**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 MARCH 31, 2007**





**or**





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


**Exchange
      Act of 1934**





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





**Commission
      File Number 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 o No x





The
      number of shares of issuer’s common stock outstanding as of May 4, 2007 was
      10,774,778.





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)March
                  31, 2007
              
              December
                  31, 2006**ASSETS**Current
                  AssetsCash
                  and cash equivalents
              
              $
              3,259,322
              
              $
              4,341,685Accounts
                  receivable, net of allowance for doubtful accounts of
                  $209,954in
                  2007 and $171,409 in 2006
              
              
              2,014,481
              
              
              2,284,177Inventories
              
              
              119,913
              
              
              61,021Prepaid
                  expenses and other
              
              
              69,785
              
              
              74,608Total
                  current assets
              
              
              5,463,501
              
              
              6,761,491Equipment,
                  net of accumulated depreciation of $367,228in
                  2007 and $336,721 in 2006
              
              
              369,339
              
              
              382,072Leasehold
                  improvements, net of accumulated depreciation of $11,932in
                  2007 and $9,535 in 2006
              
              
              165,966
              
              
              67,396Monitoring
                  equipment, net of accumulated depreciation of $5,278,918in
                  2007 and $4,904,883 in 2006
              
              
              2,588,831
              
              
              2,930,429Intangibles,
                  net of accumulated amortization and impairment charges of
                  $788,240in
                  2007 and $767,598 in 2006
              
              
              123,282
              
              
              143,924Goodwill
              
              
              2,302,179
              
              
              2,302,179Other
                  assets
              
              
              67,170
              
              
              66,045Total
                  assets
              
              $
              11,080,268
              
              $
              12,653,536**LIABILITIES
                  AND STOCKHOLDERS' (DEFICIT)**Current
                  LiabilitiesAccounts
                  payable and accrued expenses
              
              $
              737,419
              
              $
              847,765Current
                  maturities of long-term debt
              
              
              798,082
              
              
              891,070Deferred
                  revenues & gain on sale-leaseback transaction
              
              
              372,346
              
              
              423,349Accrued
                  interest payable
              
              
              141,400
              
              
              37,838Total
                  current liabilities
              
              
              2,049,247
              
              
              2,200,022Long-term
                  debt, less current maturities
              
              
              6,552,779
              
              
              6,694,102Redeemable
                  convertible Series C preferred stock
              
              
              10,980,314
              
              
              10,696,697Stockholders'
                  (Deficit)Common
                  stock
              
              
              10,775
              
              
              10,773Additional
                  paid-in capital
              
              
              54,972,782
              
              
              54,950,315Accumulated
                  deficit
              
              
              (63,485,629
              )
              
              (61,898,373
              )Total
                  stockholders' (deficit)
              
              
              (8,502,072
              )
              
              (6,937,285
              )Total
                  liabilities and stockholders' (deficit)
              
              $
              11,080,268
              
              $
              12,653,536
 See
        Notes
        to Condensed Consolidated Financial Statements (unaudited).


Page
          2




***iSECUREtrac
                  Corp. and SUBSIDIARIES******CONSOLIDATED
                  STATEMENTS OF OPERATIONS******Three
                  Months Ended March 31, 2007 and 2006******(Unaudited)***
  2007
              
              2006**Revenues:**Equipment
                  leasing & hosting
              
              $
              1,934,038
              
              $
              1,653,472Equipment
                  sales
              
              
              56,208
              
              
              7,989Service
                  revenues
              
              
              119,510
              
              
              42,712Gain
                  on related party sale-leaseback transactions
              
              
              44,862
              
              
              100,321Total
                  revenues
              
              
              2,154,618
              
              
              1,804,494**Operating
                  expenses:**Cost
                  of revenues
              
              
              860,999
              
              
              696,134Research
                  and development
              
              
              473,109
              
              
              307,240Sales,
                  general and administrative
              
              
              2,067,227
              
              
              1,970,624Total
                  operating expenses
              
              
              3,401,335
              
              
              2,973,998Operating
                  loss
              
              
              (1,246,717
              )
              
              (1,169,504
              )**Other
                  income (expense):**Interest
                  income
              
              
              46,475
              
              
              36,621Interest
                  expense
              
              
              (152,526
              )
              
              (61,812
              )Total
                  other income (expense)
              
              
              (106,051
              )
              
              (25,191
              )Loss
                  before provision for income taxes
              
              
              (1,352,768
              )
              
