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, 2006

                                       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 Identification No.)
       incorporation or organization)

                           150 West Civic Center Drive
                                    Suite 400
                                Sandy, Utah 84070
                    (Address of principal executive offices)

                                 (801) 563-7171
                           (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 July 18, 2006,  the issuer had a total of  71,878,237  shares of common stock
issued and outstanding. The issuer also had a total of 17,650 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 6,530,500 shares,  268,332
shares of Series B Preferred Stock  outstanding,  convertible at any time at the
option of the holders  thereof  into  approximately  2,367,635  shares of common
stock, and 5,357,143 shares of Series C Preferred Stock outstanding, convertible
at any time at the option of the holders thereof into  approximately  16,071,429
shares of common  stock.  On August 4,  2006,  the  Company  sold an  additional
5,300,000  shares of Common  Stock in a  private  placement.  See Note 13 to the
Financial Statements.

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

Indicate by check mark whether the  Registrant is a shell company (as defined in
Rule 12b-2 of the exchange Act)
    Yes      X   No
---         ---

                                      -1-
<PAGE>

                                TABLE OF CONTENTS


                                                                           Page
                                                                            No.
                                                                           -----
PART I.  FINANCIAL INFORMATION

   Item 1.  Financial Statements

            Condensed Consolidated Balance Sheet as of June 30, 2006
            (Unaudited)........................................................3

            Condensed Consolidated Statements of Operations for
            the three and nine months ended June 30, 2006 and 2005
            (Unaudited)........................................................4

            Condensed Consolidated Statements of Cash Flows for
            the nine months ended June 30, 2006 and 2005 (Unaudited)...........5

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

   Item 2.  Management's Discussion and Analysis or Plan of Operation.........15

   Item 3.  Controls and Procedures...........................................21

PART II.  OTHER INFORMATION

   Item 2.  Unregistered Sales Equity Securities and Use of Proceeds..........22

   Item 5.  Other Information.................................................22

   Item 6.  Exhibits..........................................................23

   Signatures.................................................................25



                                      -2-
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements


                                 REMOTEMDX, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (Unaudited)
                                                                  June 30, 2006
                                                                  --------------
 Assets
 Current assets:
    Cash                                                          $   1,517,269
    Accounts receivable, net of allowance
     for doubtful accounts of $6,500                                    147,859
    Inventories                                                         122,667
    Prepaid inventory                                                   665,652
    Prepaid expenses                                                    230,035
                                                                  --------------
                 Total current assets                                 2,683,482
 Property and equipment, net of accumulated
  depreciation and amortization of $573,083                             652,942
 Other assets                                                            48,013
                                                                  --------------
                 Total assets                                     $   3,384,437
                                                                  ==============
 Liabilities and Stockholders' Deficit
 Current liabilities:
    Accounts payable                                              $   1,767,501
    Notes payable net of debt discount of $59 (note 4)                  173,587
    Related party line of credit and note, net
      of debt discount of $4,000 (note 7)                               266,643
    Accrued liabilities                                                 446,594
    Deferred revenue                                                     17,284
    Dividends payable                                                   406,894
    Convertible debentures (note 8)                                      17,947
    Redeemable SecureAlert Series A Preferred Stock
      (note 9)                                                          600,000
    Common stock subject to mandatory redemption                         96,000
                                                                  --------------
                             Total current liabilities                3,792,450
                                                                  --------------
                             Total liabilities                        3,792,450
                                                                  --------------
 SecureAlert Series A Preferred Stock
                                                                      2,990,000
 Stockholders' deficit:
    Preferred stock:
      Series A; 10% dividend, convertible,
       non-voting; $0.0001 par value; 40,000
       shares designated;                                                     2
      17,650 shares outstanding (aggregate
       liquidation preference of $50,813)
      Series B; convertible; $0.0001 par value;
       2,000,000 shares designated; 268,332 shares                           27
        outstanding (aggregate liquidation preference
        of $804,996)
        Series C; convertible; $0.0001 par value;
        7,357,144 shares designated; 5,357,143                              536
          shares outstanding (aggregate liquidation
          preference of $9,116,340)
    Common stock;  $0.0001 par value; 100,000,000
      shares authorized, 71,878,237 shares outstanding                    7,188
    Additional paid-in capital                                      105,963,011
     Deferred compensation                                           (3,910,860)
    Subscription receivable                                            (786,885)
    Accumulated deficit                                            (104,671,032)
                                                                  --------------
                 Total stockholders' deficit                         (3,398,013)
                                                                  --------------
                 Total liabilities and stockholders' deficit      $   3,384,437
                                                                  ==============

                  See accompanying notes to unaudited condensed
                       consolidated financial statements.



<PAGE>

<TABLE>
<CAPTION>
                                                  REMOTEMDX, INC.
                                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                    (Unaudited)



                                                     Three months ended                Nine months ended
                                                          June 30,                          June 30,
                                                   2006            2005             2006              2005
                                              -------------------------------------------------------------------
<S>                                           <C>               <C>             <C>              <C>
Net sales                                     $       237,496   $     234,249   $     709,404    $        635,935
Cost of goods sold                                    119,408          99,454         345,869             486,661
                                              -------------------------------------------------------------------
       Gross profit                                   118,088         134,795         363,535             149,274

Research and development expenses                     876,646         482,229       2,030,818           1,084,043

Selling, general and administrative expenses
(including $6,437,105 and $9,092,549 of
compensation expense paid in stock or stock
options / warrants, for the three and nine
months ended 2006 respectively)                     8,325,307       3,466,895      14,366,736           5,505,561
                                              -------------------------------------------------------------------
       Loss from operations                        (9,083,865)     (3,814,329)    (16,034,019)         (6,440,330)

Other income (expense):
   Derivative valuation gain                          731,669               -         629,308                   -
   Other income (expense)                                  (1)            (46)          2,323               5,071
   Interest income                                        531           1,063           3,779               2,739
   Interest expense                                  (687,895)       (152,297)     (6,343,793)           (874,639)
                                              -------------------------------------------------------------------
              Loss before income taxes             (9,039,561)     (3,965,609)    (21,742,402)         (7,307,159)

Income tax benefit                                          -               -               -                   -
                                              -------------------------------------------------------------------

           Net loss                                (9,039,561)     (3,965,609)    (21,742,402)         (7,307,159)
Dividends on Series A and C preferred stock        (2,648,500)       (123,930)     (2,871,830)           (385,519)
                                              -------------------------------------------------------------------

Net loss attributable to common stockholders  $   (11,688,061)  $  (4,089,539)  $ (24,614,232)   $     (7,692,678)

Net loss per common share - basic and diluted $          (.17)  $        (.12)  $        (.48)   $           (.24)
                                              ===================================================================
Weighted average shares - basic and diluted        66,875,000      34,280,000      51,817,000          32,354,000
                                              ===================================================================



                 See accompanying notes to unaudited condensed consolidated financial statements.

