<PAGE>
     As filed with the Securities and Exchange Commission on March __, 2003.
===============================================================================

                                  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, 2002

                                                        OR

            [ ]    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: 000-26455

                                ISECURETRAC CORP.
                 (Name of small business issuer in its charter)

              DELAWARE                                        87-0347787
    (State or other jurisdiction                           (I.R.S. Employer
 of incorporation or organization)                        Identification No.)

                       5022 South 114th Street, Suite 103
                              Omaha, Nebraska 68137
               (Address of principal executive offices)(Zip Code)
                    Issuer's telephone number: (402) 537-0022

Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.001 per share
(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 [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year: $503,002.

As of February 28, 2003, the aggregate market value of the voting and non-voting
common equity held by non-affiliates 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, was approximately $11,848,078.

The number of shares outstanding of each of the issuer's classes of common
stock, as of February 28, 2003: 36,426,720 (one class).

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the Registrant's 2003 Annual
Meeting of Stockholders to be filed within 120 days of the fiscal year ended
December 31, 2002 are incorporated by reference in Items 10, 11, 12 and 13 of
Part III of this Annual Report on Form 10-KSB.

Transitional Small Business Disclosure format (check one): YES [X] NO [ ]

===============================================================================

<PAGE>

 PART I.

ITEM 1. DESCRIPTION OF BUSINESS

         This Form 10-KSB contains statements that plan for or anticipate the
future. Forward-looking statements include statements about the future of our
products and the industry, statements about our future business plans and
strategies, and most other statements that are not historical in nature. In this
Form 10-KSB, forward-looking statements are generally identified by the words
"anticipate," "plan," "believe," "expect," "estimate," and the like.

         Readers should carefully review these cautionary statements as they
identify certain important factors that could cause actual results to differ
materially from those in the forward-looking statements and from historical
trends. The following cautionary statements are not exclusive and are in
addition to other factors discussed elsewhere in this report, in our filings
with the Securities and Exchange Commission or in materials incorporated herein
or therein by reference.

         Because we have a limited operating history, it is difficult to
evaluate our business. Factors that may cause us to fail to meet our business
goals include the following: our ability to raise adequate capital to finance
our business plan; our future financial condition, liquidity and business
prospects generally; our inability to respond to competitive market conditions;
marketplace acceptance of our products and market demand for our products;
perceived opportunities in the marketplace for our products and our other
products under development; future sales levels and other business plans for the
future. Our profitability will require the successful commercialization of our
Series 2100 Personal Tracking Unit (PTU) and tracNET24 software. No assurances
can be given when this will occur or that we will ever be profitable.

      (a) Business Development

         iSecureTrac Corp. ("iST") is an emerging technology company. We have
developed a Global Positioning Satellite (GPS) based tracking and monitoring
system for criminal offenders on parole, probation or pre-trial release,
consisting of a PTU and a web-based automated monitoring system made available
for use by agencies through the Internet. In the first quarter of 2002, we
completed our Series 2100 PTU development and started producing manufactured
units. At the same time, we completed our first production release of tracNET24,
our automated monitoring software. We installed tracNET24 on our servers at a
secure, off-site collocation facility for accessibility by our customers through
the Internet. Direct sales of our new Series 2100 PTUs and our tracNET24
services began in December, 2002 and revenues from such sales have increased in
the first quarter of 2003. With the agreements we signed in the first two months
of 2003; five end-user agencies, one service provider and two new distributors,
with revenues generated in the current quarter and anticipated future revenues,
we have established ourselves as an operating company during the fourth quarter
of 2002. For the first three quarters of 2002, we reported as a development
stage company.

         We continue to enhance our products with additional features requested
by our customers from time to time; reduce the cost of our products through


                                       1
<PAGE>

volume production; and improve response time of tracNET24 by continuing to
streamline firmware, software and communications.

         We were incorporated under the laws of the State of Colorado on June
13, 1983 under the name Sage Institute International, Inc. A Delaware
corporation under the name Sage Analytics International, Inc. was incorporated
on July 17, 1986; and, on September 2, 1986, we reincorporated as a Delaware
corporation by merging the Colorado Corporation with and into the Delaware
Corporation.

         On December 17, 1997, the stockholders of Advanced Business Sciences,
Inc., a Nebraska corporation, concluded a share exchange with our Company (the
"Share Exchange") whereupon the Nebraska corporation became the wholly owned
subsidiary of our Company and control was transferred to the former stockholders
of the Nebraska corporation. We subsequently changed our name to Advanced
Business Sciences, Inc. We changed our name to iSecureTrac Corp., effective June
19, 2001. This name change was made to better reflect our current and future
business activities of providing advanced tracking solutions for the monitoring
of individuals and assets via a secure web hosted application.

      (b) Business of Issuer

         (i) Introduction

         Prior to the Share Exchange, our business plan was to develop
methodology and software which would identify potential failures facing an
organization or project, rank such failures in order of significance and
determine their root causes. We marketed the technology to both government and
private industry. We conducted no business operations from April 1996 until the
completion of the Share Exchange on December 17, 1997; whereupon our Company
began to develop, produce and market GPS based tracking solutions for criminal
offenders as described in this Form 10-KSB.

         Our product, which utilizes GPS technology, wireless communications and
proprietary computer software, provides real time monitoring, tracking and
reporting of adult and juvenile offenders as a criminal justice rehabilitative
alternative. Based on our patented technology it is the next generation of
software and hardware. Our system tracks the geographic location of every
offender in the system, reports specific activities and identifies violations
against customer-established parameters. This information is then delivered to
the appropriate authorities using various methods, including telephone calls,
paging, e-mail and web-based reports. We believe use of our system can offer
substantial cost savings over the cost of incarceration and improve the
efficiency of probation and parole officers. It also offers the backlogged
criminal justice systems a more secure solution to the problems of rapidly
growing criminal populations, overcrowded correctional facilities and more
lenient sentencing alternatives.

         Although the criminal justice market is our primary market, we have had
discussions with and marketed our GPS tracking system to potential users in
transportation and other markets. We believe that our system is readily
adaptable to meet the needs of locating and tracking of vehicles and other
assets.




                                       2
<PAGE>

    (ii) The Electronic Monitoring Market

         According to the U.S. Bureau of Justice Statistics latest report dated
August 25, 2002, 6.6 million adults were under some form of correctional
supervision at December 31, 2001. The number of prisoners under the jurisdiction
of federal or state correctional authorities on that date reached a record high
of 2.0 million. Moreover, 4.6 million adults were under parole or probation
supervision. The total adult correctional population has increased 45.3% from
1991 to 2001.

         This growth has resulted in stresses on the correctional system in
terms of both management and costs. While this has led to increased use of
probation and parole as alternatives to incarceration, caseworkers are unable to
monitor probationers and parolees effectively. Electronic monitoring enhances
the ability of caseworkers to monitor the activities of probationers and
parolees, as well as affording electronic monitoring as an economic alternative
to incarceration.

         Electronic monitoring offers two distinct advantages over
incarceration, 1) it reduces the public's tax burden by allowing the offender to
work and, subsequently, to pay for electronic monitoring costs, and 2) it
reduces prison and jail overcrowding by providing a viable alternative to
incarceration.

         The traditional electronic monitoring application utilizes (1) a fixed
location radio frequency device connected to a power source and telephone line
(a "house arrest unit") and (2) a tamper-proof transmitter cuff worn by the
offender. The individual under house arrest must remain within a specified
distance of the house arrest unit. When they leave that proximity, the house
arrest unit transmits a notification over the telephone line to a monitoring
center. The monitoring center software and operators determine if this is a
permitted or authorized departure, using tables of individual schedules provided
by the contracting authorities. If they determine it is a violation of the
programmed schedule, a violation notice is created and the appropriate
authorities are contacted using pre-established protocols. These protocols can
include voice calls, paging, faxing, e-mail or some combination. Additionally,
reports are created for transmission as required by the customer organization.

         House arrest monitoring equipment first became commercially available
in 1984. In 1987, twenty-one (21) states reported using this electronic
monitoring as a sentencing alternative. By 1995, all fifty states were using at
least limited amounts of house arrest electronic monitoring. Experts estimate
that as many as 300,000 individuals now incarcerated could be supervised more
cost-effectively and safely using appropriate electronic supervision. [Source:
Journal of Offender Monitoring, January 1998 and March 1999 issues] Also, the
Journal of Offender Monitoring estimated 95,000 individuals under electronic
house arrest at the beginning of 1999. These individuals were monitored
primarily through third party service providers under contract to the
appropriate local, state and federal agencies.



                                       3
<PAGE>

         We believe there is a substantial opportunity to provide a system to
allow offenders to be tracked and monitored away from the fixed house arrest
location. In early 1994, our Company began looking into the feasibility of
utilizing GPS receivers and wireless communications technologies in a device
which could be worn by offenders and thus allow electronically supervised
release from house arrest. In December of 1994, we described our concepts in a
patent application filed with the United States Patent and Trademark Office for
an "Apparatus and Method for Continuous Electronic Monitoring and Tracking of
Individuals." Over the next seven years, we continued to develop a system of
continuous monitoring of mobile offenders by creating smaller and lighter
Personal Tracking Units (PTUs) and refining the software to track and monitor
the location of the PTUs. In late 1995, we began to field test PTUs. Our lunch
pail sized units were extensively tested by the Nebraska Department of
Corrections and the concept was proven. In 1997, size had been reduced and
functionality was increased. Our 1702 model PTU, the size and shape of a "bag
phone", was capable of changing inclusion and exclusion zones while mobile
through parameters downloaded from central monitoring computers, another first
for the industry. The 1702 model was used by state probation officers in Texas,
Arizona and Illinois. In the meantime, we filed two additional patent
applications, in 1997 and 1998. In 2000, we were issued two patents for the
apparatus and method of tracking persons or mobile objects with the use of GPS
and wireless communications. In 2002 we launched our new Series 2100 PTU and our
web-based tracNET24 automated monitoring system (see below "The Products and
Services of Our Company").

         We derive our revenue from selling and leasing PTUs and related
products such as cuff transmitters and docking stations; selling services such
as training and data archiving; and, from providing the use of our web based
tracking and monitoring system, known as tracNET24(TM). tracNET24 is a hosted
application, accessible to our distributors and their justice agency customers
through secured logins and allows tracking and monitoring of all electronically
activated PTUs. For each PTU monitored through tracNET24, we charge a daily
hosting fee. Our agreements are with distributors, service providers (i.e.
private companies which operate monitoring centers for state and county
agencies), and state and county agencies.

         Our agreements with state and county agencies and service providers
typically take the form of leasing our PTUs and providing hosting services for
activated units, all for a daily fee per PTU. The usual term of such agreements
is from one to three years, with automatic one year renewals thereafter. PTUs
must be returned at the end of the lease term or be paid for, in full, at the
retail price listed in the agreement. During the term of the lease, daily rental
fees are charged for each unit delivered and daily service fees are charged for
each unit activated for tracking by the end-user.

         Our agreements with distributors typically take the form of sales
agreements, authorizing resales and leases of our PTUs, and Hosting Services
agreements, whereby we agree to provide tracNET24 via the Internet for all PTUs
sold to the distributor. The usual term of our distribution agreements is from
three to five years, with automatic one year renewals thereafter. We warrant our
products to be free from defects and to operate in accordance with our published
product specifications for a period of one year. Negotiated product volume
discounts, product shipping and delivery terms, and pricing for training, and
extended product warranties are also described in our agreements. Our standard
Hosting Services agreements with our distributors contain terms for guaranteed


                                       4
<PAGE>

system availability and capacity, accessibility through the Internet with
standard browsing software and charges for data archiving.

    (iii) Competition

  We believe that only one other company, Pro Tech Monitoring, Inc., has a
GPS-based product in the field today. We compete with Pro Tech Monitoring on the
basis of price, quality of product and quality of service.

    (iv) Business Strategy

The key elements of our business strategy are to:

o        Be a leader in applying GPS technology to applications for tracking and
         monitoring individuals on parole, probation and pre-trial release. To
         accomplish this goal:

         -        We have devoted significant resources to develop and improve
                  our products.

         -        We are constantly evaluating improvements in technology
                  components and communications systems and new or improved
                  capabilities for our products.

         -        We have signed lease and service agreements with end-user
                  agencies and service providers since the release of our new
                  Series 2100 Personal Tracking Unit and are stepping up
                  marketing and sales to other such agencies and providers.

         -        We have signed distribution and hosting services agreements
                  with leading private monitoring centers and are pursuing other
                  appropriate distributors to replace traditional house arrest
                  with our GPS based system.

o        Target application opportunities within other specific market niches
         for tracking individuals and tangible assets and to be a supplier of
         equipment and software to those end markets.

o        Maintain the capability to undertake special projects, funded by
         specific customers to meet their unique needs. These special projects
         will be done to advance iST's knowledge in certain markets and to fund
         development within specific application areas. To date, we have worked
         on no special projects.

         To date, we have had limited revenue from operations and have
accumulated significant losses. Consequently, we have had difficulty in
obtaining funding from commercial lenders, thereby requiring us to obtain
funding from private sources. On March 7, 2003, we entered into a common stock
purchase agreement with Fusion Capital Fund II, LLC. Under the terms of the
agreement, Fusion Capital shall buy up to $6,000,000 of our common stock over a
period of 30 months. The Company has the right to control the timing and the
amount of common stock sold with the limit being $200,000 a month as defined in
the agreement. We may not be able to find adequate sources of funding to


                                       5
<PAGE>

implement our strategic goals. Moreover, there is no assurance that we will ever
generate significant revenues or profits.

     (v) The Products and Services of Our Company

         Our introduction of our next generation product, our Series 2100
Personal Tracking Unit, commenced in the first quarter of 2002. The Series 2100
Personal Tracking Unit provides our customers with real-time monitoring of any
individual or thing on either a continuous or periodic basis through the
Internet, whether the person or object is moving or is at a fixed location.

