**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549-1004**





**Form
      10-QSB**





**(Mark
      One)**


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


**Act
      of 1934**





**FOR
      THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006**




**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)**


**(formerly
      Advanced Business Sciences, Inc.)**




**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 oNo
x




The
      number of shares of issuer’s common stock outstanding as of November 3, 2006,
      was 10,772,402.





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 SHEET***




(Unaudited)September
                30, 2006
            
            December
                31, 2005**ASSETS**Current
                AssetsCash
                and cash equivalents
            
            $
            269,399
            
            $
            742,626Investments
            
            
            -
            
            
            3,445,776Accounts
                receivable, net of allowance for doubtful accounts of
                $150,000in
                2006 and $175,000 in 2005
            
            
            1,786,817
            
            
            1,618,473Investment
                interest receivable
            
            
            -
            
            
            3,555Inventories
            
            
            135,467
            
            
            122,739Prepaid
                expenses and other
            
            
            102,022
            
            
            83,360Total
                current assets
            
            
            2,293,705
            
            
            6,016,529Equipment,
                  net of accumulated depreciation of $322,535 in
                  2006 and $258,105 in 2005
            
            
            247,616
            
            
            220,231Leasehold
                  improvements, net of accumulated depreciation of $7,533 in
                  2006 and $2,537 in 2005
            
            
            61,357
            
            
            18,950Monitoring
                  equipment, net of accumulated depreciation of $4,513,932 in
                  2006 and $3,456,803 in 2005
            
            
            3,055,428
            
            
            2,563,193Intangibles,
                  net of accumulated amortization of $744,421 in
                  2006 and $674,891 in 2005
            
            
            167,101
            
            
            236,631Goodwill
            
            
            2,302,179
            
            
            2,302,179Other
                assets
            
            
            152,518
            
            
            118,260Total
                assets
            
            $
            8,279,904
            
            $
            11,475,973**LIABILITIES
                AND STOCKHOLDERS' (DEFICIT)**Current
                LiabilitiesCurrent
                maturities of long-term debt
            
            $
            878,057
            
            $
            1,326,502Accounts
                payable and accrued expenses
            
            
            837,797
            
            
            539,343Deferred
                revenues & gain on sale-leaseback transaction
            
            
            538,935
            
            
            435,840Accrued
                interest payable
            
            
            -
            
            
            12,738Total
                current liabilities
            
            
            2,254,789
            
            
            2,314,423Long-term
                debt, less current maturities
            
            
            695,998
            
            
            546,290Redeemable
                convertible Series C preferred stock
            
            
            10,407,869
            
            
            9,584,398Stockholders'
                (Deficit)Common
                stock
            
            
            10,772
            
            
            10,685Additional
                paid-in capital
            
            
            54,885,056
            
            
            54,551,133Accumulated
                deficit
            
            
            (59,974,580
            )
            
            (55,530,956
            )Total
                stockholders' (deficit)
            
            
            (5,078,752
            )
            
            (969,138
            )Total
                liabilities and stockholders' (deficit)
            
            $
            8,279,904
            
            $
            11,475,973See
                Notes to Condensed Consolidated Financial Statements.




Page
          2


***iSECUREtrac
                  Corp. and SUBSIDIARIES******CONSOLIDATED
                  STATEMENTS OF OPERATIONS******(Unaudited)***
  Three
                  Months Ended
              
              Nine
                  Months EndedSeptember
                  30
              
              September
                  302006
              
              2005
              
              2006
              
              2005**Revenues:**Equipment
                  sales
              
              $
              18,421
              
              $
              4,306
              
              $
              306,476
              
              $
              24,792Equipment
                  leasing & hosting
              
              
              1,817,050
              
              
              1,181,548
              
              
              5,320,514
              
              
              3,204,607Gain
                  on sale-leaseback transactions - related party
              
              
              44,844
              
              
              172,759
              
              
              228,543
              
              
              549,701Service
              
              
              5,401
              
              
              10,065
              
              
              79,127
              
              
              50,584Total
                  revenues
              
              
              1,885,716
              
              
              1,368,678
              
              
              5,934,660
              
              
              3,829,684**Operating
                  expenses:**Cost
                  of revenues
              
              
              793,912
              
              
              672,833
              
              
              2,383,586
              
              
              2,006,840Research
                  and development
              
              
              326,979
              
              
              200,849
              
              
              987,991
              
              
              612,335Sales,
                  general and administrative
              
              
              2,384,055
              
              
              1,454,829
              
              
              6,259,082
              
              
              3,767,588Total
                  operating expenses
              
              
              3,504,946
              
              
              2,328,511
              
              
              9,630,659
              
              
              6,386,763Operating
                  loss
              
              
              (1,619,230
              )
              
