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 December 31, 2007





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 incorporation or organization)
            (IRS
      Employer Identification No.)







150
West Civic Center Drive


Suite
400


Sandy,
Utah 84070


(Address
of principal executive offices)





(801)
451-6141


(Issuer's
telephone number)





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 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 [   ]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes
[   ] No [X]





On
February 1, 2008, the issuer had a total of 131,521,046 shares of common stock
issued and outstanding. The issuer also had a total of 19 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 7,178 shares, and 10,999
shares of Series B Preferred Stock outstanding, convertible at any time at the
option of the holders thereof into approximately 113,783 shares of common
stock.





Transitional
Small Business Disclosure Format (Check One):


Yes
[   ]  No [X]





TABLE
OF CONTENTS








Page
              No.PART
      I.  FINANCIAL INFORMATIONItem
      1.  Financial StatementsCondensed
      Consolidated Balance Sheet as of December 31, 2007
    (Unaudited)
            3Condensed
      Consolidated Statements of Operations for the three months ended December
      31, 2007 and 2006 (Unaudited)
            4Condensed
      Consolidated Statements of Cash Flows for the three months ended December
      31, 2007 and 2006 (Unaudited)
            5Notes
      to Condensed Consolidated Financial Statements (Unaudited)
            7Item
      2.  Management's Discussion and Analysis or Plan of
      Operation
            16Item
      3.  Controls and Procedures
            21PART
      II.  OTHER INFORMATIONItem
      1.  Legal Proceedings
            22Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
            23Item
      6.  Exhibits and Reports on Form 8-K
            23Signatures
            26Certifications




















PART
I.  FINANCIAL INFORMATION


Item 1.  Financial Statements





REMOTEMDX,
INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEET


(Unaudited)


December
      31, 2007AssetsCurrent
      assets:Cash
              
              $
              7,713,104Accounts
      receivable, net of allowance for doubtful accounts
      of  $303,068
              
              
              6,170,561Inventories
      (note 2)
              
              
              47,059Receivables
              
              
              622,927Prepaid
      expenses
              
              
              217,114Total
      current assets
              
              
              14,770,765Property
      and equipment, net of accumulated depreciation and amortization
      of  $1,680,958 (note 3)
              
              
              2,050,433Monitoring
      equipment, net of accumulated depreciation and amortization of $2,642,348
      (note 4)
              
              
              2,119,798Goodwill
      and intangible assets (note 5)
              
              
              2,989,754Other
      assets
              
              
              57,359Total
      assets
              
              $
              21,988,109Liabilities
      and Stockholders’ DeficitCurrent
      liabilities:Bank
      line of credit (note 6)
              
              $
              3,670,451Accounts
      payable
              
              
              2,690,536Accrued
      liabilities (note 7)
              
              
              835,134Dividends
      payable
              
              
              289,948Deferred
      revenue
              
              
              34,894Notes
      payable and current portion of long-term debt (note 8)
              
              
              3,542,033Total
      current liabilities
              
              
              11,062,996Related
      party line of credit (note 9)
              
              
              8,053Long-term
      debt obligations (note 8)
              
              
              629,518Total
      liabilities
              
              
              11,700,567Minority
      interest (note 10)
              
              
              2,765,051SecureAlert
      Series A Preferred Stock
              
              
              3,590,000Stockholders’
      deficit:Preferred
      stock:Series A; 10% dividend, convertible, non-voting; $0.0001 par value; 40,000
      shares designated;19
      shares outstanding (aggregate liquidation preference of
    $450)
              
              
              1Series B; convertible; $0.0001 par value; 2,000,000 shares designated;
      10,999 shares outstanding (aggregate liquidation preference of
      $32,997)
              
              
              1Series C; convertible; $0.0001 par value; 7,357,144 shares designated; no
      shares outstanding (aggregate liquidation preference of
$0)
              
              
              -Common
      stock;  $0.0001 par value; 175,000,000 shares authorized,
      130,515,291 shares outstanding
              
              
              13,052Additional
      paid-in capital
              
              
              145,096,450Deferred
      compensation
              
              
              (6,075,342
              )Accumulated
      deficit
              
              
              (135,101,671
              )Total
      stockholders’ equity
              
              
              3,932,491Total
      liabilities and stockholders’ equity
              
              $
              21,988,109




See
accompanying notes to unaudited condensed consolidated financial
statements.




3





REMOTEMDX,
INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)








Three
      Months Ended
              December
      31,2007
            
            
            2006Net
      sales
            
            $
            3,605,545
            
            
            $
            988,237Cost
      of goods sold
            
            
            2,184,100
            
            
            
            2,205,393Gross
      profit
            
            
            1,421,445
            
            
            
            (1,217,156
            )Operating
      expensesResearch
      and development expenses
            
            
            1,040,447
            
            
            
            1,219,659Selling,
      general and administrative expenses (including $2,019,945 and $1,660,636
      of compensation expense paid in stock or stock option / warrants,
      respectively.)
            
            
            4,967,242
            
            
            
            5,196,926Loss
      from operations
            
            
            (4,586,244
            )
            
            
            (7,633,741
            )Gain
      on sale of intellectual property
            
            
            2,400,000
            
            
            
            -Other
      income (expense):Gain
      on revalued registration rights
            
            
            -
            
            
            
            52,500Minority
      interest allocation
            
            
            165,580
            
            
            
            -Other
      income
            
            
            10,602
            
            
            
            356Interest
      income
            
            
            33,189
            
            
            
            51,521Interest
      expense
            
            
            (375,510
            )
            
            
            (284,285
            )Loss
      before income taxes
            
            
            (2,352,383
            )
            
            
            (7,813,649
            )Income
      tax benefit
            
            
            -
            
            
            
            -Net
      loss
            
            
            (2,352,383
            )
            
            
            (7,813,649
            )Dividends
      on Series A preferred stock
            
            
            (167,137
            )
            
            
            (237,856
            )Net
      loss attributable to common shareholders
            
            $
            (2,519,520
            )
            
            $
            (8,051,505
            )Net
      loss per common share – basic and diluted
            
            $
            (0.02
            )
            
            $
            (0.10
            )Weighted
      average common shares outstanding – basic and diluted
            
            
            129,617,000
            
            
            
            83,018,000








See
accompanying notes to unaudited condensed consolidated financial
statements.





4





REMOTEMDX,
INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





Three
      Months Ended
              December
      31,2007
            
            
            2006Cash
      flows from operating activities:Net
      loss
            
            $
            (2,352,383
            )
            
            $
            (7,813,649
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
            
            
            441,165
            
            
            
            471,676Common
      stock issued for services
            
            
            621,085
            
            
            
            557,550Amortization
      of deferred financing and consulting costs
            
            
            1,393,656
            
            
            
            205,320Gain
      on registration rights liability
            
            
            -
            
            
            
            (52,500
            )Stock
      options vested during the period and/or issued for
services
            
            
            183,610
            
            
            
            982,567Increase
      in related party line of credit for services
            
            
            204,509
            
            
            
            150,639Minority
      interest expense, net
            
            
            (165,582
            )
            
            
            -Changes
      in operating assets and liabilities:Accounts
      receivable, net
            
            
            (638,080
            )
            
            
            (633,604
            )Interest
      receivable
            
            
            (9,068
            )
            
            
            15,604Inventories
            
            
            4,300
            
            
            
            (115,394
            )Prepaid
      expenses and other assets
            
            
            102,134
            
            
            
            2,095,248Accounts
      payable
            
            
            (799,393
            )
            
            
            3,586,883Accrued
      liabilities
            
            
            (261,826
            )
            
            
            1,116,701Deferred
      revenue
            
            
            (8,866
            )
            
            
            (14,319
            )Net
      cash provided by (used in) operating activities
            
            
            (1,284,739
            )
            
