**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**







**FORM
      10-KSB**




**(Mark
      One)**


**x**
            
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                OF 1934****FOR
                THE FISCAL YEAR ENDED DECEMBER 31, 2007****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:  $4,721,000




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 March 12, 2008:  $93,450.





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
      March 12, 2008, 7,787,535 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, 2007**





**INDEX**




**PART
                I**
            
            
            1Item
                1.
            
            Description
                of Business
            1Item
                2.
            
            Description
                of Properties
            16Item
                3.
            
            Legal
                Proceedings
            16Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            16**PART
                II**
            
            
            16Item
                5.
            
            Market
                for Common Equity and Related Stockholder Matters
            16Item
                6.
            
            Management’s
                Discussion and Analysis or Plan of Operations
            17Item
                7.
            
            Financial
                Statements
            32Item
                8.
            
            Changes
                In and Disagreements with Accountants on Accounting and Financial
                Disclosure
            32Item
                8A.
            
            Controls
                and Procedures
            32Item
                8B.
            
            Other
                Information
            34**PART
                III**
            
            
            35Item
                9.
            
            Directors
                and Executive Officers of Remote Dynamics, Inc.
            35Item
                10.
            
            Executive
                Compensation
            39Item
                11.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            40Item
                12.
            
            Certain
                Relationships and Related Transactions
            41Item
                13.
            
            Exhibits
            43Item
                14.
            
            Principal
                Accountant Fees and Services
            45Signatures
            47




i




**PART
      I**




**Item
      1.********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
      with our creditors; 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 fleets of vehicles or equipment within
      diverse industry vertical markets such as construction, field services,
      distribution, 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 their bottom line.




We
      commercially introduced our current AVL product, REDIview, in 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 current business plan. We
      expect
      this product line to provide the foundation for a growth in revenues and, if
      our
      revenues grow as we anticipate, ultimately profitability. We do
      not expect to achieve profitability or positive cash flow for 2008.  Our
      plans for 2008 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 2008. 
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
      fourth quarter of 2008.




Approximately
      $2,669,891 in principal amount of our outstanding secured convertible notes
      have
      reached their maturity date and are due and payable. In addition, we are not
      in
      compliance with certain of our other obligations relating to our secured
      convertible notes.  Our
      failure to comply with our obligations relating to these securities exposes
      us
      to demands for immediate repayment (in some cases, at a premium to outstanding
      principal) as well as default interest and liquidated damages claims by the
      security holders.





We
      have
      obtained the agreement of certain of our note holders to extend the payment
      schedule and maturity date of the notes and have resumed making payments to
      certain of our note holders of amounts due under the notes in the form of our
      common stock. We plan to continue to explore alternatives to restructure or
      otherwise satisfy our obligations to our note holders. However, we do not
      currently have the cash on hand to repay amounts due under our secured
      convertible notes if the note holders elect to exercise their repayment or
      other
      remedies. If our efforts to restructure or otherwise satisfy our obligations
      under the notes are unsuccessful, and we are unable to raise enough money
      to cover the amounts payable under the notes, we may be forced to restructure,
      file for bankruptcy, sell assets or cease operations.




1




We
      had a
      working capital deficit of $3.1 million, excluding the gross amount of our
      outstanding secured convertible notes of $10.7 million, as of December 31,
      2007.
      We believe that we will have sufficient capital to fund our ongoing operations
      through 2008, 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 “RDYM” refer to Remote Dynamics, Inc. and its
      subsidiaries.  REDIviewTM is a registered trademark of Remote Dynamics,
      Inc.




**Company
      History and Recent Financings**





We
      were
      originally incorporated in Delaware in 1994. We have undergone a number of
      changes in our business strategy and organization. We filed for bankruptcy
      in
      2004, and changed our name to “Remote Dynamics, Inc.” in connection with our
      exit from bankruptcy that same year.




On
      November 30, 2006, we agreed to acquire from Bounce Mobile Systems, Inc.
      (“BMSI”) 100% of the capital stock of BounceGPS, Inc., a provider of mobile
      asset management solutions, in exchange for:




·
            5,000
                shares of our newly authorized series C convertible preferred stock
                (initially convertible into 51% of our fully diluted shares of common
                stock);


·
            A
                series B subordinated secured convertible promissory note in the
                principal
                amount of $660,000;


·
            An
                original issue discount series B subordinated secured convertible
                promissory note in the principal amount of
                $264,000;


·
            A
                series E-7 warrant to purchase 618,750 shares of common stock;
                and


·
            A
                series F-4 warrant to purchase 618,750 shares of common
                stock.




The
      acquisition closed on December 4, 2006. As part of the acquisition of BounceGPS,
      Inc., we acquired mobile subscribers, executive management and marketing
      expertise.




Bounce
      Mobile Systems, Inc. acquired control of our Company in the transaction and,
      accordingly, we have treated the transaction as a “reverse merger” for financial
      reporting purposes. Nonetheless, the historical operations of Remote Dynamics,
      Inc. represent substantially all of our continuing business and operations.




On
      November 14, 2007, we completed an increase in the number of our authorized
      shares of common stock to 750,000,000 and a one-for-fifty reverse stock split
      of
      our common stock. The share and per-share information disclosed within this
      Form
      10K-SB reflect the completion of the reverse stock split.





We
      have
      historically relied on a series of financings and asset sales to fund our
      ongoing operations. A summary of our recent financing history is set forth
      below.





2




***2005
      Financings***




On
      May
      31, 2005, we consummated a bridge loan with SDS Capital Group SPC, Ltd (“SDS”)
      in which we issued a secured promissory note in the amount of $1.75 million
      to
      SDS. On September 2, 2005, the note automatically exchanged into a common stock
      purchase warrant with a 5-year term to purchase 33,333 shares of common stock
      at
      an exercise price of $0.50 per share and a common stock purchase warrant with
      a
      5-year term to purchase 395,887 shares of common stock at an exercise price
      of
      $3.09 per share.




On
      September 2, 2005, we closed the sale of $6.5 million of our Series B
      convertible 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 $0.75 million and returned to us all of our 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 $0.75 million related to the
      Series A convertible preferred stock. Net cash proceeds received by us were
      approximately $0.4 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 $77.50 per share. SDS also received a common stock purchase warrant with
      a
      5-year term to purchase 40,000 shares at an exercise price of $87.50 per share.
      We used the net proceeds from the financing transaction to fund our business
      plan.




On
      December 16, 2005, in consideration of our reducing the exercise price on
      certain warrants held by SDS from $33.50 to $15.00 per share, SDS exercised
      the
      warrants for the purchase of 22,500 shares of our common stock resulting in
      the
      receipt by us of cash proceeds in the amount of $0.3 million.




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 $0.5 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”) and common stock purchase warrants 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 $750,000 and the tendering of shares of our Series B preferred
      convertible stock with
      an
      aggregate face
      value of $500,000).




The
      Series A Notes matured on February 23, 2008 and are currently due and payable. The Series
      A
      Notes are secured by substantially all of our assets. The Series A Notes are
      convertible at the option of the holder into our common stock at a fixed
      conversion price of $0.32, 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. We may make scheduled 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 eighty percent (80%) of the average of the closing bid price for the ten
      (10)
      trading days immediately preceding the principal payment date.




Upon
      the
      occurrence of specified events of default under the Series A Notes, the holders
      may (a) demand
      prepayment of the notes as described below, (b) demand that the principal amount
      of the notes then outstanding be converted into shares of our common stock;
      and/or (c) 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 to 120% of the principal amount
      of the notes. The holders would also recover all other costs or expenses due
      in
      respect of the notes and the other transaction documents.




3




We
      have
      failed to comply with certain of our other obligations relating to the Series
      A
      Notes, including our failure to make scheduled principal payments and to
      register for resale the shares of common stock underlying the notes and warrants
      issued in the Series A private placement. The Series A Notes provide for a
      default interest rate of 10% per annum on the outstanding principal amount
      of
      the notes for periods in which certain specified events of default occur and
      are
      continuing and liquidated damages for non-compliance with our registration
      obligations. As of December 31, 2007, we have accrued $717,245 in default
      interest and liquidated damages under the Series A Notes.





Our
      non-compliance with the terms of the notes also exposes to the risk that our
      note holders could seek to exercise prepayment or other remedies under the
      notes.





In
      February, 2008, holders of $1,523,928 principal amount of the Series A Notes
      agreed to extend the principal payment schedule and maturity date of the notes
      until August 31, 2009. As extended, payments under the notes will be due on
      a
      monthly basis (subject to deferral at the holder’s option) and may be made in
      the form of shares of our common stock eligible for resale pursuant to Rule
      144
      under the Securities Act of 1933, as amended.





In
      March,
      2008, we resumed making payments to certain of our Series A note holders of
      amounts due under the notes by issuing shares of our common stock under the
      terms of the notes. We expect to issue additional shares of our common stock
      in
      payment of amounts due under the notes during the remainder of 2008 and
      thereafter.





We
      do not
      currently have the cash on hand to repay amounts due under our Series A Notes
      if
      the note holders elect to exercise their repayment or other remedies. If our
      efforts to restructure or otherwise satisfy our obligations under the notes
      are
      unsuccessful , and
      we
      are unable to raise enough money to cover the amounts payable under the notes,
      we may be forced to restructure, file for bankruptcy, sell assets or cease
      operations.




***Series
      B Note Financing***




On
      November 30, 2006, we entered into a Note and Warrant Purchase Agreement with
      BMSI and other accredited investors. Pursuant to the Note and Warrant Purchase
      Agreement, we were to receive up to $1,754,000 in gross proceeds from the sale
      of up to (i) $1,754,000 principal amount of our series B subordinated secured
      convertible promissory notes , (ii) $701,600 principal amount of our original
      issue discount series B subordinated secured convertible promissory notes,
      (iii)
      our series E-7 warrants to purchase 1,644,375 shares of our common stock and
      (iv) our series F-4 warrants to purchase 1,644,375 shares of our common stock.





The
      series B subordinated secured convertible promissory notes and the series B
      original issue discount series B subordinated secured convertible promissory
      notes (collectively, the “Series B Notes”) are secured by all of our assets,
      subject to existing liens, are due December 4, 2009 and began scheduled
      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 lesser of (i) $1.00 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 are convertible into our common stock at a conversion price
      of
      $0.32 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.




4




Upon
      the
      occurrence of specified events of default under the Series B Notes, the holders
      may (a) demand
      prepayment of the notes as described below, (b) demand that the principal amount
      of the notes then outstanding be converted into shares of our common stock;
      and/or (c) 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 to 120% of the principal amount
      of the notes. The holders would also recover all other costs or expenses due
      in
      respect of the notes and the other transaction documents.




The
      Series B Note financing was structured to occur in four closings. To date,
      we
      have received $1,515,500 in gross proceeds from the Series B Note financing
      in
      exchange for issuing (i) $2,121,700 principal amount of Series B Notes, (ii)
      series E-7 warrants to purchase 1,420,782 shares of our common stock and (iii)
      series F-4 warrants to purchase 1,420,782 shares of our common stock. The final
      closing of the Series B Note financing (which would provide us with gross
      proceeds of $238,500) would 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, subject to certain other conditions being satisfied,
      including no material adverse effect on our business, operations, properties,
      prospects, or financial condition having occurred. We currently do not expect
      to
      satisfy the conditions to the final closing of the Series B Note financing.
      As a
      result, unless the investors agree to waive such conditions, we do not expect
      to
      receive any additional proceeds from the financing.





As
      part
      of the Series B Note financing, we agreed:





·
            pursuant
                to the terms of "most favored nations" rights granted to our Series
                A note
                holders investors, to issue 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) series E-7 warrants to purchase 1,543,833 shares of our common
                stock
                and (iv) series F-4 warrants to purchase 1,543,833 shares of our
                common
                stock. We have not received and will not receive any additional proceeds
                from the exchange. As of December 31, 2007, we had issued (i) $1,003,394
                principal amount of Series B Notes, (ii) $401,357 principal amount
                of
                Series B OID Notes, (iii) series E-7 warrants to purchase 940,682
                shares
                of our common stock and (iv) series F-4 warrants to purchase 940,682
                shares of our common stock, in exchange for $901,144 principal amount
                of
                the Series A Notes.The
                remaining exchange will occur only if we complete the final closing
                of our
                Series B Note financing.




·
            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) $700,000 principal amount of Series B Notes, (ii)
                series
                E-7 warrants to purchase 468,750 shares of our common stock and (iii)
                series F-4 warrants to purchase 468,750 shares of our common stock.
                As of
                December, 31, 2007, this exchange was completed in its
                entirety.





·
            to
                pay to the placement agent for the transaction consideration consisting
                of
                (a) a cash sales commission of $150,480 (b) warrants to purchase
                328,875
                shares of our common stock at an exercise price of $0.32 per share
                (as of
                December 31, 2007) and being exercisable for ten years, (c) series
                E-7
                warrants to purchase 246,656 shares of our common stock, and (d)
                series
                F-4 warrants to purchase 246,656 shares of our 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,
                2007. We
                also agreed to pay $60,000 ($15,000 per closing) to Strands Management
                Company, LLC for consulting work as well as $59,816 in legal counsel
                fees
                as part of the private placement.




We
      have
      failed to comply with certain of our other obligations relating to the Series
      B
      Notes, including our failure to make scheduled principal payments and to
      register for resale the shares of common stock underlying the notes and warrants
      issued in the Series B private placement. The Series B Notes provide for a
      default interest rate of 10% per annum on the outstanding principal amount
      of
      the notes for periods in which certain specified events of default occur and
      are
      continuing and liquidated damages for non-compliance with our registration
      obligations. As of December 31, 2007, we have accrued $397,100 in default
      interest and liquidated damages under the Series B Notes.




5




Our
      non-compliance with the terms of the notes also exposes to the risk that our
      note holders could exercise their prepayment or other remedies under the
      notes.





In
      March,
      2008, we commenced making payments to certain of our Series B note holders
      of
      amounts due under the notes by issuing shares of our common stock under the
      terms of the notes. We expect to issue additional shares of our common stock
      in
      payment of amounts due under the notes during the remainder of 2008 and
      thereafter.





We
      do not
      currently have the cash on hand to repay amounts due under our Series B Notes
      if
      the note holders elect to exercise their repayment or other remedies. If our
      efforts to restructure or otherwise satisfy our obligations under the notes
      are
      unsuccessful , and
      we
      are unable to raise enough money to cover the amounts payable under the notes,
      we may be forced to restructure, file for bankruptcy, sell assets or cease
      operations.




**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.




We
      commercially launched our current product offering, REDIview, in 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.




The
      REDIview mobile data logging units combine global positioning system (GPS)
      technologies along with the latest in wireless and 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.




**Competition**




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




·
            **Largest
                Competitor****–**
                Our largest competitor is Trimble Navigation Limited. Trimble entered
                our
                market in 2007 through its acquisition of @Road, Inc. @Road's mobile
                resource management system enables vehicle location, wireless voice
                and
                text communications, and remote transaction processing with signature
                capture using a PDA. Trimble is an international provider of GPS
                and other
                advanced positioning solutions.




·
            **Mid-Sized
                Competitors –**There are several other mid-sized companies that we routinely compete
                with
                throughout the United States. Mid-sized competitors include: Teletrac,
                Network Car, Navtrak, Discrete Wireless and
                AirIQ.




6




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




**Employees**




At
      December 31, 2007, 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.




***Wireless
      Data Transmission*** .
      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.




***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**




***AT&T
      Mobility*** *.* The
      Company provides GSM/GPRS data services to its REDIview customers pursuant
      to a
      data reseller agreement with AT&T Wireless now known as AT&T Mobility
      (“AT&T”) 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 AT&T or the Company for convenience upon 90
      days prior written notice.





7


If
      AT&T 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.





**Risk
      Factors**




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.




***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 2007 and 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 positive operating cash flow until the fourth quarter of
      2008.  Our plans for 2008 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 for 2008. 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 and to improve
      profitability and cash flow, our operating losses and net operating cash
      outflows will continue into the fourth quarter of 2008.




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




·
            Ability
                to increase sales of the REDIview product line.




·
            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.




8




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




We
      had a
      working capital deficit of $3.1 million, excluding the gross amount of our
      outstanding secured convertible notes of $10.7 million, as of December 31,
      2007.
      We believe that we will have sufficient capital to fund our ongoing operations
      through 2008, 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.




***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 default interest,
      monetary liquidated damages and/or amounts in excess of the outstanding amount
      due under of the securities, and we may be forced to restructure, file for
      bankruptcy, sell assets or cease operations.***





Approximately
      $2,669,891 in principal amount of our outstanding Series A Notes have reached
      their maturity date and are due and payable. We also are not in compliance
      with
      certain of our other obligations relating to our secured convertible notes
      and
      our convertible preferred stock, including with respect to our secured
      convertible notes, our failure to make required principal and other payments
      when due.




Our
      non-compliance with the terms of the notes exposes us to the risk that our
      note
      holders could seek to exercise prepayment or other remedies under the notes.
      Events of default under the notes include:




·
            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) demand
      prepayment of the notes as described below, (b) 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 (c) 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 to 120% of the principal amount of
      the
      notes. The holders would also recover all other costs or expenses due in respect
      of the notes and the other transaction documents.





