**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549-1004**





**Form
      10-Q**





**(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, 2008**





**or**





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


**Exchange
      Act of 1934**





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





**Commission
      File Number 000-26455**





**ISECURETRAC
      CORP.**


**(Exact
      name of registrant as specified in its charter)**


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




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


**OMAHA,
      NEBRASKA 68137**


**(Address
      of principal executive offices, Zip Code)**





**(402)
      537-0022**


**(Registrant’s
      telephone number, including area code)**





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 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  ̈





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer or a smaller reporting company.
      See
      the definitions of “large accelerated filer”, “accelerated filer” and “smaller
      reporting company in Rule 12b-2 of the Exchange Act.


Large
      accelerated filer  ̈ Accelerated filer  ̈


Non-accelerated
      filer  ̈ (Do
      not
      check if a smaller reporting
      company)                     Smaller
      reporting company x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes  ̈ No x





The
      number of shares of issuer’s common stock outstanding as of July 21, 2008 was
      10,788,312.









**PART
      I. FINANCIAL INFORMATION**




**Item
      1. Financial Statements**





***iSECUREtrac
      Corp. and SUBSIDIARIES***


***CONSOLIDATED
      BALANCE SHEETS***


(Unaudited)
                June 30, 2008
              
              December 31, 2007**ASSETS**Current
                  AssetsCash
                  and cash equivalents (see Note 9)
              
              $
              706,242
              
              $
              3,442,712Accounts
                  receivable, net of allowance for doubtful accounts of $325,781
                  in 2008 and
                  $292,669 in 2007
              
              
              2,163,397
              
              
              1,941,902Inventories
              
              
              193,057
              
              
              135,376Prepaid
                  expenses and other
              
              
              63,622
              
              
              92,750Total
                  current assets
              
              
              3,126,317
              
              
              5,612,740Leasehold
                  improvements and equipment, net of accumulated depreciation of
                  $8,164,085
                  in 2008 and $7,041,272 in 2007
              
              
              4,810,561
              
              
              3,875,728Intangibles,
                  net of accumulated amortization of $871,147 in 2008 and $850,166
                  in
                  2007
              
              
              40,375
              
              
              61,356Goodwill
              
              
              2,302,179
              
              
              2,302,179Other
                  assets
              
              
              73,889
              
              
              88,425Total
                  assets
              
              $
              10,353,321
              
              $
              11,940,428**LIABILITIES
                  AND STOCKHOLDERS' (DEFICIT)**Current
                  LiabilitiesAccounts
                  payable
              
              $
              458,344
              
              $
              1,069,577Accrued
                  expenses
              
              
              585,458
              
              
              609,083Current
                  maturities of long-term debt
              
              
              1,072,243
              
              
              622,340Deferred
                  revenues & gain on sale-leaseback transactions
              
              
              291,245
              
              
              314,090Accrued
                  interest payable
              
              
              414,093
              
              
              30,513Total
                  current liabilities
              
              
              2,821,383
              
              
              2,645,603Long-term
                  debt, less current maturities
              
              
              13,058,585
              
              
              12,381,598Redeemable
                  convertible Series C preferred stock
              
              
              12,492,925
              
              
              11,882,545Stockholders'
                  (deficit)Common
                  stock
              
              
              10,788
              
              
              10,779Additional
                  paid-in capital
              
              
              55,225,412
              
              
              55,109,333Accumulated
                  deficit
              
              
              (73,255,773
              )
              
              (70,089,430
              )Total
                  stockholders' (deficit)
              
              
              (18,019,572
              )
              
              (14,969,318
              )Total
                  liabilities and stockholders' (deficit)
              
              $
              10,353,321
              
              $
              11,940,428





See
      Notes
      to Consolidated Financial Statements (unaudited).




Page
          1


***iSECUREtrac
      Corp. and SUBSIDIARIES***


***CONSOLIDATED
      STATEMENTS OF OPERATIONS***


***(Unaudited)***


Three Months Ended
                  June 30
                
                Six Months Ended
                  June 302008
                
                2007
                
                2008
                
                2007**Revenues:**Equipment
                    leasing
                
                $
                2,239,019
                
                $
                2,154,375
                
                $
                4,418,596
                
                $
                4,088,413Administrative,
                    field & support service revenues
                