                                                       -4-
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

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

                                                                              Nine months ended
                                                                                  June 30,
                                                                      -------------------------------
                                                                             2006            2005
                                                                      -------------------------------
 <S>                                                                  <C>              <C>
 Cash flows from operating activities:
    Net loss                                                          $ (21,742,402)   $   (7,307,159)
    Adjustments to reconcile net loss to net cash used in
     operating activities:
        Depreciation and amortization                                        76,170            26,293
        Beneficial conversion feature recorded as interest
         expense                                                            321,429           280,000
        Stock options and warrants issued for services                    4,543,997         1,344,798
        Derivative valuation liability                                     (629,308)                -
        Amortization on debt discount                                     1,234,034           100,129
        Amortization of deferred consulting and financing costs           5,200,804           596,404
        Accretion of interest expense related to redeemable
         common stock                                                     1,779,166                 -
        Common stock issued for services and interest                     2,037,207           939,099
        Interest income on restricted cash                                    5,628            (2,378)
        Increases in related party line of credit for service               503,754           579,273
        Changes in operating assets and liabilities:
            Accounts receivable, net                                        (51,078)          144,605
            Inventories                                                     (76,091)           29,059
            Prepaid expenses and other assets                              (867,467)          (55,141)
            Accounts payable                                                412,451           467,902
            Accrued liabilities                                            (297,163)          153,064
            Deferred revenue                                                   (255)            1,041
                                                                      -------------------------------
                 Net cash used in operating activities                   (7,549,124)       (2,703,011)
                                                                      -------------------------------
 Cash flows used in investing activities:
    Purchase of property and equipment                                     (348,397)         (162,416)
    Disposal of fixed assets                                                      -             2,392
                                                                      -------------------------------
                 Net cash used in investing activities                     (348,397)         (160,024)
                                                                      -------------------------------
 Cash flows from financing activities:
    Net payments from related-party line of credit                         (505,726)         (581,538)
    Net payments on bank line of credit                                        (423)                -
    Decrease in subscription receivable                                   1,430,580                 -
    Proceeds from issuance of Series C Preferred Stock                    5,818,877                 -
    Proceeds from common stock                                            1,020,000                 -
    Proceeds from the issuance of SecureAlert Preferred Stock               600,000         2,607,746
    Proceeds from issuance of notes payable                               2,321,153         1,258,000
    Payments on Series B and C Debentures                                  (387,008)                -
    Payments on notes payable                                            (1,298,699)         (164,000)
                                                                      -------------------------------
                 Net cash provided by financing activities                8,998,754         3,120,208
                                                                      -------------------------------
 Net increase (decrease) in cash                                          1,101,233           257,173
 Cash, beginning of period                                                  416,036            62,103
                                                                      -------------------------------
 Cash, end of period                                                  $   1,517,269    $      319,276
                                                                      ===============================


           See accompanying notes to unaudited condensed consolidated financial statements.

                                                  -5-
</TABLE>
<PAGE>


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

                                                          Nine Months ended
                                                                 June 30,
                                                      --------------------------
                                                           2006         2005
                                                       (Unaudited)   (Unaudited)
                                                      --------------------------
Cash paid for interest and taxes:
   Cash paid for income taxes                         $          -   $         -
   Cash paid for interest                             $    152,678   $    96,342

Supplemental schedule of non-cash investing and
  financing activities:

   Issuance of shares of common stock in exchange
       for shares of Series A Preferred Stock                  317             1
   Issuance of shares of common stock in exchange
       for shares of Series B Preferred Stock                  110             -
   Issuance of shares of common stock in exchange
       for deferred consulting services and
       financing costs                                   5,840,439       159,300

   Accrual of  Series A and C Preferred Stock
       dividends                                           406,894       261,589
   Issuance of shares of common stock in exchange
       for convertible debt with embedded
       derivative features                               2,581,319             -
   SecureAlert preferred stock issued in exchange
       for decrease in related party line of credit              -       175,000
   Payment of accrued preferred stock dividends
       through the issuance of Series A preferred
       stock                                                   212       787,389
   Issuance of SecureAlert Series A Preferred
       Stock for note payable and accrued interest               -       207,253
   Payment on SecureAlert line of credit from
       restricted cash                                     174,475             -
   Issuance of shares of Series C Preferred
       Stock from conversion of debt and accrued
       interest                                          1,037,152             -



                  See accompanying notes to unaudited condensed
                       consolidated financial statements.

                                      -6-
<PAGE>


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





(1)      BASIS OF PRESENTATION
         ---------------------

The accompanying 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 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, 2005. The
results of operations for the three and nine months ended June 30, 2006, are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 2006.

Going Concern

The Company has recurring net losses and negative cash flows from operating
activities, a working capital deficit, a stockholders' 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.

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 operations will generate positive cash flows and that the
Company will be economically successful at increasing selling and marketing
efforts to introduce new products into the market. Further, the Company may be
unable to complete the development and successful commercialization of any new
remote offender monitoring products.

Principles of Consolidation

The 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 accounts for its 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.

An alternative method to the intrinsic value method of accounting for
stock-based compensation is the fair value based method prescribed by Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." If the Company used the fair value
based method, the Company would be required to record deferred compensation
based on the fair value of the stock option at the date of grant as computed
using an option-pricing model, such as the Black-Scholes option pricing model.
The deferred compensation calculated under the fair value based method would
then be amortized over the vesting period of the stock option. The Company
awarded stock options to employees during the periods ended June 30, 2006 and
2005.


