**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 JUNE 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****incorporation**
                **or
                  organization)**
              **(I.R.S.
                  Employer Identification
                  No.)**




**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 July 20, 2007 was
      10,776,596.





Transitional
      Small Business Disclosure Form (Check One): YES o NO x










**PART
      I. FINANCIAL INFORMATION**





**Item
      1. Financial Statements**




***iSECUREtrac
                  Corp. and SUBSIDIARIES******CONSOLIDATED
                  BALANCE SHEETS***(Unaudited)June
                  30, 2007
              
              December
                  31, 2006**ASSETS**Current
                  AssetsCash
                  and cash equivalents
              
              $
              2,026,510
              
              $
              4,341,685Accounts
                  receivable, net of allowance for doubtful accounts of
                  $288,016in
                  2007 and $171,409 in 2006
              
              
              2,019,965
              
              
              2,284,177Inventories
              
              
              96,427
              
              
              61,021Prepaid
                  expenses and other
              
              
              64,531
              
              
              74,608Total
                  current assets
              
              
              4,207,433
              
              
              6,761,491Equipment,
                  net of accumulated depreciation of $398,780in
                  2007 and $336,721 in 2006
              
              
              398,771
              
              
              382,072Leasehold
                  improvements, net of accumulated depreciation of $25,129in
                  2007 and $9,535 in 2006
              
              
              195,427
              
              
              67,396Monitoring
                  equipment, net of accumulated depreciation of $5,699,057in
                  2007 and $4,904,883 in 2006
              
              
              2,177,130
              
              
              2,930,429Intangibles,
                  net of accumulated amortization and impairment charges of
                  $808,882in
                  2007 and $767,598 in 2006
              
              
              102,640
              
              
              143,924Goodwill
              
              
              2,302,179
              
              
              2,302,179Other
                  assets
              
              
              69,669
              
              
              66,045Total
                  assets
              
              $
              9,453,249
              
              $
              12,653,536**LIABILITIES
                  AND STOCKHOLDERS' (DEFICIT)**Current
                  LiabilitiesAccounts
                  payable and accrued expenses
              
              $
              579,010
              
              $
              847,765Current
                  maturities of long-term debt
              
              
              664,225
              
              
              891,070Deferred
                  revenues & gain on sale-leaseback transaction
              
              
              344,454
              
              
              423,349Accrued
                  interest payable
              
              
              246,112
              
              
              37,838Total
                  current liabilities
              
              
              1,833,801
              
              
              2,200,022Long-term
                  debt, less current maturities
              
              
              6,445,959
              
              
              6,694,102Redeemable
                  convertible Series C preferred stock
              
              
              11,266,537
              
              
              10,696,697Stockholders'
                  (Deficit)Common
                  stock
              
              
              10,776
              
              
              10,773Additional
                  paid-in capital
              
              
              55,016,291
              
              
              54,950,315Accumulated
                  deficit
              
              
              (65,120,115
              )
              
              (61,898,373
              )Total
                  stockholders' (deficit)
              
              
              (10,093,048
              )
              
              (6,937,285
              )Total
                  liabilities and stockholders' (deficit)
              
              $
              9,453,249
              
              $
              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
                June
                  30
            
            Six
                Months Ended
                June
                  302007
            
            2006
            
            2007
            
            2006**Revenues:**Equipment
                leasing & hosting
            
            $
            2,154,375
            
            $
            1,849,992
            
            $
            4,088,413
            
            $
            3,503,464Equipment
                sales
            
            
            20,795
            
            
            280,066
            
            
            77,003
            
            
            288,055Service
                revenues
            
            
            30,459
            
            
            31,014
            
            
            149,969
            
            
            73,726Gain
                on related party sale-leaseback transactions
            
            
            44,844
            
            
            83,378
            
            
            89,706
            
            
            183,699Total
                revenues
            
            
            2,250,473
            
            
            2,244,450
            
            
            4,405,091
            
            
            4,048,944**Operating
                expenses:**Cost
                of revenues
            
            
            893,685
            
            
            893,540
            
            
            1,754,684
            
            
            1,589,674Research
                and development
            
            
            413,115
            
            
            353,772
            
            
            886,224
            
            
            661,012Sales,
                general and administrative
            
            
            2,228,738
            
            
            1,904,403
            
            
            4,295,965
            
            
            3,875,027Total
                operating expenses
            
            
            3,535,538
            
            
            3,151,715
            
            
            6,936,873
            
            
            6,125,713Operating
                loss
            
            
            (1,285,065
            )
            