            
            552,722Cash
      flows used in investing activities:Purchase
      of property and equipment
            
            
            (43,313
            )
            
            
            -Purchase
      of monitoring equipment
            
            
            -
            
            
            
            (7,148,146
            )Net
      cash provided (used) in investing activities
            
            
            (43,313
            )
            
            
            (7,148,146
            )Cash
      flows from financing activities:Payment
      of accrued SecureAlert Series A Preferred Stock dividend
            
            
            -
            
            
            
            (20,877
            )Payments
      under related-party line of credit
            
            
            (436,219
            )
            
            
            (128,839
            )Payments
      on bank line of credit
            
            
            (188,534
            )
            
            
            (26,796
            )Payments
      on notes payable
            
            
            (78,644
            )
            
            
            -Cash
      acquired through acquisitions
            
            
            160,898
            
            
            
            -Proceeds
      from issuance of common stock
            
            
            -
            
            
            
            6,000,000Proceeds
      from the issuance of subsidiary stock
            
            
            1,575,000
            
            
            
            -Proceeds
      from the exercise of warrants
            
            
            2,452,380
            
            
            
            75,000Net
      cash provided by financing activities
            
            
            3,484,881
            
            
            
            5,898,488Net
      increase (decrease) in cash
            
            
            2,156,829
            
            
            
            (696,936
            )Cash,
      beginning of period
            
            
            5,556,275
            
            
            
            5,872,529Cash,
      end of period
            
            $
            7,713,104
            
            
            $
            5,175,593








See
accompanying notes to unaudited condensed consolidated financial
statements.


5





REMOTEMDX,
INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


(Unaudited)





Three
      Months Ended
              December
      31,2007
            
            
            2006Cash
      paid for interest and taxes:Cash
      paid for income taxes
            
            $
            -
            
            
            $
            -Cash
      paid for interest
            
            
            197,104
            
            
            
            196,834Supplemental
      schedule of non-cash investing and financing activities:Acquisition
      of Midwest Monitoring & Surveillance
            
            
            1,800,000
            
            
            
            -Acquisition
      of Court Programs
            
            
            1,147,500
            
            
            
            -Issuance
      of shares of common stock in exchange for shares of Series A preferred
      stock
            
            
            -
            
            
            
            1Issuance
      of shares of common stock in exchange for shares of Series B preferred
      stock
            
            
            1
            
            
            
            4Issuance
      of Preferred Series A for stock dividends
            
            
            -
            
            
            
            237,856Exercise
      of options for receivable
            
            
            -
            
            
            
            1,580,464SecureAlert
      Series A dividends
            
            
            167,035
            
            
            
            91,542Penalty
      shares issued for accrued liability
            
            
            -
            
            
            
            291,000








See
accompanying notes to unaudited condensed consolidated financial
statements.







































































6


REMOTEMDX,
INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)







(1)           BASIS OF
PRESENTATION




The
accompanying condensed consolidated financial statements of RemoteMDx, Inc. and
subsidiaries (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 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 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, 2007. The results of operations for the three months
ended December 31, 2007 are not necessarily indicative of the results that may
be expected for the fiscal year ending September 30, 2008.




Going
Concern


The
Company has a history of recurring net losses, negative cash flows from
operating activities, a working capital deficit, and an accumulated deficit.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.  In order for the
Company to remove substantial doubt about its ability to continue as a going
concern, the Company must generate positive cash flows from operations and
obtain the necessary funding to meet its projected capital investment
requirements.





Management’s
plans with respect to this uncertainty include raising additional capital from
the exercise of options, sale of Volu-Sol Reagents common stock, and expanding
its market for its tracking products.  There can be no assurance that
revenues will increase rapidly enough to pay back any operating losses and pay
back debts.  Likewise, there can be no assurance that the Company will
be successful in raising additional capital from the sale of equity or debt
securities.  If the Company is unable to increase revenues or obtain
additional financing, it will be unable to continue the development of its
products and may have to cease operations.





Principles
of Consolidation


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





Stock-Based
Compensation


Effective
October 1, 2006, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 123R, using the modified prospective method. SFAS 123R requires the
recognition of the cost of employee services received in exchange for an award
of equity instruments in the financial statements and is measured based on the
grant date fair value of the award. SFAS 123R also requires the stock option
compensation expense to be recognized over the period during which an employee
is required to provide service in exchange for the award (the vesting period).
Prior to our adopting SFAS 123R, the Company accounted for its stock-based
compensation plans under Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25, generally
no compensation expense is recorded when the terms of the award are fixed and
the exercise price of the employee stock option equals or exceeds the fair value
of the underlying stock on the date of grant. The Company adopted the
disclosure-only provision of SFAS No. 123,"Accounting for Stock-Based
Compensation" ("SFAS 123").





For the
three months ended December 31, 2007, no stock options were granted to
employees.  The Company granted 150,000 stock options to employees
during the three months ended December 31, 2006.  The weighted average
fair value of stock options at the date of grant during the three months ended
December 31, 2007 and 2006 was $0 and $0.69, respectively.





The
expected life of stock options represents the period of time that the stock
options granted are expected to be outstanding based on historical exercise
trends. The expected volatility is based on the historical price volatility of
common stock. The risk-free interest rate represents the U.S. Treasury bill rate
for the expected life of the related stock options. The dividend yield
represents the Company’s anticipated cash dividend over the expected life of the
stock options.





7


The
following are the weighted-average assumptions used for options granted during
the three months ended December 31, 2007 and 2006, respectively:





December 31, 2007
            December 31, 2006Risk
      free interest rate
            -
            4.69%Expected
      life
            -
            5 YearsDividend
      yield
            -
            n/aVolatility
            -
            145%








A summary
of employee stock option activity for the three months ended December 31, 2007,
is presented below:





WeightedWeighted
            
            AverageShares
            
            
            Average
            
            Remaining
            
            AggregateUnder
            
            
            Exercise
            
            Contractual
            
            IntrinsicOption
            
            
            Price
            
            Life
            
            ValueOutstanding
      at September 30, 2007
            
            
            3,295,000
            
            
            $
            0.64Granted
            
            
            -
            
            
            
            -Exercised
            
            
            (950,000
            )
            
            
            0.63Forfeited
            
            
            -
            
            
            
            -Expired
            
            
            -
            
            
            
            -Outstanding
      at December 31, 2007
            
            
            2,345,000
            
            
            $
            0.65
            
            3.80
      Years
            
            
            6,714,500Exercisable
      at December 31, 2007
            
            
            190,000
            
            
            $
            1.04
            
            3.91
      Years
            
            
            469,749





A summary
of the status of the Company's non-vested stock options as of and for the three
months ended December 31, 2007, is presented below:





WeightedAverageNon-Vested
            
            
            Grant
      DateOptions
            
            
            Fair
      ValueNon-vested
      at September 30, 2007
            
            
            2,155,000
            
            
            $
            0.61Granted
            
            
            -
            
            
            
            -Vested
            
            
            -
            
            
            
            -Forfeited
            
            
            -
            
            
            
            -Non-vested
      at December 31, 2007
            
            
            2,155,000
            
            
            $
            0.61


As of
December 31, 2007, there was approximately $1,267,997 of unrecognized
compensation cost related to stock options that will be recognized over
approximately the next two years.





Impairment
of Long-Lived Assets


The
Company reviews its long-lived assets 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.  If the carrying amount
of an asset exceeds its estimated future cash flows, an impairment charge is
recognized for the amount by which the carrying amount exceeds the estimated
fair value of the asset.  Impairment of long-lived assets is assessed
at the lowest levels for which there are identifiable cash flows that are
independent of other groups of assets.  Assets to be disposed of are
reported at the lower of the carrying amount or fair value, less the estimated
costs to sell.





