**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549-1004**








**Form
      10-QSB**





**(Mark
      One)**


**x
      Quarterly report
      pursuant to Section 13 or 15(d) of the Securities Exchange**


**Act
      of 1934**








**FOR
      THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007**





**or**








**o
      Transition report
      pursuant to Section 13 or 15(d) of the Securities**


**Exchange
      Act of 1934**





**For
      the transition period from _______________ to
      _______________**





**Commission
      File Number 0-26455**





**ISECURETRAC
      CORP.**


**(Exact
      name of small business issuer as specified in its charter)**


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




**5078
      S. 111** **th** **Street**


**OMAHA,
      NEBRASKA 68137**


**(402)
      537-0022**


**(Address,
      including zip code, and telephone number,**


**including
      area code, of registrant’s**


**principal
      executive office)**








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 for such
      shorter period that the registrant was required to file such reports), and
      (2)
      has been subject to such filing requirements for the past 90 days. YES x NO
o





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





The
      number of shares of issuer’s common stock outstanding as of November 12, 2007
      was 10,778,014.





Transitional
      Small Business Disclosure Form (Check One): YES oNO x









**PART
      I. FINANCIAL INFORMATION**





**Item
      1. Financial Statements**




***iSECUREtrac
        Corp. and SUBSIDIARIES***
 ***CONSOLIDATED
          BALANCE SHEETS***




(Unaudited)September
                30, 2007
            
            December
                31, 2006**ASSETS**Current
                AssetsCash
                and cash equivalents
            
            $
            1,300,567
            
            $
            4,341,685Accounts
                receivable, net of allowance for doubtful accounts of
                $300,916in
                2007 and $171,409 in 2006
            
            
            2,105,380
            
            
            2,284,177Inventories
            
            
            204,534
            
            
            61,021Prepaid
                expenses and other
            
            
            71,339
            
            
            74,608Total
                current assets
            
            
            3,681,820
            
            
            6,761,491Equipment,
                net of accumulated depreciation of $417,019in
                2007 and $336,721 in 2006
            
            
            415,845
            
            
            382,072Leasehold
                improvements, net of accumulated depreciation of $39,403in
                2007 and $9,535 in 2006
            
            
            187,826
            
            
            67,396Monitoring
                equipment, net of accumulated depreciation of $6,108,932in
                2007 and $4,904,883 in 2006
            
            
            2,336,002
            
            
            2,930,429Intangibles,
                net of accumulated amortization and impairment charges of
                $829,524in
                2007 and $767,598 in 2006
            
            
            81,998
            
            
            143,924Goodwill
            
            
            2,302,179
            
            
            2,302,179Other
                assets
            
            
            72,388
            
            
            66,045Total
                assets
            
            $
            9,078,058
            
            $
            12,653,536**LIABILITIES
                AND STOCKHOLDERS' (DEFICIT)**Current
                LiabilitiesAccounts
                payable and accrued expenses
            
            $
            2,128,623
            
            $
            847,765Current
                maturities of long-term debt
            
            
            672,508
            
            
            891,070Deferred
                revenues & gain on sale-leaseback transaction
            
            
            304,515
            
            
            423,349Accrued
                interest payable
            
            
            351,975
            
            
            37,838Total
                current liabilities
            
            
            3,457,621
            
            
            2,200,022Long-term
                debt, less current maturities
            
            
            6,657,349
            
            
            6,694,102Redeemable
                convertible Series C preferred stock
            
            
            11,574,541
            
            
            10,696,697Stockholders'
                (Deficit)Common
                stock
            
            
            10,778
            
            
            10,773Additional
                paid-in capital
            
            
            55,058,563
            
            
            54,950,315Accumulated
                deficit
            
            
            (67,680,794
            )
            
            (61,898,373
            )Total
                stockholders' (deficit)
            
            
            (12,611,453
            )
            
            (6,937,285
            )Total
                liabilities and stockholders' (deficit)
            
            $
            9,078,058
            
            $
            12,653,536




See
      Notes
      to Condensed Consolidated Financial Statements (unaudited).




Page
          1


***iSECUREtrac
        Corp. and SUBSIDIARIES***


***CONSOLIDATED
        STATEMENTS OF OPERATIONS***
 ***(Unaudited)***





Three
                Months Ended
            
            Nine
                Months EndedSeptember
                30
            
            September
                302007
            
            2006
            
            2007
            
            2006**Revenues:**Equipment
                leasing & hosting
            
            $
            2,141,774
            
            $
            1,817,050
            
            $
            6,230,187
            
            $
            5,320,514Equipment
                sales
            
            
            10,752
            
            
            18,421
            
            
            87,755
            
            
            306,476Service
                revenues
            
            
            38,639
            
            
            5,401
            
            
            188,608
            
            
            79,127Gain
                on related party sale-leaseback transactions
            
            
            39,828
            
            
            44,844
            
            
            129,534
            
            
            228,543Total
                revenues
            
            
            2,230,993
            
            
            1,885,716
            
            
            6,636,084
            
            
            5,934,660**Operating
                expenses:**Cost
                of revenues
            
            
            852,406
            
            
            793,912
            
            
            2,607,090
            
            
            2,383,586Research
                and development
            
            
            392,012
            
            
            326,979
            
            
            1,278,236
            
            
            987,991Sales,
                general and administrative
            
            
            3,163,369
            
            
            2,384,055
            
            
            7,459,334
            
            
            6,259,082Total
                operating expenses
            
            
            4,407,787
            
            
            3,504,946
            
            
            11,344,660
            
            
            9,630,659Operating
                loss
            
            
            (2,176,794
            )
            
            (1,619,230
            )
            
            (4,708,576
            )
            
            (3,695,999
            )**Other
                income (expense):**Interest
                income
            
            
            18,091
            
            
            11,222
            
            
            97,743
            
            
            74,023Interest
                expense
            
            
            (143,102
            )
            
            (41,651
            )
            
            (441,132
            )
            
            (145,565
            )Total
                other income (expense)
            
            
            (125,011
            )
            
            (30,429
            )
            
            (343,389
            )
            
            (71,542
            )Loss
                before provision for income taxes
            
            
            (2,301,805
            )
            
            (1,649,659
            )
            
            (5,051,965
            )
            
            (3,767,541
            )Provision
                for income taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -**Net
                loss**
            
            $
            (2,301,805
            )
            $
            (1,649,659
            )
            $
            (5,051,965
            )
            $
            (3,767,541
            )Preferred
                stock dividends and accretion
            
            
            (308,003
            )
            
            (288,827
            )
            
            (877,844
            )
            
            (823,471
            )**Net
                loss available to common stockholders**
            
            $
            (2,609,808
            )
            $
            (1,938,486
            )
            $
            (5,929,809
            )
            $
            (4,591,012
            )**Basic
                and diluted loss per common share**
            
            $
            (0.24
            )
            $
            (0.18
            )
            $
            (0.55
            )
            $
            (0.43
            )**Weighted
                average shares of common stock outstanding**
            
            
            10,777,305
            
            
            10,771,897
            
            
            10,775,556
            
            
            10,747,007




See
        Notes
        to Condensed Consolidated Financial Statements (unaudited).




