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

                                   FORM 10-QSB

(Mark One)

(X)  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934
                  For the quarterly period ended June 30, 2004

                                       OR

(  ) TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                 For the transition period from _____ to ______


                         Commission File Number 0-23153

                                 REMOTEMDX, INC.
        (Exact name of small business issuer as specified in its charter)



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


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

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


Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act during the past 12 months (or 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 [ ]

On August 16, 2004, the issuer had a total of 29,909,198 shares of common stock
issued and outstanding. The issuer also had a total of 23,101 shares of Series A
Preferred Stock outstanding, convertible at any time at the option of the
holders thereof into common stock at the rate of 370 shares of common stock for
each share of Series A Preferred Stock, or a total of 8,547,370 shares, and
1,835,824 shares of Series B Preferred Stock outstanding, convertible at any
time at the option of the holders thereof into common stock at the rate of one
share of common stock for each share of Series B Preferred Stock.

Transitional Small Business Disclosure Format (Check One): Yes __      No X
                                                                         ---



<PAGE>


                                TABLE OF CONTENTS


                                                                         Page
                                                                         No.

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

Unaudited Condensed Consolidated Balance Sheet as of June 30, 2004...........3

Unaudited Condensed Consolidated Statements of Operations for
the three and nine months ended June 30, 2004 and 2003.......................4

Unaudited Condensed Consolidated Statements of Cash Flows for
the nine months ended June 30, 2004 and 2003.................................5

Notes to Unaudited Condensed Consolidated Financial Statements...............7

Item 2.  Management's Discussion and Analysis or Plan of Operation..........13

Item 3.  Controls and Procedures............................................19

PART II.  OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds..........................19

Item 6.  Exhibits and Reports on Form 8-K...................................20

Signatures..................................................................22





<PAGE>


PART I - FINANCIAL INFORMATION

 Item 1.  Financial Statements

                                 REMOTEMDX, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                       June 30, 2004
                                                                                                    ---------------------
Assets
Current assets:
<S>                                                                                                 <C>
   Cash                                                                                             $          89,916
   Restricted cash                                                                                            175,697
   Accounts receivable, net of allowance for doubtful accounts of $27,000                                     263,993
   Inventories                                                                                                216,573
   Prepaid expenses                                                                                            68,368
                                                                                                    ---------------------
                Total current assets                                                                          814,547
Property and equipment, net                                                                                   113,933
Core technology, net                                                                                           35,000
Goodwill                                                                                                    1,321,164
Other assets                                                                                                    4,073
                                                                                                    ---------------------
                Total assets                                                                        $       2,288,717
                                                                                                    =====================
Liabilities and Stockholders' Deficit
Current liabilities:
   Notes payable                                                                                    $         775,000
   Bank line of credit                                                                                        175,000
   Related-party convertible notes payable                                                                    169,676
   Convertible debentures, net of debt discount of $183,597                                                   839,930
   Related-party line of credit                                                                               434,046
   Accounts payable                                                                                           615,372
   Accrued liabilities                                                                                        384,696
   Dividends payable                                                                                          400,289
   Deferred revenue                                                                                            13,188
   Common stock subject to mandatory redemption (see Note 6)                                                  196,000
                                                                                                    ---------------------
                Total current liabilities                                                                   4,003,197
                                                                                                    ---------------------
Commitments and contingencies

Stockholders' deficit:
   Preferred stock:
     Series A; 10% dividend, convertible, non-voting; $0.0001 par value; 40,000
        shares designated; 23,101 shares outstanding (aggregate liquidation
        preference of $593,833)                                                                                     2

     Series B; convertible; $0.0001 par value; 2,000,000 shares designated;
        1,835,824 shares outstanding (aggregate liquidation preference of $5,687,820)                             184

   Common stock; $0.0001 par value; 50,000,000 shares authorized, 29,909,198 shares
   outstanding                                                                                                  2,991

   Additional paid-in capital                                                                              65,475,647

   Series A preferred stock subscription receivable - due from related party                                 (300,000)
   Deferred consulting costs                                                                                 (113,737)
   Accumulated deficit                                                                                    (66,779,567)
                                                                                                    ---------------------
                Total stockholders' deficit                                                                (1,714,480)
                                                                                                    ---------------------
                Total liabilities and stockholders' deficit                                         $       2,288,717
                                                                                                    =====================
</TABLE>


           See accompanying notes to unaudited condensed consolidated
                             financial statements.

                                      -3-

<PAGE>


                                 REMOTEMDX, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                     Three months ended                 Nine months ended
                                                                          June 30,                           June 30,
                                                                   2004             2003                 2004              2003
                                                              -----------------   ---------------   ---------------   --------------

<S>                                                           <C>                 <C>               <C>               <C>
Revenue from products                                         $       356,515     $     242,942     $    759,582      $     515,696
Revenue from monitoring services                                       50,734            46,353          149,176            147,125
                                                              -----------------   ---------------   ---------------   --------------
                         Total revenue                                407,249           289,295          908,758            662,821

Cost of goods sold                                                    256,622            70,306          544,460            283,509
Cost of goods sold from monitoring services                           98, 610           102,383          272,815            275,815
                                                              -----------------   ---------------   ---------------   --------------
                         Total cost of goods sold                     355,232           172,689          817,275            559,324

Gross profit (loss)                                                    52,017           116,606           91,483            103,497

Research and development expenses                                           -             3,145           49,532            101,206

Selling, general and administrative expenses                        1,547,169         1,668,967        3,047,730          3,517,866

Amortization of core technology                                        35,000            46,666          105,000            140,000
                                                              -----------------   ---------------   ---------------   --------------

                Loss from operations                               (1,530,152)       (1,602,172)      (3,110,779)        (3,655,575)

Other income (expense):
   Other income                                                        10,062                -            57,667                 -

   Interest income                                                      1,077               367            6,289              1,760

   Interest expense                                                  (307,852)         (307,916)        (758,965)          (719,253)
                                                              -----------------   ---------------   ---------------   --------------
            Loss before income taxes and discontinued
                operations                                         (1,826,865)       (1,909,721)      (3,805,788)        (4,373,068)

Income tax benefit                                                          -                -                -                 -
                                                              -----------------   ---------------   ---------------   --------------
                Loss before discontinued operations                (1,826,865)       (1,909,721)      (3,805,788)        (4,373,068)

               Income (loss) on discontinued operations, net
                of tax                                                      -           131,731           99,515           (310,371)
                                                              -----------------   ---------------   ---------------   --------------
                Net loss                                           (1,826,865)       (1,777,990)      (3,706,273)        (4,683,439)