8


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 shares issuable upon conversion of preferred stock. As of
December 31, 2007 and 2006, there were approximately 16,184,404 and 46,882,148
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.  The common share equivalents outstanding at December
31, 2007, consisted of 7,178 shares of common stock underlying Series A
Preferred Stock, 113,783 shares of common stock underlying Series B Preferred
Stock, and 16,063,443 shares underlying options and warrants. Of the 16,063,443
shares underlying options and warrants, 11,307,030 shares underlie options and
warrants which have vested and 4,756,413 shares underlie options and warrants
which have not yet vested.





Revenue
Recognition


The
Company derives its revenue primarily from the sale and monitoring of offender
tracking device systems and reagent stains.





The sale
of offender tracking device systems may include the tracking device, such as the
TrackerPAL device, and/or the related monitoring service.  If the sale
includes the device only, revenue from the sale is recognized
immediately.  Revenue from the monitoring service contracts is
recognized monthly as earned in accordance with the monitoring service
contract.  If the sale includes both the sale of device and monitoring
service, the revenue from the sale of device is recognized immediately and the
revenue from the monitoring service contract is recognized in the month the
service is provided.  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.





The sale
of reagent stains is recognized when an agreement with the buyer exists, the
price is fixed or determinable, the product has been shipped, and collection is
reasonably assured.




(2)
            INVENTORIES




Substantially
all items included in inventory are finished goods and consisted of the
following as of December 31, 2007:




Reagent
      stains, net of reserve for obsolescence of $61,966
            
            $
            47,059Total
            
            $
            47,059





(3)
            PROPERTY AND
      EQUIPMENT





Property
and equipment at December 31, 2007, was as follows:





Property
      and equipment
            
            $
            3,731,391Less:  accumulated
      depreciation
            
            
            (1,680,958
            )Total
            
            $
            2,050,433








9


During
the three months ended December 31, 2007, the Company purchased $43,313 of
property and equipment.Depreciation expense for
the three months ended December 31, 2007 and 2006 was $144,410 and $99,186,
respectively.





(4)           MONITORING
EQUIPMENT





Monitoring
equipment at December 31, 2007, was as follows:





Monitoring
      equipment
            
            $
            4,762,146Less:  accumulated
      depreciation
            
            
            (2,642,348
            )Total
            
            $
            2,119,798





The
Company began leasing monitoring equipment to agencies for offender tracking in
April 2006 under the terms of operating leases.  During the three
months ended December 31, 2007, the Company had sold or leased 13,415 electronic
monitoring devices.  The monitoring equipment is depreciated on the
straight-line method over the estimated useful lives of the related assets of
three years.  This cost for billable devices is included in cost of
goods sold.  Depreciation expense in connection with monitoring
equipment for the three months ended December 31, 2007 and 2006 was $296,755 and
$372,490, respectively.




(5)           GOODWILL AND INTANGIBLE
ASSETS




Midwest Monitoring &
Surveillance


Effective
December 1, 2007, the Company purchased 51% ownership, including voting
interest, of Midwest Monitoring & Surveillance (“Midwest”) for $1,800,000 in
notes payable and 438,000 shares of the Company’s common
stock.  Midwest provides electronic monitoring for individuals on
parole.  The primary reason for the acquisition of Midwest was the
expansion of Company’s technology and name recognition throughout the midwest,
central and eastern United States.  The total consideration given to
purchase Midwest was $4,382,643 delineated a follows:  cash of
$1,800,000, shares of common stock of $1,752,000 (438,000 shares valued at $4.00
per share), transaction costs of $31,497, and long-term liabilities assumed of
$799,146.  The shares were valued based upon the stock’s trading price
on the OTC Bulletin Board at the time the transaction was
negotiated.





Subsequent
to December 31, 2007, the Company paid off the $1,800,000 note payable and
issued 438,000 shares of common stock to complete the acquisition of
Midwest.





Court
Programs


Effective
December 1, 2007, the Company purchased 51% ownership, including voting
interest, of Court Programs, Inc., a Mississippi corporation, Court Programs of
Northern Florida, Inc., a Florida corporation, and Court Programs of Florida,
Inc., a Florida corporation (collectively, “Court Programs”) for $300,000 in
note payable and 212,000 shares of the Company’s common stock.  Court
Programs is a distributor of electronic monitoring devices to courts providing a
solution to monitor individuals on parole.  The primary reasons to
acquire Court Programs are to expand the Company’s technology and name
recognition throughout the eastern United States.  The total
consideration given to purchase Court Programs was $1,433,184 delineated a
follows:  cash of $300,000, shares of common stock of $848,000
(212,000 shares valued at $4.00 per share), transaction costs of $45,324, and
long-term liabilities assumed of $239,860.  The shares were valued
based upon the stock’s trading price on the OTC Bulletin Board at the time the
transaction was negotiated.





Subsequent
to December 31, 2007, the Company paid off the $300,000 note payable and issued
212,000 shares of common stock to complete the acquisition of Court
Programs.





In
connection with the acquisitions of Midwest and Court Programs, the Company
recorded goodwill and intangible assets.  The table below shows the
allocation of the goodwill and intangibles for each company:








10





Goodwill
      and intangibles assetsGoodwillMidwest
            
            $
            78,585Court
      Programs
            
            
            587,386Intangible
      assetsMidwest
            
            
            1,699,275Court
      Programs
            
            
            624,508Total
      goodwill and intangible assets
            
            $
            2,989,754





As of the
date of this report, the Company had not yet completed the purchase price
allocation related to the acquisition of Midwest and Court
Programs.  However, the Company has identified the following
categories of intangible assets that pertain to the
acquisitions:  trade name, non-compete agreements, backlog, customer
relationships and goodwill.





Supplemental
Pro Forma Results from Operations


The
following table shows the pro forma results from operations for the three months
ended December 31, 2007 as though the Midwest and Court Programs acquisitions
had been completed as of October 1, 2007:





Net
      sales
            
            $
            4,523,484Cost
      of goods sold
            
            
            2,674,663Gross
      profit
            
            
            1,848,821Operating
      expensesResearch
      and development expenses
            
            
            1,040,447Selling,
      general and administrative expenses
            
            
            5,379,141Loss
      from operations
            
            
            (4,570,767
            )Gain
      on sale of intellectual property
            
            
            2,400,000Other
      income (expense):
            
            
            (182,294
            )Loss
      before income taxes
            
            
            (2,353,061
            )Income
      tax benefit
            
            
            -Net
      loss
            
            
            (2,353,061
            )Dividends
      on Series A preferred stock
            
            
            (167,137
            )Net
      loss attributable to common shareholders
            
            $
            (2,520,198
            )Net
      loss per common share – basic and diluted
            
            $
            (0.02
            )Weighted
      average common shares outstanding – basic and diluted
            
            
            130,267,000





(6)         BANK LINE OF
CREDIT




As of
December 31, 2007, the Company’s outstanding balance under a line of credit with
Citizen National Bank was $3,670,451. The interest rate is 7.50% and the line of
credit matures on March 1, 2008. The line of credit is secured by letters of
credit for a total of $4 million and SecureAlert’s assets excluding TrackerPAL
products. This note can be expanded up to $10 million under certain terms and
conditions.  The letters of credit were provided as collateral by four
entities.  The entities received a total of 400,000 shares of the
Company’s common stock and were reimbursed $40,000 in cash for expenses related
to establishing the letters of credit in the year ended September 30,
2006.




In
addition, the Company will pay 11% annual interest rate, paid monthly, on the
line of credit to the entities that provided and arranged for the letters of
credit.