              (1,194,695
              )Provision
                  for income taxes
              
              
              -
              
              
              -**Net
                  loss**
              
              $
              (1,352,768
              )
              $
              (1,194,695
              )Preferred
                  stock dividends and accretion
              
              
              (283,617
              )
              
              (266,116
              )**Net
                  loss available to common stockholders**
              
              $
              (1,636,385
              )
              $
              (1,460,811
              )**Basic
                  and diluted loss per common share**
              
              $
              (0.15
              )
              $
              (0.14
              )**Weighted
                  average shares of common stock outstanding**
              
              
              10,773,675
              
              
              10,698,688See
                  Notes to Condensed Consolidated Financial Statements
                  (unaudited).




Page
          3


***iSECUREtrac
                  Corp. AND SUBSIDIARIES******STATEMENT
                  OF STOCKHOLDERS' (DEFICIT)******For
                  the Three Months Ended March 31, 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
              
              
              1,324
              
              
              2
              
              
              1,998
              
              
              -
              
              
              2,000Compensation
                  related to stock options issued
              
              
              -
              
              
              -
              
              
              69,598
              
              
              -
              
              
              69,598Series
                  C preferred stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              (234,488
              )
              
              (234,488
              )Accretion
                  to redemption value of preferred stock
              
              
              -
              
              
              -
              
              
              (49,129
              )
              
              -
              
              
              (49,129
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,352,768
              )
              
              (1,352,768
              )**Balance,
                  March 31, 2007**
              
              
              10,774,778
              
              $
              10,775
              
              $
              54,972,782
              
              $
              (63,485,629
              )
              $
              (8,502,072
              )


See
        Notes
        to Condensed Consolidated Financial Statements
        (unaudited).


Page
          4




***iSECUREtrac
                  CORP. AND SUBSIDIARIES******CONSOLIDATED
                  STATEMENTS OF CASH FLOWS******Three
                  Months Ended March 31, 2007 and 2006****(Unaudited)*
  **2007**
              
              **2006****Cash
                  Flows From Operating Activities**Net
                  loss
              
              $
              (1,352,768
              )
              $
              (1,194,695
              )Depreciation
                  and amortization
              
              
              427,581
              
              
              405,816Expenses
                  paid by issuance of stock, warrants, and options in lieu of
                  cash
              
              
              71,598
              
              
              158,859Deferred
                  revenues and gain on sale - leaseback transactions
              
              
              (51,003
              )
              
              (100,321
              )Decrease
                  in accounts receivable
              
              
              269,696
              
              
              25,379(Increase)
                  in inventories
              
              
              (58,892
              )
              
              (19,792
              )Increase
                  (decrease) in accounts payable and accrued expenses
              
              
              (110,346
              )
              
              217,963Increase
                  (decrease) in accrued interest payable
              
              
              103,562
              
              
              (8,433
              )Other
              
              
              4,823
              
              
              (75,685
              )**Net
                  cash used in operating activities**
              
              
              (695,749
              )
              
              (590,909
              )**Cash
                  Flows From Investing Activities**Purchases
                  of leasehold improvements and equipment
              
              
              (118,742
              )
              
              (102,493
              )Purchases
                  of monitoring equipment
              
              
              (32,436
              )
              
              (342,497
              )Proceeds
                  from maturity of investments
              
              
              -
              
              
              6,350,000Purchase
                  of investments
              
              
              -
              
              
              (5,712,370
              )Increase
                  in other assets
              
              
              (1,125
              )
              
              29,898**Net
                  cash provided by (used in) investing activities**
              
              
              (152,303
              )
              
              222,538**Cash
                  Flows From Financing Activities**Principal
                  payments on long-term debt
              
              
              (234,311
              )
              
              (231,643
              )**Net
                  cash (used in) financing activities**
              
              
              (234,311
              )
              
              (231,643
              )**(Decrease)
                  in cash**
              
              
              (1,082,363
              )
              
              (600,014
              )**Cash
                  at beginning of period**
              
              
              4,341,685
              
              
              742,626**Cash
                  at end of period**
              
              $
              3,259,322
              
              $
              142,612**Supplemental
                  Disclosure of Cash Payments for**Interest
              
              
              48,964
              
              
              70,245


See
        Notes
        to Condensed Consolidated Financial Statements (unaudited).
  Page
            5




**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 months ended March 31, 2007 and March 31, 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 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 months ended March 31, 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 asset based credit arrangements described in
      note
      6, 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 financial 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**