         The Series 2100 Personal Tracking Unit offering consists of the
following components:

         A tracking unit is worn by or placed near the subject. The tracking
unit is secured to the subject via a wireless cuff, which is about the size of a
standard wristwatch. The wireless cuff is waterproof and shockproof; our case
and strap are designed to be tamper resistant. The tracking unit utilizes
information from the GPS to triangulate the subject's physical position. The
tracking unit then transmits this and other information to the tracNET24 hosting
center. In addition, the tracking unit can be used in a docking station (which
is similar to a cradle for a cordless telephone) as a house arrest monitor.

         The tracking unit monitors the status of the wireless cuff and itself
and reports the following conditions:

         o        Status of radio frequency contact between tracking unit and
                  the house arrest monitor, including proximity violations (i.e.
                  failure to remain within specified proximity of the house
                  arrest monitor)

         o        Tampering with tracking unit or the house arrest monitor

         o        Status of communications between the house arrest monitor and
                  the operations center

         o        Status of power connection of the house arrest monitor

         o        Status of tracking unit battery

         o        Inclusion zone violations (i.e. subject being out of a
                  designated area inappropriately)

         o        Exclusion zone violations (i.e., being in an area or location
                  from which the subject is prohibited)

         o        Find Me Mapping (i.e. allows customers to locate the specific
                  location of the unit and our offender at any given time)

         Each customer will access and maintain their offender information and
will also monitor the movement of offenders through our host software on the
Internet. The customer can build daily schedules and program inclusion and


                                       6
<PAGE>

exclusion zones via their Internet connection. We provide various levels of
service to meet the specific needs of our customers.

     (vi) The Technology

         (A) Wireless communications are transmitted through space via radio
frequency radiation, one of several types of electromagnetic radiation. The
radio frequency part of the electromagnetic spectrum is generally defined as
electromagnetic radiation with frequencies in the range of 3 kilohertz to 300
gigahertz. One "hertz" equals one cycle per second. A kilohertz ("kHz") is one
thousand-hertz, a megahertz ("MHz") is one million-hertz and a gigahertz ("GHz")
is one billion-hertz. Microwave radiation is a high-frequency form of radio
frequency radiation usually defined as from about 300 MHz to 300 GHz.

         Familiar uses of radio frequency radiation involving telecommunications
include AM and FM radios, television, citizens band radio, hand-held
walkie-talkies, amateur radio, short-wave radio, cordless telephones and
microwave point-to-point and ground-to-satellite telecommunications links.
Non-telecommunications applications include microwave ovens and radar.

         The manufacture, sale and use of devices, which utilize any part of the
radio frequency radiation spectrum, are subject to regulation. The Federal
Communications Commission (the "FCC") is the principal agency responsible for
such regulation within the United States. State and local governments, however,
exercise some control respecting the siting of wireless facilities. While many
transmitters (such as radio stations) must be individually licensed, certain
low-power transmitters need not be. These would include such devices as cordless
telephones, baby monitors, garage door openers, wireless home security systems,
and keyless automobile entry systems. Before such a device may be marketed,
however, it must first be tested to determine if the device meets FCC
specifications; and then it must receive authorization from the FCC. The devices
that iST markets fit within this regulatory scheme.

         (B) Global Positioning System

         The Global Positioning System consists of at least 24 operational
satellites that orbit the earth every 12 hours. Operated by the Department of
Defense ("DOD"), this constellation typically permits from five to eight
satellites to be visible from any point on earth at any given moment in time. A
master control facility located at Schriever Air Force Base in Colorado monitors
signals from the satellites and uploads orbital and clock data. A position fix
is acquired when a GPS receiver is "seeing" at least three of these satellites.
Since the discontinuation of selective availability (which for non-DOD users
limited horizontal accuracy to 30 meters) on May 1, 2000, the positioning system
is accurate to within 10 meters, approximately 33 ft, for horizontal position,
15 meters, approximately 50 ft, for vertical position and 110 nanoseconds time
accuracy. The United States government currently provides GPS signal
capabilities to users free of charge.

         GPS satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The
satellites have design lives of 7.5 years and are subject to damage by the


                                       7
<PAGE>

hostile space environment in which they operate. To repair damaged or
malfunctioning satellites is not economically feasible. If a significant number
of satellites were to become inoperable, there could be a substantial delay
before they are replaced with new satellites. A reduction in the number of
operating satellites would impair the current utility of the GPS system and the
growth of current and additional market opportunities. In addition, there can be
no assurance that the U.S. government will remain committed to the operation and
maintenance of GPS satellites over a long period, or that the policies of the
U.S. Government for the use of GPS without charge will remain unchanged. Because
of ever-increasing commercial applications of GPS, other U.S. Government
agencies may become involved in the administration or the regulation of the use
of GPS signals. Any of the foregoing factors could affect the willingness of
buyers of our products to select GPS-based systems instead of products based on
competing technologies such as radio frequency type house arrest units. Any
resulting change in market demand for GPS products could have a material adverse
effect on our financial results.


      (vii) Intellectual Property Rights

         We have been issued three patents to date by the United States Patent
Office:(i) No. 6,072,396 for an "Apparatus and Method for Continuous Electronic
Monitoring and Tracking of Individuals" was issued on June 6, 2000 and will
expire on June 6, 2017; (ii) No. 6,100,806, also for an "Apparatus and Method
for Continuous Electronic Monitoring and Tracking of Individuals" was issued on
August 8, 2000 and will expire on July 7, 2018; and (iii) No. 6,337,665 was
issued on January 8, 2002 for an "Antenna Orientation Maintaining System in a
System for Tracking Individuals and Method of Use" and will expire on October
18, 2020.

         We have been granted a nonexclusive software license from SiRF
Technology Incorporated ("SiRF"). SiRF has designed GPS chip sets and software
solutions that allow iST to embed GPS technology into our products. This license
is for an indefinite term; however, it may be terminated if SiRF loses any of
our rights as to the software products encompassed therein or by either party
upon thirty (30) days written notice in the event of a material breach of the
license by the other party.

      (viii) Regulation

         The FCC regulates the manufacture, sale and use of radio frequency
radiation devices. Similarly, insofar as GPS remains funded and controlled by
the U. S. government, devices utilizing GPS must conform to government
specifications. Our current Series 2100 PTU received FCC Part 2, Part 22 and
Part 15, Class B approval in August, 2001. FCC required testing was successfully
completed in January, 2002.

         The use of tracking devices as an aid to, or indeed substitute for,
physical surveillance by law enforcement personnel is subject to federal, state
and local law. Generally stated, tracking devices may be attached to or
installed upon the monitored person or object without court order as long as the
person or objects remain in public view. Once the person or object is withdrawn


                                       8
<PAGE>

from public view, a court order is required (absent permission by the person or
owner of the object). But, where a tracking device has been placed with
contraband (e.g., stolen goods), rather than with a lawfully possessed item,
warrantless monitoring can continue to occur even after the monitored object has
been taken onto private premises. As a rule, all persons presently monitored by
iST are subject to a court order requiring such monitoring as a condition to
their release.

         The use of tracking devices by private persons is also subject to
applicable law. The monitoring of persons without their consent or of objects
without their owners' or lawful possessors' consent may be a violation of laws
protecting privacy and property rights.

      (ix) Research and Development

         During 2002 and 2001, we expended $773,248 and $496,727, respectively,
toward research and development. The costs of such research and development are
borne by us and not by any of our customers. We have been a pioneer in the
development of GPS tracking as it relates to use in the criminal justice
industry. The research and development staff designs and develops products
incorporating GPS technology, wireless communications, web based reporting, and
data storage and transmission. Our current research and development efforts are
focused on additional functionality in the 2100 series product for the criminal
justice industry. This platform of technology has been designed to cross over
into over market segments including the transportation industry.

      (x) Principal Suppliers

         Our hardware products are manufactured by third party contract
manufacturers in accordance with our manufacturing specifications. Our PTUs are
designed to use off-the-shelf electronic components available for any standard
electronic assembly. We work in partnership with our contract manufacturers to
manage the supply chain of electronic components for the products they
manufacture for us. In January of 2003, we contracted with Altron Inc, of Anoka,
Minnesota, an ISO-9002 qualified electronics manufacturer, to manufacture the
bulk of our PTUs.

      (xi) Customers; Orders Backlog

         There is no material backlog of orders for the products we sell.

      (xii) Seasonality

         Our business is not seasonal.

      (xiii) Employees

         As of February 28, 2003, we had 22 full-time employees, 2 part-time
employees and 2 contract employees on staff.


Subsequent Events



                                       9
<PAGE>

On March 7, 2003, the Company entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC, a Chicago based institutional investor, as
disclosed on our Form 8-K, filed with the SEC on March 14, 2003.

On March 12, 2003, the Company entered into a distribution agreement with
Premier Geografix LTD, a United Kingdom corporation, for the distribution of our
Series 2100 personal tracking units in the United Kingdom and Canada on a
non-exclusive basis, as disclosed on our Form 8-K filed with the SEC on March
18, 2003.

ITEM 2. DESCRIPTION OF PROPERTY

         We lease approximately 6,000 square feet of office space located at
5022 South 114th Street, Suite 103, Omaha, Nebraska. All of our administrative,
sales, service and other business operations are conducted at this location.
This lease is for a term commencing on December 1, 2001 and ending on November
30, 2005. The base rent is approximately $5,262 per month. The lease also
requires us to pay $1,616 per month as our pro rata share of the operating
expenses respecting the leased premises.

         We lease office equipment from one source. The rent for such items is
in excess of $400 per month.

         In our opinion, our properties are adequately covered by insurance.

ITEM 3.  LEGAL PROCEEDINGS

         We are subject to pending or threatened lawsuits that are ordinary to
our business. In the opinion of management, no material loss is expected from
any of such pending claims or lawsuits. We are also subject to a variety of
federal and state laws and regulations, especially those relating to electronic
devices and wireless communications.

         Within the previous three years, iST was a party to two patent lawsuits
with Pro Tech Monitoring, Inc. relating to the company's patent no. 6,100,806
(issued August 8, 2000) and a similar patent, no. 5,731,757 (issued on March 24,
1998), held by Pro Tech, both for the apparatus and method of GPS tracking of
individuals. We claimed that our application for the "806" patent was a
continuation in part of an earlier patent application, made in December, 1994,
which resulted in our patent no. 6,072,396 (issued on June 6, 2000). Pro Tech
claimed that the earlier patent application was technically abandoned and that
its August, 1996 application was the first one made for the invention. After
extensive discovery, the parties settled the case in May of 2002. In the written
settlement agreement, made effective April 25, 2002, Pro Tech recognized the
validity of the company's "806" patent and the company granted Pro Tech a
royalty free, non-exclusive license to use such patent. The complaint and
counter complaint were dismissed with prejudice.

         On January 2, 2002, the company filed a complaint in U.S. District
Court, District of Nebraska, against LEDvision Inc., an Iowa corporation d/b/a
Electronic Manufacturing Technologies (EMT), for breach of contract and trade
disparagement (Case No. 8:02CV5). The complaint alleged non-delivery of
manufacturing specifications and manufactured Personal Tracking Units (PTUs) in


                                       10
<PAGE>

the fourth quarter of 2001, causing a delay in our customer deliveries. EMT
counter-complained for breach of contract. As the lawsuit progressed, EMT closed
its business and liquidated most assets. In February of 2003, the parties agreed
to settle the matter on the basis of the delivery to the company of all
remaining parts for the PTUs still in possession of EMT and a Note for $10,000
made by us, in favor of EMT, in March of 2001. In exchange, we will allow EMT to
exercise its warrant for 25,602 shares of the company's common stock. The
settlement agreement was fully executed on March 1, 2003 and, subsequently, the
Court has ordered the submission of a motion for dismissal with prejudice. The
exchange contemplated in the settlement agreement is currently being arranged
and the case is expected to be dismissed when the exchange is completed.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted to our stockholders during the fourth quarter
of 2002.


                                     PART II

ITEM 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

  Our common stock is listed on the OTC Bulletin Board. Our trading symbol was
ABSH until June 27, 2001. Effective June 27, 2001, our trading symbol changed to
ISRE.

<TABLE>
<CAPTION>

YEAR                              QUARTER                  HIGH                     LOW
<S>                               <C>                     <C>                     <C>
2001...................             1st                   $0.4375                 $0.1875
                                    2nd                   $1.0000                 $0.2000
                                    3rd                   $1.2000                 $0.6500
                                    4th                   $1.1100                 $0.8000
2002.....................           1st                   $1.5000                 $0.8000
                                    2nd                   $2.1100                 $1.2800
                                    3rd                   $1.5100                 $0.6200
                                    4th                   $0.7300                 $0.2300
</TABLE>

  The source of the foregoing information is Bloomberg, LP Quotations reflect
inter-dealer prices, without retail mark-up, markdown or commission and may not
represent actual transactions.

  As of February 28, 2003, there were outstanding 36,426,720 shares of Common
Stock held of record by 393 registered stockholders, 8,482.74 Series A
Convertible Preferred Shares held by eight (8) stockholders, and 300 Series B
Convertible Preferred Shares held by one stockholder. iST has not declared any
dividends on shares of Common Stock.


                                       11
<PAGE>


Securities Authorized for Issuance under Equity Compensation Plans

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
          Plan category               Number of securities to be       Weighted average exercise     Number of securities
                                       issued upon exercise of            price of outstanding        remaining available
                                    outstanding options, warrants     options, warrants and rights    for future issuance
                                              and rights
----------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                              <C>                         <C>

                                                 (a)                              (b)                         (c)

----------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders                   803,750                           $0.78                      382,917
----------------------------------------------------------------------------------------------------------------------------

Equity compensation plans not
approved by security holders                  6,799,825                          $0.98                         0
----------------------------------------------------------------------------------------------------------------------------

Common stock warrants                         1,858,324                           $0.63                        0
----------------------------------------------------------------------------------------------------------------------------

Total                                         9,461,899                          $0.90                      382,917
----------------------------------------------------------------------------------------------------------------------------
</TABLE>


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

         We experienced a delay in the completion our Series 2100 Personal
Tracking Unit (PTU) until the first quarter of 2002, stemming from the inability
of the contract manufacturer to complete the design for manufacturability in
2001 and to produce manufactured products by the end of 2001. Portions of our
PTU were re-designed in early 2002 to improve our product manufacturability and
allow for better integration of off-the-shelf components where possible. At the
same time, our tracNET24 software was enhanced with new features for animating
the record of physical movement as presented on a scaled map, complete with
date/time balloons pointing out the geographical location, new pull-down menus
and faster, more accurate mapping capabilities. We have now established
ourselves as an operating company during the fourth quarter of 2002. For the
first three quarters of 2002, we reported as a development stage company.