            (907,265
            )
            
            (2,531,782
            )
            
            (2,076,769
            )**Other
                income (expense):**Interest
                income
            
            
            33,177
            
            
            26,180
            
            
            79,652
            
            
            62,801Interest
                expense
            
            
            (145,504
            )
            
            (42,102
            )
            
            (298,030
            )
            
            (103,914
            )Total
                other income (expense)
            
            
            (112,327
            )
            
            (15,922
            )
            
            (218,378
            )
            
            (41,113
            )Loss
                before provision for income taxes
            
            
            (1,397,392
            )
            
            (923,187
            )
            
            (2,750,160
            )
            
            (2,117,882
            )Provision
                for income taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -**Net
                loss**
            
            $
            (1,397,392
            )
            $
            (923,187
            )
            $
            (2,750,160
            )
            $
            (2,117,882
            )Preferred
                stock dividends and accretion
            
            
            (286,224
            )
            
            (268,528
            )
            
            (569,841
            )
            
            (534,644
            )**Net
                loss available to common stockholders**
            
            $
            (1,683,616
            )
            $
            (1,191,715
            )
            $
            (3,320,001
            )
            $
            (2,652,526
            )**Basic
                and diluted loss per common share**
            
            $
            (0.16
            )
            $
            (0.11
            )
            $
            (0.31
            )
            $
            (0.25
            )**Weighted
                average shares of common stock outstanding**
            
            
            10,775,687
            
            
            10,770,437
            
            
            10,774,681
            
            
            10,734,563


See
        Notes
        to Condensed Consolidated Financial Statements
        (unaudited).


Page
          2


***iSECUREtrac
                  Corp. AND SUBSIDIARIES******STATEMENT
                  OF STOCKHOLDERS' (DEFICIT)******For
                  the Six Months Ended June 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
              
              
              3,142
              
              
              3
              
              
              3,997
              
              
              -
              
              
              4,000Compensation
                  related to stock options issued
              
              
              -
              
              
              -
              
              
              160,238
              
              
              -
              
              
              160,238Series
                  C preferred stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              (471,582
              )
              
              (471,582
              )Accretion
                  to redemption value of preferred stock
              
              
              -
              
              
              -
              
              
              (98,259
              )
              
              -
              
              
              (98,259
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,750,160
              )
              
              (2,750,160
              )**Balance,
                  June 30, 2007**
              
              
              10,776,596
              
              $
              10,776
              
              $
              55,016,291
              
              $
              (65,120,115
              )
              $
              (10,093,048
              )
  See
        Notes
        to Condensed Consolidated Financial Statements (unaudited).




Page
          3


***iSECUREtrac
                  CORP. AND SUBSIDIARIES******CONSOLIDATED
                  STATEMENTS OF CASH FLOWS******Six
                  Months Ended June 30, 2007 and 2006****(Unaudited)***2007**
              
              **2006****Cash
                  Flows From Operating Activities**Net
                  loss
              
              $
              (2,750,160
              )
              $
              (2,117,882
              )Depreciation
                  and amortization
              
              
              913,111
              
              
              805,770Expenses
                  paid by issuance of stock, warrants, and options in lieu of
                  cash
              
              
              164,238
              
              
              210,649(Increase)
                  decrease in accounts receivable
              
              
              264,212
              
              
              (276,176
              )(Increase)
                  in inventories
              
              
              (35,406
              )
              
              (196,499
              )Increase
                  (decrease) in accounts payable and accrued expenses
              
              
              (268,755
              )
              
              219,601Increase
                  (decrease) in deferred revenues and gain on sale - leaseback
                  transactions
              
              
              (78,895
              )
              
              146,610Increase
                  (decrease) in accrued interest payable
              
              
              208,274
              
              
              (12,738
              )Other
              
              
              10,077
              
              
              (123,744
              )**Net
                  cash (used in) operating activities**
              