9




Our
      failure to comply with our obligations relating to these securities also exposes
      us to default interest and liquidated damages claims by the note holders. As
      of
      December 31, 2007, we had incurred approximately $1,114,345 in default interest
      and liquidated damages under our secured convertible notes.




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).We do not currently have the cash on
      hand
      to repay amounts due under our secured convertible notes or other senior
      securities if the holders elect to exercise their repayment or other remedies.
      If our efforts to restructure or otherwise satisfy our obligations under the
      securities are unsuccessful , and
      we
      are unable to raise enough money to cover the amounts payable under the
      securities, we may be forced to restructure, file for bankruptcy, sell assets
      or
      cease operations.





***We
      expect to repay our secured convertible notes in shares of common stock valued
      at a discount of the common stock’s trading price which will result in a
      significant issuance of new shares of common stock to the note holders and
      cause
      material dilution to the then existing holders of our common
      stock.***





We
      expect
      to issue a significant number of shares of our common stock in payment of
      amounts due under our secured convertible notes during 2008 and thereafter.





In
      March,
      2008, we resumed making payments to certain of holders of our secured
      convertible notes of amounts due under the notes by issuing shares of our common
      stock under the terms of the notes. The initial payment was in the form of
      7,787,535 shares of the Company’s common stock in satisfaction of $172,595 of
      obligations due under the notes. This represents an issuance price of $.027
      per
      share (for the Series A Notes) and $.031 per share (for the Series B Notes).
      In
      general, the shares issued are available for immediate resale by the holders
      in
      accordance with Rule 144 under the Securities Act of 1933, as
      amended.





As
      of
      December 31, 2007, we had outstanding $4,193,819 principal amount of our Series
      A Notes and $6,550,452 principal amount of our Series B Notes, in each case,
      excluding accrued default interest and liquidated damages payable. To repay
      these amounts in shares of our common stock (utilizing the issuance prices
      from
      our March 2008 note repayment) we would have to issue 364,631,533 shares of
      our
      common stock.





In
      addition, if the trading price of our common stock decreases, the number of
      shares of common stock we would need to issue to satisfy our obligations under
      the notes could increase significantly, materially diluting the holdings of
      our
      then existing stockholders.





***There
      are a large number of shares of common stock underlying our senior securities
      that may be available for future sale and the sale of these shares may depress
      the market price of our common stock.***





As
      of
      December 31, 2007, we had outstanding $4,193,819 principal amount of our Series
      A Notes and $6,550,452 principal amount of our Series B Notes, in each case,
      excluding accrued default interest and liquidated damages payable. To repay
      these amounts in shares of our common stock (utilizing the issuance prices
      from
      our March 2008 note repayment) we would have to issue 364,631,533 shares of
      our
      common stock. In addition, we had outstanding (i) 522 shares of our series
      B
      convertible preferred stock (which were convertible into 67,354 shares of common
      stock), (ii) 5,202 shares of our series C convertible preferred stock (which
      were convertible into 51,180,286 shares of common stock), and (iii) warrants
      exercisable for 11,531,287 shares of common stock.





In
      general, any shares of common stock we issue in respect of our senior securities
      will be available for immediate resale by the holders in accordance with Rule
      144 under the Securities Act of 1933, as amended. In addition, we remain
      obligated to register the resale of additional shares of common stock issuable
      upon conversion of our senior securities, 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.




10




Sales
      of
      significant amounts of common stock in the public market, or the perception
      that
      such sales may occur, could materially decrease 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





***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 88.0% 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 57,516,276 shares (or 88.0%) 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.





***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;




11




·
            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 affect 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.





***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.





12





***We
      rely primarily on AT&T Mobility for the provision of GSM/GPRS data services
      to our REDIview customers and our inability to renew our agreements with
      AT&T Mobility 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 AT&T Mobility
      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 AT&T or by us for convenience upon 90 days prior
      written notice.





If
      AT&T 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.





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.




13




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.





***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 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 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.




14




***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.




***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.





***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, our financial condition, 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 and trading volume
      of our common stock has been highly volatile in recent periods and our common
      stock is often thinly traded.




15




***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.




**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.**




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.





In
      March
      2008, Teletouch Communications, Inc. brought a lawsuit against the Company
      alleging the Company was liable for payment of a $5.8 million default judgment
      obtained by Teletouch against DataLogic International, Inc., based on corporate
      alter ego and other claims (Teletouch Communications, Inc. dba Teletouch v.
      Remote Dynamics, Inc., Collin County, Texas District Court). 
  The Company believes that Teletouch’s claims are without
      merit.





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.





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




On
      October 8, 2007, our majority stockholder gave its signed written consent to
      action without a meeting (i) to approve an amendment to our Amended and Restated
      Certificate of Incorporation to authorize (after giving effect to the reverse
      stock split described below) 750,000,000 authorized shares of our common stock
      having a par value of $0.01 per share; (ii) to approve a one-for-fifty reverse
      stock split of our common stock; and (iii) to elect four directors of the
      Company to serve until the next annual meeting of stockholders or until their
      successors have been duly elected and qualified. These matters are described
      in
      our definitive Information Statement on Schedule 14C filed with the Securities
      and Exchange Commission on October 16, 2007.




**PART
      II**




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




Our
      Common Stock was initially offered to the public in June, 1995, and was quoted
      on the NASDAQ National Market until February, 1999, after which time it began
      trading on the NASDAQ SmallCap Market under the symbol “HWYM.” Our common stock
      next traded under the symbol “REDI” on the NASDAQ SmallCap Market until
      February, 2006, when began trading on the OTC Bulletin Board under the symbol
      “REDI.OB” following de-listing from the NASDAQ SmallCap Market. On November 20,
      2007, our symbol changed to “RDYM.OB” concurrent with the effectiveness of our
      1-for-50 reverse common stock split. 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.




16




BID
                PRICESHIGH
            
            LOW**2006**First
                Quarter
            
            $
            1.10
            
            $
            0.13Second
                Quarter
            
            $
            0.18
            
            $
            0.05Third
                Quarter
            
            $
            0.15
            
            $
            0.01Fourth
                Quarter
            
            $
            0.02
            
            $
            0.00**2007**First
                Quarter
            
            $
            1.90
            
            $
            0.10Second
                Quarter
            
            $
            0.27
            
            $
            0.07Third
                Quarter
            
            $
            0.27
            
            $
            0.07Fourth
                Quarter
            
            $
            0.50
            
            $
            0.02




There
      were 34 holders of record of our common stock as of March 11, 2008 **.** The last
      sale price for our common stock as reported on March 12, 2008 was $0.01.





We
      did
      not pay dividends on our common stock for the year ended December 31, 2007
      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.




**Item
      6.********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 fleets of vehicles and
      equipment. Our AVL solutions are designed for fleets within diverse industry
      vertical markets such as construction, field services, distribution, ,
      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.




17




We
      commercially introduced our next generation AVL product, REDIview, in 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 current business plan for 2008.
      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 business plan, we have completed a significant cost and operational-based
      restructuring, including rightsizing the workforce. We are focusing our efforts
      on enhancing the existing REDIview product line by adding new functionality
      in
      the areas of dispatching, security, and maintenance.




We
      have
      expanded our direct sales force to six people at the end of 2007 up from two
      people as of December 31, 2006. We also are in the process of implementing
      an
      indirect sales channel strategy. As a result of these sales efforts, we expect
      to achieve greater net activations in 2008 than in 2007.




As
      shown
      in the table below, we ended 2007 with 9,560 units in service representing
      an
      18% increase from the 8,122 units in service we had as of the end of
      2006.




**March
                31,**
              **2007**
            
            **June
                30,**
              **2007**
            
            **September 30,**
              **2007**
            
            **December 31,**
              **2007****Ending
                REDIview units**
            
            
            8,838
            
            
            9,226
            
            
            9,057
            
            
            9,560




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,
      88.0%
      of the voting power of our common stock outstanding, and beneficial ownership
      of
      approximately 61.3% 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.




*Results
      of Operations*




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





Revenues
      for 2007 totaled $4,721,000 compared to $663,000 for 2006. This 612% increase
      is
      attributable to the reverse merger transaction on December 4, 2006. The 2007
      results include operations of Remote Dynamics, Inc. and BounceGPS for the entire
      year. The 2006 results only include operations of Remote Dynamics, Inc. from
      December 4, 2006 to December 31, 2006 as well as BounceGPS for the entire year.
      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.




18




Total
      gross profit margin of 63% during 2007 increased from 3% during 2006. This
      60
      point increase is attributable to the reverse merger transaction on December
      4,
      2006. The 2007 results include operations of Remote Dynamics, Inc. and BounceGPS
      for the entire year. The 2006 results only include operations of Remote
      Dynamics, Inc. from December 4, 2006 to December 31, 2006 as well as BounceGPS
      for the entire year. Of the 63% gross profit margin, 16 percentage points or
      $752,000 represents amortization of the deferred performance obligation of
      our
      installed base related to the reverse merger transaction on December 4, 2006.
      5
      percentage points or $231,000 represents an accrued sales tax credit from
      AT&T related to overpayment of sales tax for the years 2005 to 2007. The
      Company expects gross profit margins of greater than 55% to continue through
      2008, which will include $588,000 of amortization of the deferred performance
      obligation mentioned above. This amortization is complete at the end of 2008
      and
      will not be incurred in 2009.





Total
      operating expenses increased from $1,490,000 during 2006 to $4,208,000 during
      2007. This 182% increase is attributable to the reverse merger transaction
      on
      December 4, 2006. The 2007 results include operations of Remote Dynamics, Inc.
      and BounceGPS for the entire year. The 2006 results only include operations
      of
      Remote Dynamics, Inc. from December 4, 2006 to December 31, 2006 as well as
      BounceGPS for the entire year. We recorded a $411,000 goodwill and intangible
      asset impairment charge during 2006. The goodwill and intangible assets impaired
      relate to certain assets of BounceGPS.




General
      and administrative expenses for 2007 totaled $1,766,000 compared to $495,000
      for
      2006. Sales and marketing expenses for 2007 totaled $774,000 compared to
      $317,000 for 2006. Engineering expenses for 2007 totaled $719,000 compared
      to
      $83,000 for 2006. These increases are primarily due to the 2006 results only
      including operations of Remote Dynamics, Inc. from December 4, 2006 to December
      31, 2006 as well as BounceGPS for the entire year. The 2007 results include
      the
      operations of Remote Dynamics, Inc. and BounceGPS for the entire year.
      Depreciation and amortization expense increased to $949,000 during 2007 from
      $184,000 during the prior year primarily due to the 2006 results only including
      operations of Remote Dynamics, Inc. from December 4, 2006 to December 31, 2006
      as well as BounceGPS for the entire year.




Interest
      expense totaled $4,757,000 for 2007 compared to $680,000 for 2006. The current
      year interest expense primarily relates to the accretion of the Series A Notes,
      Series B Notes, and the HFS Note in the amount of $2,628,000, $625,000, and
      $616,000, respectively, as well as $812,000 of default interest and liquidated
      damages on the Series A and Series B Notes and $85,000 amortization of deferred
      financing fees.





Interest
      income totaled $103,000 for 2007 compared to $21,000 for 2006. The current
      year
      interest income primarily relates to interest on internally financed leases
      from
      customers of our REDIview and legacy products.





We
      recorded a loss on the extinguishment of debt totaling $341,000 for 2007 for
      the
      exchange of Series A Notes into Series B Notes and the exchange of the HFS
      Note
      into Series B Notes. We also recorded a loss on the extinguishment of redeemable
      preferred stock totaling $363,000 for 2007 for the exchange of Series B
      preferred stock into Series B Notes. During 2006, we recorded a loss on the
      extinguishment of debt totaling $558,000 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.





Other
      income totaled $383,000 for 2007 versus $-0- for 2006. The 2007 other income
      is
      primarily due to the reversal of a legal accrual of $230,000 and gains from
      creditor resolution settlements of $83,000.





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





Revenues
      for 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,




19




Total
      gross profit margin of 3.3% during 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 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 certain assets of BounceGPS. 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 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 2006 totaled $495,000 compared to $101,000
      for
      2005. Sales and marketing expenses for 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 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.





***Adjusted
      EBITDA Presentation***





EBITDA
      represents net income (loss) before interest, taxes, depreciation and
      amortization, and in the case of Adjusted EBITDA, before goodwill impairment,
      gains or losses on the extinguishment of debt and preferred stock, restructuring
      charges and other non-operating costs. EBITDA is not a measurement of
      financial performance under GAAP. However, we have included data with respect
      to
      EBITDA because we evaluate and project the performance of our business using
      several measures, including EBITDA. The computations of Adjusted EBITDA for
      the year ended December 31, 2007 and 2006 are as follows.





**March 31,**
              **2006**
            
            **June 30,**
              **2006**
            
            **September 30,**
              **2006**
            
            **December 31,**
              **2006**
            
            **2006**Net
                loss
            
            $
            -
            
            $
            (11
            )
            $
            (279
            )
            $
            (2,516
            )
            $
            (2,806
            )Add
                non-EBITDA items included in net results:Depreciation
                and amortization
            
            
            -
            
            
            -
            
            
            8
            
            
            176
            
            
            184Interest
                expense, net
            
            
            -
            
            
            -
            
            
            (7
            )
            
            666
            
            
            659Non-recurring
                reversal of legal accrual
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Goodwill
                impairment
            
            
            -
            
            
            -
            
            
            -
            
            
            411
            
            
            411Loss
                on debt extinguishment
            
            
            -
            
            
            -
            
            
            -
            
            
            558
            
            
            558Loss
                on redeemable preferred stock extinguishment
            
            
            -
            
            
            -
            
            
            -
            
            
            121
            
            
            121Adjusted
                EBITDA
            
            $
            -
            
            $
            (11
            )
            $
            (278
            )
            $
            (584
            )
            $
            (873
            )




20




**March 31,**
              **2007**
            
            **June 30,**
              **2007**
            
            **September 30,**
              **2007**
            
            **December 31,**
              **2007**
            
            **2007**Net
                loss
            
            $
            (2,164
            )
            $
            (1,879
            )
            $
            (1,597
            )
            $
            (581
            )
            $
            (6,221
            )Add
                non-EBITDA items included in net results:Depreciation
                and amortization
            
            
            262
            
            
            260
            
            
            213
            
            
            214
            
            
            949Interest
                expense, net
            
            
            1,425
            
            
            1,379
            
            
            1,357
            
            
            491
            
            
            4,652Non-recurring
                reversal of legal accrual
            
            
            (230
            )
            
            -
            
            
            -
            
            
            -
            
            
            (230
            )Goodwill
                impairment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Loss
                on debt extinguishment
            
            
            234
            
            
            107
            
            
            -
            
            
            -
            
            
            341Loss
                on redeemable preferred stock extinguishment
            
            
            363
            
            
            -
            
            
            -
            
            
            -
            
            
            363Adjusted
                EBITDA
            
            $
            (110
            )
            $
            (133
            )
            $
            (27
            )
            $
            124
            
            $
            (146
            )




We
      consider adjusted EBITDA to be an important supplemental indicator of our
      operating performance, particularly as compared to the operating performance
      of
      our competitors, because this measure eliminates many differences among
      companies in financial, capitalization and tax structures, capital investment
      cycles and ages of related assets, as well as certain recurring non-cash and
      non-operating items. We believe that consideration of EBITDA should be
      supplemental, because EBITDA has limitations as an analytical financial measure.
      These limitations include the following: EBITDA does not reflect our cash
      expenditures, or future requirements for capital expenditures or contractual
      commitments; EBITDA does not reflect the interest expense, or the cash
      requirements necessary to service interest or principal payments, on our
      indebtedness; although depreciation and amortization are non-cash charges,
      the
      assets being depreciated and amortized will often have to be replaced in the
      future, and EBITDA does not reflect any cash requirements for such replacements;
      EBITDA does not reflect the effect of earnings or charges resulting from matters
      we consider not to be indicative of our ongoing operations; and not all of
      the
      companies in our industry may calculate EBITDA in the same manner in which
      we
      calculate EBITDA, which limits its usefulness as a comparative
      measure.





Management
      compensates for these limitations by relying primarily on its GAAP results
      to
      evaluate its operating performance and by considering independently the economic
      effects of the foregoing items that are not reflected in EBITDA. As a result
      of
      these limitations, EBITDA should not be considered as an alternative to net
      income (loss), as calculated in accordance with generally accepted accounting
      principles, as a measure of operating performance, nor should it be considered
      as an alternative to cash flows as a measure of liquidity.





Further,
      we realize that effective analysis of our operations with an approach of
      comparing results for a current period with the results of a corresponding
      prior
      period may be difficult due to our December 2006 reverse merger transaction
      and
      security issuances that we have completed.




*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 $228,000 as of
      December 31, 2007 (compared to $121,000 as of December 31, 2006).




Net
      cash
      used in operations in 2007 was $887,000, primarily due to a net loss of $6.2
      million offset by accretion of notes payable $3,871,000, loss on extinguishment
      of debt of $341,000, loss on extinguishment of redeemable preferred stock of
      $363,000, increase in accounts payable of $280,000, and depreciation and
      amortization of $1,035,000. 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 investing activities in 2007 was $1,000 versus $346,000 in 2006. The
      decrease can be primarily attributed to the acquisition of certain operating
      assets in 2006.