         We contracted with two manufacturers in early 2002. In January of 2003,
we contracted with Altron Inc, of Anoka, Minnesota, an ISO-9002 qualified
electronics manufacturer, to manufacture the bulk of our PTUs. As our sales and
leases of PTUs increase, we intend to take advantage of significant volume
discounts to lower our per unit manufacturing costs.



                                       12
<PAGE>

         Our hosting platform, which makes tracNET24 automated monitoring
available for use by end-user agencies through the Internet, was deployed in the
first quarter of 2002 at a collocation facility operated by Qwest in
Minneapolis, Minnesota. It allows us to provide the latest PTU tracking,
monitoring, mapping and reporting software as an Application Service Provider
(ASP). tracNET24 can now be used by our distribution partners at existing
monitoring centers to access and use the system to provide the monitoring
services as well as directly by end-user agencies. tracNET24 has been designed
for ease of use by computer users who may not be computer literate. Probation
and parole agencies now have the choice of utilizing tracNET24 for all their
offender movement scheduling, alert notifications, movement reporting, violation
reporting, trends analysis and the like, directly by their officers through the
use of any personal computer linked to the Internet, or, as an option, let a
monitoring center provide all end-user interaction.

         Sales of our PTUs and our tracNET24 services by our distributors
existing in early 2002 were disappointing, in part due to our delayed
availability of products and in part due to our inexperience in working with
distributors. By year-end 2002, we had sold only 350 PTUs through the
then-existing distribution channel. In the fourth quarter of 2002, we endeavored
to hire and train a direct sales force. We hired four sales professionals, each
with over 15 year's industry experience, in the third and fourth quarters of
2002. In the first two months of 2003, we have subsequently signed five
agreements with end-user agencies, one agreement with a service provider and one
agreement with a new distributor.

         We sell and lease our PTUs. We sell our PTUs at our Manufacturer's
Suggested Retail Price, less a negotiated volume discount. The buyer also enters
into a Hosting Services Agreement with us for access to and the use of tracNET24
through the Internet. We charge a daily services fee for each PTU which the
buyer desires to have tracked from time to time. The buyer initiates tracking by
entering an activation command on an appropriate tracNET24 screen and,
similarly, stops the tracking by entering a deactivation command. The daily fee
for tracNET24 is only charged from the time of activation to the time of
deactivation for each PTU. We bill for PTUs that are sold, and recognize such
revenue, upon receipt by the customer. One customer, ADT Security Systems, has a
45 day acceptance clause in its contract agreement with us to accept or reject
shipment. All of the 350 units shipped to ADT in 2002 were accepted. tracNET24
services are billed on a daily fee basis. These services are billed as the
service is incurred by our customer in arrears on a monthly basis. Such revenue
is recognized on the day the daily fee accrues. We began leasing our PTUs on a
daily basis in January 2003. For our leased PTUs, we bill on a monthly basis for
the daily fees incurred in arrears and add daily service fees for those days, or
any part thereof, in which the PTU is being tracked and monitored by tracNET24
as the result of the lessee entering an activation command with tracNET24.

         Financial results for 2002 reflect our delayed start into the market
and our disappointing results from sales through existing distributors. We sold
350 PTUs in 2002, all to one distributor, ADT Security Services. For the first
two months of 2003, we have sold or leased 143 PTUs through our direct sales
force.



                                       13
<PAGE>

         The following table provides a breakdown of selected results of
operations for the years ended December 31, 2002 and 2001 and is the basis for
the following discussion of the results of operations:

<TABLE>
<CAPTION>

                                                         Year Ended          Year Ended
                                                         December             December
                                                           2002                 2001
                                                      -----------------  -----------------
<S>                                                   <C>                <C>
Revenues:
       Product                                             358,305                     -
       Service                                             144,697                52,652
                                                      -----------------  -----------------
          Total revenues                                   503,002                52,652
                                                      -----------------  -----------------

Costs and expenses:
       Cost of product revenue                             524,933                    -
       Cost of service revenue                              87,870              110,198
       Research and development                            773,248              496,727
       Sales, general and administrative                 4,172,160            3,112,155
                                                      -----------------  -----------------
          Total costs and expenses                       5,558,211            3,719,080
                                                      -----------------  -----------------

       Operating (loss)                                 (5,055,209)          (3,666,428)
                                                      -----------------  -----------------

Other income (expense):
       Interest income                                       1,742                  43
       Interest expense                                   (203,419)           (671,042)
       Loan acquisition expense, stockholders             (536,734)         (2,047,259)
       Other, net                                                -             199,875
                                                      -----------------  -----------------

       Total other income (expense)                       (738,411)         (2,518,383)
                                                      -----------------  -----------------

       (Loss) before provision for income taxes         (5,793,620)         (6,184,811)
       Provision for income taxes                                -                   -
                                                      -----------------  -----------------

Net (loss)                                              (5,793,620)         (6,184,811)
                                                      -----------------  -----------------

Preferred dividends                                       (807,832)            (68,161)
                                                      -----------------  -----------------
Net (loss) available to common stockholders            $(6,601,452)        $(6,252,972)
                                                      -----------------  -----------------
</TABLE>



PRODUCT REVENUE

Product Revenue is derived from the sale of our products. For the year ended
December 31, 2002, Product Revenue was $358,305 compared to none during the same
period in 2001. The reason for the increase in the comparable period is the
sales of our Series 2100 PTUs, as opposed to units being leased in the prior
year period.



                                       14
<PAGE>


SERVICE REVENUE

For 2002, Service Revenue consisted of sales of non-core product which included
various ancillary computer equipment and the maintenance associated with such
equipment. For the year ended December 31, 2002, Service Revenue was $144,697
compared to $52,652 for the comparable period of 2001. For 2001, Service Revenue
consisted of monitoring leased units. The main reason for the twelve-month
increase was due to the change in the type of Service Revenue.


COST OF PRODUCT REVENUE

Cost of Product Revenue represents the direct costs associated with the
generation of product revenue, and includes cost of goods for products sold. A
portion of our cost of product revenue, which began in March 2002, consists of
product development costs amortization of $262,384 associated with our tracNET24
and our Series 2100 tracking unit. For the year ending December 31, 2002, Cost
of Product Revenue was $524,933, compared to $0 during the same period in 2001.
The primary reason for this cost of product revenue during the year was due to
the related sales of our Series 2100 tracking units. The comparison of the 2002
and 2001 costs is not valid because prior to 2002 we leased products and did not
sell products to customers.

COST OF SERVICE REVENUE

Cost of Service Revenue represents the direct costs associated with the
generation of service revenue. This includes direct costs of distribution of
software and equipment, maintenance expenses on equipment repaired under service
agreements, and the direct variable communications and hardware equipment
expenses associated with the web centric hosting services provided by iST. For
the year ended December 31, 2002, Cost of Service Revenue decreased to $87,870,
compared to $110,198 during the same period in 2001. The 2002 costs are
associated with the selling of our Series 2100 personal tracking units, while
the 2001 costs were solely related to the leasing of our old 1702 units.
Approximately $38,900 of the 2002 costs is associated with our outsourced web
centric hosting services, while roughly $48,400 is associated with our sales and
support of various computer equipment and maintenance agreements of the company.
The primary reason for the overall lower cost of sales for the twelve-month
period was due to the type of service revenue of leasing units to the selling of
units.

RESEARCH AND DEVELOPMENT

Research and Development expenses are the direct costs associated with iST's
development of its proprietary products. Expenses in this category include the
cost of outside contracted engineering and design, staffing expenses for the
iST's own engineers and software developers, and the actual costs of components,
prototypes, and testing equipment and services used in the product development
functions. The Research and Development expenses increased to $773,248 for the
year ended December 31, 2002, up from $496,727 for the same period in 2001. The
main reason for twelve-month increase was increases in salaries and wages due to


                                       15
<PAGE>

additional personnel added to iST for software development associated with our
Series 2100 tracking unit. We capitalized software and hardware development
costs in accordance with the Statement of Financial Accounting Standard No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed. During the years ending 2002 and 2001, we capitalized $47,257 and
$714,401 of product development costs, respectively. The capitalization of these
costs begins when a product's technological feasibility has been established and
we have a detailed product design. The capitalization of these costs ends when
the product is available for general release to customers. We are amortizing
these costs on a straight-line basis over an estimated economic useful life of
three years or on the ratio of current revenue to total projected product
revenues, whichever is shorter once the product is available to customers. We
began to amortize these costs in 2002. For the year ended December 31, 2002, we
amortized $262,384. It is reasonably possible that those estimates of projected
product revenues, the remaining estimated economic life of the product or both
would be reduced significantly in the near term due to competitive pressures or
technological changes. As a result, the carrying amount of the capitalized
software and hardware costs may be reduced materially in the near term. $86,962
and $133,833 of capitalized software and hardware development costs were charged
to expense in the years ended December 31, 2002 and 2001, respectively, due to
impairment. Based upon our product sales and product leasing to date and upon
our projected sales for the future, we believe there is no impairment of product
development costs.

SALES, GENERAL AND ADMINISTRATIVE

Sales, General and Administrative expenses are all the expenses associated with
the operations and marketing of our company, outside of the expenses described
above. These expenses include executive, sales, administrative and accounting
staff payroll, taxes and benefits, rent on property, all travel, fixed telephone
expenses, office leases and supplies, marketing advertising in magazines and
periodicals, attendance at trade shows, production of marketing and related
collateral material, as well as recruiting and training expenses. For the twelve
months ended December 31, 2002, Sales, General and Administrative expense
increased to $4,172,160, compared from $3,112,155 in the comparable period of
2001. The main reasons for the increases during the year were increases in
salaries and wages due to additional sales personnel added to iST, as well as
increases in compensation and other costs incurred related to various sales
consulting agreements for sales and marketing expansion.

OPERATING (LOSS)

For the year ended December 31, 2002, operating (loss) was $(5,055,209),
compared to $(3,666,428) for the same period in 2001. The main reason for the
twelve-month increase was higher expenses in the period, as explained above.

INTEREST EXPENSE

For the twelve months ended December 31, 2002, Interest expense totaled
$203,419, compared to interest expense of $671,042 in the comparable period of
2001. This interest expense decrease was due to a reduction of debt in the third
and fourth quarter of 2001 through the issuance of common and preferred stock,
coupled with lower interest rates throughout the year.



                                       16
<PAGE>

LOAN ACQUISITION EXPENSE, STOCKHOLDERS

For the year ended December 31, 2002, loan acquisition expense was $536,734,
compared to $2,047,259 for the comparable period of 2001. This expense is due to
stock warrants issued to various stockholders or individuals for lending us
money and for their personal guarantees on the notes payable with certain banks.
We raised more capital from equity financing in 2002 from the placement of
common stock than we did through personal loans and guarantees on bank notes.
Fewer stock warrants were issued during the year 2002 than the previous year.

OTHER, NET

For the year ended December 31, 2002, we had other income of $0 compared to
$199,875 for the comparable period of 2001. This income in 2001 was the initial
license fee payment from DMATEK, LTD of Israel for entering into a worldwide
non-exclusive license agreement with us allowing DMATEK the rights to use our
patents in people tracking applications.

NET (LOSS)

For the year ended December 31, 2002, we had a Net Loss of $(5,793,620),
compared to a Net Loss of $(6,184,811), in the comparable period of 2001, for
the reasons described above.

PREFERRED DIVIDENDS

For the twelve months ended December 31, 2002, preferred dividends totaled
$807,832, as compared to $68,161 for the comparable period of 2001. This
increase was due to the majority of Series A Convertible Preferred Stock was
outstanding throughout 2002 as compared to being outstanding for only one month
for the year ended December 31, 2001.

NET (LOSS) AVAILABLE TO COMMON STOCKHOLDERS

For the year ended December 31, 2002, we had a net (loss) available to common
stockholders of $(6,601,452) compared to a net (loss) available to common
stockholders of $(6,252,972) in the comparable period of 2001. The reasons for
the difference are described above.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 2002, we used $(3,481,345) in cash in operating
activities, another $(399,847) in investing activities, and we generated
$3,928,127 in cash from financing activities. The total of all cash flow
activities resulted in an increase in the balance of cash for the year ended
December 31, 2002 of $46,935. For the same period of 2001, we used $(2,463,068)
of cash in operating activities and $(557,409) in investing activities. We
generated $2,965,889 in cash from financing activities. The total of all cash
flow activities resulted in a decrease in the balance of cash of $(54,588).



                                       17
<PAGE>

In January 2003, we entered into a sale/leaseback agreement with a third party
leasing company. The sale of 100 series 2100 tracking units raised $120,000 in
capital for us. We are pursuing other sale/leaseback opportunities with various
third party leasing companies. We believe that lease funding of our tracking
units can be a additional source of cash to meet our financial needs.

We are working on an additional private placement of $3,350,000 in equity
financing to continue to fund the operations and production of our tracking
devices and related services. We entered into a common stock purchase agreement
on March 7, 2003, with Fusion Capital Fund II, LLC, a Chicago based
institutional investor. Under the agreement, Fusion Capital will buy up to $6.0
million of our common stock over a period of up to 30 months, subject to our
right to extend the agreement for six months. We have the right to control the
timing and amount of stock sold to Fusion Capital with the purchase price based
upon the market price of the Company's common stock at the time of sale without
any discount. Under the common stock purchase agreement, funding of the $6.0
million shall occur from time to time after the Securities & Exchange Commission
has declared effective a registration statement covering the shares of common
stock to be purchased by Fusion Capital. We are also in the process of obtaining
additional bridge financing from a financial institution to help cover some of
our general operating expenses.