Page
          2




***iSECUREtrac
        Corp. AND SUBSIDIARIES***


***STATEMENT
        OF STOCKHOLDERS' (DEFICIT)***


***For
        the Nine Months Ended September 30, 2007***
 ***(Unaudited)***
    **Additional****Common
                  Stock**
              
              **Paid
                  -in**
              
              **Accumulated****Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit**
              
              **Total****Balance,
                  December 31, 2006**
              
              
              10,773,454
              
              $
              10,773
              
              $
              54,950,315
              
              $
              (61,898,373
              )
              $
              (6,937,285
              )Shares
                  issued for director's fees
              
              
              4,560
              
              
              5
              
              
              5,995
              
              
              -
              
              
              6,000Compensation
                  related to stock options issued
              
              
              -
              
              
              -
              
              
              249,641
              
              
              -
              
              
              249,641Series
                  C preferred stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              (730,456
              )
              
              (730,456
              )Accretion
                  to redemption value of preferred stock
              
              
              -
              
              
              -
              
              
              (147,388
              )
              
              -
              
              
              (147,388
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,051,965
              )
              
              (5,051,965
              )**Balance,
                  September 30, 2007**
              
              
              10,778,014
              
              $
              10,778
              
              $
              55,058,563
              
              $
              (67,680,794
              )
              $
              (12,611,453
              )


See
      Notes
      to Condensed Consolidated Financial Statements (unaudited).




Page
          3




***iSECUREtrac
        CORP. AND SUBSIDIARIES***


***CONSOLIDATED
        STATEMENTS OF CASH FLOWS***


***Nine
      Months Ended September 30, 2007 and 2006***


*(Unaudited)*




**2007**
            
            **2006****Cash
                Flows From Operating Activities**Net
                loss
            
            $
            (5,051,965
            )
            $
            (3,767,541
            )Depreciation
                and amortization
            
            
            1,376,141
            
            
            1,196,085Expenses
                paid by issuance of stock, warrants, and options in lieu of
                cash
            
            
            255,641
            
            
            288,889(Increase)
                decrease in accounts receivable
            
            
            178,797
            
            
            (168,344
            )(Increase)
                in inventories
            
            
            (143,513
            )
            
            (12,728
            )Increase
                in accounts payable and accrued expenses
            
            
            1,280,858
            
            
            298,454Increase
                (decrease) in deferred revenues and gain on sale - leaseback
                transactions
            
            
            (118,834
            )
            
            103,095Increase
                (decrease) in accrued interest payable
            
            
            314,137
            
            
            (12,738
            )Other
            
            
            3,269
            
            
            (15,107
            )**Net
                cash (used in) operating activities**
            
            
            (1,905,469
            )
            
            (2,089,935
            )**Cash
                Flows From Investing Activities**Purchases
                of leasehold improvements and equipment
            
            
            (264,369
            )
            
            (139,218
            )Purchases
                of monitoring equipment
            
            
            (609,622
            )
            
            (1,549,364
            )Proceeds
                from maturity of investments
            
            
            -
            
            
            6,350,000Purchase
                of investments
            
            
            -
            
            
            (2,904,224
            )(Increase)
                in other assets
            
            
            (6,343
            )
            
            (34,258
            )**Net
                cash provided by (used in) investing activities**
            
            
            (880,334
            )
            
            1,722,936**Cash
                Flows From Financing Activities**Principal
                proceeds from long-term debt
            
            
            500,000
            
            
            1,000,000Principal
                payments on long-term debt
            
            
            (755,315
            )
            
            (1,109,317
            )Proceeds
                from the exercise of options and warrants
            
            
            -
            
            
            3,089**Net
                cash (used in) financing activities**
            
            
            (255,315
            )
            
            (106,228
            )**(Decrease)
                in cash**
            
            
            (3,041,118
            )
            
            (473,227
            )**Cash
                at beginning of period**
            
            
            4,341,685
            
            
            742,626**Cash
                at end of period**
            
            $
            1,300,567
            
            $
            269,399**Supplemental
                Disclosure of Cash Payments for**Interest
            
            
            126,995
            
            
            158,303




See
      Notes
      to Condensed Consolidated Financial Statements (unaudited).




Page
          4




**iSECUREtrac
      CORP. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**Note
      1.** **General**




The
      consolidated balance sheet of iSECUREtrac Corp. (“iSECUREtrac”, or the
“Company”) at December 31, 2006, has been taken from audited consolidated
      financial statements at that date. The condensed consolidated financial
      statements for the three and nine months ended September 30, 2007 and September
      30, 2006 are unaudited and reflect all normal and recurring accruals and
      adjustments which are, in the opinion of management, necessary for a fair
      presentation of the financial position, operating results and cash flows for
      the
      interim periods presented in this quarterly report. The unaudited condensed
      consolidated financial statements should be read in conjunction with the
      consolidated financial statements and notes thereto, together with management’s
      discussion and analysis of financial condition and results of operations,
      contained in our Annual Report on Form 10-KSB for the year ended December 31,
      2006. The results of operations and cash flows for the three and nine months
      ended September 30, 2007 are not necessarily indicative of the results for
      the
      entire fiscal year ending December 31, 2007. Where appropriate, items of an
      insignificant nature within the condensed consolidated financial statements
      have
      been reclassified from the previous periods’ presentation.




The
      Company’s financial statements have been presented on the basis that it is able
      to continue as a going concern, which contemplates the realization of assets
      and
      the satisfaction of liabilities in the normal course of business. The
      Company believes that its current working capital, combined with expected
      amounts available through the credit arrangements described in note 6 and note
      9, are sufficient to meet its liquidity needs through the end of 2007.  At
      that time, the Company may need to close on an additional equity investment
      transaction or debt financing to have sufficient working capital to satisfy
      liquidity needs through 2008 and beyond. However, there is no assurance that
      such additional equity or debt financing will be available and if the Company
      is
      unable to obtain additional capital, it will need to take other steps, including
      imposition of significant cost reductions, in order to maintain
      operations.