Dividends on Series A preferred stock                                (118,577)         (147,080)        (400,289)          (452,182)

                                                              -----------------   ---------------   ---------------   --------------
                Net loss attributable to common stockholders  $    (1,945,442)    $  (1,925,070)    $ (4,106,562)     $  (5,135,621)

                                                              =================   ===============   ===============   ==============
Net loss per common share from continuing operations - basic
   and diluted                                                $          (.07)    $        (.10)    $       (.15)     $        (.30)
Net income (loss) per common share from discontinued
   operations - basic and diluted                             $          0.00     $        0.01     $       0.01      $        (.02)
Net loss per common share - basic and diluted                 $          (.07)    $        (.09)    $       (.14)     $        (.32)
                                                              =================   ===============   ===============   ==============
Weighted average shares - basic and diluted                        28,556,000        22,086,000       26,598,000         15,893,000
                                                              =================   ===============   ===============   ==============
</TABLE>







                  See accompanying notes to unaudited condensed
                       consolidated financial statements.

                                      -4-

<PAGE>


                                 REMOTEMDX, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                          Nine months ended
                                                                                              June 30,
                                                                                 ------------------------------------
                                                                                       2004              2003
                                                                                 ------------------  ----------------
Cash flows from operating activities:
<S>                                                                              <C>                 <C>
   Net loss                                                                      $     (3,706,273)   $  (4,683,439)
   Adjustments to reconcile net loss to net cash used in operating activities:
       Depreciation and amortization                                                      117,250          191,784
       Amortization of discount on purchase obligation to former
         SecureAlert shareholders                                                               -            5,825
       Amortization of debt discount                                                       26,229                -
       Amortization of deferred consulting and financing costs                            149,363          385,000
       Accretion of interest expense related to redeemable common stock                   483,659                -
       Common stock issued to directors for services                                      108,000                -
       Common stock issued for services                                                    60,750        1,180,961
       Common stock options issued for services primarily to related party                498,833          274,777
       Common stock issued for services never rendered                                    (30,000)               -
       Loss on production equipment charged to research costs                                   -           70,761
       Increases in advances payable to related party for consulting services
         and expenses                                                                     478,252                -
       Changes in operating assets and liabilities:
              Decrease in restricted cash                                                  (1,352)               -
           Accounts receivable, net                                                      (179,077)         539,689
           Inventories                                                                    147,864          391,048
           Other assets                                                                    (2,701)               -
           Prepaid expenses                                                               (42,114)          (1,991)
           Accounts payable                                                               303,909         (292,452)
           Accrued liabilities                                                             71,662          122,945
           Deferred revenue                                                                (1,254)         (67,162)
                                                                                 ------------------  ----------------
                Net cash used in operating activities                                  (1,517,000)      (1,882,254)
                                                                                 ------------------  ----------------
Cash flows used in investing activities:
   Purchase of property and equipment                                                     (95,511)          (2,345)
                                                                                 ------------------  ----------------
                Net cash used in investing activities                                     (95,511)          (2,345)
                                                                                 ------------------  ----------------
Cash flows from financing activities:
   Payments on purchase obligations to former SecureAlert shareholders                    (98,794)               -
   Net advances from related-party line of credit                                         245,303         (644,065)
   Net payments on bank line of credit                                                       (105)         254,862
   Payments on related party convertible payable notes                                          -          (97,380)
   Proceeds from issuance of redeemable common stock                                      225,000          250,000
   Proceeds from sale of debentures and common stock                                    1,239,888                -
   Proceeds from issuance of notes payable                                                      -        1,440,908
   Payments on notes payable                                                              (45,759)        (217,853)
   Proceeds from issuance of common stock                                                       -          937,000
                                                                                 ------------------  ----------------
                Net cash provided by financing activities                               1,565,533        1,923,472
                                                                                 ------------------  ----------------
Net increase (decrease) in cash                                                           (46,978)          38,873
Cash, beginning of period                                                                 136,894           51,390
                                                                                 ------------------  ----------------
Cash, end of period                                                                        89,916    $      90,263
                                                                                 ==================  ================
</TABLE>

           See accompanying notes to unaudited condensed consolidated
                             financial statements.

                                      -5-

<PAGE>


                                 REMOTEMDX, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                       Nine Months ended
                                                                                            June 30,
                                                                          ---------------------------------------------
                                                                                   2004                  2003
                                                                                (Unaudited)           (Unaudited)
                                                                          -----------------------   -------------------
Cash paid for interest and taxes:
<S>                                                                       <C>                       <C>
   Cash paid for income taxes                                             $                     -   $                -

   Cash paid for interest                                                                  93,554              127,930
Supplemental schedule of non-cash investing and financing activities:
   Issuance of shares of common stock in exchange
     for shares of Series A preferred stock                                                   273                   65
   Issuance of shares of common stock in exchange
     for deferred consulting services                                                     143,100                    -
    Reduction of related party line-of-credit in exchange for
     exercise of common stock options                                                       1,620               73,279

   Common stock issued for conversion of debt and accrued interest                              -              442,750

   Common stock issued for deferred consulting and financing services                           -              150,000

   Debt exchanged for redeemable common stock                                                   -              725,000

   Accrual of Preferred Series A stock dividends                                          400,289              452,182
   Deferred financing costs paid for by issuance of redeemable
     common shares                                                                              -               45,000

   Use of restricted cash to pay debt                                                     375,681                    -

   Series A preferred stock issued in lieu of cash dividends                                    -               17,374

           Conversion of debt and accrued interest converted into shares
                of common stock                                                            33,640                    -

            Reduction of subscription receivable                                          400,000                    -

   Sale of net assets for assumption of liabilities and return
      of common shares, detailed as follows:

     Accounts payable and accrued liabilities assumed                                           -             (488,410)

     Bank line-of-credit assumed                                                                -             (300,000)

     Obligation to SecureAlert relieved                                                         -             (400,000)

     Accounts receivable sold                                                                   -              370,501

     Inventory sold                                                                             -              539,706

     Property and equipment, net of $80,331 accumulated
           depreciation sold                                                                    -              183,484

     Common stock returned (401,952 shares)                                                     -               94,719
</TABLE>











           See accompanying notes to unaudited condensed consolidated
                             financial statements.


                                      -6-

<PAGE>

                        REMOTEMDX, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(1)      ORGANIZATION AND NATURE OF OPERATIONS


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


The Company is a technology based company specializing in real-time monitoring
of mobile individuals for their own safety, security and health concerns. The
Company's products and services are offered through patented technologies that
utilize the transfer of data and voice transmissions over a cellular network in
combination with GPS (Global Positioning Satellites) and diagnostic devices that
communicate with to the Company's monitoring center, known as the PAL Services
Network.