                                      -7-
<PAGE>


The following table illustrates the effect on net loss and basic and diluted
loss per share had the Company adopted SFAS 123:

<TABLE>
<CAPTION>

                                               Three months ended            Nine months ended
                                                     June 30,                   June 30,
                                             2006              2005         2006          2005
                                         ----------------------------------------------------------
<S>                                      <C>             <C>           <C>            <C>
Net loss attributable to common
   stockholders  - as reported           $ (11,688,061)  $ (4,089,539) $ (24,614,232) $ (7,692,678)

Deduct total stock based employee
   compensation  expense determined
   under fair value based   method for
   all awards, net of related taxes

Net loss - pro forma                        (1,386,290)                   (1,400,148)      (11,194)
                                         ----------------------------------------------------------
                                         $ (13,074,351)  $ (4,089,539) $ (26,014,380) $ (7,703,872)

                                         ----------------------------------------------------------
Basic and diluted net loss per common
   share - as reported                   $        (.17)  $       (.12) $        (.48) $       (.24)
                                         ----------------------------------------------------------
Basic and diluted net loss per common
   share - pro forma                     $        (.20)  $       (.12) $        (.50) $       (.24)
                                         ----------------------------------------------------------
</TABLE>

The fair value of the option grants was estimated as of the date of grant using
the Black-Scholes option pricing model with the following assumptions:

                                                           Nine Months Ended
                                                               June 30,
                                                     ---------------------------
                                                       2006            2005
                                                     ---------------------------

                Expected dividend yield                   -                -
                Expected stock price volatility        140%             106%
                Risk-free interest rate               4.80%            3.72%
                Expected life of options            5 years          5 years

The weighted average fair value per share using the Black-Scholes Option Pricing
Model of options and warrants granted during the nine months ended June 30, 2006
and 2005, was $0.64 and $0.44, respectively.

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.


                                      -8-
<PAGE>
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 June 30, 2006 and 2005, there were approximately 46,958,698 and
20,436,000 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. The common share equivalents outstanding at June 30,
2006, consisted of 6,530,500 shares of common stock underlying Series A
Preferred Stock, 2,367,635 shares of common stock underlying Series B Preferred
Stock, 16,071,429 shares of common stock underlying Series C Preferred Stock,
38,409 shares of common stock underlying the Series B and C debentures, and
21,850,725 shares underlying options and warrants. Of the 21,850,725 shares
underlying options and warrants, 17,250,357 shares underlie options and warrants
which have vested and 4,600,368 shares underlie options and warrants which have
not yet vested.

Revenue Recognition

The Company derives its revenue primarily from the sale of mobile emergency and
personal security systems and reagent stains.

The sale of mobile emergency and personal security systems may include the
security device, such as the MobilePal phone, and the related monitoring
service. If the sale includes both the device and the monitoring service,
revenue from the sale of the device is deferred and 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 is for the device only and does not include the
monitoring services, 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.

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 June 30, 2006:

      Offender tracking devices and accessories                     $  88,392
      Reagent stains,  net of reserve for  obsolescence                34,275
      of $65,204
                                                                    ----------
               Total                                                $ 122,667
                                                                    ==========

(3)      ACCRUED LIABILITIES
         -------------------

Accrued liabilities consisted of the following at June 30, 2006:

         Accrued tooling                             $        116,000
         Accrued interest                                      84,140
         Accrued bonuses and director fees                     30,000
         Accrued payroll and employee benefits                125,954
         Accrued commissions                                    4,500
         Other accrued expenses                                86,000
                                                     ----------------
                  Total                              $        446,594
                                                     ================

                                      -10-
<PAGE>

(4)      NOTES PAYABLE
         -------------

Notes payable at June 30, 2006 consisted of the following:

Current liabilities:

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.                               $   169,676

Unsecured note payable to an entity.  The note has
a monthly payment of $1,985.  The loan bears no
interest, but has been imputed at 12%.  The note is
due September 18, 2006.   The note is collateralized
by the furniture purchased with the note.  As of
June 30, 2006, the unamortized debt discount was $59.                     3,911
                                                                    ------------

         Total                                                      $   173,587
                                                                    ============

(5)      BANK LINE OF CREDIT
         -------------------

As of June 30, 2006, the Company had no outstanding balance under a line of
credit with Zion's First National Bank. The line of credit was paid off in April
2006 with the certificates of deposits.

On July 5, 2006, the Company opened a $4 million line of credit with Citizen
National Bank. The interest rate is 8% and the line of credit matures on June
30, 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
addition, the Company will pay 11% annual interest rate, paid monthly, on the
line of credit to the entities who provided and arranged for the letters of
credit. As of August 9, 2006, the outstanding balance of the line of credit was
approximately $1,900,000.

(6)      COMMON STOCK SUBJECT TO MANDATORY REDEMPTION
         --------------------------------------------

As of June 30, 2006, the Company had 32,000 common shares outstanding that are
redeemable at the option of the holder with a redeemable value of $96,000. The
Company had not yet been released from the $96,000 obligation. In accordance
with SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, the redemption value of the
redeemable shares has been recorded as a liability.

(7)      RELATED-PARTY LINE OF CREDIT AND NOTE
         -------------------------------------

As of June 30, 2006, the Company owed to ADP Management, an entity owned and
controlled by two of the Company's officers and directors, $15,643 under a line
of credit agreement. Outstanding amounts on the line of credit accrue interest
at 5.0% and were due in July 2006. Subsequent to June 30, 2006, the
related-party line of credit was extended to July 2007. During the nine months
ended June 30, 2006, the net decrease in the related party line of credit was
$1,972. The net decrease consisted of net cash repayments during the nine months
ended June 30, 2006, of $505,726 and net increases of $503,754 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.


                                      -11-
<PAGE>

The Company entered into a loan with an entity controlled by an employee of the
Company. The loan bears interest at 17%. An origination fee of $10,000 was added
to the principal balance owed under the note. Principal and interest were due
November 13, 2005. The first four months are interest only and the last three
months are interest and principal. This loan is secured by the stock and assets
of Volu-Sol Reagents Corporation, a wholly-owned subsidiary of RemoteMDx, Inc.
As of June 30, 2006, the balance, net of the debt discount, was $251,000.
Subsequent to June 30, 2006, the note was paid off.