**Note
      2. Common Stock Options and Warrants**




The
      Company may issue stock options and other types of equity-based compensation
      under its 2006 Omnibus Equity Incentive Plan (the “2006 Plan”) which was
      implemented on May 31, 2006. This is the only plan under which the Company
      may
      now issue additional equity-base compensation. The Company also has outstanding
      stock options that were issued under its 2001 Omnibus Equity Incentive Plan
      (the
“2001 Plan”) and which were issued under employment agreements with executive
      officers.




During
      the three and nine months ended September 30, 2007, the Company granted options
      to purchase a total of 35,000 and 129,975 shares of common stock to twelve
      and
      thirty-four employees, respectively, pursuant to the 2006 Plan. During the
      three
      and nine months ended September 30, 2007, 3,918 and 36,856 options issued under
      the 2006 Plan were forfeited, 1,969 and 45,561 options issued under the 2001
      Plan were forfeited and 0 and 204,375 options issued under employment agreements
      outside the 2006 Plan and the 2001 Plan were forfeited. No options were
      exercised during the three or nine months ended September 30, 2007. The
      following table shows stock option activity during the nine month period ended
      September 30, 2007:




Page
          5




**Options**
              
              **Number
                  of Shares**
              
              **Weighted
                  Average Exercise Price Per Share**
              
              **Weighted
                  Average Remaining Contractual Life (Years)**
              
              **Aggregate
                  Intrinsic Value**Outstanding
                  at December 31, 2006
              
              
              1,969,116
              
              $
              2.35Granted
              
              
              129,975
              
              
              1.15Exercised
              
              
              -
              
              
              -Forfeited
              
              
              (286,792
              )
              
              2.06Outstanding
                  at September 30, 2007
              
              
              1,812,299
              
              $
              2.31
              
              
              5.74
              
              $
              13,685Exercisable
                  at September 30, 2007
              
              
              1,317,340
              
              $
              2.47
              
              
              4.50
              
              $
              2,018




As
      of
      September 30, 2007, the aggregate intrinsic value of outstanding and exercisable
      options, which is the actual value of the options if exercised, was $13,685
      and
      $2,018, respectively.




During
      the three and nine month periods ended September 30, 2007, respectively, 16,305
      and 719,461 warrants expired and no warrants were granted or exercised by
      warrant holders.




At
      September 30, 2007, the Company had 1,812,299 outstanding stock options,
      6,287,045 shares issuable upon exercise of warrants to be issued upon exchange
      of Preferred Stock, and 4,022,925 shares issuable upon the exercise of
      outstanding warrants that were not included in the computation of diluted EPS
      because to do so would have been anti-dilutive for the period
      presented.




On
      January 1, 2006, the Company adopted Financial Accounting Standards Board
      (“FASB”) Statement No. 123 (revised 2004), “ *Share-Based
      Payment* ”
(“FAS
      No. 123(R)” or the “Statement”) which requires that the compensation cost
      relating to share-based compensation awards, including grants of employee stock
      options, be recognized in financial statements as these awards become vested,
      based on the grant date fair value of the equity instruments
      issued.




For
      purposes of FAS No. 123(R), the Company estimated the grant date fair value
      of
      each option granted during the periods set forth below using the Black-Scholes
      option pricing model with the following weighted average
      assumptions:




**Nine
                  Months Ended**
              
              **Year
                  Ended****September
                  30, 2007**
              
              **December
                  31, 2006**Risk
                  free interest rate
              
              
              4.65
              %
              
              4.63
              %Expected
                  volatility factor
              
              
              86.69
              %
              
              86.27
              %Expected
                  option term in years
              
              
              3.5
                  to 6.5
              
              
              3.5
                  to 6.5Dividends
              
              
              $0.00
              
              
              $0.00Forfeitures
                  for senior executives and non-senior executives
              
              
              0%
                  and 16
              %
              
              0%
                  and 21
              %




The
      risk-free interest rate is determined on the date the grant is issued. This
      rate
      is equal to the rates based on yields from U.S. Treasury zero-coupon issues
      with
      maturity of seven years.




Expected
      volatilities are based on historical stock prices over the two years prior
      to
      the stock option award.




Prior
      to
      adopting FAS No. 123(R), the cancellation of stock options was accounted for
      based on the actual cancellations during the reporting period. Under FAS No.
      123(R), the Company is required to estimate forfeitures. The forfeiture rate
      is
      the rate at which options are expected to be forfeited prior to full vesting.
      For options issued to senior executives, the Company uses an assumed forfeiture
      rate of 0%. For all other options, the forfeiture rate is determined based
      on
      actual forfeiture rate experience as follows: For each historical year of option
      issuance, the total options issued for the year is compared to the options
      forfeited prior to having vested. For option years in which the two year vesting
      period has not passed, past experience is used to project future forfeitures.
      The total of pro forma forfeitures is then compared to total options awarded
      and
      the resultant percentage is used as the forfeiture rate. The estimated
      forfeiture rate for non-senior executive option grants is 16%. This rate is
      recalculated on an annual basis.




Page
          6




The
      annual rate of quarterly dividends is 0% since iSECUREtrac has historically
      not
      paid dividends on its common stock and does not expect to pay dividends in
      the
      foreseeable future.




The
      Company recorded compensation expense of $89,402 and $249,641 for the three
      and
      nine month periods ended September 30, 2007, respectively, compared to $76,240
      and $282,889 for the same periods in 2006 related to share-based compensation
      awards.




As
      of
      September 30, 2007, there was approximately $585,646 of total unrecognized
      compensation costs related to non-vested stock option agreements granted to
      the
      Company’s executives and employees. The future compensation expense the Company
      will recognize if and as these options vest according to their contractual
      terms
      is as follows:





2007
            
            $
            91,4972008
            
            
            329,6592009
            
            
            164,490Total
            
            $
            585,646




**Note
      3. Monitoring Equipment**




Monitoring
      equipment consists of equipment under lease to customers. Upon deployment,
      monitoring equipment is amortized ratably over its useful life which is
      generally three years. Monitoring equipment, net, at September 30, 2007,
      consisted of the following:




Active
                  GPS
              
              Passive
                  GPS
              
              Breath
                  Alcohol
              
              Other
              
              TotalMonitoring
                  Equipment
              
              $
              3,514,508
              
              $
              3,225,327
              
              $
              964,897
              
              $
              740,202
              
              $
              8,444,934Less
                  accumulated depreciation
              
              
              (1,969,668
              )
              
              (2,819,702
              )
              
              (826,797
              )
              
              (492,765
              )
              
              (6,108,932
              )Monitoring
                  Equipment, net
              
              $
              1,544,840
              
              $
              405,625
              
              $
              138,100
              
              $
              247,437
              
              $
              2,336,002




**Note
      4. Goodwill and Intangible Assets Subject to Amortization**




Goodwill
      is the excess of the cash paid over the fair value of the
      net
      assets acquired and liabilities assumed in an acquisition, less the amount
      of
      identifiable intangible assets.  Goodwill is not amortized, but is tested
      for impairment on an annual basis at the end of each calendar year.  The
      Company has determined that there is no impairment of goodwill as of December
      31, 2006.




