease, our election to repay the notes in
      shares of common stock could result in a significant issuance of new shares
      of
      common stock to the note holders, causingmaterial dilution to the then existing
      holders of our common stock.***





As
      of March 31, 2007, we had
      outstanding (a) $4,209,847 principal amount of our series A senior secured
      convertible notes (including original issue discount notes) and (b) $4,870,451
      principal amount of our series B senior secured convertible notes (including
      original issue discount notes).





The
      series A senior secured convertible
      notes mature 24 months from issuance and beginning on September 1, 2006 and
      continuing thereafter on the first business day of each month, we must pay
      an
      amount to the holders of the notes equal to 1/18th of the original principal
      amount of the notes; provided, that if on any principal payment date the
      outstanding principal amount of the notes is less than such principal
      installment amount, then we must pay to the holders of the notes the lesser
      amount. We may make such principal installment amounts in cash or in registered
      shares of common stock in our sole discretion. If paid in common stock, certain
      conditions must be satisfied, and the number of registered shares to be paid
      to
      the holders must be an amount equal to the principal installment amount divided
      by eighty percent (80%) of the average of the closing bid price for each of
      the
      ten (10) trading days immediately preceding the principal payment
      date.





The
      series B subordinated secured
      convertible notes are due December 4, 2009 and begin amortization of principal
      (in nine quarterly installments) on August 1, 2007.  We may make
      principal installment payments in cash or in registered shares of our common
      stock. If paid in common stock, certain conditions must be satisfied, and the
      number of registered shares to be paid to the holder must be an amount equal
      to
      the greater of (i) the principal installment amount divided by $0.02 and (ii)
      the principal installment amount divided by 90% of the average of the volume
      weighted average trading prices of the common stock for the ten trading days
      immediately preceding the principal payment.





As
      a result, should we elect to repay
      the original principal amount of the notes in shares of common stock and should
      the trading price of our common stock decrease, the number of shares of common
      stock we would need to issue to satisfy the original principal amount could
      increase significantly, materially diluting the holdings of our then existing
      stockholders.





***The
      price of our common stock is volatile.***





Historically,
      market prices for securities of emerging companies in the telecommunications
      industry have been highly volatile. Future announcements concerning our
      business, the business of our competitors or our wireless providers, including
      results of technological innovations, new commercial products, financial
      transactions, government regulations, proprietary rights or product or patent
      litigation, may have a significant impact on the market price of shares of
      our
      common stock. The market price of our common stock and its trading volume have
      been highly volatile in recent periods and our common stock is often thinly
      traded.





**21**


***We
      do not expect to pay dividends on our common stock in the foreseeable
      future.***





We
      have
      never paid cash dividends on our common stock and have no plans to do so in
      the
      foreseeable future. We intend to retain earnings, if any, to develop and expand
      our business.





***Our
      common stock was recently delisted from trading on the NASDAQ SmallCap Market
      and it may be deemed to be a “penny stock.”***





As
      the
      closing bid for our common stock remained below $1.00 per share and we were
      no
      longer able to meet certain other tests, we voluntarily delisted our common
      stock from The NASDAQ SmallCap Market on February 10, 2006, and our common
      stock may now be deemed to be penny stock. If our common stock is considered
      penny stock, it will be subject to rules that impose additional sales practices
      on broker-dealers who sell our securities. For example, broker-dealers selling
      penny stock must make a special suitability determination for the purchaser
      and
      must have received the purchaser’s written consent to the transaction prior to
      sale. Also, a disclosure schedule must be prepared before any transaction
      involving a penny stock can be completed, including required disclosure
      concerning:





·
            sales
                commissions payable to both the broker-dealer and the registered
                representative; and




·
            current
                quotations for the securities.




Brokers
      are also required to send monthly statements disclosing recent price information
      for the penny stock held in the account and information on the limited market
      in
      penny stock. Because of these additional obligations, some brokers may not
      effect transactions in penny stock. This could have a material and adverse
      effect on the market for our common stock, and the ability of stockholders
      to
      sell shares.




**Item
      2.Description of Properties.**




Our
      headquarters are located in Plano, Texas.  We occupy approximately 4,000
      square feet of floor space in this facility. This facility includes our
      corporate administration, operations, marketing, research and development,
      sales
      and technical support personnel.  The lease for our headquarters facility
      extends through March 2009.





**Item
      3.Legal Proceedings.**




In
      August
      2005, @Road, Inc. brought a lawsuit against us alleging intentional interference
      with prospective economic advantage (@Road, Inc. v. Kierston Dowd, et al.,
      Stanislaus County Superior Court). On October 13, 2006, we entered into a
      preliminary Memorandum of Understanding with @Road, Inc. with respect to a
      settlement of the lawsuit in exchange for a payment from us of $250,000,
      however, the parties could not agree on the details of the
      settlement.  Additionally, the proposed settlement terms were not
      approved by our Board of Directors





In
      November 2006, Mike Albert Leasing, Inc. brought a lawsuit against us alleging
      breach of a motor vehicle lease agreement (Mike Albert Leasing, Inc. v. Remote
      Dynamics, Inc., Hamilton County, Ohio Court of Common Pleas).  In February
      2007, the plaintiff obtained a default judgment against us in the amount of
      $79,401.20, plus interest.





**22**


We
      are aware
      of a potential claim involving us and our prior inventory
      vendor.  This claim has not been asserted, but we have discussed the
      possibility of a dispute arising out of disposition of inventory manufactured
      by
      this vendor.  We do not believe we are liable for future inventory
      purchases from this vendor and several months ago expressed our position to
      them.  However, should this vendor be successful in asserting a claim,
      it may have a material adverse affect to our financial position, operating
      results and cash flows.





We
      are
      subject to legal proceedings and claims that involve the collection of payments
      due by us or arise in the ordinary course of business.  We do not
      believe that any claims other than those described above exist where the outcome
      of such matters would have a material adverse affect on our consolidated
      financial position, operating results or cash flows.  However, there
      can be no assurance such legal proceedings will not have a material impact
      on
      future results.





**Item4.Submission of Matters to a Vote of Security
      Holders.**




There
      were no matters submitted to a vote of our security holders during the fourth
      quarter of 2006.




**PARTII**









**Item5.Market for Common Equity and Related Stockholder
      Matters.**




Our
      Common Stock was initially offered to the public on June 22, 1995, and was
      quoted on the NASDAQ National Market (“NASDAQ NMS”) through close of business on
      February 1, 1999, after which time it began trading on the NASDAQ SmallCap
      Market (“NASDAQ SmallCap”) under the symbol “HWYM.”  Our common stock
      next traded under the symbol “REDI” on the NASDAQ SmallCap until February 21,
      2006, when began trading on the OTC Bulletin Board under the symbol “REDI.OB”
following de-listing from the NASDAQ SmallCap.  The following table
      sets forth the range of high and low trading prices on the NASDAQ SmallCap
      Market or the OTC Bulletin Board, as applicable, for the Common Stock for the
      periods indicated.  Such price quotations represent inter-dealer
      prices without retail markup, markdown or commission and may not necessarily
      represent actual transactions.




BID
                        PRICESHIGH
                    
                    
                    LOW**2005**First
                        Quarter
                    
                    $
                    1.17
                    
                    
                    $
                    0.92Second
                        Quarter
                    
                    $
                    2.89
                    
                    
                    $
                    0.89Third
                        Quarter
                    
                    $
                    1.59
                    
                    
                    $
                    0.50Fourth
                        Quarter
                    
                    $
                    0.90
                    
                    
                    $
                    0.26**2006**First
                        Quarter
                    
                    $
                    1.10
                    
                    
                    $
                    0.13Second
                        Quarter
                    
                    $
                    0.18
                    
                    
                    $
                    0.05Third
                        Quarter
                    
                    $
                    0.15
                    
                    
                    $
                    0.01Fourth
                        Quarter
                    
                    $
                    0.02
                    
                    
                    $
                    0.00




There
        were  84 holders of record of our common stock as of April 11,
        2007**.**  The last sales price for our common stock as
        reported on April 11, 2007 was $0.0031.




We
      did
      not pay dividends on our common stock for the year ended December 31, 2006
      and
      have no plans to do so in the foreseeable future. Furthermore, covenants in
      the
      Certificates of Designation for our Series B convertible preferred stock and
      our
      Series C convertible preferred stock require the consent of a majority of the
      Series B convertible preferred stock and the Series C convertible preferred
      stock, voting as separate classes before may pay a dividend on our common
      stock.




We
      do not
      have an equity compensation plan.




**23**


**Item6.Management’s Discussion and Analysis or Plan of
      Operations.**




**“Safe
      Harbor” Statement under the Private Litigation Reform Act of
      1995**




This
      Annual Report, other than historical information, may include forward-looking
      statements, including statements with respect to financial results, product
      introductions, market demand, sales channels, industry trends, sufficiency
      of
      cash resources and certain other matters. These statements are made under the
      “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995
      and involve risks and uncertainties which could cause actual results to differ
      materially from those in the forward-looking statements, including those
      discussed in the section entitled “Factors That May Affect Future Results
      of Operations” in Item 1 and elsewhere in this Annual Report on Form 10-KSB
      and other filings with the Securities and Exchange Commission.




**Overview**




We
      market, sell and support automatic vehicle location (“AVL”) and mobile resource
      management solutions targeting companies that operate private vehicle fleets.
      Our AVL solutions are designed for metro, short-haul fleets within diverse
      industry vertical markets such as field services, distribution, courier,
      limousine, electrical/plumbing, waste management, and government.  Our
      core technology, telematics, combines wireless communications, GPS location
      technology, geospatial solutions and vehicle data integration with a
      web-accessible application that aids in the optimization of remote business
      solutions.  We believe our fleet management solution contributes to
      increased operator efficiency by improving the productivity of mobile workers
      through real-time position reports, route-traveled information, and exception
      based reporting designed to highlight mobile workforce inefficiencies. This
      in-depth reporting enables our customers to correct those inefficiencies and
      deliver cost savings to the bottom line.






We
      commercially introduced our next generation AVL product, REDIview, in January
      of
      2005.  REDIview was designed with a flexible architecture to
      accommodate expected additional functional requirements that will be required
      to
      effectively compete in the marketplace.






Our
      REDIview product line forms the basis of our business plan for 2007 and
      beyond.  We expect this product line to provide the foundation for a
      growth in revenues and, if our revenues grow as we anticipate, ultimately
      profitability.  In implementing our new business plan, we are
      completing a significant cost and operational-based restructuring, including
      rightsizing the workforce.  We are focusing our efforts on enhancing
      the existing REDIview product line.  As a result, in addition to
      significantly reducing projected operational costs, we have significantly
      reduced our projected sales targets and associated cash flows from our previous
      business plan which included multiple product offerings sold through both a
      direct sales force and third-party distributors.






As
      a
      result of the securities issued to BMSI in our November 2006 Share Exchange
      Agreement and Note and Warrant Purchase Agreement transactions, BMSI obtained
      and currently has effective control of our board of directors, management,
      94.5%
      of the voting power of our common stock outstanding, and beneficial ownership
      of
      approximately 61.1% of our common stock (on a as-converted, fully diluted
      basis).  Accordingly, our financial statements reflect the historical
      operations of BounceGPS as the acquisition has been treated as a reverse merger
      in accordance with FAS 141 “Accounting for Business Combinations” with BounceGPS
      considered the accounting acquirer. Accordingly, BounceGPS is deemed to be
      the
      purchaser and surviving company for accounting purposes and its net assets
      are
      included in the balance sheet at their historical book values and the results
      of
      operations of BounceGPS have been presented for the comparative prior
      period.  The results of operations of Remote Dynamics, Inc. are
      included in our financial statements subsequent to December 4, 2006 with the
      purchase price allocated to the acquired assets and liabilities of Remote
      Dynamics, Inc. as of December 4, 2006.




**24**




Since
      the
      historical operations of Remote Dynamics, Inc. will comprise substantially
      all
      of our ongoing operations, we believe that the historical results of operations
      of Remote Dynamics, Inc. provide a better indication of and basis of comparison
      for our future performance.  We have provided the historical financial
      statements of Remote Dynamics, Inc. (prior to the BounceGPS acquisition) for
      the
      fiscal years ended August 31, 2006 and 2005 and the three months ended November
      30, 2006 and 2005 for information purposes as Exhibits 15.1 and 15.2 to this
      Form 10-KSB.






*Results
      of Operations*




*Year
      Ended December 31, 2006, Compared to Year Ended December 31,
      2005*





Revenues
      for the year ended December 31, 2006 totaled $663,000 compared to $317,000
      for
      2005.  This 109% increase is attributable to the reverse merger
      transaction on December 4, 2006.  The 2006 results include operations
      of Remote Dynamics, Inc. from December 4, 2006 to December 31, 2006 as well
      as
      BounceGPS for the entire year.  The 2005 results only include the
      operations of BounceGPS.  In accordance with our revenue recognition
      policies, REDIview unit sales and the associated cost of sales are deferred
      and
      recognized over the customer’s contract life.  Our future revenues
      will be solely dependent upon sales of our REDIview product line. The failure
      of
      the marketplace to accept our REDIview product line would have a material
      adverse effect on the Company’s business, financial condition and results of
      operations.




Total
      gross profit margin of 3.3% during the year ended December 31, 2006 decreased
      from 60% during 2005. The decrease is primarily due to the clearance of
      BounceGPS inventory prior to the reverse merger transaction.  The 2006
      gross profit of $22,000 includes negative gross profit of $212,000 from the
      BounceGPS results of operations.  For the period December 4, 2006 to
      December 31, 2006 (which includes the results of operations of Remote Dynamics,
      Inc.), gross profit was $234,000 and gross profit margin was 48%.





Total
      operating expenses increased from $298,000 during the year ended December 31,
      2005 to $1,490,000 during 2006. We recorded a $411,000 goodwill and intangible
      asset impairment loss during the twelve months ended December 31,
      2006.  The goodwill and intangible assets impaired relate to the
      BounceGPS acquisition of certain assets from DataLogic International, Inc.
      in
      July 2006.  Goodwill represents the excess of the purchase price over
      the fair value of the net tangible and intangible assets
      acquired.   Since the launch of the BounceGPS product line in
      July 2006, BounceGPS has failed to achieve its forecasted sales targets and
      began analyzing and revising its current and long-term business
      plans.  In October 2006, BounceGPS materially modified its existing
      business plan which significantly reduced its projected sales forecasts from
      the
      former plan.   As a result, and in accordance with SFAS 142,
      BounceGPS performed an interim impairment test of goodwill and other intangible
      assets as of October 31, 2006 utilizing a discounted future cash flow analysis
      based on its new projected sales targets.  BounceGPS determined that
      goodwill and customer lists totaling $411,000 were fully impaired.




General
      and
      administrative expenses for the year ended December 31, 2006 totaled $495,000
      compared to $101,000 for the year ended December 31, 2005.  Sales and
      marketing expenses for the year ended December 31, 2006 totaled $317,000
      compared to $177,000 for 2005.  These increases are primarily due to
      the inclusion of operations of Remote Dynamics, Inc. from December 4, 2006
      to
      December 31, 2006 as well as BounceGPS for the entire year.  The 2005
      results only include the operations of BounceGPS.  Depreciation and
      amortization expense increased to $184,000 during the twelve months ended
      December 31, 2006 from $20,000 during the prior year primarily due to the
      amortization of intangible assets and depreciation of fixed assets recorded
      in
      connection with the reverse merger transaction on December 4, 2006




Interest
      expense totaled $680,000 for
      the year ended December 31, 2006 primarily due to interest expense related
      to
      the Series A Note, Series B Note, and the HFS Note   We recorded
      a loss on the extinguishment of debt totaling $558,000 for 2006 for the exchange
      of Series A Notes into new Series B Notes.  We also recorded a loss on
      the extinguishment of redeemable preferred stock totaling $121,000 for 2006
      for
      the exchange of Series B preferred stock into Series B Notes.







**25**




*Liquidity
      and Capital Resources*




We
      have
      incurred significant operating losses since our inception and have limited
      financial resources until such time that we are able to generate positive cash
      flow from operations.  We had cash and cash equivalents of $121,000 as
      of December 31, 2006 (compared to $1,000 as of December 31, 2005).




Net
      cash
      used in operations in 2006 was $712,000, primarily due to a net loss of $2.8
      million offset by a goodwill and intangible asset impairment charge of $411,000,
      loss on extinguishment of debt of $558,000, loss on extinguishment of redeemable
      preferred stock of $121,000, accretion of notes payable of $364,000, and
      depreciation and amortization of $184,000.  Net cash used in
      operations in 2005 was $88,000, primarily due to a net loss of
      $73,000.




Net
      cash
      used in investing activities in 2006 was $346,000, primarily due to the
      acquisition of certain operating assets  Net cash provided by
      investing activities in 2005 was $47,000 due to the sale property and
      equipment.




Net
      cash
      provided by financing activities in 2006 was $1,178,000, primarily due to the
      net proceeds from the Series B debt offering of $315,000 and the proceeds from
      BMSI contributing capital into BounceGPS of $1,011,000 (prior to our acquisition
      of BounceGPS), offset by payments on capital leases and other notes payable
      of
      $148,000.  Net cash provided by financing activities in 2005 was
      $21,000.




We
      do not
      expect to achieve profitability or positive cash flow for 2007.  Key to
      achieving profitability is to obtain a REDIview customer base that provides
      monthly recurring revenues and corresponding gross margins that exceed operating
      costs and expenses to support the REDIview customer base.Our plans for 2007 include
      increasing our sales staff and sales channel development in an effort to build
      recurring revenue and continuing to identify additional operating cost
      reductions.  However, there can be no assurance that we will achieve our
      sales targets or our targeted operating cost reductions for 2007. Failure to
      do
      so may have a material adverse effect on our business, financial condition
      and
      results of operations.  Moreover, despite actions to increase revenue,
      to reduce operating costs and to improve profitability and cash flow, our
      operating losses and net operating cash outflows will continue into at least
      the
      third quarter of 2007.




We
      currently are not in compliance with
      certain of our obligations relating to our secured convertible notes and our
      convertible preferred stock, including our failure to maintain sufficient
      authorized shares to permit conversion of the securities and our failure to
      register the resale of the shares of common stock issuable upon conversion
      of
      the securities.  Although, to date, no security holder has sent us a
      notice of acceleration of amounts owed under or redemption of these securities,
      there can be no assurance that the security holders will not take such action
      in
      the future.  Our failure to comply with our obligations relating to these
      securities also exposes us to liquidated damages claims by the security
      holders.  As of December 31, 2006, we had accrued $302,000 in respect
      of such liquidated damages.  In the event of an acceleration of
      amounts owed under or redemption of these securities (or a claim for liquidated
      damages), if we are unable to raise enough money to cover the amounts payable,
      we may be forced to restructure, file for bankruptcy, sell assets or cease
      operations.




We
      had a
      working capital deficit of $4.7 million as of December 31, 2006.  We
      believe that with the expected proceeds from our November 2006 private
      placement, we will have sufficient capital to fund our ongoing operations
      through the remainder of 2007, assuming that we are able to meet our sales
      targets and operating cost reduction plans and to negotiate acceptable payment
      arrangements with our senior security holders, vendors and other
      creditors.  The sufficiency of our cash resources also depends to a certain
      extent on general economic, financial, competitive or other factors beyond
      our
      control.




We
      have
      historically relied on a series of financings and asset sales to fund our
      ongoing operations.  We do not currently have any arrangements for
      additional financing and we may not be able to secure additional debt or equity
      financing on terms acceptable to us, or at all, at the time when we need such
      financing.  Further, our ability to secure certain types of additional
      financings is restricted under the terms of our existing financing
      arrangements.  There can be no assurance that we will be able to consummate
      a transaction for additional capital prior to substantially depleting our
      available cash reserves, and our failure to do so may force us to restructure,
      file for bankruptcy, sell assets or cease operations.






**26**




*NASDAQ
      Delisting Notification*




On
      February 15, 2005, we received notice from the NASDAQ Listing Qualifications
      Department that for the previous 30 days, the bid price for our common stock
      had
      closed below the minimum $1.00 per share requirement for continued inclusion
      under Marketplace Rule 4310(c)(4). In accordance with Marketplace Rule
      4310(c)(4), we were provided 180 calendar days, or until August 15, 2005, to
      regain compliance.




On
      April
      27, 2005, we received written notice from the NASDAQ Listing Qualifications
      Staff of the NASDAQ Stock Market that we had regained compliance with NASDAQ
      Marketplace Rule 4310(c)(4) as the closing bid price for our common stock
      has been at $1.00 per share or greater for at least 10 consecutive business
      days. Accordingly, the matter regarding the Company’s non-compliance with
      Marketplace Rule 4310(c)(4) was closed and our listing on the NASDAQ Small
      Cap Market was in good standing.




On
      November 2, 2005, we received a NASDAQ Staff Deficiency Letter from the NASDAQ
      Listing Qualifications Department that for the previous 30 days, the bid price
      for our common stock had closed below the minimum $1.00 per share requirement
      for continued inclusion under Marketplace Rule 4310(c)(4). In accordance with
      Marketplace Rule 4310(c)(8)(D), we were provided 180 calendar days, or until
      May
      1, 2006, to regain compliance.




On
      February 10, 2006, as a result of
      our request, after conferring with the NASDAQ Staff to voluntarily accept the
      impending delisting of its securities, our securities were delisted from The
      NASDAQ Capital Market.  After conferring with the NASDAQ Staff, and
      based upon the current business plan and forecast, we did not believe that
      we
      could achieve compliance with the requirements set forth in Marketplace Rule
      4310(c)(2)(B) in the time frame required by the NASDAQ Stock Market to maintain
      the listing of its securities on the NASDAQ Stock Market.





Our
      securities are traded on the NASD OTC Bulletin Board (“OTCBB”). The OTCBB is a
      controlled quotation service that offers real-time quotes, last-sale prices
      and
      volume information in over-the-counter equities.  In accordance with
      NASDAQ Marketplace Rule 6530, in order for the securities to be eligible to
      trade on the OTCBB, they must not be listed on The NASDAQ Stock Market or a
      registered national securities exchange in the U.S. and we must be subject
      to
      and current in its filings under Section 13 or 15(d) of the Securities and
      Exchange Act of 1934.





On
      February 15, 2006, the sole holder of our Series B Convertible Preferred Stock
      (“B Holder”), provided us with a waiver letter irrevocably waiving their right
      to force us to redeem our Convertible Stock pursuant to Article VII of the
      Certificate of Designation, Preferences and Rights for the Series B Stock based
      upon the delisting of our common stock from the NASDAQ SmallCap Market which
      occurred on February 10, 2006 (the “Waiver Letter”).  As per the
      Waiver Letter, the B Holder further irrevocably waived its right to demand
      that
      we pay any penalties to the B Holder pursuant to that certain Registration
      Rights Agreement between us and the B Holder dated September 2, 2005 based
      upon
      the delisting of our common stock from the NASDAQ SmallCap Market which occurred
      on February 10, 2006.






**27**


**Contractual
      Obligations**




The
      following summarizes the Company’s significant financial commitments at December
      31, 2006:




Payments
                            due by periodTotal
                        
                        
                        Less
                            than 1 Year
                        
                        
                        1-3
                            Years
                        
                        
                        3-5
                            Years
                        
                        
                        More
                            than 5 YearsObligations
                            under Series A Note and WarrantPrincipal
                            Payments - Notes & OID
                        
                        $
                        4,435
                        
                        
                        $
                        2,956
                        
                        
                        $
                        1,479
                        
                        
                        $
                        -
                        
                        
                        $
                        -Obligations
                            under Series B Note and WarrantPrincipal
                            Payments - Notes & OID
                        
                        
                        2,716
                        
                        
                        $
                        302
                        
                        
                        $
                        2,414Long-Term
                            Debt (a)Principal
                            Payments
                        
                        
                        2,000
                        
                        
                        
                        2,000
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Capital
                            Lease Obligations
                        
                        
                        228
                        
                        
                        
                        147
                        
                        
                        
                        81
                        
                        
                        
                        -
                        
                        
                        
                        -Operating
                            Leases
                        
                        
                        76
                        
                        
                        
                        67
                        
                        
                        
                        9
                        
                        
                        
                        -
                        
                        
                        
                        -Other
                            Notes Payable
                        
                        
                        266
                        
                        
                        
                        266
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Total
                        
                        $
                        9,721
                        
                        
                        $
                        5,738
                        
                        
                        $
                        3,983
                        
                        
                        $
                        -
                        
                        
                        $
                        -




(a)
            Convertible
                promissory note payable to HFS Minorplanet Funding LLC with the principal
                balance being due in December of
                2007.