Additionally, through its wholly owned subsidiary SecureAlert II, Inc.
("SecureAlert"), the Company markets and manufactures various mobile emergency,
personal security and related health products utilizing the Company's patented
technologies. The Company's revenues for the three months and nine months ended
June 30, 2004 and 2003 were generated from the sale of personal security
products and services and medical stains and reagents.


Basis of Presentation


The accompanying unaudited condensed consolidated financial statements of the
Company have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to such rules and regulations. These unaudited
condensed consolidated financial statements reflect all adjustments (consisting
only of normal recurring adjustments) that, in the opinion of management, are
necessary to present fairly the results of operations of the Company for the
periods presented. These unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and the
notes thereto included in the Company's Form 10-KSB for the year ended September
30, 2003. The results of operations for the three and nine months ended June 30,
2004 are not necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 2004.


Going Concern


The Company has recurring net losses, negative cash flows from operating
activities and a working capital deficit, a stockholders' deficit and
accumulated deficit. These factors raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


Management's plans with respect to this uncertainty include converting debt
obligations to equity, and raising additional capital from the sale of equity
securities, obtaining debt financing and enhancing revenues and cash flows from
its operations by increasing selling and marketing efforts related to new and
existing products and services.


There can be no assurance that the Company will be able to raise sufficient
capital to meet its working capital needs. In addition, there can be no
assurance that the Company's operations will generate positive cash flows, that
the Company will be successful in introducing new products to the market or that
the Company will be economically successful from its increased selling and
marketing efforts related to its new and existing products in the market.
Further, the Company may be unable to complete the development and successful
commercialization of any new remote health monitoring products.




                                      -7-
<PAGE>

Principles of Consolidation


The unaudited condensed consolidated financial statements include the accounts
of the Company and its wholly or majority-owned subsidiaries. All significant
inter-company transactions have been eliminated in consolidation.


Stock-Based Compensation


The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation.
Accordingly, no compensation cost has been recognized in the financial
statements for stock-based compensation awarded to employees, except when the
exercise price of the award is below the market price of the stock on the date
of grant. Had compensation cost for the Company's stock option plans been
determined based on the fair value at the grant date for awards in fiscal year
2004 and 2003 consistent with the provisions of SFAS No. 123, the Company's
approximate net loss and loss per share would have been the pro forma amounts
indicated below:




<TABLE>
<CAPTION>
                                                   Three months ended                       Nine months ended
                                                        June 30,                                June 30,
                                               2004                2003                2004                2003
                                         ------------------- ------------------ ----------------- ------------------------
<S>                                      <C>                 <C>                <C>               <C>
Net loss  - as reported                  $    (1,826,865)    $      (1,777,990) $   (3,706,273)   $      (4,683,439)


Add:  Stock-based employee compensation
expense included in reported net income,
net of related tax effects                             -                     -               -                    -

Deduct total stock based employee
compensation expense determined under
fair value based method for all
awards, net of related taxes                     (102,771)              (68,310)         (112,647)               (68,310)
                                         ------------------- ------------------ ----------------- ------------------------
Net loss - pro forma                     $     (1,929,636)   $       (1,846,300)$      (3,818,920)   $        (4,751,749)
                                         ------------------- ------------------ ----------------- ------------------------
Basic and diluted net loss per common
share - as reported                      $          (0.07)   $            (0.09)$           (0.14    $             (0.32)
                                         ------------------- ------------------ ----------------- ------------------------
Basic and diluted net loss per common
   share - pro forma                     $          (0.07)   $            (0.09)$           (0.14)   $             (0.32)
                                         ------------------- ------------------ ----------------- ------------------------
</TABLE>



                                      -8-
<PAGE>

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

                                               Nine Months Ended
                                                    June 30,
                                        ----------------------------------
                                              2004            2003
                                        ----------------------------------

Expected dividend yield                                -                -
Expected stock price volatility                      93%             146%
Risk-free interest rate                            3.87%            4.75%
Expected life of options                         5 years          5 years




The weighted average fair value of options and warrants granted during the nine
months ended June 30, 2004 and 2003, were $0.40 and $2.14, respectively.


Impairment of Long-Lived Assets


Goodwill is not amortized but is subject to an impairment test, which is
performed at least annually. Goodwill is related to the acquisition of
SecureAlert (PAL Services) in July 2001. The Company tests goodwill for
impairment at least annually or when changes in circumstances may indicate
impairment. Impairment is measured by comparing the carrying value of the
component unit to which goodwill is assigned, namely the assets of SecureAlert
(PAL Services) its wholly owned subsidiary SecureAlert, Inc. to the estimated
fair value of the component unit using an income approach method of estimated
future cash flows. The estimated future cash flows include those primarily
related from mobile medical alert devices of the component unit. If the carrying
amount of the component unit including goodwill is determined to exceed the
estimated fair value of the component unit then an impairment is recorded as the
difference between the carrying value and the fair market value.


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

Net Loss Per Common Share

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

Common share equivalents consist of shares issuable upon the exercise of common
stock options and warrants, the conversion of the convertible debentures and
related accrued interest, and conversion of preferred stock. As of June 30, 2004
and 2003, there were approximately 20,146,000 and 18,086,000 outstanding common
share equivalents, respectively, that were not included in the computation of
diluted net loss per common share as their effect would be anti-dilutive.


Revenue Recognition


The Company derives its revenue primarily from the sale of mobile emergency and
personal security systems and reagent stains. Revenue, less reserves for
returns, is recognized upon shipment to the customer. The Company records
reserves for estimated returns of defective product. Amounts received in advance
of shipment are recorded as deferred revenue. Shipping and handling fees are
included as part of net sales. The related freight costs and supplies directly
associated with shipping products to customers are included as a component of
cost of goods sold.