                
                86,700
                
                
                -
                
                
                161,153Equipment
                    sales
                
                
                23,958
                
                
                20,795
                
                
                46,199
                
                
                77,003Other
                    revenues
                
                
                6,004
                
                
                30,459
                
                
                218,852
                
                
                149,969Gain
                    on related party sale-leaseback transactions
                
                
                -
                
                
                44,844
                
                
                13,191
                
                
                89,706Total
                    revenues
                
                
                2,355,681
                
                
                2,250,473
                
                
                4,857,992
                
                
                4,405,091**Operating
                    expenses:**Cost
                    of revenues
                
                
                948,121
                
                
                893,685
                
                
                2,036,015
                
                
                1,754,684Research
                    and development
                
                
                328,747
                
                
                413,115
                
                
                668,558
                
                
                886,224Sales,
                    general and administrative
                
                
                2,046,532
                
                
                2,228,738
                
                
                4,298,335
                
                
                4,295,965Total
                    operating expenses
                
                
                3,323,400
                
                
                3,535,538
                
                
                7,002,908
                
                
                6,936,873Operating
                    loss
                
                
                (967,719
                )
                
                (1,285,065
                )
                
                (2,144,916
                )
                
                (2,531,782
                )**Other
                    income (expense):**Interest
                    income
                
                
                4,843
                
                
                33,177
                
                
                24,067
                
                
                79,652Interest
                    expense
                
                
                (268,388
                )
                
                (145,504
                )
                
                (533,372
                )
                
                (298,030
                )Total
                    other income (expense)
                
                
                (263,545
                )
                
                (112,327
                )
                
                (509,305
                )
                
                (218,378
                )Loss
                    before provision for income taxes
                
                
                (1,231,264
                )
                
                (1,397,392
                )
                
                (2,654,220
                )
                
                (2,750,160
                )Provision
                    for income taxes
                
                
                -
                
                
                -
                
                
                -
                
                
                -**Net
                    loss**
                
                $
                (1,231,264
                )
                $
                (1,397,392
                )
                $
                (2,654,220
                )
                $
                (2,750,160
                )Preferred
                    stock dividends and accretion
                
                
                (305,190
                )
                
                (286,224
                )
                
                (610,380
                )
                
                (569,841
                )**Net
                    loss available to common stockholders**
                
                $
                (1,536,454
                )
                $
                (1,683,616
                )
                $
                (3,264,601
                )
                $
                (3,320,001
                )**Basic
                    and diluted loss per common share**
                
                $
                (0.14
                )
                $
                (0.16
                )
                $
                (0.30
                )
                $
                (0.31
                )**Weighted
                    average shares of common stock outstanding**
                
                
                10,785,534
                
                
                10,775,687
                
                
                10,783,583
                
                
                10,774,681




See
      Notes
      to Consolidated Financial Statements (unaudited).




Page
          2





***iSECUREtrac
      Corp. AND SUBSIDIARIES***


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


***For
      the Six Months Ended June 30, 2008***


***(unaudited)***





**Common Stock**
            
            **Additional**
              **Paid -in**
            
            **Accumulated****Shares**
            
            **Amount**
            
            **Capital**
            
            **Deficit**
            
            **Total****Balance,
                December 31, 2007**
            
            
            10,779,680
            
            $
            10,779
            
            $
            55,109,333
            
            $
            (70,089,430
            )
            $
            (14,969,318
            )Shares
                issued for director's fees
            
            
            8,632
            
            
            9
            
            
            3,991
            
            
            -
            
            
            4,000Stock
                based compensation
            
            
            -
            
            
            -
            
            
            210,347
            
            
            -
            
            
            210,347Series
                C preferred stock dividends
            
            
            -
            
            
            -
            
            
            -
            
            
            (512,122
            )
            
            (512,122
            )Accretion
                to redemption value of preferred stock
            
            
            -
            
            
            -
            
            
            (98,259
            )
            
            -
            
            
            (98,259
            )Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,654,220
            )
            
            (2,654,220
            )**Balance,
                June 30, 2008**
            
            
            10,788,312
            
            $
            10,788
            
            $
            55,225,412
            
            $
            (73,255,773
            )
            $
            (18,019,572
            )





See
      Notes
      to Consolidated Financial Statements (unaudited).