**Critical
      Accounting Policies and Estimates**




Management’s
      discussion and analysis of financial condition and results of operations are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States.
      The preparation of these financial statements requires us to make estimates
      and
      judgments that affect the reported amounts of assets, liabilities, revenues
      and
      expenses, and related disclosure of contingent assets and liabilities. On an
      ongoing basis, we evaluate our estimates, including those related to product
      returns, bad debts, inventories, income taxes, warranty obligations, maintenance
      contracts and contingencies. We base our estimates on historical experience
      and
      on various other assumptions that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying values of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates under different
      assumptions or conditions.




We
      believe the following critical accounting policies affect our more significant
      judgments and estimates used in the preparation of our consolidated financial
      statements.




*Revenue
      Recognition*




We
      recognize revenue when earned in
      accordance with the applicable accounting literature including:  EITF
      No. 00-21, “Revenue Arrangements With Multiple Deliverables”, Statement of
      Position 97-2, “Software Revenue Recognition”, and Staff Accounting Bulletin No.
      101, “Revenue Recognition in Financial Statements”, as amended by Staff
      Accounting Bulletin No. 104, “Revenue Recognition in Financial
      Statements”.  Revenue is recognized when the following criteria are
      met:  there is persuasive evidence that an arrangement exists,
      delivery has occurred and all obligations under such arrangement have been
      fulfilled, the price is fixed and determinable, and collectibility is reasonably
      assured.





Initial
      sale proceeds received under
      multiple-element sales arrangements that require us to deliver products and
      services over a period of time and which are not determined by us to meet
      certain criteria are deferred.  All REDIview and VMI sales proceeds
      related to delivered products are deferred and recognized over the contract
      life
      that typically ranges from one to five years.   Product sales
      proceeds recognized under this method are portrayed in the accompanying
      Consolidated Statement of Operations as “Ratable product revenues.” The related
      deferred revenue is classified as a current and long term liability on the
      Consolidated Balance Sheets under the captions “Deferred product revenues –
current portion” and “Deferred product revenues non-current
      portion.”  If the customer relationship is terminated prior to the end
      of the customer contract term, such deferred sales proceeds are recognized
      as
      revenue in the period of termination.  Under sales arrangements, which
      initially meet the earnings criteria described above, revenues are recognized
      upon shipment of the products or upon customer acceptance of the delivered
      products if terms of the sales arrangement give the customer the right of
      acceptance.





**28**


Service
      revenue generally commences
      upon product installation and customer acceptance and is billed and recognized
      during the period such services are provided.





We
      provide lease financing to certain customers of our REDIview and VMI
      products.  Leases under these arrangements are classified as
      sales-type leases or operating leases.  These leases typically have
      terms of one to five years, and all sales type leases are discounted at interest
      rates ranging from 14% to 18% depending on the customer’s credit
      risk.  The net present value of the lease payments for sales-type
      leases is recognized as product revenue and deferred under our revenue
      recognition policy described above.  Income from operating leases is
      recognized ratably over the term of the leases.





*Allowance
      for Doubtful Accounts and Returns*




We
      maintain allowances for doubtful accounts for estimated losses resulting from
      the inability of our customers to make required payments. Our receivables are
      uncollateralized and we expect to continue this policy in the future.  If
      the financial condition of our customers were to deteriorate, resulting in
      an
      impairment of their ability to make payments, additional allowances may be
      required.  Historically, our estimates for sales returns and doubtful
      accounts have not differed materially from actual results.




*Inventory*




We
      write
      down our inventory for estimated obsolescence or unmarketable inventory equal
      to
      the difference between the cost of inventory and the estimated market value
      based upon assumptions about future demand and market conditions. If actual
      market conditions are less favorable than those projected by management,
      additional inventory write-downs may be required.   Historically, our
      estimates for inventory obsolescence have not differed materially from actual
      results.





*Stock-Based
      Compensation*






In
      December of 2004, the Financial Accounting Standards Board (“FASB”) issued FAS
      123R, which applies to transactions in which an entity exchanges its equity
      instruments for goods or services and also applies to liabilities an entity
      may
      incur for goods or services that are based on the fair value of those equity
      instruments.  For any unvested portion of previously issued and
      outstanding awards, compensation expense is required to be recorded based on
      the
      previously disclosed FAS 123 methodology and amounts.  Prior periods
      presented are not required to be restated.  We adopted FAS 123R as of
      January 1, 2006 and applied the standard using the modified prospective
      method.  Remote Dynamics extinguished all prior stock options upon
      emergence from bankruptcy effective July 2, 2004 and has not issued any new
      stock options beyond that date.  As discussed above, we have issued
      restricted stock to certain members of senior management which have either
      been
      issued or retired as of December 31, 2006.   We did not incur any
      expense associated with these restricted shares during the fiscal years ended
      December 31, 2006 and 2005.




*Goodwill
      and Other Intangibles*





We
      account for goodwill, the vehicle management information license right, and
      other intangibles in accordance with Statement of Financial Accounting Standards
      (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”) and
      SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
      Assets” (“SFAS 144”). SFAS 144 requires us to review for impairment of our
      long-lived assets, whenever events or changes in circumstances indicate that
      the
      carrying amount of an asset might not be recoverable and exceeds its fair value.
      Impairment evaluations involve our estimates of asset useful lives and future
      cash flows. When this event occurs, we estimate the future cash flows expected
      to result from the use of the asset and its eventual disposition. If the
      undiscounted expected future cash flows are less than the carrying amount of
      the
      asset and the carrying amount of the asset exceeds its fair value, we recognize
      an impairment loss. We generally utilize an income approach, a discounted future
      cash flow analysis and an analysis of market multiples to estimate fair value
      of
      the asset. Actual useful lives and cash flows could be different from those
      estimated. This could have a material affect on our operating results and
      financial position. We test goodwill for impairment on an annual basis, or
      between annual tests if we determine that a significant event or change in
      circumstances warrants such testing in accordance with the provisions of SFAS
      142 which requires a comparison of the carrying value of goodwill to the fair
      value of the reporting unit. If the fair value of the reporting unit is less
      than the carrying value of goodwill, an adjustment to the carrying value of
      goodwill is required.






**29**


*Business
      and Credit Concentrations*


We
        continuously monitor collections and payments from our customers and maintain
        a
        provision for estimated accounts receivable that may eventually become
        uncollectible based upon historical experience and specific customer
        information.  There is no guarantee that we will continue to
        experience the same credit loss history in future periods.  If a
        significant change in the liquidity or financial condition of a large customer
        or group of customers were to occur, it could have a material adverse affect
        on
        the collectibility of our accounts receivable and future operating
        results.
 
 The
        Company occasionally maintains
        amounts on deposit with a financial institution that are in excess of the
        federally insured limit of $100,000.  Statement of Financial
        Accounting Standards No. 105 identifies this as a concentration of credit
        risk
        requiring disclosure, regardless of the degree of risk. The risk is managed
        by
        maintaining all deposits in high quality financial institutions. Amounts
        in
        excess of federally insured limits totaled approximately $72,000 at December
        31,
        2006.


**Impact
      of Recently Issued Accounting Standards**






***Accounting
      Changes and Error Corrections.***In May 2005, the
      FASB issued FASB Statement No. 154, "Accounting Changes and Error Corrections."
      This new standard replaces APB Opinion No. 20, "Accounting Changes, and FASB
      Statement No. 3, Reporting Accounting Changes in Interim Financial Statements,"
      and represents another step in the FASB's goal to converge its standards with
      those issued by the IASB. Among other changes, Statement 154 requires that
      a
      voluntary change in accounting principle be applied retrospectively with all
      prior period financial statements presented on the new accounting principle,
      unless it is impracticable to do so. Statement 154 also provides that (1) a
      change in method of depreciating or amortizing a long-lived non-financial asset
      be accounted for as a change in estimate (prospectively) that was effected
      by a
      change in accounting principle, and (2) correction of errors in previously
      issued financial statements should be termed a "restatement." The new standard
      is effective for accounting changes and correction of errors made in fiscal
      years beginning after December 15, 2005. Early adoption of this standard is
      permitted for accounting changes and correction of errors made in fiscal years
      beginning after June 1, 2005 . The adoption of this statement in 2006 did not
      have a material impact on the Company’s consolidated financial position or
      results of operations.




***Accounting
      for Certain Hybrid Financial Instrument***.  In February
      2006, the FASB issued FASB Statement No. 155, “Accounting for Certain Hybrid
      Financial Instruments,” an amendment of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”) and
      Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing
      of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”). With
      respect to SFAS 133, SFAS 155 simplifies accounting for certain hybrid financial
      instruments by permitting fair value remeasurement for any hybrid financial
      instrument that contains an embedded derivative that otherwise would require
      bifurcation and eliminates the interim guidance in Statement 133 Implementation
      Issue No. D1, “Application of Statement 133 to Beneficial Interests in
      Securitized Financial Assets,” which provided that beneficial interests in
      securitized financial assets are not subject to the provision of SFAS 133.
      With
      respect to SFAS 140, SFAS 155 eliminates a restriction on the passive derivative
      instruments that a qualifying special-purpose entity may hold. SFAS 155 is
      effective for all financial instruments acquired or issued after the beginning
      of an entity’s first fiscal year that begins after September 15, 2006. We do not
      expect the adoption of SFAS 155 to significantly affect our financial condition
      or results of operations.




***Accounting
      for Uncertainty in Income Taxes.***In June 2006, the FASB
      issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,
      an interpretation of FASB Statement No. 109,” (“FIN 48”). The
      interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. It also provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. The Company is currently evaluating the
      impact of FIN 48 on its consolidated results of operations and financial
      position but has not yet determined or reasonably estimated the impact as of
      December 31, 2006. The Company is required to adopt this interpretation
      effective January 1, 2007.






**30**




***Accounting
      for Servicing of Financial Assets.***In March 2006, the
      FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets -
      an amendment of FASB Statement No. 140” (“SFAS No. 156”). This
      Statement amends SFAS No. 140, “Accounting for Transfers and Servicing of
      Financial Assets and Extinguishments of Liabilities,” with respect to the
      accounting for separately recognized servicing assets and servicing liabilities.
      SFAS No. 156 requires that an entity recognize a servicing asset or
      servicing liability each time it undertakes an obligation to service a financial
      asset by entering into a servicing contract and that the separately recognized
      servicing asset or servicing liability be initially measured at fair value,
      if
      practicable. This statement is effective as of the beginning of the first fiscal
      year that begins after September 15, 2006. The adoption of this statement
      in 2007 is not expected to have a material impact on the Company’s consolidated
      financial position or results of operations.




***Fair
      Value Measurements.***In September 2006, the FASB issued
      SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). This
      statement defines fair value, establishes a framework for measuring fair value
      in U.S. GAAP and expands disclosures about fair value measurements. This
      statement does not require any new fair value measurements. The effective date
      of this statement is for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. The Company is currently
      evaluating the impact, if any, of the adoption of SFAS
      No. 157.




***Employers’
      Accounting for Defined Benefit Pension and Other Postretirement
      Plans.***In September 2006, the FASB issued SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans an Amendment of FASB Statements No. 87, 88, 106 and
      132(R).”  This statement improves financial reporting by requiring an
      employer to recognize the over-funded or under-funded status of a defined
      benefit postretirement plan (other than a multi-employer plan) as an asset
      or
      liability in its statement of financial position and to recognize changes in
      that funded status in the year in which the changes occur through comprehensive
      income of a business entity of changes in unrestricted net assets of a
      not-for-profit organization.  The adoption of SFAS No. 158 did not
      have an impact on the Company’s consolidated financial statements.




***Considering
        the Effects of Prior Year Misstatements When Quantifying Current Year
        Misstatements.***In September 2006, the Securities and
        Exchange Commission, or the SEC, released Staff Accounting Bulletin, or SAB,
        No. 108, *Considering the Effects of Prior Year Misstatements When
        Quantifying Current Year Misstatements*, or SAB No. 108, to
        address diversity in practice regarding consideration of the effects of prior
        year errors when quantifying misstatements in current year financial statements.
        The SEC staff concluded that registrants should quantify financial statement
        errors using both a balance sheet approach and an income statement approach
        and
        evaluate whether either approach results in quantifying a misstatement that,
        when all relevant quantitative and qualitative factors are considered, is
        material. SAB No. 108 states that if correcting an error in the
        current year materially affects the current year’s income statement, the prior
        period financial statements must be restated. SAB No. 108 is effective
        for fiscal years ending after November 15, 2006. The adoption of
        SAB No. 108 in the fourth quarter of 2006 did not have a material
        impact on our consolidated financial statements.





***The
        Fair Value Option for Financial Assets and Financial
        Liabilities.***In February 2007, the FASB issued
        SFAS No. 159, *The Fair Value Option for Financial Assets and
        Financial Liabilities*, or SFAS No. 159. SFAS No. 159
        permits entities to choose to measure many financial instruments and certain
        other items at fair value. The objective of the guidance is to improve financial
        reporting by providing entities with the opportunity to mitigate volatility
        in
        reported earnings caused by measuring related assets and liabilities differently
        without having to apply complex hedge accounting provisions.
        SFAS No. 159 is effective as of the beginning of the first fiscal year
        that begins after November 15, 2007. Early adoption is permitted as of the
        beginning of the fiscal year beginning on or before November 15, 2007,
        provided the provisions of SFAS No. 157 are applied. We will adopt
        SFAS No. 159 on January 1, 2008. We are evaluating
        SFAS No. 159 and have not yet determined the impact the adoption, if
        any, will have on our consolidated financial statements.




**Off-Balance
      Sheet Arrangements**


****


As
      of
      December 31, 2006, we did not have any significant off-balance sheet
      arrangements, as defined in Item 303(c)(2) of Regulation S-B.






**31**


**Quantitative
      and Qualitative Disclosures About Market Risk**




We
      do not have any material exposure to market risk associated with our cash and
      cash equivalents. Our note payables are at a fixed rate and, thus, are not
      exposed to interest rate risk.





**Item7.Financial Statements.**




The
      information required by this item is included on pages F-1 through
      F-35.




**Item8.Changes In and Disagreements with Accountants on Accounting and Financial
      Disclosure.**




On
      March 23, 2007, upon approval of its Audit Committee, the Company dismissed
      KBA Group LLP (“KBA”) as the Company’s independent registered public accounting
      firm effective as of March 23, 2007.  During the fiscal year ended
      August 31, 2006, and through November 30, 2006, there were no disagreements
      with KBA on any matters of accounting principles or practices, financial
      statement disclosure, or auditing scope or procedure, which, if not resolved
      to
      KBA’s satisfaction, would have caused KBA to make reference thereto in its
      reports on the financial statements for such years.





On
      March 23, 2007, the Company’s Audit
      Committee engaged Chisholm, Bierwolf & Nilson, LLC as the Company’s new
      independent registered public accounting firm.





**Item8A.
Controls and Procedures**


****


We
      maintain disclosure controls and procedures, which we have designed to ensure
      that material information related to us, including our consolidated
      subsidiaries, is made known to our disclosure committee on a regular basis.
      Our
      disclosure committee consists of members of our senior management.





Under
      the
      supervision, and with the participation of our senior management, including
      our
      Chief Executive Officer and principal financial officer (the “Certifying
      Officer”), an evaluation of the effectiveness of our disclosure controls and
      procedures was performed as of December 31, 2006.  Based on this
      evaluation, the Certifying Officers have concluded that, as of the end of the
      period covered by this Annual Report, our Disclosure Controls are not effective
      to provide reasonable assurance that our financial statements are fairly
      presented in conformity with generally accepted accounting principles for the
      reasons discussed below.





These
      matters are with regard to
      insufficient personnel resources within the company, based on the size and
      complexity of the organization, to affect timely financial close process and
      to
      effectively evaluate and resolve certain non-routine and/or complex accounting
      transactions. A significant deficiency, or combination of significant
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected is considered a material weakness. Significant deficiencies are
      control issues that could have a significant adverse effect on the ability
      to
      record, process, summarize and report financial data in the financial
      statements.





To
      remediate this internal control weakness, management has commenced
      implementation of the following measures: The Company will continue to add
      sufficient personnel to properly segregate duties and to effect a timely,
      accurate preparation of the financial statements. The Company will also
      implement additional control procedures for non-routine and/or complex
      accounting transactions and provide additional training programs for technical
      accounting issues.  The Company plans to have this implemented during
      2007.





There
      were no changes in our internal controls over financial reporting (as such
      term
      is defined in Rule 13a-15(f) under the Exchange Act) that occurred during
      our year ended December 31, 2006, that have materially affected, or are
      reasonably likely to materially affect, our internal controls over financial
      reporting. In the estimation of our senior management, none of the following
      changes in the composition of management have materially affected, or are
      reasonably likely to materially affect, our internal controls over financial
      reporting:




**32**





(i)
            
            On
                May 31, 2006, J. Raymond Bilbao resigned the office of President,
                Chief Operating Officer and Secretary;(ii)
            
            On
                June 18, 2006, Mathew Petzold resigned from his position as
                director;(iii)
            
            On
                June 30, 2006, Dennis R. Casey resigned the office of Chief Executive
                Officer and resigned from his position as Chairman of our Board of
                Directors;(iv)
            
            On
                June 30, 2006, Gregg J. Pritchard resigned from his position as
                director;(v)
            
            On
                June 30, 2006, Thomas W. Honeycutt resigned from his position as
                director;(vi)
            
            On
                June 30, 2006, Marshall G. Saffer joined our Board of
                Directors;(vii)
            
            On
                July 8, 2006, Phillip K. Hunter joined our Board of
                Directors;(viii)
            
            On
                July 11, 2006, Christopher D. Phillips joined our Board of
                Directors;(ix)
            
            On
                December 5, 2006, David Walters joined our Board of Directors and
                was
                appointed Chairman of the Board;(x)
            
            On
                December 5, 2006, Keith Moore joined our Board of Directors and was
                appointed Secretary of the Board;(xi)
            
            On
                December 5, 2006, Christopher D. Phillips resigned from his position
                as
                director; and,(xii)
            
            On
                December 22, 2006, Phillip K. Hunter resigned from his position as
                director.(xiii)
            
            On
                February 16, 2007, Gary Hallgren was appointed as Chief Executive
                Officer
                and Greg Jones was appointed as Senior Vice President,
                Operations(xiv)
            
            On
                February 23, 2007, Neil Read resigned from his position as Chief
                Financial
                Officer.(xv)
            
            On
                April 3, 2007, Marshall G. Saffer resigned from his position as
                director.




**Item8B.Other Information**




Not
      applicable.







**33**


**PARTIII**




**Item9.Directors and Executive Officers of Remote Dynamics,
      Inc.**




The
      following table presents information with respect to our directors and executive
      officers.







Name
              
              Age
              
              PositionDavid
                  Walters
              
              44
              
              Director,
                  ChairmanKeith
                  Moore
              
              46
              
              Director,
                  SecretaryDennis
                  Ackerman
              
              59
              
              DirectorGary
                  Hallgren
              
              38
              
              Chief
                  Executive OfficerGreg
                  Jones
              
              41
              
              Senior
                  Vice President, Operations




**Directors**







**DAVID
      WALTERS – Director and Chairman since December 5, 2006.**




Mr.
      Walters has served as Chairman and Chief Executive Officer of BMSI since July
      2006.  Since February 2000, he has served as a managing member of
      Monarch Bay Capital Group, LLC (“MBCG”),a consulting company and since March
      2006 as a managing member of Monarch Bay Management Company, LLC (“MBMC”), also
      a consulting company.  Mr. Walters has extensive experience in
      investment management, corporate growth development strategies and capital
      markets.  Mr. Walters earned a B.S. in Bioengineering from the
      University of California, San Diego in 1985.   Mr. Walters also
      serves as Chairman of the Board of Directors of Monarch Staffing, Inc. and
      a
      member of the Board of Directors of Precision Aerospace Components,
      Inc.





**KEITH
      C. MOORE – Director and Secretary since December 5, 2006.**





Mr.
      Moore
      is Chairman and Chief Executive Officer of DataLogic International, Inc., an
      information technology company, positions he has held since January
      2005.   Since March 2006, he has also served as a managing member
      of MBMC.  From April 1999 to January 2005, Mr. Moore served as
      Chairman and Chief Executive Officer of iTechexpress, Inc.   Mr.
      Moore received his Bachelors degree in Accounting from Eastern Michigan
      University in 1982 and his Masters degree from Eastern Michigan University
      in
      Finance in 1984.  Mr. Moore also serves as a member of the Board of
      Directors of Monarch Staffing, Inc.







**DENNIS
      ACKERMAN — Director since January 4, 2006.**





Mr. Ackerman,
      age 59, served as Director of the Bank of America Entrepreneurial Center from
      1987 through December 2004. The Bank of America Entrepreneurial Center
      provides business planning and business plan implementation services for
      businesses. Since formation in 1987, the Center has assisted business with
      raising over $500 million in working capital. From 1974 through 1987, Mr.
      Ackerman served as President of energy company with a distribution network
      covering five states. Mr. Ackerman obtained a B.S. degree in Comprehensive
      Science from the College of Education at Ohio State University in
      1969.







**Executive
      Officers**





Except
      as
      disclosed under “Employment Agreements” below, all officers serve until their
      successors are duly elected and qualified or their earlier death, disability
      or
      removal from office.








**GARY
      HALLGREN**— **Chief Executive Officer since February 16,
      2007**





Mr. Hallgren,
      age 38, previously served as Vice President, Technical Services of Presentation
      Products Inc., dba Spinitar, a systems integration company, from May 2005 to
      February 2007. Previously, Mr. Hallgren served as Chief Executive Officer
      (2002-2005) and Chief Operating Officer (2000-2002) of WirelessCar North
      America, Inc., a joint venture of Volvo, Ericsson and Brainheart Capital which
      provided wireless middleware and billing services to the telematics
      marketplace.   Mr. Hallgren received his Bachelors degree in
      Engineering from University of Minnesota, Institute of Technology in
      1991.





**34**


**GREG
      JONES**— **Senior Vice President, Operations since February 16,
      2007**





Mr. Jones,
      age 41, previously served as Senior Director of Software Engineering for
      Aeris.net, a leading provider of wireless mobile to mobile solutions to the
      telematics industry, from October 2004 to February 2007. From 2000-2004, Mr.
      Jones served as Director of Technology and Development of WirelessCar North
      America, Inc., bringing to market wireless communications and billing solutions.
      Prior to WirelessCar, Mr. Jones served as Director of Internet Development
      at
      Liberty Enterprises, where he led a team that developed Liberty's hosted
      internet banking solution for credit unions.





There
      are
      no family relationships among the directors and executive officers of Remote
      Dynamics, Inc.





**Organization
      of the Board of Directors and Meetings**





Our
      Board
      of Directors currently consists of three board members:  David
      Walters, Keith Moore, and Dennis Ackerman. All directors serve until the next
      annual meeting of the stockholders or until their respective successors are
      duly
      elected and qualified, or until their earlier death or removal from
      office.





The
      holder of a majority of the Series B convertible preferred stock has the
      right to appoint one representative to our Board of Directors and is entitled
      to
      designate one observer to meetings of our Board of Directors and its committees.
      Although the holder of our Series B convertible preferred stock retains the
      right to do so in the future, it has not yet exercised its right to appoint
      a
      board member. The holder of our Series B convertible preferred stock has
      designated Raahim Don as its board observer to attend the meetings of our Board
      of Directors and its committees.  If the holder of a majority of the
      Series B convertible preferred stock provides written notice to us that it
      intends to designate a board member, then the Board of Directors can, by
      resolution, increase the size of the board by one board seat to accommodate
      the
      request.





**Audit
      Committee**. Our Board of Directors maintains a separately standing audit
      committee, currently composed of Keith Moore and Dennis
      Ackerman.   Neither Mr. Ackerman nor Mr. Moore qualifies as
“independent,” as required by Rule 4200(a)(15) of the National Association of
      Securities Dealers’ listing standards. The Audit Committee, with the assistance
      of our independent accountants, determines the adequacy of internal controls
      and
      other financial reporting matters, and reviews and recommends to the board
      of
      directors for approval all published financial statements.





**Audit
      Committee Financial Expert**. Our Board of Directors has determined that
      Keith Moore qualifies as an audit committee financial expert under the
      Sarbanes-Oxley Act of 2002 and the rules of the Securities and Exchange
      Commission. Mr. Moore does not qualify as independent under
      Rule 4200(a)(15) of the National Association of Securities Dealers’ listing
      standards.