                                      -9-
<PAGE>

(2)      INVENTORIES


       Substantially all items included in inventory are finished goods and
       consisted of the following as of June 30, 2004:

 Mobile emergency and personal security systems     $               179,639
 Reagent stains                                                      36,934
                                                    ------------------------
                                                    $               216,573
                                                    ========================
(3)      NOTES PAYABLE


Short-term notes payable consist of the following at June 30, 2004:

     o    $300,000  note  payable  to an  individual  with  interest  at 12% due
          monthly. The principal on the note is due September 30, 2004. The note
          is unsecured.

     o    $175,000  convertible  note payable to an individual  with interest at
          12% due monthly.  The note was amended during the quarter changing the
          maturity  date to a  month-to-month  loan  callable by the lender upon
          sixty (60) days written notice to the Company. The note is convertible
          into common  stock at the rate of $1.50 of  indebtedness  per share of
          common stock.  The conversion rate is subject to adjustment to reflect
          any dividend,  split or consolidation effected on the Company's common
          stock. This note is unsecured.

     o    $300,000 note payable to a  corporation  which was assumed on April 2,
          2003 by David Derrick and James Dalton,  officers and directors of the
          Company,  and ADP Management Corp. ("ADP  Management"),  a corporation
          owned and controlled by Mr.  Derrick and Mr. Dalton.  However the note
          holder has not released the Company of this  obligation.  This note is
          currently in default.

(4)      CONVERTIBLE DEBENTURES


During the nine months ended June 30, 2004, the Company conducted a private
offering of debt and equity securities. The offering closed April 22, 2004. The
offering involved the sale of units, each unit consisting of $70,588 in
principal amount of convertible debentures, 54,467 shares of common stock, and
16,176 "origination shares" of common stock. The debentures are convertible
automatically into common stock upon the closing of an equity or debt offering
by the Company with gross proceeds of at least $5,000,000 at a conversion price
equal to 80% of the pre-money valuation of the common stock immediately prior to
the closing of the qualified offering. In connection with this offering, the
Company raised $1,450,000 in gross proceeds while netting $1,239,888 after
expenses and commissions. As of June 30, 2004, the debt discount was $183,597.

(5)      BANK LINE OF CREDIT


As of June 30, 2004, the Company had $175,000 outstanding under a line of credit
with Zions First National Bank. The line of credit bears interest at prime plus
..25% (4.25% at June 30, 2004), matures on April 15, 2005, is limited to $175,000
plus fees, and is secured by certificates of deposit which the Company holds as
restricted cash of $175,697.

(6)      COMMON STOCK SUBJECT TO REDEMPTION


As of June 30, 2004, the Company had 217,185 shares of common stock subject to
redemption at the option of the holder at prices ranging from $0.54 to $3.00 per
share. The total redemption value of $196,000 is included in current
liabilities. The redemption feature terminates when the Company's common stock
is listed on a national exchange.


(7)      RELATED-PARTY ADVANCES


As of June 30, 2004, the Company had related party advances payable to ADP
Management totaling $434,046. These advances bear interest at 4.75% and are due
on demand. During the nine months ended June 30, 2004, the net cash borrowings
from ADP Management were $245,303.







                                      -10-
<PAGE>

(8)      RELATED-PARTY CONVERTIBLE PROMISSORY NOTES


In connection with the acquisition of SecureAlert (PAL Services) in July 2001
the Company assumed two promissory notes payable to former SecureAlert (PAL
Services) shareholders each with a principal balance of $250,000. The Company
also granted each of the note holders the right, at any time prior to July 2,
2002, to convert their note into 83,333 shares of the Company's common stock, or
to be paid $250,000 on July 2, 2002. The promissory notes were amended during
the three months ended December 31, 2002 to provide for payments of principal
and accrued interest at a rate of $20,000 per month until paid in full,
commencing March 25, 2003; the aggregate remaining balance on the notes as of
June 30, 2004 was $169,676, which amount continues to be convertible into shares
of common stock at the option of the holder at a rate of $3.00 per share. The
notes continue to bear interest at a rate of 5% percent per year. During the
nine months ended June 30, 2004, the Company recorded interest expense of $7,661
on these promissory notes.


 (9)    PREFERRED STOCK


Series A 10 % Convertible Non-Voting Preferred Stock


Each share of Series A Preferred Stock is convertible into 370 shares of common
stock. During the nine months ended June 30, 2004, a total of 7,376 shares of
Series A Preferred Stock were converted into 2,725,357 shares of common stock.
As of June 30, 2004, there were 23,101 shares of Series A Preferred Stock
outstanding, which represents 8,547,370 common stock equivalents at a conversion
rate of 370 for 1. However, the Company's Articles of Incorporation prohibit
Series A Preferred Stockholders to convert their shares into common stock if,
after such conversion, the holder thereof would hold in excess of 4.9% of the
Company's issued and outstanding shares of common stock. On April 13, 2004, ADP
Management, a significant shareholder of the Company, converted 789 shares of
Series A Preferred Stock into 292,012 shares of common stock (the "Conversion
Shares"), notwithstanding the limitation on conversion in the Articles of
Incorporation. ADP Management subsequently transferred the shares of common
stock issued upon this conversion to unrelated third parties in bone fide gift
transactions. The Company is reviewing alternatives for rectifying this
transaction, investigating the extent of similar conversions that may have
occurred by other Series A Preferred Stockholders, and establishing policies to
ensure that similar conversions do not occur in the future. In the case of ADP
Management's April 13, 2004 conversion, it appears that at the time of
conversion, ADP Management owned shares of common stock of the Company other
than the Conversion Shares, which it could have transferred by gift to the
unrelated third parties (the "Replacement Shares"). Accordingly, it appears that
the Company and ADP Management could rectify the conversion by rescinding the
conversion transaction, restoring to ADP Management the shares of Series A
Preferred which it originally owned, and surrendering to the Company for
cancellation Replacement Shares equal in number to the shares of common stock
which ADP Management transferred by gift.


The holders of the Series A Preferred Stock are entitled to dividends at the
rate of 10% per year on the stated value of the Series A Preferred Stock (or
$200 per share), payable in cash or in additional shares of Series A Preferred
Stock at the discretion of the board of directors. Dividends are fully
cumulative and accrue from the date of original issuance. During the nine months
ended June 30, 2004 and 2003, the Company recorded $400,289 and $452,182,
respectively, in dividends on Series A Preferred Stock.


The Company may, at its option, redeem up to two-thirds of the total number of
shares of Series A Preferred Stock at a redemption price of 133 percent of the
stated value of Series A Preferred Stock; however, the Company may designate a
different and lower redemption price for all shares of Series A Preferred Stock
called for redemption by the Company. Through June 30, 2004, the Company had not
exercised its option to redeem shares of Series A Preferred Stock.