The
      Company also separately records other intangible assets that can be identified
      and assigned a value.  At September 30, 2007, such intangible assets
      consisted solely of customer monitoring contracts acquired in a prior
      acquisition. The Company amortizes the initial carrying value based on the
      projected revenue stream of the monitoring contracts. This amortization expense
      is included in sales, general and administrative expenses in the consolidated
      statements of operations and equaled $20,642 and $61,927 for the three and
      nine
      month periods ended September 30, 2007, respectively, and $23,176 and $69,530
      for the comparable periods in 2006. These intangible assets are also tested
      for
      impairment on an annual basis.




Page
          7




The
      composition of goodwill and intangible assets at September 30, 2007, is as
      follows:




**Intangibles,
                  subject****Goodwill**
              
              **to
                  Amortization**Gross
                  Carrying Amount
              
              $
              2,302,179
              
              $
              911,522Accumulated
                  Amortization, including $302,298 of impairment loss
              
              
              -
              
              
              (829,524
              )Balance
                  at September 30, 2007
              
              $
              2,302,179
              
              $
              81,998


The
      estimated aggregate amortization expense of the intangible assets is $20,643
      for
      the remainder of 2007, $41,962 for 2008 and $19,393 for 2009.




**Note
      5. Redeemable Exchangeable Series C Preferred Stock**




On
      June
      27, 2005, the Company issued 1,000,000 shares of its $0.01 par value Series
      C 8%
      Cumulative ,
      Compounding Exchangeable Preferred Stock (the “Series C Preferred Stock”).
 The Series C Preferred Stock is exchangeable for 4,782,609 shares of
      common stock and warrants to acquire 6,287,045 shares of common stock at an
      exercise price of $2.30 per share at anytime at the discretion of the preferred
      stockholder.




If,
      after
      June 27, 2010, the closing price of the common stock exceeds $20.00 per share
      for at least 120 consecutive trading days, the Company can require the
      conversion of the Series C Preferred Stock into common stock in accordance
      with
      the above exchange provisions.




The
      Preferred Stock is redeemable on the tenth anniversary of the original issue
      date. The redemption price per share of the Preferred Stock will equal the
      per
      share original issue price ($11 per share) plus an amount equal to all accrued
      but unpaid dividends thereon (and any interest payable thereon).  The
      interest method will be utilized to accrete the carrying amount of the Preferred
      Stock over the ten year period to the earliest redemption date so that the
      carrying amount will equal the redemption amount at the earliest possible
      redemption date.  Due to the accumulated deficit position of the Company,
      the periodic accretion will be charged to Additional Paid-In Capital. As of
      September 30, 2007, the Company had accrued Series C Preferred Stock dividends
      totaling $2,097,087 and accretion to redemption value of the Series C Preferred
      Stock totaling $442,164. Of these amounts, $730,456 and $147,388, respectively,
      were the amounts accrued during the nine months ended September 30, 2007.




Upon
      any
      liquidation of the Company, no distribution can be made to the holders of shares
      of common stock or other stock ranking junior to the Series C Preferred Stock
      unless, prior thereto, the holders of shares of Series C Preferred Stock have
      received an amount per share equal to the per share original issue price plus
      an
      amount equal to accrued and unpaid dividends and distributions thereon, whether
      or not declared, to the date of such payment, multiplied by a factor of 105%.




Page
          8




Except
      as
      otherwise required by law, the holders of shares of Series C Preferred Stock
      vote together with the holders of shares of the common stock of the Company
      on
      all matters submitted to the stockholders of the Company and not as a separate
      class, and each share of Series C Preferred Stock entitles the holder thereof
      to
      11 votes or the equivalent amount of voting power thereof as determined by
      the
      Board of Directors. In addition, until such time that less than 500,000 shares
      of Series C Preferred Stock are outstanding, the Series C Preferred Stockholders
      have the ability to appoint a majority of directors.




**Note
      6. Long-Term Debt**




Long-term
      debt consists of capital leases used to finance the acquisition of monitoring
      equipment and unsecured borrowings for working capital.





As
      of
      September 30, 2007, the Company had eight capital lease facilities in place
      which were used to finance the acquisition of approximately $2,650,000 of
      monitoring equipment with AHK Leasing, LLC (“AHK”), a company controlled by
      three stockholders, one of which is a current director. Under these
      sale-leaseback arrangements, the Company purchases the monitoring equipment
      from
      the manufacturer, sells it to AHK at a price no less than the Company’s cost and
      then leases the equipment back. AHK has indicated that it has the capacity
      to
      make up to $1,000,000 of additional credit available to the Company for future
      financing transactions. In cases where the monitoring equipment was sold to
      AHK
      at a gain, this gain is recorded as a liability and amortized into income over
      the life of the lease (typically 2-3 years) as Gain on Sale-leaseback
      Transactions. Maturity dates on these capital leases run from November 2007
      to
      September 2010. The assets and the related liabilities under the leases have
      been recorded at the present value of the future minimum lease payments using
      discount rates of 9.50% to 12.50%. As of September 30, 2007 and December 31,
      2006, the aggregate balance on these eight capital leases totaled $1,329,857
      and
      $1,585,172, respectively. For the three and nine month periods ended September
      30, 2007, interest expense to AHK was $29,471 and $111,136, respectively,
      compared to $38,433 and $89,001 during the same periods in 2006. There was
      no
      accrued interest at September 30, 2007 and December 31, 2006 to
      AHK.