11


(7)          ACCRUED
LIABILITIES





Accrued
liabilities consisted of the following at December 31, 2007:





Accrued
      payroll, taxes and employee benefits
            
            $
            243,581Accrued
      consulting costs
            
            
            126,500Accrued
      cellular costs
            
            
            113,935Accrued
      interest
            
            
            83,420Accrued
      engineering costs
            
            
            68,460Accrued
      bonuses and director fees
            
            
            55,000Accrued
      rental expenses
            
            
            55,000Accrued
      monitoring center costs
            
            
            32,170Accrued
      professional expenses
            
            
            22,377Accrued
      commissions
            
            
            15,000Other
      accrued expenses
            
            
            19,691Total
            
            $
            835,134





(8)           NOTES
PAYABLE





Notes
payable at December 31, 2007 consisted of the following:





Unsecured
      notes payable to former SecureAlert shareholders, with interest at 5%,
      payable in installments of $80,000 per month until paid in
      full.  These notes are currently in default, although these
      notes are subject to an offset provision which has never been provided to
      the Company.
            
            $
            169,676Notes
      payable due to three individuals for the acquisition of
      Midwest.  The note is due January 20,
      2008.  Subsequent to December 31, 2007, the Company has paid off
      these notes.
            
            $
            1,800,000Note
      payable due to an individual for the acquisition of Court
      Programs.  The note is due January 20,
      2008.  Subsequent to December 31, 2007, the Company has paid off
      this note.
            
            $
            1,147,500Unsecured
      revolving line of credit with a bank, with interest at
    8.85%.
            
            $
            37,716Note
      payable due to the Small Business Association (“SBA”).  Note
      bears interest at 4.17% and matures on April 6, 2037
            
            $
            233,081Unsecured
      revolving line of credit with a bank, with interest at
    14.24%.
            
            $
            43,010Automobile
      loans with several financial institutions secured by the
      vehicles.  Interest rates range between 4.65% and 15.96%. These
      notes become due between November 2008 and November 2011.
            
            $
            114,272Notes
      payable for monitoring equipment.  The notes bear interest at
      10% and mature December 2008 and January 2009.  The notes are
      secured by the monitoring equipment.
            
            $
            215,928Notes
      payable with financial institution bearing interest at
      9%.  Notes mature in June 2011 and June 2016.  The
      notes are secured by the property.
            
            $
            305,845Notes
      payable to three shareholders of Midwest.  Notes bear interest
      between 5% and 10% maturing on February 2013.
            
            $
            104,523Total
      debt obligations
            
            $
            4,171,551Less:  Current
      maturities
            
            
            3,542,033Long-term
      debt
            
            $
            629,518









12




(9)          RELATED-PARTY LINE OF CREDIT
AND NOTE




As of
December 31, 2007, the Company owed $8,053 to ADP Management, an entity owned
and controlled by two of the Company’s officers and directors, under a line of
credit agreement. Outstanding amounts on the line of credit accrue interest at
11.0% and are due on August 31, 2009.  During the three months ended
December 31, 2007, the net decrease in the related party line of credit was
$231,710.  The net decrease consisted of net cash repayments during
the three months ended December 31, 2007, of $436,219 and net increases of
$204,509 related to a monthly management fee owed to ADP Management, and
expenses incurred by ADP Management that are reimbursable by the
Company.  Mr. Derrick’s and Mr. Dalton’s respective salaries are paid
to ADP Management which in turn pays Messrs. Derrick and Dalton.  If
the Company is unable to pay the management fee and the reimbursable expenses in
cash, the related party line of credit is increased for the amount owed to ADP
Management.





(10)        MINORITY
INTEREST





Volu-Sol
Reagents


In
January 2007, Messrs. Derrick and Dalton exercised their previously granted
right (this right was granted in February 2006) to purchase from the Company
2,500,000 shares of Volu-Sol Reagents common stock for cash proceeds of $400,000
or $0.16 per share.  Prior to the sale, the Company owned 100% of
Volu-Sol Reagents common stock.  The sale decreased its ownership to
70%.  During the year ended September 30, 2007, Volu-Sol Reagents
negotiated a non-exclusive license agreement with the
Company.  Additionally, the Company issued 3,375,000 shares of common
stock, with a three year anti-dilution provision, for net cash proceeds of
$1,150,000 or $0.34 per share to various investors.  These
transactions decreased the Company’s ownership of Volu-Sol Reagents to
50%.





During
the three months ended December 31, 2007, the Company issued 3,937,500 shares of
Volu-Sol Reagents common stock for cash proceeds of $1,575,000.  In
addition, the Company issued 875,000 shares of Volu-Sol Reagents common stock
for services.  As of December 31, 2007, Volu-Sol Reagents had a total
of 16,520,833 shares outstanding.  The Company has voting control for
50.82% of the outstanding shares of Volu-Sol Reagents; and has therefore
included Volu-Sol Reagents in the consolidation of the financial
statements.





Subsequent
to December 31, 2007, the Company sold 3,000,000 shares of Volu-Sol Reagents for
$2,400,000 in cash or $0.80 per share.





Midwest


Effective
December 1, 2007, the Company acquired 51% ownership of Midwest for $1,800,000
in cash and 438,000 shares of the Company’s common stock.





Court
Programs


Effective
December 1, 2007, the Company acquired 51% ownership of Court Programs for
$300,000 in cash and 212,000 shares of the Company’s common stock.





The
schedule below shows the allocation of the minority interest among the
entities:





Minority
      InterestVolu-Sol
      Reagents
            
            $
            2,789,945Midwest
            
            
            58,321Court
      Programs
            
            
            (83,215
            )Total
            
            $
            2,765,051





(11)        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 three months ended December 31, 2007, no shares of Series A
Preferred Stock were converted into common stock.  As of December 31,
2007, there were 19 shares of Series A Preferred Stock outstanding, which
represent 7,178 common stock equivalents at a conversion rate of 370 for 1.
Subsequent to December 31, 2007, and as of the date of this Report, no
additional shares of Series A Preferred Stock had been converted into shares of
common stock.




13


The
holders of the Series A Preferred Stock are entitled to dividends at the rate of
10 percent per year on the stated value of the Series A Preferred Stock (or $200
per share), payable in cash or in additional shares of Series A Preferred Stock
at the discretion of the board of directors. Dividends are fully cumulative and
accrue from the date of original issuance. During the three months ended
December 31, 2007 and 2006, the Company recorded $102 and $50,440, 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 December 31, 2007, the Company had
not exercised its option to redeem shares of Series A Preferred
Stock.




Series
B Convertible Preferred Stock




During
the three months ended December 31, 2007, a total of 2,000 shares of Series B
Convertible Preferred Stock were converted into 15,000 shares of common
stock.  As of December 31, 2006, there were 10,999 shares of Series B
Preferred Stock outstanding convertible into approximately 113,783 common
shares.  Subsequent to December 31, 2007, and as of the date of this
Report, no additional shares of Series B Convertible Preferred Stock had been
converted into shares of common stock.




SecureAlert,
Inc. Preferred Stock




As of
December 31, 2007, there were 3,590,000 shares of SecureAlert Series A Preferred
Stock outstanding.  The holders of shares of Series A Preferred Stock
are entitled to receive quarterly dividends out of any of SecureAlert’s assets
legally available therefore, prior and in preference to any declaration or
payment of any dividend on the Common Stock of SecureAlert, at the rate of $1.54
per day times the number of SecureAlert’s parolee contracts calculated in days
during the quarter. For example, if there were an average of 10,000 parolee
contracts outstanding during the quarter, the total dividend would be $1,386,000
($1.54 X 90 days X 10,000 contracts) or $.386 per share of Series A Preferred
Stock. In no case will a dividend be paid if the gross revenue per contract per
day to SecureAlert averages less than $4.50. Dividends will be paid in cash to
the holders of record of shares of Series A Preferred Stock as they appear on
the books and records of SecureAlert on such record dates not less than ten (10)
days nor more than sixty (60) days preceding the payment dates thereof, as may
be fixed by the Board of Directors of SecureAlert. As a group, all SecureAlert
Series A Preferred Stock may be converted at the holders’ option at any time
into an aggregate of 20% ownership of the common shares of SecureAlert, Inc.
During the three months ended December 31, 2007, no shares of SecureAlert Series
A Preferred Stock had been converted into shares of SecureAlert common
stock.