During 2002 we incurred approximately $237,000 in general monthly recurring
operating expenses. 58% of that, or roughly $137,000, was salaries and wages and
the taxes associated with them. Another 11% are expenses surrounding legal,
professional and public company issues. While around 8% were health and
liability insurance expenses. Travel expenses, plus our utilities, including
rent, each account for 4% of our monthly burn. An additional $2,101,000 in
certain non-cash and one-time expenses were recorded in 2002. Expenses
incorporating this category includes consulting fees, stock options issue
expenses and commissions. As explained above, additional funding for operations
and production of our tracking devices and related services will be necessary to
cover these continued monthly expenses.

In an agreement, dated as of November 7, 2001, Total Tech, LLC, Roger Kanne,
Dennis Anderson, Martin Halbur, Macke Partners, Robert Badding and James and
Patricia Pietig as trustees of the James L. Pietig 1992 Revocable Trust U/TA
3-13-92 (collectively, the "Investors"), acquired 8,609.80 shares of our Series
A Convertible Preferred Stock (the "Series A Preferred"). Each share of Series A
Preferred is convertible into 1,000 shares of Common Stock, subject to
adjustment for stock splits and similar events. The Series A Preferred has a
liquidation preference of $1,000 per share (the "Stated Value") and a dividend
preference equal to 9.5% per annum of the Stated Value. Preferred dividends
totaling $203,121 at December 31, 2002 have been accrued but not declared.
Dividends are payable at the option of the Board of Directors, in cash or in
additional shares of Series A Stock (valued at $1,000 per share). A group of
disinterested directors determines whether such dividends are paid in cash or
in-kind. Holders of Series A Stock have no voting rights except with respect to
any action which (1) alters or changes the rights, preferences or privileges of
the Series A Stock materially and adversely, (2) increases the authorized number
of shares of Series A Stock, (3) creates any new class of shares having
preference over or being on a parity with the Series A Stock or (4) involves
sales by the Company of a substantial portion of its assets, any merger of the


                                       18
<PAGE>

Company with another entity, or any amendment of the Company's certificate of
incorporation. The Series A Preferred was issued in consideration of the
forgiveness of indebtedness owed to Investors in the aggregate of $1,497,915,
the assumption of $1,000,000 of bank debt by certain investors, the cancellation
of 11,071,716 stock purchase warrants held by Investors (having an aggregate
value of $1,932,887) and the assumption by Total Tech, LLC of $4,178,989 of
iST's indebtedness with financial institutions. In 2002, $2,476,763 of the above
described indebtedness was transferred to Total Tech, LLC. Members of Total
Tech, LLC include Dennis Anderson, Robert Badding, Mary Collison, Martin Halbur,
Roger Kanne, Ronald Muhlbauer, and James and Patricia Pietig as trustees of the
James L. Pietig 1992 Revocable Trust U/TA 3-13-92.

On October 28, 2002, Macke Partners acquired 150 shares of our Series B
Convertible Preferred Stock (the "Series B Preferred"). Holders of Series B
Preferred are entitled to receive cumulative, fixed rate dividends, starting at
10%, increasing to: 11% after six months; 12% after twelve months; and, 13%
after twenty four months. Each share of Series B Preferred is convertible into
1,667 shares of Common Stock, subject to adjustment for stock splits and similar
events. The Series B Preferred has a liquidation preference of $1,000 per share.
The Company may call part or all Series B Preferred with the payment of a
premium (see "Series B Convertible Preferred Stock" under Foot Note No. 6).

As of March 5, 2003, we had the following borrowing facilities in place, all of
which are guaranteed by various directors of iST:

We have a $750,000 note payable from U.S. Bank N.A. of Omaha, Nebraska. iST is
repaying this loan in 35 monthly payments of $16,557 and one last payment
estimated at $369,376 due June 30, 2003. The interest rate is a variable rate
based on the U.S. Bank N.A. Reference Rate (the "Index Rate") plus one-fourth
(0.25) percent. As of December 31, 2002, the Index Rate was currently four and
one-fourth (4.25) percent, and the outstanding loan balance was $403,438. This
loan is secured by a security interest in our tangible and intangible assets. We
intend to negotiate with the bank to renew and extend this note payable.

We have a $1,000,000 note payable from Wells Fargo Bank. Interest only payments
are due monthly. The note matures on July 31, 2003 and carries an interest rate
per annum equal to the prime rate. As of December 31, 2002, the prime rate is
four and one-fourth (4.25)%. We intend to negotiate with the bank to renew and
extend this note payable.

We have a $98,318 note payable from Nebraska State Bank of Omaha. This
short-term note matured on January 21, 2003 and has since been renewed until
June 5, 2003 and carries an interest rate of seven and one-fourth (7.25)% due at
maturity.

The majority of our remaining $1,060,000 in notes payable consists of amounts
owed to individuals, primarily directors of iST, which mature within one year
and carry interest rates ranging from 6% to 10%.

Critical Accounting Policies



                                       19
<PAGE>

         The Company prepares its consolidated financial statements in
conformity with generally accepted accounting principles in the United States of
America ("U.S. GAAP"). This requires management to make estimates and judgments
that affect reported amounts and related disclosures. Actual amounts will differ
from those estimates. Our significant accounting policies are described in Note
1 to the audited Consolidated Financial Statements. Of those policies, we have
identified the following to be the most critical because they are the most
important to our portrayal of our results of operations and financial condition
and they require subjective or complex management judgments:

         Revenue recognition related to sale of our Series 2100 product and for
services provided through our tracNET24 information system. We charge a daily
services fee for each PTU which the buyer desires to have tracked from time to
time. The buyer initiates tracking by entering an activation command on an
appropriate tracNET24 screen and, similarly, stops the tracking by entering a
deactivation command. The daily fee for tracNET24 is only charged from the time
of activation to the time of deactivation for each PTU. Revenue related to this
daily service fee was $2,009 in 2002. We bill for PTUs that are sold, and
recognize such revenue, upon receipt by the customer. All 2002 sales were made
to one distributor. We record revenue when the PTUs are received by the
distributor, which is also the point at which the distributor takes title to the
PTUs. One customer, ADT Security Systems, has a 45 day acceptance clause in its
contract agreement with us to accept or reject shipment. All 350 units shipped
to ADT in 2002 were accepted.

         tracNET24 services are billed on a daily fee basis. These services are
billed as the service is incurred by our customer in arrears on a monthly basis.
Such revenue is recognized on the day the daily fee accrues. We began leasing
our PTUs on a daily basis in January 2003. For our leased PTUs, we bill on a
monthly basis for the daily fees incurred in arrears and add daily service fees
for those days, or any part thereof, in which the PTU is being tracked and
monitored by tracNET24 as the result of the lessee entering an activation
command with tracNET24.

         Capitalization of product development costs related to the hardware
development of our series 2100 product and the software development of our
tracNET24 information system. We capitalized software and hardware development
costs in accordance with the Statement of Financial Accounting Standard No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed. During the years ending 2002 and 2001, we capitalized $47,257 and
$714,401 of product development costs, respectively. The capitalization of these
costs begins when a product's technological feasibility has been established and
we have a detailed product design. The capitalization of these costs ends when
the product is available for general release to customers.

         We are amortizing these costs on a straight-line basis over an
estimated economic useful life of three years or on the ratio of current revenue
to total projected product revenues, whichever is shorter once the product is
available to customers. We began to amortize these costs in 2002. For the year
ended December 31, 2002, we amortized $262,384. It is reasonably possible that
those estimates of projected product revenues, the remaining estimated economic
life of the product or both would be reduced significantly in the near term due
to competitive pressures or technological changes. As a result, the carrying


                                       20
<PAGE>

amount of the capitalized software and hardware costs may be reduced materially
in the near term. $86,962 and $133,833 of capitalized software and hardware
development costs were charged to expense in the years ended December 31, 2002
and 2001, respectively, due to impairment. Based upon our product sales and
product leasing to date and upon our projected sales for the future, we believe
there is no impairment of product development costs.

ITEM 7.  FINANCIAL STATEMENTS.

         See "Item 13 Exhibits, Financial Statement Schedules and Reports on
Form 8-K" for our Consolidated Financial Statement and the notes thereto filed
as part of this report.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

         Not applicable.

                                    PART III

         Incorporated by reference in Items 9 to 12 below are certain sections
of our definitive proxy statement, to be filed pursuant to Regulation 14A with
the SEC within 120 days after December 31, 2002.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16 (A) OF THE EXCHANGE ACT.

                  The information relating to our directors, nominees for
election as directors and executive officers under the headings "Election of
Directors" and "Executive Officers" in our definitive proxy statement for the
2003 Annual Meeting of Shareholders is incorporated herein by reference to such
proxy statement.


ITEM 10.  EXECUTIVE COMPENSATION.

         The discussion under the heading "Executive Compensation" in our
definitive proxy statement for the 2003 Annual Meeting of Shareholders is
incorporated herein by reference to such proxy statement.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

                  The discussion under the heading "Security Ownership of
Certain Beneficial Owners and Management" in our definitive proxy statement for
the 2003 Annual Meeting of Shareholders is incorporated herein by reference to
such proxy statement.


                                       21
<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The discussion under the heading "Certain Relationships and Related
Transactions" in our definitive proxy statement for the 2003 Annual Meeting of
Shareholders is incorporated herein by reference to such proxy statement.


ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.

         (a) (1) Financial Statements.

         Reference is made to the Index to the Financial Statements on Page F-1.

         (a) (2)      Exhibits

   3.01  Restated Certificate of Incorporation of the Company (1)

   3.02  Restated Bylaws of the Company (2)

   3.03  Certificate of Designations, Preferences and Rights of Series A
         Convertible Preferred Stock of iSecureTrac Corp. (3)

   4.01  Form of Common Stock Certificate (1)

   4.03  2001 Omnibus Equity Incentive Plan (4)

 10.01   Business Office Lease (3)

 10.02   Loan Agreement with US Bank, N.A. (1)

 10.04   License Agreement with SiRF Technology, Inc. (1)

 10.05   Agreement between iST and Telemarket Resources International (3)

 10.07   ADT Distribution Agreement (3) Confidential Treatment Requested

 10.08   ADT Hosting Agreement (3) Confidential Treatment Requested

 10.09   Employment Agreement between iST and Michael P. May (5)

 10.10   Employment Agreement between iST and James E. Stark (5)

 10.13   Consulting Services Agreement with Salzwedel Financial
         Communications, Inc.(3)

 10.14   Common Stock Purchase Agreement with Fusion Capital Fund II (6)



                                       22
<PAGE>

 10.15   Preferred Distributor Agreement with Premier Geografix LTD. (7)

 21.01   Subsidiaries of the Company

  99.1   Certifications

(1) Incorporated by reference from the registrant's registration statement under
Form 10-SB, filed on June 22, 1999 (Commission File No. 0-26455).

(2) Incorporated by reference from the registrant's current report under Form
8-K filed on June 10, 2001 (Commission File No. 0-26455).

(3) Incorporated by reference from the registrant's registration statement under
Form SB-2 filed on November 30, 2001 (Commission File No. 333-74762), which is
hereby incorporated by this reference.

(4) Incorporated by reference from the Notice of Annual Meeting of Stockholders
and Proxy Statement contained in Registrant's Definitive Proxy Statement under
Schedule 14A, filed with the SEC on May 14, 2001 (Commission File No. 0-26455).

(5) Incorporated by reference from the Company's Quarterly Report on Form 10-QSB
for the period ending March 31, 2001.

(6) Incorporated by reference from the registrant's current report under Form
8-K filed on March 14, 2003 (Commission File No. 0-26455).

(7) Incorporated by reference from the registrant's current report under Form
8-K filed on March 18, 2003 (Commission File No. 0-26455)



    (b)   Reports on Form 8-K.

                  None.


ITEM 14.  CONTROLS AND PROCEDURES.

         Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we conducted
an evaluation of the effectiveness of our disclosure controls and procedures as
defined in Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934
within 90 days of the filing date of this report. Based on their evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that the design


                                       23
<PAGE>

and operation of our disclosure controls and procedures were effective as of the
date of the evaluation.

         There have been no significant changes (including corrective actions
with regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in the preceding paragraph.



                                       24
<PAGE>




                                   SIGNATURES

    In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                          ISecureTrac Corp.

                                          By:   /S/ Michael P. May
                                              ---------------------------------
                                                    Michael P. May
                                             Chairman of the Board of Directors
                                                (Chief Executive Officer)

                                          Dated: March 28, 2003


    In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.


<TABLE>
<CAPTION>

             SIGNATURE                                       TITLE                               DATE
             ---------                                       -----                          --------------
<S>            <C>                                            <C>                                <C>
          /S/ Michael P.May                   Chairman of the Board of Directors,           March 28, 2003
-------------------------------------------
              Michael P. May                       Chief Executive Officer
                                                (Principal Executive Officer)

          /S/ James E.Stark                        Director, President and                  March 28, 2003
-------------------------------------------
              James E. Stark                       Chief Financial Officer
                                             (Principal Financial and Accounting Officer)

          /S/ Robert E. Badding                            Director                         March 28, 2003
-------------------------------------------
              Robert E. Badding

          /S/ Martin J. Halbur                             Director                         March 28, 2003
-------------------------------------------
              Martin J. Halbur

          /S/ Roger J. Kanne                               Director                         March 28, 2003
-------------------------------------------
              Roger J. Kanne

          /S/ Ronald W. Muhlbauer                          Director                         March 28, 2003
-------------------------------------------
              Ronald W. Muhlbuaer

          /S/ Ravi Nath                                    Director                         March 28, 2003
-------------------------------------------
              Ravi Nath

          /S/ Donald R. Smith                              Director                         March 28, 2003
-------------------------------------------
              Donald R. Smith

          /S/ Thomas E. Wharton Jr.                        Director                         March 28, 2003
-------------------------------------------
              Thomas E. Wharton Jr.

</TABLE>



                                       25
<PAGE>


                                                                 EXHIBIT 21.01
                                  SUBSIDIARIES


The Company has two wholly-owned subsidiaries: ABS Nebraska, Inc. and iST
Services, Inc. Both subsidiary companies are incorporated in the State of
Nebraska and are in good standing. Both subsidiary companies are currently
inactive. There are no plans to utilize ABS Nebraska, Inc. and the Company
intents to dissolve ABS Nebraska, Inc. iST Services, Inc. was incorporated on
September 25, 2002. The address of both subsidiary companies is: 5022 South
114th Street, Suite 103, Omaha, Nebraska 68137.