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




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 options. 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 months ended March 31, 2007, the Company granted options to purchase
      a
      total of 5,250 shares of common stock to nine employees pursuant to the 2006
      Plan. During the quarter ended March 31, 2007, 12,314 options were forfeited
      with respect the to 2006 Plan, 11,913 options were forfeited pursuant to the
      2001 Plan and 4,167 options issued under employment agreements outside the
      2006
      Plan and the 2001 Plan were forfeited. No options were exercised during the
      three months ended March 31, 2007. The following table shows stock option
      activity during the three month period ended March 31, 2007:




Page
          6


**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
              
              
              5,250
              
              
              1.07Exercised
              
              
              -
              
              
              -Forfeited
              
              
              (28,394
              )
              
              1.82Outstanding
                  at March 31, 2007
              
              
              1,945,972
              
              $
              2.36
              
              
              5.22
              
              $
              470Exercisable
                  at March 31, 2007
              
              
              1,381,354
              
              $
              2.47
              
              
              3.60
              
              $
              38




At
      March
      31, 2007, the Company had 1,945,972 outstanding stock options, 6,287,045 shares
      issuable upon exercise of warrants to be issued upon exchange of Preferred
      Stock, and 4,184,065 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.




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


**Three
                  Months Ended**
              
              **Year
                  Ended****March
                  31,**
                **2007**
              
              **December
                  31, 2006**Risk
                  free interest rate
              
              
              4.62
              %
              
              4.63
              %Expected
                  volatility factor
              
              
              86.48
              %
              
              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# 123(R), the cancellation of stock options was accounted for based
      on the actual cancellations during the reporting period. Under FAS# 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.




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 $69,598 and $156,859 for the three
      months ended March 31, 2007 and March 31, 2006, respectively.




Page
          7


As
      of
      March 31, 2007, there was approximately $690,411 of total unrecognized
      compensation costs related to non-vested share based compensation agreements
      granted to the Company’s executives and employees. The estimated aggregate
      amortization expense of the unrecognized compensation costs is as
      follows:


2007
              
              
              251,6192008
              
              
              293,6602009
              
              
              145,132Total
              
              $
              690,411




During
      the three month period ended March 31, 2007, 558,321 warrants expired and no
      warrants were granted or exercised by warrant holders.




**Note
      3. Monitoring Equipment**




Monitoring
      equipment consists of equipment under lease to customers. Monitoring equipment
      is amortized over its useful life which is generally 3 years. Monitoring
      equipment, net at March 31, 2007, consisted of the following:




Active
                  GPS
              
              Passive
                  GPS
              
              Breath
                  Alcohol
              
              Other
              
              TotalMonitoring
                  Equipment
              
              $
              2,932,392
              
              $
              3,256,738
              
              $
              964,896
              
              $
              713,723
              
              $
              7,867,749Less
                  accumulated depreciation
              
              
              (1,537,538
              )
              
              (2,630,372
              )
              
              (751,469
              )
              
              (359,539
              )
              
              (5,278,918
              )Monitoring
                  Equipment, net
              
              $
              1,394,854
              
              $
              626,366
              
              $
              213,427
              
              $
              354,184
              
              $
              2,588,831




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




Goodwill
      is the excess of the cash paid over the net fair value of 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.  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 March 31, 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 $23,177 for the three month periods ended
      March 31, 2007 and March 31, 2006, respectively. These intangible assets are
      also tested for impairment on an annual basis.




The
      composition of goodwill and intangible assets at March 31, 2007, is as
      follows:




**Intangibles,
                  subject****Goodwill**
              
              **to
                  Amortization**Gross
                  Carrying Amount
              
              $
              2,302,179
              
              $
              911,522Accumulated
                  Amortization, including $302,298 of impairment loss
              
              
              -
              
              
              (788,240
              )Balance
                  at March 31, 2007
              
              $
              2,302,179
              
              $
              123,282


Page
          8




**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 Annually
      Compounding Exchangeable Preferred Stock.  The 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.




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
      March 31, 2007, the Company had accrued Series C Preferred Stock dividends
      totaling $1,601,118 and accretion to redemption value of the Series C Preferred
      Stock totaling $343,906. Of these amounts, $234,488 and $49,129, respectively,
      were the amounts accrued during the three months ended March 31, 2007.




Upon
      any
      liquidation of the Corporation, no distribution shall 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
      shall 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%.