**Code
      of Ethics for Chief Executive Officer and Senior Financial Officers**. On
      November 7, 2003, our Board of Directors adopted a Code of Ethics that
      applies to our principal executive officer, principal financial officer,
      principal accounting officer or controller, or persons performing similar
      functions. A full copy of this Code is filed as Exhibit 14.1 filed in
      connection with our Annual Report on Form 10-K/A for the fiscal year ended
      August 31, 2004.





**Nomination
      and Corporate Governance Committee**. There have been no material changes
      to the procedures by which our stockholders may recommend nominees to our Board
      of Directors.





**35**


**Indemnification
      of Directors and Officers.** We indemnify each person who is or was
      a director, officer, employee or agent of Remote Dynamics, or serves at our
      request as a director, officer, employee or agent of another corporation,
      partnership, joint venture, trust or other enterprise, against expenses,
      judgments, fines and amounts incurred in that capacity.





We
      will
      indemnify only for actions taken:





·
            in
                good faith in a manner the indemnified person reasonably believed
                to be in
                or not opposed to the best interests of Remote Dynamics;
                or





·
            with
                respect to criminal proceedings, not
                unlawful.







We
      will
      also advance to the indemnified person payments incurred in defending a
      proceeding to which indemnification might apply, provided the recipient agrees
      to repay all such advanced amounts if it is ultimately determined that such
      person is not entitled to be indemnified. Our Bylaws specifically provide that
      the indemnification rights granted there under are nonexclusive. In accordance
      with our Bylaws, we have purchased insurance on behalf of our directors and
      officers in amounts that we believe to be reasonable.




**Section 16(a)
      Beneficial Ownership Reporting Compliance**





Section 16(a)
      of the Securities Exchange Act of 1934 requires our directors and executive
      officers, and persons who own more than 10% of a registered class of our equity
      securities to file with the Securities and Exchange Commission initial
      statements of beneficial ownership of securities and subsequent changes in
      beneficial ownership. Our officers, directors and greater-than-ten-percent
      stockholders are required by the Securities and Exchange Commission’s
      regulations to furnish us with copies of all Section 16(a) forms which they
      have
      filed.





To
      our
      knowledge, based solely on a review of the copies of such reports furnished
      to
      us and written representations that no Form 5 reports were required, all of
      our officers, directors and beneficial owners of more than 10% of our common
      stock, the only class of securities registered under the Exchange Act, timely
      complied with all Section 16(a) filing requirements applicable to them during
      the year ended December 31, 2006.





**Compensation
      of Directors**





Our
      Board
      of Directors has the authority to fix the compensation of directors. Our Bylaws
      provide that directors may be reimbursed for reasonable expenses for their
      services to us, and may be paid either a fixed sum for attendance at each Board
      of Directors meeting or a stated annual director fee. We also reimburse our
      directors for travel expenses.





**DIRECTOR
                      COMPENSATION**Name
                  
                  Fees
                      Earned or Paid in Cash ($)
                  
                  
                  Stock
                      Awards ($)
                  
                  
                  Option
                      Awards ($)
                  
                  
                  Non-equity
                      Incentive Plan Compensation ($)
                  
                  
                  Nonqualified
                      Deferred Compensation Earnings ($)
                  
                  
                  All
                      Other Compensation ($)
                  
                  Total
                      Compensation ($)David
                      Walters
                  
                  $
                  1,000
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  47,500
                  
                  
                  
                  (1),(2),(3)
                  
                  $
                  48,500Thomas
                      Honeycutt (former)
                  
                  
                  25,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  25,000Gregg
                      Pritchard (former)
                  
                  
                  25,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  25,000Matthew
                      Petzold (former)
                  
                  
                  25,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  25,000Dennis
                      Ackerman
                  
                  
                  15,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  15,000Keith
                      Moore
                  
                  
                  1,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  7,500
                  
                  
                  
                  (3)
                  
                  
                  8,500Marshall
                      Saffer (former)
                  
                  
                  5,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  5,000


Current
      directors Dennis Ackerman, David Walters, and Keith Moore receive an annual
      director's fee of $12,000, paid quarterly and prorated for
      service.  Former director Marshall Saffer received an annual
      director's fee of $12,000, paid quarterly and prorated for
      service.  Former directors Thomas Honeycutt, Gregg Pritchard, and
      Matthew Petzold received an annual director's fee of $30,000, paid quarterly
      and
      prorated for service.





1)
            BounceGPS
                has an agreement with MBCG for corporate development and chief financial
                officer services.   David Walters (our Chairman) is the
                managing member of MBCG and beneficially owns 100% of
                MBCG.   Under the agreement with MBCG, BounceGPS will pay
                to MBCG a monthly fee of $20,000 in cash.  This fee was earned
                for December 2006.


2)
            We
                agreed to pay a $20,000 documentation fee to BMSI in connection with
                our
                December 2006 acquisition of BounceGPS from BMSI.  David Walters
                (our Chairman) is the Chairman and Chief Executive Officer of BMSI
                and
                beneficially owns a majority of the outstanding common stock of
                BMSI.


3)
            In
                connection with our November 2006 private placement, we agreed to
                pay
                $60,000 ($15,000 per closing) to MBMC for consulting
                work.  David Walters (our Chairman) and Keith Moore (a member of
                our Board of Directors) are managing members of MBMC and each beneficially
                own 50% off MBMC.As of December
                31,
                2006, the Company owed $15,000 to MBMC for these services.








**36**








**Item10.Executive Compensation.**





The
      following table describes compensation awarded, paid to or earned, for the
      last
      fiscal year, by us to our former President and Chief Executive Officer and
      two other most highly compensated executive officers during 2006.






**SUMMARY
                                COMPENSATION TABLE**Name
                                and principal position
                            
                            Year
                            
                            Salary
                                ($)
                            
                            
                            Bonus
                                ($)
                            
                            
                            Stock
                                Awards ($)
                            
                            
                            Option
                                Awards ($)
                            
                            
                            Non-equity
                                Incentive Plan Compensation ($)
                            
                            
                            Nonqualified
                                Deferred Compensation Earnings ($)
                            
                            
                            All
                                Other
                              Compensation
                                ($)
                            
                            
                            Total
                                Compensation ($)Dennis
                                R. Casey,
                              Former
                                President and Chief Executive Officer
                            
                            2006
                            
                            $
                            50,000
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            
                            (1
                            )
                            
                            $
                            50,000W.
                                Michael Smith,
                              Former
                                Executive Vice President, Chief Financial Officer,
                                Chief Operating
                                Officer, and Treasurer
                            
                            2006
                            
                            
                            16,667
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            216,667
                            
                            
                            
                            (2
                            )
                            
                            
                            233,334Neil
                                Read,
                              Former
                                Vice President, Chief Financial Officer and Treasurer
                            
                            2006
                            
                            
                            115,721
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (3
                            )
                            
                            
                            115,721





(1)
            Mr.
                Casey became our President and Chief Executive Officer effective
                January
                30, 2004. Mr. Casey resigned the office of President on December
                27, 2005.
                Mr. Casey resigned the office of Chief Executive Officer (Principal
                Executive Officer) on June 30,
                2006.





(2)
            Mr.
                Smith earned severance in accordance with the termination of his
                employment agreement with us on January 28, 2006.  For the year
                ended December 31, 2006, Mr. Smith earned $216,667 in severance
                pay.





(3)
            Mr.
                Read resigned on February 23, 2007.







**37**





The
      following table sets forth certain information concerning stock option awards
      granted to our executive officers and our directors.




**OPTION
                          AWARDS**
                      
                      **STOCK
                          AWARDS**Name
                      
                      Number
                          of securities underlying unexercised options (#)
                          Exercisable
                      
                      
                      Equity
                          Incentive Plan Awards: Number of Securities underlying unexercised
                          unearned options (#)
                      
                      
                      Option
                          exercise price (#)
                      
                      
                      Option
                          expiration date
                      
                      
                      Number
                          of shares or units of stock that have not vested (#)
                      
                      
                      Market
                          value of shares or units of stock that have not vested
                          ($)
                      
                      
                      Equity
                          incentive plan awards: number of unearned shares, units or rights
                          that have not vested (#)
                      
                      
                      Equity
                          incentive plan awards: Market or payout value of unearned shares,
                          units or other rights that have not vested ($)Dennis
                          R. Casey,
                        Former
                          President and Chief Executive Officer
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -W.
                          Michael Smith,
                        Former
                          Executive Vice President, Chief Financial Officer, Chief
                          Operating
                          Officer, and Treasurer
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Neil
                          Read,
                        Former
                          Vice President, Chief Financial Officer and Treasurer
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -




**Savings
      Plan**




We
      have a
      401(k) Retirement Investment Profit-Sharing Plan that covers all of our
      employees once they become eligible to participate. As permitted under the
      401(k) Plan, employees may contribute up to 20% of their pre-tax earnings.
      The
      maximum amount of contributions by any employee each calendar year is $15,000,
      the maximum amount permitted under the Internal Revenue Code of 1986, as
      amended. We match 50% of an employee’s contribution to the 401(k) Plan up to 6%
      of pre-tax earnings for a total potential matching contribution of 3% of the
      employee’s pre-tax earnings.





**Employment
      Agreements**





As
      of
      March 31, 2007, we have employment agreements with Gary Hallgren, our Chief
      Executive Officer and Greg Jones, our Senior Vice President,
      Operations.  The following is a summary of the material details of the
      employment agreement.





Our
      employment agreement with Mr. Hallgren has an initial term of two years
      (expiring in February 2009).    The employment agreement
      provides for a base salary of $165,000.  If the employment agreement
      is terminated by us (other than for specified cause events), Mr. Hallgren will
      receive his full base salary for the lesser of (a) twelve months and (b) the
      remaining term of the agreement.(plus an additional six months if the
      termination occurs within 60 days of the occurrence of a change in control
      of
      the company).





Mr.
      Hallgren (together with other
      members of our senior management) will receive a quarterly bonus equal to 20%
      of
      our earnings before interest, taxes, depreciation and
      amortization.  In addition, if we consummate certain corporate
      transactions in which the consideration received by our security holders exceeds
      $20 million, Mr. Hallgren (together with other members of our senior management)
      will receive a bonus equal to 10% of the aggregate transaction value exceeding
      $20 million. Mr. Hallgren will determine the allocation of the bonuses among
      Mr.
      Hallgren and the other members of our senior management.   Mr.
      Hallgren will receive a cash draw of $2,083.33 per month as an advance against
      payments under such bonuses.





Our
      employment agreement with Mr. Jones
      has an initial term of two years (expiring in February
      2009).    The employment agreement provides for a base
      salary of $153,000.  If the employment agreement is terminated by us
      (other than for specified cause events), Mr. Jones will receive his full base
      salary for the lesser of (a) six months and (b) the remaining term of the
      agreement.(plus an additional six months if the termination occurs within 60
      days of the occurrence of a change in control of the company)..






**38**




Mr.
      Jones (together with other members
      of our senior management) will participate in an EBITDA Bonus Program and
      Corporate Transaction Bonus Program as the same may be established and
      maintained from time to time by us.  Our Chief Executive Officer will
      determine the allocation of the bonuses among the members of our senior
      management.  Mr. Jones will receive a cash draw of $1,000 per month as
      an advance against payments under such bonus programs.





*Compensation
      Committee Interlocks and Insider Participation*





During
      the year ended December 31, 2006, the following members of the Board of
      Directors served on our Compensation Committee: Gerry Quinn, Thomas Honeycutt,
      Greg Pritchard, Matthew Petzold, Marshall Saffer and Keith
      Moore.  Gerry Quinn resigned from the Board of Directors and its
      Compensation Committee effective December 22, 2005. Matthew Petzold was
      appointed to the Compensation Committee effective January 23, 2006. Mr. Petzold
      resigned from the Board of Directors and its Compensation Committee effective
      June 18, 2006. Mr. Honeycutt resigned from the Board of Directors and its
      Compensation Committee effective June 30, 2006. Mr. Pritchard resigned from
      the
      Board of Directors and its Compensation Committee effective June 30,
      2006.  Marshall Saffer and Keith Moore were appointed to the
      Compensation Committee effective December 5, 2006.  Marshall Saffer
      resigned from the Board of Directors and its Compensation Committee effective
      April 3, 2007





During
      the year ended December 31, 2006, our Compensation Committee reviewed and
      adjusted the salary structures of executive officers subject to employment
      agreements and executive officers who were not subject to employment
      agreements.




**Item11.Security Ownership of Certain Beneficial Owners and Management
                and
                Related Stockholder
                Matters.**




The
      following table sets forth certain information regarding beneficial ownership
      of
      our common stock as of March 31, 2007





·
            by
                each person who is known by us to beneficially own more than 5% of
                our
                common stock;


·
            by
                each of our executive officers and directors;
                and


·
            by
                all of our executive officers and directors as a
                group.






Name
                                      and Address of Beneficial Owner (1)
                                  
                                  Nature
                                      of Beneficial owner (1)
                                  
                                  Beneficial
                                      Ownership Number of Shares
                                  
                                  
                                  Percent
                                      of Total (2)Bounce
                                      Mobile Systems, Inc.
                                    30950
                                      Rancho Viejo Rd. #120
                                    San
                                      Juan Capistrano, CA. 92675
                                  
                                  Stockholder
                                  
                                  
                                  1,361,276,165
                                  (3)
                                  
                                  
                                  61.10
                                  %Dennis
                                      Ackerman
                                  
                                  Director
                                  
                                  
                                  15,558
                                  (4)
                                  
                                  
                                  *Keith
                                      Moore
                                  
                                  Director
                                  
                                  
                                  --
                                  
                                  
                                  
                                  --David
                                      Walters
                                  
                                  Chairman
                                      and Director
                                  
                                  
                                  1,361,276,165
                                  (3)
                                  
                                  
                                  61.10
                                  %Gary
                                      Hallgren
                                  
                                  Chief
                                      Executive Officer
                                  
                                  
                                  --Greg
                                      Jones
                                  
                                  Sr.
                                      Vice President, Operations
                                  
                                  
                                  --
                                  
                                  
                                  
                                  --All
                                      executive officers and directors as a group
                                      (5 persons)
                                  
                                  
                                  1,361,291,723
                                  (3,4)
                                  
                                  
                                  61.20
                                  %*  Less
                                      than 1%






(1)
      Beneficial ownership is determined in accordance with the rules of the
      Commission and generally includes voting or investment power with respect to
      securities. In accordance with Commission rules, shares of the Company's common
      stock which may be acquired upon exercise of stock options or warrants which
      are
      currently exercisable or which become exercisable within 60 days of the date
      of
      the table are deemed beneficially owned by the optionees. Subject to community
      property laws, where applicable, the persons or entities named in the table
      above have sole voting and investment power with respect to all shares of the
      Company's common stock indicated as beneficially owned by them.





(2)
      Based
      upon the following outstanding securities: (a) 63,228,182 shares of common
      stock, (b) 522 shares of our series B convertible preferred stock (which were
      convertible into 3,367,742 shares of common stock), (c) 5,000 shares of our
      series C convertible preferred stock (which were convertible into 1,135,619,915
      shares of common stock), (d) $4,209,847 principal amount of our series A senior
      secured convertible promissory notes (which were convertible into 263,115,438
      shares of common stock), (e) $4,870,451 principal amount of our series B
      subordinated secured convertible promissory notes (which were convertible into
      304,403,188 shares of common stock), (f) series A-7 warrants exercisable for
      20,625,000 shares of common stock, (g) series B-4 warrants exercisable for
      13,750,000 shares of common stock, (h) series C-3 warrants exercisable for
      27,500,000 shares of common stock, (i) series D-1 warrants exercisable for
      19,250,000 shares of common stock, (j) series E-7 warrants exercisable for
      172,322,768 shares of common stock, (k) series F-4 warrants exercisable for
      172,322,768 shares of common stock, and (l) other warrants exercisable for
      30,551,365 shares of common stock.





(3)
      Consists of shares of common stock issuable upon conversion or exercise of
      the
      following outstanding securities held by BMSI:  (a) 5,000 shares of
      our series C convertible preferred stock, (b) $2,184,000 principal amount of
      series B subordinated secured convertible notes (including original issue
      discount series B subordinated secured convertible notes), (c) our series E-7
      warrants to purchase 73,125,000 shares of our common stock, and (d) our series
      F-4 warrants to purchase 73,125,000 shares of our common stock.





(4)
      This
      individual owns 900 shares of common stock and beneficially owns an additional
      14,658 shares issuable upon conversion of a convertible promissory note issued
      by the Company.





**39**




**Item12.Certain Relationships and Related Transactions.**




In
      2004,
      we issued a $2,000,000 convertible promissory note to HFS Minorplanet Funding
      LLC (“HFS”).   The principal balance is due 36 months from the
      date of funding, with an annual interest rate of 12%.  In January,
      2006, the Company appointed Dennis Ackerman to serve as the HFS-designee member
      of our Board of Directors.  Mr. Ackerman currently serves as a
      director of HFS Capital Private Equity Fund LLC, the Managing Member of
      HFS.  On November 30, 2006, we entered into a new promissory note with
      HFS pursuant to which, on December 1, 2007, the existing $2,000,000 convertible
      promissory note issued to HFS will be cancelled and we will issue to HFS (i)
      $1,000,000 principal amount of our series B subordinated secured convertible
      promissory notes, (ii) $400,000 principal amount of our original issue discount
      series B subordinated secured convertible promissory notes, (iii) our series
      E-7
      warrants to purchase 46,875,000 shares of our common stock and (iv) our series
      F-4 warrants to purchase 46,875,000  shares of our common
      stock.




In
      June,
      2006, BounceGPS, our wholly owned subsidiary, issued a $250,000 note to
      DataLogic International, Inc. in conjunction with the acquisition of certain
      assets.  Keith Moore (a member of our Board of Directors), is the CEO
      and Chairman of DataLogic International, Inc.




BounceGPS
      has an agreement with MBCG
      for corporate development and chief financial officer
      services.   David Walters (our Chairman) is the managing member
      of MBCG and beneficially owns 100% of MBCG.   The agreement was
      entered into prior to our December 2006 acquisition of  BounceGPS and
      prior to Mr. Walters joining our Board of Directors.  Under the
      agreement with MBCG, BounceGPS will pay to MBCG a monthly fee of $20,000 in
      cash.  The initial term of the agreement expires on December 31, 2007
      and continues thereafter on a month-to-month basis unless terminated by either
      party.   Fees paid to MBCG totaled $100,000 and $0 for the years
      ended December 31, 2006 and 2005, respectively.





In
      connection with our November 2006
      private placement, we agreed to pay $60,000 ($15,000 per closing) to MBMC for
      consulting work.  David Walters (our Chairman) and Keith Moore (a
      member of our Board of Directors) are managing members of MBMC and each
      beneficially own 50% off MBMC.As of December 31, 2006,
      the Company
      owed $15,000 to MBMC for these services.  The Company made this
      payment to MBMC
      in January 2007.





Additionally,
      we agreed to pay a $20,000 documentation fee to BMSI in connection with our
      December 2006 acquisition of BounceGPS from BMSI.  David Walters (our
      Chairman) is the Chairman and Chief Executive Officer of BMSI and beneficially
      owns a majority of the outstanding common stock of BMSI. This payment was made
      in January 2007.







**40**




**Item13.Exhibits.**




(a)1.   **Consolidated Financial
      Statements.**




The
      following consolidated financial statements of Remote Dynamics, Inc. and
      Subsidiary, are submitted as a separate section of this report (See
      F-pages), and are incorporated by reference in Item 7:




Report
                of Independent Registered
                Public Accounting Firm
            F-2Consolidated
                Balance Sheets at
                December 31, 2006 and 2005
            F-3Consolidated
                Statements of
                Operations for the fiscal years ended December 31, 2006, and
                2005
            F-4Consolidated
                Statements of
                Stockholders’ Deficit for the fiscal years ended December 31, 2006 and
                2005
            F-5Consolidated
                Statements of Cash
                Flows for the fiscal years ended December 31, 2006 and
                2005
            F-6Notes
                to Consolidated Financial
                Statements
            F-8




(b)******Exhibits**




The
      following Exhibits are filed herewith pursuant to Item 601 of
      Regulation S-B or incorporated herein by reference to previous filings as
      noted:




**Exhibit**
                **No.**
              ****
              **Identification
                  of Exhibit**2.1
              
              Stock
                  Purchase and Exchange Agreement by and among @Track Communications,
                  Inc.,
                  Minorplanet Systems PLC and Mackay Shields LLC dated February 14,
                  2001
                  (1)2.2.1
              
              Asset
                  Purchase Agreement by and between @Track Communications, Inc. and
                  Aether
                  Systems, Inc. dated March 15, 2002 (2)2.2.2
              
              List
                  of schedules and exhibits omitted from that certain Asset Purchase
                  Agreement by and between @Track Communications, Inc. and Aether
                  Systems,
                  Inc. dated March 15, 2002 (2)2.3
              
              Findings
                  and Fact, Conclusions of Law and Order Confirming Remote Dynamics,
                  Inc.’s
                  Third Amended Joint Plan of Reorganization and Approving Settlement
                  of
                  Remote Dynamics, Inc.’s Amended Motion for Valuation dated June 28,
                  2004.  (3)2.4.1
              
              Share
                  Exchange Agreement with Bounce Mobile Systems, Inc. dated November
                  30,
                  2006 (4)2.4.2
              
              Registration
                  Rights Agreement with Bounce Mobile Systems, Inc. dated December
                  4, 2006
                  (4)2.4.3
              
              Security
                  Agreement with Bounce Mobile Systems, Inc. dated December 4, 2006
                  (4)2.4.4
              
              Series
                  B subordinated secured convertible promissory note of issued to
                  Bounce
                  Mobile Systems, Inc. on December 4, 2006 (4)2.4.5
              
              Original
                  issue discount series B subordinated secured convertible promissory
                  note
                  issued to Bounce Mobile Systems, Inc. on December 4, 2006
                  (4)2.4.6
              
              Series
                  E-7 Warrant issued to Bounce Mobile Systems, Inc. on December 4,
                  2006
                  (4)
  **41**
 2.4.7
              
              Series
                F-4 Warrant issued to Bounce Mobile systems, Inc. on December 4,
                2006
                (4)3.1.1
              
              Amended
                  and Restated Certificate of Incorporation dated June 30, 2004
                  (3)3.1.2
              
              Certificate
                  Of Amendment to the Amended and Restated Certificate of Incorporation
                  dated May 26, 2006 (5)3.2
              
              Third
                  Amended and Restated By-Laws dated June 30, 2004 (6)4.1
              
              Specimen
                  of certificate representing the Common Stock, $.01 par value, of
                  Remote
                  Dynamics, Inc.  (7)4.2
              
              Amended
                  and Restated Certificate of Designation, Preferences and Rights,
                  Series B
                  Convertible Preferred Stock, as filed with Secretary of State of
                  Delaware
                  on December 4, 2006 (4)4.3
              
              Certificate
                  of Designation, Preferences and Rights, Series C Convertible Preferred
                  Stock, as filed with Secretary of State of Delaware on December
                  4, 2006
                  (4)10.1.1
              
              Securities
                  Purchase Agreement with SDS Capital Group SPC, Ltd. dated May 31,
                  2005
                  (8)10.1.2
              
              Amendment
                  No. 1 to Securities Purchase Agreement with SDS Capital Group SPC,
                  Ltd.
                  (4)10.2.1
              
              Registration
                  Rights Agreement by and between Remote Dynamics, Inc. and SDS Capital
                  Group SPC, Ltd. dated September 2, 2005 (8)10.2.2
              
              Stock
                  Purchase Warrant issued to SDS Capital Group SPC, Ltd. on September
                  2,
                  2005 for purchase of 2,000,000 shares of common stock
                  (8)10.2.3
              
              Stock
                  Purchase Warrant issued to SDS Capital Group SPC, Ltd. on September
                  2,
                  2005 for purchase of 1,666,667 shares of common stock
                  (8)10.2.4
              
              Stock
                  Purchase Warrant issued to SDS Capital Group SPC, Ltd. on September
                  2,
                  2005 for purchase of 700,000 shares of common stock (8)10.3.1
              
              Note
                  and Warrant Purchase Agreement dated as of February 23, 2006
                  (9)10.3.2
              
              Registration
                  Rights Agreement dated as of February 23, 2006 (9)10.3.3
              
              Security
                Agreement dated as of February 23, 2006 (9)10.3.4
              
              Form
                of series A senior secured convertible promissory note due February
                24,
                2008 (9)10.3.5
              
              Form
                of original issue discount series A senior secured convertible promissory
                note due February 24, 2008 (9)10.3.6
              