Series B Convertible Preferred Stock


In April 2002, the Company sold 1,835,824 shares of Series B Preferred Stock for
$3,366,273. Of these issuances 1,000,000 shares were sold to Matsushita Electric
Works, Ltd., a Japanese corporation ("MEW"). MEW was granted an anti-dilution
right on the common stock conversion feature of the 1,000,000 Series B shares it
purchased. If the Company should at any time during a two-year period (beginning
April 2002) sell its common stock or any security exercisable into common stock
for an equivalent value of less than $3.00 per share, then the conversion price
of the 1,000,000 Series B shares into common stock will be adjusted to the
common stock equivalent value of those securities sold. On December 12, 2003,
the holders of a majority of the outstanding shares of Series B Preferred Stock,


                                      -11-
<PAGE>

including MEW, waived their rights under the anti-dilution provisions of the
Series B Preferred Stock designation of rights and preferences and under other
agreements with the Company through that date. The Company may redeem the Series
B Preferred Stock at any time. The redemption price will be a minimum of 110
percent of the conversion price at the date of redemption. As of June 30, 2004,
the Company had not exercised its option to redeem shares of Series B Preferred
Stock.


(10)     COMMON STOCK

During the three months ended June 30, 2004, the Company issued 1,165,541 shares
of common stock as follows: o 405,469 shares were issued upon the conversion of
1,095 shares of Series A Preferred Stock.

     o    112,500 shares were issued in exchange for services.

     o    150,000 shares were issued in exchange for services to be performed in
          subsequent periods.

     o    200,000 shares were issued to directors for services.

     o    282,572  shares were issued in connection  with the sale of debentures
          and equity securities of the Company for gross proceeds of $400,000.

     o    15,000  shares  were  issued  to a  debt  holder  in  exchange  for an
          agreement to extend the maturity date of the note payable.


In addition, options allowing holders of 963,333 shares of common stock to
require the Company to purchase their shares at prices ranging from $1.50 to
$3.00 expired during the three months ended June 30, 2004.


Common Stock Options and Warrants


Options and warrants to purchase a total of 7,322,043 shares of common stock
were outstanding at June 30, 2004 with a weighted average exercise price of
$2.75 per share.


(11)     SEGMENT INFORMATION


The Company is organized into two business segments based primarily on the
nature of the Company's products. The Reagents segment is engaged in the
business of manufacturing and marketing medical diagnostic stains, solutions and
related equipment to hospitals and medical testing laboratories. The SecureAlert
(PAL services) segment is engaged in the business of developing, manufacturing
and marketing mobile emergency and personal security systems to distributors and
consumers, and distributing consumer electronics products to the manufactured
home market. Other (unallocated) loss consists of research and development,
selling, general and administrative expenses related to the Company's corporate
activities, including remote health monitoring and market and business
development activities.


The following table reflects certain financial information relating to each
reportable segment for each of the three-month periods ended June 30, 2004 and
2003:




<TABLE>
<CAPTION>
                                                                              Three Months
                                                                             Ended June 30,
                                                                   ----------------------------------------
                                                                         2004              2003
                                                                   ------------------ ---------------------
      Net sales:
        SecureAlert (PAL Services):
<S>                                                                <C>                <C>
           Mobile emergency and personal security systems          $          217,164 $          103,086
           Monitoring                                                          50,734             46,353
                                                                   ------------------ ---------------------
                                                                              267,898            149,439
        Reagents                                                              139,351            139,856
                                                                   ------------------ ---------------------
                                                                   $          407,249 $          289,295
                                                                   ================== =====================
      Net income (loss):
        SecureAlert (PAL Services)                                            (73,312)          (333,229)
        Reagents                                                               15,469             14,371
        Other (unallocated)                                                (1,769,022)        (1,459,132)
                                                                   ------------------ ---------------------
                                                                   $       (1,826,865)$       (1,777,990)
                                                                   ================== =====================
</TABLE>

                                      -12-
<PAGE>




The following table reflects certain financial information relating to each
reportable segment for each of the nine-month periods ended June 30, 2004 and
2003:




<TABLE>
<CAPTION>
                                                                              Nine Months
                                                                             Ended June 30,
                                                                   -----------------------------------
                                                                         2004               2003
                                                                   ------------------ ------------------
      Net sales:
        SecureAlert (PAL Services):
<S>                                                                <C>                <C>
           Mobile emergency and personal security systems          $         336,015  $         105,345
             Monitoring                                                      149,176            147,125
                                                                   ------------------ ------------------
             Total                                                           485,191            252,470
        Reagents                                                             423,567            410,351
                                                                   ------------------ ------------------
                                                                   $         908,758  $         662,821
                                                                   ================== ==================


      Net income (loss):
        SecureAlert (PAL Services)                                 $        (134,871) $      (1,010,240)
        Reagents                                                              72,832             33,027
        Other (unallocated)                                               (3,644,234)        (3,706,226)
                                                                   ------------------ ------------------
                                                                   $      (3,706,273) $      (4,683,439)
                                                                   ================== ==================

      Identifiable assets:
           SecureAlert  (PAL  Services)  (including  goodwill  of
                $1,321,164)                                                1,770,872
           Reagents                                                          129,142
           Other (unallocated)                                               388,703
                                                                   ------------------
                                                                   $       2,288,717
                                                                   ==================
</TABLE>

(12)     SUBSEQUENT EVENTS


The Company had no significant events subsequent to June 30, 2004.


Item 2.  Management's Discussion and Analysis or Plan of Operation


Special Note Regarding Forward-looking Information


Certain statements in this Item 2 "Management's Discussion and Analysis or Plan
of Operation" are "forward-looking statements" within the meaning of the
Securities Exchange Act of 1934 as amended (the "Exchange Act"). For this
purpose, any statements contained or incorporated in this report that are not
statements of historical fact may be deemed to be forward-looking statements.
The words, "believes," "will," "plans," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. A number of
important factors could cause the actual results of the Company to differ
materially from those anticipated by forward-looking statements. These factors
include those set forth under the caption "Risk Factors" in Item 6.
"Management's Discussion and Analysis or Plan of Operation" in the Company's
Annual Report on Form 10-KSB for the year ended September 30, 2003.




                                      -13-
<PAGE>

Critical Accounting Policies

In Note 1 to the audited consolidated financial statements for the fiscal year
ended September 30, 2003 included in its Form 10-KSB, the Company discusses
those accounting policies that are considered to be significant in determining
its the results of operations and its financial position. The Company believes
that the accounting principles utilized by it conform to generally accepted
accounting principles in the United States of America.

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

The Company applies the following critical accounting policies in the
preparation of its financial statements:

Inventory Reserves

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

o        Current inventory quantities on hand;
o        Product acceptance in the marketplace;
o        Customer demand;
o        Historical sales;
o        Forecast sales;
o        Product obsolescence; and
o        Technological innovations.