21




Net
      cash
      provided by financing activities in 2007 was $995,000, primarily due to the
      net
      proceeds of the Series B Note offering of $982,000. Net cash provided by
      financing activities in 2006 was $1,178,000, primarily due to the net proceeds
      from the Series B Note 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.




We
      do not
      expect to achieve profitability in 2008. 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 2008 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 for 2008. 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 fourth quarter of 2008.





We
      had a
      working capital deficit of $3.1 million, excluding the gross amount of our
      outstanding secured convertible notes of $10.7 million, as of December 31,
      2007.
      We believe that we will have sufficient capital to fund our ongoing operations
      through 2008, 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. In 2007, we received proceeds of $982,000 from closing
      under
      our Series B Note financing. The final closing of the Series B Note financing
      (which would provide us with gross proceeds of $238,500) would 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, subject to certain
      other conditions being satisfied, including no material adverse effect on our
      business, operations, properties, prospects, or financial condition having
      occurred. We currently do not expect to satisfy the conditions to the final
      closing of the Series B Note financing. As a result, unless the investors agree
      to waive such conditions, we do not expect to receive any additional proceeds
      from the financing.




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.




The
      following table summarizes our secured convertible notes payable by maturity
      dates as of December 31, 2007 (in 000’s) (as we currently are not in compliance
      with certain of our obligations relating to the Series A and B Notes, we
      classify the secured convertible notes payable as a current liability on our
      balance sheet):




Principal
            
            Less
              Discount
            
            Carrying
              AmountFiscal
                Year ending December 31, 2007
            
            $
            4,941
            
            $
            635
            
            $
            4,306Fiscal
                Year ending December 31, 2008
            
            $
            3,377
            
            $
            729
            
            $
            2,648Fiscal
                Year ending December 31, 2009
            
            $
            2,425
            
            $
            571
            
            $
            1,854$
            10,743
            
            $
            1,935
            
            $
            8,808




22







Approximately
      $2,669,891 in principal amount of our outstanding Series A Notes have reached
      their maturity date and are due and payable. In February, 2008, holders of
      $1,523,928 principal amount of the Series A Notes agreed to extend the principal
      payment schedule and maturity date of the notes until August 31, 2009. As
      extended, payments under the notes will be due on a monthly basis (subject
      to
      deferral at the holder’s option) and may be made in the form of shares of our
      common stock eligible for resale pursuant to Rule 144 under the Securities
      Act
      of 1933, as amended.





We
      have
      failed to comply with certain of our other obligations relating to the notes,
      including our failure to make scheduled principal payments and to register
      for
      resale the shares of common stock underlying the notes and warrants issued
      in
      the related private placements. The notes provide for a default interest rate
      of
      10% per annum on the outstanding principal amount of the notes for periods
      in
      which certain specified events of default occur and are continuing and for
      liquidated damages for non-compliance with our registration obligations. As
      of
      December 31, 2007, we have accrued $1,114,354 in default interest and liquidated
      damages under our secured convertible notes.





Our
      non-compliance with the terms of the notes also exposes to the risk that our
      note holders could seek to exercise prepayment or other remedies under the
      notes.





In
      March,
      2008, we resumed making payments to certain of our note holders of amounts
      due
      under the notes by issuing shares of our common stock under the terms of the
      notes. We expect to issue additional shares of our common stock in payment
      of
      amounts due under the notes during the remainder of 2008 and thereafter.





We
      do not
      currently have the cash on hand to repay amounts due under our secured
      convertible notes if the note holders elect to exercise their repayment or
      other
      remedies. If our efforts to restructure or otherwise satisfy our obligations
      under the notes are unsuccessful , and
      we
      are unable to raise enough money to cover the amounts payable under the notes,
      we may be forced to restructure, file for bankruptcy, sell assets or cease
      operations.




***Outstanding
      Debt, Preferred Securities and Warrants***




*Series
      A Notes*




As
      of
      December 31, 2007 we had $4,193,819 principal amount of our Series A Notes
      outstanding. The
      Series A Notes matured on February 23, 2008 and are currently due and payable. The Series
      A
      Notes are secured by substantially all of the our assets. The Series A Notes
      are
      convertible at the option of the holder into our common stock at a fixed
      conversion price of $0.32, 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. We may make scheduled 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 eighty percent (80%) of the average of the closing bid price for the ten
      (10)
      trading days immediately preceding the principal payment date.




Upon
      the
      occurrence of specified events of default on the Series A Notes, the holders
      may
      (a) demand
      prepayment of the notes as described below, (b) demand that the principal amount
      of the notes then outstanding be converted into shares of our common stock;
      and/or (c) 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 to 120% of the principal amount
      of the notes. The holders would also recover all other costs or expenses due
      in
      respect of the notes and the other transaction documents.




23




*Series
      B Notes*





As
      of
      December 31, 2007 we had $6,550,452 principal amount of our Series B Notes
      outstanding. 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 began scheduled
      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 lesser of (i) $1.00 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 a
      conversion price of $0.32 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.





Upon
      the
      occurrence of specified events of default on the Series B Notes, the holders
      may
      (a) demand
      prepayment of the notes as described below, (b) demand that the principal amount
      of the notes then outstanding be converted into shares of our common stock;
      and/or (c) 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 to 120% of the principal amount
      of the notes. The holders would also recover all other costs or expenses due
      in
      respect of the notes and the other transaction documents.





*Series
      B Preferred Stock*




The
      series B convertible preferred stock issued to SDS in connection with our 2005
      financing has a face amount of $10,000 per share ($5,220,000 in the aggregate),
      ranks senior to our series C convertible preferred stock and our common stock
      with respect to payment of amounts upon any liquidation, dissolution or winding
      up of the Company, and is entitled to receive non-cumulative dividends in an
      amount equal to 3% per year when, as and if declared by our Board of Directors.




The
      series B convertible preferred stock is convertible into common stock at a
      conversion price of $77.50 per share, subject to adjustment for stock splits
      and
      combinations, and certain dividends and distributions,




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.




24




The
      series B 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 B convertible preferred stock, voting as a separate
      class, have the right to appoint one member of our Board of Directors and 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.




*Series
      C Preferred Stock*




The
      series C convertible preferred stock issued to BMSI in connection with our
      acquisition of BounceGPS has a face amount of $1,000 per share ($5,220,000
      in
      the aggregate), ranks junior to our series B convertible preferred stock and
      senior to our 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 was 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 and outstanding
                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;




25




·
            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.




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).




*Warrants*





As
      of
      December 31, 2007, we had outstanding the following common stock purchase
      warrants:





·
            Series A-7
                warrants to purchase 412,500 shares of common stock at an exercise
                price
                of $0.32 per sharesubject 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 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 (38,000
                of
                these warrants are exercisable over 5
                years).





·
            Series B-4
                warrants to purchase 275,000 shares of common stock at an exercise
                price
                of $0.32 per sharesubject 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 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 (26,000 of these
                warrants are exercisable over 5
                years).




26




·
            Series C-3
                warrants to purchase 550,000 shares of common stock at an exercise
                price
                of $0.32 per sharesubject 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 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. 50,000
                of
                these warrants are exercisable over 5
                years.





·
            Series
                D-1 warrants (callable only at our option) to purchase 385,000 shares
                in
                the aggregate of common stock at an exercise price per share equal
                to the
                lesser of: (a) $17.50 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.





·
            Series
                E-7 Warrants to purchase 4,571,456 shares of common stock at an exercise
                price of $1.00 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 series E-7 warrants are exercisable
                for a
                seven-year period from the date of issuance.





·
            Series
                F-4 Warrants to purchase 4,571,456 shares of common stock at an exercise
                price of $1.50 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 series 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
                following warrants issued to SDS in connection with our 2005 financings:
                (i) a common stock purchase warrant with a 5-year term to purchase
                33,000
                shares of common stock at an exercise price of $87.50 per share and
                (ii) a
                common stock purchase warrant with a 5-year term to purchase 40,000
                shares
                at an exercise price of $0.50 per
                share.





·
            Warrants
                issued to the placement agents in our Series A Note financing to
                purchase
                50,000 shares of common stock at an exercise price per share equal
                to
                $0.32 with a term of 5 years following the
                closing.





·
            Warrants
                issued to the placement agents in our Series B Note financing to
                purchase
                246,656 shares of common stock at an exercise price per share equal
                to
                $0.32 with a term of 5 years following the
                closing.




27




**Contractual
      Obligations**




The
      following summarizes the Company’s significant financial commitments at December
      31, 2007:


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
              
              $
              4,193
              
              $
              4,193
              
              $
              -
              
              $
              -
              
              $
              -Obligations
                  under Series B Note and WarrantPrincipal
                  Payments - Notes & OID
              
              
              6,550
              
              
              6,550
              
              
              -
              
              
              -
              
              
              -Default
                  Penalties & Interest - Series A Notes
              
              
              717
              
              
              717Default
                  Penalties & Interest - Series B Notes
              
              
              397
              
              
              397Capital
                  Lease Obligations
              
              
              37
              
              
              26
              
              
              11
              
              
              -
              
              
              -Operating
                  Leases
              
              
              73
              
              
              59
              
              
              14
              
              
              -
              
              
              -Note
                  Payable - Related Parties
              
              
              250
              
              
              250
              
              
              -
              
              
              -
              
              
              -Total
              
              $
              12,217
              
              $
              12,192
              
              $
              25
              
              $
              -
              
              $
              -




**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 legacy
      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.





*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.





*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





*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 b e
      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, 2007 and 2006.




*Beneficial
      Conversion Feature*





From
      time
      to time, the Company has debt with conversion options that provide for a rate
      of
      conversion that is below market value. This feature is normally characterized
      as
      a beneficial conversion feature ("BCF"), which is recorded by the Company
      pursuant to Emerging Issues Task Force (“EITF”) Issue No. 98-5 ("EITF 98-5"), *Accounting
      for Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios,* and EITF
      Issue No. 00-27, *Application
      of EITF Issue No. 98-5 to Certain Convertible Instruments.* If a BCF
      exists, the Company records it as a debt discount. Debt discounts are amortized
      to interest expense over the life of the debt on a straight-line basis, which
      approximates the effective interest method.




29




*Issuance
      of Shares for Non-Cash Consideration*




The
      Company accounts for the issuance of equity instruments to acquire goods and/or
      services based on the fair value of the goods and services or the fair value
      of
      the equity instrument at the time of issuance, whichever is more reliably
      determinable. The Company's accounting policy for equity instruments issued
      to
      consultants and vendors in exchange for goods and services follows the
      provisions of EITF Issue No. 96-18, *Accounting
      for Equity Instruments That are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling, Goods or Services* and EITF
      Issue No. 00-18, *Accounting
      Recognition for Certain Transactions Involving Equity Instruments Granted to
      Other Than Employees.* The
      measurement date for the fair value of the equity instruments issued is
      determined at the earlier of (i) the date at which a commitment for performance
      by the consultant or vendor is reached or (ii) the date at which the consultant
      or vendor's performance is complete. In the case of equity instruments issued
      to
      consultants, the fair value of the equity instrument is recognized over the
      term
      of the consulting agreement.




*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.





**Impact
      of Recently Issued Accounting Standards**




**Financial
      Accounting Standards No. 155 (“FAS 155”)** .
      In
      February 2006, the FASB issued FAS 155, “Accounting for Certain Hybrid Financial
      Instruments,” an amendment of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”) and
      Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing
      of Financial Assets and Extinguishments of Liabilities” (“FAS 140”). With
      respect to FAS 133, FAS 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 FAS 133. With
      respect to FAS 140, FAS 155 eliminates a restriction on the passive derivative
      instruments that a qualifying special-purpose entity may hold. FAS 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. The
      adoption of FAS 155 did not have a material impact on the Company’s financial
      condition or results of operations.




30




**FASB
      Interpretation No. 48 (“FIN 48”)** .
      In July
      2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes” which
      prescribes a recognition threshold and measurement process for recording in
      the
      financial statements uncertain tax positions taken or expected to be taken
      in a
      tax return. Additionally, FIN 48 provides guidance on derecognition,
      classification, accounting in interim periods and disclosure requirements for
      uncertain tax positions. The adoption of FIN 48 did not have a material impact
      on the Company’s financial condition or results of operations.




**Financial
      Accounting Standards No. 156 (“FAS 156”)** .
      In
      March 2006, the FASB issued FAS 156, “Accounting for Servicing of Financial
      Assets - an amendment of FASB Statement No. 140” (“FAS 156”). This
      Statement amends FAS 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.
      FAS 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. The adoption of FAS 156 did not have a material impact on the
      Company’s financial condition or results of operations.




**Financial
      Accounting Standards No. 157 (“FAS 157”).** In
      September 2006, the FASB issued FAS 157, “Fair Value Measurements.” FAS 157
      defines fair value, established a framework for measuring fair value in
      generally accepted accounting principles (GAAP) and expands disclosures about
      fair value measurements. FAS 157 is effective for financial statements issued
      for fiscal years beginning after November 15, 2007. We do not expect the
      adoption of FAS 157 to significantly affect our financial condition or results
      of operations.




**Financial
      Accounting Standards No. 159 (“FAS 159”)** In
      February 2007, the FASB issued FAS  159, The Fair Value Option for
      Financial Assets and Financial Liabilities, or FAS 159. FAS 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. FAS 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 FAS 157 are applied. We will adopt FAS 159 on
      January 1, 2008. We are evaluating FAS 159 and have not yet determined the
      impact the adoption, if any, will have on our consolidated financial statements.





**Financial
      Accounting Standards No. 141 (R) (“FAS 141”)**  In
      December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS
      No.
      141(R) establishes principles and requirements for how an acquirer recognizes
      and measures in its financial statements the identifiable assets acquired,
      the
      liabilities assumed, and any non-controlling interest in the acquiree and
      recognizes and measures the goodwill acquired in the business combination or
      a
      gain from a bargain purchase.  SFAS No. 141(R) also sets forth the
      disclosures required to be made in the financial statements to evaluate the
      nature and financial effects of the business combination. SFAS No. 141(R)
      applies prospectively to business combinations for which the acquisition date
      is
      on or after the beginning of the first annual reporting period beginning on
      or
      after December 15, 2008. Accordingly, the Company will adopt this standard
      in
      fiscal 2009.  The Company is currently evaluating the potential impact
      of the adoption of SFAS 141(R) on its consolidated financial
      statements.





**Financial
      Accounting Standards No. 160 (R) (“FAS 160”)**  In
      December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
      Consolidated Financial Statements, an amendment of ARB No. 51. SFAS 160
      will change the accounting and reporting for minority interests, which will
      be
      recharacterized as non-controlling interests (NCI) and classified as a component
      of equity. This new consolidation method will significantly change the
      accounting for transactions with minority interest
      holders.  SFAS 160 requires retroactive adoption of the
      presentation and disclosure requirements for existing minority interests. All
      other requirements of SFAS 160 shall be applied
      prospectively.  SFAS 160 is effective for fiscal years beginning
      after December 15, 2008 and, as such, the Company will adopt this standard
      in fiscal 2009.  The Company is currently evaluating the potential
      impact of the adoption of SFAS 160 on its consolidated financial
      statements.




31




**Off-Balance
      Sheet Arrangements**




As
      of
      December 31, 2007, we did not have any significant off-balance sheet
      arrangements, as defined in Item 303(c)(2) of Regulation S-B.




**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.





**Item
      7.********Financial
      Statements.**




The
      information required by this item is included on pages F-1 through
      F-6.




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




On
      March 23, 2007, upon approval of our Audit Committee, we dismissed KBA
      Group LLP (“KBA”) as our 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, our Audit Committee engaged Chisholm,
      Bierwolf & Nilson, LLC as our
      new independent registered public accounting firm.





**Item
      8A.********Controls
      and Procedures**




We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our reports made
      pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”). is
      recorded, processed, summarized and reported within the timelines specified
      in
      the Securities and Exchange Commission’s rules and forms, and that such
      information is accumulated and communicated to our management, including our
      Chief Executive Officer and Principal Financial Officer, as appropriate, to
      allow timely decisions regarding required disclosure. In designing and
      evaluating the disclosure controls and procedures, management recognized that
      any controls and procedures, no matter how well designed and operated, can
      only
      provide reasonable assurance of achieving the desired control objectives, and
      in
      reaching a reasonable level of assurance, management necessarily was required
      to
      apply its judgment in evaluating the cost-benefit relationship of possible
      controls and procedures.




As
      required by Rule 13a-15(b) under the Exchange Act, we carried out an
      evaluation, under the supervision and with the participation of our management,
      including our Chief Executive Officer and Principal Financial Officer, of the
      effectiveness of the design and operation of our disclosure controls and
      procedures as of the end of the year covered by this report. Based on the
      foregoing, our Chief Executive Officer and Principal Financial Officer concluded
      that our disclosure controls and procedures were not
      effective as of the end of period covered by this report in timely alerting
      them
      to material information relating to Remote Dynamics, Inc. required to be
      disclosed in our periodic reports with the Securities and Exchange Commission.
      As a result of this conclusion, we have initiated the remedial actions disclosed
      below.