              Form
                of Series A-7 Warrant issued on February 24, 2006 (9)10.3.7
              
              Form
                of Series B-4 Warrant issued on February 24, 2006 (9)10.3.8
              
              Form
                of Series C-3 Warrant issued on February 24, 2006 (9)10.3.9
              
              Form
                of Series D-1 Warrant issued on February 24, 2006 (9)10.4.1
              
              Note
                and Warrant Purchase Agreement dated as of November 30, 2006
                (4)10.4.2
              
              Registration
                Rights Agreement dated as of November 30, 2006 (4)10.4.3
              
              Securities
                Agreement dated as of November 30, 2006 (4)10.4.4
              
              Form
                of series B senior secured convertible promissory note due December
                4,
                2009 (4)10.4.5
              
              Form
                of original issue discount series B senior secured convertible promissory
                note due December 4, 2009 (4)10.4.6
              
              Form
                of Series E-7 Warrant issued on December 4, 2006 (4)10.4.7
              
              Form
                of Series F-4 Warrant issued on December 4, 2006 (4)10.5#
              
              2004
                Restated Management Incentive Plan (10)10.6.1#
              
              Employment
                Agreement with Gary Hallgren dated February 16, 2007 (11)10.6.2#
              
              Employment
                Agreement with Greg Jones dated February 16, 2007 (11)10.7
              
              Consulting
                Agreement with Saffron Capital Management LLC dated January 24, 2006
                (12)10.8#
              
              Seperation
                Agreement with J. Raymond Bilbao dated May 31, 2006 (5)10.9
              
              Consulting
                Agreement with Monarch Bay Management Company dated July 1, 2006
                (13)10.10*
              
              Promissory
                Note issued to HFS due December 31, 200714.1
              
              Code
                  of Ethics for Senior Financial Officers (20)15.1*
              
              Financial
                  Statements of Remote Dynamics and Subsidiary for the quarterly
                  period
                  ended November 30, 2006 and 2005 as previously filed in Remote
                  Dynamics,
                  Inc.’s Quarterly Report on Form 10-QSB, as filed with the SEC on January
                  24, 2007.15.2*
              
              Financial
                  Statements of Remote Dynamics and Subsidiary as of and for the
                  fiscal
                  years ended August 31, 2006 and 2005 as previously filed in Remote
                  Dynamics, Inc.’s Annual Report on Form 10-KSB, as filed with the SEC on
                  January 16, 2007.21.1*
              
              Subsidiaries
                  of Registrant31.1*
              
              Certification
                  of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14
                  promulgated
                  under the Securities Exchange Act of 193431.2*
              
              Certification
                  of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14
                  promulgated under the Securities Exchange Act of 193432.1*
              
              Certification
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002#   Management
                  contract and/or compensatory plan, contract or arrangement*  Filed
                  herewith(1)   Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Definitive Proxy Statement
                  on Schedule 14A, as filed with the SEC on May 11, 2001.(2)   Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Current Report on Form 8-K,
                  as filed with the SEC on March 27, 2002; certain confidential portions
                  were deleted pursuant to an ‘Order Granting Application for Confidential
                  Treatment’ issued in connection with Remote Dynamics, Inc.’s Current
                  Report on Form 8-K filed with the SEC on March 27, 2002.(3)   Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Quarterly Report on Form
                  10-Q, as filed with the SEC on July 14, 2004.(4)   Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Current Report on Form 8-K,
                  as filed with the SEC on December 7, 2006.(5)   Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Quarterly Report on Form
                  10-QSB, as filed with the SEC on July 17, 2006.(6)   Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Annual Report on Form 10-K,
                  as filed with the SEC on November 18, 2004.(7)   Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Registration Statement on
                  Form S-1, as amended (No. 33-9 1486), as declared effective by
                  the SEC on
                  June 22, 1995(8)Incorporated
                  herein
                  by reference to Remote Dynamics, Inc.’s Current Report on Form 8-K, as
                  filed with the SEC on September 7, 2005.(9)Incorporated
                  herein
                  by reference to Remote Dynamics, Inc.’s Current Report on Form 8-K/A, as
                  filed with the SEC on March 1, 2006.(10)
                  Incorporated herein
                  by reference to Remote Dynamics, Inc.’s Annual Report on Form 10-K, as
                  filed with the SEC on November 18, 2004.(11)
                  Incorporated herein by reference to Remote Dynamics, Inc.’s Current Report
                  on Form 8-K, as filed with the SEC on February 22, 2007.(12)
                  Incorporated herein by reference to Remote Dynamics, Inc.’s Current Report
                  on Form 8-K, as filed with the SEC on January 30, 2006.





**42**


**Item14.Principal Accountant Fees and Services**





On
      March 23, 2007, the Audit Committee
      of our Board of Directors approved the engagement of Chisholm Bierwolf &
Nilson LLC (“CBN”) to serve as our principal independent public accountant to
      audit our financial statements for the fiscal year ended December 31,
      2006.  On March 8, 2006, the Audit Committee of our Board of Directors
      approved the engagement of KBA Group LLP (“KBA”) to serve as our principal
      independent public accountant to audit our financial statements for the fiscal
      year ended August 31, 2006.  Prior to March 8, 2006, our principal
      independent public accountant was BDO Seidman, LLP (“BDO”).  Audit
      fees billed by Chisholm, Bierwolf & Nilson relate to the audits for the
      fiscal years ending December 31, 2006 and 2005.  On March 27, 2007,
      the Company changed is fiscal year end from August 31 to December
      31.  The accountant fees paid to KBA Group, BDO Seidman, and Deloitte
& Touche relate to the previous fiscal year reporting of August
      31.  Audit fees billed by our principal independent public accountants
      for services rendered for the audit of our annual financial statements and
      review of our quarterly financial statements included in Form 10-Q for the
      last
      two fiscal years are presented below.  Audit-related fees, tax fees,
      and other fees for services billed by our principal independent public
      accountant during each of the last two fiscal years are also presented in the
      following table:




Year
                                            Ended December 31,2006
                                        
                                        
                                        2005**Chisholm,
                                            Bierwolf & Nilson**Audit
                                            fees
                                        
                                        $
                                        28,000
                                        
                                        
                                        $
                                        11,000Audit-related
                                            fees  (a)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Tax
                                            fees  (b)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Registration
                                            Statement Fees
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -All
                                            other fees
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -**KBA
                                            Group**Audit
                                            fees
                                        
                                        $
                                        47,000
                                        
                                        
                                        $
                                        -Audit-related
                                            fees  (a)
                                        
                                        
                                        23,350
                                        
                                        
                                        
                                        -Tax
                                            fees  (b)
                                        
                                        
                                        19,050
                                        
                                        
                                        
                                        -Registration
                                            Statement Fees
                                        
                                        
                                        12,000
                                        
                                        
                                        
                                        -All
                                            other fees
                                        
                                        
                                        12,150
                                        
                                        
                                        
                                        -**BDO
                                            Seidman**Audit
                                            fees
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        125,171Audit-related
                                            fees  (a)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Tax
                                            fees  (b)
                                        
                                        
                                        
                                        
                                        
                                        
                                        24,400Registration
                                            Statement Fees
                                        
                                        
                                        30,000
                                        
                                        
                                        
                                        12,268All
                                            other fees
                                        
                                        
                                        -
                                        
                                        
                                        
                                        8,000**Deloitte
                                            & Touche**
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -Audit
                                            fees
                                        
                                        
                                        -Audit-related
                                            fees  (a)
                                        
                                        
                                        -Tax
                                            fees  (b)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,200Registration
                                            Statement Fees
                                        
                                        
                                        -
                                        
                                        
                                        
                                        5,750All
                                            other fees
                                        
                                        
                                        -


(a)
                Audit-related fees primarily include research services to validate
                certain
                accounting policies of us.




(b)
                Tax fees include costs for the preparation of our corporate income
                tax
                return.







**43**




In
      accordance with the Audit Committee Charter of our Audit Committee (“Charter”),
      all audit and non-audit services to be provided by our principal accountant
      relating to the audit of our financial statements must be pre-approved by our
      Audit Committee.  The Charter further provides that if the services to
      be rendered by our principal accountant are services other than audit, review
      or
      attest services, the pre-approval requirement is waived if: (a) the aggregate
      amount of all such services provided by the principal accountant constitutes
      no
      more than five percent (5%) of the total amount of revenues paid by us to our
      principal accountant during the fiscal year in which the services are provided;
      and (b) such services were not recognized by us at the time of the engagement
      to
      be non-audit services; and (c) such services are promptly brought to the
      attention of our Audit Committee and approved prior to the completion of the
      audit by our Audit Committee or by one or more members of our Audit Committee
      who are members of the Board of Directors to whom authority to grant such
      approvals has been delegated by our Audit Committee.  All the services
      provided by our principal accountants during the fiscal years ended December
      31,
      2006 and 2005 were pre-approved by our Audit Committee.







**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act
      of 1934, the Registrant has duly caused this report to be signed on its behalf
      by the undersigned, thereunto duly authorized.




Dated:
                April 16, 2007
            REMOTE
                DYNAMICS, INC.(Registrant)By:
            /s/
                GARY HALLGRENGary
                Hallgren*Chief
                Executive Officer**(Principal
                Executive Officer)*




Pursuant
      to the requirements of the Securities Exchange Act of 1934, 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/
                GARY HALLGREN
            
            Chief
                Executive Officer
            
            April
                16, 2007Gary
                Hallgren/s/
                DAVID WALTERS
            
            Chairman
                and Director*(Principal Financial and Accounting
                Officer)*
            
            April 16,
                2007David
                Walters/s/
                DENNIS ACKERMAN
            
            Director
            
            April
                16, 2007Dennis
                Ackerman/s/
                KEITH MOORE
            
            Director
                and Secretary
            
            April
                16, 2007Keith
                Moore






**44**


**ANNUAL
      REPORT ON FORM 10-KSB**


**ITEM
      7**


**FINANCIAL
      STATEMENTS**


**YEARS
      ENDED DECEMBER 31, 2006 and 2005**


**REMOTE
      DYNAMICS, INC.**


**PLANO,
      TEXAS**


**45**







**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**







The
      Board
      of Directors and Stockholders


Remote
      Dynamics, Inc.


Plano,
      Texas




We
      have
      audited the accompanying consolidated balance sheets of Remote Dynamics, Inc.
      and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the
      related consolidated statements of operations, stockholders’ deficit, and cash
      flows for the years then ended. These consolidated financial statements are
      the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these consolidated financial statements based on our
      audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement.  The Company is not required
      to have, nor were we engaged to perform, an audit of their internal control
      over
      financial reporting.  Our audit included consideration of internal control
      over financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting.  Accordingly, we express no such opinion.  An audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements, assessing the accounting principles
      used and significant estimates made by management, as well as evaluating the
      overall financial statement presentation. We believe that our audit provides
      a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Remote
      Dynamics, Inc. and subsidiaries as of December 31, 2006 and 2005, and the
      consolidated results of their operations and their cash flows for the years
      then
      ended in conformity with accounting principles generally accepted in the United
      States of America.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. The Company has a significant working capital
      deficit, suffered recurring losses from operations and has negative cash flows
      from operating activities that raise substantial doubt about its ability to
      continue as a going concern.  The Company’s plans in regard to these
      matters are described in Note 1 to the financial statements.  The
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.





/s/
      Chisholm Bierwolf & Nilson, LLC


Chisholm
      Bierwolf & Nilson, LLC


Bountiful,
      Utah


April
      10,
      2007






















F-2


**REMOTE
                        DYNAMICS, INC. AND SUBSIDIARIES****CONSOLIDATED
                        BALANCE SHEETS****(in
                        thousands, except share amounts)****December
                        31,**
                    
                    
                    **December
                        31,****2006**
                    
                    
                    **2005****ASSETS**Current
                        assets:Cash
                        and cash equivalents
                    
                    $
                    121
                    
                    
                    $
                    1Accounts
                        receivable, net of allowance for doubtful accountsof $67 and $0,
                        respectively
                    
                    
                    534
                    
                    
                    
                    1Inventories,
                        net of reserve for obsolescence of $112 and $0,
                        respectively
                    
                    
                    287
                    
                    
                    
                    -Deferred
                        product costs - current portion
                    
                    
                    157
                    
                    
                    
                    -Lease
                        receivables and other current assets, net
                    
                    
                    414
                    
                    
                    
                    1Total
                        current assets
                    
                    
                    1,512
                    
                    
                    
                    3Property
                        and equipment, net of accumulated depreciation and amortization
                        of $112
                        and $37 respectively
                    
                    
                    371
                    
                    
                    
                    29Deferred
                        product costs - non-current portion
                    
                    
                    154
                    
                    
                    
                    -Goodwill
                    
                    
                    616
                    
                    
                    
                    -Customer
                        Lists, net
                    
                    
                    2,714Software,
                        net
                    
                    
                    846Tradenames,
                        net
                    
                    
                    74License
                        right, net
                    
                    
                    57
                    
                    
                    
                    -Deferred
                        financing fees, net
                    
                    
                    165
                    
                    
                    
                    -Lease
                        receivables and other assets, net
                    
                    
                    352
                    
                    
                    
                    -Total
                        assets
                    
                    $
                    6,861
                    
                    
                    $
                    32**LIABILITIES
                        AND STOCKHOLDERS' DEFICIT**Current
                        liabilities:Accounts
                        payable
                    
                    $
                    1,441
                    
                    
                    $
                    45Deferred
                        product revenues - current portion
                    
                    
                    1,035
                    
                    
                    
                    -Series
                        A convertible notes payable (net of discount of $3,193 and
                        $0,
                        respectively)
                    
                    
                    1,242
                    
                    
                    
                    -Series
                        B convertible notes payable (net of discount of $113 and
                        $0,
                        respectively)
                    
                    
                    189
                    
                    
                    
                    -Note
                        payable - HFS (net of discount of $1,716 and $0,
                        respectively)
                    
                    
                    284
                    
                    
                    
                    -Note
                        payable, current portion
                    
                    
                    266
                    
                    
                    
                    204Accrued
                        expenses and other current liabilities
                    
                    
                    1,720
                    
                    
                    
                    60Total
                        current liabilities
                    
                    
                    6,178
                    
                    
                    
                    309Deferred
                        product revenues - non-current portion
                    
                    
                    894
                    
                    
                    
                    -Capital
                        leases, less current portion
                    
                    
                    79
                    
                    
                    
                    -Series
                        B convertible notes payable - non-current (net of discount
                        of $906 and $0,
                        respectively)
                    
                    
                    1,509
                    
                    
                    
                    -Other
                        non-current liabilities
                    
                    
                    321
                    
                    
                    
                    -Total
                        liabilities
                    
                    
                    8,981
                    
                    
                    
                    309Commitments
                        and contingenciesRedeemable
                        Preferred Stock - Series B (3% when declared, $10,000 stated
                        value,
                      2,000,000
                        shares
                        authorized, 559.5 and 600 shares issued and outstanding at
                      December
                        31, 2006 and
                        December 31, 2005, respectively (redeemable in
                      liquidation
                        at an aggregate of $5,595,000 at December 31, 2006)
                    
                    
                    146
                    
                    
                    
                    -Redeemable
                        Preferred Stock - Series C (8% cumulative, $10,000 stated
                        value,
                      10,000 shares authorized, 5,000 and 0 shares issued and outstanding
                        at
                      December 31, 2006 and December 31, 2005, respectively (redeemable
                        in
                      liquidation at an aggregate of $5,000,000 at December 31,
                        2006)
                    
                    
                    -
                    
                    
                    
                    -Stockholders'
                        deficit:Common
                        stock, $0.01 par value, 230,000,000 shares authorized,
                        62,225,408
                      shares
                        issued and
                        61,325,460 outstanding at December 31, 2006;
                      230,000,000
                        shares
                        authorized, 8,855,885 shares issued and 7,925,937 outstanding
                      at
                        December 31, 2005
                    
                    
                    623
                    
                    
                    
                    1Treasury
                        stock, 929,948 shares, at cost
                    
                    
                    -
                    
                    
                    
                    -Preferred
                        Stock - Series C
                    
                    
                    -
                    
                    
                    
                    -Additional
                        paid-in capital
                    
                    
                    194
                    
                    
                    
                    -Accumulated
                        deficit
                    
                    
                    (3,083
                    )
                    
                    
                    (278
                    )Total
                        stockholders' deficit
                    
                    
                    (2,266
                    )
                    
                    
                    (277
                    )Total
                        liabilities and stockholders' deficit
                    
                    $
                    6,861
                    
                    
                    $
                    32


The
            accompanying notes are an integral part of these financial
            statements.
 F-3





**REMOTE
                          DYNAMICS, INC. AND SUBSIDIARIES****CONSOLIDATED
                          STATEMENTS OF OPERATIONS****(In
                          thousands, except per share amounts)****Twelve
                          months ended****December
                          31,****2006**
                      
                      
                      **2005**RevenuesService
                      
                      $
                      286
                      
                      
                      $
                      -Ratable
                          product
                      
                      
                      234
                      
                      
                      
                      -Product
                      
                      
                      144
                      
                      
                      
                      317Total
                          revenues
                      
                      
                      663
                      
                      
                      
                      317Cost
                          of revenuesService
                      
                      
                      229
                      
                      
                      
                      -Ratable
                          product
                      
                      
                      118
                      
                      
                      
                      -Product
                      
                      
                      294
                      
                      
                      
                      126Total
                          cost of revenues
                      
                      
                      641
                      
                      
                      
                      126Gross
                          profit
                      
                      
                      22
                      
                      
                      
                      191Expenses:General
                          and administrative
                      
                      
                      495
                      
                      
                      
                      101Customer
                          service
                      
                      
                      23
                      
                      
                      
                      -Sales
                          and marketing
                      
                      
                      317
                      
                      
                      
                      177Engineering
                      
                      
                      60
                      
                      
                      
                      -Depreciation
                          and amortization
                      
                      
                      184
                      
                      
                      
                      20Goodwill
                          impairment
                      
                      
                      411
                      
                      
                      
                      -Total
                          expenses
                      
                      
                      1,490
                      
                      
                      
                      298Operating
                          loss
                      
                      
                      (1,467
                      )
                      
                      
                      (107
                      )Interest
                          income
                      
                      
                      21
                      
                      
                      
                      -Interest
                          expense
                      
                      
                      (680
                      )
                      
                      
                      -Other
                          (expense) income
                      
                      
                      -
                      
                      
                      
                      34Loss
                          on extinguishment of debt
                      
                      
                      (558
                      )Loss
                          on extinguishment of redeemable preferred stock
                      
                      
                      (121
                      )
                      
                      
                      -Loss
                          before income taxes
                      
                      
                      (2,805
                      )
                      
                      
                      (73
                      )Income
                          tax benefit
                      
                      
                      -
                      
                      
                      
                      -Net
                          loss
                      
                      $
                      (2,805
                      )
                      
                      $
                      (73
                      )Net
                          loss per common share - basic and diluted
                      
                      $
                      (0.13
                      )
                      
                      $
                      (0.01
                      )Weighted
                          average number of common shares outstanding:Basic
                          and diluted
                      
                      
                      20,902
                      
                      
                      
                      6,721





The
            accompanying notes are an integral part of these financial
            statements.
 F-4





**REMOTE
                                  DYNAMICS, INC. AND SUBSIDIARIES****CONSOLIDATED
                                  STATEMENT OF STOCKHOLDERS' DEFICIT****(in
                                  thousands, except share information)****Treasury****Stock****Shares**
                              
                              
                              **Amount**
                              
                              
                              **Additional**
                                **Paid-in**
                                **Capital**
                              
                              
                              **Shares**
                              
                              
                              **Amount**
                              
                              
                              **Accumulated**
                                **Deficit**
                              
                              
                              **Total****Stockholders'
                                  deficit at December 31, 2004**
                              
                              
                              1,000,000
                              
                              
                              $
                              1
                              
                              
                              $
                              -
                              
                              
                              
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              (205
                              )
                              
                              $
                              (204
                              )Net
                                  loss
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (73
                              )
                              
                              
                              (73
                              )**Stockholders'
                                  deficit at December 31, 2005**
                              
                              
                              1,000,000
                              
                              
                              
                              1
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (278
                              )
                              
                              
                              (277
                              )Capital
                                contribution into Bounce GPS
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,146
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,146Bounce
                                GPS common stock exchanged
                              
                              
                              (1,000,000
                              )
                              
                              
                              (1
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (1
                              )Remote
                                Dynamics common stock acquired in share exchange
                              
                              
                              59,955,408
                              
                              
                              
                              600
                              
                              
                              
                              (597
                              )
                              
                              
                              929,948
                              
                              
                              $
                              -
                              
                              
                              
                              -
                              
                              
                              
                              3Issuance
                                of warrants in connection with debt offering
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              182
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              182Beneficial
                                conversion feature of convertible notes
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              52
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              52Issuance
                                of Series B Notes to BMSI in share exchange
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (577
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (577
                              )Common
                                  stock issued for services
                              
                              
                              2,300,000
                              
                              
                              
                              23
                              
                              
                              
                              (12
                              )
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              11Net
                                  loss
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (2,805
                              )
                              
                              
                              (2,805
                              )**Stockholders'
                                deficit at December 31, 2006**
                              
                              
                              62,255,408
                              
                              
                              $
                              623
                              
                              
                              $
                              194
                              
                              
                              
                              929,948
                              
                              
                              $
                              -
                              
                              
                              $
                              (3,083
                              )
                              
                              $
                              (2,266
                              )





The
            accompanying notes are an integral part of these financial
            statements.
 F-5





**REMOTE
                    DYNAMICS, INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS (1 of 2)****(in
                    thousands)****Year
                    ended December 31,****CASH
                    FLOWS FROM OPERATING ACTIVITIES:**
                
                **2006**
                
                
                **2005**Net
                    loss
                
                $
                (2,805
                )
                
                $
                (73
                )Adjustments
                    to reconcile net loss to cash used inoperating
                    activitiesDepreciation
                    and amortization
                
                
                114
                
                
                
                20Amortization
                    of license rights and other intangibles
                
                
                70
                
                
                
                -Amortization
                    of debt discount
                
                
                6
                
                
                
                -Accretion
                    of HFS note payable
                
                
                134
                
                
                
                -Accretion
                    of Series A notes
                
                
                201
                
                
                
                -Accretion
                    of Series B notes
                
                
                29
                
                
                
                -Goodwill
                    impairment
                
                
                411
                
                
                
                -Provision
                    for bad debt
                
                
                13
                
                
                
                -Loss
                    on extinguishment of debt
                
                
                558
                
                
                
                -Loss
                    on extinguishment of redeemable preferred stock
                
                
                121
                
                
                
                -Loss
                    on sale of fixed assets
                
                
                -
                
                
                
                6Common
                    stock issued for services
                
                
                10
                
                
                
                -Changes
                    in operating assets and liabilities:Decrease
                    in accounts receivable
                
                
                37
                
                
                
                -Decrease
                    in inventory
                
                
                200
                
                
                
                -Decrease
                    in deferred product costs
                
                
                78
                
                
                
                -(Increase)
                    decrease in lease receivables and other assets
                
                
                (12
                )
                
                
                2(Decrease)
                    in deferred product revenue
                
                
                (121
                )
                
                
                -Increase
                    (decrease) in accounts payable
                
                
                22
                
                
                
                (19
                )Increase
                    (decrease) in accrued expenses and other liabilities
                
                
                222
                
                
                
                (24
                )Net
                    cash used in operating activities
                
                
                (712
                )
                
                
                (88
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES:**Cash
                    paid in acquisition
                
                
                (450
                )
                
                
                -Cash
                    acquired from reverse merger transaction
                
                
                107
                
                
                
                -Payments
                    made to acquire property and equipment
                
                
                (3
                )
                
                
                (75
                )Proceeds
                    from sale of assets
                
                
                -
                
                
                
                122Net
                    cash (used in) provided by investing activities
                
                
                (346
                )
                
                
                47**CASH
                    FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                    from issuance of Series B notes, net of offering costs
                
                
                315
                
                
                
                -Proceeds
                    from capital contribution of parent
                
                
                1,011
                
                
                
                -Proceeds
                    from issuance of other notes payable
                
                
                -
                
                
                
                97Payments
                    on capital leases and other notes payable
                
                
                (148
                )
                
                
                (76
                )Net
                    cash provided by financing activities
                
                
                1,178
                
                
                
                21**NET
                    (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS**
                
                
                120
                
                
                
                (20
                )**CASH
                    AND CASH EQUIVALENTS, beginning of year**
                
                
                1
                
                
                
                21**CASH
                    AND CASH EQUIVALENTS, end of year**
                
                
                121
                
                
                
                1**SHORT
                    TERM INVESTMENTS**
                
                
                -
                
                
                
                -**TOTAL
                    CASH AND SHORT TERM INVESTMENTS**
                
                $
                121
                
                
                $
                1




The
          accompanying notes are an integral part of these financial
          statements.
 F-6


**REMOTE
                    DYNAMICS, INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS (2 of 2)****(in
                    thousands)****Year
                    ended December 31,****CASH
                    FLOWS FROM OPERATING ACTIVITIES:**
                
                **2006**
                
                
                **2005**Supplemental
                    Cash Flow Information:Interest
                    paid
                
                $
                1
                
                
                $
                -Income
                    taxes paid
                
                $
                -
                
                
                $
                -Non-Cash
                    Financing & Investing Activities:Common
                    stock issued for services
                
                $
                11
                
                
                $
                -Fair
                    value of assets acquired in acquisition:Net
                    assets acquired
                
                
                289
                
                
                
                -Identifiable
                    intangible assets (customer lists)
                
                
                50
                
                
                
                -Goodwill
                
                
                361
                
                
                
                -Purchase
                    Price:Cash
                
                
                450
                
                
                
                -Note
                    Payable
                
                
                250
                
                
                
                -Total
                    Purchase Price of Acquisition
                
                $
                700
                
                
                $
                -



















The
            accompanying notes are an integral part of these financial
            statements.
 F-7


**REMOTE
      DYNAMICS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**






**1.**
            **ORGANIZATION,
                BUSINESS OVERVIEW, ACQUISITIONS AND GOING
                CONCERN**




**Organization
      and Business Overview**





Huron
      Holdings, Inc., a Nevada Corporation, (HHI) was originally incorporated on
      December 15, 1999.   HHI provides local courier delivery services
      to commercial and residential locations in the Phoenix area.  HHI utilized
      a fleet of delivery vans to perform these services on a contract basis for
      international based shipping and logistics companies.  On June 30,
      2006, HHI purchased certain assets (referred to as BounceGPS) from DataLogic
      International, Inc. (see below for further discussion on
      acquisition).  On July 17, 2006, HHI changed its name to BounceGPS,
      Inc. (BounceGPS).