During
      the fourth quarter of 2006, the Company received two unsecured loans totaling
      $6,000,000 from a private investment company that is an affiliate of Mykonos
      6420 LP (“Mykonos”), the holder of all shares of our Series C Preferred Stock.
      The proceeds of the loans are being used to meet the Company’s working capital
      needs. Both loans bear interest at a rate of 7% per annum. These loans mature
      on
      the earlier of (i) July 1, 2009 or (ii) the first date on which the Company
      issues equity securities or arranges for additional indebtedness (other than
      trade indebtedness incurred in the ordinary course of its business) in a
      transaction or series of transactions which generates aggregate net proceeds
      to
      the Company of not less than $6,000,000. The terms of the two notes were
      approved by a Special Committee of the Board of Directors consisting solely
      of
      disinterested directors. As of September 30, 2007 and December 31, 2006, the
      note balances were $6,000,000. For the three and nine month periods ended
      September 30, 2007, interest expense on the two unsecured notes was $105,863
      and
      $314,137, respectively, compared to $0 and $0 during the same periods in 2006.
      As of September 30, 2007 and December 31, 2006, accrued interest on the two
      unsecured loans totaled $351,975 and $37,838, respectively. See Note 9.
      Subsequent Event.




**Note
      7. Recent Accounting Pronouncements**




In
      June
      2006, the FASB issued Interpretation No. 48, *“Accounting*  *for
      Uncertainty in Income Taxes”* (“FIN
      48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
      in an enterprise’s financial statements in accordance with SFAS No. 109,
“ *Accounting
      for Income Taxes”.* This
      interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. This interpretation also provides guidance
      on de-recognition, classification, interest and penalties, accounting in interim
      periods, and disclosure. The Company adopted FIN 48 as of January 1, 2007.
      The
      adoption of FIN 48 had no impact on the Company’s financial statements for the
      three and nine months ended September 30, 2007.




Page
          9




We
      recognize interest and penalties related to uncertain tax positions in general
      and administrative expense. As of September 30, 2007, we have not recorded
      any
      provisions for accrued interest and penalties related to uncertain tax
      positions.




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* (“SFAS
      No. 157”). SFAS No. 157 defines fair value, establishes a framework for
      measuring fair value under generally accepted accounting principles and expands
      disclosure about fair value measurements. SFAS No. 157 emphasizes that fair
      value is a market-based measurement, not an entity-specific measurement.
      Therefore, a fair value measurement should be determined based on the
      assumptions that market participants would use in pricing the asset or
      liability. This statement clarifies that market participant assumptions include
      assumptions about risk. A fair value measurement should include an adjustment
      for risk if market participants would include one in pricing the related asset
      or liability, even if the adjustment is difficult to determine. This statement
      also clarifies that market participant assumptions should also include
      assumptions about the effect of a restriction on the sale or use of an asset.
      This statement clarifies that fair value measurement for a liability should
      reflect nonperformance risk (the risk that the obligation will not be
      fulfilled). This statement expands disclosures about the use of fair value
      to
      measure assets and liabilities in interim and annual periods subsequent to
      initial recognition. The disclosures focus on the inputs used to measure fair
      value and for recurring fair value measurements using significant unobservable
      inputs and the effect of the measurements on earnings (or changes in net assets)
      for the period. SFAS No. 157 is effective for financial statements issued for
      fiscal years beginning after November 15, 2007. The Company is currently
      evaluating the impact of adopting SFAS No. 157 on its consolidated financial
      statements.




In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option of Financial Assets and Financial Liabilities* (“SFAS
      No. 159”). SFAS No. 159 provides an option to report selected financial assets
      and financial liabilities using fair value. The standard establishes required
      presentation and disclosures to facilitate comparisons with companies that
      use
      different measurements for similar assets and liabilities. SFAS No. 159 is
      effective for fiscal years beginning after November 15, 2007, with early
      adoption allowed if SFAS No. 157 is also adopted. The Company is currently
      evaluating the impact of adopting SFAS No. 159 on its consolidated financial
      statements.




**Note** **8.
      Contingencies**


On
        March
        8, 2007, a lawsuit was filed by Pro Tech Monitoring, Inc. (“Pro Tech") against
        the Company in United States District Court for the Middle District of Florida.
        Pro Tech alleges that the Company has infringed and continues to infringe
        on a
        U.S. patent held by Pro Tech relating to GPS tracking and monitoring apparatus
        and systems. The action filed by Pro Tech seeks an injunction and substantial
        monetary damages, either of which, if awarded, could have a material adverse
        effect on the Company. The Company believes it has valid defenses against
        the
        material allegations made by Pro Tech and intends to vigorously defend itself
        against this lawsuit. These defenses include, among other things, that the
        Company has not and is not infringing upon the Pro Tech patents and/or that
        the
        Pro Tech patents are invalid. Cost of litigation for the three and nine month
        periods ending September 30, 2007, totaled $941,535 and $1,032,010,
        respectively, which includes Company accruals for potential settlement. Although
        the Company believes that a mediated settlement can be accomplished, it is
        unable to predict the outcome of this lawsuit at this time.


The
      Company is not subject to any other material pending or threatened
      lawsuits.





Page
          10




**Note
      9. Subsequent Event**





On
      October 29, 2007, the Company closed on a Credit and Security Agreement with
      Crestpark LP, Inc., an affiliate of Mykonos (“Crestpark”), under which Crestpark
      agreed to lend approximately $8.5 million to the Company through the
      earlier of (i) July 1, 2010 or (ii) the first date on which the
      Company issues equity securities or arranges for additional indebtedness (other
      than trade indebtedness incurred in the ordinary course of its business) in
      a
      transaction or series of transactions which generates aggregate net proceeds
      to
      the Company of not less than the amount lent to the Company by Crestpark. The
      loan from Crestpark is evidenced by a promissory note (the “Crestpark Note”)
      which provides, among other things, that $6,391,863.90 of the borrowings
      thereunder (which amount equals the principal and accrued interest on the two
      previous loans from a Mykonos affiliate (the “Prior Loans”) as of
      October 29, 2007) bear interest at 7.0% per annum and such interest will be
      due and payable at maturity of the Crestpark Note. The remaining $2,100,000
      advanced to the Company under the Crestpark Note represents new borrowings
      and
      will bear interest at an annual rate of 2% over a floating base rate equal
      to
      prime (the “Base Rate”). The portion of the interest on these additional
      borrowings determined by the Base Rate will be payable at maturity, but the
      remaining portion of the interest representing the 2% premium over the Base
      Rate
      will be payable monthly. At closing of the Crestpark loan transaction, all
      obligations of the Company under the Prior Loans were terminated and released.
      Unlike the Prior Loans, which were unsecured, borrowings under the Crestpark
      Note are secured by a first security interest in all of the assets of the
      Company except that Crestpark’s security interest in certain monitoring
      equipment is subordinate to the interest of AHK under its sale leaseback
      arrangements. The terms of the Crestpark Note were approved by a Special
      Committee of the Board of Directors consisting solely of disinterested
      directors.