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

Revenue Recognition

The Company derives its revenue primarily from the sale of mobile emergency and
personal security systems and reagent stains. Under applicable accounting
principles, revenue, less reserves for returns, is recognized upon shipment to
the customer. From the date of the acquisition of SecureAlert (PAL Services) in
July 2001 through September 30, 2003, and for the year ended September 30, 2003,
the provision for sales returns was not material. Amounts received in advance of
shipment are recorded as deferred revenue. Shipping and handling fees are
included as part of net sales. The related freight costs and supplies directly
associated with shipping products to customers are included as a component of
cost of goods sold.

Impairment of Long-lived Assets

Under applicable accounting principles, the Company does not amortize goodwill.
Goodwill is subject to an impairment test, which is performed at least annually.
The Company reviews its long-lived assets, other than goodwill, for impairment
when events or changes in circumstances indicate that the book value of an asset
may not be recoverable. The Company evaluates, at each balance sheet date,
whether events and circumstances have occurred which indicate possible
impairment. The Company uses an estimate of future undiscounted net cash flows
of the related asset or group of assets over the estimated remaining life in
measuring whether the assets are recoverable.



                                      -14-
<PAGE>

Accounting for Stock-based Compensation

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

The Company accounts for stock-based compensation issued to persons other than
employees using the fair value method in accordance with SFAS No. 123 and
related interpretations. Under SFAS No. 123, stock-based compensation is
determined as either the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable.
The measurement date for these issuances is the earlier of either the date at
which a commitment for performance by the recipient to earn the equity
instruments is reached or the date at which the recipient's performance is
complete.

Allowance for Doubtful Accounts

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


Discontinued Operations

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

<TABLE>
<CAPTION>
                                               Three Months Ended                  Nine Months Ended
                                                    June 30,                           June 30,
                                               --------------------           ----------------------------
                                                2004      2003                     2004         2003
                                               --------- ----------           --------------  ------------
<S>                                            <C>       <C>                  <C>             <C>
Net Sales and royalties from
consumer electronics product
Distribution                                   $       - $131,731             $       99,515  $   252,517

Costs associated with consumer
electronics operations                         -                 -            -                 (562,888)
                                               --------- ----------           --------------  ------------

Net increase (loss) from
discontinued operations                        $       - $131,731                 $  99,515   $ (310,371)
                                               ========= ==========           ==============  ============
</TABLE>





                                      -15-
<PAGE>

Continued Operations


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


Three months ended June 30, 2004 Compared to Three months ended June 30, 2003


Net Sales


For the three months ended June 30, 2004, the Company had net sales of $407,249
compared to $289,295 for the three months ended June 30, 2003, an increase of
$117,954. The increase in net sales resulted primarily from focusing on the core
business model of the personal safety and medical monitoring. In addition, the
net sales increased by developing dealer-distribution channels.


The Company's SecureAlert (PAL Services) segment had net sales of $267,898
during the three months ended June 30, 2004 compared to net sales of $149,439
for the three months ended June 30, 2003. These sales consisted of mobile
emergency and personal security systems. MDC, a Canadian company, was a
significant customer of the SecureAlert (PAL Services) segment accounting for
63% of the segment's sales during the period. No other customer of the
SecureAlert (PAL Services) segment accounted for 10% or more of the segment's
sales.


The Company's Reagents segment had revenues for the three months ended June 30,
2004 of $139,351, compared to $139,856 during the quarter ended June 30, 2003.
The Company anticipates that Reagents segment sales will decrease in the future
as a percentage of total sales. Fisher Scientific was a significant customer of
the Reagents segment, accounting for 28% of Reagents' segment sales during the
period. No other customer of the Reagents segment's accounted for 10% or more of
its sales.


Cost of Goods Sold


For the three months ended June 30, 2004, cost of goods sold totaled $355,232
compared to $172,689 during the three months ended June 30, 2003, an increase of
$182,543. The increase in cost of sales was due primarily to the increase in net
sales. The SecureAlert's (PAL Services) segment's cost of goods sold totaled
$282,337 or 105% of SecureAlert's (PAL Services) net sales during the three
months ended June 30, 2004. Personal emergency response products are sold below
cost in order to receive recurring revenues under a long-term monitoring
agreement. The Company has certain fixed costs associated with the segment's
cost of goods sold, such as monitoring expenses. As volume increases, the
Company expects the segment's cost of goods sold as a percentage of its net
sales to decrease. Therefore, the Company currently incurs a negative gross
margin on SecureAlert's (PAL Services) products. The Reagents' segment's cost of
goods sold was $72,895 or 52% of the segment's net sales during the three months
ended June 30, 2004, compared to $86,609 or 62% of the segment's net sales for
the same period during the prior fiscal year. The decrease in the segment's cost
of sales was primarily due to a decrease in shipping costs.


Research and Development Expenses


No research and development expenses were incurred for the three months ended
June 30, 2004.


Amortization of Core Technology


Core technology primarily represents patents in the area of remote security and
medical alert devices received in the acquisition of SecureAlert (PAL Services).
Core technology is amortized using the straight-line method over an estimated
useful life of three years. The core technology amortization for the three
months ended June 30, 2004 totaled $35,000.


Selling, General and Administrative Expenses


During the three months ended June 30, 2004, selling, general and administrative
expenses were $1,547,169, compared to selling, general and administrative
expenses in the prior year period of $1,668,967, a decrease of $121,798. This
decrease relates primarily to a reduction in consulting expenses for services
provided to the Company. In addition, amounts allocated to selling, general, and
administrative expenses in the three months ended June 30, 2004 included


                                      -16-
<PAGE>

non-cash consideration of approximately $824,000 paid in the form of common
stock and options to related parties, consultants and creditors in lieu of cash
compensation for services provided to the Company as compared to approximately
$1,407,598 related to such expenses for the three months ended June 30, 2003.


Interest Income and Expense


During the three months ended June 30, 2004, interest expense totaled $307,852
compared to $307,916 paid in the three months ended June 30, 2003. This amount
consists primarily of non-cash interest expense of $297,412 related to the
issuance of common stock in settlement of various debt obligations.





Nine months ended June 30, 2004 Compared to Nine months ended June 30, 2003


Net Sales


Net sales during the nine months ended June 30, 2004 were $908,758 compared to
$662,821 in net sales during the nine months ended June 30, 2003, an increase of
$245,937. The increase in net sales resulted primarily from the Company's
on-going efforts to develop dealer-distribution channels for its products.