Remote
      Dynamics, Inc., a Delaware Corporation (“Remote Dynamics”, “Company” and/or
“We”) was originally incorporated on February 3, 1994.  We market,
      sell and support automatic vehicle location (“AVL”) and mobile resource
      management solutions targeting companies that operate private vehicle fleets.
      The REDIviewTM family of solutions is designed for metro, short-haul fleets
      within diverse industry vertical markets such as field services, distribution,
      courier, limousine, electrical/plumbing, waste management, and
      government.  Our core technology, telematics, combines wireless
      communications, GPS location technology, geospatial solutions and vehicle data
      integration with an easy-to-use web-accessible application that aids in the
      optimization of remote business solutions.  We believe our fleet
      management solution contributes to increased operator efficiency by improving
      the productivity of mobile workers through real-time position reports,
      route-traveled information, and exception based reporting designed to highlight
      mobile workforce inefficiencies. This in-depth reporting enables our customers
      to correct those inefficiencies and deliver cost savings.





We
      commercially launched our current product offering, REDIview, during January
      of
      2005.  REDIview is an Internet and service bureau-based software
      application that provides an extensive array of real-time and accurate mapping,
      trip replay, and vehicle activity reports.  REDIview includes a series
      of exception-based reports designed to highlight inefficiencies in the
      operations of a vehicle fleet.  Utilizing GPRS technology and our
      network service center, customers may access their information securely through
      the Internet from any personal computer or certain other devices.






REDIview
      incorporates technologies that allow for fast and effective integration into
      legacy applications operated by companies with vehicle fleets and mobile
      workers.  This design allows companies to easily extend their existing
      supply chain management systems to the mobile workforce for transaction
      processing and customer fulfillment.  REDIview was also designed to be
      hardware and network agnostic to provide the maximum flexibility in designing
      solutions that best fit the customer’s specific needs.






Our
      new
      REDIview product line forms the basis of our business plan for fiscal year
      2007
      and beyond and will be the foundation for expected growth in revenues and
      ultimately profitability for us.  In implementing our new business
      plan, we are completing a significant cost and operational-based restructuring,
      including rightsizing the workforce.  We are focusing our efforts on
      enhancing the existing REDIview product line.  As a result, in
      addition to significantly reducing projected operational costs, we have reduced
      our projected sales targets and associated cash flows from our previous business
      plan which included multiple product offerings sold through both a direct sales
      force and third-party distributors.




**Share
      Exchange Agreement**






On
      November
      30, 2006, Remote Dynamics entered into a Share Exchange Agreement with Bounce
      Mobile Systems, Inc. (“BMSI”).  Pursuant to the Share Exchange
      Agreement, Remote Dynamics agreed to acquire from BMSI 100% of the capital
      stock
      of BounceGPS, a provider of mobile asset management solutions, in exchange
      for
      5,000 shares of Remote Dynamics’ newly authorized series C convertible preferred
      stock, a Series B Note in the principal amount of $660,000, a Series B OID
      Note
      in the principal amount of $264,000, an E-7 Warrant to purchase 30,937,500
      shares of Remote Dynamics common stock and, a F-4 Warrant to purchase 30,937,500
      shares of Remote Dynamics common stock.





F-8


As
      a result
      of the securities issued to BMSI in the Share Exchange Agreement and Note and
      Warrant Purchase Agreement transactions, BMSI obtained and currently has
      effective control of Remote Dynamics board of directors, management, 94.5%
      of
      the voting power of Remote Dynamics common stock outstanding, and beneficial
      ownership of approximately 61.1% of Remote Dynamics common stock (on a
      as-converted, fully diluted basis).   Accordingly, our financial
      statements reflect the historical operations of BounceGPS as the acquisition
      has
      been treated as a reverse merger in accordance with FAS 141 “Accounting for
      Business Combinations” with BounceGPS considered the accounting acquirer.
      Accordingly, BounceGPS is deemed to be the purchaser and surviving company
      for
      accounting purposes and its net assets are included in the balance sheet at
      their historical book values and the results of operations of BounceGPS have
      been presented for the comparative prior period.  The statement of
      stockholder's deficit  is that of BounceGPS  with
      an  increase  in the  number of
      shares  outstanding  of
      59,955,408  that  represents  the  shares
      retained by the Remote Dynamics stockholders.




The
      results of operations of Remote Dynamics are included in our financial
      statements subsequent to December 4, 2006 with the purchase price allocated
      to
      the acquired assets and liabilities of Remote Dynamics as of December 4, 2006.
      Since the historical operations of Remote Dynamics will comprise substantially
      all of our ongoing operations, we have provided the historical financial
      statements of Remote Dynamics (prior to the BounceGPS acquisition) for the
      fiscal years ending August 31, 2006 and 2005 and the three months ending
      November 30, 2006 for information purposes as Exhibits 15.1 and 15.2 to this
      Form 10-KSB.







On
      December 4, 2006,
      Remote Dynamics consummated the Share Exchange Agreement and acquired100% of the capital stock of BounceGPS commensurate with Remote Dynamics
      receiving a capital infusion from BMSI and other third parties.





We
      have estimated a purchase cost of
      $616,000 equal to the excess of the fair value of the debt assumed over the
      fair
      value of the identifiable assets acquired with the full net liabilities assumed
      of $616,000 allocated to goodwill. We have preliminarily excluded from the
      purchase cost the fair value of the BounceGPS capital stock exchanged by BMSI
      for Remote Dynamics debt and equity instruments due to the substantial ownership
      in BounceGPS net assets retained by BMSI through the total Remote Dynamics
      equity interests BMSI obtained in the overall exchange (effectively treating
      this element of the transaction as in substance a form of recapitalization
      where
      no goodwill is recorded).





F-9


The
      following table summarizes the estimated fair values of the assets acquired
      and
      liabilities assumed at the date of acquisition. The Company is in the process
      of
      obtaining third-party valuations of certain intangible assets, performance
      obligations, debt and assumed instruments with characteristics of debt; thus,
      the allocation of the purchase price is subject to refinement:




**At
                        December 4, 2006****($000s)**Cash
                        and cash equivalents
                    
                    $
                    107Accounts
                        receivable
                    
                    
                    576Inventory
                    
                    
                    211Deferred
                        product costs
                    
                    
                    270Lease
                        receivables and other current assets
                    
                    
                    391Property
                        and equipment
                    
                    
                    316Goodwill
                    
                    
                    616Intangibles
                    
                    
                    3,695License
                        right
                    
                    
                    66Lease
                        receivables and other assets
                    
                    
                    367**Total
                        assets acquired**
                    
                    $
                    6,615Accounts
                        payable
                    
                    $
                    1,424Deferred
                        product revenues - current portion
                    
                    
                    993Series
                        A convertible notes payable
                    
                    
                    1,200Note
                        payable - HFS
                    
                    
                    150Accrued
                        expenses and other current liabilities
                    
                    
                    1,451Deferred
                        product revenues - non-current portion
                    
                    
                    836Capital
                        leases, less current portion
                    
                    
                    90Other
                        non-current liabilities
                    
                    
                    321**Total
                        liabilities assumed**
                    
                    $
                    6,465Redeemable
                        Preferred Stock - Series B
                    
                    $
                    150**Net
                        assets acquired**
                    
                    $
                    -
  The
      $3,695,000 of acquired intangible assets includes (i) registered trademarks
      of
      $75,000 (5-year weighted-average useful life); (ii) customer lists of
      $2,760,000  (5-year weighted-average useful life); and (iii)
      computer software of $860,000 (5-year weighted-average useful
      life).  The $616,000of
      goodwill was assigned to our only segment and is not deductible for tax
      purposes.




We
      have
      estimated the fair value of our performance obligations under existing contracts
      of $1,340,000 in accordance with EITF Issue No. 01-03 “Accounting in a Business
      Combination for Deferred Revenue of an Acquiree”.  Of this amount,
      $752,000 has been reflected within the current portion of deferred revenue
      and
      $588,000 is included within the non-current portion of deferred
      revenue.  Additionally, we have recorded acquired deferred revenue of
      $241,000 in current and $248,000 in non-current deferred product
      revenues.





The
      estimated fair values of the acquired assets and liabilities are preliminary
      and
      may change as we complete our valuation procedures regarding the fair value
      of
      debt assumed, redeemable preferred stock and debt and equity exchanged with
      BMSI. To the extent completion of valuation procedures results in fair values
      greater than preliminarily estimated, additional goodwill may be required
      to be recorded. Further, the preliminary estimated fair value of assumed debt
      indicates that we may record significant interest charges as the preliminary
      fair value amounts of $1,200,000 and $150,000 for the Series A Notes and Note
      Payable HFS, respectively, are accreted up to the face amount of $5,111,000
      for
      Series A Notes (before note payable exchange discussed in Note 8) and $2,000,000
      of HFS notes, respectively.  See Note 8 for further discussion on debt
      instruments.




Any
      changes resulting from our preliminary purchase accounting fair value estimates
      may effect allocations we have made with respect to the multiple elements
      contained between (i) the purchase accounting transactions and (ii) the
      financing transaction. The merger of Remote Dynamics and BounceGPS was
      negotiated simultaneously with the agreement of BMSI to invest in the financing
      transaction and the completion of the financing transaction was conditioned
      on
      the merger completion. We estimated that the portion of the financing
      transaction sold to third parties for cash established a reasonable fair value
      for BMSI’s portion of the financing transaction purchased and therefore did not
      indicate any required reallocation of proceeds or consideration between the
      purchase accounting and financing transactions consummated with BMSI. However,
      to the extent our completion of preliminary purchase accounting valuation
      procedures indicate that an allocation of consideration becomes necessary
      between the two transactions with BMSI it is possible that a beneficial
      conversion feature could result, requiring us to record a deemed dividend at
      the
      earliest conversion date limited to the amount of the proceeds received by
      Remote Dynamics in the transactions with BMSI on December 4, 2006.




F-10


*Pro
        Forma Results of Operations (Unaudited)*
 
 The
        results of Remote Dynamics have been included in the consolidated statements
        of
        operations since its date of acquisition. The following unaudited supplemental
        information is presented on a pro forma basis for the 9 months ended September
        30, 2006 and the year ended December 31, 2005 as though the merger had been
        completed at the beginning of each year, respectively. This summary is not
        necessarily indicative of what our results of operations would have been
        had
        Remote Dynamics been a consolidated entity during such periods, nor does
        it
        purport to represent results of operations for any future periods.


**(in
                        thousands, except per share amounts)**
                    
                    **9
                        Months Ended**
                      **September
                        30, 2006**
                    
                    
                    **Year
                        Ended**
                      **December
                        31, 2005**Net
                        operating revenue
                    
                    $
                    4,069
                    
                    
                    $
                    14,094Net
                        loss
                    
                    $
                    (8,057
                    )
                    
                    $
                    (6,470
                    )Net
                        loss attributable to common shareholders
                    
                    $
                    (8,931
                    )
                    
                    $
                    (9,109
                    )Net
                        loss per common share - basic and diluted
                    
                    $
                    (1.05
                    )
                    
                    $
                    (0.01
                    )




**Other
      Acquisitions**





On
      June
      30, 2006, HHI purchased certain assets of a communications business from
      DataLogic International, Inc.  The transaction was accounted for using
      the purchase method of accounting.  Thus, the results of operations of
      this business are included in the accompanying consolidated financial statements
      from the acquisition date.  The total purchase price of $700,000
      consisted of cash payment of $450,000 and note payable in the amount of
      $250,000.  See Note 8 for further discussion on notes
      payable.





F-11


The
      allocation of the purchase price to the assets acquired and liabilities assumed
      based on their estimated fair values was as follows (000s):




**Purchase
                            Price:**Cash
                        
                        $
                        450Note
                            Payable
                        
                        
                        250Total
                            Purchase Price of Acquisition
                        
                        $
                        700**Assets
                            Aquired:**Net
                            assets acquired
                        
                        $
                        289Identifiable
                            intangible assets (customer lists)
                        
                        
                        50Goodwill
                        
                        
                        361Total
                            Assets Acquired
                        
                        $
                        700


Goodwill
      represents the excess of the purchase price over the fair value of the net
      tangible and intangible assets acquired.   Since the launch of
      the BounceGPS product line in July 2006, BounceGPS has failed to achieve its
      forecasted sales targets and began analyzing and revising its current and
      long-term business plans.  In October 2006, BounceGPS materially
      modified its existing business plan which significantly reduced its projected
      sales forecasts from the former plan.   As a result, and in
      accordance with SFAS 142, BounceGPS performed an interim impairment test of
      goodwill and other intangible assets as of October 31, 2006 utilizing a
      discounted future cash flow analysis based on its new projected sales
      targets.  BounceGPS determined that goodwill and customer lists
      totaling $411,000 were fully impaired.




**Going
      Concern**




We
      have
      incurred significant operating losses since our inception, and these losses
      will
      continue for the near future. We may not ever achieve profitability. Even if
      we
      do achieve profitability, we may not be able to sustain or increase profits
      on a
      quarterly or annual basis.    We do not expect to achieve
      profitability or positive cash flow for 2007.  Our plans for 2007 include
      increasing our sales staff and sales channel development in an effort to build
      recurring revenue and continuing to identify additional operating cost
      reductions.  However, there can be no assurance that we will achieve our
      sales targets or our targeted operating cost reductions for 2007. Failure to
      do
      so may have a material adverse effect on our business, financial condition
      and
      results of operations.  Moreover, despite actions to increase revenue,
      to reduce operating costs and to improve profitability and cash flow, our
      operating losses and net operating cash outflows will continue into the third
      quarter of 2007.




Critical
      success factors in our plans to achieve positive cash flow from operations
      include:




·
            Ability
                to increase sales of the
                REDIview product line.




·
            Ability
                to further reduce our
                operating costs in accordance with our latest revised business
                plan.




·
            Significant
                market acceptance of
                our product offerings from new customers, including our REDIview
                product
                line, in the United States.




·
            Maintaining
                and expanding our direct sales
                channel.




·
            Training
                and development of new
                sales staff.




·
            Maintenance
                and expansion of
                indirect distribution channels for our REDIview product
                line..




There
      can be no assurances that any of these success factors will be realized or
      maintained.




We
      currently
      are not in compliance with certain of our obligations relating to our secured
      convertible notes and our convertible preferred stock, including our failure
      to
      maintain sufficient authorized shares to permit conversion of the securities
      and
      our failure to register the resale of the shares of common stock issuable upon
      conversion of the securities.  Although, to date, no security holder
      has sent us a notice of acceleration of amounts owed under or redemption of
      these securities, there can be no assurance that the security holders will
      not
      take such action in the future.  Our failure to comply with our obligations
      relating to these securities also exposes us to liquidated damages claims by
      the
      security holders.  In the event of an acceleration of amounts owed
      under or redemption of these securities (or a claim for liquidated damages),
      or
      if we are unable to raise enough money to cover the amounts payable, we may
      be
      forced to restructure, file for bankruptcy, sell assets or cease
      operations.




F-12


We
      had a
      working capital deficit of $4.7 million as of December 31, 2006.  We
      believe that with the expected proceeds from our November 2006 private
      placement, we will have sufficient capital to fund our ongoing operations
      through the remainder of 2007, assuming that we are able to meet our sales
      targets and operating cost reduction plans and to negotiate acceptable payment
      arrangements with our senior security holders, vendors and other
      creditors.  The sufficiency of our cash resources depends to a certain
      extent on general economic, financial, competitive or other factors beyond
      our
      control. We do not currently have any arrangements for additional financing
      and
      we may not be able to secure additional debt or equity financing on terms
      acceptable to us, or at all, at the time when we need such financing.
      Furthermore, our ability to secure certain types of additional financings is
      restricted under the terms of our existing financing arrangements. There can
      be
      no assurance that we will be able to consummate a transaction for additional
      capital prior to substantially depleting our available cash reserves, and our
      failure to do so may force us to restructure, file for bankruptcy, sell assets
      or cease operations.





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**





**Principles
      of Consolidation**





Our
      consolidated financial statements include our accounts and those of our wholly
      owned subsidiaries.  Intercompany balances and transactions have been
      eliminated in consolidation.





**Estimates
      Inherent in the Preparation of Financial Statements**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires us 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 those
      estimates.





**Revenue
      Recognition**





We
      recognize revenue when earned in
      accordance with the applicable accounting literature including:  EITF
      No. 00-21, “Revenue Arrangements With Multiple Deliverables”, Statement of
      Position 97-2, “Software Revenue Recognition”, and Staff Accounting Bulletin No.
      101, “Revenue Recognition in Financial Statements”, as amended by Staff
      Accounting Bulletin No. 104, “Revenue Recognition in Financial
      Statements”.  Revenue is recognized when the following criteria are
      met:  there is persuasive evidence that an arrangement exists,
      delivery has occurred and all obligations under such arrangement have been
      fulfilled, the price is fixed and determinable and collectibility is reasonably
      assured.





Initial
      sale proceeds received under
      multiple-element sales arrangements that require us to deliver products and
      services over a period of time and which are not determined by us to meet
      certain criteria are deferred.  All REDIview and VMI sales proceeds
      related to delivered products are deferred and recognized over the contract
      life
      that typically ranges from one to five years.   Product sales
      proceeds recognized under this method are portrayed in the accompanying
      Consolidated Statement of Operations as “Ratable product revenues.” The related
      deferred revenue is classified as a current and long term liability in the
      Consolidated Balance Sheets under the captions “Deferred product revenues –
current portion” and “Deferred product revenues non-current
      portion.”  If the customer relationship is terminated prior to the end
      of the customer contract term, such deferred sales proceeds are recognized
      as
      revenue in the period of termination.  Under sales arrangements, which
      initially meet the earnings criteria described above, revenues are recognized
      upon shipment of the products or upon customer acceptance of the delivered
      products if terms of the sales arrangement give the customer the right of
      acceptance.





Service
      revenue generally commences
      upon product installation and customer acceptance and is billed and recognized
      during the period such services are provided.





We
      provide lease financing to certain customers of our REDIview and VMI
      products.  Leases under these arrangements are classified as
      sales-type leases or operating leases.  These leases typically have
      terms of one to five years, and all sales type leases are discounted at interest
      rates ranging from 14% to 18% depending on the customer’s credit
      risk.  The net present value of the lease payments for sales-type
      leases is recognized as product revenue and deferred under our revenue
      recognition policy described above.  Income from operating leases is
      recognized ratably over the term of the leases.




F-13


**Shipping
      and Handling Fees and Costs**




We
      record
      amounts billed to customers for shipping and handling and related costs incurred
      for shipping and handling as components of “Product revenues” and “Cost of
      product revenues” respectively.




**Deferred
      Product Costs**




We
      defer
      certain product costs (generally consisting of the direct cost of product sold
      and installation costs) for our sales contracts determined to require deferral
      accounting.  The deferred costs are classified as a current and long
      term asset on the balance sheet under the captions “Deferred product costs –
current portion” and “Deferred product costs non-current
      portion”.  Such costs are recognized over the longer of the term of
      the service contract or the estimated life of the customer relationship and
      are
      portrayed in the accompanying Consolidated Statements of Operations as “Ratable
      product costs.”  Such terms range from one to five
      years.  If the customer relationship is terminated prior to the end of
      the estimated customer relationship period, such costs are recognized in the
      period of termination.




**Financial
      Instruments**




We
      consider all liquid interest-bearing investments with a maturity of ninety
      days
      or less at the date of purchase to be cash equivalents.  Short-term
      investments mature between ninety days and one year from the purchase
      date.




The
      carrying amount of cash and cash equivalents, accounts receivable, notes
      payable, accounts payable and accrued liabilities approximates fair value
      because of their short-term maturity.




**Allowance
      for Doubtful Accounts**




We
      use
      estimates in determining the allowance for doubtful accounts based on historic
      collection experience, current trends and a percentage of the accounts
      receivable aging categories. In determining these percentages we review
      historical write-offs, including comparisons of write-offs to provisions for
      doubtful accounts and as a percentage of revenues and monitor collections
      amounts and statistics.




December
                          31,2006
                      
                      
                      2005Beginning
                          balance
                      
                      $
                      -
                      
                      
                      $
                      -Additions
                      
                      
                      72
                      
                      
                      
                      -Deductions
                      
                      
                      (5
                      )
                      
                      
                      -Ending
                          balance
                      
                      $
                      67
                      
                      
                      $
                      -




**Business
      and Credit Concentrations**




We
      continuously monitor collections and payments from our customers and maintain
      a
      provision for estimated accounts receivable that may eventually become
      uncollectible based upon historical experience and specific customer
      information.  There is no guarantee that we will continue to
      experience the same credit loss history in future periods.  If a
      significant change in the liquidity or financial condition of a large customer
      or group of customers were to occur, it could have a material adverse affect
      on
      the collectibility of our accounts receivable and future operating
      results.





F-14




**Inventories**




Inventories
      consist primarily of component parts and finished products that are valued
      at
      the lower of cost or market. Cost is determined using the first-in, first-out
      (FIFO) method.  The Company records a write-down for excess and
      obsolete inventory based on usage history and specific identification
      criteria.  There is a risk we will forecast demand for our products
      and market conditions incorrectly and maintain excess
      inventories.  Therefore, there can be no assurance that we will not
      maintain excess inventory and incur inventory lower or cost or market charges
      in
      the future.






**Property
      and Equipment**




Property
      and equipment is stated at
      cost and depreciated on a straight-line basis over the estimated useful lives
      of
      the various classes of assets, which generally ranged from two to seven
      years.  After the reverse merger transaction and the associated
      purchase accounting, the new fair value of Remote Dynamic’s property and
      equipment is being depreciated on a straight-line basis over the estimated
      applicable remaining useful lives which generally ranged from one to five
      years.    Maintenance and repairs costs are expensed as
      incurred.




**Research
      and Development Costs**




We
      expense research and development costs as incurred.  During the fiscal
      years ended December 31, 2006 and 2005, we did not incur any research and
      development costs






**Valuation
      of Long-Lived Assets**




We
      evaluate the recoverability of our long-lived assets under Statement of
      Financial Accounting Standards No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets” (“SFAS 144”).  SFAS 144 requires us to
      review for impairment of our long-lived assets, whenever events or changes
      in
      circumstances indicate that the carrying amount of an asset might not be
      recoverable and exceeds its fair value.  Impairment evaluations
      involve our estimates of asset useful lives and future cash
      flows.  When such an event occurs, we estimate the future cash flows
      expected to result from the use of the asset and its eventual
      disposition.  If the undiscounted expected future cash flows are less
      than the carrying amount of the asset and the carrying amount of the asset
      exceeds its fair value, an impairment loss is recognized.  We utilize
      an expected present value technique, in which multiple cash flow scenarios
      that
      reflect the range of possible outcomes and a risk-free rate are used, to
      estimate fair value of the asset.