32




**Management’s
      Report on Internal Control Over Financial Reporting**




Our
      Chief Executive Officer and Principal Financial Officer, are responsible for
      establishing and maintaining adequate internal control over financial reporting,
      as such term is defined in Rule 13a-15(f) of the Exchange Act.




Internal
      control over financial reporting is promulgated under the Exchange Act as a
      process designed by, or under the supervision of, our Chief Executive Officer
      and Principal Financial Officer and effected by our board of directors,
      management and other personnel, to provide reasonable assurance regarding the
      reliability of financial reporting and the preparation of financial statements
      for external purposes in accordance with generally accepted accounting
      principles and includes those policies and procedures that:




•
              Pertain to the maintenance of
      records that in reasonable detail accurately and fairly reflect the transactions
      and dispositions of our assets;




•        Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with accounting principles
      generally accepted in the United States and that our receipts and expenditures
      are being made only in accordance with authorizations of our management and
      directors; and




•        Provide
      reasonable assurance regarding prevention or timely detection of unauthorized
      acquisition or disposition of our assets that could have a material effect
      on
      the financial statements.




Readers
      are cautioned that internal control over financial reporting, no matter how
      well
      designed, has inherent limitations and may not prevent or detect misstatements.
      Therefore, even effective internal control over financial reporting can only
      provide reasonable assurance with respect to the financial statement preparation
      and presentation.




Our
      management, under the supervision and with the participation of our Chief
      Executive Officer and Principal Financial Officer, has evaluated the
      effectiveness of our internal controls over financial reporting as of the end
      of
      the period covered by this report based upon the framework in Internal
      Control—Integrated Framework issued by the Committee of Sponsoring Organizations
      of the Treadway Commission (COSO).




As
      a result of this evaluation, , we identified a material weakness in our internal
      controls over financial reporting relating to the compliance of certain related
      party transactions to the Sarbanes-Oxley Act.




A
      material weakness is a control deficiency, or a combination of control
      deficiencies, that results in a more than remote likelihood that a material
      misstatement of the Company’s annual or interim financial statements will not be
      prevented or detected. Management has concluded that material weaknesses existed
      in the following areas with respect to compliance with Section 402 of the
      Sarbanes Oxley Act as of December 31, 2007:




·
            On
                November 14, 2007, BounceGPS loaned $21,875 to BMSI. Interest accrued
                at
                an annual rate of 10%. David Walters, Chairman, is also the Chairman
                and
                Chief Executive Officer of BMSI and beneficially owns a majority
                of the
                outstanding common stock of BMSI. We received payment in full, including
                interest of $729 in March 2008.




·
            On
                December 26, 2007, BounceGPS loaned $22,000 to Monarch Staffing,
                Inc. and
                $25,000 to a subsidiary of Monarch Staffing, Inc. Interest accrued
                at an
                annual rate of 10%. David Walters (our Chairman) is also the Chairman
                of
                Monarch Staffing and beneficially owns 41% of the outstanding common
                stock
                of Monarch Staffing. David Walters (a member of our Board of Directors)
                is
                also a director of Monarch Staffing and beneficially owns 41% of
                the
                outstanding common stock of Monarch Staffing. Keith Moore (a Director)
                is
                also a Director of Monarch Staffing and beneficially owns 41% of
                the
                outstanding common stock of Monarch Staffing. We received payment
                in full,
                including interest of $1,175 in March 2008.




33




The
      following remedial actions have been undertaken:




·
            The
                company now requires that the independent members of our board of
                directors approve all related party transactions prior to occurring
                and
                ensure appropriate preventative controls are in
                place.




Prior
      to
      presenting any related party transactions to the Board of Directors for
      approval, management of the Company will submit such transaction to securities
      law counsel for review to ensure compliance with applicable securities
      law.




Remote
      Dynamics, Inc. continues the process to complete a thorough review of its
      internal controls as part of its preparation for compliance with the
      requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404
      requires our management to report on, and our external auditors to attest to,
      the effectiveness of our internal control structure and procedures for financial
      reporting. As a non-accelerated filer under Rule 12b-2 of the Exchange Act,
      our
      first report under Section 404 as a smaller reporting company will be contained
      in our Form 10-K for the period ended December 31, 2009.




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




Despite
      these material weaknesses, management believes that the consolidated financial
      statements are fairly stated in all material respects as of and for the year
      ended December 31, 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, 2007, 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:




(i)
            
            On
                February 16, 2007, Gary Hallgren was appointed as Chief Executive
                Officer
                and Greg Jones was appointed as Senior Vice President,
                Operations;(ii)
            
            On
                February 23, 2007, Neil Read resigned from his position as Chief
                Financial
                Officer;(iii)
            
            On
                April 3, 2007, Marshall G. Saffer resigned from his position as
                director;(iv)
            
            On
                November 20, 2007, Thomas W. Friedberg joined our Board of
                Directors.




**Item
      8B.********Other
      Information**




Not
      applicable.




34




**PART
      III**




**Item
      9.********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
            45
            Director,
                ChairmanKeith
                Moore
            47
            Director,
                SecretaryDennis
                Ackerman
            60
            DirectorThomas
                Friedberg
            48
            DirectorGary
                Hallgren
            39
            Chief
                Executive OfficerGreg
                Jones
            42
            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 Bounce Mobile
      Systems, Inc., since July 2006. Since February 2000, he has served as a managing
      member of Monarch Bay Capital Group, LLC, a consulting company, and since March
      2006 as a managing member of Strands Management Company, LLC, also a consulting
      company. Since April 2006, he has served as a managing member of Monarch Bay
      Associates, LLC, a FINRA registered firm. Mr. Walters has extensive experience
      in investment management, corporate growth development strategies and capital
      markets. From October 1992 through July 2000, he served as executive vice
      president and managing director in charge of Capital Markets for Roth Capital
      (formerly Cruttenden Roth, "Roth"). As an equity partner and a key senior
      management member, he was instrumental in building the company's revenues from
      $7 million to $65 million. He managed the capital markets group and led over
      100
      financings (public and private), raising over $2 billion in growth capital.
      Mr.
      Walters sat on Roth's Board of Directors from 1994 through 2000. Previously,
      Mr.
      Walters has served as a vice president for both Drexel Burnham Lambert and
      Donaldson Lufkin and Jenrette in Los Angeles, and has run a private equity
      investment fund. 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 STI Group, 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
      has served his entire career founding, growing and financing technology and
      service companies. He is a managing member of Strands Management Company, LLC
      and Monarch Bay Associates, LLC. Throughout his career Mr. Moore has served
      in
      various executive capacities for micro-cap to Russell 1000 companies, including
      Activision, Inc., DataLogic International, Inc., POPcast Communications Corp.,
      and Cinemaware, Inc. Mr. Moore has raised over $100 million for these
      organizations and has grown collective revenues in excess of $600 million.
      From
      1996 through December 2007, Mr. Moore served in Chief Executive and other
      executive capacities for DataLogic International, Inc., Service Advantage
      International, Inc., POPcast Communications Corp., Cinemaware, Inc. and
      iTechexpress, Inc., overseeing their respective strategic growth and capital
      raises. From 1991 through 1996, Mr. Moore served as President, Chief Operating
      Officer, Chief Financial Officer, Director and Consultant of Activision, Inc.
      (NASDAQ: ATVI), recognized as the international market leader in videogames
      and
      multimedia software. Mr. Moore is a founder of International Consumer
      Technologies Corp. and was Vice President, Chief Financial Officer and Director
      since its inception in July 1986 until its merger into Activision in December
      1991. Mr. Moore currently serves on the Board of Directors of Monarch Staffing,
      Inc., KG3, Inc. and Service Advantage International, Inc. Mr. Moore also serves
      on the Mission Hospital Foundation Executive Committee and Board of Directors.
      Mr. Moore earned a B.S. in Accounting and a Masters in Finance from Eastern
      Michigan University.




35




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





Mr. Ackerman
      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.





**THOMAS
      FRIEDBERG — Director since November 20, 2007.**





Thomas
      W.
      Friedberg has been President of Mineral King Partners, LLC (and its predecessor
      TWF Consulting), a strategic consulting firm that provides competitive
      benchmarking, competitive and strategic financial analysis, and valuation
      services since 2004. Previously, Mr. Friedberg advised various technology
      companies, automobile salvage processors, specialty financial institutions,
      and
      telecommunications service providers, with an emphasis on wireless providers,
      for more than twenty years at firms such as Hambrecht & Quist, Piper
      Jaffray, and Tucker Anthony Sutro, and as a partner at Genesis Merchant Group
      Securities. Mr. Friedberg also served as Director of Investor Relations and
      Strategic Financial Analysis at US WEST NewVector Group, US WEST’s former
      publicly traded cellular and paging subsidiary where he directed the financial
      aspects and analysis of all merger and acquisitions undertaken by the Company.
      Mr. Friedberg received his MBA from the Wharton School at the University of
      Pennsylvania and BA and BS degrees from Stanford University. From 1999 to 2007,
      Mr. Friedberg served on the Governor’s Commission on Science and Technology for
      the State of Colorado at the appointment of Governor Bill Owens. Mr. Friedberg
      is a member of the Board of Directors of Systems Evolution, Inc., Monarch
      Staffing, Inc. and STI Group, Inc. Since
      March 2007, Mr. Friedberg has also been an independent FINRA-registered
      representative associated with Monarch Bay Associates, LLC.  MBA provides
      placement agent and other investment banking services to us.  See “CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS”.  Mr. Friedberg does not perform
      any services related to MBA’s engagement by us and does not have any direct or
      indirect pecuniary interest in MBA’s engagement by us.




**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 39, 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.





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





Mr. Jones,
      age 42, 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.




36




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 four board members: David Walters, Keith
      Moore, Dennis Ackerman, and Thomas Friedberg. 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, Dennis Ackerman, and Thomas
      Friedberg.   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.





**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.




37




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, 2007, except that BMSI filed three late Form 4
      reports, David Walters filed two late Form 4 reports, Keith Moore filed one
      late
      Form 4 report, Gary Hallgren filed one late Form 3 report and Greg Jones filed
      one late Form 3 report.





**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
            
            $
            12,000
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            12,000Dennis
                Ackerman
            
            
            12,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            12,000Keith
                Moore
            
            
            12,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            12,000Thomas
                Friedberg
            
            
            1,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,000Marshall
                Saffer (former)
            
            
            3,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,000




Current
      directors Dennis Ackerman, David Walters, Keith Moore, and Thomas Friedberg
      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.




38




**Item
      10.** **** **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 2007.


**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
                ($)Gary
                  Hallgren, Chief Executive Officer
              
              
              2007
              
              $
              146,913
              
              $
              21,872
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -(1
              )
              $
              168,785Greg
                  Jones, Senior Vice President, Operations
              
              
              2007
              
              
              136,229
              
              
              10,500
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -(2
              )
              
              146,729


(1)  Mr.
      Hallgren became our Chief Executive Officer effective February 16,
      2007.




(2)  Mr.
      Jones
      became our Senior Vice President, Operations effective February 16,
      2007.




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 ($)Gary
                  Hallgren, Chief Executive Officer
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Greg
                  Jones, Senior Vice President, Operations
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -




**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 $15,500,
      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
      December 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).




39




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 receives
      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).




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 receives a cash draw of $1,000 per month as an advance
      against payments under such bonus programs.





*Compensation
      Committee Interlocks and Insider Participation*





Due
      to
      the limited number of directors constituting our Board of Directors and there
      being no members of our executive team serving on the Board, we elected to
      suspend the operation of our Compensation Committee effective June 1, 2007.
      As a
      result, the full Board of Directors considers and participates in the
      compensation of our executive officers.




**Item
      11.********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 12, 2008





·
            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.


****
                ****
                ****
                ****
                **Beneficial Ownership**
                  **Number of Shares**
                ****
                ****
                ******Name and Address of**
                ****
                **Nature of**
                ****
                ****
                ****
                **Series B**
                ****
                **Series C**
                ****
                ****
                ****
                **Percent of**
                ******Beneficial Owner (1)**
                ****
                **Beneficial Owner (1)**
                ****
                **Common Stock**
                ****
                **Preferred Stock**
                ****
                **Preferred Stock**
                ****
                **Total**
                ****
                **Total (2)**Bounce
                    Mobile Systems, Inc.
                
                Stockholder
                
                
                10,246,875
                
                
                -
                
                
                57,516,276
                
                
                67,763,151
                **(3)**
                
                61.25
                %30950
                    Rancho Viejo Rd. #120San
                    Juan Capistrano, CA 92675Dennis
                    Ackerman
                
                Director
                
                
                25,018
                
                
                -
                
                
                -
                
                
                25,018
                **(4)**
                
                
                *Keith
                    Moore
                
                Director
                
                
                312,500
                
                
                -
                
                
                -
                
                
                312,500
                **(5)**
                
                
                *David
                    Walters
                
                Chairman and Director
                
                
                10,559,375
                
                
                -
                
                
                57,516,276
                
                
                68,075,651
                **(6)**
                
                61.53
                %Gary
                    Hallgren
                
                Chief Executive Officer
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Greg
                    Jones
                
                Senior VP, Operations
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -All
                    executive officers anddirectors
                    as a group(5
                    persons)
                
                
                
                
                
                10,896,893
                
                
                -
                
                
                57,516,276
                
                
                68,413,169
                
                
                61.84
                %


40




*
      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) 7,787,535 shares of common stock,
      (b) 522 shares of our series B convertible preferred stock (which were
      convertible into 67,355 shares of common stock), (c) 5,202 shares of our series
      C convertible preferred stock (which were convertible into 57,516,276 shares
      of
      common stock), (d) $4,070,478 principal amount of our series A senior secured
      convertible promissory notes (which were convertible into 12,720,244 shares
      of
      common stock), (e) $6,494,026 principal amount of our series B subordinated
      secured convertible promissory notes (which were convertible into 20,293,831
      shares of common stock), (f) series A-7 warrants exercisable for 412,500 shares
      of common stock, (g) series B-4 warrants exercisable for 275,000 shares of
      common stock, (h) series C-3 warrants exercisable for 550,000 shares of common
      stock, (i) series D-1 warrants exercisable for 385,000 shares of common stock,
      (j) series E-7 warrants exercisable for 4,852,705 shares of common stock, (k)
      series F-4 warrants exercisable for 4,852,705 shares of common stock, and (l)
      other warrants exercisable for 918,019 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) 5,202
      shares of our series C convertible preferred stock, (b) $2,043,000 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 1,931,250 shares of our common stock, and (d) our
      series F-4 warrants to purchase 1,931,250 shares of our common
      stock.





(4) This
      individual owns 18 shares of common stock and beneficially owns an additional
      25,000 shares issuable upon conversion of a convertible promissory note issued
      by the Company.





(5)
      Represents shares of our Common Stock held by Strands Management Company, LLC.
      Keith Moore is a managing member and owns 50% of the interests of Strands
      Management Company, LLC.





(6)
      Represents shares of our Common Stock held by BMSI (as described in note #3
      above) as well as shares of our Common Stock held by Strands Management Company,
      LLC. David Walters is a managing member and owns 50% of the interests of Strands
      Management Company, LLC.




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




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), was the CEO and
      Chairman of DataLogic International, Inc. at the time the note was issued.
      Mr.
      Moore was not a member of our Board of Directors or the board of directors
      of
      BounceGPS at the time the note was issued. Mr. Moore is not a member of the
      board of directors of BounceGPS.




In
      connection with our November 2006 private placement, we agreed to pay $60,000
      ($15,000 per closing) to Strands Management Company, LLC (“Strands”), formerly
      known as Monarch Bay Management Company, LLC, for consulting work. David Walters
      (our Chairman) and Keith Moore (a member of our Board of Directors) are managing
      members of Strands and each own 50% of Strands.  As
      of
      December 31, 2006, the Company owed $15,000 to Strands for these
      services . The
      Company made payments totaling $45,000 during the year ended December 31,
      2007.




41




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.




BounceGPS
      had an agreement with Monarch Bay Capital Group, LLC (“MBCG”) for corporate
      development and chief financial officer services during the period from July
      2006 to May 2007. 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 paid to MBCG a
      monthly fee of $20,000 in cash. Fees paid to MBCG totaled $80,000 and $100,000
      for the years ended December 31, 2007 and 2006, respectively. Remaining amounts
      due to MBCG totaled $20,000 as of December 31, 2007.




On
      May 1,
      2007, we entered into a Support Services Agreement with Strands. David Walters,
      our Chairman, and Keith Moore, our director, each are members of, and each
      own
      50% of the ownership interests in Strands. Under the Support Services Agreement,
      Strands provides us with financial management services, facilities and
      administrative services, business development services, creditor resolution
      services and other services as agreed by the parties. We pay to Strands monthly
      cash fees of $22,000 for the services. In addition, Strands will receive fees
      equal to (a) 6% of the revenue generated from any business development
      transaction with a customer or partner introduced to us by Strands and (b)
      20%
      of the savings to us from any creditor debt reduction resolved by Strands on
      our
      behalf. The initial term of the Support Services Agreement expires May 1, 2008.
      Fees paid to Strands totaled $199,000 for the year ended December 31,
      2007.