                                       26
<PAGE>

                                 CERTIFICATIONS


I, Michael P. May, certify that:

1.   I have reviewed this annual report on Form 10-KSB of iSECUREtrac Corp.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a)  designed such disclosure controls and procedures to ensure that
              material information relating to the registrant, including its
              consolidated subsidiaries, is made known to us by others within
              those entities, particularly during the period in which this
              annual report is being prepared;

          b)  evaluated the effectiveness of the registrant's disclosure
              controls and procedures as of a date within 90 days prior to the
              filing date of this annual report (the "Evaluation Date"); and

          c)  presented in this annual report our conclusions about the
              effectiveness of the disclosure controls and procedures based on
              our evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

          a)  all significant deficiencies in the design or operation of
              internal controls which could adversely affect the registrant's
              ability to record, process, summarize and report financial data
              and have identified for the registrant's auditors any material
              weaknesses in internal controls; and

          b)  any fraud, whether or not material, that involves management or
              other employees who have a significant role in registrant's
              internal controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including


                                       27
<PAGE>

     any corrective actions with regard to significant deficiencies and material
     weaknesses.

         Date     March 28, 2003          /s/ Michael P. May
                                          ------------------

                                              Michael P. May
                                              Chief Executive Officer


                                       28
<PAGE>



I, James E. Stark, certify that:

1.   I have reviewed this annual report on Form 10-KSB of iSECUREtrac Corp.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a)  designed such disclosure controls and procedures to ensure that
              material information relating to the registrant, including its
              consolidated subsidiaries, is made known to us by others within
              those entities, particularly during the period in which this
              annual report is being prepared;

          b)  evaluated the effectiveness of the registrant's disclosure
              controls and procedures as of a date within 90 days prior to the
              filing date of this annual report (the "Evaluation Date"); and

          c)  presented in this annual report our conclusions about the
              effectiveness of the disclosure controls and procedures based on
              our evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

          a)  all significant deficiencies in the design or operation of
              internal controls which could adversely affect the registrant's
              ability to record, process, summarize and report financial data
              and have identified for the registrant's auditors any material
              weaknesses in internal controls; and

          b)  any fraud, whether or not material, that involves management or
              other employees who have a significant role in registrant's
              internal controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



                                       29
<PAGE>

         Date     March 28, 2003          /s/ James E. Stark
                                          ------------------

                                              James E. Stark
                                              Chief Financial Officer


                                       30
<PAGE>


EXHIBIT 99.1

          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


Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
1350, as adopted), Michael P. May, the Chief Executive Officer of iSECUREtrac
Corp. (the "Company"), and James E. Stark, the Chief Financial Officer of the
Company, each hereby certifies that:



1.       The Company's Annual Report on Form 10-KSB for the period ended
         December 31, 2002, to which this Certification is attached as Exhibit
         99.1 (the "Periodic Report"), fully complies with the requirements of
         Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934,
         as amended; and


2.       The information contained in the Periodic Report fairly presents, in
         all material respects, the financial condition of the Company at the
         end of the period covered by the Periodic Report and results of
         operations of the Company for the period covered by the Periodic
         Report.


Dated:  March 28, 2003


/s/   Michael P. May                           /s/   James E. Stark
      ---------------------                          --------------------
      Michael P. May                                 James E. Stark
      Chief Executive Officer                        Chief Financial Officer



                                       31
<PAGE>



                       ISECURETRAC CORP. AND SUBSIDIARIES
                          CONSOLIDATED FINANCIAL REPORT


                                Table of Contents


   Independent Auditors' Report...................................  F-1

   Financial Statements:
       Balance Sheets.............................................  F-2
       Statements of Operations...................................  F-3
       Statements of Stockholders' Equity (Deficit)...............  F-4
       Statements of Cash Flows...................................  F-6

   Notes to Financial Statements..................................  F-8



                                       32
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
iSECUREtrac Corp.
Omaha, Nebraska

We have audited the accompanying consolidated balance sheet of iSECUREtrac Corp.
and subsidiaries as of December 31, 2002, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended December 31, 2002 and 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of iSECUREtrac Corp.
and subsidiaries as of December 31, 2002, and the results of their operations
and their cash flows for the years ended December 31, 2002 and 2001, in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has suffered recurring losses from operations
and its total liabilities exceeds its total assets. This raises substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also discussed in Note 7. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/ McGladrey & Pullen, LLP
Des Moines, Iowa
January 17, 2003, except for the third paragraph in Note 7 as to which that date
is March 7, 2003.


                                      F-1
<PAGE>


                        ISECURETRAC CORP AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2002
<TABLE>
<CAPTION>

                                      ASSETS (NOTE 3)
                                      ---------------
CURRENT ASSETS
<S>                                                                                                   <C>
   Cash                                                                                               $47,374
   Receivables:
      Trade accounts                                                                                   18,493
      Other                                                                                            75,111
    Inventories                                                                                        51,460
   Prepaid expenses and other                                                                          15,872
                                                                                                       ------

      TOTAL CURRENT ASSETS                                                                            208,310
LEASEHOLD IMPROVEMENTS AND EQUIPMENT, NET (Note 2)                                                    217,822
PRODUCT DEVELOPMENT COSTS, NET OF ACCUMULATED
AMORTIZATION OF $262,384                                                                              682,200
OTHER ASSETS                                                                                            9,081
                                                                                                        -----

                                                                                                   $1,117,413
                                                                                                   ==========


                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
   Notes payable (Note 3)                                                                          $2,168,318
   Outstanding checks in excess of bank balance                                                       121,694
   Current maturities of long-term debt (Note 3)                                                      443,438
   Accounts payable and accrued expenses                                                              672,130
   Accrued interest payable                                                                            46,113
   Preferred dividends payable                                                                        203,121
                                                                                                      -------

      TOTAL CURRENT LIABILITIES                                                                     3,654,814

COMMITMENTS AND CONTINGENCIES (Notes 7, 8 and 9)

STOCKHOLDERS' EQUITY (DEFICIT) (Notes 5 and 6)
   Series A Convertible Preferred stock, 10,000 shares designated at $.01 par value;
         8,483 issued and outstanding, stated value $1,000 per share                                8,482,662
   Series B Convertible Preferred stock, 3,500 shares designated at $.01 par value;
         150 issued and outstanding, stated value $1,000 per share                                    145,000
   Common stock, 50,000,000 shares authorized at $.001 par
         value; 34,919,703 issued and outstanding                                                      34,919
   Additional paid-in capital                                                                      21,510,819
   Accumulated deficit                                                                            (32,710,801)
                                                                                                  -----------
      Total stockholders' (deficit)                                                               (2,537,401)
                                                                                                  -----------
                                                                                                   $1,117,413
                                                                                                  ===========
</TABLE>


See Notes to Consolidated Financial Statements.

                                      F-2

<PAGE>



                        ISECURETRAC CORP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


<TABLE>
<CAPTION>

                                                                      2002          2001
                                                              ---------------- ----------------
<S>                                                                 <C>              <C>
Revenues:
     Product                                                        358,305                 -
     Service                                                        144,697            52,652
                                                              ---------------- ----------------
        Total revenues                                               503,002           52,652
                                                              ---------------- ----------------
Costs and expenses:
     Cost of product revenue                                         524,933                -
     Cost of service revenue                                          87,870          110,198
     Research and development                                        773,248          496,727
     Sales, general and administrative                             4,172,160        3,112,155
                                                              ---------------- ----------------
        Total costs and expenses                                   5,558,211        3,719,080
                                                              ---------------- ----------------

     Operating (loss)                                             (5,055,209)      (3,666,428)
                                                              ---------------- ----------------

Other income (expense):
     Interest income                                                   1,742               43
     Interest expense (Note 3)                                      (203,419)        (671,042)
     Loan acquisition expense, stockholders                         (536,734)      (2,047,259)
     Other, net                                                            -          199,875
                                                              ---------------- ----------------

     Total other income (expense)                                   (738,411)      (2,518,383)
                                                              ---------------- ----------------
     (Loss) before provision
     for income taxes                                             (5,793,620)      (6,184,811)

     Provision for income taxes (Note 4)                                   -                -
                                                              ---------------- ----------------

Net (loss)                                                        (5,793,620)      (6,184,811)

Preferred dividends (Note 6)                                        (807,832)         (68,161)
                                                              ---------------- ----------------
Net (loss) available to common stockholders                   $   (6,601,452)     $(6,252,972)
                                                              ---------------- ----------------

Basic and diluted (loss) per common share                     $        (0.23)  $        (0.29)
                                                              ================ ================

Weighted average shares of common stock outstanding               29,248,828       21,307,617
                                                              ================ ================
</TABLE>

See Notes to Consolidated Financial Statements.


                                      F-3

<PAGE>

                       ISECURETRAC CORP AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


<TABLE>
<CAPTION>
                                     SERIES A               SERIES B
                                    CONVERTIBLE            CONVERTIBLE
                                  PREFERRED STOCK        PREFERRED STOCK    COMMON STOCK
                                  ---------------        ---------------    ------------
                               SHARES       AMOUNT      SHARES     AMOUNT      SHARES       AMOUNT
                               ------       ------      ------     ------      ------       ------

<S>                                <C>             <C>       <C>        <C>         <C>          <C>
Balance, December 31, 2000         --    $         --        --   $      --   18,746,646   $ 18,747

  Shares issued upon
     exercise of warrants
     at $0.43 per share            --              --        --          --       12,500         12

  Shares issued for
     director's fees               --              --        --          --      248,861        249

  Shares issued in lieu
     of payment on
     notes payable and
     long-term debt                --              --        --          --      471,191        471

  Shares issued for services       --              --        --          --      356,110        356

  Shares issued upon
     exercise of warrants
     in lieu of payment
     on notes payable
     and long-term debt            --              --        --          --    5,762,695      5,763

  Paid-in capital for cost
     of options issued             --              --        --          --           --         --

  Warrants issued in
     connection with
     stockholder loans
     and services loan
     guarantees                    --              --        --          --           --         --

  Shares issued upon
     surrender of warrants,
     assumption of bank
     notes and forgiveness
     of debt (Note 5)           6,133       6,133,027        --          --           --         --

  Shares issued in
     anticipation of
     assumption of  bank
     debt (Note 5)              2,477              --        --          --           --         --

  Net (loss)                       --              --        --          --           --         --
                               --------  ------------  ---------  ---------  -----------  ---------
Balance, December 31, 2001      8,610       6,133,027        --          --   25,598,003     25,598

</TABLE>

                                      F-4
<PAGE>

<TABLE>
<CAPTION>

                                      ADDITIONAL
                                       PAID -IN       ACCUMULATED
                                       CAPITAL          DEFICIT          TOTAL
                                       -------          -------          -----
<S>                                    <C>           <C>             <C>
Balance, December 31, 2000       $ 12,532,907         $(19,856,377)   $  7,304,723

  Shares issued upon
     exercise of warrants
     at $0.43 per share                 5,363                   --           5,375

  Shares issued for
     director's fees                  112,941                   --         113,190

  Shares issued in lieu
     of payment on
     notes payable and
     long-term debt                    93,767                   --          94,238

  Shares issued for services          347,476                   --         347,832

  Shares issued upon
     exercise of warrants
     in lieu of payment
     on notes payable
     and long-term debt             1,658,173                   --       1,663,936

  Paid-in capital for cost
     of options issued                253,193                   --         253,193

  Warrants issued in
     connection with
     stockholder loans
     and services loan
     guarantees                     2,054,738                   --       2,054,738

  Shares issued upon
     surrender of warrants,
     assumption of bank
     notes and forgiveness
     of debt (Note 5)              (1,932,887)                  --       4,200,140

  Shares issued in
     anticipation of
     assumption of  bank
     debt (Note 5)                         --                   --              --

  Net (loss)                               --           (6,184,811)     (6,184,811)
                                 ------------          ------------    -------------
Balance, December 31, 2001         15,125,671          (26,041,188)     (4,756,892)
                                 ============         =============    =============
</TABLE>


                                      F-4 (Continued)
<PAGE>


                       iSECUREtrac CORP AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                     Years Ended December 31, 2002 and 2001



<TABLE>
<CAPTION>
                                     SERIES A               SERIES B
                                    CONVERTIBLE            CONVERTIBLE
                                  PREFERRED STOCK        PREFERRED STOCK    COMMON STOCK
                                  ---------------        ---------------    ------------
                               SHARES       AMOUNT      SHARES     AMOUNT      SHARES       AMOUNT
                               ------       ------      ------     ------      ------       ------

<S>                                <C>             <C>       <C>        <C>         <C>          <C>
Subtotal carryforward           8,610    $  6,133,027        --   $      --   25,598,003   $ 25,598

  Shares issued upon
     surrender of warrants,
     assumption of bank
     notes and forgiveness
     of debt (Note 5)              --       2,476,763        --          --           --         --

  Shares issued upon
     exercise of warrants          --              --        --          --      250,000        250
     at $0.20 per share

  Shares issued for
     director's fees               --              --        --          --      144,229        144

  Shares issued for services       --              --        --          --    1,895,001      1,895

  Shares issued for cash
     at $0.3325 to $1.50
     per share, net of
     offering costs of
     $159,625                      --              --        --          --    3,295,504      3,295

  Shares issued upon
     exercise of options
     at $0.10 to $0.875
     per share                     --              --        --          --    1,437,666      1,438

  Shares issued in lieu
     of payment on
     note payable                  --              --        --          --      121,522        121


  Shares issued upon
     conversion of Series A
     preferred stock           (1,110)     (1,110,000)       --          --    2,177,778      2,178

  Shares issued for cash
     at $1,000 per share,
     net of offering costs
     of $5,000                    310         310,000       150     145,000           --         --

  Paid-in capital for cost
     of options issued             --              --        --          --           --         --

  Warrants issued in
     connection with
     stockholder loans
     and loan guarantees
     and other consulting
     services                      --              --        --          --           --         --

  Series A preferred stock
     dividends                    673         672,872        --          --           --         --

  Net (loss)                       --              --        --          --           --         --
                               --------  ------------  ---------  ---------  -----------  ---------

Balance, December 31, 2002      8,483    $  8,482,662       150   $ 145,000   34,919,703   $ 34,919
                               ====================================================================

</TABLE>

                                      F-5
<PAGE>

<TABLE>
<CAPTION>



                                 ADDITIONAL
                                  PAID-IN          ACCUMULATED
                                  CAPITAL            DEFICIT          TOTAL
                                  -------            -------          -----
<S>                                   <C>        <C>             <C>
Subtotal carryforward           $ 15,125,671     $(26,041,188)   $ (4,756,892)

  Shares issued upon
     surrender of warrants,
     assumption of bank
     notes and forgiveness
     of debt (Note 5)                     --               --       2,476,763

  Shares issued upon
     exercise of warrants             49,750               --          50,000
     at $0.20 per share

  Shares issued for
     director's fees                 113,206               --         113,350

  Shares issued for services       1,138,880               --       1,140,775

  Shares issued for cash
     at $0.3325 to $1.50
     per share, net of
     offering costs of
     $159,625                      2,981,024               --       2,984,319

  Shares issued upon
     exercise of options
     at $0.10 to $0.875
     per share                       169,190               --         170,628

  Shares issued in lieu
     of payment on
     note payable                     43,796               --          43,917


  Shares issued upon
     conversion of Series A
     preferred stock               1,107,822               --              --

  Shares issued for cash
     at $1,000 per share,
     net of offering costs
     of $5,000                            --               --         455,000

  Paid-in capital for cost
     of options issued               191,071               --         191,071

  Warrants issued in
     connection with
     stockholder loans
     and loan guarantees
     and other consulting
     services                        590,409               --         590,409

  Series A preferred stock
     dividends                            --         (875,993)       (203,121)

  Net (loss)                              --       (5,793,620)     (5,793,620)
                                ------------     -------------  ---------------

Balance, December 31, 2002      $ 21,510,819     $(32,710,801)   $ (2,537,401)
                               ================================================
</TABLE>


   See Notes to Consolidated Financial Statements.