We
      assess
      the impairment in value to our long-lived assets whenever events or
      circumstances indicate that the carrying value may not be
      recoverable.  Significant factors, which would trigger an impairment
      review, include the following:




·
            significant
                negative industry trends,


·
            significant
                changes in technology,


·
            significant
                underutilization of the asset, and


***·***
            significant
                changes in how the asset is used or is planned to be
                used.





**Goodwill
      and Other Intangibles**





We
      test
      our goodwill for impairment on an annual basis, or between annual tests if
      it is
      determined that a significant event or change in circumstances warrants such
      testing, in accordance with the provisions of SFAS  No. 142, “Goodwill
      and Other Intangible Assets”, (“SFAS 142”) which requires a comparison of the
      carrying value of goodwill  to the fair value of the reporting
      unit.   If the fair value of the reporting unit is less than the
      carrying value of goodwill, an adjustment to the carrying value of goodwill
      is
      required.  See Note 1 and Note 5 for further discussion on goodwill
      and other intangible assets impairment.






**Income
      Taxes**




Deferred
      income taxes are calculated using an asset and liability approach wherein
      deferred taxes are provided for the tax effects of basis differences for assets
      and liabilities arising from differing treatments for financial and income
      tax
      reporting purposes. A valuation allowance is recognized if, based on the weight
      of available evidence, it is more likely than not that some portion or all
      of
      the deferred tax asset will not be realized.




F-15


**Restricted
      Stock**




On
      July
      2, 2004, Remote Dynamics adopted the Restated 2004 Management Incentive Plan
      (the “Incentive Plan”).  The Incentive Plan allows for the issuance of
      up to 700,000 restricted shares of common stock to management.  As of
      December 31, 2006, 565,000 shares of restricted stock had been issued to certain
      members of the senior management and 220,000 shares of restricted stock were
      retired.  These restricted shares are accounted for in accordance with
      variable plan accounting, which requires that the fair value of the shares
      be
      measured and charged to the income statement upon determination that the
      fulfillment of the performance criteria has been met or is
      probable.  We did not incur any expense associated with these
      restricted shares during the fiscal years ended December 31, 2006 and
      2005.




**Stock-Based
      Compensation**






In
      December of 2004, the Financial Accounting Standards Board (“FASB”) issued FAS
      123R, which applies to transactions in which an entity exchanges its equity
      instruments for goods or services and also applies to liabilities an entity
      may
      incur for goods or services that are based on the fair value of those equity
      instruments.  For any unvested portion of previously issued and
      outstanding awards, compensation expense is required to be recorded based on
      the
      previously disclosed FAS 123 methodology and amounts.  Prior periods
      presented are not required to by restated.  We adopted FAS 123R as of
      January 1, 2006 and applied the standard using the modified prospective
      method.  Remote Dynamics extinguished all prior stock options upon
      emergence from bankruptcy effective July 2, 2004 and have not issued any new
      stock options beyond that date.  As discussed above, we have issued
      restricted stock to certain members of senior management which have either
      been
      issued or retired as of December 31, 2006.   We did not incur any
      expense associated with these restricted shares during the fiscal years ended
      December 31, 2006 and 2005.




**Earnings
      Per Share**




We
      compute earnings per share in accordance SFAS No. 128, “Earnings Per
      Share.”  Net loss per basic share was computed by dividing net loss by
      the weighted average number of shares outstanding during the respective
      periods.  Diluted earnings per share is computed using the “Treasury
      Stock Method.”  The Company’s potentially dilutive
      securities**have been excluded from the weighted average number of
      shares outstanding, since their effect would be anti-dilutive.




The
      securities listed below were not included in the computation of diluted earnings
      per share as the effect from their conversion would have been
      antidilutive:




For
                        the Years Ended
                      December
                        31,2006
                    
                    
                    2005Restricted
                        stock ( not vested)
                    
                    
                    -
                    
                    
                    
                    565,000Convertible
                        notes payable
                    
                    
                    447,601,913
                    
                    
                    
                    649,351Convertible
                        preferred stock
                    
                    
                    839,769,254
                    
                    
                    
                    3,870,968Outstanding
                        warrants to purchase common stock
                    
                    
                    289,372,006
                    
                    
                    
                    4,366,667






Stock
      warrants issued and outstanding total 289,372,006 at December 31, 2006 with
      an
      average exercise price of $0.0611 per share.





**New
      Accounting Standards**






***Accounting
      Changes and Error Corrections.***In May 2005, the
      FASB issued FASB Statement No. 154, "Accounting Changes and Error Corrections."
      This new standard replaces APB Opinion No. 20, "Accounting Changes, and FASB
      Statement No. 3, Reporting Accounting Changes in Interim Financial Statements,"
      and represents another step in the FASB's goal to converge its standards with
      those issued by the IASB. Among other changes, Statement 154 requires that
      a
      voluntary change in accounting principle be applied retrospectively with all
      prior period financial statements presented on the new accounting principle,
      unless it is impracticable to do so. Statement 154 also provides that (1) a
      change in method of depreciating or amortizing a long-lived non-financial asset
      be accounted for as a change in estimate (prospectively) that was effected
      by a
      change in accounting principle, and (2) correction of errors in previously
      issued financial statements should be termed a "restatement." The new standard
      is effective for accounting changes and correction of errors made in fiscal
      years beginning after December 15, 2005. Early adoption of this standard is
      permitted for accounting changes and correction of errors made in fiscal years
      beginning after June 1, 2005 . The adoption of this statement in 2006 did not
      have a material impact on the Company’s consolidated financial position or
      results of operations.




F-16


***Accounting
      for Certain Hybrid Financial Instrument***.  In February
      2006, the FASB issued FASB Statement No. 155, “Accounting for Certain Hybrid
      Financial Instruments,” an amendment of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”) and
      Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing
      of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”). With
      respect to SFAS 133, SFAS 155 simplifies accounting for certain hybrid financial
      instruments by permitting fair value remeasurement for any hybrid financial
      instrument that contains an embedded derivative that otherwise would require
      bifurcation and eliminates the interim guidance in Statement 133 Implementation
      Issue No. D1, “Application of Statement 133 to Beneficial Interests in
      Securitized Financial Assets,” which provided that beneficial interests in
      securitized financial assets are not subject to the provision of SFAS 133.
      With
      respect to SFAS 140, SFAS 155 eliminates a restriction on the passive derivative
      instruments that a qualifying special-purpose entity may hold. SFAS 155 is
      effective for all financial instruments acquired or issued after the beginning
      of an entity’s first fiscal year that begins after September 15, 2006. We do not
      expect the adoption of SFAS 155 to significantly affect our financial condition
      or results of operations.




***Accounting
      for Uncertainty in Income Taxes.***In June 2006, the FASB
      issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,
      an interpretation of FASB Statement No. 109,” (“FIN 48”). The
      interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. It also provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. The Company is currently evaluating the
      impact of FIN 48 on its consolidated results of operations and financial
      position but has not yet determined or reasonably estimated the impact as of
      December 31, 2006. The Company is required to adopt this interpretation
      effective January 1, 2007.




***Accounting
      for Servicing of Financial Assets.***In March 2006, the
      FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets -
      an amendment of FASB Statement No. 140” (“SFAS No. 156”). This
      Statement amends SFAS No. 140, “Accounting for Transfers and Servicing of
      Financial Assets and Extinguishments of Liabilities,” with respect to the
      accounting for separately recognized servicing assets and servicing liabilities.
      SFAS No. 156 requires that an entity recognize a servicing asset or
      servicing liability each time it undertakes an obligation to service a financial
      asset by entering into a servicing contract and that the separately recognized
      servicing asset or servicing liability be initially measured at fair value,
      if
      practicable. This Statement is effective as of the beginning of the first fiscal
      year that begins after September 15, 2006. The adoption of this statement
      in 2007 is not expected to have a material impact on the Company’s consolidated
      financial position or results of operations.




***Fair
      Value Measurements.***In September 2006, the FASB issued
      SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). This
      statement defines fair value, establishes a framework for measuring fair value
      in U.S. GAAP and expands disclosures about fair value measurements. This
      statement does not require any new fair value measurements. The effective date
      of this statement is for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. The Company is currently
      evaluating the impact, if any, of the adoption of SFAS
      No. 157.




***Employers’
      Accounting for Defined Benefit Pension and Other Postretirement
      Plans.***In September 2006, the FASB issued SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans an Amendment of FASB Statements No. 87, 88, 106 and
      132(R).”  This statement improves financial reporting by requiring an
      employer to recognize the over-funded or under-funded status of a defined
      benefit postretirement plan (other than a multiemployer plan) as an asset or
      liability in its statement of financial position and to recognize changes in
      that funded status in the year in which the changes occur through comprehensive
      income of a business entity of changes in unrestricted net assets of a
      not-for-profit organization.  The adoption of SFAS No. 158 did not
      have an impact on the Company’s consolidated financial statements.






F-17


***Considering
        the Effects of Prior Year Misstatements When Quantifying Current Year
        Misstatements.***In September 2006, the Securities and
        Exchange Commission, or the SEC, released Staff Accounting Bulletin, or SAB,
        No. 108, *Considering the Effects of Prior Year Misstatements When
        Quantifying Current Year Misstatements*, or SAB No. 108, to
        address diversity in practice regarding consideration of the effects of prior
        year errors when quantifying misstatements in current year financial statements.
        The SEC staff concluded that registrants should quantify financial statement
        errors using both a balance sheet approach and an income statement approach
        and
        evaluate whether either approach results in quantifying a misstatement that,
        when all relevant quantitative and qualitative factors are considered, is
        material. SAB No. 108 states that if correcting an error in the
        current year materially affects the current year’s income statement, the prior
        period financial statements must be restated. SAB No. 108 is effective
        for fiscal years ending after November 15, 2006. The adoption of
        SAB No. 108 in the fourth quarter of 2006 did not have a material
        impact on our consolidated financial statements.





***The
        Fair Value Option for Financial Assets and Financial
        Liabilities.***In February 2007, the FASB issued
        SFAS No. 159, *The Fair Value Option for Financial Assets and
        Financial Liabilities*, or SFAS No. 159. SFAS No. 159
        permits entities to choose to measure many financial instruments and certain
        other items at fair value. The objective of the guidance is to improve financial
        reporting by providing entities with the opportunity to mitigate volatility
        in
        reported earnings caused by measuring related assets and liabilities differently
        without having to apply complex hedge accounting provisions.
        SFAS No. 159 is effective as of the beginning of the first fiscal year
        that begins after November 15, 2007. Early adoption is permitted as of the
        beginning of the fiscal year beginning on or before November 15, 2007,
        provided the provisions of SFAS No. 157 are applied. We will adopt
        SFAS No. 159 on January 1, 2008. We are evaluating
        SFAS No. 159 and have not yet determined the impact the adoption, if
        any, will have on our consolidated financial statements.





**3.**
            **INVENTORIES**





Inventories
      consist of the following (in thousands):




December
                            31,2006
                        
                        
                        2005Complete
                            systems
                        
                        $
                        205
                        
                        
                        $
                        -Component
                            parts
                        
                        
                        194
                        
                        
                        
                        -Reserve
                            for obsolescence - systems
                        
                        
                        (65
                        )Reserve
                            for obsolescence - parts
                        
                        
                        (47
                        )$
                        287
                        
                        
                        $
                        -


**4.**
            **PROPERTY
                AND EQUIPMENT**





Property
      and equipment consist of the following (in thousands):




December
                            31,2006
                        
                        
                        2005Machinery
                            and equipment
                        
                        $
                        2
                        
                        $
                        -Capitalized
                            software costs
                        
                        
                        62
                        
                        
                        -Leasehold
                            improvements
                        
                        
                        -
                        
                        
                        -Vehicles,
                            computer equipment, and other equipment
                        
                        
                        419
                        
                        
                        
                        66483
                        
                        
                        
                        66Less:  accumulated
                            depreciation and amortization
                        
                        
                        (112
                        )
                        
                        
                        (37
                        )$
                        371
                        
                        
                        $
                        29




Total
      depreciation and amortization
      expense related to property and equipment charged to operations during the
      year
      ended December 31, 2006 and 2005 was $114,000 and $20,000,
      respectively.




F-18




**5.**
            **GOODWILL
                AND OTHER INTANGIBLE
                ASSETS**




Goodwill
      and other intangible assets consist of the following as of December 31, 2006
      and
      2005 (in thousands):





RemainingBalance
                      at
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  Balance
                      at
                  
                  
                  AmortizationDecember
                      31,
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  December
                      31,
                  
                  
                  Period2005
                  
                  
                  Addition
                  
                  
                  Amortization
                  
                  
                  Impairment
                  
                  
                  2006
                  
                  
                  (in
                      months)Goodwill
                  
                  $
                  -
                  
                  
                  $
                  977
                  
                  
                  $
                  -
                  
                  
                  $
                  (361
                  )
                  
                  $
                  616
                  
                  
                  
                  n/aOther
                      intangibles:Customer
                      lists
                  
                  
                  -
                  
                  
                  
                  2,810
                  
                  
                  
                  (46
                  )
                  
                  
                  (50
                  )
                  
                  
                  2,714
                  
                  
                  
                  59VMI
                      License Right
                  
                  
                  -
                  
                  
                  
                  66
                  
                  
                  
                  (9
                  )
                  
                  
                  
                  
                  
                  
                  57
                  
                  
                  
                  6Software
                  
                  
                  -
                  
                  
                  
                  860
                  
                  
                  
                  (14
                  )
                  
                  
                  
                  
                  
                  
                  846
                  
                  
                  
                  59Tradenames
                  
                  
                  -
                  
                  
                  
                  75
                  
                  
                  
                  (1
                  )
                  
                  
                  
                  
                  
                  
                  74
                  
                  
                  
                  59





Total
      amortization expense for the other intangible assets for the year ended December
      31, 2006 and 2005 was approximately $70,000 and $0, respectively.  See
      Note for further discussion.





**6.**
            **LEASE
                RECEIVABLES AND OTHER
                ASSETS**





We
      provide lease financing to certain customers of our REDIview and VMI
      products.  Leases under these arrangements are classified as
      sales-type leases or operating leases.  These leases typically have
      terms of one to five years, and all sales type leases are discounted at interest
      rates ranging from 14% to 18% depending on the customer’s credit
      risk.




The
        net present value of the lease
        payments for sales-type leases is recognized as product revenue and deferred
        under the Company’s revenue recognition policy.   The components
        of the net investment in sales-type leases are as follows (in
        thousands):


December
                                    31,2006
                                
                                
                                2005Minimum
                                    lease payments receivable
                                
                                $
                                661
                                
                                
                                $
                                -Less:  Allowance
                                    for uncollectibles
                                
                                
                                (88
                                )
                                
                                
                                -573
                                
                                
                                
                                -Less:  Unearned
                                    interest income
                                
                                
                                (108
                                )
                                
                                
                                -Net
                                    investment in sales-type leases
                                
                                $
                                465
                                
                                
                                $
                                -


The
      long term portion
      of the net investment in sales-type leases at December 31, 2006 and 2005 was
      $442,000 and $-0-, respectively.




Total
      minimum lease payments receivable on sales-type leases at December 31, 2006
      are
      as follows (in thousands):




Fiscal
                      Year Ending December 31,
                  
                  2006
                  
                  
                  20052007
                  
                  $
                  359
                  
                  
                  $
                  -2008
                  
                  
                  229
                  
                  
                  
                  -2009
                  
                  
                  74
                  
                  
                  
                  -Total
                      minimum lease payments receivable
                  
                  $
                  661
                  
                  
                  $
                  -




Income
      from operating leases is recognized ratably over the term of the leases. Total
      future minimum rental payments due under operating leases as of December 31,
      2006 are as follows (in thousands):




Fiscal
                                    Year Ending December 31,
                                
                                2006
                                
                                
                                20052007
                                
                                $
                                12
                                
                                
                                $
                                -2008
                                
                                
                                -
                                
                                
                                
                                -2009
                                
                                
                                -
                                
                                
                                
                                -Total
                                    minimum rental payments
                                
                                $
                                12
                                
                                
                                $
                                -
  F-19


**7.**
            **ACCRUED
                EXPENSES AND OTHER CURRENT
                LIABILITIES**





Accrued
      expenses and other current liabilities consist of the following (in
      thousands):




December
                                31,2006
                            
                            
                            2005Capital
                                leases - current portion
                            
                            $
                            133
                            
                            
                            $
                            -Property,
                                franchise, and other taxes payable
                            
                            
                            172
                            
                            
                            
                            -Accrued
                                warranty costs
                            
                            
                            127
                            
                            
                            
                            -Accrued
                                vacation
                            
                            
                            67
                            
                            
                            
                            -Legal,
                                accounting, interest and other accruals
                            
                            
                            1,221
                            
                            
                            
                            60$
                            1,720
                            
                            
                            $
                            60


**8.**
            **NOTES
                PAYABLE**





**DataLogic
      Note Payable**




On
      June 30, 2006, BounceGPS issued a
      $250,000 note to DataLogic International, Inc. in conjunction with the
      acquisition described in Note 1.  The note has a term of 2 years with
      an annual interest rate of 9%.  Principal payments of $31,250 were
      scheduled to commence October 1, 2006 and quarterly
      thereafter.  Interest is payable quarterly.  BounceGPS is
      currently in default as principal and interest payments have not been made
      in
      accordance with the note agreement.  The Company has accrued $21,551
      of interest expense as of December 31, 2006.  The $250,000 principal
      balance has been classified as current on the accompanying consolidated balance
      sheet due to the default mentioned above.   Keith Moore, Director
      and Audit Committee Chair of the Company, is the CEO and Chairman of DataLogic
      International, Inc.  See Note 12 for further discussion on related
      party transactions.




**HFS
      Note Payable**






In
      2004, Remote Dynamics issued a
      $2,000,000 convertible promissory note to HFS Minorplanet Funding LLC
      (“HFS”).   The principal balance is due 36 months from the date
      of funding, with an annual interest rate of 12%.  HFS may at any time
      demand repayment of the accrued interest and unpaid principal on the note,
      based
      upon a fixed conversion price (currently $3.08 per share of common stock),
      whose
      aggregate value equals the amount of accrued interest and principal being
      repaid.






As
      described in Note 1, as part of the purchase accounting for the reverse merger
      transaction, the, debt was adjusted to fair value.  Accordingly, the
      difference between the estimated fair value of $150,000 and the face amount
      of
      the note payable totaling $2,000,000 is recorded as a debt
      discount.  The debt discount is being accreted to interest expense
      over the remainder of the term of the note.




On
      November 30, 2006, Remote Dynamics entered into a new promissory note with
      HFS
      pursuant to which, on December 1, 2007 (a) the existing $2,000,000 convertible
      promissory note issued by to HFS will be cancelled on December 1, 2007 and
      (b)
      Remote Dynamics will issue to HFS (i) $1,000,000 principal amount of our series
      B subordinated secured convertible promissory notes, (ii) $400,000 principal
      amount of our original issue discount series B subordinated secured convertible
      promissory notes, (iii) our series E-7 warrants to purchase 46,875,000 shares
      of
      our common stock and (iv) our series F-4 warrants to purchase
      46,875,000  shares of our common stock.





F-20


The
      following table summarizes the HFS Note Payable as of December 31, 2006 (
      000’s):




Less
                        
                        
                        CarryingPrincipal
                        
                        
                        Discount
                        
                        
                        AmountTotal
                            HFS Note - On reverse merger date of December 4, 2006
                        
                        $
                        2,000
                        
                        
                        $
                        1,850
                        
                        
                        $
                        150Accretion
                            of HFS Note from December 4, 2006 to December 31, 2006
                        
                        
                        -
                        
                        
                        
                        (134
                        )
                        
                        
                        134Total
                            HFS Note Payable - December 31, 2006
                        
                        $
                        2,000
                        
                        
                        $
                        1,716
                        
                        
                        $
                        284





***Series
      A Note
      Financing***





On
      February 24, 2006, Remote Dynamics closed a Note and Warrant Purchase Agreement
      with certain institutional investors pursuant to which Remote Dynamics sold
      $5.75 million of its series A senior secured convertible notes and original
      issue discount series A notes (collectively, “Series A Notes”) in a private
      placement transaction.   In the private placement, Remote
      Dynamics received proceeds of approximately $4.1 million in cash (after
      deducting brokers’ commission but before payment of legal and other professional
      fees, the 15% original issue discount of $750,000 and the tendering of 50 shares
      of their 650 shares Series B preferred convertible stock with an aggregate
      face
      value of $500,000 by our sole series B preferred convertible
      stockholder).




The
      Series A Notes are secured by substantially all of the Company’s assets. The
      Series A Notes mature 24 months from issuance and are convertible at the option
      of the holder into our common stock at a fixed conversion price of $0.20 per
      share (which adjusted to $0.016 per share upon the issuance of series B
      subordinated secured convertible notes discussed below).  Beginning on
      September 1, 2006 and continuing thereafter on the first business day of each
      month, Remote Dynamics must pay an amount to each holder of a Series A Note
      equal to 1/18th of the original principal payment of the note; provided, that
      if
      on any principal payment date the outstanding principal amount of the note
      is
      less than such principal installment amount, then Remote Dynamics must pay
      to
      the holder of the note the lesser amount. Remote Dynamics may make such
      principal installment amounts in cash or in registered shares of its common
      stock. If paid in common stock, certain conditions must be satisfied, and the
      number of registered shares to be paid to the holder must be an amount equal
      to
      the principal installment amount divided by eighty percent (80%) of the average
      of the closing bid price for the ten (10) trading days immediately preceding
      the
      principal payment date.




The
      purchasers of the Series A Notes (and the placement agent in the transaction)
      received the following common stock purchase warrants:





·
            Series A-7
                warrants to purchase 20,625,000 million shares in the aggregate of
                common stock at an initial exercise price of $0.40 per share subject
                to
                adjustment for stock splits and combinations, certain dividends and
                distributions, reclassification, exchange or substitution, reorganization,
                merger, consolidation or sales of assets; issuances of additional
                shares
                of common stock, and issuances of common stock equivalents.  The
                exercise price of the series A-7 warrants adjusted to $0.016 per
                share
                upon the issuance of the Company’s series B subordinated secured
                convertible notes as discussed below.  The series A-7 warrants
                can be exercised on a cashless basis beginning one year after issuance
                if
                (i) the per share market value of a share of our common stock (either
                the
                volume the weighted average price or the fair market value as determined
                by an independent appraiser) is greater than the warrant price; and
                (ii) a
                registration statement for the warrant stock is not then in
                effect.  The series A-7 warrants are exercisable for a
                seven-year period from the date of issuance.  1.9 million of
                these warrants are exercisable over 5
                years.





·
            Series B-4
                warrants to purchase 13,750,000 million shares in the aggregate of
                common stock at an initial exercise price of $0.90 per share subject
                to
                adjustment for stock splits and combinations, certain dividends and
                distributions, reclassification, exchange or substitution, reorganization,
                merger, consolidation or sales of assets; issuances of additional
                shares
                of common stock, and issuances of common stock equivalents.  The
                exercise price of the series B-4 warrants adjusted to $0.016 per
                share
                upon the issuance of the Company’s series B subordinated secured
                convertible notes as discussed below. The series B-4 warrants can
                be
                exercised on a cashless basis beginning one year after issuance if
                (i) the
                per share market value of a share of our common stock (either the
                volume
                the weighted average price or the fair market value as determined
                by an
                independent appraiser) is greater than the warrant price; and (ii)
                a
                registration statement for the warrant stock is not then in effect.
                The
                series B-4 warrants are exercisable for a four-year period beginning
                on
                the date a resale registration statement for the shares underlying
                the
                warrants is declared effective by the Securities and Exchange
                Commission.  1.3 million of these warrants are exercisable over
                5 years.





F-21


·
            Series C-3
                warrants to purchase 27,500,000 million shares in the aggregate of
                common stock at an initial exercise price of $0.21 per share subject
                to
                adjustment for stock splits and combinations, certain dividends and
                distributions, reclassification, exchange or substitution, reorganization,
                merger, consolidation or sales of assets; issuances of additional
                shares
                of common stock, and issuances of common stock equivalents.  The
                exercise price of the series C-3 warrants adjusted to $0.016 per
                share
                upon the issuance of our series B subordinated secured convertible
                notes
                as discussed below. The series C-3 warrants can be exercised on a
                cashless
                basis beginning one year after issuance if (i) the per share market
                value
                of a share of our common stock (either the volume the weighted average
                price or the fair market value as determined by an independent appraiser)
                is greater than the warrant price; and (ii) a registration statement
                for
                the warrant stock is not then in effect.  The series C-3
                warrants are exercisable for a three-year period from the date of
                issuance.  2.5 million of these warrants are exercisable over 5
                years.