              (959,833
              )
              
              (3,695,999
              )
              
              (2,557,079
              )**Other
                  income (expense):**Interest
                  income
              
              
              11,222
              
              
              27,759
              
              
              74,023
              
              
              29,725Interest
                  expense
              
              
              (41,651
              )
              
              (91,618
              )
              
              (145,565
              )
              
              (559,025
              )Other,
                  net
              
              
              -
              
              
              -
              
              
              -
              
              
              31,837Total
                  other income (expense)
              
              
              (30,429
              )
              
              (63,859
              )
              
              (71,542
              )
              
              (497,463
              )Loss
                  before provision for income taxes
              
              
              (1,649,659
              )
              
              (1,023,692
              )
              
              (3,767,541
              )
              
              (3,054,542
              )Provision
                  for income taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -**Net
                  loss**
              
              $
              (1,649,659
              )
              $
              (1,023,692
              )
              $
              (3,767,541
              )
              $
              (3,054,542
              )Preferred
                  stock dividends and accretion
              
              
              (288,827
              )
              
              (270,937
              )
              
              (823,471
              )
              
              (278,170
              )**Net
                  loss available to common stockholders**
              
              $
              (1,938,486
              )
              $
              (1,294,629
              )
              $
              (4,591,012
              )
              $
              (3,332,712
              )**Basic
                  and diluted loss per common share**
              
              $
              (0.18
              )
              $
              (0.12
              )
              $
              (0.43
              )
              $
              (0.35
              )**Weighted
                  average shares of common stock outstanding**
              
              
              10,771,897
              
              
              10,635,864
              
              
              10,747,007
              
              
              9,656,142See
                  Notes to Condensed Consolidated Financial Statements.




Page
          3


***iSECUREtrac
                  Corp. AND SUBSIDIARIES******STATEMENT
                  OF STOCKHOLDERS' (DEFICIT)******For
                  the Nine Months Ended September 30,
                  2006***
  **Additional****Common
                  Stock**
              
              **Paid
                  -in**
              
              **Accumulated****Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit**
              
              **Total****Balance,
                  December 31, 2005**
              
              
              10,684,529
              
              $
              10,685
              
              $
              54,551,133
              
              $
              (55,530,956
              )
              $
              (969,138
              )Shares
                  issued upon conversion of notes
              
              
              83,958
              
              
              83
              
              
              189,337
              
              
              -
              
              
              189,420Shares
                  issued upon exercise of options
              
              
              1,385
              
              
              1
              
              
              3,088
              
              
              -
              
              
              3,089Shares
                  issued for director's fees
              
              
              2,530
              
              
              3
              
              
              5,997
              
              
              -
              
              
              6,000Compensation
                  related to stock options issued
              
              
              -
              
              
              -
              
              
              282,889
              
              
              -
              
              
              282,889Series
                  C preferred stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              (676,083
              )
              
              (676,083
              )Accretion
                  to redemption value of preferred stock
              
              
              -
              
              
              -
              
              
              (147,388
              )
              
              -
              
              
              (147,388
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,767,541
              )
              
              (3,767,541
              )**Balance,
                  September 30, 2006**
              
              
              10,772,402
              
              $
              10,772
              
              $
              54,885,056
              
              $
              (59,974,580
              )
              $
              (5,078,752
              )See
                  Notes to Condensed Consolidated Financial Statements.
  Page
            4
  ***iSECUREtrac
                  CORP. AND SUBSIDIARIES******CONSOLIDATED
                  STATEMENTS OF CASH FLOWS******For
                  the Nine Months Ended September 30, 2006 and
                  2005****(Unaudited)*
  **2006**
              
              **2005****Cash
                  Flows From Operating Activities**Net
                  loss
              
              $
              (3,767,541
              )
              $
              (3,054,542
              )Depreciation
                  and amortization
              
              
              1,196,085
              
              
              1,375,910Expenses
                  paid by issuance of stock, warrants, and options in lieu of
                  cash
              
              
              288,889
              
              
              148,022Gain
                  on sale - leaseback transactions
              
              
              (228,543
              )
              
              (549,701
              )Increase
                  in deferred income
              
              
              331,638
              
              
              -(Increase)
                  in accounts receivable
              
              
              (168,344
              )
              
              (132,612
              )(Increase)
                  in inventories
              
              
              (12,728
              )
              
              (11,100
              )Increase
                  (decrease) in accounts payable and accrued expenses
              
              
              298,454
              
              
              (1,042,594
              )Decrease
                  in restricted cash
              
              
              -
              
              
              700,000Other
              
              
              (27,845
              )
              