(8)      CONVERTIBLE DEBENTURES
         ----------------------

During the year ended September 30, 2004, the Company sold $1,450,000 of Series
B Convertible Debentures and $350,000 of Series C Convertible Debentures. The
Debentures are convertible automatically into shares of the Company's common
stock upon the closing of a qualified equity or debt offering with gross
proceeds of at least $5,000,000. Under the terms, the conversion price will
equal 80% of the fair value prior to closing the offering. The Debentures bear
interest at an annual rate of 10%, not including any original issue discount,
with interest during the first six months of $47,954 added to the principal
amount. Thereafter, interest payments will be made monthly in cash or, at the
sole option of the Company, in shares of Common Stock at a price of $0.54 per
share. The Debentures mature and are payable two years from each closing,
subject to the conversion as indicated above. During the nine months ended June
30, 2006, 2,030,184 shares of common stock were issued to repay $913,583 of the
Series B and C Convertible Debentures. In addition, during the nine months ended
June 30, 2006, $387,008 of the Series B and C Convertible Debentures were paid
off in cash. Subsequent to June 30, 2006, all Series B Convertible Debentures
were paid off.

(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, 2006, a total of 8,568 shares of
Series A Preferred Stock were converted into 3,173,299 shares of common stock.
As of June 30, 2006, there were 17,650 shares of Series A Preferred Stock
outstanding, which represents 6,530,500 common stock equivalents at a conversion
rate of 370 for 1. Subsequent to June 30, 2006, and through August 10, 2006, no
additional shares of Series A Preferred Stock had been converted into shares of
common stock.

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 nine months
ended June 30, 2006 and 2005, the Company recorded $290,554 and $385,519,
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, 2006, the Company had not
exercised its option to redeem shares of Series A Preferred Stock.

During the nine months ended June 30, 2006, the Company issued 212 shares of
Series A preferred stock in satisfaction of accrued dividends on Series A
preferred stock of $42,314.

Series B Convertible Preferred Stock

During the nine months ended June 30, 2006, a total of 1,100,825 shares of
Series B Preferred Stock were converted into 5,656,381 shares of common stock.
As of June 30, 2006, there were 268,332 shares of Series B Preferred Stock
outstanding convertible into approximately 2,367,635 common shares. Subsequent
to June 30, 2006, 205,001 shares of Series B Preferred Stock were converted into
1,505,000 shares of common stock.


                                      -12-
<PAGE>

Series C Convertible Preferred Stock

During the nine months ended June 30, 2006, the Company received subscriptions
for 5,357,143 shares of Series C Convertible Preferred Stock at $1.68 per share
for proceeds of $9,000,000. One share of Series C Convertible Preferred Stock is
convertible into three shares of the Company's common stock, subject to
adjustments. The stock has an 8% dividend that may be paid in cash or additional
shares of Series C Convertible Preferred Stock at the option of the Company. The
Company issued 5,357,143 shares of Series C Preferred Stock for $7,175,964 in
cash, $1,037,151 from conversion of debt and accrued interest, and $786,885 in
subscription receivables. Subsequent to June 30, 2006, the subscription
receivables of $786,885 were collected. The holders of shares of Common
underlying the Series C Convertible Preferred Stock shall be entitled to
registration rights. For the nine months ended June 30, 2006, a beneficial
conversion feature of $2,464,935 was recorded as a distribution to the Series C
Preferred shareholders to reflect the difference between the market value of the
underlying common stock and the conversion price.

SecureAlert, Inc., Preferred Shares

During the year ended September 30, 2005, and pursuant to Board of Director
approval, the Company amended the articles of incorporation of its wholly owned
subsidiary, SecureAlert, Inc., to establish 3,500,000 shares of preferred stock
designated as Series A Convertible Redeemable Non-Voting Preferred Stock. The
holders of shares of Series A Preferred Stock shall be entitled to receive
quarterly dividends out of any of SecureAlert's assets legally available
therefor, prior and in preference to any declaration or payment of any dividend
on the Common Stock of SecureAlert, at the rate of $1.50 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 $1,350,000 ($1.50 X 90 days X
10,000 contracts) or $.385 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 Series A Preferred Stock may
be converted at the holder's option at any time into an aggregate of 20%
ownership of the common shares of SecureAlert, Inc. During the nine months ended
June 30, 2006, the Company sold 600,000 of these shares for $600,000. As of June
30, 2006, there were 3,590,000 shares of SecureAlert Series A Preferred Stock
outstanding.

The 600,000 shares of SecureAlert Series A Preferred Stock issued during the
nine months ended June 30, 2006, have an additional feature pursuant to which
the Company would buy back the SecureAlert Series A Preferred Shares and pay the
investor 15% interest should the Company not have contracts for a total of 7,000
parolee units by March 31, 2006. Because the Company did not secure 7,000
parolee contracts by March 31, 2006 and in accordance with SFAS No. 150,
Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity, the redemption value of the redeemable shares has been
recorded as a liability. The Company has committed to collateralize these
instruments with 600,000 free-trading shares of the Company's common stock. In
addition, each holder received an option to purchase 1 share of common stock
with an exercise price of $1.00 per share for each share of SecureAlert Series A
Preferred Shares received. The Black-Scholes model was used to determine the
value for the 600,000 options issued. The value of the options was $443,515. The
detachable warrants were valued at $443,515 and the debt discount was prorated
in the first and second quarter 2006. As of June 30, 2006, the debt discount had
been fully amortized. To date none of the shareholders with rights to this
additional feature have exercised their respective rights under this agreement.

(10)     DERIVATIVES
         -----------

The Company does not hold or issue derivative instruments for trading purposes.
However, the Company had convertible notes payable that contain embedded
derivatives that require separate valuation from the convertible notes. The
Company recognizes these derivatives as liabilities in its balance sheet and
measures them at their estimated fair value, and recognizes changes in their
estimated fair value in earnings (losses) in the period of change. The Company
has estimated the fair value of these embedded derivatives using the
Black-Scholes model based on the historical volatility of its common stock over
the past three years. The fair value of derivative instruments are re-measured
each quarter. During the nine months ended June 30, 2006, and the year ended
September 30, 2005, the Company issued convertible notes payable containing
embedded derivatives. The Company received a total of $1,855,000 from these
convertible notes ($575,000 during the nine months ended June 30, 2006 and
$1,280,000 from the prior year ended September 30, 2005). The Company issued
1,855,000 shares of common stock valued at $1,539,100 for three years of prepaid
interest.