The Company's SecureAlert (PAL Services) segment had net sales of $485,191
during the nine months ended June 30, 2004 compared to $252,470 during the nine
months ended June 30, 2003. The Company's Reagents segment had sales for the
nine months ended June 30, 2004 of $423,567, compared to $410,351 during the
same period in the prior fiscal year, relatively unchanged from the prior year
fiscal period. The Company anticipates that Reagents' segment sales will
decrease in the future as a percentage of total sales.


Cost of Goods Sold


During the nine months ended June 30, 2004, cost of goods sold was $817,275
compared to $559,324 during the nine months ended June 30, 2003, an increase of
$257,951. The increase in cost of sales resulted primarily from an increase in
net sales. The SecureAlert's (PAL Services) segment's cost of goods sold was
$577,020 or 119% of the segment's net sales in the nine months ended June 30,
2004, compared to $306,841 or 122% of the segment's net sales during the same
period one year ago. Personal emergency response products are sold below cost in
order to receive recurring revenues under a long-term monitoring agreement. The
Company has certain fixed costs associated with the segment's cost of goods
sold, such as monitoring expenses. As volume increases the Company expects the
segment's cost of goods sold as a percentage of its net sales to decrease. The
Reagents' segment's cost of goods sold totaled $240,255 or 57% of the segment's
net sales during the nine months ended June 30, 2004, compared to $252,483 or
62% of the segment's net sales during the same period in the prior fiscal year.
The decrease as a percentage of net sales was primarily due to a decrease in
material, shipping, wages and overhead costs.


Research and Development Expenses


During the nine months ended June 30, 2004 and 2003, research and development
expense was $49,532 and $101,206, respectively, and consisted primarily of
expenses associated with the development of SecureAlert's (PAL Services)
personal security devices, and related services.


Amortization of Core Technology


Core technology primarily represents patents in the area of remote security and
medical alert devices received in the acquisition of SecureAlert (PAL Services).
Core technology is amortized using the straight-line method over an estimated
useful life of three years. The core technology amortization for the nine months
ended June 30, 2004 totaled $105,000.


Selling, General and Administrative Expenses


During the nine months ended June 30, 2004, selling, general and administrative
expenses totaled $3,047,730, compared to $3,517,866 during the nine months ended
June 30, 2003, a decrease of $470,136. This decrease relates primarily to a
reduction in labor costs. In addition, amounts allocated to selling, general,
and administrative expenses in the nine months ended June 30, 2004 included


                                      -17-
<PAGE>

non-cash consideration of approximately $1,278,000 paid in the form of common
stock and options granted to related parties, consultants and creditors in lieu
of cash compensation for services provided to the Company compared to
approximately $2,242,000 in such expenses paid during the nine months ended June
30, 2003.


Interest Income and Expense


During the nine months ended June 30, 2004, interest expense totaled $758,965.
This amount consists primarily of non-cash interest expense of $665,410 related
to common stock issuances under various note obligations.


Liquidity and Capital Resources


The Company is presently unable to finance its operations solely from cash flows
from operating activities. During the nine months ended June 30, 2004, the
Company financed its operations primarily through borrowings from a related
party and unrelated third parties and from the sale of debt and equity
securities of the Company for aggregate net proceeds of $1,710,191.


As of June 30, 2004, the Company had cash of $89,916 and a working capital
deficit of $3,188,650, compared to cash of $136,894 and a working capital
deficit of $1,826,996 at September 30, 2003. This change includes the
reclassification of $196,000 from mezzanine equity capital to debt liabilities.


During the nine months ended June 30, 2004, the Company's operating activities
used cash of $1,517,000, compared to cash of $1,882,254 used during the nine
months ended June 30, 2003. The decrease was primarily a result of the loss of
operations.


The Company used cash of $95,511 for investing activities during the nine months
ended June 30, 2004.


The Company's financing activities during the nine months ended June 30, 2004
provided cash of $1,565,533 compared to $1,923,472 during the nine months ended
June 30, 2003. During the nine months ended June 30, 2004, the Company received
net cash proceeds of $245,303 in net advances from a related party and net
proceeds of $225,000 from the issuance of redeemable common stock, as well as
net cash proceeds of $1,239,888 from the sale of its debentures and equity
securities. Cash was decreased by $45,759 in payments to notes payable, $105 in
payments on bank line-of-credit, and $98,794 in payments to a related party
note.


The Company incurred a net loss of $3,706,273 during the nine months ended June
30, 2004. As of June 30, 2004, the Company had a net tangible stockholders'
deficit of $3,070,644 and an accumulated deficit of $66,779,567. These factors,
as well as the risk factors set out in the Company's annual report on Form
10-KSB for the year ended September 30, 2003, raise substantial doubt about the
Company's ability to continue as a going concern. The unaudited condensed
consolidated financial statements included in this Quarterly Report on Form
10-QSB do not include any adjustments that might result from the outcome of this
uncertainty. The Company's plans with respect to this uncertainty include
raising capital from the sale of the Company's common stock or other debt and
equity securities.


There is no assurance that the Company will be successful in its plans to raise
capital or meet its current financial obligations. There has been no adjustment
to the financial statements included in this report should management's plans
not be met.


Recent Developments


During the nine months ended June 30, 2004, the Company conducted a private
offering of debt and equity securities. The offering closed April 22, 2004. The
offering involved the sale of units, each unit consisting of $70,588 in
principal amount of convertible debentures, 54,467 shares of common stock, and
16,176 "origination shares" of common stock. The debentures are convertible
automatically into common stock upon the closing of an equity or debt offering
by the Company with gross proceeds of at least $5,000,000 at a conversion price
equal to 80% of the pre-money valuation of the common stock immediately prior to
the closing of the qualified offering. In connection with this offering, the
Company raised $1,450,000 in gross proceeds while netting $1,239,888 after
expenses and commissions. As of June 30, 2004, the debt discount was $183,597.



                                      -18-
<PAGE>

The Company has opened a new $2,000,000 private offering of debt and equity
securities with similar "unit" terms as the previously closed offering, with all
shares originally issued in the offering by the Company.


Item 3.   Controls and Procedures


Evaluation of Disclosure Controls and Procedures. Based upon their review, the
Company's principal executive officer and principal financial officer have
concluded that the current disclosure controls and procedures (as defined in
Exchange Act Rules 240.13a-14(c) and 15d-14(c)) are effective in providing the
material information required to be disclosed in the reports it file or submits
under the Exchange Act. Their review was completed as of June 30, 2004.


Changes in Internal Controls. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date the Company carried out this
evaluation.