On
      May 1,
      2007, we entered into a Placement Agency and Advisory Services Agreement with
      Monarch Bay Associates, LLC (“MBA”). (MBA is a FINRA registered firm.) David
      Walters, our Chairman, and Keith Moore, our director, each are members of,
      and
      each owns 50% of the ownership interests in MBA. Under the agreement, MBA acts
      as our placement agent on an exclusive basis with respect to private placements
      of our capital stock and as our exclusive advisor with respect to acquisitions,
      mergers, joint ventures and similar transactions. MBA will receive fees equal
      to
      (a) 9% of the gross proceeds raised by us in any private placement (plus
      warrants to purchase 9% of the number of shares of common stock issued or
      issuable by us in connection with the private placement) and (b) 3% of the
      total
      consideration paid or received by us or our stockholders in an acquisition,
      merger, joint venture or similar transaction. The initial term of the Placement
      Agency and Advisory Services Agreement expires May 1, 2008. No fees were paid
      to
      MBA in 2006 or 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 our acquisition of the capital stock of BounceGPS.




On
      August
      4, 2006, BounceGPS loaned $150,000 to a subsidiary of Monarch Staffing, Inc.
      at
      10% per annum. David Walters (our Chairman) is also the Chairman of Monarch
      Staffing and beneficially owns 41% of the outstanding common stock of Monarch
      Staffing. Keith Moore (a Director) is also a Director of Monarch Staffing and
      beneficially owns 41% of the outstanding common stock of Monarch Staffing.
      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. Mr. Moore was not a member of BMSI or
      BounceGPS at the time the note was issued, nor thereafter. 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 our acquisition of the capital stock of
      BounceGPS. At the time of the loan transactions, BounceGPS was a private company
      and a wholly owned subsidiary of BMSI.




42




On
      November 14, 2007, BounceGPS loaned $21,875 to BMSI. Interest accrued at an
      annual rate of 10%. David Walters, Chairman, is also the Chairman and Chief
      Executive Officer of BMSI and beneficially owns a majority of the outstanding
      common stock of BMSI. We received payment in full, including interest of $729
      in
      March 2008.




On
      December 26, 2007, BounceGPS loaned $22,000 to Monarch Staffing, Inc. and
      $25,000 to a subsidiary of Monarch Staffing, Inc. Interest accrued at an annual
      rate of 10%. David Walters (our Chairman) is also the Chairman of Monarch
      Staffing and beneficially owns 41% of the outstanding common stock of Monarch
      Staffing. David Walters (a member of our Board of Directors) is also a director
      of Monarch Staffing and beneficially owns 41% of the outstanding common stock
      of
      Monarch Staffing. Keith Moore (a Director) is also a Director of Monarch
      Staffing and beneficially owns 41% of the outstanding common stock of Monarch
      Staffing. We received payment in full, including interest of $1,175 in March
      2008.




**Item
      13.********Exhibits.**




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




The
      following consolidated financial statements of Remote Dynamics, Inc. and
      Subsidiaries, 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-1Consolidated
                Balance Sheets at December 31, 2007 and 2006
            F-2Consolidated
                Statements of Operations for the fiscal years ended December 31,
                2007, and 2006
            F-3Consolidated
                Statements of Stockholders’ Deficit for the fiscal years ended December
                31, 2007 and 2006
            F-4Consolidated
                Statements of Cash Flows for the fiscal years ended December 31,
                2007 and
                2006
            F-5Notes
                to Consolidated Financial Statements
            F-7




(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**2.1.1
              
              Share
                  Exchange Agreement with Bounce Mobile Systems, Inc. dated November
                  30,
                  2006 (1)2.1.2
              
              Registration
                  Rights Agreement with Bounce Mobile Systems, Inc. dated December
                  4, 2006
                  (1)2.1.3
              
              Security
                  Agreement with Bounce Mobile Systems, Inc. dated December 4, 2006
                  (1)2.1.4
              
              Series
                  B subordinated secured convertible promissory note of issued to
                  Bounce
                  Mobile Systems, Inc. on December 4, 2006 (1)2.1.5
              
              Original
                  issue discount series B subordinated secured convertible promissory
                  note
                  issued to Bounce Mobile Systems, Inc. on December 4, 2006
                  (1)2.1.6
              
              Series
                  E-7 Warrant issued to Bounce Mobile Systems, Inc. on December 4,
                  2006
                  (1)
  43
  2.1.7
              
              Series
                  F-4 Warrant issued to Bounce Mobile systems, Inc. on December 4,
                  2006
                  (1)3.1.1
              
              Amended
                  and Restated Certificate of Incorporation dated June 30, 2004
                  (2)3.1.2
              
              Certificate
                  Of Amendment to the Amended and Restated Certificate of Incorporation
                  dated May 26, 2006 (3)3.1.3*
              
              Certificate
                  Of Amendment to the Amended and Restated Certificate of Incorporation
                  dated November 19, 20073.2
              
              Third
                  Amended and Restated By-Laws dated June 30, 2004 (4)4.1
              
              Specimen
                  of certificate representing the Common Stock, $.01 par value, of
                  Remote
                  Dynamics, Inc. (5)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 (1)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
                  (1)10.1.1
              
              Securities
                  Purchase Agreement with SDS Capital Group SPC, Ltd. dated May 31,
                  2005
                  (6)10.1.2
              
              Amendment
                  No. 1 to Securities Purchase Agreement with SDS Capital Group SPC,
                  Ltd.
                  (1)10.2.1
              
              Registration
                  Rights Agreement by and between Remote Dynamics, Inc. and SDS Capital
                  Group SPC, Ltd. dated September 2, 2005 (6)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
                  (6)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
                  (6)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 (6)10.3.1
              
              Note
                  and Warrant Purchase Agreement dated as of February 23, 2006
                  (7)10.3.2
              
              Registration
                  Rights Agreement dated as of February 23, 2006 (7)10.3.3
              
              Security
                  Agreement dated as of February 23, 2006 (7)10.3.4
              
              Form
                  of series A senior secured convertible promissory note due February
                  24,
                  2008 (7)10.3.5
              
              Form
                  of original issue discount series A senior secured convertible
                  promissory
                  note due February 24, 2008 (7)10.3.6
              
              Form
                  of Series A-7 Warrant issued on February 24, 2006 (7)10.3.7
              
              Form
                  of Series B-4 Warrant issued on February 24, 2006 (7)10.3.8
              
              Form
                  of Series C-3 Warrant issued on February 24, 2006 (7)10.3.9
              
              Form
                  of Series D-1 Warrant issued on February 24, 2006 (7)10.4.1
              
              Note
                  and Warrant Purchase Agreement dated as of November 30, 2006
                  (1)10.4.2
              
              Registration
                  Rights Agreement dated as of November 30, 2006 (1)10.4.3
              
              Security
                  Agreement dated as of November 30, 2006 (1)10.4.4
              
              Form
                  of series B senior secured convertible promissory note due December
                  4,
                  2009 (1)10.4.5
              
              Form
                  of original issue discount series B senior secured convertible
                  promissory
                  note due December 4, 2009 (1)10.4.6
              
              Form
                  of Series E-7 Warrant issued on December 4, 2006 (1)10.4.7
              
              Form
                  of Series F-4 Warrant issued on December 4, 2006 (1)10.5#
              
              2004
                  Restated Management Incentive Plan (8)10.6.1#
              
              Employment
                  Agreement with Gary Hallgren dated February 16, 2007
                  (9)10.6.2#
              
              Employment
                  Agreement with Greg Jones dated February 16, 2007 (9)10.9
              
              Consulting
                  Agreement with Monarch Bay Management Company dated July 1, 2006
                  (10)14.1
              
              Code
                  of Ethics for Senior Financial Officers (11)21.1*
              
              Subsidiaries
                  of Registrant23.1*
              
              Consent
                  of Chisholm Bierwolf & Nilson, LLC31.1*
              
              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




44




#
      Management contract and/or compensatory plan, contract or
      arrangement





*
      Filed
      herewith


(1)
              Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Current Report on Form 8-K,
                  as filed with the SEC on December 7, 2006.(2)
              Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Quarterly Report on Form
                  10-Q, as filed with the SEC on July 14, 2004.(3)
              Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Quarterly Report on Form
                  10-QSB, as filed with the SEC on July 17, 2006.(4)
              Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Annual Report on Form 10-K,
                  as filed with the SEC on November 18, 2004.(5)
              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(6)
              Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Current Report on Form 8-K,
                  as filed with the SEC on September 7, 2005.(7)
              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.(8)
              Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Annual Report on Form 10-K,
                  as filed with the SEC on November 18, 2004.(9)
              Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Current Report on Form 8-K,
                  as filed with the SEC on February 22, 2007.(10)
              Incorporated
                  herein by reference to Remote Dynamics, Inc.’s Annual Report on Form 10-K,
                  as filed with the SEC on April 16, 2007.(11)
              Filed
                  in connection with Company’s Form 10-K Annual Report for the year ended
                  August 31, 2003.




**Item
      14.********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, 2007 and 2006. On March 27, 2007, the Company changed is fiscal
      year end from August 31 to December 31. The accountant fees paid to KBA Group
      and BDO Seidman 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:




45




Year
                Ended December 31,2007
            
            2006**Chisholm,
                Bierwolf & Nilson**Audit
                fees
            
            $
            31,254
            
            $
            28,000Audit-related
                fees (a)
            
            $
            797
            
            
            -Tax
                fees (b)
            
            $
            -
            
            
            -Registration
                Statement Fees
            
            $
            -
            
            
            -All
                other fees
            
            $
            303
            
            
            -**KBA
                Group**Audit
                fees
            
            $
            66,600
            
            $
            47,000Audit-related
                fees (a)
            
            $
            -
            
            
            23,350Tax
                fees (b)
            
            $
            -
            
            
            19,050Registration
                Statement Fees
            
            $
            -
            
            
            12,000All
                other fees
            
            $
            15,975
            
            
            12,150**BDO
                Seidman**Audit
                fees
            
            $
            -
            
            $
            -Audit-related
                fees (a)
            
            $
            -
            
            
            -Tax
                fees (b)
            
            $
            -Registration
                Statement Fees
            
            $
            -
            
            
            30,000All
                other fees
            
            $
            10,000
            
            
            -**Hartman,
                Leito & Bolt, LLP**
            
            
            
            
            $
            -Audit
                fees
            
            $
            -
            
            
            -Audit-related
                fees (a)
            
            $
            -
            
            
            -Tax
                fees (b)
            
            $
            14,805
            
            
            -Registration
                Statement Fees
            
            $
            -
            
            
            -All
                other fees
            
            $
            -
            
            
            -




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




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




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, 2007
      and
      2006 were pre-approved by our Audit Committee.




46




**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:
                March 20, 2008
            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
            
            March
                20, 2008Gary
                Hallgren/s/
                DAVID WALTERS
            
            Chairman
                and Director*(Principal Financial and*
            
            March
                20, 2008David
                Walters
            
            *Accounting
              Officer)*/s/
                DENNIS ACKERMAN
            
            Director
            
            March
                20, 2008Dennis
                Ackerman/s/
                KEITH MOORE
            
            Director
                and Secretary
            
            March
                20, 2008Keith
                Moore/s/
                THOMAS FRIEDBERG
            
            Director
            
            March
                20, 2008Thomas
                Friedberg




47




**ANNUAL
      REPORT ON FORM 10-KSB**


**ITEM
      7**


**FINANCIAL
      STATEMENTS**


**YEARS
      ENDED DECEMBER 31, 2007 and 2006**


**REMOTE
      DYNAMICS, INC.**


**PLANO,
      TEXAS**









**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, 2007 and 2006, 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, 2007 and 2006, 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


March
      20,
      2008


F-1





**REMOTE
      DYNAMICS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**(in
      thousands, except share amounts)**





**December 31,**
            
            **December 31,****2007**
            
            **2006****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            228
            
            $
            121Accounts
                receivable, net of allowance for doubtful accounts of $54 and $67,
                respectively
            
            
            526
            
            
            534Due
                from related parties
            
            
            71
            
            
            -Inventories,
                net of reserve for obsolescence of $7 and $112,
                respectively
            
            
            158
            
            
            287Deferred
                product costs - current portion
            
            
            352
            
            
            157Lease
                receivables and other current assets, net
            
            
            466
            
            
            414Total
                current assets
            
            
            1,801
            
            
            1,512Property
                and equipment, net of accumulated depreciation and amortization of
                $154
                and $112, respectively
            
            
            157
            
            
            371Deferred
                product costs - non-current portion
            
            
            336
            
            
            154Goodwill
            
            
            616
            
            
            616Customer
                Lists, net
            
            
            2,162
            
            
            2,714Software,
                net
            
            
            674
            
            
            846Tradenames,
                net
            
            
            59
            
            
            74License
                right, net
            
            
            -
            
            
            57Deferred
                financing fees, net
            
            
            191
            
            
            165Lease
                receivables and other assets, net
            
            
            135
            
            
            352Total
                assets
            
            $
            6,131
            
            $
            6,861**LIABILITIES
                AND STOCKHOLDERS' DEFICIT**Current
                liabilities:Accounts
                payable
            
            $
            1,530
            
            $
            1,386Accounts
                payable - related parties
            
            
            75
            
            
            55Deferred
                product revenues - current portion
            
            
            1,197
            
            
            1,035Series
                A convertible notes payable (net of discount of $392 and $3,193,
                respectively)
            
            
            3,801
            
            
            1,242Series
                B convertible notes payable (net of discount of $1,543 and $113,
                respectively)
            
            
            5,007
            
            
            189Note
                payable - HFS (net of discount of $1,716)
            
            
            -
            
            
            284Note
                payable - related parties
            
            
            250
            
            
            250Accrued
                expenses and other current liabilities
            
            
            1,770
            
            
            1,701Accrued
                expenses and other current liabilities - related parties
            
            
            60
            
            
            36Total
                current liabilities
            
            
            13,690
            
            
            6,178Deferred
                product revenues - non-current portion
            
            
            590
            
            
            894Capital
                leases, less current portion
            
            
            11
            
            
            79Series
                B convertible notes payable - non-current (net of discount of $0
                and $906,
                respectively)
            
            
            -
            
            
            1,509Other
                non-current liabilities
            
            
            99
            
            
            321Total
                liabilities
            
            
            14,390
            
            
            8,981Commitments
                and contingenciesRedeemable
                Preferred Stock - Series B (3% when declared, $10,000 stated value,
                650
                shares authorized, 522 and 559.5 shares issued and outstanding at
                December
                31, 2007 and December 31, 2006, respectively (redeemable in liquidation
                at
                an aggregate of $5,220,000 at December 31, 2007)
            
            
            134
            
            
            146Redeemable
                Preferred Stock - Series C (8% cumulative, $1,000 stated value, 10,000
                shares authorized, 5,202 and 5,000 shares issued and outstanding
                at
                December 31, 2007 and December 31, 2006, respectively (redeemable
                in
                liquidation at an aggregate of $5,202,000 at December 31,
                2007)
            
            
            -
            
            
            -Stockholders'
              deficit:Common
                stock, $0.01 par value, 750,000,000 shares authorized, 1,393,231
                shares
                issued and 1,374,632 outstanding at December 31, 2007, retroactively
                restated; 230,000,0000 shares authorized, 1,245,108 shares issued
                and
                1,226,509 outstanding at December 31, 2006, retroactively
                restated
            
            
            14
            
            
            12Treasury
                stock, 18,599 shares at December 31, 2007 and 2006, at
                cost
            
            
            -
            
            
            -Additional
                paid-in capital
            
            
            897
            
            
            805Accumulated
                deficit
            
            
            (9,304
            )
            
            (3,083
            )Total
                stockholders' deficit
            
            
            (8,393
            )
            
            (2,266
            )Total
                liabilities and stockholders' deficit
            
            $
            6,131
            
            $
            6,861





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


F-2




**REMOTE
      DYNAMICS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(In
      thousands, except per share amounts)**





**Year
                ended****December
                31,****2007**
            
            **2006**RevenuesService
            
            $
            3,176
            
            $
            286Ratable
                product
            
            
            1,385
            
            
            234Product
            
            
            160
            
            
            144Total
                revenues
            
            
            4,721
            
            
            663Cost
                of revenuesService
            
            
            1,245
            
            
            229Ratable
                product
            
            
            330
            
            
            118Product
            
            
            186
            
            
            294Total
                cost of revenues
            
            
            1,761
            
            
            641Gross
                profit
            
            
            2,960
            
            
            22Expenses:General
                and administrative
            
            
            1,766
            
            
            495Sales
                and marketing
            
            
            774
            
            
            317Engineering
            
            
            719
            
            
            83Depreciation
                and amortization
            
            
            949
            
            
            184Goodwill
                impairment
            
            
            
            
            
            411Total
                expenses
            
            
            4,208
            
            
            1,490Operating
                loss
            
            
            (1,248
            )
            
            (1,468
            )Other
                income (expenses):Interest
                income
            
            
            105
            
            
            21Interest
                expense
            
            
            (4,757
            )
            
            (680
            )Other
                income
            
            
            383
            
            
            -Loss
                on extinguishment of debt
            
            
            (341
            )
            
            (558
            )Loss
                on extinguishment of redeemable preferred stock
            
            
            (363
            )
            