                                      F-5 (Continued)
<PAGE>


                        ISECURETRAC CORP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
<TABLE>
<CAPTION>


                                                                        2002          2001
                                                                        ----          ----
<S>                                                                 <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net (loss)                                                       (5,793,620)   (6,009,811)
   Adjustments to reconcile net (loss) to net cash (used in)
   operating activities;
      Loss on asset abandonment                                         67,013       247,164
      Depreciation and amortization                                    346,505       131,053
      (Gain)/loss on sale of leasehold improvements and equipment           --        86,893
      Expenses paid by issuance of stock, warrants and options       2,035,605     2,768,953
            in lieu of cash
      Provision for bad debts                                               --         3,100
      Changes in working capital components:
         (Increase) decrease in trade accounts receivable               (7,933)        8,499
         (Increase) other receivable                                   (75,111)           --
         (Increase) decrease in employee receivables                       700          (700)
         (Increase) decrease in inventories                            (51,460)       77,000
         (Increase) decrease in prepaid expenses and other              22,451       (32,598)
         Increase in accounts payable                                   52,204       170,485
             and accrued expenses
         Increase (decrease) in accrued interest payable                (1,136)      185,331
         Increase (decrease) in deferred revenue                       (76,563)       76,563
                                                                    ------------------------

            NET CASH (USED IN) OPERATING ACTIVITIES                 (3,481,345)   (2,463,068)
                                                                    ----------    ----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of leasehold improvements and equipment                   (196,727)      (29,918)
   Proceeds from sale of leasehold improvements and equipment               --        15,872
   Product development costs                                          (204,200)     (557,458)
   Acquisition/disposal of other assets                                  1,080        14,095
                                                                    ------------------------

            NET CASH (USED IN) INVESTING ACTIVITIES                   (399,847)     (557,409)
                                                                    ----------    ----------
</TABLE>

                                   (Continued)


                                      F-6
<PAGE>



                        ISECURETRAC CORP AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001




<TABLE>
<CAPTION>

                                                                             2002          2001
                                                                             ----          ----
CASH FLOWS FROM FINANCING ACTIVITIES
<S>                                                                         <C>         <C>
   Proceeds from notes payable, net                                         508,315     2,959,082
   Principal payments on long-term debt                                    (217,759)     (142,638)
   Proceeds from issuance of common stock                                 3,204,947         5,375
   Increase (decrease) in checks outstanding in excess of bank balance      (22,376)      144,070
   Proceeds from issuance of preferred stock                                455,000            --
                                                                         --------------------------

      NET CASH PROVIDED BY FINANCING ACTIVITIES                           3,928,127     2,965,889
                                                                         --------------------------

      INCREASE (DECREASE) IN CASH                                            46,935       (54,588)
CASH
   Beginning
                                                                                439        55,027
                                                                         --------------------------

   Ending                                                                    47,374           439
                                                                         ==========================

SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS FOR
   Interest                                                                 204,555       485,711
   Income taxes                                                                  --            --
SUPPLEMENT DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
   Issuance of common and preferred stock in lieu of payment on           2,520,680     5,958,314
        long-term debt, notes payable and accrued interest payable
   Product development costs purchased on  / (paid on) account             (156,943)      156,943
   Issuance of preferred stock in payment of preferred stock dividends      672,872            --
   Preferred stock dividends declared but not paid                          203,121            --

</TABLE>


See Notes to Consolidated Financial Statements.

                                      F-7
<PAGE>

                        ISECURETRAC CORP AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES


 Nature of business: iSECUREtrac Corp (formerly Advanced Business Sciences,
Inc.) On June 19, 2001, Advanced Business Sciences, Inc. was changed to
iSecureTrac Corp. This name change was made to better reflect iST's current and
future business activities of providing advanced tracking solutions for the
monitoring of individuals and assets via a secure web hosted application.

         iST designs, develops, produces, sells, leases and supports wireless
products and services relating to the tracking, monitoring, and reporting of
individuals and objects. iST products are designed to enhance productivity,
reduce costs, and improve overall response using on-line access to information
previously maintained on a variety of media. Today, iST primarily markets to the
criminal justice application for continuous electronic monitoring.

         iST was formed on January 5, 1992 and was engaged in the development of
wireless products and services relating to tracking, monitoring and reporting of
individuals and objects. The Company began generating revenue in the fourth
quarter of 2002. The Company previously reported as a development stage
enterprise and became operational during the fourth quarter of the year ended
December 31, 2002.



Significant accounting policies:

Principles of consolidation: The consolidated financial statements include the
accounts of iST and its wholly-owned subsidiaries, iST Services, Inc., formed
September 25, 2002, and ABS Nebraska, Inc., which is inactive. All material
intercompany balances and transactions have been eliminated in consolidation.

Accounting estimates and assumptions: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Receivables: Receivables are carried at original invoice amount less an estimate
made for doubtful receivables based on a review of all outstanding amounts on a
monthly basis. Management determines the allowance for doubtful receivables by
regularly evaluating individual customer receivables and considering a
customer's financial condition, credit history and current economic conditions.
Receivables are written off when deemed uncollectible. Recoveries of receivables
previously written off are recorded when received.

Inventories: Inventories consist of PTUs and parts and are recorded at the lower
of cost (first in - first out method) or market.

Leasehold improvements and equipment: Leasehold improvements and equipment are
recorded at cost. Equipment is depreciated on the straight-line method over the
estimated useful lives of the related assets. The cost of leasehold improvements
is amortized over the lesser of the estimated lives of the assets or the lease
term. These assets are reviewed for impairment under SFAS No. 144 when events
indicate the carrying amount may not be recoverable.


                                      F-8
<PAGE>

Product development: iST capitalized software and hardware development costs in
accordance with the Statement of Financial Accounting Standard No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed. At December 31, 2002, the majority of our capitalized costs related to
the development of our web based tracking and monitoring system, known as
tracNET24. Customers of iST are charged a daily usage fee. During the years
ending 2002 and 2001, we capitalized $47,257 and $714,401 of product development
costs, respectively. The capitalization of these costs begins when a product's
technological feasibility has been established and ends when the product is
available for general release to customers. iST is amortizing these costs on a
straight-line basis over an estimated economic useful life of three years or on
the ratio of current revenue to total projected product revenues, whichever is
shorter once the product is available to customers. We began to amortize these
costs in 2002. It is reasonably possible that those estimates of projected
product revenues, the remaining estimated economic life of the product or both
would be reduced significantly in the near term due to competitive pressures or
technological changes. As a result, the carrying amount of the capitalized
software and hardware costs may be reduced materially in the near term. $86,962
and $133,833 of capitalized software and hardware development costs were charged
to expense in the years ended December 31, 2002 and 2001, respectively, due to
impairment. Based upon unit sales to date, and projected sales for the future,
we believe there is no impairment of product development costs. Amortization of
capitalized software and hardware development costs totaled $262,384 and none
for the years ended December 31, 2002 and 2001, respectively.

Patents: Patents are included in other assets at cost less accumulated
amortization. Amortization is by the straight-line method over ten years.

Earnings per share: Basic Earnings Per Common Share is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted Earnings Per Common Share shall be
computed by including contingently issuable shares with the weighted average
shares outstanding during the period. When inclusion of the contingently
issuable shares would have an antidilutive effect upon earnings per share, no
diluted earnings per share shall be presented.

The following contingently issuable shares were not included in diluted earnings
per common share as they would have an antidilutive effect upon earnings per
share:



                                                       2002             2001
   Shares issuable upon conversion of Series A
      Convertible Preferred Stock                   8,482,662         8,609,800
   Shares issuable upon conversion of Series B
      Convertible Preferred Stock                     250,050                 -
   Common stock options outstanding                 7,603,575         8,439,158
   Common stock warrants outstanding                1,858,324         1,058,154
   Convertible subordinated debentures                  6,600            13,201



Revenue recognition: Product revenues and cost of goods sold are recognized when
goods are received by the customer. Service revenues and related expenses are
recognized once the service has been performed. Other revenues and directly
related expenses are recognized ratably over the life of the agreement
commencing when products are delivered to the customer. We bill for Personal
Tracking Units (PTUs) that are sold, and recognize such revenue when goods are
received by the customer. One customer, ADT Security Systems, has a 45 day
acceptance clause in its contract agreement with us to accept or reject
shipment. ADT Security Systems accepted all 350 units billed to them in 2002.

                                       F-9
<PAGE>

For tracNET24 services we bill for the daily fees incurred in arrears on a
monthly basis. Such revenue is recognized on the day the daily fee accrues. For
our leased PTUs, we also bill on a monthly basis for the daily fees incurred in
arrears.

Advertising costs:  Advertising costs are expensed as incurred.

Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

Stock -based compensation: At December 31, 2002, iST has various stock-based
compensation plans, which are more fully described in Note 5. iST accounts for
those plans under the recognition and measurement principles of APB Opinion No.
25 (APB 25), Accounting for Stock Issued to Employee, and related
interpretations, which measures compensation as the difference between the fair
value of the stock at the date of award and the amount required to be paid for
the stock. Stock-based compensation of $191,071 and $253,193 has been reflected
in net (loss) for the years ended December 31, 2002 and 2001, respectively. The
following table illustrates the effect on net (loss) for the years ended
December 31, 2002 and 2001, as if iST had applied the fair value recognition
provisions of SFAS No. 123 (FAS 123), Accounting for Stock -Based Compensation,
to stock-based compensation.

                                               Year Ended December 31
                                                2002           2001
                                                ----           ----

Net (loss), as reported                     $(5,793,620)   $(6,184,811)
Add:  Stock-based employee compensation
  expense included in reported net (loss)       191,071        253,193

Decuct:  Total stock-based employee
  compensation expense determined under
  fair value based method for all awards       (377,447)    (1,752,374)
                                            ------------- -------------

Pro forma net (loss)                        $(5,979,996)   $(7,683,992)
                                            ============= =============

Basic and diluted (loss) per share:
     As reported                            $     (0.23)   $     (0.29)
                                            ============= =============

     Pro forma                              $     (0.23)   $     (0.36)
                                            ============= =============


         In determining the pro forma amounts above during 2002 and 2001, the
value of each grant is estimated at the grant date using the fair value method
prescribed in SFAS 123 with the following assumptions: no dividends, risk free
interest rate of 5%; expected life of 3.5 and 5 years and; expected price
volatility of 61.06% and 129.10%.

The fair value of stock options and warrants issued to non-employees is being
accounted for using FAS 123. Related compensation expense is charged to income
when incurred.


                                      F-10
<PAGE>

Warrants and common stock issued in consideration for notes payable and debt
guarantee fees is expensed in the period incurred due to the short term nature
of the related notes.

Segments of business: The Company currently only has one segment line of
business.

New accounting pronouncements: In August 2001, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS)
No. 143 (SFAS 143), Accounting for Asset Retirement Obligations, which will be
effective for iST beginning January 1, 2003. SFAS 143 addresses the financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs.

In April 2002, the FASB issued SFAS No. 145 (SFAS 145), Rescission of FASB
Statements No. 4, 44, 64, Amendment of FASB Statement No. 13, and Technical
Corrections, which will be effective for iST beginning January 1, 2003. SFAS 145
rescinds SFAS Nos. 4, 44, 64 and amends SFAS No. 13, Accounting for Leases, to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions.

In June 2002, the FASB issued SFAS No. 146 (SFAS 146) Accounting for Costs
Associated with Exit or Disposal Activities, which will be effective for iST
beginning January 1, 2003. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized at fair value when
the liability is incurred unless the liability is for one-time termination
benefits incurred over time. SFAS 146 nullifies Emerging Issues Task Force Issue
No. 94-3 Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (Including Costs Associated with a
Restructuring).

In November of 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, which elaborates on required
disclosures by a guarantor in its financial statements about obligations under
certain guarantees that it has issued and clarifies the need for a guarantor to
recognize, at the inception for certain guarantees, a liability for the fair
value of the obligation undertaken in issuing the guarantee. The provisions of
this Interpretation relating to initial recognition and measurement of guarantor
liabilities are effective for qualifying guarantees entered into or modified
after December 31, 2002.