Except
      as
      otherwise required by law, the holders of shares of Series C Preferred Stock
      shall vote together with the holders of shares of the Common Stock of the
      Corporation on all matters submitted to the stockholders of the Corporation
      and
      not as a separate class, and each share of Series C Preferred Stock shall
      entitle 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.





During
      2006 and through March 31, 2007, the Company had financed the acquisition of
      approximately $1,250,000 of monitoring equipment through five sale-leaseback
      agreements with AHK Leasing, LLC, a company controlled by three stockholders,
      one of which is a current director (“AHK”). 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. 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. 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. As of March
      31, 2007, the Company had nine capital leases in conjunction with these
      transactions which expire from September 2007 to October 2009. 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 12.00%.
      As
      of March 31, 2007, the aggregate balance on these nine capital leases totaled
      $1,350,861. For the three months ended March 31, 2007 and March 31, 2006,
      interest expense to AHK Leasing was $44,015 and $27,737, respectively. There
      was
      no accrued interest at March 31, 2007 and December 31, 2006 to AHK
      Leasing.




Page
          9


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.
      Both loans bear interest at a rate of 7% per annum. These loans mature on the
      earlier of (i) July 1, 2008 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. For the three months ended March 31, 2007 and 2006,
      interest expense to the private investment company was $103,562 and $0,
      respectively. As of March 31, 2007 and December 31, 2006, accrued interest
      on
      the two unsecured loans totaled $141,400 and $37,838, respectively.




**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
      quarter ended March 31, 2007.




We
      recognize interest and penalties related to uncertain tax positions in general
      and administrative expense. As of March 31, 2007, we have not recorded any
      provisions for accrued interest and penalties related to uncertain tax
      positions.




Tax
      years
      2003-2006 remain open to examination by the major taxing jurisdictions to which
      we are subject.




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. We are evaluating the impact
      that SFAS No. 157 may have on our consolidated financial
      statements.





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          10


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 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 monetary
      damages. The Company denies all material allegations made by Pro Tech and
      intends to vigorously defend itself against this lawsuit. The Company 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
          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 licensing fees, 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 month
      period ended March 31, 2007, equipment leasing and hosting revenues were
      $1,934,038 compared to $1,653,472 for the same period 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.




**Equipment** **Sales
      Revenue**




Equipment
      Sales Revenue is derived from the sale of offender monitoring equipment. For
      the
      three months ended March 31, 2007, equipment sales revenues were $56,208
      compared to $7,989 during the same period in 2006. The main reason for the
      three
      month increase is due to increased sales of units to customers to replace lost
      and damaged units. In general, our business plan is to lease monitoring
      equipment rather than to sell it to customers. Accordingly, we do not expect
      significant increases in 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 licensing fees, server
      maintenance agreements, and monitoring equipment repairs. For the three months
      ended March 31, 2007, Service Revenue was $119,510 compared to $42,712 for
      the
      comparable period of 2006. The 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
      months ended March 31, 2007, the Gain on Sale-leaseback Transactions was $44,862
      compared to $100,321 during the same period in 2006. This decrease is
      attributable to fewer capital leases relating to monitoring equipment sold
      at a
      gain to the leasing company. As of March 31, 2007, the Company had nine capital
      leases, four of which consisted of equipment sold at a gain. As of March 31,
      2006, the Company had five capital leases in place in conjunction with these
      transactions, all 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 months ending March 31, 2007, Cost of
      Revenues was $860,999 compared to $696,134 during the same period in 2006.
      This
      increase is primarily due to the increased amortization of our monitoring
      equipment, 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 $473,109
      for
      the three months ended March 31, 2007, compared to $307,240 for the same period
      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.




**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, as well as recruiting
      and training expenses. For the three months ended March 31, 2007, SG&A
      expenses were $2,067,227 compared to $1,970,624 in the comparable period of
      2006. The increase in SG&A expenses was primarily due to the increases in
      compensation expense associated with the hiring of additional non-Research
      and
      Development staff, bad debt expense, advertising expense and travel expenses.




Page
          13




**Operating
      Loss**




For
      the
      three months ended March 31, 2007, operating loss was $1,246,717, compared
      to
      $1,169,504 for the same period in 2006. The increase is primarily attributable
      to increases in 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 months ended March 31, 2007, interest income was $46,475, compared to
      interest income of $36,621 in the comparable period of 2006. The increase was
      due to the greater amount held in money market funds during the first three
      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 months ended March 31, 2007, interest expense was $152,526, compared
      to
      interest expense of $61,812 in the comparable period of 2006. This increase
      was
      due to the increase in Company’s borrowings in 2006.