              77,071**Net
                  cash used in operating activities**
              
              
              (2,089,935
              )
              
              (2,489,546
              )**Cash
                  Flows From Investing Activities**Purchases
                  of leasehold improvements and equipment
              
              
              (139,218
              )
              
              (62,661
              )Purchases
                  of monitoring equipment
              
              
              (1,549,364
              )
              
              (1,330,728
              )Proceeds
                  from maturity of investments
              
              
              6,350,000
              
              
              -Purchase
                  of investments
              
              
              (2,904,224
              )
              
              (3,391,836
              )Increase
                  in other assets
              
              
              (34,258
              )
              
              -**Net
                  cash provided by (used in) investing activities**
              
              
              1,722,936
              
              
              (4,785,225
              )**Cash
                  Flows From Financing Activities**Principal
                  proceeds from notes
              
              
              -
              
              
              1,700,000Principal
                  payments on notes
              
              
              -
              
              
              (1,915,654
              )Principal
                  proceeds from long-term debt
              
              
              1,000,000
              
              
              400,000Principal
                  payments on long-term debt
              
              
              (1,109,317
              )
              
              (1,193,863
              )Proceeds
                  from the exercise of options and warrants
              
              
              3,089
              
              
              192,175Proceeds
                  from issuance of Series C preferred stock, net of offering
                  costs
              
              
              -
              
              
              10,578,687**Net
                  cash provided by (used in) financing activities**
              
              
              (106,228
              )
              
              9,761,345**(Decrease)
                  increase in cash**
              
              
              (473,227
              )
              
              2,486,574**Cash
                  at beginning of period**
              
              
              742,626
              
              
              44,997**Cash
                  at end of period**
              
              $
              269,399
              
              $
              2,531,571**Supplemental
                  Disclosure of Cash Payments for**Interest
              
              
              158,303
              
              
              693,969See
                  Notes to Condensed Consolidated Financial Statements.
  Page
            5





**iSECUREtrac
      CORP AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




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




The
      consolidated balance sheet of iSECUREtrac Corp (“Company”, or “iSt”) at December
      31, 2005, has been taken from audited consolidated financial statements at
      that
      date. The consolidated financial statements for the three and nine months ended
      September 30, 2006, and for the three and nine months ended September 30, 2005,
      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 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, 2005. The results of operations and
      cash
      flows for the three and nine months ended September 30, 2006, are not
      necessarily indicative of the results for the entire fiscal year ending December
      31, 2006. Where appropriate, items within the 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 the $2.25
      million credit facility described in Note 7 and the $1.7 million loan described
      in Note 9 are sufficient to meet its liquidity needs through the end of
      2006.  If the Company closes on an additional equity investment transaction
      as contemplated, it believes that it will have sufficient capital to satisfy
      liquidity needs through 2007. However, 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**




During
      the nine months ended September 30, 2006, the Company granted options to
      purchase a total of 71,175 shares of common stock to 69 employees pursuant
      to
      the Company’s 2001 Omnibus Equity Incentive Plan (the “2001 Plan”). No such
      options were issued during the three months ended September 30, 2006. During
      the
      nine months ended September 30, 2006, 183,000 shares of common stock were issued
      as employee compensation to our former President and Chief Executive Officer
      pursuant to contractual obligations outside the 2001 Plan. No shares were issued
      outside of the 2001 Plan during the three months ended September 30, 2006.
      The
      exercise prices for stock options issued during the period were set at the
      fair
      market value of iSt’s common stock on each respective grant date. The options
      vest ratably over two years. For the three and nine month periods ended
      September 30, 2006, 15,250 and 40,206 options were forfeited, respectively,
      by
      option holders and 177 and 1,385 options were exercised, respectively pursuant
      to the 2001 Plan. In addition, during the three and nine month periods ended
      September 30, 2006, 15,625 and 15,625 options issued outside the 2001 Plan,
      respectively, were forfeited. As of May 31, 2006, the 2001 Plan expired. No
      further option grants may be issued in conjunction with the 2001
      Plan.




On
      May 4,
      2006, the stockholders of iSt voted in favor of the proposal at the Company’s
      annual meeting to approve the newly created 2006 Omnibus Equity Incentive Plan
      (the “2006 Plan”). The 2006 Plan went into effect on May 31, 2006. For the three
      and nine month periods ended September 30, 2006, the Company granted options
      to
      purchase a total of 442,356 and 478,356 shares of common stock to 11 and 14
      employees and two board members, respectively, pursuant to the 2006 Plan. The
      exercise prices for these options were set at the fair market value of iSt’s
      common stock on each respective grant date. The options granted to the 14
      employees, one of which was an executive, vest ratably over two years, except
      for the executive’s options which vest ratably over three years The options
      granted to the two board members do not vest until May 31, 2007, at which time
      they will be fully vested. During the quarter ended September 30, 2006, with
      respect to the 2006 Plan, no options were forfeited by option holders and no
      options were exercised.