              
              (1,573,304
              )
              
              (1,344,409
              )**Cash
                  Flows From Investing Activities**Purchases
                  of leasehold improvements and equipment
              
              
              (222,385
              )
              
              (109,019
              )Purchases
                  of monitoring equipment
              
              
              (40,874
              )
              
              (790,845
              )Proceeds
                  from maturity of investments
              
              
              -
              
              
              6,350,000Purchase
                  of investments
              
              
              -
              
              
              (3,646,814
              )(Increase)
                  decrease in other assets
              
              
              (3,624
              )
              
              10,532**Net
                  cash provided by (used in) investing activities**
              
              
              (266,883
              )
              
              1,813,854**Cash
                  Flows From Financing Activities**Principal
                  proceeds from long-term debt
              
              
              -
              
              
              500,000Principal
                  payments on long-term debt
              
              
              (474,988
              )
              
              (863,636
              )Proceeds
                  from the exercise of options and warrants
              
              
              -
              
              
              2,778**Net
                  cash (used in) financing activities**
              
              
              (474,988
              )
              
              (360,858
              )**Increase
                  (decrease) in cash**
              
              
              (2,315,175
              )
              
              108,587**Cash
                  at beginning of period**
              
              
              4,341,685
              
              
              742,626**Cash
                  at end of period**
              
              $
              2,026,510
              
              $
              851,213**Supplemental
                  Disclosure of Cash Payments for**Interest
              
              
              89,756
              
              
              116,652


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 six months ended June 30, 2007 and June 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 six months ended June 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, 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 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 and six months ended June 30, 2007, the Company granted options to
      purchase a total of 89,725 and 94,975 shares of common stock to thirteen and
      twenty-two employees, respectively, pursuant to the 2006 Plan. During the three
      and six months ended June 30, 2007, 20,624 and 32,938 options issued under
      the
      2006 Plan were forfeited, 31,679 and 43,592 options issued under the 2001 Plan
      were forfeited and 200,208 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 six months ended June 30, 2007. The following
      table shows stock option activity during the six month period ended June 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
              
              
              94,975
              
              
              1.08Exercised
              
              
              -
              
              
              -Forfeited
              
              
              (280,905
              )
              
              2.07Outstanding
                  at June 30, 2007
              
              
              1,783,186
              
              $
              2.33
              
              
              5.90
              
              $
              51,758Exercisable
                  at June 30, 2007
              
              
              1,246,053
              
              $
              2.50
              
              
              4.52
              
              $
              7,022




As
      of
      June 30, 2007, the aggregate intrinsic value of outstanding and exercisable
      options, which is the actual value of the options if exercised, was $51,758
      and
      $7,022, respectively.




During
      the three and six month periods ended June 30, 2007, respectively, 144,835
      and
      703,156 warrants expired and no warrants were granted or exercised by warrant
      holders.




At
      June
      30, 2007, the Company had 1,783,186 outstanding stock options, 6,287,045 shares
      issuable upon exercise of warrants to be issued upon exchange of Preferred
      Stock, and 4,039,230 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.




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 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# 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:




**Six
                  Months Ended**
              
              **Year
                  Ended****June
                  30, 2007**
              
              **December
                  31, 2006**Risk
                  free interest rate
              
              
              4.65
              %
              
              4.63
              %Expected
                  volatility factor
              
              
              86.92
              %
              
              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.




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 $90,640 and $160,238 for the three
      and
      six month periods ended June 30, 2007, respectively, compared to $49,790 and
      $206,649 for the same periods in 2006.




As
      of
      June 30, 2007, there was approximately $645,489 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
              
              $
              176,1862008
              
              
              315,7002009
              
              
              153,603Total
              
              $
              645,489




**Note
      3. Monitoring Equipment**




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




Active
                  GPS
              
              Passive
                  GPS
              
              Breath
                  Alcohol
              
              Other
              
              TotalMonitoring
                  Equipment
              
              $
              2,932,525
              
              $
              3,242,822
              
              $
              964,896
              
              $
              735,944
              
              $
              7,876,187Less
                  accumulated depreciation
              
              
              (1,748,123
              )
              
              (2,728,234
              )
              
              (789,133
              )
              