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, which addresses consolidation by a
business of variable interest entities in which it is the primary beneficiary.
The Interpretation is effective immediately for certain disclosure requirements
and variable interest entities created after January 31, 2003, and is effective
fiscal 2004 for all other variable interest entities.

iST has assessed the impact of SFAS Nos. 143, 145, and 146, FIN 45 and FIN 46,
and estimates that the impact of these standards and interpretations will not be
material to iST's financial condition, results of operations or liquidity.

In December 2002, the FASB issued SFAS No. 148 (SFAS 148) Accounting for
Stock-Based Compensation- Transition and Disclosure, an amendment of SFAS No.
123. SFAS 148 amended SFAS 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to the fair

                                      F-11
<PAGE>

value based method of accounting for employee stock-based compensation. In
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require
prominent disclosure in annual and interim financial statements about the method
of accounting for stock-based compensation and its effect on reported results.
The disclosure provisions of SFAS 148 are included in the accompanying Notes to
Consolidated Financial Statements. iST applies the principles of APB 25 and
related interpretations in accounting for its stock-based compensation plans.
See Note 5 to the consolidated financial statements.

NOTE 2. LEASEHOLD IMPROVEMENTS AND EQUIPMENT

         Leasehold improvements and equipment at December 31, 2002, are as
follows:


Leasehold improvements.........................................       $ 10,000
Furniture and equipment........................................        603,219
                                                                       -------
                                                                       613,219
Less accumulated depreciation..................................        395,397
                                                                       -------

                                                                     $ 217,822



NOTE 3. PLEDGED ASSETS, NOTES PAYABLE AND LONG TERM DEBT AT DECEMBER 31, 2002

         iST has the following notes payable and long-term debt at December 31,
2002:

Notes payable:

<TABLE>
<CAPTION>

<S>                                                                                                  <C>
Unsecured notes payable due to certain stockholders, principal and interest are due at
   maturity (January 2003 to December 2003). Interest rates are 10 %.(A)...................          $960,000
Unsecured note payable due to a stockholder, principal and interest are currently due.
   Interest rate is prime plus 1.25% (5.50% at December 31, 2002). (A)                                100,000
Note payable bank, interest is due monthly at prime (4.25% at December 31, 2002)
through July 2003, when all remaining principal and interest are due. The note is secured
by the personal guarantees of various stockholders.(B).....................................         1,000,000
Note payable bank, principal and interest of 7.25% due at maturity, January 21, 2003.                  98,318
Other                                                                                                  10,000
                                                                                                       ------
                                                                                                   $2,168,318
                                                                                                   ==========

Long-term debt:
   Note payable bank, due in monthly installments of $16,557 including interest at the
      Bank's prime rate plus 0.25% (4.50% at December 31, 2002) through June 2003, when all
      remaining principal and interest are due. The note is collateralized by substantially
      all the assets of the Company and the personal guarantees of various stockholders.(C)        $  403,438
   10% convertible subordinated debenture, currently due, convertible into shares of common
      stock at $6.06 per share........................................................                 40,000
                                                                                                       ------
                                                                                                      443,438
   Less current maturities.................................................................           443,438
                                                                                                      -------
                                                                                                   $        0
                                                                                                   ==========
</TABLE>

                                      F-12
<PAGE>

        Interest expense to stockholders for the years ended December 31, 2002
and 2001, was approximately $59,221 and $227,000, respectively.



     (A)  Common stock warrants were issued to a majority of note holders (See
          Note 5).

     (B)  Common stock warrants were issued to those stockholders guaranteeing
          this note (See Note 5).

     (C)  Shares of common stock and common stock warrants were issued to those
          stockholders guaranteeing this note (See Note 5).


         The carrying value of fixed rate notes payable and long term debt
approximates its fair value at December 31, 2002 due to the stockholder
guarantees and the relatively short-term nature of the borrowings.







NOTE 4. INCOME TAXES

         Net deferred taxes in the accompanying balance sheets include the
following components as of December 31, 2002:



Net operating loss carryforward...............................       11,975,000
Other.........................................................           10,000
                                                                   ------------

                                                                     11,985,000
Valuation allowance...........................................     (11,985,000)
                                                                   ------------

   NET DEFERRED TAX ASSET.....................................     $         --
                                                                   ============




         The income tax provision differs from the amount of income tax
determined by applying the statutory federal income tax rate to pretax loss for
the years ended December 31, 2002 and 2001 due to the following:


<TABLE>
<CAPTION>
                                                                      2002         2001
                                                                      ----         ----

<S>                                                              <C>            <C>
Computed "expected" tax (benefit) ............................   $(1,946,931)   $(2,043,336)
Increase (decrease) in income taxes (benefits) resulting from:
   Benefit from state taxes ..................................      (343,576)      (360,589)
   Nondeductible expenses ....................................       475,507        131,925
   Increase in the valuation allowance .......................     1,815,000      2,272,000
                                                                 -----------    -----------
                                                                 $         -    $         -
                                                                 ===========    ===========

</TABLE>

                                      F-13
<PAGE>


         iST has net operating losses of approximately $29,936,000 to
carryforward for future tax purposes that expire from 2010 to 2022. It is
reasonably possible the Section 382 limitations of Internal Revenue Service
regulations may limit the amount of net operating loss carryforward. Due to the
uncertainty surrounding the timing of the realization of the benefit from the
net operating loss carryforward, iST has recorded a valuation allowance to
offset the deferred tax asset.

NOTE 5. STOCK OPTIONS AND WARRANTS

Stock options

         In 1997 the Company issued 140,825 to former stockholders. All of these
options expire no later than November 2003. As permitted under generally
accepted accounting principles, these options were accounted for following APB
No. 25, and accordingly, no compensation expense was recognized.

         In 2001 iST issued options to purchase in the aggregate of 5,000,000
shares of common stock at an exercise price 85% of the average daily closing
price of common stock for the week prior to when the options were granted to the
Chairman of the Board of Directors. The options are to vest on a monthly basis
over a two year period of time which began January 1, 2001. The President was
also issued options to purchase in the aggregate of 1,000,000 shares of common
stock at an exercise price 85% of the average daily closing price of the
Company's common stock for the week prior to when the options were granted. The
options are to vest on a monthly basis over a two year period of time which
began February 1, 2001. Both of these option grants contain provisions that
accelerate vesting if the common stock price meets various thresholds or if
various working capital requirements are met. 6,000,000 options vested according
to the common stock price thresholds. 91,000 and no options were exercised
during the years ended 2002 and 2001.

         In November 2001, iST granted options to purchase in the aggregate of
600,000 shares of common stock at an exercise price 85% of the average daily
closing price of the common stock for the week prior to when the options were
granted to the Senior Vice President of Technology, Senior Vice President of
Sales and Marketing, and Senior Vice President of Product and Project
Development. The options are to vest on a monthly basis over a two year period
of time which began November 5, 2001.

         In January 2002, iST granted options to purchase in the aggregate of
150,000 shares of common stock at an exercise price 85% of the average daily
closing price of the common stock for the week prior to when the options were
granted to the Senior Vice President Corporate Development and General Counsel.
The options are to vest on a monthly basis over a two year period of time which
began January 1, 2002.

         In June 2001, the shareholders of iST approved the 2001 Omnibus Equity
Incentive Plan. The 2001 Omnibus Equity Incentive Plan provides for the granting
of stock options and other equity incentives for up to 1,000,000 shares of the
Company's Common Stock to the Company's officers, directors, consultants or
advisers who provide services to the Company and key employees at an exercise
price 85% of the average daily closing price of the Company's common stock for
the week prior to when the options were granted. As of January 1 of each year,
commencing with the year 2002, the aggregate number of options that may be
awarded under the Plan will automatically increase by a number equal to the
lesser of 1% of the total number of Common Shares then outstanding or 200,000.
During the years ended 2002 and 2001, grants for 702,500 and 165,000 shares of
Common Stock have been made, respectively. 71,250 and 45,000 of those options
were made to the Company's directors or executive officers. Options exercised
under the Omnibus plan during the years ended 2002 and 2001 were 13,333 and
none, respectively. And options forfeited for the same time periods were 50,417
and none, respectively. As of December 31, 2002, 382,917 shares of Common Stock
remain available for new option grants under this plan. The options are to vest
on a monthly basis over a six month to three year period of time from the date
of grant.


                                      F-14
<PAGE>

         In 1999, iST issued stock options to two key employees to purchase
shares of common stock of iST (4,000,000 options and 500,000 options,
respectively). The options vest ( 1/3 of the options, 1st block) beginning at
the earlier of anniversary date (December 31, 1999 and July 30, 2000,
respectively) or when the closing price of the common stock exceeds $3.00 per
share for at least five consecutive days. The options are exercisable ($0.10 per
share and $0.20 per share, respectively) for a period of three years from date
of vesting. The second and third ( 1/3 blocks of options) vest one year and two
years after the first block of options or when the closing price of the common
stock exceeds $4.00 (2nd block of options) or $6.00 (3rd block of options) for
at least five consecutive days. The options are exercisable ($0.10 per share and
$0.20 per share, respectively) for a period of three years from the date of
vesting. The fair value at the date of grants were $0.18 and $0.20,
respectively. Of the 4,000,000 options, 1,333,333 (1st block) are vested and
have been exercised as of December 31, 2002. The other blocks of options did not
vest as the employee is no longer with iST. None of the 500,000 options vested
as the employee was not employed as of the first anniversary date (July 30,
2000).

A summary of the status of options issued to employees at December 31, 2002 and
2001, and changes during the years ended on those dates is as follows:


<TABLE>
<CAPTION>

                                                                                2002                            2001
                                                                                ----                            ----
                                                                                      WEIGHTED-                      WEIGHTED-
                                                                                       AVERAGE                        AVERAGE
                                                                                       EXERCISE                       EXERCISE
OPTIONS                                                                SHARES           PRICE          SHARES          PRICE
-------                                                                ------           -----          ------          -----

<S>                                                                       <C>                <C>         <C>                <C>
Outstanding at beginning of year..................................        8,239,158          $0.83       1,474,158          $3.08
Granted...........................................................          852,500           0.77       6,765,000           0.34
Exercised.........................................................        1,437,666           0.12               -              -
Forfeited.........................................................           50,417           0.91               -              -
                                                                     -------------------------------------------------------------

Outstanding at end of year........................................        7,603,575           0.99       8,239,158           0.83
                                                                     =============================================================



Exercisable at end of year........................................        6,733,957          $0.99       6,322,913          $0.94
                                                                     =============================================================
Weighted-average fair value per options for options granted during
   the year.......................................................                           $0.44                          $0.35
                                                                                    ===============                ===============
</TABLE>


A further summary about options outstanding at December 31, 2002 is as follows:

<TABLE>
<CAPTION>

                                                  Options Outstanding              Options Exercisable
                                                  -------------------              -------------------

                                                         Weighted
                                                         Average      Weighted                  Weighted
                                                        Remaining     Average                   Average
                                           Number      Contractual    Exercise      Number      Exercise
Range of Exercise Prices                 Outstanding       Life        Price     Exercisable     Price
------------------------                 -----------       ----        -----     -----------     -----

<S>                                          <C>            <C>         <C>           <C>         <C>
$0.01 to 0.25........................         77,500         3           $0.23         3,021       $0.23
0.26 to 0.50.........................      5,949,000         3            0.29     5,909,833        0.29
0.51 to 0.75.........................        150,000         3            0.67        34,167        0.68
0.76 to 1.00.........................      1,175,000         3            0.80       614,444        0.80
1.01 to 1.50.........................        111,250         3            1.36        31,667        1.36
1.51 and up..........................        140,825         1           31.25       140,825       31.25
                                       -------------                            ------------
Total................................      7,603,575                               6,733,957
</TABLE>


                                      F-15
<PAGE>


         In addition iST issued 200,000 options in 1999 to a consultant to
purchase 200,000 shares of common stock. 50,000 of the options vested on July 8,
1999, another 50,000 options vested on January 11, 2000 and the remaining
100,000 options vested on February 8, 2000. All of the 200,000 options are
exercisable for a three-year period from the date of vesting. The exercise price
is $0.88/share. iST accounts for the fair value of the options in accordance
with FSAS No. 123. No options were exercised in 2002 or 2001.

         The fair value of each option is estimated at the grant date using the
Black-Scholes option pricing model with the following assumptions: zero
dividends; risk free interest rate of 5%; expected life of the options three
years; no forfeiture rate and; a price volatility of 210.63%.

Common Stock Warrants

         iST issues warrants to stockholders and non-employees in connection
with various services these individuals provide iST. iST accounts for the fair
value of the warrants in accordance with FASB Statement No. 123. Compensation
expense that has been charged to income for these warrants was approximately
$590,000 and $2,055,000 for the years ended December 31, 2002 and 2001,
respectively.

         The fair value of each warrant is estimated at the grant date using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for warrants in 2002 and 2001: dividend rate of 0.0; price
volatility of 56.82% and 111.49%, risk-free interest rate of 5%; and
expected lives of three years.