Page
          6




For
      the
      three and nine month periods ended September 30, 2006, 140,150 and 194,058
      warrants expired, respectively, and no warrants were granted or exercised by
      warrant holders.




At
      September 30, 2006, the Company had 1,796,727 outstanding stock options,
      6,287,045 shares issuable upon exercise of warrants to be issued upon exchange
      of Preferred Stock, and 4,811,110 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.




See
      Note
      3 for additional information regarding stock options granted as stock-based
      compensation.




**Note** **3.
      Stock-Based Compensation**




In
      December 2004, the Financial Accounting Standards Board (“FASB”) published FASB
      Statement No. 123 (revised 2004), “Share-Based Payment” (“FAS# 123(R)” or the
“Statement”). FAS# 123(R) requires that the compensation cost relating to
      share-based payment transactions, including grants of employee stock options,
      be
      recognized in financial statements. That cost will be measured based on the
      fair
      value of the equity or liability instruments issued. FAS# 123(R) covers a wide
      range of share-based compensation arrangements including stock options,
      restricted share plans, performance-based awards, share appreciation rights,
      and
      employee share purchase plans. FAS# 123(R) is a replacement of FASB Statement
      No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion
      No.
      25, Accounting for Stock Issued to Employees, and its related interpretive
      guidance (APB 25).




The
      Company adopted FAS# 123(R) as of January 1, 2006, using the modified
      prospective transition method for valuing stock options. Under this method,
      stock based compensation expense is recognized using the fair-value based
      accounting method for all employee awards granted, modified, or settled during
      a
      period. The effect of the Statement is to require the Company to measure the
      cost of its employee services received in exchange for stock options based
      on
      the grant-date fair value of the award, and to recognize the cost over the
      period the employee is required to provide services for the award. The Company
      is not restating any of the prior period stock based compensation
      disclosures.




Compensation
      expense related to the unvested portion of awards outstanding as of January
      1,
      2006, were based on the grant-date fair value of those awards as calculated
      under the original provisions of Statement No. 123. Accordingly, the Company
      did
      not re-measure the grant-date fair value estimate of the unvested portion of
      awards granted prior to January 1, 2006. The Company determined the fair value
      of these awards using the Black-Scholes option pricing model.




As
      a
      result of adopting FAS# 123(R), the Company recorded compensation expense of
      $78,240 and $288,889 for the three and nine months ended September 30, 2006,
      respectively.




As
      of May
      31, 2006, the Company’s 2001 Omnibus Equity Incentive Plan (the “2001 Plan”),
      that was approved by shareholders in June, 2001, expired. The 2001 Plan provided
      for the granting of stock options and other equity incentives to the Company’s
      officers, employees, directors and consultants who provided services to the
      Company. At September 30, 2006, there were 156,936 outstanding options in
      conjunction with the 2001 Plan. No further options may be issued under this
      plan.




Page
          7




On
      May 4,
      2006, at the Company’s annual meeting of shareholders, the stockholders approved
      the adoption of the Company’s newly created 2006 Omnibus Equity Incentive Plan
      (the “2006 Plan”). The 2006 Plan became effective on May 31, 2006. The 2006 Plan
      provides for the granting of stock options and other equity incentives to the
      Company’s officers, employees, directors and consultants who provide services to
      the Company. The 2006 Plan has a term of ten years unless terminated by the
      board of directors. Stock options are granted with an exercise price not less
      than fair market value of the common stock on the date of the grant. Vesting
      schedules and expiration dates for the grants issued under this plan are
      specified at the time of grant. At September 30, 2006, there were 478,356
      outstanding options in conjunction with the 2006 Plan.




Prior
      to
      the adoption of the 2006 Plan, the Company also granted stock-based compensation
      under executive employment agreements.




During
      the nine months ended September 30, 2006, the Company granted 732,531 common
      stock options to its executives and employees. The following table summarizes
      the stock options outstanding:


**Options**
              
              **Shares**
              
              **Weighted
                  Average**
                **Exercise
                  Price**
              
              **Weighted****Average**
                **RemainingContractual**
                **Life
                  (Years)**
              
              **Aggregate**
                  **Intrinsic**
                  **Value**Outstanding
                  at December 31, 2005
              
              
              1,121,412
              
              $
              2.62Granted
              
              
              732,531
              
              
              2.27Exercised
              
              
              (1,385
              )
              
              2.23Forfeited
              
              
              (55,831
              )
              
              3.37Outstanding
                  at September 30, 2006
              
              
              1,796,727
              
              $
              2.45
              
              
              5.25
              
              $
              75,681Exercisable
                  at September 30, 2006
              
              
              1,250,056
              
              $
              2.51
              
              
              3.60
              
              $
              51,514




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:




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 ten years.