            (121
            )Total
                other income (expenses)
            
            
            (4,973
            )
            
            (1,338
            )Loss
                before income taxes
            
            
            (6,221
            )
            
            (2,806
            )Income
                tax benefit
            
            
            -
            
            
            -Net
                loss
            
            
            (6,221
            )
            
            (2,806
            )Net
                loss per common share - basic and diluted
            
            $
            (4.70
            )
            $
            (6.71
            )Weighted
                average number of common shares outstanding:Basic
                and diluted
            
            
            1,325
            
            
            418





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


F-3




**REMOTE
      DYNAMICS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' DEFICIT**


**FOR
      THE PERIOD JANUARY 1, 2006 THROUGH DECEMBER 31, 2007**


**(in
      thousands, except share information)**


**Additional****Common Stock**
              
              **Paid-in**
              
              **Treasury Stock**
              
              **Accumulated****Shares**
              
              **Amount**
              
              **Capital**
              
              **Shares**
              
              **Amount**
              
              **Deficit**
              
              **Total****Balance,
                  December 31, 2005**
              
              
              20,000
              
              $
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              $
              (278
              )
              $
              (277
              )Capital
                  contribution into BounceGPS
              
              
              -
              
              
              -
              
              
              1,146
              
              
              -
              
              
              -
              
              
              -
              
              
              1,146BounceGPS
                  common stock exchanged
              
              
              (20,000
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Remote
                  Dynamics common stock acquired in share exchange
              
              
              1,199,108
              
              
              12
              
              
              (9
              )
              
              18,599
              
              $
              -
              
              
              -
              
              
              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
              
              
              46,000
              
              
              -
              
              
              11
              
              
              -
              
              
              -
              
              
              -
              
              
              11Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,805
              )
              
              (2,805
              )**Balance,
                  December 31, 2006**
              
              
              1,245,108
              
              $
              12
              
              $
              805
              
              
              18,599
              
              $
              -
              
              $
              (3,083
              )
              $
              (2,266
              )Common
                  stock issued for services
              
              
              51,384
              
              
              1
              
              
              8
              
              
              -
              
              
              -
              
              
              -
              
              
              9Issuance
                  of warrants in connection with Series B debt offering
              
              
              -
              
              
              -
              
              
              45
              
              
              -
              
              
              -
              
              
              -
              
              
              45Issuance
                  of warrants in connection with exchange of Series A Notes to Series
                  B
                  Notes
              
              
              -
              
              
              -
              
              
              5
              
              
              -
              
              
              -
              
              
              -
              
              
              5Issuance
                  of warrants in connection with exchange of Series B Preferred Stock
                  to
                  Series B Notes
              
              
              -
              
              
              -
              
              
              6
              
              
              -
              
              
              -
              
              
              -
              
              
              6Conversion
                  of Series A Notes to common stock
              
              
              12,640
              
              
              -
              
              
              10
              
              
              -
              
              
              -
              
              
              -
              
              
              10Conversion
                  of HFS Note to Series B Notes
              
              
              -
              
              
              -
              
              
              13
              
              
              -
              
              
              -
              
              
              -
              
              
              13Common
                  stock issued as partial principal payments on Series A
                  Notes
              
              
              65,500
              
              
              1
              
              
              5
              
              
              -
              
              
              -
              
              
              -
              
              
              6Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,221
              )
              
              (6,221
              )**Balance,
                  December 31, 2007**
              
              
              1,374,632
              
              $
              14
              
              $
              897
              
              
              18,599
              
              $
              -
              
              $
              (9,304
              )
              $
              (8,393
              )





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




F-4




**REMOTE
      DYNAMICS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (1 of 2)**


**(in
      thousands)**





**Year
                ended December 31,****2007**
            
            **2006****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (6,221
            )
            $
            (2,806
            )Adjustments
                to reconcile net loss to cash used inoperating
                activitiesDepreciation
                and amortization
            
            
            154
            
            
            112Amortization
                of customer lists and other intangibles
            
            
            795
            
            
            70Amortization
                of deferred financing fees
            
            
            85
            
            
            -Accretion
                of HFS note payable
            
            
            618
            
            
            134Accretion
                of Series A notes
            
            
            2,628
            
            
            201Accretion
                of Series B notes
            
            
            625
            
            
            35Goodwill
                impairment
            
            
            -
            
            
            411Provision
                for bad debt
            
            
            72
            
            
            13Loss
                on extinguishment of debt
            
            
            341
            
            
            558Loss
                on extinguishment of redeemable preferred stock
            
            
            363
            
            
            121Loss
                on retirement of fixed assets
            
            
            55
            
            
            -Common
                stock issued for services
            
            
            9
            
            
            11Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (214
            )
            
            37Due
                from related parties
            
            
            (71
            )
            
            -Inventory
            
            
            128
            
            
            200Deferred
                product costs
            
            
            (377
            )
            
            78Lease
                receivables and other assets
            
            
            133
            
            
            (12
            )Deferred
                product revenue
            
            
            (142
            )
            
            (121
            )Accounts
                payable
            
            
            260
            
            
            (33
            )Accounts
                payable - related parties
            
            
            20
            
            
            55Accrued
                expenses and other liabilities
            
            
            (148
            )
            
            224Net
                cash used in operating activities
            
            
            (887
            )
            
            (712
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Cash
                paid for acquisition
            
            
            
            
            
            (450
            )Cash
                acquired from reverse merger transaction
            
            
            
            
            
            107Payments
                made to acquire property and equipment
            
            
            (1
            )
            
            (3
            )Net
                cash used in investing activities
            
            
            (1
            )
            
            (346
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from issuance of Series B notes, net of offering costs
            
            
            982
            
            
            315Proceeds
                from line of credit
            
            
            69Proceeds
                from capital contribution of Parent
            
            
            -
            
            
            1,011Payments
                on capital leases and other notes payable
            
            
            (56
            )
            
            (148
            )Net
                cash provided by financing activities
            
            
            995
            
            
            1,178**NET
                (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS**
            
            
            107
            
            
            120**CASH
                AND CASH EQUIVALENTS, beginning of year**
            
            
            121
            
            
            1**CASH
                AND CASH EQUIVALENTS, end of year**
            
            
            228
            
            
            121




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


F-5




**REMOTE
      DYNAMICS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (2 of 2)**


**(in
      thousands)**





**Twelve months ended December 31,****2007**
            
            **2006**Supplemental
                Cash Flow Information:Interest
                paid
            
            $
            7
            
            $
            1Income
                taxes paid
            
            $
            -
            
            $
            -Non-Cash
                Financing & Investing Activities:Common
                stock issued for services
            
            $
            9
            
            $
            11Fair
                value of assets acquired in acquisition:Net
                assets acquired
            
            $
            -
            
            $
            289Identifiable
                intangible assets (customer lists)
            
            $
            -
            
            $
            50Goodwill
            
            $
            -
            
            $
            361Purchase
                Price:Cash
            
            $
            -
            
            $
            450Note
                Payable
            
            $
            -
            
            $
            250Total
                Purchase Price of Acquisition
            
            $
            -
            
            $
            700




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


F-6


**REMOTE
      DYNAMICS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




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




**Organization
      and Business Overview**





The
      consolidated financial statements presented are those of Remote Dynamics, Inc.
      and its wholly-owned subsidiaries, BounceGPS, Inc. (formerly known as Huron
      Holdings, Inc.) and HighwayMaster of Canada, LLC.





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 data acquisition 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, distributed
      assets, 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 2008 and beyond
      and is the foundation for expected growth in revenues and ultimately
      profitability. In implementing our new business plan, we have completed a
      significant cost and operational-based restructuring, including rightsizing
      the
      workforce. We are focusing our efforts on enhancing the existing REDIview
      product line.




**Share
      Exchange Agreement**





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).




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 618,750 shares
      (30,937,500 shares pre-reverse split) of Remote Dynamics common stock and,
      a F-4
      Warrant to purchase 618,750 shares (30,937,500 shares pre-reverse split) of
      Remote Dynamics common stock.


F-7





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, 88.0%
      of
      the voting power of Remote Dynamics common stock outstanding, and beneficial
      ownership of approximately 61.3% 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 1,199,108 (59,955,408 pre-reverse split) 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. On
      December 4, 2006, Remote Dynamics consummated the Share Exchange Agreement
      and
      acquired 100%
      of
      the capital stock of BounceGPS commensurate with Remote Dynamics receiving
      a
      capital infusion from BMSI and other third parties.





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





**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**
            
            $
            -




F-8





The
      $3,761,000 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 $ 616,000 of
      goodwill was assigned to our only segment and is not deductible for tax
      purposes.





We
      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 was
      reflected within the current portion of deferred revenue and $588,000 was
      included within the non-current portion of deferred revenue. Additionally,
      we
      recorded acquired deferred revenue of $241,000 in current and $248,000 in
      non-current deferred product revenues.





*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, BounceGPS 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.





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


F-9




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 for
      2008.  Our plans for 2008 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 2008. 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 fourth quarter of 2008.




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




·
            Ability
                to increase sales of the REDIview product line.




·
            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 $3.1 million, excluding the gross amount of our
      outstanding secured convertible notes of $10.7 million, as of December 31,
      2007.
      We believe that we will have sufficient capital to fund our ongoing operations
      through 2008, 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. In 2007, we received proceeds of $982,000 from closing
      under
      our Series B Note financing. The final closing of the Series B Note financing
      (which would provide us with gross proceeds of $238,500) would 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, subject to certain
      other conditions being satisfied, including no material adverse effect on our
      business, operations, properties, prospects, or financial condition having
      occurred. We currently do not expect to satisfy the conditions to the final
      closing of the Series B Note financing. As a result, unless the investors agree
      to waive such conditions, we do not expect to receive any additional proceeds
      from the financing.




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.


F-10


As
      of
      March 14, 2008, approximately $2,669,891 in principal amount of our outstanding
      Series A Notes have reached their maturity date and are due and payable. In
      February, 2008, holders of $1,523,928 principal amount of the Series A Notes
      agreed to extend the principal payment schedule and maturity date of the notes
      until August 31, 2009. As extended, payments under the notes will be due on
      a
      monthly basis (subject to deferral at the holder’s option) and may be made in
      the form of shares of our common stock eligible for resale pursuant to Rule
      144
      under the Securities Act of 1933, as amended.





We
      have
      failed to comply with certain of our other obligations relating to the notes,
      including our failure to make scheduled principal payments and to register
      for
      resale the shares of common stock underlying the notes and warrants issued
      in
      the related private placements. The notes provide for a default interest rate
      of
      10% per annum on the outstanding principal amount of the notes for periods
      in
      which certain specified events of default occur and are continuing and for
      liquidated damages for non-compliance with our registration obligations. As
      of
      December 31, 2007, we have accrued $1,114,354 in default interest and liquidated
      damages under our secured convertible notes.





Our
      non-compliance with the terms of the notes also exposes to the risk that our
      note holders could seek to exercise prepayment or other remedies under the
      notes.





In
      March,
      2008, we resumed making payments to certain of our note holders of amounts
      due
      under the notes by issuing shares of our common stock under the terms of the
      notes. We expect to issue additional shares of our common stock in payment
      of
      amounts due under the notes during the remainder of 2008 and thereafter.





We
      do not
      currently have the cash on hand to repay amounts due under our secured
      convertible notes if the note holders elect to exercise their repayment or
      other
      remedies. If our efforts to restructure or otherwise satisfy our obligations
      under the notes are unsuccessful , and
      we
      are unable to raise enough money to cover the amounts payable under the notes,
      we may be forced 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 consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities, disclosure of contingent assets and liabilities at
      the
      date of the consolidated financial statements and the reported amounts of
      revenues and expenses during the reporting period.  Significant estimates
      include the collectibility of accounts receivable and lease receivables, the
      valuation of goodwill and intangibles, the valuation of common and preferred
      stock, the valuation of convertible notes payable, and the valuation allowance
      of the deferred tax asset.  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.


F-11





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 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 legacy
      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.




**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 Company
      maintains its cash balances at credit-worthy financial institutions that are
      insured by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000.
      As
      of December 31, 2007 and at various times during the year ended December 31,
      2007, the Company's cash balances exceeded the amount insured by the FDIC.
      Management believes the risk of loss of cash balances in excess of the insured
      limit to be low.




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.




F-12




December 31,2007
            
            2006Beginning
                balance
            
            $
            67
            
            $
            -Additions
            
            
            31
            
            
            72Deductions
            
            
            (44
            )
            
            (5
            )Ending
                balance
            
            $
            54
            
            $
            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.




**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 straightline 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, 2007 and 2006, we incurred $21,000 and $-0-, respectively,
      of
      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:


F-13


·
            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**




The
      Company accounts for income taxes under the provisions of SFAS No. 109, *Accounting
      for Income Taxes* .
      Under
      SFAS No. 109, deferred tax assets and liabilities are recognized for future
      tax
      benefits or consequences attributable to temporary differences between the
      financial statement carrying amounts of existing assets and liabilities and
      their respective tax bases. Deferred tax assets and liabilities are measured
      using enacted tax rates expected to apply to taxable income in the years in
      which those temporary differences are expected to be recovered or settled.
      A
      valuation allowance is provided for significant deferred tax assets when it
      is
      more likely than not that such assets will not be realized through future
      operations.




**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, 2007
      and
      2006.




**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, 200 7
      and
      2006.




**Beneficial
      Conversion Feature**





From
      time
      to time, the Company has debt with conversion options that provide for a rate of
      conversion that is below market value. This feature is normally characterized
      as
      a beneficial conversion feature ("BCF"), which is recorded by the Company
      pursuant to Emerging Issues Task Force (“EITF”) Issue No. 98-5 ("EITF 98-5"), *Accounting
      for Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios,* and EITF
      Issue No. 00-27, *Application
      of EITF Issue No. 98-5 to Certain Convertible Instruments.* If a BCF
      exists, the Company records it as a debt discount. Debt discounts are amortized
      to interest expense over the life of the debt on a straight-line basis, which
      approximates the effective interest method.


F-14





**Issuance
      of Shares for Non-Cash Consideration**





The
      Company accounts for the issuance of equity instruments to acquire goods and/or
      services based on the fair value of the goods and services or the fair value
      of
      the equity instrument at the time of issuance, whichever is more reliably
      determinable. The Company's accounting policy for equity instruments issued
      to
      consultants and vendors in exchange for goods and services follows the
      provisions of EITF Issue No. 96-18, *Accounting
      for Equity Instruments That are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling, Goods or Services* and EITF
      Issue No. 00-18, *Accounting
      Recognition for Certain Transactions Involving Equity Instruments Granted to
      Other Than Employees.* The
      measurement date for the fair value of the equity instruments issued is
      determined at the earlier of (i) the date at which a commitment for performance
      by the consultant or vendor is reached or (ii) the date at which the consultant
      or vendor's performance is complete. In the case of equity instruments issued
      to
      consultants, the fair value of the equity instrument is recognized over the
      term
      of the consulting agreement.




**Earnings
      Per Share**




The
      Company adopted the provisions of SFAS No. 128, *Earnings
      Per Share* ("EPS").
      SFAS No. 128 provides for the calculation of basic and diluted earnings or
      loss
      per share. Basic loss per share includes no dilution and is computed by dividing
      income or loss available to common stockholders by the weighted average number
      of common shares outstanding for the period. Diluted loss per share reflects
      the
      potential dilution of securities that could share in the earnings or losses
      of
      the entity. Such amounts include shares potentially issuable pursuant to the
      Notes and the attached warrants and the convertible preferred stock (see Notes
      8
      and 10). For the years ended December 31, 2007 and 2006, basic and diluted
      loss
      per share are the same as the potentially dilutive shares were excluded from
      diluted loss per share as their effect would be anti-dilutive for the year
      then
      ended.





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,****2007**
            
            **2006**Convertible
                notes payable
            
            
            33,014,075
            
            
            9,552,038Convertible
                preferred stock
            
            
            57,583,631
            
            
            16,795,385Outstanding
                warrants to purchase common stock
            
            
            12,245,930
            
            
            5,787,440




Stock
      warrants issued and outstanding total 12,245,930 at December 31,
      2007.





**New
      Accounting Standards**




**Financial
      Accounting Standards No. 155 (“FAS 155”)** .
      In
      February 2006, the FASB issued FAS 155, “Accounting for Certain Hybrid Financial
      Instruments,” an amendment of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”) and
      Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing
      of Financial Assets and Extinguishments of Liabilities” (“FAS 140”). With
      respect to FAS 133, FAS 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 FAS 133. With
      respect to FAS 140, FAS 155 eliminates a restriction on the passive derivative
      instruments that a qualifying special-purpose entity may hold. FAS 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. The
      adoption of FAS 155 did not have a material impact on the Company’s financial
      condition or results of operations.


F-15




**FASB
      Interpretation No. 48 (“FIN 48”)** .
      In July
      2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes” which
      prescribes a recognition threshold and measurement process for recording in
      the
      financial statements uncertain tax positions taken or expected to be taken
      in a
      tax return. Additionally, FIN 48 provides guidance on derecognition,
      classification, accounting in interim periods and disclosure requirements for
      uncertain tax positions. The adoption of FIN 48 did not have a material impact
      on the Company’s financial condition or results of operations.