Page
          11




**I** **tem
      2. Management's Discussion and Analysis.**




**General**




Discussions
      of certain matters contained in this Quarterly Report on Form 10-QSB may contain
      statements that plan for or anticipate the future. Forward-looking statements
      include statements about the future of our products and the industry, statements
      about our future business plans and strategies, and most other statements that
      are not historical in nature. In this Form 10-QSB, forward-looking statements
      are generally identified by the words "anticipate," "plan," "believe," "expect,"
      "estimate," and the like. Because forward-looking statements involve future
      risks and uncertainties, there are factors that could cause actual results
      to
      differ materially from those expressed or implied. The actual outcomes of these
      matters may differ significantly from the outcomes expressed or implied in
      these
      forward-looking statements and other risks detailed in *“ITEM 1. Description
      of Business”* contained in the Company’s Form 10-KSB filed for the year
      ended December 31, 2006.




The
      following discussion is intended to provide a better understanding of the
      significant changes in trends relating to the Company’s financial condition and
      results of operations. Management’s Discussion and Analysis should be read in
      conjunction with the accompanying Condensed Consolidated Financial Statements
      and Notes thereto.




The
      Company develops, markets, and distributes electronic monitoring products
      employing global positioning satellite (“GPS”) technology and related services
      to criminal justice agencies, both in the United States and internationally,
      for
      use in offender management programs. The Company’s three principal sources of
      revenues are: (i) leasing of monitoring units to criminal justice agencies
      and providing agencies the use of Company’s proprietary software including its
      web-based tracking and monitoring system known as tracNET24TM, (ii) sales of
      offender monitoring equipment and (iii) sales of non-core services
      including software licensing, server maintenance agreements and monitoring
      equipment repairs.




**Results
      of Operations** ****




**Equipment
      Leasing and Hosting Revenue**




Equipment
      Leasing and Hosting Revenue is derived from the fees charged to customers for
      the rental of offender monitoring equipment, the use of the Company’s offender
      monitoring software including tracNET24, hosting offender data, and ancillary
      charges directly related to the monitoring of offenders. For the three and
      nine
      month periods ended September 30, 2007, equipment leasing and hosting revenues
      were $2,141,774 and $6,230,187 compared to $1,817,050 and $5,320,514 for the
      same periods in 2006. This increase is attributable to the increase in the
      number of units under lease. Leasing and hosting revenues are recognized over
      the term of the lease or customer contract based on the performance of services.
      Leasing and hosting contracts with customers typically have initial terms of
      one
      year and are typically renewed at one year increments thereafter.




**Equipment** **Sales
      Revenue**




Equipment
      Sales Revenue is derived from the sale of offender monitoring equipment. For
      the
      three and nine months ended September 30, 2007, equipment sales revenues were
      $10,752 and $87,755 compared to $18,421 and $306,476 during the same periods
      in
      2006. The main reason for the nine month decrease is the nonrecurring sale
      of
      hosting equipment during the second quarter of 2006 to a customer that
      implemented its own GPS host monitoring system. The decline during the three
      month period compared to the third quarter of 2006 was due to the decreased
      emphasis on equipment sales and greater emphasis on equipment leasing. In
      general, our business plan is to lease monitoring equipment rather than to
      sell
      it to customers. Accordingly, we do not expect significant revenues from
      equipment sales. Revenues from monitoring equipment sold in conjunction with
      a
      hosting agreement for tracking and monitoring services on tracNet24 are
      recognized ratably over the initial term of the hosting agreement which is
      typically for one year. Revenues from monitoring equipment sold without a
      hosting agreement are recognized when goods are shipped to the customer.




Page
          12




**Service
      Revenue**




Service
      Revenue consists of sales of non-core services including software licensing,
      server maintenance agreements, and monitoring equipment repairs. For the three
      and nine months ended September 30, 2007, Service Revenue was $38,639 and
      $188,608 compared to $5,401 and $79,127 for the comparable periods of 2006.
      The
      three and nine month increase is attributable to an increase in equipment
      repairs of deployed monitoring units. Service Revenue is recognized upon
      performance of the respective service.




**Gain
      on Sale-leaseback Transactions**




The
      Company finances much of its monitoring equipment through sale-leaseback
      agreements, primarily with a leasing company owned by a related party. Under
      these agreements, the Company purchases the monitoring equipment from the
      manufacturer, sells it to the leasing company at a price not less than the
      Company’s cost, and then leases it back from the leasing company. If the
      monitoring equipment is sold to the leasing company at a gain, this gain is
      recorded as a liability and amortized into income over the life of the lease
      (typically 2-3 years) as Gain on Sale-leaseback Transactions. For the three
      and
      nine months ended September 30, 2007, the Gain on Sale-leaseback Transactions
      was $39,828 and $129,534 compared to $44,844 and $228,543 during the same
      periods in 2006. This decrease is attributable to fewer capital leases relating
      to monitoring equipment sold at a gain to the leasing company. As of September
      30, 2007, the Company had eight capital leases, four of which consisted of
      equipment sold at a gain. As of September 30, 2006, the Company had nine capital
      leases in place in conjunction with these transactions, five of which consisted
      of equipment being sold at a gain.




**Cost
      of Revenues**




Cost
      of
      Revenues represents all direct costs associated with the generation of equipment
      and hosting revenue, including cost of goods for equipment that is sold and
      leased, the direct variable communications and hardware equipment expenses
      associated with the webcentric hosting services, the costs of distribution
      of
      software and equipment, and the maintenance expenses on equipment repaired
      under
      service agreements. Costs of revenues are recorded as products are delivered
      or
      services are performed. For the three and nine months ending September 30,
      2007,
      Cost of Revenues was $852,406 and $2,607,090 compared to $793,912 and $2,383,586
      during the same periods in 2006. This increase is primarily due to the increased
      amortization of our monitoring equipment as a result of more units being
      deployed, increased communication costs, and third party service and monitoring
      costs of supporting additional units in the field.