During
the three months ended December 31, 2007, the Company entered into a stock
redemption agreement with SecureAlert Series A Preferred Stock shareholders to
redeem all outstanding shares for $6,863,695 in cash and 3,000,000 shares of
RemoteMDx common stock.  The stock redemption agreement will in effect
amend the Designation of Rights and Preferences of the SecureAlert Series A
Convertible Redeemable Non-Voting Preferred Stock. The redemption price will
eliminate all future dividends due to SecureAlert Series A Preferred Stock
shareholders.




(12)        COMMON
STOCK




During
the three months ended December 31, 2007, the Company issued 3,175,206 shares of
common stock as follows:




·
            130,000
      shares were issued for services performed for a value of
      $621,085.




·
            15,000
      shares were issued from Series B Preferred Stock
    conversions.




·
            2,854,453
      shares were issued from the exercise of
  warrants.




·
            175,753
      shares were issued for dividends on SecureAlert Series A Preferred
      stock.




14




Common
Stock Options and Warrants




As of
December 31, 2007, 11,307,030 of the 16,063,443 outstanding options and warrants
were vested with a weighted average exercise price of $1.68 per
share.  During the three months ended December 31, 2007, 50,000
warrants were issued with an exercise price of $4.05 per share and vested
immediately.  During the three months ended December 31, 2007, various
warrant holders exercised 2,854,453 warrants for cash proceeds of
$2,044,881.




(13)        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 labs. The electronic monitoring
segment comprising the SecureAlert, Midwest, and Court Programs subsidiaries is
engaged in the business of developing, distributing and monitoring offender
tracking devices. 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 three months ended December 31, 2007 and
2006:




Three
      Months Ended
                December
      31,2007
              
              
              2006Sales
      to external customers:Electronic
      monitoring
              
              $
              3,435,953
              
              
              $
              835,383Reagents
              
              
              169,592
              
              
              
              152,854$
              3,605,545
              
              
              $
              988,237




Net
      (loss) income from operations:Electronic
      monitoring
              
              $
              (2,144,304
              )
              
              $
              (4,878,089
              )Reagents
              
              
              (284,246
              )
              
              
              (66,722
              )Other
      (unallocated)
              
              
              (2,157,694
              )
              
              
              (2,688,930
              )$
              (4,586,244
              )
              
              $
              (7,633,741
              )
  Identifiable
      assets:Electronic
      monitoring
              
              $
              13,963,198Reagents
              
              
              2,494,825Other
      (unallocated)
              
              
              5,530,086Total
      assets
              
              $
              21,988,109




(14)        SUBSEQUENT
EVENTS




Subsequent
to December 31, 2007, the Company entered into the following
transactions:





1)
            Issued
      212,000 shares of common stock and paid cash of $300,000 as payment in
      full on the note payable in connection with the acquisition of Court
      Programs.


2)
            Issued
      438,000 shares of common stock and paid cash of $1,800,000 as payment in
      full on the $1,800,000 notes payable in connection with the acquisition of
      Midwest.


3)
            Issued
      345,755 shares of common stock for services
  rendered.


4)
            Issued
      10,000 shares upon the exercise of options for cash proceeds of
      $6,000.


5)
            The
      Company sold 3,000,000 shares of Volu-Sol Reagents for $2,400,000 in cash
      to an unrelated entity.





15


(15)        COMMITMENTS
AND CONTINGENCIES




Onyx Consulting Group, LLC
v. RemoteMDx, Inc.  The dispute arises out of an agreement
between Onyx and the Company pursuant to which Onyx agreed to provide investor
relations related services to the Company.  On October 9, 2007, Onyx
served its Statement of Claim, in which it asserted a claim for breach of
contract, seeking as damages the value of 750,000 shares of restricted RemoteMDx
common stock it claims it is due under the agreement.  An arbitrator
has been appointed but discovery has not yet commenced.  The
arbitration hearing is scheduled for April 2008.  The Company has
asserted counterclaims against Onyx for breach of contract and
rescission.  The Company intends to vigorously defend itself against
Onyx’s claim and to prosecute its counterclaims against
Onyx.   The Company has not accrued any potential loss as the
probability of incurring such losses is deemed remote.





Strategic Growth
International, Inc. v. RemoteMDx, Inc., This action was filed in response
to an action previously filed by the Company against SGI in Utah.  The
action arises out of a contract between SGI and the Company for certain investor
relations related services to be performed by SGI.  The SGI
Defendants’ Complaint alleges a single claim for Breach of Contract and seeks
recovery of: 1) the balance they claim remains due under the contract
(approximately $80,000); 2) the value of options to purchase 500,000 shares of
restricted RemoteMDx common stock at $0.50 per share; and 3) the value of one
million shares of restricted RemoteMDx common stock.  In its Answer
and Counterclaims, the Company denied the SGI Defendants’ allegations and
asserted counterclaims for:  (1) Breach of Contract; (2) Rescission;
and (3) Declaratory Judgment.  On October 29, 2007, with the approval
of the court, the Company amended its Answer and Counterclaims to assert an
additional claim against SGI for Fraudulent inducement. The Company seeks
rescission of its contract with SGI and the return of amounts the Company paid
SGI under the contract.  Discovery is ongoing and a final pretrial
conference is set for March 2008.  The Company intends to vigorously
defend itself against the SGI Defendants’ claim and to prosecute its
counterclaims against the SGI Defendants.  The Company has not accrued
any potential loss as the probability of incurring such losses is deemed
remote.




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 (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, 2007.  The Company disclaims any
obligation or intention to update any forward-looking statement.





General


RemoteMDx,
Inc. (“RemoteMDx” or the “Company”) markets, monitors and sells the TrackerPAL
device.  The TrackerPAL is used to monitor convicted offenders that
are on probation or parole, in the criminal justice system.  The
TrackerPAL device utilizes GPS and cellular technologies in conjunction with a
monitoring center that is staffed 365 days a year.   The Company
believes that its technologies and services will benefit the law enforcement
officials and allow them to respond immediately to a problem involving one of
their offenders.  The parole and probation market consists of
approximately 4.9 million adults in the criminal justice system at any given
time. The TrackerPAL is targeted to meet the needs of this market.




Our
Strategy




Our goal
is to establish the Company as a significant marketer and distributor of leading
technology and services we have developed for the parolee and probation
market.







16


Critical
Accounting Policies





In Note 1
to the audited financial statements for the fiscal year ended September 30,
2007, included in the Company’s Annual Report on Form 10-KSB, the Company
discusses those accounting policies that are considered to be significant in
determining the results of operations and its financial position. The Company
believes that the accounting principles utilized by it conform to generally
accepted accounting principles in the United States of America.





The
preparation of consolidated financial statements requires management to make
significant estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. By their nature, these judgments are subject
to an inherent degree of uncertainty. On an on-going basis, 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.





With
respect to inventory reserves, revenue recognition and allowance for doubtful
accounts, 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, among other things:





Current
inventory quantities on hand;





·
            Product
      acceptance in the marketplace;





·
            Customer
      demand;





·
            Historical
      sales;





·
            Forecast
      sales;





·
            Product
      obsolescence; and





·
            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 selling or leasing the TrackerPAL
device and providing monitoring services in connection with the
device.  In addition, the Company receives revenue from the sale of
medical diagnostic stains.