              (433,567
              )
              
              (5,699,057
              )Monitoring
                  Equipment, net
              
              $
              1,184,402
              
              $
              514,588
              
              $
              175,763
              
              $
              302,377
              
              $
              2,177,130




**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 June 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 $41,284 for the three and six month periods
      ended June 30, 2007, respectively, and $23,176 and $46,353 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 June 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
              
              
              -
              
              
              (808,882
              )Balance
                  at June 30, 2007
              
              $
              2,302,179
              
              $
              102,640




The
      estimated aggregate amortization expense of the intangible assets is $41,285
      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 Annually 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
      June
      30, 2007, the Company had accrued Series C Preferred Stock dividends totaling
      $1,838,212 and accretion to redemption value of the Series C Preferred Stock
      totaling $393,035. Of these amounts, $471,582 and $98,259, respectively, were
      the amounts accrued during the six months ended June 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.





During
      2006, and through June 30, 2007, the Company financed the acquisition of
      approximately $1,250,000 of monitoring equipment through five sale-leaseback
      agreements 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 $1,500,000 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. As of June 30, 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 June 30, 2007 and December 31, 2006, the aggregate
      balance on these nine capital leases totaled $1,110,184 and $1,585,172,
      respectively. For the three and six month periods ended June 30, 2007, interest
      expense to AHK was $37,650 and $81,665, respectively, compared to $22,831 and
      $50,568 during the same periods in 2006. There was no accrued interest at June
      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 June 30, 2007 and December 31, 2006, the note
      balances were $6,000,000. For the three and six month periods ended June 30,
      2007, interest expense on the two unsecured notes was $104,712 and $208,274,
      respectively, compared to $0 and $0 during the same periods in 2006. As of
      June
      30, 2007 and December 31, 2006, accrued interest on the two unsecured loans
      totaled $246,112 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 and six months ended June 30, 2007.




Page
          9




We
      recognize interest and penalties related to uncertain tax positions in general
      and administrative expense. As of June 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. We are evaluating the impact
      that SFAS No. 157 may have on our 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 a valid defense against
      the
      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
          10




**Item
      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 and
      six
      month periods ended June 30, 2007, equipment leasing and hosting revenues were
      $2,154,375 and $4,088,413 compared to $1,849,992 and $3,503,464 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 six months ended June 30, 2007, equipment sales revenues were $20,795
      and $77,003 compared to $280,066 and $288,055 during the same periods in 2006.
      The main reason for the three and six 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. 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
          11




**Service
      Revenue**




Service
      Revenue consists of sales of non-core services including licensing fees, server
      maintenance agreements, and monitoring equipment repairs. For the three and
      six
      months ended June 30, 2007, Service Revenue was $30,459 and $149,969 compared
      to
      $31,014 and $73,726 for the comparable periods of 2006. The six month increase
      is attributable to an increase in equipment repairs of deployed monitoring
      units
      while the three month decrease reflects slightly fewer repairs in the second
      quarter of 2007 as compared to the second quarter of 2006. 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
      six months ended June 30, 2007, the Gain on Sale-leaseback Transactions was
      $44,844 and $89,706 compared to $83,378 and $183,699 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 June 30,
      2007,
      the Company had nine capital leases, four of which consisted of equipment sold
      at a gain. As of June 30, 2006, the Company had seven 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 six months ending June 30, 2007,
      Cost
      of Revenues was $893,685 and $1,754,684 compared to $893,540 and $1,589,674
      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 $413,115
      and
      $886,224 for the three and six months ended June 30, 2007, compared to $353,772
      and $661,012 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.




Page
          12




**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 and six months ended June 30, 2007,
      SG&A expenses were $2,228,738 and $4,295,965 compared to $1,904,403 and
$3,875,027 in the comparable periods 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, professional fees,
      advertising expense and travel expenses.




**Operating
      Loss**




For
      the
      three and six months ended June 30, 2007, operating loss was $1,285,065 and
      $2,531,782, compared to $907,265 and $2,076,769 for the same periods 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 and six months ended June 30, 2007, interest income was $33,177 and
      $79,652, compared to interest income of $26,180 and $62,801 in the comparable
      periods of 2006. The increase was due to the greater amount held in money market
      funds during the first six 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 six months ended June 30, 2007, interest expense was $145,504 and
      $298,030, compared to interest expense of $42,102 and $103,914 in the comparable
      periods of 2006. This increase was due to the increase in Company’s borrowings
      in the fourth quarter of 2006.