**Research
      and Development**




Research
      and Development expenses are the direct costs associated with the Company’s
      development of its proprietary products. Expenses in this category include
      the
      cost of outside contracted engineering and design, staffing expenses for the
      Company’s own engineers and software developers, and the actual costs of
      components, prototypes, and testing equipment and services used in the product
      development functions. The Research and Development expenses were $392,012
      and
      $1,278,236 for the three and nine months ended September 30, 2007, compared
      to
      $326,979 and $987,991 for the same periods in 2006. This increase in research
      and development expenses was the result of additional testing and configuration
      expenses related to the development of our next generation product, including
      an
      increase in Research and Development staff from 13 employees at September 30,
      2006, to 18 employees at September 30, 2007.




Page
          13




**Sales,
      General and Administrative**




Sales,
      General and Administrative (SG&A) expenses are all the expenses associated
      with the operations of the Company, other than the expenses described above.
      These expenses include executive, sales, administrative and accounting staff
      payroll, taxes and benefits, rent on property, travel, communications, office
      leases and supplies, marketing, advertising, attendance at trade shows,
      production of marketing and related collateral material, recruiting and training
      expenses, cost of litigation, professional fees and bad debt expense. For the
      three and nine months ended September 30, 2007, SG&A expenses were
      $3,163,369 and $7,459,334 compared to $2,384,055 and $6,259,082 in the
      comparable periods of 2006. The three and nine month increase in SG&A
      expenses was primarily due to the increase in cost of litigation. The Company
      recorded approximately $941,535 and $1,032,010 in litigation expenses for the
      three and nine month periods of 2007, compared to $0 and $34,203 for the same
      periods in 2006. Also contributing to the three and nine month increase in
      SG&A expenses were increases in compensation expense due to the hiring of
      additional personnel, professional fees, office supplies and travel expenses.




**Operating
      Loss**




For
      the
      three and nine months ended September 30, 2007, operating loss was $2,176,794
      and $4,708,576, compared to $1,619,230 and $3,695,999 for the same periods
      in
      2006. The three and nine month increase in our operating loss was primarily
      attributable to increases in both Research and Development and SG&A expenses
      as described above which more than offset higher revenues generated during
      the
      period.




**Interest
      Income**




For
      the
      three and nine months ended September 30, 2007, interest income was $18,091
      and
      $97,743, compared to interest income of $11,222 and $74,023 in the comparable
      periods of 2006. The increase was due to the greater amount held in money market
      funds during the first nine months of 2007 as a result of the cash received
      from
      the two unsecured loans received by the Company in the fourth quarter of 2006.




**Interest
      Expense**




For
      the
      three and nine months ended September 30, 2007, interest expense was $143,102
      and $441,132, compared to interest expense of $41,651 and $145,565 in the
      comparable periods of 2006. This increase was due to the $6,000,000 increase
      in
      Company’s borrowings under the two unsecured loans received by the Company in
      the fourth quarter of 2006.




**Net
      Loss**




For
      the
      three and nine months ended September 30, 2007, the Company had a net loss
      of
      $2,301,805 and $5,051,965 compared to a net loss of $1,649,659 and $3,767,541
      in
      the comparable periods of 2006, for the reasons described above.




**Preferred** **Stock
      Dividends and Accretion**




For
      the
      three and nine months ended September 30, 2007, accrual of preferred stock
      dividends and accretion were $308,003 and $877,844, as compared to $288,827
      and
      $823,471 for the comparable periods of 2006. This increase was due to
      compounding interest on accrued but unpaid dividends on our Series C Preferred
      Stock. The Series C Preferred Stock accrues interest at a cumulative compounded
      rate of 8.0% per annum.




Page
          14




**Net
      Loss Available to Common Stockholders**




For
      the
      three and nine months ended September 30, 2007, there was a net loss available
      to common stockholders of $2,609,808 and $5,929,809 compared to $1,938,486
      and
      $4,591,012 in 2006. The reasons for these changes are described
      above.




**Liquidity
      and Capital Resources**




For
      the
      nine months ended September 30, 2007, the Company used $1,905,469 of cash in
      operating activities, used another $880,334 in investing activities, and used
      $255,315 in cash from financing activities. The total of all cash flow
      activities resulted in a decrease in the balance of cash for the nine months
      ended September 30, 2007 of $3,041,118. For the same period of 2006, the Company
      used $2,089,935 of cash in operating activities, generated $1,722,936 in
      investing activities, and used $106,228 in cash from financing activities.
      The
      total of all cash flow activities through the third quarter of 2006 resulted
      in
      a decrease in the balance of cash of $473,227.




The
      Company’s principal uses of cash are the payment of operating expenses, the
      acquisition of monitoring equipment and the financing of its receivables. In
      general, the Company meets its liquidity needs from its current revenues, from
      cash and cash equivalents, and through capital leasing arrangements. As of
      September 30, 2007, the Company had approximately $1,300,567 in cash and cash
      equivalents. These resources are what remain of the $6,000,000 borrowed by
      the
      Company in the fourth quarter of 2006 under two unsecured loans from a private
      investment company that is an affiliate of Mykonos 6420 LP (“Mykonos”), the sole
      holder of the Company’s Series C Preferred Stock (the “2006 Notes”). Interest on
      the 2006 Notes accrued at a rate of 7% per annum. Principal and interest on
      the
      loans was due at the earlier of (i) July 1, 2009 or (ii) the first date on
      which the Company issues equity securities or arranges for additional
      indebtedness (other than trade indebtedness incurred in the ordinary course
      of
      its business) in a transaction or series of transactions which generates
      aggregate net proceeds to the Company of not less than $6,000,000.




On
      October 29, 2007, the Company refinanced the 2006 Notes and borrowed an
      additional $2,100,000 under the terms of a Credit and Security Agreement with
      Crestpark LP, Inc., another affiliate of Mykonos (“Crestpark”). Borrowings from
      Crestpark are evidenced by a promissory note (the “Crestpark Note”) in the
      principal amount of $8,491,863.90 which is equal to the aggregate principal
      and
      accrued interest on the 2006 Notes as of October 29, 2007 plus an additional
      $2,100,000. Principal on the Crestpark Note is due on the earlier of
      (i) July 1, 2010 or (ii) the first date on which the Company issues
      equity securities or arranges for additional indebtedness (other than trade
      indebtedness incurred in the ordinary course of its business) in a transaction
      or series of transactions which generates aggregate net proceeds to the Company
      of not less than the amount lent to the Company by Crestpark. The Company may
      prepay the Crestpark loan at any time without premium or penalty. The Crestpark
      Note provides, among other things, that $6,391,863.90 of the borrowings
      thereunder bear interest at 7.0% per annum (the same rate that was payable
      on
      the 2006 Notes) and such interest will be due and payable at maturity of the
      Crestpark Note. The additional $2,100,000 advanced to the Company under the
      Crestpark Note will bear interest at an annual rate of 2% over a floating base
      rate equal to prime (the “Base Rate”). The portion of the interest on these
      additional borrowings determined by the Base Rate will be payable at maturity,
      but the remaining portion of the interest representing the 2% premium over
      the
      Base Rate will be payable monthly. At closing of the Crestpark loan transaction,
      all obligations of the Company under the 2006 Notes were terminated and
      released. Unlike the 2006 Notes, which were unsecured, borrowings under the
      Crestpark Note are secured by a first security interest in all of the assets
      of
      the Company except that Crestpark’s security interest in certain monitoring
      equipment is subordinate to the interest of AHK under its sale leaseback
      arrangements. The terms of the Crestpark Note were approved by a Special
      Committee of the Board of Directors consisting solely of disinterested
      directors. The proceeds of the Crestpark loan will be used for working capital
      purposes.