                                      -13-
<PAGE>

During the nine months ended June 30, 2006, the Company paid $1,080,000 toward
these convertible notes. In addition, $775,000 of these notes converted into
2,284,351 shares of common stock. As of June 30, 2006, all convertible notes
payable were paid off.

(11)     COMMON STOCK
         ------------

During the nine months ended June 30, 2006, the Company issued 26,749,195 shares
of common stock as follows:

         o    5,796,428 shares were issued for services performed for a value of
              $3,884,107.

         o    10,539,753 shares were issued for debt and accrued interest for a
              value of $7,587,782.

         o    8,829,680 shares were issued from Series A and B Preferred Stock
              conversions.

         o    1,583,334 shares were issued for $1,020,000 in cash, net
              commission of $35,000.

Common Stock Subject to Redemption

Of the shares of common stock outstanding at June 30, 2006, a total of 32,000
shares are subject to redemption. These shares are redeemable by the Company for
$96,000.

Common Stock Options and Warrants

As of June 30, 2006, 17,250,357 of the 21,850,725 outstanding options and
warrants were vested with a weighted average exercise price of $0.72 per share.
During the nine months ended June 30, 2006, 11,379,076 options were issued with
an exercise price range of $0.56 and $0.75 per share. Of the 11,379,076 options
and warrants, 6,778,708 are vested and 4,600,368 have not yet vested.

(12)     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 SecureAlert segment
is engaged in the business of developing, distributing and marketing mobile
emergency and personal security systems to distributors and consumers. 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, 2006 and
2005:
                                                 Three Months Ended
                                                      June 30,
                                          ---------------------------------
                                               2006               2005
                                          ---------------------------------
Sales to external customers:
     SecureAlert                          $     80,589       $       81,216
     Reagents                                  156,907              153,033
                                          ---------------------------------
                                          $    237,496       $      234,249
                                          ---------------------------------
Net (loss) income from operations:
     SecureAlert                          $ (2,086,587)      $     (992,447)
     Reagents                                  (57,934)              27,550
     Other (unallocated)                    (6,895,040)          (3,000,712)
                                          ---------------------------------
                                          $ (9,039,561)      $   (3,965,609)
                                          ---------------------------------

                                      -14-
<PAGE>

The following table reflects certain financial information relating to each
reportable segment for each of the nine-month periods ended June 30, 2006 and
2005:
                                                   Nine Months Ended
                                                       June 30,
                                          ---------------------------------
                                                2006               2005
                                          ---------------------------------
Sales to external customers:
     SecureAlert                          $    233,521       $      216,626
     Reagents                                  475,883              419,309
                                          ---------------------------------
Total Sales                               $    709,404       $      635,935
                                          ---------------------------------
Net (loss) income from operations:
     SecureAlert                          $ (4,749,211)      $   (2,398,551)
     Reagents                                  (43,382)              30,060
     Other (unallocated)                   (16,949,809)          (4,938,668)
                                          ---------------------------------
                                          $(21,742,402)      $   (7,307,159)
                                          ---------------------------------
Identifiable assets:
     SecureAlert                          $  1,712,770
     Reagents                                  202,950
     Other (unallocated)                     1,468,717
                                          ------------
Total assets                              $  3,384,437
                                          ============

(13)     SUBSEQUENT EVENTS
         -----------------

Subsequent to June 30, 2006, the Company entered into the following
transactions:

         A.   On August 4, 2006, the Company, closed a private placement of
              shares of its common stock. The Company sold 5,300,000 shares of
              its common stock (the "Shares"), at a purchase price of $1.30 per
              share, for aggregate proceeds to the Company of $6,890,000. In
              connection with the sale of the Shares, the Company granted
              registration rights to the purchasers, in connection with which
              the Company agreed to file a registration statement to register
              the resale of the Shares by the purchasers within 60 days of the
              closing. The Company also agreed to use its best efforts to have
              the registration statement declared effective within 120 days of
              the filing. In the event that the registration statement is not
              filed within 60 days of the closing or effective within 120 days
              of the filing, the Company is required to pay a 5% penalty to the
              investors.
         B.   On July 10, 2006, the shareholders approved increasing the total
              authorized shares of the Company's common stock from 100,000,000
              to 175,000,000 shares. In addition, the total authorized preferred
              stock was increased from 10,000,000 to 20,000,000 shares.
         C.   On July 5, 2006, the Company entered into a revolving line of
              credit arrangement with Citizen's National Bank (the "Lender").
              Under this arrangement, the Company and the Lender entered into a
              Promissory Note in the principal amount of $4 million (the

                                      -15-

<PAGE>

              "Note"), pursuant to which the Lender may advance $4 million under
              the Note to the Company upon receipt of satisfactory collateral
              documents. This Note can be expanded up to $10 million under
              certain terms and conditions. The Note accrues interest at the
              Prime Rate as published in the Wall Street Journal (8% per annum
              as of the date of the Note). The Company must pay all outstanding
              principal and interest on the Note in one payment on June 30,
              2007. The Note may be prepaid in full at any time without penalty,
              except that the Lender is entitled to a minimum interest charge of
              $100. The Note is secured by all of the assets of the Company
              which secures all advances made by the Lender to the Company.
              SecureAlert, Inc. also granted to the Lender a security interest
              in all of its assets, excluding TrackerPAL products, which secures
              all advances made by the Lender to the Company. The Note will also
              be secured by an Unconditional Irrevocable Letter of Credit to be
              issued to the Lender on behalf of the Company by United States
              Trust Company, N.A. in the amount of $4 million (the "USTC LOC").
              Under the revolving line of credit arrangement, the Lender has
              agreed to lend up to an additional $6 million, provided that,
              among other things, such loans are secured by additional letters
              of credit in the amount of such loans.  As of August 9, 2006 the
              outstanding balance of the line of credit was approximately
              $1,900,000.