The sale
of offender tracking device systems may include the tracking device, such as the
TrackerPAL device, and/or the related monitoring service.  If the sale
includes the device only, revenue from the sale is recognized
immediately.  If the sale includes the monitoring service, revenue for
the service is recognized ratably over the life of the monitoring service
contract.  Revenue from the monitoring service contract is recognized
monthly as earned in accordance with the monitoring service
contract.  If the sale includes both the sale of device and monitoring
service, the revenue from the sale of device is recognized immediately and the
revenue from the monitoring service contract is recognized in the month the
service is provided.  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.





17


The sale
of reagent stains is recognized when an agreement with the buyer exists, the
price is fixed or determinable, the product has been shipped, and collection is
reasonably assured.





Impairment
of Long-lived Assets





The
Company reviews its long-lived assets 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.  If the carrying amount
of an asset exceeds its estimated future cash flows, an impairment charge is
recognized for the amount by which the carrying amount exceeds the estimated
fair value of the asset.  Impairment of long-lived assets is assessed
at the lowest levels for which there are identifiable cash flows that are
independent of other groups of assets.  Assets to be disposed of are
reported at the lower of the carrying amount or fair value, less the estimated
costs to sell.  In addition, depreciation of the asset
ceases.  During the three months ended December 31, 2007 and 2006, no
impairment of long-lived assets was recorded.





Accounting
for Stock-based Compensation





Effective
October 1, 2006, the Company adopted Statement of Financial Accounting Standards
(“SFAS”) No. 123R (“SFAS 123R”), using the modified prospective method. SFAS
123R requires the recognition of the cost of employee services received in
exchange for an award of equity instruments in the financial statements and is
measured based on the grant date fair value of the award. SFAS 123R also
requires the stock option compensation expense to be recognized over the period
during which an employee is required to provide service in exchange for the
award (the vesting period). Prior to adopting SFAS 123R, the Company accounted
for its stock-based compensation plans under Accounting Principles Board Opinion
("APB") No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Under APB
25, generally no compensation expense is recorded when the terms of the award
are fixed and the exercise price of the employee stock option equals or exceeds
the fair value of the underlying stock on the date of grant. The Company adopted
the disclosure-only provision of SFAS No. 123,"Accounting for Stock-Based
Compensation" ("SFAS 123").





For the
three months ended December 31, 2007, no stock options were granted to
employees.  The Company granted 150,000 stock options to employees
during the three months ended December 31, 2006.  The weighted average
fair value of stock options at the date of grant during the three months ended
December 31, 2007 and 2006 was $0 and $0.69, respectively.





The
expected life of stock options represents the period of time that the stock
options granted are expected to be outstanding based on historical exercise
trends. The expected volatility is based on the historical price volatility of
common stock. The risk-free interest rate represents the U.S. Treasury bill rate
for the expected life of the related stock options. The dividend yield
represents the Company’s anticipated cash dividend over the expected life of the
stock options.





The
following are the weighted-average assumptions used for options granted during
the three months ended December 31, 2007 and 2006, respectively:





December 31, 2007
            
            December 31, 2006Risk
      free interest rate
            -
            
            4.69%Expected
      life
            -
            
            5
      YearsDividend
      yield
            -
            
            n/aVolatility
            -
            
            145%








18


A summary
of employee stock option activity for the three months ended December 31, 2007,
is presented below:


WeightedWeighted
            
            AverageShares
            
            
            Average
            
            Remaining
            
            AggregateUnder
            
            
            Exercise
            
            Contractual
            
            IntrinsicOption
            
            
            Price
            
            Life
            
            ValueOutstanding
      at September 30, 2007
            
            
            3,295,000
            
            
            $
            0.64Granted
            
            
            -
            
            
            
            -Exercised
            
            
            (950,000
            )
            
            
            0.63Forfeited
            
            
            -
            
            
            
            -Expired
            
            
            -
            
            
            
            -Outstanding
      at December 31, 2007
            
            
            2,345,000
            
            
            $
            0.65
            
            3.80
      Years
            
            
            6,714,500Exercisable
      at December 31, 2007
            
            
            190,000
            
            
            $
            1.04
            
            3.91
      Years
            
            
            469,749





A summary
of the status of the Company's non-vested stock options as of and for the three
months ended December 31, 2007, is presented below:





WeightedAverageNon-Vested
            
            
            Grant
      DateOptions
            
            
            Fair
      ValueNon-vested
      at September 30, 2007
            
            
            2,155,000
            
            
            $
            0.61Granted
            
            
            -
            
            
            
            -Vested
            
            
            -
            
            
            
            -Forfeited
            
            
            -
            
            
            
            -Non-vested
      at December 31, 2007
            
            
            2,155,000
            
            
            $
            0.61





As of
December 31, 2007, there was approximately $1,267,997 of unrecognized
compensation cost related to stock options that will be recognized over
approximately the next two years.





Three
months ended December 31, 2007, compared to three months ended December 31,
2006





Net
Sales




For the
three months ended December 31, 2007, the Company had net sales of $3,605,545
compared to $988,237 for the three months ended December 31, 2006, an increase
of $2,617,308. The increase in net sales resulted primarily from the sale and
monitoring of offender tracking devices.




SecureAlert
had net sales of $2,875,057 during the three months ended December 31, 2007,
compared to net sales of $835,383 for the three months ended December 31, 2006.
These sales in the three months ended December 31, 2007 consisted of $1,000,000
from the sale of offender tracking devices, $1,855,149 from the monitoring of
offender tracking devices, and $19,908 from home and personal security
systems.  Electronic Monitoring Services and QuestGuard were
significant customers of SecureAlert, accounting for 35% and 29%, respectively,
of SecureAlert sales for the three months ended December 31, 2007.  No
other SecureAlert customer accounted for 10% or more of its sales.




Reagents
had revenues for the three months ended December 31, 2007, of $169,592, compared
to $152,854 during the three months ended December 31, 2006. The Company
anticipates that Reagents' sales will decrease in the future as a percentage of
total sales.  The following are significant customers of Reagents
accounting for more than 10% of Reagents’ sales during the
period:  Thermo Fisher Scientific (previously known as Fisher
Scientific) accounted for 25%, Cardinal Health Medical accounted for 14%, and
Esbe Scientific accounted for 11%.  No other Reagents customer
accounted for 10% or more of its sales.





19


On
December 1, 2007, the Company acquired Midwest. For the month ended December 31,
2007, Midwest had net sales of $351,583.  These sales consisted of
$311,631 from the monitoring of offender tracking devices, $36,046 from the sale
of devices, and $3,906 from other miscellaneous sales.





On
December 1, 2007, the Company acquired Court Programs. For the month ended
December 31, 2007, Court Programs had net sales of $209,313 all from the
monitoring of offender tracking devices and parolee services.





Cost
of Goods Sold





For the
three months ended December 31, 2007, cost of goods sold was $2,184,100 compared
to $2,205,393 during the three months ended December 31, 2006, a decrease of
$21,293. SecureAlert's cost of goods sold totaled $1,758,351 or 61% of
SecureAlert's net sales during the three months ended December 31, 2007,
compared to $2,111,909 or 253% of SecureAlert’s net sales during the three
months ended December 31, 2006.  Cost of goods sold for the December
31, 2007 of $1,758,351 was comprised of the following:  device costs
of $670,149, commissions of $120,176, communication costs of $263,300, location
costs of $11,441, monitoring center costs of $456,318, amortization of $59,798,
personal emergency response costs of $3,626, and other TrackerPAL costs of
$173,543.  Cost of goods sold for the December 31, 2006 of $2,111,909
was comprised of the following:  device costs of $345,026,
communication costs of $894,847, monitoring center costs of $412,438,
amortization of $372,490, personal emergency response costs of $80,600, and
other TrackerPAL costs of $6,508.  During the December 31, 2007
quarter, communication costs of $739,500 and amortization costs of $337,209 for
non-billable units were reported under selling, general and administrative
expenses. Midwest’s cost of goods sold totaled $173,915 for the one month ended
December 31, 2007.  Court Programs cost of goods sold totaled $137,613
for the one month ended December 31, 2007.  Reagents' cost of goods
sold was $114,221 or 67% of Reagent's net sales during the three months ended
December 31, 2007, compared to $93,484 or 61% of Reagent's net sales for the
same period during the prior fiscal year. The increase as a percentage of net
sales was primarily due to an increase in material, shipping and labor
costs.