Expected
      volatilities are based upon looking back at historical stock prices over the
      two
      years prior to the stock option award. Twelve observations per year are used
      in
      the calculation with the 15 th of the
      month stock price. The Company does a 2-year look back for the following
      reasons: (i) 2 years is the option vesting period; (ii) the stock price prior
      to
      two years ago is not reflective of Company’s expected future stock price; and
      (iii) the change in stock price prior to two years ago is considered abnormal
      with respect to the Company’s current state.




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 21%. This rate is
      recalculated on an annual basis.




Page
          8




The
      annual rate of quarterly dividends is 0% since iSECUREtrac has historically
      not
      paid dividends on its common stock.


**Nine
                  Months Ended**
              
              **Year
                  Ended****September
                  30, 2006**
              
              **December
                  31, 2005**Risk
                  free interest rate
              
              
              4.64
              %
              
              5.00
              %Expected
                  volatility factor
              
              
              89.06
              %
              
              106.62
              %Expected
                  option term in years
              
              
              4.12
              
              
              3.50Dividends
              
              $
              0.00
              
              $
              0.00




As
      of
      September 30, 2006, there was approximately $928,000 of total unrecognized
      compensation costs related to non-vested share based compensation agreements
      granted to the Company’s executives and employees.




Stock-based
      compensation of $133,720 and $148,022 has been reflected in net loss for the
      three and nine months ending September 30, 2005. Prior to 2006, the Company
      accounted for modifications of previously issued fixed stock option awards
      under
      the accounting consequences of modifications to a fixed stock option or award
      of
      APB Opinion No. 25 and related interpretations. Accordingly, the options granted
      prior to 2006 were accounted for as variable from the date of the modification
      to the date the option was exercised, forfeited, or expired unexercised.
      However, with the implementation of FAS# 123(R), variable accounting for equity
      awards has been eliminated, and instead a fair value is calculated for our
      stock
      options on the date granted.




The
      following table illustrates the effect on net loss for the three and nine months
      ending September 30, 2005, as if iSt had applied the fair value recognition
      provisions of SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      to
      stock-based compensation.


**Three
                  Months Ended**
              
              **Nine
                  Months Ended****September
                  30, 2005**
              
              **September
                  30, 2005**Net
                  loss, as reported
              
              $
              (1,023,692
              )
              $
              (3,054,542
              )Add:
                  Stock-based employee compensation expense included in reported
                  net
                  loss
              
              
              133,720
              
              
              148,022Deduct:
                  Total stock-based employee compensation expense determined under
                  fair
                  value based method for all awards
              
              
              (70,177
              )
              
              (114,878
              )Pro
                  forma net loss
              
              
              (960,149
              )
              
              (3,021,398
              )Preferred
                  dividends and accretion
              
              
              (270,937
              )
              
              (278,170
              )Pro
                  forma net loss available to common stockholders
              
              $
              (1,231,086
              )
              $
              (3,299,568
              )Basic
                  and diluted loss per share:As
                  reported
              
              $
              (0.12
              )
              $
              (0.35
              )Pro
                  forma
              
              $
              (0.12
              )
              $
              (0.34
              )




In
      determining the pro forma amounts above during 2005, the value of each grant
      is
      estimated at the grant date using the fair value method prescribed in SFAS
      No. 123 with the following assumptions: no dividends, risk free interest
      rate of 5%; expected life of 3.5 years and; expected price volatility of
      106.55%.




Page
          9




**Note
      4. Monitoring Equipment**




Monitoring
      equipment at September 30, 2006, is as follows:




Active
                  GPS
              
              Passive
                  GPS
              
              Breath
                  Alcohol
              
              Other
              
              TotalMonitoring
                  Equipment
              
              $
              2,798,938
              
              $
              3,185,812
              
              $
              964,896
              
              $
              619,714
              
              $
              7,569,360Less
                  accumulated depreciation
              
              
              (1,115,760
              )
              
              (2,458,219
              )
              
              (676,142
              )
              
              (263,811
              )
              
              (4,513,932
              )Monitoring
                  Equipment, net
              
              $
              1,683,178
              
              $
              727,593
              
              $
              288,754
              
              $
              355,903
              
              $
              3,055,428




No
      impairment charges were taken in 2005 or the nine months ended September 30,
      2006.