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, 2005. The Company disclaims any obligation or
intention to update any forward-looking statement.

General
RemoteMDx, Inc. ("RemoteMDx" or the "Company"), markets and sells patented
wireless location technologies and the related monitoring services, and
develops, markets and sells personal security, senior supervision, and health
monitoring devices and monitoring services. The RemoteMDx products and
monitoring services feature wireless products that utilize GPS and cellular
technologies in conjunction with a monitoring center. These devices include a
mobile emergency response device, MobilePAL(TM), which can locate persons in
distress, no matter where they may be, and dispatch the closest emergency
service to their location. The Company has recently developed and has numerous
pre-production models of a tracking device, TrackerPAL, which will be used to
monitor convicted offenders in the criminal justice system. The Company believes
that its technologies and services will benefit the healthcare and penal system
as they allow both care providers and law enforcement officials to respond
immediately to a medical event or criminal activity. Our customers will be able
to better monitor and manage their own chronic disease and medical conditions,
giving peace of mind to them and their loved ones and care providers.

The Company's primary health monitoring market consists of approximately 35
million Americans over the age of sixty-five. Of these 35 million seniors, it is
estimated that approximately 9.7 million currently live alone. However, in most
cases, the Company anticipates that senior customers will not purchase the
Company's products for themselves. Instead, based on the Company's experience,
the Company believes that it is more effective to target the children or
caregivers of these seniors. Therefore, the primary target market is children,
friends, and spouses of these individuals.

Additionally, the Company has identified a growing need in the parole/probation
market, which in 2003, consisted of approximately 4.9 million adults in the
criminal justice system. In order to meet the needs of this growing demand, the
Company has developed TrackerPAL, which works in conjunction with our monitoring
center. Through the date of this report, the Company had received $7,868 of
revenue from this market.

We also sell medical diagnostic stains, solutions, and equipment through a
wholly owned subsidiary, Volu-Sol Reagents Corporation ("Reagents").

                                      -16-

<PAGE>

We derive our revenues from the following sources:

         o    Medical Diagnostic Stains - We sell medical diagnostic stains and
              equipment to laboratories throughout the United States. The
              Company anticipates that these sales will decrease in the future
              as a percentage of total sales.

         o    Monitoring Activation - We sell our MobilePAL(TM) and anticipate
              leasing our TrackerPAL devices as part of a monitoring contract,
              with prepaid activation charges.

         o    Monitoring Services - Following activation, our MobilePAL and
              TrackerPAL customers pay a monthly monitoring fee and fees for
              additional services offered by our contract providers or by us.

In addition to the foregoing sources, we have contractual rights to receive
royalty revenues from a license agreement with Matsushita Electric Works ("MEW")
and from sales of telematic products and services under marketing agreements.
"Telematic" means any wireless communication system designed for the collection
and dissemination of data. To date these royalty agreements have not produced
any royalty income.

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 mobile personal
emergency market, the parolee and probation market, and health monitoring
industries. Until the beginning of calendar 2003, most of our revenues were
provided by the distribution of consumer electronics through a business acquired
by a wholly owned subsidiary, SecureAlert, Inc. ("SecureAlert"), in July 2001.
With our decision to refocus our business and product development efforts on the
mobile health and emergency monitoring and law enforcement industries, which
previously comprised a smaller part of our business, we discontinued the
distribution of consumer electronics and automotive telematic products during
2003.

Critical Accounting Policies

In Note 1 to the audited financial statements for the fiscal year ended
September 30, 2005, 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:

                                      -17-
<PAGE>

         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.

The sale of mobile emergency and personal security systems may include the
security device, such as the MobilePal phone, and the related monitoring
service. If the sale includes both the device and the monitoring service,
revenue from the sale of the device is deferred and 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 is for the device only and does not include the
monitoring services, 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.

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 periods ended June 30, 2006 and 2005, no impairment of
long-lived assets was recorded.

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

                                      -18-
<PAGE>

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.

Three months ended June 30, 2006, Compared to Three months ended June 30, 2005

Net Sales

For the three months ended June 30, 2006, the Company had net sales of $237,496
compared to $234,249 for the three months ended June 30, 2005, an increase of
$3,247. The increase in net sales resulted primarily the sale of stain and
reagents solutions.

SecureAlert (PAL Services) had net sales of $80,589 during the three months
ended June 30, 2006, compared to net sales of $81,216 for the three months ended
June 30, 2005. These sales consisted of $72,721 from mobile emergency and
personal security systems and $7,868 from monitoring of offender tracking
devices. No SecureAlert (PAL Services) customer accounted for 10% or more of its
sales.

Reagents had revenues for the three months ended June 30, 2006, of $156,907,
compared to $153,033 during the quarter ended June 30, 2005. The Company
anticipates that Reagents' sales will decrease in the future as a percentage of
total sales. Fisher Scientific is a significant customer of Reagents, accounting
for 38% of Reagents' sales during the period. No other Reagents customer
accounted for 10% or more of its sales.

Cost of Goods Sold

For the three months ended June 30, 2006, cost of goods sold was $119,408
compared to $99,454 during the three months ended June 30, 2005, an increase of
$19,954. SecureAlert's cost of goods sold totaled $34,895 or 43% of
SecureAlert's net sales during the three months ended June 30, 2006. The mobile
emergency and personal security products have generally been sold below cost in
an effort to secure a recurring revenue stream under monthly monitoring
contracts. Reagents' cost of goods sold was $84,513 or 54% of Reagent's net
sales during the three months ended June 30, 2006, compared to $79,767 or 52% 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 and labor costs.

Research and Development Expenses

During the three months ended June 30, 2006 and 2005, research and development
expense was $876,646 and $1,084,043, 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 June 30, 2006, selling, general and administrative
expenses were $8,325,307 compared to $3,466,895 during the three months ended
June 30, 2005. The increase of $4,858,412 relates primarily to an increase in
advertising and marketing of $65,184; an increase in outside services of
$231,147; an increase in payroll and payroll taxes of $313,690; an increase in
other selling, general and administrative expenses of $297,011; and an increase
in consulting costs of $3,951,380. Consulting expense increased due to
commissions paid on the Series C preferred stock raise of $2,438,074 (non-cash
portion is $2,438,074), expenses related to the issuance of common stock and
options issued to employees and the board of directors of $963,069 (non-cash
portion is $963,069), and other consulting of $550,237 (non-cash portion is
$500,237). The majority of other consulting expense for the three months ended
June 30, 2006, is related to the issuance of warrants and shares of common stock
issued to consultants for public relations and branding services and to increase
the Company's presence in the capital markets.