**Financial
      Accounting Standards No. 156 (“FAS 156”)** .
      In
      March 2006, the FASB issued FAS 156, “Accounting for Servicing of Financial
      Assets - an amendment of FASB Statement No. 140” (“FAS 156”). This
      Statement amends FAS 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.
      FAS 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. The adoption of FAS 156 did not have a material impact on the
      Company’s financial condition or results of operations.




**Financial
      Accounting Standards No. 157 (“FAS 157”).** In
      September 2006, the FASB issued FAS 157, “Fair Value Measurements.” FAS 157
      defines fair value, established a framework for measuring fair value in
      generally accepted accounting principles (GAAP) and expands disclosures about
      fair value measurements. FAS 157 is effective for financial statements issued
      for fiscal years beginning after November 15, 2007. We do not expect the
      adoption of FAS 157 to significantly affect our financial condition or results
      of operations.




**Financial
      Accounting Standards No. 159 (“FAS 159”)** In
      February 2007, the FASB issued FAS  159, The Fair Value Option for
      Financial Assets and Financial Liabilities, or FAS 159. FAS 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. FAS 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 FAS 157 are applied. We will adopt FAS 159 on
      January 1, 2008. We are evaluating FAS 159 and have not yet determined the
      impact the adoption, if any, will have on our consolidated financial statements.





**Financial
      Accounting Standards No. 141 (R) (“FAS 141”)**  In
      December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS
      No.
      141(R) establishes principles and requirements for how an acquirer recognizes
      and measures in its financial statements the identifiable assets acquired,
      the
      liabilities assumed, and any non-controlling interest in the acquiree and
      recognizes and measures the goodwill acquired in the business combination or
      a
      gain from a bargain purchase.  SFAS No. 141(R) also sets forth the
      disclosures required to be made in the financial statements to evaluate the
      nature and financial effects of the business combination. SFAS No. 141(R)
      applies prospectively to business combinations for which the acquisition date
      is
      on or after the beginning of the first annual reporting period beginning on
      or
      after December 15, 2008. Accordingly, the Company will adopt this standard
      in
      fiscal 2009.  The Company is currently evaluating the potential impact
      of the adoption of SFAS 141(R) on its consolidated financial
      statements.





**Financial
      Accounting Standards No. 160 (R) (“FAS 160”)**  In
      December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
      Consolidated Financial Statements, an amendment of ARB No. 51. SFAS 160
      will change the accounting and reporting for minority interests, which will
      be
      recharacterized as non-controlling interests (NCI) and classified as a component
      of equity. This new consolidation method will significantly change the
      accounting for transactions with minority interest
      holders.  SFAS 160 requires retroactive adoption of the
      presentation and disclosure requirements for existing minority interests. All
      other requirements of SFAS 160 shall be applied
      prospectively.  SFAS 160 is effective for fiscal years beginning
      after December 15, 2008 and, as such, the Company will adopt this standard
      in fiscal 2009.  The Company is currently evaluating the potential
      impact of the adoption of SFAS 160 on its consolidated financial
      statements.


F-16




**3.**
            **INVENTORIES**





Inventories
      consist of the following (in thousands):





December 31,2007
            
            2006Complete
                systems
            
            $
            67
            
            $
            205Component
                parts
            
            
            98
            
            
            194Reserve
                for obsolescence - systems
            
            
            -
            
            
            (65
            )Reserve
                for obsolescence - parts
            
            
            (7
            )
            
            (47
            )$
            158
            
            $
            287




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





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




December 31,2007
            
            2006Machinery
                and equipment
            
            
            4
            
            
            2Capitalized
                software costs
            
            
            62
            
            
            62Leasehold
                improvements
            
            
            -
            
            
            -Vehicles,
                computer equipment, and other equipment
            
            
            245
            
            
            419311
            
            
            483Less:
                accumulated depreciation and amortization
            
            
            (154
            )
            
            (112
            )$
            157
            
            $
            371




Total
      depreciation and amortization expense related to property and equipment charged
      to operations during the year ended December 31, 2007 and 2006 was $154,000
      and
      $112,000, respectively.




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




Goodwill
      and other intangible assets consist of the following as of December 31, 2007
      and
      2006 (in thousands):





RemainingBalance at
            
            
            
            
            
            
            
            Balance at
            
            AmortizationDecember 31,
            
            
            
            
            
            
            
            December 31,
            
            Period2006
            
            Addition
            
            Amortization
            
            Impairment
            
            2007
            
            (in months)Goodwill
            
            $
            616
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            616
            
            
            n/aOther
                intangibles:Customer
                lists
            
            
            2,714
            
            
            -
            
            
            (552
            )
            
            
            
            
            2,162
            
            
            47VMI
                License Right
            
            
            57
            
            
            -
            
            
            (57
            )
            
            
            
            
            -
            
            
            0Software
            
            
            846
            
            
            -
            
            
            (172
            )
            
            
            
            
            674
            
            
            47Tradenames
            
            
            74
            
            
            -
            
            
            (15
            )
            
            
            
            
            59
            
            
            47





Total
      amortization expense for the other intangible assets for the year ended December
      31, 2007 and 2006 was approximately $796,000 and $70,000,
      respectively.





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





We
      provide lease financing to certain customers of our REDIview and legacy
      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.


F-17


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 31,2007
            
            2006Minimum
                lease payments receivable
            
            $
            381
            
            $
            661Less:
                Allowance for uncollectibles
            
            
            (16
            )
            
            (88
            )365
            
            
            573Less:
                Unearned interest income
            
            
            (55
            )
            
            (108
            )Net
                investment in sales-type leases
            
            $
            310
            
            $
            465





The
      long-term portion of the net investment in sales-type leases at December 31,
      2007 and 2006 was $279,000 and $442,000, respectively.




Total
      minimum lease payments receivable on sales-type leases as of December 31, 2007
      are as follows (in thousands):





Fiscal Year Ending December 31,
            
            20072008
            
            
            2372009
            
            
            1362010
            
            
            8Total
                minimum lease payments receivable
            
            $
            381





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,
      2007 are as follows (in thousands):





Fiscal Year Ending December 31,
            
            20072008
            
            $
            -2009
            
            
            -2010
            
            
            -Total
                minimum rental payments
            
            $
            -





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





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




December 31,2007
            
            2006Capital
                leases - current portion
            
            
            36
            
            
            133Property,
                franchise, and other taxes payable
            
            
            110
            
            
            172Accrued
                warranty costs
            
            
            68
            
            
            127Accrued
                vacation
            
            
            37
            
            
            67Accrual
                for Series A & B default penalty and interest
            
            
            1,114
            
            
            302Legal,
                accounting, interest and other accruals
            
            
            405
            
            
            900$
            1,770
            
            $
            1,701


F-18




**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 $44,051 of interest expense as of December 31, 2007. 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, was previously 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%.




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
      May 8,
      2007, Remote Dynamics and HFS completed an exchange transaction in which: (a)
      the $2,000,000 convertible promissory note originally issued by the Company
      to
      HFS was cancelled, and (b) Remote Dynamics issued 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 937,500 (46,875,000 pre-reverse split) shares of our common stock
      and (iv) our series F-4 warrants to purchase 937,500 (46,875,000 pre-reverse
      split) shares of our common stock. The Company recorded a loss on extinguishment
      of debt totaling $107,000 during the second quarter of 2007 in relation to
      the
      exchange.




The
      following table summarizes the HFS Note Payable as of December 31, 2007
      (000’s):


Less
              
              CarryingPrincipal
              
              Discount
              
              AmountTotal
                  HFS Note Payable - December 31, 2006
              
              $
              2,000
              
              $
              1,716
              
              $
              284Accretion
                  of HFS Note from January 1, 2007 to May 8, 2007
              
              
              -
              
              
              (616
              )
              
              616Conversion
                  to Series B on May 8, 2007
              
              $
              (2,000
              )
              $
              (1,100
              )
              $
              (900
              )Total
                  HFS Note Payable - December 31, 2007
              
              $
              -
              
              $
              -
              
              $
              -





***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).


F-19








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 $10.00 per share
      (which adjusted to $0.80 per share upon the issuance of series B subordinated
      secured convertible notes discussed below). The conversion price adjusted to
      $0.32 effective June 30, 2007 as the Company did not meet certain financial
      and
      operating milestones specified in its Series B Notes, as 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 412,500 (20,625,000 pre-reverse split) shares in
                the aggregate of common stock at an initial exercise price of $20.00
                per
                sharesubject 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
                $0.80 per share upon the issuance of the Company’s series B subordinated
                secured convertible notes as discussed below. The exercise price
                of the
                series A-7 warrants further adjusted to $0.32 effective June 30,
                2007 as
                the Company did not meet certain financial and operating milestones
                specified in its Series B 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. 38,000 of these warrants are exercisable
                over 5
                years.





·
            Series B-4
                warrants to purchase 275,000 (13,750,000 pre-reverse split) shares
                in the
                aggregate of common stock at an initial exercise price of $45.00
                per
                sharesubject 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
                $0.80 per share upon the issuance of the Company’s series B subordinated
                secured convertible notes as discussed below. The exercise price
                of the
                series B-4 warrants further adjusted to $0.32 effective June 30,
                2007 as
                the Company did not meet certain financial and operating milestones
                specified in its Series B 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. 26,000 of these warrants are exercisable over
                5
                years.





·
            Series C-3
                warrants to purchase 550,000 (27,500,000 pre-reverse split) shares
                in the
                aggregate of common stock at an initial exercise price of $10.50
                per
                sharesubject 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
                $0.80 per share upon the issuance of our series B subordinated secured
                convertible notes as discussed below. The exercise price of the series
                C-3
                warrants further adjusted to $0.32 effective June 30, 2007 as the
                Company
                did not meet certain financial and operating milestones specified
                in its
                Series B 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. 50,000 of these warrants are exercisable over 5
                years.




F-20





·
            Series
                D-1 warrants (callable only at our option) to purchase 385,000 (19,250,000
                pre-reverse split) shares in the aggregate of common stock at an
                exercise
                price per share equal to the lesser of: (a) $17.50 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 50,000
                (2.5
                million pre-reverse split) shares of common stock at an exercise
                price per
                share equal to $10.00 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).




We
      have
      failed to comply with certain of our other obligations relating to the Series
      A
      Notes, including our failure to make scheduled principal payments and to
      register for resale the shares of common stock underlying the notes and warrants
      issued in the Series A private placement. The Series A Notes provide for a
      default interest rate of 10% per annum on the outstanding principal amount
      of
      the notes for periods in which certain specified events of default occur and
      are
      continuing and liquidated damages for non-compliance with our registration
      obligations. As of December 31, 2007, we have accrued $717,245 in default
      interest and liquidated damages under the Series A Notes.





Our
      non-compliance with the terms of the notes also exposes to the risk that our
      note holders could seek to exercise prepayment or other remedies under the
      notes.





In
      February, 2008, holders of $1,523,928 principal amount of the Series A Notes
      agreed to extend the principal payment schedule and maturity date of the notes
      until August 31, 2009. As extended, payments under the notes will be due on
      a
      monthly basis (subject to deferral at the holder’s option) and may be made in
      the form of shares of our common stock eligible for resale pursuant to Rule
      144
      under the Securities Act of 1933, as amended.





In
      March,
      2008, we resumed making payments to certain of our Series A note holders of
      amounts due under the notes by issuing shares of our common stock under the
      terms of the notes. We expect to issue additional shares of our common stock
      in
      payment of amounts due under the notes during the remainder of 2008 and
      thereafter.





The
      following table summarizes the Series A Notes as of December 31, 2007
      (000’s):




F-21





Principal
            
            Less
              Discount
            
            Carrying
              AmountTotal
                Series A Notes - December 31, 2006
            
            $
            4,435
            
            $
            3,193
            
            $
            1,242Exchange
                of Series A Notes for Series B Notes - January 10, 2007
            
            
            (113
            )
            
            (86
            )
            
            (26
            )Exchange
                of Series A Notes for Series B Notes - March 26, 2007
            
            
            (113
            )
            
            (86
            )
            
            (26
            )Exchange
                of Series A Notes for Common Stock - April 18, 2007
            
            
            (10
            )
            
            -
            
            
            (10
            )Partial
                Principal Payment - June 29, 2007
            
            
            (5
            )
            
            -
            
            
            (5
            )Partial
                Principal Payment - July 5, 2007
            
            
            (0
            )
            
            -
            
            
            (0
            )Accretion
                of Series A Notes from January 1, 2007 to December 31,
                2007
            
            
            -
            
            
            (2,628
            )
            
            2,628Total
                Series A Notes - December 31, 2007
            
            $
            4,194
            
            $
            392
            
            $
            3,801




***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 1,644,375 (82,218,750 pre-reverse split) shares of the
      Company’s common stock and (iv) its series F-4 warrants (“F-4 Warrants”) to
      purchase 1,644,375 (82,218,750 pre-reverse split) 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 lesser of (i) $1.00 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 $0.80 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 conversion price was adjusted to
                $0.32
                effective June 30, 2007 as the Company failed to achieve financial
                and
                operating milestones specified in the Series B
                Notes.





·
            The
                E-7 Warrants have an exercise price of $1.00 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.




F-22





·
            The
                F-4 Warrants have an exercise price of $1.50 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. 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.




The
      first
      closing occurred on December 4, 2006. 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 411,094 (20,554,688 pre-reverse split) shares
      of
      our common stock and (iv) F-4 Warrants to purchase 411,094 (20,554, 688
      pre-reverse split) shares of our common stock.




On
      January 10, 2007, the Company closed on the second round of the Series B Note
      financing. 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 411,094 (20,554,688 pre-reverse split) shares of our common stock
      and
      (iv) F-4 Warrants to purchase 411,094 (20,554, 688 pre-reverse split) shares
      of
      our common stock.





On
      March
      26, 2007, the
      Company closed
      on
      the third round of funding. 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 411,094 (20,554,688 pre-reverse split) shares of our common
      stock and (iv) F-4 Warrants to purchase 411,094 (20,554,688 pre-reverse split)
      shares of our common stock.





In
      October 2007, the Company closed on a portion of the fourth round of Series
      B
      Note financing, whereby BMSI funded $200,000 of its $300,000 obligation. BMSI
      waived the fourth round closing conditions with respect to the amounts funded.
      The Company issued to BMSI (i) $200,000 principal amount of Series B Notes,
      (ii)
      $80,000 principal amount of Series B OID Notes, (iii) E-7 Warrants to purchase
      187,500 (9,375,000 pre-reverse split) shares of our common stock and (iv) F-4
      Warrants to purchase 187,500 (9,375,000 pre-reverse split) 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 1,543,833 (77,191,646 pre-reverse split) shares of the Company’s common
      stock and (iv) F-4 Warrants to purchase 1,543,833 (77,191,646 pre-reverse split)
      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 occurring
      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
      671,880 (33,594,000 pre-reverse split) shares of its common stock and (iv)
      F-4
      Warrants to purchase 671,880 (33,594,000 pre-reverse split) 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 was valued at $158,699.
      Accordingly, the Company recorded a loss on extinguishment of debt totaling
      $557,973 during the year ended December 31, 2006.




F-23





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 134,401 (6,720,047 pre-reverse split) shares of the Company’s common
      stock and (iv) F-4 Warrants to purchase 134,401 (6,720,047 pre-reverse split)
      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 recorded a loss on extinguishment
      of
      debt totaling $116,922 during the first quarter of fiscal year 2007 in relation
      to this exchange.





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 134,401 (6,720,047 pre-reverse split) shares of the Company’s common
      stock and (iv) F-4 Warrants to purchase 134,401 (6,720,047 pre-reverse split)
      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 recorded a loss on extinguishment
      of
      debt totaling $116,922 during the first quarter of fiscal year 2007 in relation
      to this exchange.





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 468,750 (23,437,500 pre-reverse split) shares of the
      Company’s common stock and (iv) F-4 Warrants to purchase 468,750 (23,437,500
      pre-reverse split) shares of the Company’s common stock. Only a portion of the
      exchange occurred during the year ended December 31, 2006, and the remaining
      exchanges occurred 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
      117,188 (5,859,375 pre-reverse split) shares of its common stock and (iv) F-4
      Warrants to purchase 117,188 (5,859,375 pre-reverse split) 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.





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 117,188 (5,859,375 pre-reverse split) shares of the Company’s common
      stock and (iv) F-4 Warrants to purchase 117,188 (5,859,375 pre-reverse split)
      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 recorded 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 234,375 (11,718,750 pre-reverse split) shares of the Company’s common
      stock and (iv) F-4 Warrants to purchase 234,375 (11,718,750 pre-reverse split)
      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 recorded a
      loss
      on extinguishment of convertible preferred stock of $242,060 during the first
      quarter of fiscal year 2007 in relation to this exchange.





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 328,875 (16,443,750 pre-reverse
      split) shares of the Company’s common stock, with each warrant having an
      exercise price of $0.80 per share (which adjusted to $0.32 per share as
      discussed above) and being exercisable for ten years, (c) E-7 Warrants to
      purchase 246,656 (12,332,813 pre-reverse split) shares of the Company’s common
      stock, and (d) F-4 Warrants to purchase 246,656 (12,332,813 pre-reverse split)
      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, 2007. Fees paid as of December 31, 2007, included
      a
      cash sales commission of $112,860, warrants to purchase 246,656 (12,332,814
      pre-reverse split) shares of the Company’s common stock, E-7 Warrants to
      purchase 184,992 (9,249,609 pre-reverse split) shares of the Company’s common
      stock, and F-4 Warrants to purchase 184,992 (9,249,609 pre-reverse split) 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.