         A summary of the status of all the warrants issued at December 31, 2002
and 2001 and changes during the years ended on those dates is as follows:

<TABLE>
<CAPTION>

                                                                                2002                            2001
                                                                                ----                            ----
                                                                                         WEIGHTED-                      WEIGHTED-
                                                                                           AVERAGE                        AVERAGE
                                                                                          EXERCISE                       EXERCISE
WARRANTS                                                                     SHARES          PRICE          SHARES          PRICE
--------                                                                     ------          -----          ------          -----
<S>                                                                       <C>                <C>        <C>                 <C>
Outstanding at beginning of year..................................        1,058,154          $0.44      13,454,549          $0.46
Granted...........................................................        1,169,244           0.69       8,153,421           0.44
Exercised.........................................................        (369,074)           0.24     (5,775,195)           0.26
Exchanged for Preferred Stock.....................................               -               -    (11,071,716)           0.39
Forfeited.........................................................               -               -     (3,752,905)           2.25
                                                                    --------------------------------------------------------------

Outstanding at end of year........................................        1,858,324          $0.63       1,058,154          $0.44
                                                                    ==============================================================



Exercisable at end of year........................................        1,858,324          $0.63       1,058,154          $0.44
                                                                    ==============================================================
Weighted-average fair value per warrant of warrants granted during
   the year.......................................................                           $0.46                          $0.25
                                                                                    ===============                ===============
</TABLE>



                                      F-16
<PAGE>

         A further summary about warrants outstanding at December 31, 2002 is as
follows:

<TABLE>
<CAPTION>

                                                                  WARRANTS OUTSTANDING AND EXERCISABLE
                                                                  ------------------------------------
                                                                                 WEIGHTED-
                                                                                  AVERAGE           WEIGHTED-
                                                                                 REMAINING            AVERAGE
                                                                      NUMBER    CONTRACTUAL          EXERCISE
RANGE OF EXERCISE PRICES                                         OUTSTANDING       LIFE                 PRICE
------------------------                                         -----------       ----                 -----

<S>                                                                    <C>         <C>                    <C>
$0.01 to 0.25............................................            350,000     0.5 years              $0.20
 0.26 to 0.50............................................             87,081       0.75                  0.31
 0.51 to 0.75............................................          1,106,744        2.0                  0.63
 0.76 to 1.65............................................            314,499       2.75                  1.20
                                                                     -------
          Total..........................................          1,858,324
</TABLE>

     The exercise of all options, warrants and conversion rights of Preferred
Stock, if exercise, will exceed the total shares of Common Stock authorized by
the Company's Certificate of Incorporation. Current executive officers have
agreed to defer any exercise of stock options until after shareholder approval
of an increase in authorized stock from 50,000,000 to 100,000,000 shares of
Common Stock, to be voted on at the Stockholder's Meeting to be held on May 30,
2003.


NOTE 6. CONVERTIBLE PREFERRED STOCK

Series A Convertible Preferred Stock
------------------------------------

         In an agreement, dated as of November 7, 2001, Total Tech, LLC (an
entity made up of various board members and stockholders) and other Board of
Director members and stockholders (collectively, the "Investors"), acquired
8,609.80 shares of our Series A Convertible Preferred Stock (the "Series A
Preferred"). Each share of Series A Preferred is convertible into 1,000 shares
of Common Stock, subject to adjustment for stock splits and similar events.

         The Series A Preferred was issued in consideration of the forgiveness
of indebtedness owed to certain Investors in the aggregate of $1,497,915, the
assumption of $1,000,000 in bank debt by certain investors, the cancellation of
11,071,716 stock purchase warrants held by certain Investors (having an
aggregate value of $1,932,887) and the assumption by Total Tech, LLC of
$4,178,989 of iST's indebtedness with financial institutions. As of December 31,
2001, $1,702,226 had been assumed by Total Tech, LLC. Subsequent to December 31,
2001, the remaining $2,476,763 of indebtedness had been transferred to Total
Tech, LLC.

         The Board of Directors has the authority, without any further vote or
action by the stockholders, to provide for the issuance of up to 1,000,000
shares of Preferred Stock from time to time in one or more series with such
designations, rights, preferences and limitations as the Board of Directors may
determine, including the consideration received therefore. The Board also has
the authority to determine the number of shares comprising each series, dividend
rates, redemption provisions, liquidation preferences, sinking fund provisions,
conversion rights and voting rights without approval by the holders of Common
Stock. Although it is not possible to state the effect that any issuance of
Preferred Stock might have on the rights of holders of Common Stock, the
issuance of Preferred Stock may have one or more of the following effects (i) to
restrict Common Stock dividends if Preferred Stock dividends have not been paid,
(ii) to dilute the voting power and equity interest of holders of Common Stock
to the extent that any Preferred Stock series has voting rights or is
convertible into Common Stock or (iii) to prevent current holders of Common
Stock from participating in our Company's assets upon liquidation until any
liquidation preferences granted to holders of Preferred Stock are satisfied. In
addition, the issuance of Preferred Stock may, under certain circumstances, have
the effect of discouraging a change in control of our Company by, for example,
granting voting rights to holders of Preferred Stock that require approval by
the separate vote of the holders of Preferred Stock for any amendment to the
Certificate of Incorporation or any reorganization, consolidation, merger or
other similar transaction involving our Company. As a result, the issuance of
such Preferred Stock may discourage bids for our Company's Common Stock at a

                                      F-17
<PAGE>

premium over the market price therefore, and could have a materially adverse
effect on the market value of the Common Stock.

         Our Board of Directors has designated 10,000 shares of our Company's
Preferred Stock as "Series A Convertible Preferred Stock" (the "Series A
Stock"). Each share of Series A Stock is convertible into 1,000 shares of Common
Stock, subject to adjustment for stock splits and similar events. The Series A
Stock has a liquidation preference of $1,000 per share (the "Stated Value") and
a dividend preference equal to 9.5% per annum of the Stated Value. Dividends are
payable at the option of the Board of Directors, in cash or in additional shares
of Series A Stock (valued at $1,000 per share). Holders of Series A Stock have
no voting rights except with respect to any action which (1) alters or changes
the rights, preferences or privileges of the Series A Stock materially and
adversely, (2) increases the authorized number of shares of Series A Stock, (3)
creates any new class of shares having preference over or being on a parity with
the Series A Stock or (4) involves sales by our Company of a substantial portion
of its assets, any merger of our Company with another entity, or any amendment
of our Company's certificate of incorporation. Our Company may redeem all, or
any part, of the Series A Stock at any time or from time to time. The base
redemption price is calculated as follows:

<TABLE>
<CAPTION>


                  REDEMPTION DATE                              BASE REDEMPTION PRICE
                  ---------------                              ---------------------
<S>                     <C>                                           <C>
           If prior to September 30, 2002                      103% of Stated Value
   If on or after September 30, 2002, but before
                 September 30, 2003                            102% of Stated Value
   If on or after September 30, 2003, but before
                 September 30, 2004                            101% of Stated Value
              After September 30, 2004                         100% of Stated Value
</TABLE>


Holders of Series A Stock have been granted certain registration rights. The
Series A Stock is subject to mandatory conversion after September 30, 2004, at
the election of the Board of Directors.

We issued 310 Series A Convertible Preferred shares in December 2002 to one
company that converted them into common shares. An additional 800 shares were
converted to common shares by Total Tech, LLC, during 2002.

Series A Preferred Stock holders have received payment in kind dividends during
the year ended December 31, 2002, in the amount of $672,872.

Series B Convertible Preferred Stock
------------------------------------

         Our Board of Directors approved iST's proposed private placement
offering of 3,500 shares of Series B Convertible Preferred Stock ($0.01 par
value) as described in the Offering Memorandum dated December 1, 2002. The price
per Share is $1,000 and will be paid in cash by each subscriber at the time of
subscription. Each share of Series B Preferred Stock being offered is
convertible to 1,667 shares of Common Stock. Each share so converted would be
priced at $0.60.

As of December 31, 2002, 150 shares of Series B preferred stock has been issued
valued at $145,000, net of offering costs of $5,000.

Rights, Preferences, Privileges and Restrictions of Preferred Stock:

         Dividend Provisions: The holders of the Preferred will be entitled to
                  receive cumulative, fixed-rate dividends per annum (the
                  "Dividend Dollar Amount") at the following rates:


                                      F-18
<PAGE>

                                10.0% months 1-6,
                                11.0% months 7-12,
                                12.0% months 13-24,
                                13.0% months 25-60.

         Dividends shall be payable in cash or in additional shares of Series B
Convertible Preferred Stock at the sole discretion of the Board of Directors. If
dividends are paid in Stock each share shall be valued, for this purpose, at an
amount equal to the Original Purchase Price.

         Dividends shall be payable quarterly beginning May 31, 2003 (the
"Dividend Date").

         Liquidation Preference: In the event of any liquidation or winding up
of the Company, the holders of Preferred will be entitled to receive in
preference to the holders of Common an amount ("Liquidation Amount") equal to
the Original Purchase Price plus any dividends cumulated on the Preferred but
not paid. A consolidation or merger of the Company, in which the Company does
not survive, or a sale of all or substantially all of its assets shall be deemed
to be a liquidation or winding up for purposes of the liquidation preference.

         Call Provisions: At any time, and from time to time prior to the
Mandatory Conversion date, the Company may call and/or retire in part or all
preferred shares outstanding. If preferred shares are called prior to the
Mandatory Conversion date, the following premium would apply:

                                Prior to October 31, 2003 - 115%
                                Prior to October 31, 2004 - 110%
                                Prior to October 31, 2005 - 105%

         Mandatory Conversion: At any time, and from time to time, after October
31, 2005, all or any part of the Preferred may be converted into Common at the
then applicable common stock equivalents, at the option of the Company.

         Anti-dilution Provisions: The Common Stock Equivalents, will be subject
to adjustment to reflect any subdivisions or combinations of Common Stock.
         Voting Rights:  The holders of Preferred shall have no voting rights,
         except as indicated herein

         Protective Provisions: Consent of the holders of at least a two-thirds
majority of the Preferred will be required for any action which (i) alters or
changes the rights, preferences or privileges of the Preferred materially and
adversely, (ii) increases the authorized number of shares of Preferred, (iii)
creates any new class of shares having preference over or being on a parity with
the Preferred, or (iv) involves sale by the Company of a substantial portion of
its assets, any merger of the Company with another entity, or any amendment of
the Company's certificate of incorporation.

         Redemption:  The Preferred shall not be redeemable by the holder.

Preemptive Rights: If the Company at any time grants, issues or sells any
options, warrants, convertible securities or rights to purchase stock pro rata
to the record holders of Common, the holders of Preferred shall be granted the
same rights on an as converted basis.

NOTE 7. GOING CONCERN AND SUBSEQUENT EVENT

         The accompanying financial statements of iSECUREtrac Corp. have been
prepared on a going-concern basis, which contemplates profitable operations and
the satisfaction of liabilities in the normal course of business. There are

                                      F-19
<PAGE>

uncertainties that raise substantial doubt about the ability of iSECUREtrac
Corp. to continue as a going concern. As shown in the statements of operations,
iST has not yet achieved profitable operations. As of January 31, 2003, iST has
insufficient working capital to execute its business plan. These items raise
substantial doubt about the ability of the iST to continue as a going concern.
Management plans to continue financing operations and development of our
technology through the plan described herein.

         We plan to continue financing our technology and operations through
external and related party financing. We are working on an additional private
placement of $3,350,000 in equity financing to continue to fund the operations
and production of our tracking devices and related services. We are also in the
process of obtaining additional bridge financing from a financial institution to
help cover some of our general operating expenses.

         On March 7, 2003, iSecureTrac entered into a common stock purchase
agreement with Fusion Capital Fund II, LLC. Under the agreement, Fusion Capital
shall buy up to $6,000,000 of iSecureTrac's common stock over a period of 30
months. The Company has the right to control the timing and the amount of common
stock sold with the limit being $200,000 a month as defined in the agreement.
The price per common stock is based on the trading price of the stock as defined
in the agreement and is not discounted.

         Management has hired additional sales and sales support staff to help
expand iST's sales opportunities within the United States. The addition of this
sales personnel has enabled us to increase sales on an accelerated basis.

         iST's continuation as a going concern is dependent upon its ability to
satisfactorily meet its debt obligations, meet its product development goals,
secure new financing and generate sufficient cash flows from operations. The
financial statements do not include any adjustments that might result from
outcome of these uncertainties.

NOTE 8. LEASE OBLIGATIONS

         The Company leases its facilities under a noncancelable lease agreement
expiring November 2005. The future minimum lease payments under the operating
lease as of December 31, 2002 are as follows:



YEAR ENDING DECEMBER 31,
------------------------

2003...........................................................        66,275
2004...........................................................        69,300
2005...........................................................        63,525
                                                                       ------
                                                                     $199,100
                                                                     ========


         Rent expense related to the above leases was $66,023 and $84,940 for
the years ended December 31, 2002 and 2001, respectively.

NOTE 9. LEGAL PROCEEDINGS

         We are subject to pending or threatened lawsuits that are ordinary to
our business. In the opinion of management, no material loss is expected from
any of such pending claims or lawsuits. We are also subject to a variety of
federal and state laws and regulations, especially those relating to electronic
devices and wireless communications.


                                      F-20
<PAGE>

         Within the previous three years, iST was a party to two patent lawsuits
with Pro Tech Monitoring, Inc. relating to the company's patent no. 6,100,806
(issued August 8, 2000) and a similar patent, no. 5,731,757 (issued on March 24,
1998), held by Pro Tech, both for the apparatus and method of GPS tracking of
individuals. We claimed that our application for the "806" patent was a
continuation in part of an earlier patent application, made in December, 1994,
which resulted in our patent no. 6,072,396 (issued on June 6, 2000). Pro Tech
claimed that the earlier patent application was technically abandoned and that
its August, 1996 application was the first one made for the invention. After
extensive discovery, the parties settled the case in May of 2002. In the written
settlement agreement, made effective April 25, 2002, Pro Tech recognized the
validity of the company's "806" patent and the company granted Pro Tech a
royalty free, non-exclusive license to use such patent. The complaint and
counter complaint were dismissed with prejudice.

On January 2, 2002, the company filed a complaint in U.S. District Court,
District of Nebraska, against LEDvision Inc., an Iowa corporation d/b/a
Electronic Manufacturing Technologies (EMT), for breach of contract and trade
disparagement (Case No. 8:02CV5). The complaint alleged non-delivery of
manufacturing specifications and manufactured Personal Tracking Units (PTUs) in
the fourth quarter of 2001, causing a delay in our customer deliveries. EMT
counter-complained for breach of contract. As the lawsuit progressed, EMT closed
its business and liquidated most assets. In February of 2003, the parties agreed
to settle the matter on the basis of the delivery to the company of all
remaining parts for the PTUs still in possession of EMT and a Note for $10,000
made by us, in favor of EMT, in March of 2001. In exchange, we will allow EMT to
exercise its warrant for 25,602 shares of the company's common stock. The
settlement agreement was fully executed on March 1, 2003 and, subsequently, the
Court has ordered the submission of a motion for dismissal with prejudice. The
exchange contemplated in the settlement agreement is currently being arranged
and the case is expected to be dismissed when the exchange is completed.

                                      F-21
<PAGE>