**Note
      5. Goodwill and Intangibles, 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, 2005.




The
      Company also records those other intangible assets that can be separately
      identified and assigned a value.  At September 30, 2006, all intangible
      assets consist of customer monitoring contracts. The Company is amortizing
      the
      intangible assets based on the revenue stream of the existing monitoring
      contracts. Amortization expense is included in sales, general and administrative
      expenses in the consolidated statements of operations and was $69,530 and
      $94,689 for the nine month periods ended September 30, 2006, and September
      30,
      2005, respectively. Included in the accumulated amortization is $302,298 of
      impairment losses taken in 2004 reflecting the uncertainty of customer retention
      as the Company began replacing their products with their tracNET24-based
      products.




The
      composition of goodwill and intangible assets at September 30, 2006, is as
      follows:


**Intangibles,
                  subject****Goodwill**
              
              **to
                  Amortization**Gross
                  Carrying Amount
              
              $
              2,302,179
              
              $
              911,522Accumulated
                  Amortization, including $302,298 of impairment loss
              
              
              -
              
              
              (744,421
              )Balance
                  at September 30, 2006
              
              $
              2,302,179
              
              $
              167,101




**Note
      6. Redeemable Convertible Series C Preferred Stock**




On
      June
      27, 2005, the Company issued 1,000,000 shares of its $0.01 par value Series
      C 8%
      Cumulative Compounding Exchangeable Preferred Stock .
       The 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. For the
      nine months ended September 30, 2006, the accretion amount charged to Additional
      Paid-In Capital was $147,388, while the Series C Preferred dividend accrual
      was
      $676,083.




Page
          10




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
      7. Lease Obligations**




During
      the quarter ended September 30, 2006, the Company financed the acquisition
      of
      approximately $500,000 of monitoring equipment through two $250,000
      sale-leaseback agreements with an entity owned by a director and two
      shareholders of the Company. The $500,000 was part of a $2.25 million
      asset-based credit facility from the related party to be used by the Company
      for
      the purchase of monitoring equipment. The advances against this line are secured
      by the Company’s revenue generating monitoring equipment. As of September 30,
      2006, the Company has received advances totaling $1,000,000 from this credit
      facility.




The
      Company has a total of nine capital leases which expire from October 2006 to
      August 2009. All nine of these capital leases are with related parties. 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 September 30, 2006, the aggregate balance on these nine capital
      leases totaled $1,574,055.




**Note
      8. Related Party Transactions**




During
      the quarter ended September 30, 2006, the Company paid $12,500 in consulting
      fees to Peter Michel for services provided by him, prior to becoming President,
      CEO and director of the Company on August 4, 2006.




**Note
      9. Subsequent Event**




On
      October 24, 2006, the Company received a loan in the amount of $1,700,000 from
      a
      private investment company to be used for short-term operating needs. This
      loan
      bears interest at a rate of 7% per annum and matures on the earlier of (i)
      January 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 $1,700,000. This loan is anticipated to be repaid with the
      proceeds from an equity investment in the Company currently being negotiated
      with the same investment group. The terms of such equity investment have not
      been agreed to at this time (and there is no assurance that such transaction
      will occur), but it is expected that the Company would issue shares of a newly
      created series of preferred stock that would be convertible into additional
      shares of common stock.





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 iSt’s Form 10-KSB filed for the year ended
      December 31, 2005.




The
      following discussion is intended to provide a better understanding of the
      significant changes in trends relating to iSt’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) selling and leasing of monitoring units to criminal
      justice agencies, (ii) providing agencies the use of Company’s proprietary
      software including its web-based tracking and monitoring system known as
      tracNET24TM and (iii) providing ancillary services such as training,
      monitoring and data archiving.




**Results
      of Operations** ****




**Equipment
      Sales Revenue**




Equipment
      Sales Revenue is derived from the sale of offender monitoring equipment. For
      the
      three and nine months ended September 30, 2006, equipment sales revenues were
      $18,421 and $306,476 compared to $4,306 and $24,792 during the same periods
      in
      2005. The main reason for the three and nine month increase is the hosting
      equipment sold to a customer that implemented its own GPS host monitoring
      system. 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
      and from hosting equipment are recognized when goods are received by the
      customer.




**Equipment** **Leasing
      and Hosting Revenue**




Equipment
      Leasing and Hosting Revenue is derived from the fees charged to customers for
      the use of the Company’s offender monitoring software including tracNET24,
      hosting offender data, the rental of offender monitoring equipment, and
      ancillary charges directly related to the monitoring of offenders. For the
      three
      and nine month periods ended September 30, 2006, equipment leasing and hosting
      revenues were $1,817,050 and $5,320,514 compared to $1,181,548 and $3,204,607
      for the same periods in 2005. This increase is attributable to the increase
      in
      the number of units under lease. Leasing, hosting, and service revenues are
      recognized upon performance of the respective service. Leasing and hosting
      contracts with customers are typically for twelve months.