                                      -19-
<PAGE>

Interest Income and Expense

During the three months ended June 30, 2006, interest expense totaled $687,895
compared to $152,297 paid in the three months ended June 30, 2005. This amount
consists primarily of non-cash interest expense of approximately $646,995
related to unamortized financing costs associated with shares of common stock
issued for prepaid interest.

Nine months ended June 30, 2006, Compared to Nine months ended June 30, 2005

Net Sales

Net sales during the nine months ended June 30, 2006 were $709,404 compared to
$635,935 in net sales during the nine months ended June 30, 2005, an increase of
$73,469. The increase in net sales resulted primarily from the sale of stain and
reagents solutions.

SecureAlert (PAL Services) had net sales of $233,521 during the nine months
ended June 30, 2006, compared to $216,626 during the nine months ended June 30,
2005. These sales consisted of $225,653 from mobile emergency and personal
security systems and $7,868 from monitoring of offender tracking devices.
Reagents had sales for the nine months ended June 30, 2006, of $475,883,
compared to $419,309 during the same period in the prior fiscal year, an
increase of $56,574. This increase is due to Reagents' largest customer ordering
more products.

Cost of Goods Sold

For the nine months ended June 30, 2006, cost of goods sold was $345,869
compared to $486,661 during the nine months ended June 30, 2005, a decrease of
$140,792. During the fiscal year ended September 30, 2005, the Company recorded
an impairment of the GPS2000 mobile phone inventory based on the estimated
recoverability of the inventory. Therefore, the sales of such phones during the
period ended June 30, 2006, resulted in a lower cost of goods sold per unit
based on the impairment. SecureAlert's cost of goods sold totaled $102,997 or
44% of SecureAlert's net sales during the nine months ended June 30, 2006. The
mobile emergency and personal security products have generally been sold below
cost in an effort to secure a recurring revenue stream under monthly monitoring
contracts. Reagents' cost of goods sold was $242,872 or 51% of Reagent's net
sales during the nine months ended June 30, 2006, compared to $241,972 or 58% of
Reagent's net sales for the same period during the prior fiscal year. The
decrease as a percentage of net sales was primarily due to a reduction in
material and labor costs.

Research and Development Expenses

During the nine months ended June 30, 2006 and 2005, research and development
expense was $2,030,818 and $1,084,043, 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 nine months ended June 30, 2006, selling, general and administrative
expenses were $14,366,736 compared to $5,505,561 during the nine months ended
June 30, 2005. The increase of $8,861,175 relates primarily to an increase in
legal and professional fees of $234,734; an increase in outside services of
$407,993; an increase in payroll and payroll taxes of $510,537; an increase in
travel of $179,725; an increase in other selling, general and administrative
expenses of $541,461 and an increase in consulting costs of $6,986,725.
Consulting expense increased due to one-time finder fees and commissions paid on
the Series C preferred stock raise paid in warrants of $2,591,928 (non-cash
portion is $2,591,928), tooling costs of $219,084, expenses related to the
issuance of common stock and options issued to employees and the board of
directors of $2,664,360 (non-cash portion is $2,664,360), and other consulting
of $1,511,353 (non-cash portion is $1,209,853). The majority of other consulting
expense for the nine months ended June 30, 2006 is related to the issuance of
warrants and shares of common stock issued to consultants for public relations
and branding services and to increase the Company's presence in the capital
markets.


                                      -20-
<PAGE>

Interest Income and Expense

During the nine months ended June 30, 2006, interest expense totaled $6,343,793.
This amount consists primarily of non-cash interest expense of $5,869,686
related to the issuance of common stock in settlement of various note
obligations and $321,429 to record a beneficial conversion feature. In addition,
interest expense increased significantly for the nine months ended June 30, 2006
because several notes converted during the period; thus, recognizing the
unamortized financing costs associated with shares of common stock issued for
prepaid interest.

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, 2006, the
Company financed its operations primarily from the sale of debt and equity
securities of the Company for net proceeds of $8,998,754.

As of June 30, 2006, the Company had unrestricted cash of $1,517,269 and a
working capital deficit of $1,108,968, compared to unrestricted cash of $787,457
and a working capital deficit of $5,517,466 at September 30, 2005.

During the nine months ended June 30, 2006, the Company's operating activities
used cash of $7,549,124, compared to $2,703,011 of cash used during the nine
months ended June 30, 2005. The increase was primarily a result of an increase
in selling, general and administrative expenses and research and development
costs related to SecureAlert's TrackerPAL device.

The Company used cash of $348,397 for investing activities during the nine
months ended June 30, 2006.

The Company's financing activities during the nine months ended June 30, 2006,
provided cash of $8,998,754 compared to $3,120,208 during the nine months ended
June 30, 2005. During the nine months ended June 30, 2006, the Company had net
proceeds of $2,321,153 from the issuance of debt, as well as net cash proceeds
of $8,869,457 from the sale of its debentures and equity securities. Cash was
decreased by $1,299,121 in payments to notes payable and on the bank line of
credit, and $505,726 in net payments on the related party line of credit.

The Company incurred a net loss of $21,742,402 through the nine months ended
June 30, 2006. As of June 30, 2006, the Company had a net tangible stockholders'
deficit of $3,398,013 and an accumulated deficit of $104,671,032. 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, 2005, 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 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

Subsequent to June 30, 2006, the Company entered into the following
transactions:

         A.   On August 4, 2006, the Company, closed a private placement of
              shares of its common stock. The Company sold 5,300,000 shares of
              its common stock (the "Shares"), at a purchase price of $1.30 per
              share, for aggregate proceeds to the Company of $6,890,000. In
              connection with the sale of the Shares, the Company granted
              registration rights to the purchasers, in connection with which
              the Company agreed to file a registration statement to register
              the resale of the Shares by the purchasers within 60 days of the
              closing. The Company also agreed to use its best efforts to have
              the registration statement declared effective within 120 days of
              the filing. In the event that the registration statement is not
              filed within 60 days of the closing or effective within 120 days
              of the filing, the Company is required to pay a 5% penalty to the
              investors.