**·**
            Series
                D-1 warrants (callable only at our option) to purchase 19,250,000
                shares
                in the aggregate of common stock at an exercise price per share equal
                to
                the lesser of: (a) $0.35 and (b) 90% of the average of the 5 day
                volume weighted average price of our common stock on the OTC Bulletin
                Board preceding the call notice, as defined in the
                warrant.





**·**
            Warrants
                issued to the placement agents in the financing to purchase 2.5 million
                shares of  common stock at an exercise price per share equal to
                $0.20 with a term of 5 years following the
                closing.





Under
      the Series A Note and Warrant
      Purchase Agreement, Remote Dynamics made certain covenants to the investors,
      including, as long as any notes or warrants remain outstanding, to
      have  authorized and reserved for issuance 120% of the aggregate
      number of shares of the Company’s common stock needed for issuance upon
      conversion of the notes and exercise of the warrants. The Company also agreed
      to
      prepare and file resale registration statements with the SEC for the shares
      of
      common stock underlying the notes and warrants. If the registration statements
      are not filed or declared effective within specified time frames or the Company
      fails to meet other specified deadlines, the investors are entitled to monetary
      liquidated damages equal to 1.5% of the total amount invested by such investor
      in the private placement, plus an additional 1.5% liquidated damages for each
      30-day period thereafter. The Company is obligated to maintain the effectiveness
      of the registration statements until the earlier of (a) the date when the
      underlying securities have been sold or (b) the date on which the underlying
      shares of common stock can be sold without restriction under Rule
      144(k).




The
      Company currently is not in compliance with certain of its obligations relating
      to the Series A Notes, including its failure to maintain sufficient authorized
      shares to permit conversion of the notes and related warrants and its failure
      to
      register the resale of the shares of common stock issuable upon conversion
      of
      the notes and related warrants.  The Company has obtained waivers of
      compliance of these obligations from certain of the note holders. Although
      no
      note holder has sent the Company a notice of acceleration of amounts owed under
      the secured convertible notes, there can be no assurance that the note holders
      will not take such action in the future.  In the event of any acceleration
      of these obligations, or if the Company is unable to raise enough money to
      cover
      the amounts payable, it may be forced to restructure, file for bankruptcy,
      sell
      assets or cease operations.  The Company has accrued $302,000 for
      liquidated damages as of December 31, 2006.





F-22


The
      following table summarizes the Series A Notes as of December 31, 2006
      (000’s):





Less
                                  
                                  
                                  CarryingPrincipal
                                  
                                  
                                  Discount
                                  
                                  
                                  AmountTotal
                                      Series A Notes - On reverse merger date of
                                      December 4,
                                      2006
                                  
                                  $
                                  5,111
                                  
                                  
                                  $
                                  3,911
                                  
                                  
                                  $
                                  1,200Exchange
                                      of Series A Notes for Series B Notes
                                  
                                  
                                  (676
                                  )
                                  
                                  
                                  (517
                                  )
                                  
                                  
                                  (159
                                  )Accretion
                                      of Series A Notes from December 4, 2006 to
                                      December 31,
                                      2006
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (201
                                  )
                                  
                                  
                                  201Total
                                      Series A Notes - December 31, 2006
                                  
                                  $
                                  4,435
                                  
                                  
                                  $
                                  3,193
                                  
                                  
                                  $
                                  1,242


***Series
      B Note
      Financing***





On
      November 30, 2006, Remote Dynamics entered into a Note and Warrant Purchase
      Agreement with BMSI and other accredited investors.  Pursuant to the
      Note and Warrant Purchase Agreement, Remote Dynamics will receive up to
      $1,754,000 in gross proceeds (of which BMSI has committed to provide $1,200,000)
      from the sale of up to (i) $1,754,000 principal amount of its series B
      subordinated secured convertible promissory notes (“Series B Notes’), (ii)
      $701,600 principal amount of its original issue discount series B subordinated
      secured convertible promissory notes (“Series B OID Notes”), (iii) its series
      E-7 warrants (“E-7 Warrants”) to purchase 82,218,750 shares of the Company’s
      common stock and (iv) its series F-4 warrants (“F-4 Warrants”) to purchase
      82,218,750  shares of the Company’s common stock.





·
            The
                Series B Notes and the Series B OID Notes are secured by all of the
                Company’s assets, subject to existing liens, are due December 4, 2009 and
                begin amortization of principal (in nine quarterly installments)
                on August
                1, 2007.  The Company may make principal installment payments in
                cash or in registered shares of its common stock. If paid in common
                stock,
                certain conditions must be satisfied, and the number of registered
                shares
                to be paid to the holder must be an amount equal to the principal
                installment amount divided by the greater of (i) $0.02 and (ii) 90%
                of the
                average of the volume weighted average trading prices of the common
                stock
                for the ten trading days immediately preceding the principal
                payment.  The Series B Notes and Series B OID Notes are
                convertible into the Company’s common stock at an initial conversion price
                of $0.016 per share, subject to reduction if the Company fails to
                achieve
                specified financial and operating milestones and subject to adjustment
                for
                stock splits and combinations, certain dividends and distributions,
                reclassification, exchange or substitution, reorganization, merger,
                consolidation or sales of assets; issuances of additional shares
                of common
                stock, and issuances of common stock
                equivalents.





·
            The
                E-7 Warrants have an exercise price of $0.02 per share, subject to
                adjustment for stock splits and combinations, certain dividends and
                distributions, reclassification, exchange or substitution, reorganization,
                merger, consolidation or sales of assets; issuances of additional
                shares
                of common stock, and issuances of common stock equivalents.  The
                E-7 Warrants are exercisable for a seven-year period from the date
                of
                issuance.





·
            The
                F-4 Warrants have an exercise price of $0.03 per share, subject to
                adjustment for stock splits and combinations, certain dividends and
                distributions, reclassification, exchange or substitution, reorganization,
                merger, consolidation or sales of assets; issuances of additional
                shares
                of common stock, and issuances of common stock equivalents. The F-4
                Warrants are exercisable for a four-year period beginning on the
                date a
                resale registration statement for the shares underlying the warrants
                is
                declared effective by the Securities and Exchange
                Commission.




The
      Series B
      Note financing  is structured to occur in four closings, each
      providing $438,500 in gross proceeds to us.  The first closing
      occurred on December 4, 2006.  The second closing occurred on January
      10, 2007 after we filed a preliminary proxy statement on December 27, 2006
      with
      the Securities and Exchange Commission with respect to stockholder approval
      of
      an increase in the number of our authorized shares of common stock to
      575,000,000 and a one-for-fifty reverse stock split of our common
      stock.   The third closing occurred on March 26, 2007.The third round closing
      conditions of filing an amendment to our Certificate of Incorporation increasing
      the number of our authorized shares of common stock to 575,000,000 and a
      one-for-fifty reverse stock split of our common stock were both waived by BMSI
      and the other accredited investors.  The fourth closing will occur
      within five business days after the date that an initial resale registration
      statement for the shares underlying the notes and warrants issued in the private
      placement is declared effective by the Securities and Exchange
      Commission.  Each closing is subject to certain other conditions being
      satisfied, including (i) the Company’s representations and warranties in the
      agreement being true and correct in all material respects as of each closing
      date, (ii) the Company having performed, satisfied and complied in all material
      respects with all covenants, agreements and conditions required by the agreement
      to be performed, satisfied or complied with by us at or prior to each closing
      date, and (iii) no material adverse effect on the business, operations,
      properties, prospects, or financial condition of the Company and its
      subsidiaries having occurred.




F-23


Gross
      proceeds provided by the first closing totaled $438,500, accordingly, the
      Company issued (i) $438,500 principal amount of Series B Notes, (ii) $175,400
      principal amount of Series B OID Notes, (iii) E-7 Warrants to purchase
      20,554,688 shares of our common stock and (iv) F-4 Warrants to purchase 20,554,
      688 shares of our common stock.




As
      a result
      of the financing and pursuant to the terms of "most favored nations" rights
      granted to investors in the Company’s February 2006 private placement of the
      Series A Notes, the Company agreed to issue certain of our February 2006 private
      placement investors, in exchange for $1,013,755 principal amount of the Series
      A
      Notes, an additional (i) $1,146,755 principal amount of Series B Notes, (ii)
      $458,702 principal amount of Series B OID Notes, (iii) E-7 Warrants to purchase
      77,191,646 shares of the Company’s common stock and (iv) F-4 Warrants to
      purchase 77,191,646 shares of the Company’s common stock.  Remote
      Dynamics will receive no additional proceeds from the
      exchange.   Only a portion of the above exchanged notes occurred
      during the year ended December 31, 2006, with the remaining exchanges to occur
      over the second, third, and fourth closings.   As of December 31,
      2006,  Remote Dynamics had issued (i) $716,672 principal amount of
      Series B Notes, (ii) 286,669 principal amount of Series B OID Notes, (iii)
      E-7
      Warrants to purchase 33,594,000 shares of its common stock and (iv) F-4 Warrants
      to purchase 33,594,000 shares of its common stock, in exchange for $675,922
      principal amount of the Series A Notes.  In conjunction with the fair
      value adjustments required under purchase accounting, the $675,922 principal
      amount of Series A Notes were valued at $158,699.  Accordingly, the
      Company recorded a loss on extinguishment of debt totaling $557,973 during
      the
      year ended December 31, 2006.




In
      addition,
      the Company agreed to issue, in exchange for 50 shares of its Series B
      convertible preferred stock with an aggregate face value of $500,000 (held
      by
      SDS Capital Group SPC, Ltd. ) an additional (i) $500,000 principal amount of
      Series B Notes, (ii) $200,000 principal amount of Series B OID Notes, (iii)
      E-7
      Warrants to purchase 23,437,500 shares of the Company’s common stock and (iv)
      F-4 Warrants to purchase 23,437,500 shares of the Company’s common
      stock.   Only a portion of the exchange occurred during the year
      ended December 31, 2006, with the remaining exchanges to occur over the second
      and third closings.  As of December, 31, 2006, the Company had issued
      (i) $125,000 principal amount of Series B Notes, (ii) $50,000 principal amount
      of Series B OID Notes, (iii) E-7 Warrants to purchase 5,859,375 shares of its
      common stock and (iv) F-4 Warrants to purchase 5,859,375 shares of its common
      stock, in exchange for 12.5 shares of Series B convertible preferred
      stock.  In conjunction with the fair value adjustments required under
      purchase accounting, the 12.5 shares of Series B convertible preferred stock
      were valued at $3,970.  Accordingly, the Company recorded a loss on
      extinguishment of convertible preferred stock of $121,031 during the year ended
      December 31, 2006.




In
      connection
      with the private placement, the Company agreed to pay to the placement agent
      for
      the transaction consideration consisting of (a) a cash sales commission of
      $150,480  (b) warrants to purchase 16,443,750 shares of  the
      Company’s common stock, with each warrant having an exercise price of $0.016 per
      share and being exercisable for ten years, (c) E-7 Warrants to purchase
      12,332,813 shares of the Company’s common stock, and (d) F-4 Warrants to
      purchase 12,332,813 shares of the Company’s common stock.   The
      above fees are earned and to be paid over the four closings, accordingly only
      a
      portion of the placement agent fees were paid as of December 31,
      2006.   Fees paid as of December 31, 2006, included a cash sales
      commission of $48,870, warrants to purchase 4,110,936 shares of the Company’s
      common stock, E-7 Warrants to purchase 3,083,203 shares of the Company’s common
      stock, and F-4 Warrants to purchase 3,083,203 shares of the Company’s common
      stock.  The Company also agreed to pay $60,000 ($15,000 per closing)
      to Monarch Bay Management Company for consulting work as well as $59,816 in
      legal counsel fees as part of the private placement.  See Note 12 for
      discussion on related party transactions.




F-24


The
      issuance
      of the Series B Notes triggered anti-dilution adjustments to the conversion
      price of the Series A Notes and the exercise price of the common stock purchase
      warrants issued in connection with the Series A Notes as follows:  (a)
      the conversion price of the Series A Notes changed from $0.20 to $0.016 per
      share, (b) the exercise price of the Series A-7 warrants changed from $0.40
      to
      $0.016 per share, (c) the exercise price of the Series B-4 warrants changed
      from
      $0.90 to $0.016, and (d) the exercise price of our Series C-3 warrants changed
      from $0.21 to $0.016 per share. In addition, the transaction triggered an
      anti-dilution adjustment to certain warrants issued to SDS in September 2005
      in
      connection with the Series B preferred stock transaction, by changing the
      exercise price from $1.75 to $0.0966 per share and increasing the number of
      shares of common stock for which the warrants can be exercised from 700,000
      to
      12,683,191.




Under
      the terms of the Series B Note
      and Warrant Purchase Agreement, the Company has agreed to use its commercially
      reasonable efforts to obtain stockholder approval for an increase in the number
      of its authorized shares of common stock to at least 575,000,000 and a
      one-for-fifty reverse stock split of its common
      stock.    The Company also has agreed to prepare and file
      one or more resale registration statements with the SEC for the shares of common
      stock underlying the notes and warrants issued in the private placement.
      Specifically, the Company is obligated to (a) file an initial registration
      statement with the SEC on or before the earlier of (i) March 4, 2007 and (ii)
      the 30th day
      following the date the Company’s stockholders approve the increase in authorized
      shares and reverse stock split described above and (b) have the initial
      registration statement declared effective not later than the 60th day after
      the
      registration statement is filed (or 90 days if the registration statement
      receives a full review by the SEC). If the initial registration statement is
      not
      filed or declared effective within these time frames or the Company fails to
      meet other specified deadlines, the investors will be entitled to monetary
      liquidated damages equal to 1.5% of the total amount invested by such investor
      in the private placement, plus an additional 1.5% liquidated damages for each
      30-day period thereafter, up to a maximum liquidated damages amount of not
      more
      than 9% of the amount invested by each investor. The Company is obligated to
      maintain the effectiveness of the registration statements until the earlier
      of
      (a) the date when the underlying securities have been sold or (b) the date
      on
      which the underlying shares of common stock can be sold without restriction
      under Rule 144(k), or the effectiveness period.




The
      Company currently is not in compliance with certain of its obligations relating
      to the Series B Notes, including its failure to register the resale of the
      shares of common stock issuable upon conversion of the notes and related
      warrants.  Although no note holder has sent the Company a notice of
      acceleration of amounts owed under the  secured convertible notes,
      there can be no assurance that the note holders will not take such action in
      the
      future.  In the event of any acceleration of these obligations, or if the
      Company is unable to raise enough money to cover the amounts payable, it may
      be
      forced to restructure, file for bankruptcy, sell assets or cease
      operations.




***BounceGPS
      Acquisition***






On
      November 30, 2006, Remote Dynamics entered into a Share Exchange Agreement
      with
      BMSI.Pursuant to the
      Share Exchange Agreement, the Company agreed to acquire from BMSI 100% of the
      capital stock of BounceGPS, Inc., a provider of mobile asset management
      solutions.  As part of the consideration for the acquisition, the
      Company issued to BMSI a Series B Note in the principal amount of $660,000
      and a
      Series B OID Note in the principal amount of $264,000.  See Note 1 for
      a more detailed description of the acquisition




The
      following table summarizes the Series B Notes as of December 31, 2006
      (000’s):




Less
                          
                          
                          CarryingPrincipal
                          
                          
                          Discount
                          
                          
                          AmountTotal
                              Series B Notes - December 4, 2006
                          
                          $
                          2,716
                          
                          
                          $
                          1,048
                          
                          
                          $
                          1,668Accretion
                              of Series B Notes from December 4, 2006 to December
                              31,
                              2006
                          
                          
                          -
                          
                          
                          
                          (29
                          )
                          
                          
                          29Total
                              Series B Notes - December 31, 2006
                          
                          $
                          2,716
                          
                          
                          $
                          1,019
                          
                          
                          $
                          1,698
  F-25


The
      following table summarizes the Company’s convertible notes payable by maturity
      dates as of December 31, 2006 (000’s):




Less
                            
                            
                            CarryingPrincipal
                            
                            
                            Discount
                            
                            
                            AmountFiscal
                                Year ending December 31, 2007
                            
                            $
                            6,396
                            
                            
                            $
                            4,777
                            
                            
                            $
                            1,619Fiscal
                                Year ending December 31, 2008
                            
                            
                            1,548
                            
                            
                            
                            698
                            
                            
                            
                            850Fiscal
                                Year ending December 31, 2009
                            
                            
                            1,207
                            
                            
                            
                            453
                            
                            
                            
                            754$
                            9,151
                            
                            
                            $
                            5,928
                            
                            
                            $
                            3,223




**Accounting
      for Series B Notes and Warrant Purchase Agreement**





In
      connection with the convertible Series B Notes and OID Notes, we issued warrants
      to the Note holders to purchase approximately 182 million shares of our common
      stock at exercise prices noted above. The fair value of the warrants was
      estimated to be approximately $325,000 using the Black-Scholes pricing model.
      The fair value of the warrants allocated to the warrants on a relative fair
      value basis was determined to be approximately $220,000 and was recorded as
      additional paid-in-capital and a debt discount.  The debt discount
      will be amortized to interest expense over the terms of the notes.





Additionally,
      the Series B Notes and OID Notes were considered to have a beneficial conversion
      feature because they permitted the holders to convert their interest in the
      Series B Notes and OID Notes into shares of our common stock at a deemed
      effective fair value conversion price of $0.014 per share, which on the date
      of
      issuance, was lower than the price of our common stock of $0.015 per share.
      The
      total amount of the beneficial conversion feature was approximately
      $51,000.  This amount was recorded as additional paid-in-capital and
      will be amortized to interest expense from the date of issuance to the earlier
      of the maturity of the Series B Notes or to the date of the
      conversion.





We
      recorded approximately $123,686 of transaction costs as deferred financing
      fees.  We also recorded approximately $46,301 as deferred financing
      fees for the fair value of the placement agent warrants which were valued using
      the Black-Scholes pricing model.  The deferred financing fees will be
      amortized to interest expense from the date of the Series B Notes to the earlier
      of the maturity of the Series B Notes or the date of
      conversion.  During the fiscal year ended December 31, 2006, $4,723 of
      the deferred financing fees were amortized to interest expense.




**Capital
      Leases  Payable**




We
      lease
      certain vehicles, computer equipment, and other equipment under capital
      leases.  As of December 31, 2006 and 2005, assets under capital leases
      included in “Property and equipment” on our Consolidated Balance Sheets, were
      $368,000 and $0, net of accumulated depreciation of $83,000 and $0
      respectively.




The
      following is a schedule of our future minimum lease payments under capital
      leases together with the present value of the net minimum lease payments as
      of
      December 31, 2006 (in thousands).




Fiscal
                                year ending December 31,2007
                            
                            $
                            1472008
                            
                            
                            702009
                            
                            
                            11Total
                                minimum lease payments
                            
                            
                            228Less:
                                amount representing interest
                            
                            
                            (15
                            )Present
                                value of net minimum lease payments
                            
                            
                            214


F-26




**9.**
            **INCOME
                TAXES**




The
      Company
      has adopted the provisions of FAS No. 109 “Accounting for Income
      Taxes”.  The Company currently has no issues that create timing
      differences that would mandate deferred tax expense.  Net operating
      losses would create possible tax assets in future years.  Due to the
      uncertainty as to the utilization of net operating loss carry forwards, a
      valuation allowance has been made to the extent of any tax benefit that net
      operating losses may generate.






No
      provision
      for income taxes has been recorded due to the net operating loss carryforwards
      totaling approximately $1.4 million as of December 31, 2006 that will be offset
      against future taxable income.  No tax benefit has been reported in
      the consolidated financial statements because the Company believes there is
      a
      50% or greater chance the carry forwards will expire unused.




Deferred
      tax
      asset and the valuation account is as follows (in thousands):




December
                                  31,2006
                              
                              
                              2005Deferred
                                  tax asset:NOL
                                  Carryforward
                              
                              $
                              477
                              
                              
                              $
                              46Valuation
                                  allowances
                              
                              
                              (477
                              )
                              
                              
                              (46
                              )Total
                              
                              $
                              -
                              
                              
                              $
                              -The
                                  components of income tax expense are as follows:Current
                                  Federal Tax
                              
                              $
                              -
                              
                              
                              $
                              -Current
                                  State Tax
                              
                              
                              -
                              
                              
                              
                              -Change
                                  in NOL benefit
                              
                              
                              431
                              
                              
                              
                              25Change
                                  in valuation allowance
                              
                              
                              (431
                              )
                              
                              
                              (25
                              )$
                              -
                              
                              
                              $
                              -






**10.**
            **STOCKHOLDERS’
                EQUITY INSTRUMENTS AND RELATED
                MATTERS**





**Common  Stock**





As
      of
      December 31, 2005 we had 230,000,000 shares of common stock authorized with
      a
      par value of $0.01. We had 8,855,885 common stock shares issued and 7,925,937
      shares outstanding.





As
      of
      December 31, 2006 we had 230,000,000 shares of common stock authorized with
      a
      par value of $0.01.  We had 62,255,408 common stock shares issued and
      61,325,460 shares outstanding.







**Series
      B Convertible Redeemable Preferred Stock**




In
      September, 2005, Remote Dynamics closed the sale of $6.5 million of Series
      B
      convertible preferred stock and common stock purchase warrants in a private
      placement transaction with SDS previously entered into in May,
      2005.   As of December 31, 2006, 559.5 shares of the Series B
      convertible preferred stock remained outstanding.  Each share has a
      face value of $10,000 ($5,595,000 in the aggregate).




The
      most
      significant terms of the Series B convertible preferred stock are as
      follows:




***Ranking****.*  The
      Series B convertible preferred stock ranks senior to our common stock and our
      Series C convertible preferred stock with respect to payment of dividends and
      amounts upon any liquidation, dissolution or winding up of the
      company.




F-27


***Dividends***.    Holders
      of shares of Series B convertible preferred stock are entitled to receive
      dividends in an amount equal to 3% per year when, as and if declared by Remote
      Dynamics.




***Conversion****.*  Each
      holder of Series B convertible preferred stock has the right to convert its
      shares of Series B convertible preferred stock into shares of our common stock
      at an original conversion price of $1.55 per share of common stock, subject
      to
      adjustment in the event of stock splits, stock dividends and similar
      distributions and events.  In no event can any holder of Series B
      convertible preferred stock convert shares of Series B convertible preferred
      stock into shares of common stock or dispose of any shares of Series B
      convertible preferred stock to the extent that such conversion or disposition
      would result in the holder and its affiliates together beneficially owning
      or
      having the power to vote more than 9.99% of our outstanding shares of common
      stock.




***Redemption
      by Holder***.  The holders of shares of Series B
      convertible preferred stock have the right to cause us to redeem any or all
      of
      its shares at a price equal to 100% of face value, plus accrued but unpaid
      dividends in the following events:




·
            We
                fail to remove any restrictive legend on any certificate or any shares
                of
                common stock issued to the holders of Series B convertible preferred
                stock
                upon conversion of the Series B convertible preferred stock as and
                when
                required and such failure continues uncured for five business
                days;




·
            We
                provide written notice (or otherwise indicate) to any holder of Series
                B
                convertible preferred stock, or state by way of public announcement
                distributed via a press release, at any time, of our intention not
                to
                issue, or otherwise refuse to issue, shares of common stock to any
                holder
                of Series B convertible preferred stock upon conversion in accordance
                with
                the terms of the certificate of designation for our Series B convertible
                preferred stock;




·
            We
                or any of our subsidiaries make an assignment for the benefit of
                creditors, or applies for or consents to the appointment of a receiver
                or
                trustee for us or for a substantial part of our property or
                business;




·
            Bankruptcy,
                insolvency, reorganization or liquidation proceedings or other proceedings
                for the relief of debtors shall be instituted by or against us or
                any of
                our subsidiaries which shall not be dismissed within 60 days of their
                initiation;




·
            We
                sell, convey or dispose of all or substantially all of our assets;
                or




*·*
            We
                otherwise breach any
                material term under the private placement transaction documents,
                and if
                such breach is curable, shall fails to cure such breach within 10
                business
                days after we have been notified thereof in writing by the
                holder.