**Net
      Loss**




For
      the
      three and six months ended June 30, 2007, the Company had a net loss of
      $1,397,392 and $2,750,160 compared to a net loss of $923,187 and $2,117,882
      in
      the comparable periods of 2006, for the reasons described above.




**Preferred
      Stock Dividends and Accretion**




For
      the
      three and six months ended June 30, 2007, accrual of preferred stock dividends
      and accretion were $286,224 and $569,841, as compared to $268,528 and $534,644
      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.




**Net
      Loss Available to Common Stockholders**




For
      the
      three and six months ended June 30, 2007, there was a net loss available to
      common stockholders of $1,683,616 and $3,320,001 compared to $1,191,715 and
      $2,652,526 in 2006. The reasons for these changes are described
      above.




**Liquidity
      and Capital Resources**




For
      the
      six months ended June 30, 2007, the Company used $1,573,304 of cash in operating
      activities, used another $266,883 in investing activities, and used $474,988
      in
      cash from financing activities. The total of all cash flow activities resulted
      in a decrease in the balance of cash for the six months ended June 30, 2007
      of
      $2,315,175. For the same period of 2006, the Company used $1,344,409 of cash
      in
      operating activities, generated $1,813,854 in investing activities, and used
      $360,858 in cash from financing activities. The total of all cash flow
      activities through the second quarter of 2006 resulted in an increase in the
      balance of cash of $108,587.




Page
          13




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
      June
      30, 2007, the Company had approximately $2,026,510 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 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, 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 Company may prepay the loans at any time without premium or
      penalty. The proceeds of the loans have been and will continue to be used to
      meet the Company’s working capital needs.




During
      2006 and through June 30, 2007, the Company had financed the acquisition of
      approximately $1,250,000 of monitoring equipment through five sale-leaseback
      agreements with AHK Leasing, LLC (“AHK”), a company controlled by three
      stockholders, one of which is a current director. In total, as of June 30,
      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.
      AHK
      has indicated that it has the capacity to make up to $1,500,000 of additional
      credit available to the Company for future financing transactions. 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 June 30, 2007, the aggregate balance on these nine
      capital leases totaled $1,110,184, of which $664,225 is current and the balance
      of $445,959 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 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
          14




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
          15


**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 a valid defense against
      the
      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
      May
      23, 2007, the Company issued a total of 1,818 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.**




The
      Company held its 2007 Annual Meeting of Stockholders on May 4, 2007. All matters
      placed before security holders received the necessary votes to pass. The
      following three individuals were elected to continue a one year term as
      directors of the Company until the 2008 Annual Meeting of Stockholders: Roger
      J.
      Kanne, 7,945,110 votes for and 42,162 votes withheld, Ravi Nath 7,945,110 votes
      for and 42,162 votes withheld, and Peter A. Michel 7,945,110 votes for and
      42,162 votes withheld.




Mykonos,
      as the sole holder of the Company’s Series C Preferred Stock, re-appointed
      Robert W. Korba, Joseph A. Ethridge and Bruce Leadbetter to serve as directors
      of the Company for an additional one year term.




Also
      receiving the necessary votes to pass was the ratification of McGladrey &
Pullen, LLP as our independent auditor for 2007. The results were as follows:
      1,000,000 shares of Series C Preferred Stock (each of which is entitled to
      11
      votes on this matter) and 7,891,460 shares of Common Stock voted for
      ratification, 61,071 shares of Common Stock voted against ratification, and
      32,740 shares of Common Stock abstained.




**Item
      5. Other Information.**




Not
      Applicable




**Item
      6. Exhibits**





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




Page
          16




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
            Promissory
                Note Amendments, dated May 9, 2007, made by the Company in favor
                of and
                    for the benefit of Consolidated Investment Services, Inc.
                (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
                May 9, 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. MichelPeter
                A. Michel
              *President
                & CEO*Dated:
                August 8, 2007




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          18