Page
          15




As
      of
      September 30, 2007, the Company had eight capital lease facilities in place
      which were used to finance the acquisition of approximately $2,650,000 of
      monitoring equipment with AHK Leasing, LLC (“AHK”), a company controlled by
      three stockholders, one of which is a current director. Under these
      sale-leaseback arrangements, the Company sells the inventory to AHK and then
      leases the equipment back. AHK has indicated that it has the capacity to make
      up
      to $1,000,000 of additional credit available to the Company for future financing
      transactions. All capital leases are treated as financing transactions with
      two
      of the leases carrying interest rates of 9.50% per annum, five of them carrying
      interest rates of 12.00% per annum and one of them carrying an interest rate
      of
      12.50% per annum. Maturity dates on these capital leases run from November
      2007
      to September 2010. As of September 30, 2007, the aggregate balance on these
      eight capital leases totaled $1,329,857, of which $672,508 is current and the
      balance of $657,349 is classified as long-term debt.




The
      Company’s financial statements have been presented on the basis that it is able
      to continue as a going concern, which contemplates the realization of assets
      and
      the satisfaction of liabilities in the normal course of business. The
      Company believes that its current working capital, combined with expected
      amounts available through the credit arrangements described above are sufficient
      to meet its liquidity needs through the end of 2007.  At that time, the
      Company expects to need additional equity or debt financing to have sufficient
      working capital to satisfy liquidity needs through 2008 and beyond. The Company
      does not have any commitments to provide any such additional capital at this
      time and there is no assurance that such additional equity or debt financial
      will be available. If the Company is unable to obtain additional capital, it
      will need to take other steps, including imposition of significant cost
      reductions, in order to maintain operations.




**Item
      3. Controls and Procedures**




The
      Company maintains disclosure controls and procedures designed to ensure that
      the
      information the Company must disclose in its filings with the Securities and
      Exchange Commission is recorded, processed, summarized and reported on a timely
      basis. The Company's principal executive officer and principal financial officer
      have reviewed and evaluated the Company's disclosure controls and procedures
      as
      defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
      of
      1934, as amended (the "Exchange Act") as of the end of the period covered by
      this report (the "Evaluation Date"). Based on such evaluation, such officers
      have concluded that, as of the Evaluation Date, the Company's disclosure
      controls and procedures are effective in bringing to their attention on a timely
      basis material information relating to the Company required to be included
      in
      the Company's periodic filings under the Exchange Act.




There
      have not been any changes in the Company's internal control over financial
      reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that
      occurred during the Company's most recent fiscal quarter that have materially
      affected, or are reasonably likely to materially affect, the Company's internal
      control over financial reporting.




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          16


**PART
      II. OTHER INFORMATION**






**Item
      1. Legal Proceedings.**





On
        March
        8, 2007, a lawsuit was filed by Pro Tech Monitoring, Inc. (“Pro Tech") against
        the Company in United States District Court for the Middle District of Florida.
        Pro Tech alleges that the Company has infringed and continues to infringe
        on a
        U.S. patent held by Pro Tech relating to GPS tracking and monitoring apparatus
        and systems. The action filed by Pro Tech seeks an injunction and substantial
        monetary damages, either of which, if awarded, could have a material adverse
        effect on the Company. The Company believes it has valid defenses against
        the
        material allegations made by Pro Tech and intends to vigorously defend itself
        against this lawsuit. These defenses include, among other things, that the
        Company has not and is not infringing upon the Pro Tech patents and/or that
        the
        Pro Tech patents are invalid. Cost of litigation for the three and nine month
        periods ending September 30, 2007, totaled $941,535 and $1,032,010,
        respectively, which includes Company accruals for potential settlement. Although
        the Company believes that a mediated settlement can be accomplished, it is
        unable to predict the outcome of this lawsuit at this time.




The
      Company is not subject to any other material pending or threatened
      lawsuits.




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




On
      August
      23, 2007, the Company issued a total of 1,418 shares of common stock to two
      directors in partial payment of directors’ fees. The shares had a market value
      on the date of the board meeting of $2,000. The issuance of these shares is
      exempt from registration under Section 4(2) of the Securities Act of 1933.




**Item
      3. Defaults Upon Senior Securities** **.**




Not
      Applicable




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




Not
      Applicable




**Item
      5. Other Information.**




Not
      Applicable




**Item
      6. Exhibits**







3.1
            Amended
                and Restated Certificate of Incorporation of the Company, as amended
                (3)




3.2
            Restated
                Bylaws of the Company (1)




3.3
            Certificate
                of Designations, Preferences and Rights of Series C 8% Cumulative,
                Compounding Exchangeable Preferred Stock of the Company
                (2)




4.1
            Form
                of Common Stock Certificate (1)






31.1
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.






31.2
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.




Page
          17




32
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                18
                U.S.C. Section 1350 as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.




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




*(2)*
            *Incorporated
                by reference from the registrant’s current report on Form 8-K, filed on
                June 23, 2005 (Commission File No.
                0-26455).*




*(3)*
            *Incorporated
                by reference from the registrant’s current report on Form 8-K, filed on
                December 14, 2006 (Commission File No.
                0-26455).*














**SIGNATURE**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, the
      registrant has duly caused this report to be signed on its behalf by the
      undersigned thereunto duly authorized.






iSECUREtrac
              Corp.By:
            /s/ Peter
              A.
              MichelPeter
                A. Michel
              *President
                & CEO*





Dated:
      November 14, 2007




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          18