Page
          3





***iSECUREtrac
      CORP. AND SUBSIDIARIES***


***CONSOLIDATED
      STATEMENTS OF CASH FLOWS***


***Six
      Months Ended June 30, 2008 and 2007***


***(unaudited)***


**2008**
              
              **2007****Cash
                  Flows From Operating Activities**Net
                  loss
              
              $
              (2,654,220
              )
              $
              (2,750,160
              )Depreciation
                  and amortization
              
              
              1,143,794
              
              
              913,111Stock
                  based compensation
              
              
              214,347
              
              
              164,238(Increase)
                  decrease in accounts receivable
              
              
              (221,494
              )
              
              264,212(Increase)
                  in inventories
              
              
              (57,681
              )
              
              (35,406
              )Decrease
                  in prepaid expenses
              
              
              29,129
              
              
              10,077Increase
                  in accounts payable
              
              
              (611,233
              )
              
              (330,786
              )(Decrease)
                  in accrued expenses
              
              
              (23,625
              )
              
              62,031(Decrease)
                  in deferred revenues and gain on sale - leaseback transactions
              
              
              (22,845
              )
              
              (78,895
              )Increase
                  in accrued interest payable
              
              
              383,580
              
              
              208,274**Net
                  cash (used in) operating activities**
              
              
              (1,820,250
              )
              
              (1,573,304
              )**Cash
                  Flows From Investing Activities**Purchases
                  of leasehold improvements and equipment
              
              
              (2,057,647
              )
              
              (263,259
              )(Increase)
                  in other assets
              
              
              14,537
              
              
              (3,624
              )**Net
                  cash (used in) investing activities**
              
              
              (2,043,111
              )
              
              (266,883
              )**Cash
                  Flows From Financing Activities**Principal
                  proceeds from long-term debt
              
              
              1,600,000
              
              
              -Principal
                  payments on long-term debt
              
              
              (473,109
              )
              
              (474,988
              )**Net
                  cash provided by (used in) financing activities**
              
              
              1,126,891
              
              
              (474,988
              )**(Decrease)
                  in cash**
              
              
              (2,736,470
              )
              
              (2,315,175
              )**Cash
                  at beginning of period**
              
              
              3,442,712
              
              
              4,341,685**Cash
                  at end of period**
              
              $
              706,242
              
              $
              2,026,510**Supplemental
                  Disclosure of Cash Payments for**Interest
              
              
              149,792
              
              
              89,756




See
      Notes
      to 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, 2007, 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, 2008 and June 30, 2007
      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 audited 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, 2007. The results
      of operations and cash flows for the three and six months ended June 30, 2008
      are not necessarily indicative of the results for the entire fiscal year ending
      December 31, 2008. Where appropriate, items of an insignificant nature within
      the condensed consolidated financial statements have been reclassified from
      the
      previous periods’ presentation.




The
      Company believes that its current working capital, combined with the expected
      amounts available through lease financing for its monitoring equipment described
      in notes 5 and 9, are sufficient to meet its liquidity needs through
      2008. In the early part of 2009, depending on the results of operations for
      2008, it is probable the Company will need additional equity or debt
      financing to have sufficient capital to satisfy liquidity needs  in
      2009.  The Company does not have any irrevocable commitments to provide any
      such additional capital at this time and there is no assurance that such
      additional equity or debt financing will be available. However,
      the Company has begun discussions with a major shareholder regarding additional
      debt financing with the intention of having an agreement in place during the
      4 th Quarter
      of 2008. If
      the
      Company is unable to obtain additional capital, it will need to take other
      steps, including imposition of significant cost reductions, in order to maintain
      operations.




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




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




During
      the three and six months ended June 30, 2008, the Company granted options to
      purchase a total of 87,500 and 561,000 shares of common stock to eleven and
      sixty-eight employees, respectively, pursuant to the 2006 Plan. During the
      three
      and six months ended June 30, 2008, 39,156 and 70,200 options issued under
      the
      2006 Plan were forfeited, 712 and 775 options issued under the 2001 Plan were
      forfeited and 0 and 36,000 options issued under employment agreements outside
      the 2006 Plan and the 2001 Plan, respectively, were forfeited. No options were
      exercised during the three or six months ended June 30, 2008. The following
      table shows stock option activity during the six month period ended June 30,
      2008:




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, 2007
            
            
            1,817,580
            
            $
            2.30Granted
            
            
            561,000
            
            
            0.61Exercised
            
            
            -
            
            
            -Forfeited
            
            
            (106,975
            )
            
            0.73Outstanding
                at June 30, 2008
            
            
            2,271,605
            
            $
            0.86
            
            
            6.19
            
            $
            15,215Exercisable
                at June 30, 2008
            
            
            1,604,148
            
            $
            2.27
            
            
            4.94
            
            $
            793




As
      of
      June 30, 2008, the aggregate intrinsic value of outstanding and exercisable
      options, which is the actual value of the options if exercised, was $15,215
      and
      $793, respectively.