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 $10.00 to $0.80
      per
      share, (b) the exercise price of the Series A-7 warrants changed from $20.00
      to
      $0.80 per share, (c) the exercise price of the Series B-4 warrants changed
      from
      $45.00 to $0.80, and (d) the exercise price of our Series C-3 warrants changed
      from $10.50 to $0.80 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 $87.50 to $4.50 per share and increasing the number of
      shares of common stock for which the warrants can be exercised from 14,000
      (700,000 pre-reverse split) to 261,068 (13,053,378 pre-reverse
      split).




Effective
      June 30, 2007, the Company failed to meet certain financial and operating
      milestones specified in the Series B Notes and, as a result, the conversion
      price of the series B Notes was reduced from $0.80 per share to $0.32 per share.
      The reduction in the conversion price of the Series B Notes triggered further
      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 $0.80 to $0.32 per share, (b) the exercise price of the Series
      A-7
      warrants changed from $0.80 to $0.32 per share, (c) the exercise price of the
      Series B-4 warrants changed from $0.80 to $0.32 per share, and (d) the exercise
      price of our Series C-3 warrants changed from $0.80 to $0.32 per share. In
      addition, the conversion price adjustment 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 $4.50
      to $3.00 per share and increasing the number of shares of common stock for
      which
      the warrants can be exercised from 261,068 (13,053,378 pre-reverse split) to
      395,887 (19,794,332 pre-reverse split).




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.




On
      November 14, 2007, the Company completed an increase in the number of its
      authorized shares of common stock to 750,000,000 and a one-for-fifty reverse
      stock split of its common stock. The share information disclosed within this
      Form 10K is post-split.




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 30 th 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 60 th 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.




We
      have
      failed to comply with certain of our other obligations relating to the Series
      B
      Notes, including our failure to make scheduled principal payments and to
      register for resale the shares of common stock underlying the notes and warrants
      issued in the Series B private placement. The Series B Notes provide for a
      default interest rate of 10% per annum on the outstanding principal amount
      of
      the notes for periods in which certain specified events of default occur and
      are
      continuing and liquidated damages for non-compliance with our registration
      obligations. As of December 31, 2007, we have accrued $397,100 in default
      interest and liquidated damages under the Series B Notes.




F-25


Our
      non-compliance with the terms of the notes also exposes to the risk that our
      note holders could exercise their prepayment or other remedies under the
      notes.





In
      March,
      2008, we commenced making payments to certain of our Series B note holders
      of
      amounts due under the notes by issuing shares of our common stock under the
      terms of the notes. We expect to issue additional shares of our common stock
      in
      payment of amounts due under the notes during the remainder of 2008 and
      thereafter.





We
      do not
      currently have the cash on hand to repay amounts due under our Series B Notes
      if
      the note holders elect to exercise their repayment or other remedies. If our
      efforts to restructure or otherwise satisfy our obligations under the notes
      are
      unsuccessful , and
      we
      are unable to raise enough money to cover the amounts payable under the notes,
      we 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, 2007
      (000’s):




Less
            
            CarryingPrincipal
            
            Discount
            
            AmountTotal
                Series B Notes - December 31, 2006
            
            $
            2,716
            
            $
            1,019
            
            $
            1,698Issuance
                of Series B Notes - January 10, 2007
            
            
            614
            
            
            184
            
            
            429Exchange
                of Series A Notes to Series B Notes - January 10, 2007
            
            
            201
            
            
            60
            
            
            140Exchange
                of Series B Preferred Stock to Series B Notes - January 10,
                2007
            
            
            175
            
            
            53
            
            
            122Issuance
                of Series B Notes - March 26, 2007
            
            
            614
            
            
            181
            
            
            433Exchange
                of Series A Notes to Series B Notes - March 26, 2007
            
            
            201
            
            
            59
            
            
            141Exchange
                of Series B Preferred Stock to Series B Notes - March 26,
                2007
            
            
            350
            
            
            103
            
            
            247HFS
                Conversion - May 8, 2007
            
            
            1,400
            
            
            414
            
            
            986Issuance
                of Series B Notes - October 10, 2007
            
            
            280
            
            
            94
            
            
            186Accretion
                of Series B Notes from January 1, 2007 to December 31,
                2007
            
            
            -
            
            
            (625
            )
            
            625Total
                Series B Notes - December 31, 2007
            
            $
            6,550
            
            $
            1,543
            
            $
            5,007





F-26




The
      following table summarizes the Company’s convertible notes payable by maturity
      dates as of December 31, 2007 (000’s) (as the Company currently is not in
      compliance with certain of its obligations relating to the Series A and Series
      B
      Notes, the Company is classifying the convertible notes payable as a current
      liability on the balance sheet):





Less
            
            CarryingPrincipal
            
            Discount
            
            AmountFiscal
                Year ending December 31, 2007
            
            $
            4,941
            
            $
            635
            
            $
            4,306Fiscal
                Year ending December 31, 2008
            
            $
            3,377
            
            $
            729
            
            $
            2,648Fiscal
                Year ending December 31, 2009
            
            $
            2,425
            
            $
            571
            
            $
            1,854$
            10,743
            
            $
            1,935
            
            $
            8,808




**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 7.08 million shares (354 million
      shares pre-reverse split) of our common stock at exercise prices noted above.
      The fair value of the warrants was estimated to be approximately $388,000 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
      $260,000 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 $0.70 per share ($0.014 per share
      pre-reverse split), which on the date of issuance, was lower than the price
      of
      our common stock of $0.75 per share ($0.015 per share pre-reverse split). 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 $217,676 of transaction costs as deferred financing fees. We also
      recorded $62,169 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, 2007, $85,000
      of
      the deferred financing fees was amortized to interest expense.




**Capital
      Leases Payable**




We
      lease
      certain vehicles, computer equipment, and other equipment under capital leases.
      As of December 31, 2007 and 2006, assets under capital leases included in
“Property and equipment” on our Consolidated Balance Sheets, were $83,000 and
      $368,000, net of accumulated depreciation of $26,000 and $83,000 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, 2007 (in thousands).




Fiscal
                year ending December 31,2008
            
            $
            272009
            
            
            112010
            
            
            -Total
                minimum lease payments
            
            
            39Less:
                amount representing interest
            
            
            (2
            )Present
                value of net minimum lease payments
            
            $
            37





F-27




**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 $2.1 million as of December 31, 2007 that
      will be offset against future taxable income. The available net operating loss
      carry forwards of approximately $2.1 million expire in various years through
      2027. 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 31,2007
            
            2006Deferred
                tax asset:NOL
                Carryforward
            
            $
            713
            
            $
            477Valuation
                allowances
            
            
            (713
            )
            
            (477
            )Total
            
            $
            -
            
            $
            -The
                components of income tax expense are as follows:Current
                Federal Tax
            
            $
            -
            
            $
            -Current
                State Tax
            
            
            -
            
            
            -Change
                in NOL benefit
            
            
            236
            
            
            431Change
                in valuation allowance
            
            
            (236
            )
            
            (431
            )$
            -
            
            $
            -




The
      Company’s effective tax rate differs from the federal and state statutory rates
      due to the valuation allowance recorded for the deferred tax asset due to unused
      net operating loss carry forwards and permanent differences.





The
      following is a reconciliation of the provision for income taxes at the expected
      rates to the income taxes reflected in the statement of operations:





December 31,2007
            
            2006Tax
                at federal statutory rate
            
            
            (34
            )%
            
            (34
            )%State
                tax expense, net of federal tax effect
            
            
            (5
            )
            
            (5
            )Permanent
                differences
            
            
            38
            
            
            31Change
                in valuation allowance
            
            
            2
            
            
            9-
            
            
            -





F-28




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





**Common
      Stock**





As
      of
      December 31, 2007 we had 750,000,000 shares of common stock authorized with
      a
      par value of $0.01. We had 1,393,231 common stock shares issued and 1,374,632
      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 1,245,108 (62,255,408 pre-reverse split) common
      stock
      shares issued and 1,226,509 (61,325,460 pre-reverse split) shares outstanding.





During
      2007, the Company issued 51,384 shares of common stock for $9,000 of
      professional services. These shares were valued at $9,000 and are included
      in
      general and administrative expenses for the year ended December 31,
      2007.





During
      2007, the Company issued 12,640 (632,000 pre-reverse split) shares of its common
      stock for conversion of $10,000 of principal amount Series A convertible notes.





During
      2007, the Company issued 65,500 (3,275,000 pre-reverse split) shares of its
      common stock as a partial principal payment of $6,000 on the Series A Notes
      convertible notes.




**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, 2007, 522 shares of the Series B convertible preferred stock
      remained outstanding. Each share has a face value of $10,000 ($5,220,000 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.




***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 $77.5 ($1.55 pre-reverse split) 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;




F-29


·
            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




·
            Weotherwise 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;




·
            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.




F-30





**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;




·
            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;




F-31


·
            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;




·
            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).




F-32


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
                33,333 (1,666,667 pre-reverse split) shares of our common stock at
                an
                exercise price equal to $0.50 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
                14,000 (700,000 pre-reverse split) shares of our common stock at
                an
                exercise price equal to $87.50 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 $87.50 to $4.50 per share and increasing the number of
                shares
                of common stock for which the warrants can be exercised from 14,000
                (700,000 pre-reverse split) to 261,068 (13,053,378 pre-reverse
                split).




·
            Effective
                June 30, 2007, the Company failed to meet certain financial and operating
                milestones specified in the Series B Notes and, as a result, the
                conversion price of the series B Notes was reduced from $0.80 per
                share to
                $0.32 per share. The reduction in the conversion price of the Series
                B
                Notes triggered further anti-dilution adjustments to certain warrants
                issued to SDS in September 2005 in connection with the Series B preferred
                stock transaction, by changing the exercise price from $4.50 to $3.00
                per
                share and increasing the number of shares of common stock for which
                the
                warrants can be exercised from 261,068 (13,053,378 pre-reverse split)
                to
                395,887 (19,794,332 pre-reverse
                split).




·
            With
                respect to the third warrant, the holder has the right to purchase
                up to
                40,000 (2,000,000 pre-reverse split) shares of our common stock at
                an
                exercise price equal to $87.50 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.




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.




F-33




**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).





2008
            
            $
            592009
            
            
            14$
            73




During
      the year ended December 31, 2007 and 2006, total rent charged to operating
      expenses was approximately $70,000 and $41,000, 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 31,2007
            
            2006Warranty
                product liability at beginning of period
            
            $
            127
            
            $
            -Accruals
                for product warranties issued
            
            
            56
            
            
            132Product
                replacements
            
            
            (115
            )
            
            (5
            )Adjustments
                to pre-existing warranty estimates
            
            
            -
            
            
            -Warranty
                product liability at end of period
            
            $
            68
            
            $
            127




The
      long-term portion of the warranty product liability at December 31, 2007 and
      2006 was approximately $-0- and $-0-, respectively.




**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, 2007 and 2006 were approximately $21,000 and $2,000
      respectively.




**Other
      Purchase Commitments**




As
      of
      December 31, 2007, we had approximately $1,049,000 in primarily
      inventory-related purchase commitments.




F-34





**Litigation**




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
      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), was the CEO and
      Chairman of DataLogic International, Inc. at the time the note was issued.
      Mr.
      Moore was not a member of our Board of Directors or the board of directors
      of
      BounceGPS at the time the note was issued. Mr. Moore is not a member of the
      board of directors of BounceGPS.




In
      connection with our November 2006 private placement, we agreed to pay $60,000
      ($15,000 per closing) to Strands Management Company, LLC (“Strands”), formerly
      known as Monarch Bay Management Company, LLC, for consulting work. David Walters
      (our Chairman) and Keith Moore (a member of our Board of Directors) are managing
      members of Strands and each own 50% of Strands.  As
      of
      December 31, 2006, the Company owed $15,000 to Strands for these
      services . The
      Company made payments totaling $45,000 during the year ended December 31,
      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.




BounceGPS
      had an agreement with Monarch Bay Capital Group, LLC (“MBCG”) for corporate
      development and chief financial officer services during the period from July
      2006 to May 2007. 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  paid
      to
      MBCG a monthly fee of $20,000 in cash. Fees paid to MBCG totaled $80,000 and
      $100,000 for the years ended December 31, 2007 and 2006, respectively. Remaining
      amounts due to MBCG totaled $20,000 as of December 31, 2007.




On
      May 1,
      2007, we entered into a Support Services Agreement with Strands. David Walters,
      our Chairman, and Keith Moore, our director, each are members of, and each
      own
      50% of the ownership interests in Strands. Under the Support Services Agreement,
      Strands provides us with financial management services, facilities and
      administrative services, business development services, creditor resolution
      services and other services as agreed by the parties. We pay to Strands monthly
      cash fees of $22,000 for the services. In addition, Strands will receive fees
      equal to (a) 6% of the revenue generated from any business development
      transaction with a customer or partner introduced to us by Strands and (b)
      20%
      of the savings to us from any creditor debt reduction resolved by Strands on
      our
      behalf. The initial term of the Support Services Agreement expires May 1, 2008.
      Fees paid to Strands totaled $199,000 for the year ended December 31,
      2007.




F-35


On
      May 1,
      2007, we entered into a Placement Agency and Advisory Services Agreement with
      Monarch Bay Associates, LLC (“MBA”). (MBA is a FINRA registered firm.) David
      Walters, our Chairman, and Keith Moore, our director, each are members of,
      and
      each owns 50% of the ownership interests in MBA. Under the agreement, MBA acts
      as our placement agent on an exclusive basis with respect to private placements
      of our capital stock and as our exclusive advisor with respect to acquisitions,
      mergers, joint ventures and similar transactions. MBA will receive fees equal
      to
      (a) 9% of the gross proceeds raised by us in any private placement (plus
      warrants to purchase 9% of the number of shares of common stock issued or
      issuable by us in connection with the private placement) and (b) 3% of the
      total
      consideration paid or received by us or our stockholders in an acquisition,
      merger, joint venture or similar transaction. The initial term of the Placement
      Agency and Advisory Services Agreement expires May 1, 2008. No fees were paid
      to
      MBA in 2006 or 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 our acquisition of the capital stock of BounceGPS.




On
      August
      4, 2006, BounceGPS loaned $150,000 to a subsidiary of Monarch Staffing, Inc.
      at
      10% per annum. David Walters (our Chairman) is also the Chairman of Monarch
      Staffing and beneficially owns 41% of the outstanding common stock of Monarch
      Staffing. Keith Moore (a Director) is also a Director of Monarch Staffing and
      beneficially owns 41% of the outstanding common stock of Monarch Staffing.
      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. Mr. Moore was not a member of BMSI or
      BounceGPS at the time the note was issued, nor thereafter. 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 our acquisition of the capital stock of
      BounceGPS. At the time of the loan transactions, BounceGPS was a private company
      and a wholly owned subsidiary of BMSI.




On
      November 14, 2007, BounceGPS loaned $21,875 to BMSI. Interest accrued at an
      annual rate of 10%. David Walters, Chairman, is also the Chairman and Chief
      Executive Officer of BMSI and beneficially owns a majority of the outstanding
      common stock of BMSI. We received payment in full, including interest of $729
      in
      March 2008.




On
      December 26, 2007, BounceGPS loaned $22,000 to Monarch Staffing, Inc. and
      $25,000 to a subsidiary of Monarch Staffing, Inc. Interest accrued at an annual
      rate of 10%. David Walters (our Chairman) is also the Chairman of Monarch
      Staffing and beneficially owns 41% of the outstanding common stock of Monarch
      Staffing. David Walters (a member of our Board of Directors) is also a director
      of Monarch Staffing and beneficially owns 41% of the outstanding common stock
      of
      Monarch Staffing. Keith Moore (a Director) is also a Director of Monarch
      Staffing and beneficially owns 41% of the outstanding common stock of Monarch
      Staffing. We received payment in full, including interest of $1,175 in March
      2008.




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




In
      February, 2008, holders of $1,523,928 principal amount of the Series A Notes
      agreed to extend the principal payment schedule and maturity date of the notes
      until August 31, 2009. As extended, payments under the notes will be due on
      a
      monthly basis (subject to deferral at the holder’s option) and may be made in
      the form of shares of our common stock eligible for resale pursuant to Rule
      144
      under the Securities Act of 1933, as amended.





In
      March,
      2008, we resumed making payments to certain of holders of our secured
      convertible notes of amounts due under the notes by issuing shares of our common
      stock under the terms of the notes. The initial payment was in the form of
      7,787,535 shares of the Company’s common stock in satisfaction of $172,595 of
      obligations due under the notes. The represents an issuance price of $.027
      per
      share (for the Series A Notes) and $.031 per share (for the Series B Notes).
      In
      general, the shares issued are available for immediate resale by the holders
      in
      accordance with Rule 144 under the Securities Act of 1933, as
      amended.





F-36