                                      -21-
<PAGE>

         B.   On July 10, 2006, the shareholders approved increasing the total
              authorized shares of the Company's common stock from 100,000,000
              to 175,000,000. In addition, the total authorized preferred stock
              was increased from 10,000,000 to 20,000,000.
         C.   On July 5, 2006, the Company entered into a revolving line of
              credit arrangement with Citizen's National Bank (the "Lender").
              Under this arrangement, the Company and the Lender entered into a
              Promissory Note in the principal amount of $4 million (the
              "Note"), pursuant to which the Lender may advance $4 million under
              the Note to the Company upon receipt of satisfactory collateral
              documents. This Note can be expanded up to $10 million under
              certain terms and conditions. The Note accrues interest at the
              Prime Rate as published in the Wall Street Journal (8% per annum
              as of the date of the Note). The Company must pay all outstanding
              principal and interest on the Note in one payment on June 30,
              2007. The Note may be prepaid in full at any time without penalty,
              except that the Lender is entitled to a minimum interest charge of
              $100. The Note is secured by all of the assets of the Company
              which secures all advances made by the Lender to the Company.
              SecureAlert, Inc. also granted to the Lender a security interest
              in all of its assets which secures all advances made by the Lender
              to the Company. The Note will also be secured by an Unconditional
              Irrevocable Letter of Credit to be issued to the Lender on behalf
              of the Company by United States Trust Company, N.A. in the amount
              of $4 million (the "USTC LOC"). Under the revolving line of credit
              arrangement, the Lender has agreed to lend up to an additional $6
              million, provided that, among other things, such loans are secured
              by additional letters of credit in the amount of such loans.

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 Securities Exchange Act of 1934, as
amended (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 June 30, 2006. 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.

The deficiencies in our internal control over financial reporting related to the
failure to properly disclose equity and debt transactions. 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, 2006. 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 June 30, 2006 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.

                                      -22-
<PAGE>
                           PART II. OTHER INFORMATION


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

During the nine months ended June 30, 2006, the Company issued 26,749,195 shares
of common stock as follows:

         o    5,796,428 shares were issued for services performed for a value of
              $3,884,107.

         o    10,539,753 shares were issued for debt and accrued interest for a
              value of $7,587,782.

         o    8,829,680 shares were issued from Series A and B Preferred Stock
              conversions.

         o    1,583,334 shares were issued for $1,020,000 in cash, net
              commission of $35,000.

Subsequent to June 30, 2006, the Company, closed a private placement of shares
of its common stock. The Company sold 5,300,000 shares of its common stock (the
"Shares"), at a purchase price of $1.30 per share, for aggregate proceeds to the
Company of $6,890,000. In connection with the sale of the Shares, the Company
granted registration rights to the purchasers, in connection with which the
Company agreed to file a registration statement to register the resale of the
Shares by the purchasers within 60 days of the closing. The Company also agreed
to use its best efforts to have the registration statement declared effective
within 120 days of the filing. In the event that the registration statement is
not filed within 60 days of the closing or effective within 120 days of the
filing, the Company is required to pay a 5% penalty to the investors.

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 securities in the Company's private placement of debt and
equity 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.

Item 5. Other Information

On July 10, 2006, we held our 2006 Annual Meeting of Shareholders at our
corporate headquarters. Five proposals were presented for shareholder approval.

The first proposal related to the election of Robert E. Childers, James J.
Dalton, David G. Derrick, and Peter McCall as directors. The voting was as
follows:

      ----------------------- ----------------------- --------------------------
                                   Shares in Favor         Shares Withheld
      ----------------------- ----------------------- --------------------------
      Robert E. Childers             46,085,385                734,108
      ----------------------- ----------------------- --------------------------
      James J. Dalton                46,280,921                538,572
       ----------------------- ----------------------- -------------------------
      David G. Derrick               46,621,180                198,313
      ----------------------- ----------------------- --------------------------
      Peter McCall                   46,817,716                 1,777
      ----------------------- ----------------------- --------------------------

The second proposal related to the ratification of the Company's selection of
Hansen Barnett & Maxwell, as the Company's independent auditors. The voting was
as follows: 46,728,809 shares were voted in favor; 501 shares were voted
against; and 90,183 shares abstained.

The third proposal was to approve an amendment to the Articles of Incorporation
increasing the number of shares of common stock authorized to be issued by the
Company. The voting was as follows: 46,432,459 shares were voted in favor;
202,826 shares were voted against; and 172,304 shares abstained.

The fourth proposal was to approve an amendment to the Articles of Incorporation
increasing the number of shares of preferred stock authorized to be issued by
the Company. The voting was as follows: 30,843,459 shares were voted in favor;
181,699 shares were voted against; and 83,107 shares abstained.

                                      -23-
<PAGE>


The fifth proposal was to approve the 2006 Equity Incentive Award Plan. The
voting was as follows: 30,971,336 shares were voted in favor; 71,825 shares were
voted against; and 77,008 shares abstained.

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)


      3.01(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)

      4.01          2006 Equity Incentive Award Plan (July 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         Securities Purchase Agreements with ADP Management and James
                    Dalton (previously filed)

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

                                      -24-
<PAGE>


      10.07         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)

      10.08         Amended 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)

      10.09         Amended 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)

      10.10         Amended 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)

      10.11         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)

      10.12         License 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)

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

      10.14         Agreement 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)

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

      10.17         Security Agreement between Citizen National Bank and the
                    Company (July 2006).

      10.18         Promissory Note between Citizen National Bank and the
                    Company (July 2006).

      10.19         Common Stock Puchase 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).

      10.20         Change in Terms Agreement between Citizen National Bank and
                    the Company (August 2006).

      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-
<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 14, 2006                     By:      /s/ David G. Derrick
                                                   --------------------
                                                   David G. Derrick,
                                                   Chief Executive Officer




Date: August 14, 2006                     By:      /s/ Michael G. Acton
                                                   --------------------
                                                   Michael G. Acton,
                                                   Principal Accounting Officer




                                      -26-