Research
and Development Expenses




During
the three months ended December 31, 2007 and 2006, research and development
expense was $1,040,447 and  $1,219,659, respectively, and consisted
primarily of expenses associated with the development of SecureAlert’s
TrackerPAL device and related services.




Selling,
General and Administrative Expenses




During
the three months ended December 31, 2007, selling, general and administrative
expenses were $4,967,242 compared to $5,196,926 during the three months ended
December 31, 2006.  The decrease of $229,684 relates primarily to a
decrease in the following expenses:  bad debt of $13,684, commissions
of $26,867, consulting of $770,998, investment relations and banking fees of
$154,282, lease of $13,898, legal and professional fees of $228,199, outside
services of $184,883, overhead allocation of $67,000, rent of $13,136, supplies
of $31,111, and other decreases in selling, general and administrative expenses
of $184,626.  Furthermore, the decrease of $229,684 in selling,
general and administrative expenses was offset by increases in the following
expenses: advertising of $32,224, amortization for non-billable devices of
$213,568, automobile expense of $22,749, board of director fees of $10,000,
communication cost services for non-billable devices of $438,832, depreciation
of $45,224, insurance of $25,064, payroll and taxes of $201,318, rent of
$27,271, repairs and maintenance of $11,948, telephone of $41,309, travel of
$359,942 and other increases in selling, general and administrative expenses of
$29,551.  The decrease in consulting of $770,998 relates primarily to
the issuance of warrants and shares of common stock issued consultants in the
three months ended December 31, 2006 for public relations and branding services
to increase the Company presence in the capital markets.




Interest
Income and Expense




During
the three months ended December 31, 2007, interest expense totaled $375,510
compared to $284,285 paid in the three months ended December 31, 2006. This
amount consists primarily of non-cash interest expense of approximately $178,406
related to unamortized financing costs associated with shares of common stock
issued for prepaid interest. The increase of $91,225 is due primarily from the
issuance of common stock to extend the Company’s related party line of
credit.




20




Liquidity
and Capital Resources




The
Company is presently unable to finance its operations solely from cash flows
from operating activities. During the three months ended December 31, 2007, the
Company financed its operations primarily from the sale and issuance of common
stock of the Company’s subsidiary Volu-Sol Reagents and the exercise of warrants
for the purchase of common stock of the Company for net proceeds of
$4,027,380.




As of
December 31, 2007, the Company had unrestricted cash of $7,713,104 and a working
capital of $3,707,769, compared to unrestricted cash of $5,556,275 and a working
capital of $2,596,985 at September 30, 2007.




During
the three months ended December 31, 2007, the Company's operating activities
used cash of $1,284,739, compared to $552,722 of cash provided during the three
months ended December 31, 2006.




The
Company used cash of $43,313 for investing activities during the three months
ended December 31, 2007.




The
Company's financing activities during the three months ended December 31, 2007,
provided cash of $3,484,881 compared to $5,898,488 during the three months ended
December 31, 2006. During the three months ended December 31, 2007, the Company
had net proceeds of $1,575,000 from the sale of equity securities through the
Company’s subsidiary Volu-Sol Reagents, $2,452,380 from the exercise of
warrants, and $160,898 of cash acquired through the purchase of Midwest and
Court Programs.  Cash was decreased by $188,534 in payments to the
bank line of credit, $436,219 in net payments on the related party line of
credit, $78,644 in payments on notes payable.





The
Company incurred a net loss of $2,352,383 through the three months ended
December 31, 2007. As of December 31, 2007, the Company had a net tangible
stockholders' equity of $942,737 and an accumulated deficit of
$135,101,671.  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,
2007, raise substantial doubt about the Company's ability to continue as a going
concern. The unaudited condensed consolidated financial statements included in
this report do not include any adjustments that might result from the outcome of
this uncertainty.  The Company’s plans with respect to this
uncertainty, is to focus on sales of the TrackerPAL product.  There
can be no assurance that revenues will increase rapidly enough to payback
operating losses and payback debts.  Likewise, there can be no
assurance that the debt holders will be willing to convert the debt obligations
to equity securities or that the Company will be successful in raising
additional capital from the sale of equity or debt securities.  If the
Company is unable to increase revenues or obtain additional financing, it will
be unable to continue the development of its products and may have to cease
operations.




Recent
Developments




Subsequent
to December 31, 2007, the Company entered into the following
transactions:





1)
            Issued
      212,000 shares of common stock and paid off the $300,000 note payable in
      connection with the acquisition of Court
  Programs.


2)
            Issued
      438,000 shares of common stock and paid off the $1,800,000 notes payable
      in connection with the acquisition of
Midwest.


3)
            Issued
      345,755 shares of common stock for services
  rendered.


4)
            Issued
      10,000 shares upon the exercise of options for cash proceeds of
      $6,000.


5)
            The
      Company sold 3,000,000 shares of Volu-Sol Reagents for $2,400,000 in cash
      to an unrelated entity.






Item
3.   Controls and Procedures




Evaluation of Disclosure Controls
and Procedures.  We maintain disclosure controls and procedures
designed to ensure that information required to be disclosed in our reports
filed under the Exchange Act, is recorded, processed, summarized, and reported
within the required time periods, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow for timely decisions regarding
disclosure.





As
required by Rule 13a-15(b) under the Exchange Act, the Chief Executive Officer
and Chief Financial Officer conducted an evaluation of the effectiveness of our
disclosure controls and procedures as of September 30, 2007.  In their
evaluation, the Chief Executive Officer and Chief Financial Officer identified
deficiencies that existed in the design or operation of our internal control
over financial reporting that we and our independent registered public
accounting firm considered to be “material weaknesses.”  A material
weakness is a significant deficiency or combination of significant deficiencies
that results in more than a remote likelihood that a material misstatement of
the annual or interim financial information will not be prevented or
detected.





21


The
deficiencies in our internal control over financial reporting related to the
failure to properly disclose equity and debt transactions.  In
addition, there have been deficiencies in our inventory control process. The
deficiencies were detected in the evaluation process and the transactions have
been appropriately recorded and disclosed in this Form 10-QSB.  In
addition, we have not created a “Disclosure Controls Committee” to monitor and
follow up on our processes to assure disclosures are complete and accurate;
however, we intend to have such a committee in place by October 1,
2008.  We are in the process of improving our internal control over
financial reporting in an effort to resolve these deficiencies through improved
supervision and training of our accounting staff, but additional effort is
needed to fully remedy these deficiencies.  Our management, audit
committee, and directors will continue to work with our auditors and outside
advisors to ensure that our controls and procedures are adequate and
effective.





Based on
the matter identified above, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were not
effective.  These deficiencies have been disclosed to our Audit
Committee.





Changes in Internal
Controls.  There has been no change in our internal control
over financial reporting during the quarter ended December 31, 2007 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.  Since the most recent evaluation
date, there have been no significant changes in our internal control structure,
policies, and procedures or in other areas that could significantly affect our
internal control over financial reporting.