***Restricted
      Actions***.  So long as any shares of Series B convertible
      preferred stock are outstanding, we are not permitted to take any of the
      following corporate actions (whether by merger, consolidation or otherwise)
      without first obtaining the approval of the majority holders of Series B
      convertible preferred stock:




·
            Alter
                or change the rights, preferences or privileges of the Series B
                convertible preferred stock, or increase the authorized number of
                shares
                of Series B convertible preferred
                stock;




·
            Issue
                any shares of Series B convertible preferred stock other than pursuant
                to
                the Securities Purchase Agreement with the selling
                stockholder;




·
            Redeem,
                repurchase or otherwise acquire, or declare or pay any cash dividend
                or
                distribution on, any junior
                securities;




·
            Increase
                the par value of our common stock;




·
            Sell
                all or substantially all of our assets or stock, or consolidate or
                merge
                with another entity;




·
            Sell,
                transfer or encumber technology, other than licenses granted in the
                ordinary course of business;




·
            Liquidate,
                dissolve, recapitalize or
                reorganize;




·
            Create
                or issue any senior securities or pari passu securities to the Series
                B
                convertible preferred stock;




F-28


·
            Enter
                into any agreement, commitment, understanding or other arrangement
                to take
                any of the foregoing actions; or




·
            Cause
                or authorize any of our subsidiaries to engage in any of the foregoing
                actions.




***Voting
      Rights***.  Except as otherwise provided in the certificate
      of designation and as otherwise required by the Delaware General Corporation
      Law, each holder of Series B convertible preferred stock has the right to vote
      on all matters before the common stockholders on an as-converted basis voting
      together with the common stockholders as a single class.  This voting
      right is subject to the limitation that in no event may a holder of shares
      of
      Series B convertible preferred stock (or warrants discussed below) have the
      right to convert shares of Series B convertible preferred stock into shares
      of
      our common stock or to dispose of any shares of Series B convertible preferred
      stock to the extent that such right to effect such conversion or disposition
      would result in the holder and its affiliates together beneficially owning
      or
      having the power to vote more than 9.99% of our outstanding shares of common
      stock.  The holders of a majority of the Series B convertible
      preferred stock also have the right to appoint one representative to our board
      of directors and are entitled to designate one observer to the meetings of
      our
      board of directors and committees.





In
      connection with the issuance of Series B convertible preferred stock and
      warrants to SDS, Remote Dynamics granted certain registration rights to SDS.
      If
      the Company fails to meet specified deadlines, it could face a liquidated
      damages claim by SDS.  The liquidated damages for the first 30 days
      equals 3% of the purchase price of the Series B convertible preferred stock
      and
      equals 1.5% for each 30 days thereafter of non-compliance.  In
      addition to the liquidated damages provision discussed above, SDS can require
      the redemption of its shares of Series B convertible preferred stock upon
      certain default events.  We currently are not in compliance with
      certain terms of the registration rights agreement.  SDS waived
      non-compliance through January 23, 2007.





**Series
      C Convertible Preferred Stock**




On
      November
      30, 2006, we entered into a Share Exchange Agreement with BMSI.Pursuant to the Share
      Exchange Agreement, we agreed to acquire from BMSI 100% of the capital stock
      of
      BounceGPS.  As part of the consideration for the acquisition, we
      issued to BMSI 5,000 shares of our Series C convertible preferred
      stock.  See Note 1 for a more detailed description of the
      acquisition




The
      most
      significant terms of the Series C convertible preferred stock are as
      follows:






***Ranking.*******The series C convertible preferred stock
      issued under the Share Exchange Agreement has a face amount of $1,000 per share
      ($5,000,000 in the aggregate), ranks junior to the Company’s series B
      convertible preferred stock and senior to its common stock with respect to
      payment of dividends and amounts upon any liquidation, dissolution or winding
      up
      of the Company.






***Dividends.***  Holders
      of shares of Series C convertible preferred stock are entitled to receive
      cumulative dividends in an amount equal to 8% per year (payable at the election
      of the holder in cash or additional shares).






***Conversion.***The
      Series C convertible preferred stock issued under the Share Exchange Agreement
      is initially convertible into 51% of the number of our fully diluted shares,
      as
      defined to include, without limitation:






·
            Shares
                of common stock outstanding on the date of issuance of the Series
                C
                convertible preferred stock;






·
            Shares
                of common stock issuable upon conversion, exercise or exchange of
                any
                convertible security or purchase right outstanding on the date
                of  issuance (including, without limitation, the Series C
                convertible preferred stock, the Company’s Series B convertible preferred
                stock, the Series A Notes, the Series B Notes, the Series B OID Notes,
                the
                E-7 Warrants and the F-4 Warrants);






·
            Shares
                of common stock issuable upon conversion, exercise or exchange of
                any
                convertible security or purchase right issued after the issuance
                date of
                the Series C convertible preferred stock in conversion, exercise
                or
                exchange of securities outstanding as of the issuance date or as
                a
                dividend, interest payment, liquidated damages, penalty, compromise,
                settlement or other payment of certain securities or  pursuant
                to or in connection with any agreement, indebtedness or other obligation
                of the Company existing as of the issuance date, or with respect
                to any
                amendment, waiver or modification thereto or extension
                thereof;






F-29


·
            Shares
                of common stock issued after the issuance date of the Series C convertible
                preferred stock as a dividend, interest payment, liquidated damages,
                penalty, compromise, settlement or other payment of certain securities
                or  pursuant to or in connection with any agreement,
                indebtedness or other obligation of the Company existing as of the
                issuance date, or with respect to any amendment, waiver or modification
                thereto or extension thereof; and






·
            Shares
                of common stock authorized for issuance from time to time under the
                Company’s equity incentive plans.




***Redemption
      by Holder***.  The holders of shares of Series C
      convertible preferred stock have the right to cause us to redeem any or all
      of
      its shares at a price equal to 100% of face value, plus accrued but unpaid
      dividends in the following events:




·
            We
                fail to remove any restrictive legend on any certificate or any shares
                of
                common stock issued to the holders of Series B convertible preferred
                stock
                upon conversion of the Series B convertible preferred stock as and
                when
                required and such failure continues uncured for five business
                days;




·
            We
                provide written notice (or otherwise indicate) to any holder of Series
                B
                convertible preferred stock, or state by way of public announcement
                distributed via a press release, at any time, of our intention not
                to
                issue, or otherwise refuse to issue, shares of common stock to any
                holder
                of Series B convertible preferred stock upon conversion in accordance
                with
                the terms of the certificate of designation for our Series B convertible
                preferred stock;




·
            We
                or any of our subsidiaries make an assignment for the benefit of
                creditors, or applies for or consents to the appointment of a receiver
                or
                trustee for us or for a substantial part of our property or
                business;




·
            Bankruptcy,
                insolvency, reorganization or liquidation proceedings or other proceedings
                for the relief of debtors shall be instituted by or against us or
                any of
                our subsidiaries which shall not be dismissed within 60 days of their
                initiation;




·
            We
                sell, convey or dispose of all or substantially all of our
                assets;




·
            We
                merge or consolidate with or into, or engage in any other business
                combination with, any other person or entity, in any case which results
                in
                either (i) the holders of our voting securities immediately prior
                to such
                transaction holding or having the right to direct the voting of fifty
                percent (50%) or less of our total outstanding voting securities
                of or
                such other surviving or acquiring person or entity immediately following
                such transaction or (ii) the members of our board of directors comprising
                fifty percent (50%) or less of the members of our board of directors
                or
                such other surviving or acquiring person or entity immediately following
                such transaction;




·
            We
                have fifty percent (50%) or more of the voting power of our capital
                stock
                owned beneficially by one person, entity or
                “group”;




·
            We
                experience any other change of control not otherwise addressed above;
                or




*·*
            We
                otherwise breach any material term under the private placement transaction
                documents, and if such breach is curable, shall fails to cure such
                breach
                within 10 business days after we have been notified thereof in writing
                by
                the holder.




***Restricted
      Actions***.  So long as any shares of Series C convertible
      preferred stock are outstanding, we are not permitted to take any of the
      following corporate actions (whether by merger, consolidation or otherwise)
      without first obtaining the approval of the majority holders of Series C
      convertible preferred stock:




·
            Alter
                or change the rights, preferences or privileges of the Series C
                convertible preferred stock, or increase the authorized number of
                shares
                of Series C convertible preferred
                stock;




·
            Amend
                our certificate of incorporation or
                bylaws;




·
            Issue
                any shares of Series C convertible preferred stock other than pursuant
                to
                the Share Exchange Agreement or as a dividend on the Series C convertible
                preferred stock;




·
            Redeem,
                repurchase or otherwise acquire, or declare or pay any cash dividend
                or
                distribution on, any junior
                securities;




F-30


·
            Increase
                the par value of our common stock;




·
            Sell
                all or substantially all of our assets or stock, or consolidate or
                merge
                with another entity;




·
            Enter
                into or permit to occur any change of control
                transaction;




·
            Liquidate,
                dissolve, recapitalize or
                reorganize;




·
            Change
                the Company’s principal business;




·
            Create
                or issue any senior securities or pari passu securities to the Series
                B
                convertible preferred stock;




·
            alter
                or change the rights, preferences or privileges of any capital stock
                of
                the Company so as to affect adversely the Series C convertible
                preferred stock;




·
            Enter
                into any agreement, commitment, understanding or other arrangement
                to take
                any of the foregoing actions; or




·
            Cause
                or authorize any of our subsidiaries to engage in any of the foregoing
                actions.






***Voting
      Rights.*******The series C convertible preferred stock
      generally has the right to vote on all matters before the common stockholders
      on
      an as-converted basis voting together with the common stockholders as a single
      class. In addition, the holders of a majority of the Series C Preferred Stock,
      voting as a separate class, have the right to appoint a majority of the members
      of the Company’s Board of Directors (as long as the Company has not exercised
      its limited rights to redeem series C convertible preferred stock).




In
      connection with the Share Exchange
      Agreement and issuance of Series C convertible preferred stock, Remote Dynamics
      granted certain registration rights to BMSI and also made certain covenants
      to
      BMSI, including to have authorized and reserved for issuance the aggregate
      number of shares of the Company’s common stock needed for issuance upon
      conversion of the Series C convertible preferred stock. The Company currently
      is
      not in compliance with certain terms of the Series C convertible preferred stock
      and related agreements.





**Warrants**





***Warrants
      Issued in Series B
      Convertible Preferred Stock Financing***.  In connection
      with the issuance of shares of Series B convertible preferred stock to SDS,
      Remote Dynamics also issued to SDS three warrants to purchase shares of the
      Company’s common stock.





·
            With
                respect to the first warrant, the holder has the right to purchase
                up to
                1,666,667 shares of our common stock at an exercise price equal to
                $0.01
                per share, subject to anti-dilution protections for stock splits
                and other
                similar pro rata events.  The first warrant may be exercised at
                any time until September 2, 2010.




·
            With
                respect to the second warrant, the holder has the right to purchase
                up to
                700,000 shares of our common stock at an exercise price equal to
                $1.75 per
                share.  The second warrant may be exercised at any time until
                September 1, 2011.  The remaining terms of the second warrant
                are identical to the first warrant except the second warrant contains
                certain anti-dilution price protections in the event of a dilutive
                stock
                issuance (in addition to anti-dilution protections for stock splits
                and
                other similar pro rata events).  As discussed in Note 8, the
                Series B Note transaction triggered an anti-dilution adjustment to
                these
                warrants issued to SDS in September 2005 by changing the exercise
                price
                from $1.75 to $0.0966 per share and increasing the number of shares
                of
                common stock for which the warrants can be exercised from 700,000
                to
                12,683,191.




·
            With
                respect to the third warrant, the holder has the right to purchase
                up to
                2,000,000 shares of our common stock at an exercise price equal to
                $1.75
                per share, subject to anti-dilution protections for stock splits
                and other
                similar pro rata events..  The third warrant may be exercised at
                any time after March 2, 2006 until September 2,
                2010.




F-31


All
      three
      warrants contain a provision that prevents any holder from exercising the
      warrant to the extent that such exercise would result in such holder
      beneficially owning or having the right to vote more than 9.99% of our
      outstanding shares of common stock.




***Warrants
      Issued in
      Connection with the Series A Note and Warrant Purchase
      Agreement.***As discussed in Note 8, on February 24,
      2006, Remote Dynamics closed its Series A Note financing.   The
      Company issued common stock purchase warrants in connection with the Series
      A
      Note financing.  See Note 8 for a description of these
      warrants.




***Warrants
      Issued in
      Connection with the Series B Note and Warrant Purchase
      Agreement.***As discussed in Note 8, on December 4, 2006,
      Remote Dynamics closed its Series B Note financing.   The Company
      issued common stock purchase warrants in connection with the Series B Note
      financing.  See Note 8 for a description of these
      warrants.




**11.**
            **COMMITMENTS
                AND CONTINGENCIES**




**Operating
      Lease Commitments**




We
      lease
      certain office facilities and equipment under non-cancelable operating leases,
      with expirations through March 2009.  The future minimum lease
      payments associated with such leases for the fiscal years ending December 31
      are
      as follows (in thousands).






2007
                        $
                        672008
                        $
                        9$
                        76





During
      the
      year ended December 31, 2006 and 2005, total rent charged to operating expenses
      was approximately $41,000 and $5,000, respectively.




**Product
      Warranty Guarantees**




We
      provide a limited warranty on all
      REDIview product sales, at no additional cost to the customer that provides
      for
      replacement of defective parts for one year after the product is
      sold.  We provide a limited warranty on all VMI product sales, at no
      additional cost to the customer that provides for replacement of defective
      parts
      during the contract term, typically ranging from one to five years. We have
      established an estimated liability for expected future warranty commitments
      based on a review of historical warranty expenditures associated with these
      products and other similar products.  Changes in our product warranty
      liability, which is included in “Accrued expenses and other current liabilities”
and “Other non-current liabilities” in the accompanying Consolidated Balance
      Sheets, are summarized below (in thousands).




Fiscal
                            Years EndedDecember
                            31,2006
                        
                        
                        2005Warranty
                            product liability at beginning of period
                        
                        $
                        -
                        
                        
                        $
                        -Accruals
                            for product warranties issued
                        
                        
                        132
                        
                        
                        
                        -Product
                            replacements
                        
                        
                        (5
                        )
                        
                        
                        -Adjustments
                            to pre-existing warranty estimates
                        
                        
                        -
                        
                        
                        
                        -Warranty
                            product liability at end of period
                        
                        $
                        127
                        
                        
                        $
                        -




The
      long-term portion of the warranty product liability at December 31, 2006 and
      2005 was approximately $-0- and $-0-, respectively.




F-32


**Retirement
      Plan**




The
      Company sponsors a 401(k) Retirement Investment Profit-Sharing Plan (the
“Retirement Plan”) covering substantially all employees.  In order to
      attract and retain employees, the Company amended the Retirement Plan during
      2000 to include a mandatory employer matching.  Matching contributions
      during the fiscal years ended December 31, 2006 and 2005 were approximately
      $2,000 and


$-0-
      respectively.







**Other
      Purchase Commitments**




As
      of
      December 31, 2006, we had approximately $1,049,000 in primarily
      inventory-related purchase commitments.





**Litigation**





In
      August
      2005, @Road, Inc. brought a lawsuit against us alleging intentional interference
      with prospective economic advantage (@Road, Inc. v. Kierston Dowd, et al.,
      Stanislaus County Superior Court). On October 13, 2006, we entered into a
      preliminary Memorandum of Understanding with @Road, Inc. with respect to a
      settlement of the lawsuit in exchange for a payment from us of $250,000,
      however, the parties could not agree on the details of the
      settlement.  Additionally, the proposed settlement terms were not
      approved by our Board of Directors





We
      are
      aware of a potential claim involving us and our prior inventory
      vendor.  This claim has not been asserted, but we have discussed the
      possibility of a dispute arising out of disposition of inventory manufactured
      by
      this vendor.  We do not believe we are liable for future inventory
      purchases from this vendor and several months ago expressed our position to
      them.  However, should this vendor be successful in asserting a claim,
      it may have a material adverse affect to our financial position, operating
      results and cash flows.





We
      are
      subject to legal proceedings and claims that arise in the ordinary course of
      business.  We do not believe that any claims other than those
      described above exist where the outcome of such matters would have a material
      adverse affect on our consolidated financial position, operating results or
      cash
      flows.  However, there can be no assurance such legal proceedings will
      not have a material impact on future results.








**12.**
            **RELATED
                PARTY TRANSACTIONS**




In
      2004,
      we issued a $2,000,000 convertible promissory note to HFS Minorplanet Funding
      LLC (“HFS”).   The principal balance is due 36 months from the
      date of funding, with an annual interest rate of 12%.  In January,
      2006, the Company appointed Dennis Ackerman to serve as the HFS-designee member
      of our Board of Directors.  Mr. Ackerman currently serves as a
      director of HFS Capital Private Equity Fund LLC, the Managing Member of
      HFS.  On November 30, 2006, we entered into a new promissory note with
      HFS pursuant to which, on December 1, 2007, the existing $2,000,000 convertible
      promissory note issued by to HFS will be cancelled and we will issue to HFS
      (i)
      $1,000,000 principal amount of our series B subordinated secured convertible
      promissory notes, (ii) $400,000 principal amount of our original issue discount
      series B subordinated secured convertible promissory notes, (iii) our series
      E-7
      warrants to purchase 46,875,000 shares of our common stock and (iv) our series
      F-4 warrants to purchase 46,875,000  shares of our common
      stock.




In
      June,
      2006, BounceGPS, our wholly owned subsidiary, issued a $250,000 note to
      DataLogic International, Inc. in conjunction with the acquisition of certain
      assets.  Keith Moore (a member of our Board of Directors),is the CEO
      and Chairman of DataLogic International, Inc.




BounceGPS
      has an agreement with MBCG
      for corporate development and chief financial officer
      services.   David Walters (our Chairman) is the managing member
      of MBCG and beneficially owns 100% of MBCG.   The agreement was
      entered into prior to our December 2006 acquisition of  BounceGPS and
      prior to Mr. Walters joining our Board of Directors.  Under the
      agreement with MBCG, BounceGPS will pay to MBCG a monthly fee of $20,000 in
      cash.  The initial term of the agreement expires on December 31, 2007
      and continues thereafter on a month-to-month basis unless terminated by either
      party.   Fees paid to MBCG totaled $100,000 and $0 for the years
      ended December 31, 2006 and 2005, respectively.





F-33


In
      connection with our November 2006
      private placement, we agreed to pay $60,000 ($15,000 per closing) to MBMC for
      consulting work.  David Walters (our Chairman) and Keith Moore (a
      member of our Board of Directors) are managing members of MBMC and each
      beneficially own 50% off MBMC.As of December 31, 2006,
      the Company
      owed $15,000 to MBMC for these services.  The Company made this
      payment to MBMC
      in January 2007.





Additionally,
      we agreed to pay a $20,000 documentation fee to BMSI in connection with our
      December 2006 acquisition of BounceGPS from BMSI.  David Walters (our
      Chairman) is the Chairman and Chief Executive Officer of BMSI and beneficially
      owns a majority of the outstanding common stock of BMSI. This payment was made
      in January 2007.





In
      2006,
      while BounceGPS was a private company and a wholly owned subsidiary of BMSI,
      BMSI contributed additional capital of $1,146,000 into BounceGPS in the form
      of
      cash and the assumption of certain liabilities.  This transaction
      occurred prior to the share exchange agreement between Remote Dynamics and
      BounceGPS.




On
      August
      4, 2006, BounceGPS loaned $150,000 to a subsidiary of MSTF at 10% per
      annum.  David Walters (our Chairman) is also the Chairman and Chief
      Financial Officer of MSTF and beneficially owns 42% of the outstanding common
      stock of MSTF.  At the time of the loan, David Walters was the
      Chairman and Chief Executive Officer of BMSI (parent of BounceGPS at the time)
      and beneficially owned a majority of the outstanding common stock of
      BMSI.   The principal balance was repaid in full on September 11,
      2006.  On October 4, 2006, BounceGPS loaned $18,000 to the same
      related company.  The principal balance was repaid in full on October
      11, 2006.  On October 5, 2006, BounceGPS loaned $95,000 to the same
      related company.  The principal balance was repaid in full on October
      11, 2006.  BounceGPS also loaned $220,000 during late October and
      early November 2006 to the same related company.  The entire
      outstanding balance of $220,000 was repaid on November 8,
      2006.  BounceGPS received interest payments of $636 during 2006 and
      interest receivables totaled $1,899 as of December 31, 2006.  These
      loan transactions occurred prior to the share exchange agreement between Remote
      Dynamics and BounceGPS.  At the time of the loan transactions,
      BounceGPS was a private company and a wholly owned subsidiary of
      BMSI.






**13.**
            **SUBSEQUENT
                EVENTS**






On
      January 10, 2007, the Company closed on the second round of the Series B Note
      financing after filing a preliminary proxy statement on December 27, 2006 with
      the Securities and Exchange Commission with respect to stockholder approval
      of
      an increase in the number of our authorized shares of common stock to
      575,000,000 and a one-for-fifty reverse stock split of our common
      stock.  Gross proceeds provided by the second closing totaled
      $438,500, accordingly, the Company issued (i) $438,500 principal amount of
      Series B Notes, (ii) $175,400 principal amount of Series B OID Notes, (iii)
      E-7
      Warrants to purchase 20,554,688 shares of the Company’s common stock and (iv)
      F-4 Warrants to purchase 20,554,688 shares of the Company’s common
      stock.




On
      March
      26, 2007, the Company closed on the third round of funding.  The third
      round closing conditions of filing an amendment to our Certificate of
      Incorporation increasing the number of our authorized shares of common stock
      to
      575,000,000 and a one-for-fifty reverse stock split of our common stock were
      both waived by the investors.  Gross proceeds provided by the third
      closing totaled $438,500, accordingly, the Company issued (i) $438,500 principal
      amount of Series B Notes, (ii) $175,400 principal amount of Series B OID Notes,
      (iii) E-7 Warrants to purchase 20,554,688 shares of the Company’s common stock
      and (iv) F-4 Warrants to purchase 20,554, 688 shares of the Company’s common
      stock.





On
      January 10, 2007, the Company issued (i) $143,361 principal amount of Series
      B
      Notes, (ii) 57,344 principal amount of Series B OID Notes, (iii) E-7 Warrants
      to
      purchase 6,720,047 shares of the Company’s common stock and (iv) F-4 Warrants to
      purchase 6,720,047 shares of the Company’s common stock, in exchange for
      $112,611 principal amount of the Series A Notes.  In conjunction with
      the fair value adjustments required under purchase accounting, the $112,611
      principal amount of Series A Notes were valued at
      $26,440.  Accordingly, the Company is required to record a loss on
      extinguishment of debt totaling $116,922 during the first quarter of fiscal
      year
      2007 in relation to this exchange.





F-34


On
      March
      26, 2007, the Company issued (i) $143,361 principal amount of Series B Notes,
      (ii) 57,344 principal amount of Series B OID Notes, (iii) E-7 Warrants to
      purchase 6,720,047 shares of the Company’s common stock and (iv) F-4 Warrants to
      purchase 6,720,047 shares of the Company’s common stock, in exchange for
      $112,611 principal amount of the Series A Notes.  In conjunction with
      the fair value adjustments required under purchase accounting, the $112,611
      principal amount of Series A Notes were valued at
      $26,440.  Accordingly, the Company is required to record a loss on
      extinguishment of debt totaling $116,922 during the first quarter of fiscal
      year
      2007 in relation to this exchange.





On
      January 10, 2007, the Company issued (i) $125,000 principal amount of Series
      B
      Notes, (ii) $50,000 principal amount of Series B OID Notes, (iii) E-7 Warrants
      to purchase 5,859,375 shares of the Company’s common stock and (iv) F-4 Warrants
      to purchase 5,859,375 shares of the Company’s common stock, in exchange for 12.5
      shares of Series B convertible preferred stock.  In conjunction with
      the fair value adjustments required under purchase accounting, the 12.5 shares
      of Series B convertible preferred stock were valued at
      $3,970.  Accordingly, the Company is required to record a loss on
      extinguishment of convertible preferred stock of $121,031 during the first
      quarter of fiscal year 2007 in relation to this exchange.





On
      March 26,
      2007, the Company issued (i) $250,000 principal amount of Series B Notes, (ii)
      $100,000 principal amount of Series B OID Notes, (iii) E-7 Warrants to purchase
      11,718,750 shares of the Company’s common stock and (iv) F-4 Warrants to
      purchase 11,718,750 shares of the Company’s common stock, in exchange for 25
      shares of Series B convertible preferred stock.  In conjunction with
      the fair value adjustments required under purchase accounting, the 25 shares
      of
      Series B convertible preferred stock were valued at
      $7,940.  Accordingly, the Company is required to record a loss on
      extinguishment of convertible preferred stock of $242,060 during the first
      quarter of fiscal year 2007 in relation to this exchange.





F-35