During
      the three and six months ended June 30, 2008, 0 and 295,890 warrants expired
      and
      no warrants were granted or exercised by warrant holders.




At
      June
      30, 2008, the Company had 2,271,605 outstanding stock options, 6,287,045 shares
      issuable upon exercise of warrants to be issued upon exchange of Preferred
      Stock, and 3,627,035 shares issuable upon the exercise of outstanding warrants
      that were not included in the computation of diluted EPS because to do so would
      have been anti-dilutive for the period presented.




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




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****30-Jun-08**
            
            **December 31, 2007**Risk
                free interest rate
            
            
            4.27
            %
            
            4.65
            %Expected
                volatility factor
            
            
            84.54
            %
            
            86.59
            %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
            
            
            19%
                and 20
            %
            
            19%
                and 20
            %




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 3.5 years to 6.5 years.




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




The
      Company is required to estimate forfeitures of stock options. The forfeiture
      rate is the rate at which options are expected to be forfeited prior to full
      vesting. 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
      senior executive and non-senior executive option grants is 19% and 20%,
      respectively. 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.




The
      Company recorded share-based compensation expense of $105,218 and $210,347
      for
      the three and six months ended June 30, 2008, respectively, compared to $90,640
      and $160,238 for the same periods in 2007.




As
      of
      June 30, 2008, there was approximately $486,110 of total unrecognized
      compensation costs related to non-vested stock option agreements granted to
      the
      Company’s executives and employees. The future compensation expense the Company
      will recognize if and as these options vest according to their contractual
      terms
      is as follows:





2008
            
            $
            207,9422009
            
            
            267,5192010
            
            
            10,649Total
            
            $
            486,110




**Note
      3. Leasehold Improvements and Equipment**




The
      cost
      and accumulated depreciation of our leasehold improvements and equipment as
      of
      June 30, 2008 and December 31, 2007 are as follows:





**June
                30, 2008**
            
            **December
                31, 2007****Cost**
            
            **Accumulated**
              **Depreciation**
            
            **Net
                Book**
              **Value**
            
            **Cost**
            
            **Accumulated**
              **Depreciation**
            
            **Net
                Book**
              **Value**Equipment
            
            $
            969,867
            
            $
            523,002
            
            $
            446,864
            
            $
            844,307
            
            $
            446,991
            
            $
            397,316Leasehold
                improvements
            
            
            230,338
            
            
            83,593
            
            
            146,746
            
            
            227,229
            
            
            54,047
            
            
            173,182Monitoring
                equipment
            
            
            11,774,441
            
            
            7,557,490
            
            
            4,216,951
            
            
            9,845,464
            
            
            6,540,234
            
            
            3,305,230Total
                leasehold improvements and equipment
            
            $
            12,974,646
            
            $
            8,164,085
            
            $
            4,810,561
            
            $
            10,917,000
            
            $
            7,041,272
            
            $
            3,875,728




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




Goodwill
      is the excess of the cash paid over the fair value of the net assets acquired
      and liabilities assumed in an acquisition, less the amount of identifiable
      intangible assets.  Goodwill is not amortized, but is tested for impairment
      on an annual basis at the end of each calendar year.  The Company
      determined that there was no impairment of goodwill as of December 31,
      2007.




The
      Company also separately records other intangible assets that can be identified
      and assigned a value.  At June 30, 2008, such intangible assets consisted
      solely of customer monitoring contracts acquired in a prior acquisition. The
      Company amortizes the initial carrying value attributable to these monitoring
      contracts 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 $10,490 and
      $20,981 for the three and six month periods ended June 30, 2008, respectively
      and $20,642 and $41,284 for the comparable periods in 2007. These intangible
      assets are also tested for impairment on an annual basis.