Page
          12




**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 gain or at 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). The
      Gain
      on Sale-leaseback Transactions consists of amortization of this deferred gain.
      For the three and nine months ended September 30, 2006, the Gain on
      Sale-leaseback Transactions with related parties was $44,844 and $228,543
      compared to $172,759 and $549,701 during the same periods in 2005. This decrease
      is attributable to the maturity of two of the capital leases associated with
      these transactions. As of September 30, 2006, the Company had nine capital
      leases in conjunction with these transactions. Four of the nine capital leases
      consisted of equipment being sold at cost. As of September 30, 2005, the Company
      had seven capital leases in place in conjunction with these transactions, all
      of
      which consisted of equipment being sold at a gain.




**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
      nine
      months ended September 30, 2006, Service Revenue was $5,401 and $79,127 compared
      to $10,065 and $50,584 for the comparable periods of 2005. The three month
      decrease in the comparable three-month periods is the result of fewer equipment
      repairs, while the nine month increase is attributable to an overall increase
      in
      equipment repairs of deployed monitoring units.




**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. A portion of the cost of revenues consists of the
      amortization of product development costs, which began in March 2002. For the
      three and nine months ending September 30, 2006, Cost of Revenues was $793,912
      and $2,383,586 compared to $672,833 and $2,006,840 during the same periods
      in
      2005. This increase is primarily due to the increased amortization, 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 iSt’s development
      of its proprietary products. Expenses in this category include the cost of
      outside contracted engineering and design, staffing expenses for iSt’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 $326,979 and $987,991
      for
      the three and nine months ended September 30, 2006, compared to $200,849 and
      $612,335 for the same periods in 2005. This increase in research and development
      expenses was the result of additional testing and configuration expenses and
      increased costs related to the development of our next generation product,
      including an increase in research and development staff from ten employees
      at
      September 30, 2005, to 13 employees at September 30, 2006.




**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 nine months ended September 30, 2006,
      SG&A expenses were $2,384,055 and $6,259,082 compared to $1,454,829 and
      $3,767,588 in the comparable periods of 2005. The three and nine month increases
      were largely due to the increase in contract labor, bad debt expense, increased
      stock based compensation expense, travel expenses, and the payroll associated
      with the hiring of additional non-Research and Development staff from 52
      employees at September 30, 2005, to 66 employees at September 30, 2006.




Page
          13




**Operating
      Loss**




For
      the
      three and nine months ended September 30, 2006, operating loss was $1,619,230
      and $3,695,999, compared to $959,833 and $2,557,079 for the same periods in
      2005. 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 nine months ended September 30, 2006, interest income was $11,222
      and
      $74,023, compared to interest income of $27,759 and $29,725 in the comparable
      periods of 2005. The nine month increase was due to the investment of the cash
      received from the sale of Preferred Stock and warrants in June 2005, which
      was
      not needed for immediate working capital needs or debt repayment. These funds
      were invested in government securities and certificates of deposits with the
      Company’s primary bank. As these funds were needed for working capital purposes,
      they were not reinvested in such securities as they matured and, as a result,
      interest earnings declined in the three months ended September 30, 2006,
      compared to the same period of 2005.




**Interest
      Expense**




For
      the
      three and nine months ended September 30, 2006, interest expense was $41,651
      and
      $145,565, compared to interest expense of $91,618 and $559,025 in the comparable
      periods of 2005. This decrease was due to a significant reduction in the
      Company’s debt in 2005 pursuant to the Company’s recapitalization
      plan.




**Net
      Loss**




For
      the
      three and nine months ended September 30, 2006, the Company had a net loss
      of
      $1,649,659 and $3,767,541 compared to a net loss of $1,023,692 and $3,054,542
      in
      the comparable periods of 2005, for the reasons described above.




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




For
      the
      three and nine months ended September 30, 2006, preferred stock dividends and
      accretion were $288,827 and $823,471, as compared to $270,937 and $278,170
      for
      the comparable periods of 2005. This increase was due to the Series C
      Convertible Preferred Stock being outstanding for the entire nine month period
      in 2006 compared to being outstanding for only 95 days in 2005. The Series
      C
      Convertible Preferred Stock accrues interest at a cumulative compounded rate
      of
      8.0% per annum.