PART
II.  OTHER INFORMATION





Item
1.   Legal Proceedings





Onyx Consulting Group, LLC
v. RemoteMDx, Inc.  The dispute arises out of an agreement
between Onyx and the Company pursuant to which Onyx agreed to provide investor
relations related services to the Company.  On October 9, 2007, Onyx
served its Statement of Claim, in which it asserted a claim for breach of
contract, seeking as damages the value of 750,000 shares of restricted RemoteMDx
common stock it claims it is due under the agreement.  An arbitrator
has been appointed but discovery has not yet commenced.  The
arbitration hearing is scheduled for April 2008.  The Company has
asserted counterclaims against Onyx for breach of contract and
rescission.  The Company intends to vigorously defend itself against
Onyx’s claim and to prosecute its counterclaims against
Onyx.   The Company has not accrued any potential loss as the
probability of incurring such losses is deemed remote.





Strategic Growth
International, Inc. v. RemoteMDx, Inc., This action was filed in response
to an action previously filed by the Company against SGI in Utah.  The
action arises out of a contract between SGI and the Company for certain investor
relations related services to be performed by SGI.  The SGI Complaint
alleges a single claim for breach of contract and seeks recovery of: 1) the
balance SGI claims remains due under the contract (approximately $80,000); 2)
the value of options to purchase 500,000 shares of restricted common stock of
the Company at $0.50 per share; and 3) the value of one million shares of
restricted common stock of the Company.  In its Answer and
Counterclaims, the Company denied the SGI’s allegations and asserted
counterclaims for:  (1) breach of contract; (2) rescission; and (3)
declaratory judgment.  On October 29, 2007, with the approval of the
court, the Company amended its Answer and Counterclaims to assert an additional
claim against SGI for fraudulent inducement. The Company seeks rescission of its
contract with SGI and the return of amounts the Company paid SGI under the
contract.  Discovery is ongoing and a final pretrial conference is set
for March 2008.  The Company intends to vigorously defend itself
against SGI’s claims and to prosecute its counterclaims against
SGI.  The Company has not accrued any potential loss as the
probability of incurring such losses is deemed remote.





22


Item
2.   Unregistered Sales of Equity Securities and Use of
Proceeds


During
the three months ended December 31, 2007, the Company issued 3,175,206 shares of
common stock as follows:




·
            130,000
      shares were issued for services performed for a value of
      $621,085.




·
            15,000
      shares upon Series B Preferred Stock
  conversions.




·
            2,854,453
      shares upon the exercise of
warrants.




·
            175,753
      shares were issued for dividends on SecureAlert Series A Preferred
      stock.




In each
of these transactions the securities were issued without registration under the
Securities Act of 1933, as amended (the “Securities Act”), in reliance upon
exemptions from registration applicable to limited or non-public offers and
sales of securities afforded by Section 4(2) and Rule 506 of Regulation D under
the Securities Act.




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 as
      Exhibit on Form 10-KSB for the year ended September 30,
    2001)




3.01(2)
            Amendment
      to Articles of Incorporation Amending Rights and Preferences of Series A
      Preferred Stock (previously filed as Exhibit on Form 10-KSB for the year
      ended September 30, 2001)




3.01(3)
            Amendment
      to Articles of Incorporation Adopting Designation of Rights and
      Preferences of Series B Preferred Stock (previously filed as Exhibit on
      Form 10-QSB for the six months ended March 31,
  2002)




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)




3.01(5)
            Certificate
      of Amendment to the Designation of Rights and Preferences Related to
      Series C 8% Convertible Preferred Stock of RemoteMDx, Inc. (incorporated
      by reference to the Company’s Current Report on Form 8-K, filed with the
      Commission on March 24, 2006)




3.01(6)
            Articles
      of Amendment to Articles of Incorporation filed July 12, 2006 (previously
      filed as exhibits to the Company’s current report on Form 8-K filed July
      18, 2006, and incorporated herein by
reference).




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




3.03
            Articles
      of Amendment to the Fourth Amended and Restated Designation of Right and
      Preferences of Series A 10% Convertible Non-Voting Preferred Stock of
      RemoteMDx, Inc. (previously filed as Exhibit on Form 10-QSB for the nine
      months ended June 30, 2007, filed in August
  2007).




3.04
            Articles
      of Amendment to the Designation of Right and Preferences of Series A
      Convertible Redeemable Non-Voting Preferred Stock of SecureAlert, Inc.
      (previously filed as Exhibit on Form 10-QSB for the nine months ended June
      30, 2007, filed in August 2007).




23




4.01
            2006
      Equity Incentive Award Plan (previously filed in August 2006 the Form
      10-QSB for the nine months ended June 30,
2006)




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




10.02
            1997
      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).




10.03
            1997
      Transition Plan (incorporated by reference to the Company’s Registration
      Statement and Amendments thereto on Form 10-SB, effective December 1,
      1997).




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




10.05
            Loan
      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)




10.06
            Loan
      Agreement (as amended and extended) dated March 5, 2002 between ADP
      Management and the Company, effective December 31, 2001 (filed as an
      exhibit to the Company’s quarterly report on Form 10-QSB for the quarter
      ended December 31, 2001)




10.07
            Agreement
      with ADP Management, Derrick and Dalton (April 2003) (previously filed as
      Exhibit on Form 10-QSB for the six months ended March 31,
      2003)




10.08
            Security
      Agreement between Citizen National Bank and the Company (previously filed
      on Form 8-K in July 2006).




10.09
            Promissory
      Note between Citizen National Bank and the Company (previously filed on
      Form 8-K in July 2006).




10.10
            Common
      Stock Purchase Agreement dated as of August 4, 2006 (previously filed as
      an exhibit to the Company’s current report on Form 8-K filed August 7,
      2006 and incorporated herein by
reference).




10.11
            Change
      in Terms Agreement between Citizen National Bank and the Company
      (previously filed as Exhibit on Form 10-KSB for the year ended September
      30, 2006)




10.12
            Securities
      Purchase Agreement between the Company and VATAS Holding GmbH, a German
      limited liability company (previously filed on Form 8-K in November
      2006).




10.13
            Common
      Stock Purchase Warrant between the Company and VATAS Holding GmbH dated
      November 9, 2006 (previously filed as Exhibit on Form 10-QSB for the three
      months ended December 31, 2006, filed in February
  2007).




10.14
            Settlement
      Agreement and Mutual Release between the Company and Michael Sibbett and
      HGR Enterprises, LLC, dated as of February 1, 2007 (previously filed as
      Exhibit on Form 10-QSB for the three months ended December 31, 2006, filed
      in February 2007).




10.15
            Distributor
      Sales, Service and License Agreement between the Company and Seguridad
      Satelital Vehicular S.A. de C.V., dated as of February 5, 2007 (previously
      filed as Exhibit on Form 10-QSB for the three months ended December 31,
      2006, filed in February 2007).




24




10.16
            Distributor
      Agreement between the Company and QuestGuard, dated as May 31,
      2007.  Portions of this exhibit were redacted pursuant to a
      request for confidential treatment filed with the Securities and Exchange
      Commission (previously filed as Exhibit on Form 10-QSB for the nine months
      ended June 30, 2007, filed in August
2007).




10.17
            Stock
      Purchase Agreement between the Company and Midwest Monitoring &
      Surveillance, Inc., dated effective December 1, 2007 (previously filed as
      Exhibit on Form 10-KSB for the year ended September 30, 2007, filed in
      January 2008).




10.18
            Stock
      Purchase Agreement between the Company and Court Programs, Inc., Court
      Programs of Florida Inc., and Court Programs of Northern Florida, Inc.,
      dated effective December 1, 2007 (previously filed as Exhibit on Form
      10-KSB for the year ended September 30, 2007, filed in January
      2008).




14
            Code
      of Business Conduct and Ethics (previously filed as Exhibit on Form 10-KSB
      for the year ended September 30, 2007, filed in January
    2008).




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)














25


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:
      February 14, 2008
            By:
            /s/ David G.
      DerrickDavid
      G. Derrick,Chief
      Executive OfficerDate:
      February 14, 2008
            By:
            /s/ Michael G.
      ActonMichael
      G. Acton,Principal
      Accounting Officer

















































26