Page
          7




The
      composition of goodwill and intangible assets at June 30, 2008 and December
      31,
      2007, is as follows:





**June
                30, 2008**
            
            **December
                31, 2007****Goodwill**
            
            **Intangibles, subject**
              **to****Amortization**
            
            **Goodwill**
            
            **Intangibles, subject**
              **to****Amortization**Gross
                Carrying Amount
            
            $
            2,302,179
            
            $
            911,522
            
            $
            2,302,179
            
            $
            911,522Accumulated
                Amortization
            
            
            -
            
            
            (871,147
            )
            
            -
            
            
            (850,166
            )Balance
            
            $
            2,302,179
            
            $
            40,375
            
            $
            2,302,179
            
            $
            61,356





The
      estimated aggregate amortization expense of the intangibles is as
      follows:




2008
            
            $
            20,9822009
            
            
            19,393Total
            
            $
            40,375





**Note
      5. Long-Term Debt**




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





As
      of
      June 30, 2008, the Company had remaining capital lease facilities in place
      to
      finance the future acquisition of approximately $1,150,000 of monitoring
      equipment with AHK Leasing, LLC (“AHK”), a company controlled by three
      stockholders, one of which is a current director. Subsequent to June 30, 2008,
      the Company executed an additional $500,000 lease as described in Note 9.





Under
      these sale-leaseback arrangements, the Company sells the inventory to AHK and
      then leases the equipment back. AHK has indicated that it will continue to
      provide lease financing for additional monitoring equipment throughout 2008.
      Maturity dates on these capital leases run from June 2009 to April 2011. 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
      10.00% to 12.50%. As of June 30, 2008, the aggregate balance on these capital
      leases totaled $2,253,353. The aggregate balance on capital leases at December
      31, 2007 was $1,126,463. For the three and six months ended June 30, 2008
      interest expense to AHK was $47,869 and $82,278, respectively, as compared
      to
      $37,650 and $81,665 for the three and six months ended June 30, 2007,
      respectively. There was no accrued interest at June 30, 2008 and December 31,
      2007 to AHK.





As
      of
      June 30, 2008, the Company had outstanding borrowings of $11,877,475 under
      a
      secured Promissory Note payable to, and an associated Credit and Security
      Agreement (the “Crestpark Note”) with, Crestpark LP, Inc. (the “Lender”). The
      Lender is an affiliate of the sole holder of our Series C Preferred Stock.
      Principal on the Crestpark Note is due on the earlier of (i) July 1, 2010
      or (ii) the first date on which the Company either issues equity securities
      or
      arranges for additional indebtedness (other than trade indebtedness incurred
      in
      the ordinary course of its business) in a transaction or series of transactions
      which generates aggregate net proceeds to the Company of not less than the
      then
      current principal amount outstanding under the Crestpark Note, plus all accrued
      but unpaid interest. The Company may prepay the Crestpark Note at any time
      without premium or penalty. The Crestpark Note provides, among other things,
      that $6,455,250 of the borrowings thereunder bears interest at 7.0% per annum
      and that such interest will be due and payable at maturity of the Crestpark
      Note. The remaining $5,422,225 of borrowings (the “Floating Tranche”) under the
      Crestpark Note bears interest at a floating rate equal to 2% over the prime
      rate
      (the “Base Rate”). The portion of the interest on the Floating Tranche
      determined by the Base Rate will be payable at maturity, but the remaining
      portion of the interest representing the 2% premium over the Base Rate is
      payable monthly. Accrued interest on the Crestpark Note at June 30, 2008 and
      December 31, 2007, equaled $414,093 and $30,513, respectively.




Page
          8




Total
      interest expense for the Company for the three and six months ended June 30,
      2008 was $268,388 and $533,372, respectively, compared to $145,504 and $298,030
      during the same periods in 2007. Of that amount, $259,126 and $520,382 was
      expensed to related parties under the AHK Capital Leases and the Crestpark
      Note
      for the three and six months ended June 30, 2008, respectively, compared to
      $140,562 and $288,139 during the same periods in 2007.




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




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




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




The
      Preferred Stock is redeemable on the tenth anniversary of the original issue
      date. The redemption price per share of the Preferred Stock will equal the
      per
      share original issue price ($11 per share) plus an amount equal to all accrued
      but unpaid dividends thereon (and any interest payable thereon).  The
      interest method will be utilized to accrete the carrying amount of the Preferred
      Stock over the ten year period to the earliest redemption date so that the
      carrying amount will equal the redemption amount at the earliest possible
      redemption date.  Due to the accumulated deficit position of the Company,
      the periodic accretion will be charged to Additional Paid-In Capital. As of
      June
      30, 2008, the Company had accrued Series C Preferred Stock dividends totaling
      $2,868,083 and accretion to redemption value of the Series C Preferred Stock
      totaling $589,552. Of these amounts, $256,061 and $49,129, respectively, were
      the amounts accrued during the three months ended June 30, 2008.