                           PART II. OTHER INFORMATION


 Item 2.  Changes in Securities and Use of Proceeds


During the three months ended June 30, 2004, the Company issued $282,352 of
convertible debentures and 1,165,541 shares of common stock without registration
of the offer and sale of the securities under the Securities Act of 1933, as
amended (the "Securities Act"). The common stock issued consisted of the
following:

     o    405,469  shares  were issued upon the  conversion  of 1,095  shares of
          Series A Preferred Stock.

     o    112,500 shares were issued in exchange for services.

     o    150,000 shares were issued in exchange for services to be performed in
          subsequent periods.

     o    200,000 shares were issued to directors for services.

     o    282,572  shares  were  issued  in connection  with  the  sale  of  its
          debentures and equity  securities of the Company for gross proceeds of
          $400,000.

     o    15,000  shares  were  issued  to a  debt  holder  in  exchange  for an
          agreement to extend the maturity date of the note payable.


In each of these transactions the securities were issued without registration
under the Securities Act of 1933, as amended, in reliance upon exemptions from
registration applicable to limited or non-public offers and sales of securities.
The offer and sale of convertible debentures and common stock in the Company's
April 2004 private placement were made solely to individuals or entities that
were "accredited investors" as that term is used in Rule 501 under Regulation D
of the Securities Act, in reliance on the exemptions from the registration
requirements of the Securities Act afforded by Section 4(2) and Rule 506 of
Regulation D under the Securities Act.

The Company's Series A Preferred Stock is convertible into common stock at a
rate of 370 shares of common stock for each share of Series A Preferred Stock.
However, the Company's Articles of Incorporation prohibit Series A Preferred
Stockholders to convert their shares into common stock if, after such
conversion, the holder thereof would hold in excess of 4.9% of the Company's
issued and outstanding shares of common stock. On April 13, 2004, ADP
Management, a significant shareholder of the Company, converted 789 shares of
Series A Preferred Stock into 292,012 shares of common stock (the "Conversion
Shares"), notwithstanding the limitation on conversion in the Articles of
Incorporation. ADP Management subsequently transferred the shares of common
stock issued upon this conversion to unrelated third parties in bone fide gift
transactions. The Company is reviewing alternatives for rectifying this
transaction, investigating the extent of similar conversions that may have
occurred by other Series A Preferred Stockholders, and establishing policies to
ensure that similar conversions do not occur in the future. In the case of ADP
Management's April 13, 2004 conversion, it appears that at the time of
conversion, ADP Management owned shares of common stock of the Company other
than the Conversion Shares, which it could have transferred by gift to the
unrelated third parties (the "Replacement Shares"). Accordingly, it appears that
the Company and ADP Management could rectify the conversion by rescinding the
conversion transaction, restoring to ADP Management the shares of Series A
Preferred which it originally owned, and surrendering to the Company for


                                      -19-
<PAGE>

cancellation Replacement Shares equal in number to the shares of common stock
which ADP Management transferred by gift.




Item 6.  Exhibits and Reports on Form 8-K


(a) Exhibits Required by Item 601 of Regulation S-B


Exhibit Number             Title of Document

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


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


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


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


     3.01(4)  Certificate  of  Amendment  to  the   Designation  of  Rights  and
          Preferences Related to Series A 10% Cumulative  Convertible  Preferred
          Stock of RemoteMDx,  Inc.  (incorporated by reference to the Company's
          annual report on Form 10-KSB for the year ended September 30, 2001)


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


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


     10.021997 Stock Incentive Plan of the Company,  (incorporated  by reference
          to the Company's Registration Statement and Amendments thereto on Form
          10-SB, effective December 1, 1997).


     10.031997  Transition  Plan  (incorporated  by reference  to the  Company's
          Registration Statement and Amendments thereto on Form 10-SB, effective
          December 1, 1997).

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

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

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

     10.07Loan  Agreement  (as amended)  dated June 2001 between ADP  Management
          and the Company  (incorporated  by reference to the  Company's  annual
          report on Form 10-KSB for the year ended September 30, 2001)

     10.08Amended and Restated Loan and Security  Agreement  (SunTrust  Bank and
          SecureAlert  (PAL  Services)),  dated August 3, 2001  (incorporated by
          reference to the  Company's  annual report on Form 10-KSB for the year
          ended September 30, 2001)

     10.09Amended and Restated Loan and Security  Agreement  (SunTrust  Bank and
          SecureAlert  (PAL  Services)),  dated  January  24,  2002 (filed as an
          exhibit  to the  Company's  quarterly  report on Form  10-QSB  for the
          quarter ended December 31, 2001)



                                      -20-
<PAGE>

     10.10Amended and Restated Loan and Security  Agreement  (SunTrust  Bank and
          SecureAlert  (PAL Services))  dated March 1, 2002 (filed as an exhibit
          to the Company's quarterly report on Form 10-QSB for the quarter ended
          December 31, 2001)

     10.11Loan  Agreement (as amended and extended)  dated March 5, 2002 between
          ADP Management and the Company,  effective December 31, 2001 (filed as
          an exhibit to the  Company's  quarterly  report on Form 10-QSB for the
          quarter ended December 31, 2001)

     10.12License  Agreement  between  RemoteMDx,   Inc.  and  SecureAlert  (PAL
          Services),  Inc. as licensor and Matsushita  Electric Works,  Ltd., as
          licensee,  (April 12, 2002) Agreement with SecureAlert  Entertainment,
          LLC, with amendments (January and June 2003) (previously filed)

     10.13Agreement  with  SAE  (incorporated  by  reference  to  the  Company's
          quarterly  report on Form 10-QSB for the quarter  ended  December  31,
          2002)

     10.14Agreement    between   the   Company   and   SecureAlert    Telematics
          (incorporated  by reference to the Company's  quarterly report on Form
          10-QSB for the quarter ended December 31, 2002)

     10.15 Amendments to SAE Agreement (previously filed)

     10.16Agreement  with  ADP  Management,  Derrick  and  Dalton  (April  2003)
          (previously filed)


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


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


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


(b)       Reports on Form 8-K


During the quarter ended March 31, 2004, the Company filed no reports on Form
8-K.







                                      -21-
<PAGE>


                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report, as amended, to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                 REMOTEMDX, INC.



Date: August 23, 2004          By: /s/ David G. Derrick
                                  --------------------------------------------
                                  David G. Derrick,
                                  Chief Executive Officer




Date: August 23, 2004          By: /s/ Michael G. Acton
                                  ----------------------------------------
                                  Michael G. Acton,
                                  Principal Accounting Officer



                                      -22-