**Net
      Loss**




For
      the
      three months ended March 31, 2007, the Company had a net loss of $1,352,768
      compared to a net loss of $1,194,695 in the comparable periods of 2006, for
      the
      reasons described above.




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




For
      the
      three months ended March 31, 2007, accrual of preferred stock dividends and
      accretion were $283,617, as compared to $266,116 for the comparable period
      of
      2006. This increase was due to compounding interest on accrued but unpaid
      dividends on our Series C Exchangeable Preferred Stock. The Series C
      Exchangeable Preferred Stock accrues interest at a cumulative compounded rate
      of
      8.0% per annum.




**Net
      Loss Available to Common Stockholders**




For
      the
      three months ended March 31, 2007, there was a net loss available to common
      stockholders of $1,636,385 compared to $1,460,811 in 2006. The reasons for
      these
      changes are described above.




**Liquidity
      and Capital Resources**




For
      the
      three months ended March 31, 2007, the Company used $695,749 of cash in
      operating activities, used another $152,303 in investing activities, and used
      $234,311 in cash from financing activities. The total of all cash flow
      activities resulted in a decrease in the balance of cash for the three months
      ended March 31, 2007 of $1,082,363. For the same period of 2006, the Company
      used $590,909 of cash in operating activities, generated $222,538 in investing
      activities, and used $231,643 in cash from financing activities. The total
      of
      all cash flow activities through the first quarter of 2006 resulted in a
      decrease in the balance of cash of $600,014.




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
      March
      31, 2007, the Company had approximately $3,259,322 in cash and cash equivalents.
      These resources are what remain of the $6,000,000 in proceeds received by the
      Company by the way of unsecured loans as described below.




Page
          14




During
      the fourth quarter of 2006, the Company received two unsecured loans totaling
      $6,000,000. The lender of the $6,000,000 is a private investment company that
      is
      an affiliate of Mykonos 6420 LP (“Mykonos”), the sole holder of the Company’s
      Series C Preferred Stock. As such, Mykonos has the right to elect a majority
      of
      the Company's Board of Directors. The terms of the two notes were approved
      by a
      Special Committee of the Board of Directors consisting solely of disinterested
      directors. Both loans bear interest at a rate of 7% per annum. Principal and
      interest on the loans are due at the earlier of (i) July 1, 2008 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 Company may prepay the loans at any time without premium or
      penalty. The proceeds of the loans will be used to meet the Company’s working
      capital needs and are anticipated to be repaid from proceeds of a subsequent
      debt or equity financing.




During
      2006 and through March 31, 2007, the Company had financed the acquisition of
      approximately $1,250,000 of monitoring equipment through five sale-leaseback
      agreements with AHK Leasing, LLC, a company controlled by three stockholders,
      one of which is a current director (“AHK”). 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 total, as of March 31, 2007, the Company
      had nine capital lease facilities in place which were used to finance offender
      monitoring equipment. Under these sale-leaseback arrangements, the Company
      sells
      the inventory to AHK and then leases the equipment back. All capital leases
      are
      treated as financing transactions with four of the leases carrying interest
      rates of 9.50% per annum and five of them carrying interest rates of 12.00%
      per
      annum. Maturity dates on these capital leases run from September 2007 to October
      2009. As of March 31, 2007, the aggregate balance on these nine capital leases
      totaled $1,350,861, of which $798,082 is current and the balance of $552,779
      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 asset based credit arrangements described in
      note
      7, 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 financial 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.




**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.




Page
          15




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.







Page
          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 monetary
      damages. The Company denies all material allegations made by Pro Tech and
      intends to vigorously defend itself against this lawsuit. The Company 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
      March
      30, 2007, the Company issued a total of 1,324 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 Exchangeable
                Preferred
                Stock of the Company (2)4.1
            Form
                of Common Stock Certificate (1)10.1
            Indemnification
                Agreement, dated February 21, 2007, made by the Company in favor
                of and
                for the benefit of AHK Leasing, LLC (4)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 2002.32
            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).**(4)*
              *Incorporated
                  by reference from the registrant’s current report on Form 8-K, filed on
                  February 22, 2007 (Commission File No.
                  0-26455).*


Page
          17







**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. Michel


Peter
      A.
      Michel


*President
      & CEO*





Dated:
      May 9, 2007










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          18