**Net
      Loss Available to Common Stockholders**




For
      the
      three and nine months ended September 30, 2006, there was a net loss available
      to common stockholders of $1,938,486 and $4,591,012 compared to $1,294,629
      and
      $3,332,712 in 2005. The reasons for these changes are described
      above.




Page
          14




**Liquidity
      and Capital Resources**




For
      the
      nine months ended September 30, 2006, the Company used $2,089,935 of cash in
      operating activities, generated $1,722,936 in investing activities, and used
      $106,228 in cash from financing activities. The total of all cash flow
      activities resulted in a decrease in the balance of cash for the nine months
      ended September 30, 2006 of $473,227. For the same period of 2005, the Company
      used $2,489,546 of cash in operating activities, another $4,785,225 in investing
      activities, and generated $9,761,345 of cash from financing activities. The
      total of all cash flow activities through the third quarter of 2005 resulted
      in
      an increase in the balance of cash of $2,486,574.




The
      Company’s principal uses of cash are the payment of operating expenses, the
      acquisition of monitoring equipment and the financing of its receivables. In
      general, the Company meets its liquidity needs from its current revenues, from
      cash and cash equivalents, and through capital leasing arrangements. As of
      September 30, 2006, the Company had approximately $269,000 in cash and cash
      equivalents. These resources are what remains of the $10,578,686 in net proceeds
      received by the Company as a result of the sale of 1,000,000 shares of Series
      C
      Preferred Stock in June 2005.




During
      the quarter ended June 30, 2006, the Company closed on a $2.25 million
      asset-based credit facility from a related party for the purchase of its
      monitoring equipment. The advances against this line are secured by the
      Company’s revenue generating monitoring equipment. During the quarter ended
      September 30, 2006, the Company took down two $250,000 draws against the $2.25
      million available under this facility which were structured as capital lease
      agreements. As of September 30, 2006, the Company had received advances totaling
      $1,000,000 from this credit facility leaving $1.25 million available for future
      financing transactions. In total, as of September 30, 2006, the Company had
      nine
      capital lease facilities in place which were used to finance offender monitoring
      equipment. All nine of these capital leases were sale-leaseback transactions
      with a related party. Under these sale-leaseback arrangements, the Company
      sells
      the inventory to the credit facility provider and then leases the equipment
      back. All capital leases are treated as financing transactions with five of
      the
      leases carrying interest rates of 9.50% per annum and four of them carrying
      interest rates of 12.00% per annum. Maturity dates on these capital leases
      run
      from October 2006 to August 2009. As of September 30, 2006, the aggregate
      balance on these nine capital leases totaled $1,574,055.




On
      October 24, 2006, the Company received a loan in the amount of $1,700,000 from
      a
      private investment company that is an affiliate of the holder of all shares
      of
      our Class C Preferred Stock to be used for short-term operating needs. The
      loan
      bears interest at a rate of 7% per annum. This loan matures on the earlier
      of
      (i) January 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 $1,700,000. This loan is anticipated to be repaid with the
      proceeds from an equity investment in the Company currently being negotiated
      with by the same investment group. The terms of such equity investment have
      not
      been agreed to at this time (and there is no assurance that such transaction
      will occur), but it is expected that the Company would issue shares of a newly
      created series of preferred stock that would be convertible into additional
      shares of common stock.




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 the $2.25
      million credit facility and $1.7 million loan described above are sufficient
      to
      meet its liquidity needs through the end of 2006.  If the Company closes on
      an additional equity investment transaction as contemplated, it believes that
      it
      will have sufficient capital to satisfy liquidity needs through 2007. However,
      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.




Page
          15




**Item
      3. Controls and Procedures**




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




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




Page
          16




**PART
      II. OTHER INFORMATION**




**Item
      1. Legal Proceedings.**




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




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




On
      August
      9, 2006, the Company issued a total of 834 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**


3.01
              Amended
                  and Restated Certificate of Incorporation of the Company, as amended
                  (3)3.02
              Restated
                  Bylaws of the Company (1)3.03
              Certificate
                  of Designations, Preferences and Rights of Series C Convertible
                  Preferred
                  Stock of iSt (2)4.01
              Form
                  of Common Stock Certificate (1)10.01
              Employment
                  Agreement between the Company and Peter Michel, dated August 4,
                  2006
                  (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 under Form 8-K, filed on
                June 23, 2005 (Commission File No.*
              *0-26455).*




*(3)*
            *Incorporated
                by reference from the registrant’s quarterly report under Form 10-QSB,
                filed on August 11, 2006 (Commission File No.*
              *0-26455).*




*(4)*
            *Incorporated
                by reference to Exhibit 10.1 from the registrants current report
                under
                Form 8-K, filed August 8, 2006 (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: November 8, 2006




Page
          18