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%.




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.




Page
          9




**Note
      7. Recent Accounting Pronouncements**




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. In February 2008, FASB
      issued FASB Staff Position (“FSP”) FAS 157-2, *Effective
      Date of FASB Statement No. 157,* which
      delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial
      liabilities that are recognized or disclosed in the financial statements on
      a
      nonrecurring basis. The FSP partially defers the effective date of SFAS 157
      to
      fiscal years beginning after November 15, 2008, and interim periods within
      those
      fiscal years for items within the scope of this FSP. The adoption of SFAS 157
      did not have a material effect on the Company’s financial position or results of
      operations. The Company is currently evaluating the potential effect of FSP
      FAS
      157-2 on the Company’s financial position and results of
      operations.





In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* (“SFAS
      No. 159”). SFAS No. 159 permits entities to choose to measure many financial
      instruments and certain other items at fair value and establishes presentation
      and disclosure requirements designed to facilitate comparisons between entities
      that choose different measurement attributes for similar types of assets and
      liabilities. The statement is effective for fiscal years beginning after
      November 15, 2007. The adoption of SFAS No. 159 did not have a material effect
      on the Company’s financial condition or results of operations.





In
      December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
      consolidated Financial Statements - an Amendment of ARB No. 51." This statement
      requires that noncontrolling or minority interests in subsidiaries be presented
      in the consolidated statement of financial position within equity, but separate
      from the parents' equity, and that the amount of the consolidated net income
      attributable to the parent and to the noncontrolling interest be clearly
      identified and presented on the face of the consolidated statement of income.
      SFAS No. 160 is effective for the fiscal years beginning on or after December
      15, 2008. Currently the Company does not anticipate that this statement will
      have an impact on its financial statements.





In
      December 2007, the FASB issued SFAS No. 141 (Revised) “Business Combinations”.
      SFAS No. 141 (Revised) establishes principles and requirements for how the
      acquirer of a business recognizes and measures in its financial statements
      the
      identifiable assets acquired, the liabilities assumed, and any noncontrolling
      interest in the acquiree. The statement also provides guidance for recognizing
      and measuring the goodwill acquired in the business combination and determines
      what information to disclose to enable users of the financial statements to
      evaluate the nature and financial effects of the business combination. The
      guidance will become effective for the fiscal year beginning after December
      15,
      2008. Management does not anticipate that SFAS No. 141 (Revised) will have
      an
      impact on the Company’s financial statements upon adoption.




Page
          10




In
      March
      2008, the Financial Accounting Standards Board (“FASB”) issued SFAS
      No. 161, *Disclosures
      about Derivative Instruments and Hedging Activities* (“Statement No. 161”) *.* The new
      standard is intended to improve financial reporting about derivative instruments
      and hedging activities by requiring enhanced disclosures to enable investors
      to
      better understand their effects on an entity’s financial condition, financial
      performance, and cash flows. It is effective for financial statements issued
      for
      fiscal years and interim periods beginning after November 15, 2008.
      Statement No. 161 will impact disclosures only and will not have an impact
      on the Company’s consolidated financial condition, results of operations or cash
      flows.




**Note
      8. Contingencies**




On
      November 27, 2007, the Company and Pro Tech Monitoring, Inc. (“Pro Tech”)
      entered into a Confidential Settlement Agreement (the “Settlement Agreement”),
      pursuant to which the parties agreed to compromise and settle all claims and
      disputes related to a lawsuit filed by Pro Tech against the Company in the
      United States District Court for the Middle District of Florida in which Pro
      Tech alleged that the Company had infringed on a U.S. patent held by Pro Tech
      relating to GPS tracking and monitoring apparatus and systems. Pro Tech was
      seeking an injunction and substantial monetary damages from the
      Company.




Pursuant
      to the Settlement Agreement, Pro Tech has caused the dismissal of its lawsuit
      against the Company. In consideration, the Company paid Pro Tech $800,000 in
      cash upon execution of the Settlement Agreement and agreed to, and did purchase
      $600,000 worth of sobriety monitoring equipment from Pro Tech prior to December
      31, 2007. The $800,000 was included in sales, general and administrative
      expenses for the year ended December 31, 2007. In addition, the Company has
      agreed to make a modification to its GPS tracking equipment to eliminate or
      disable a component that allegedly infringed on Pro Tech’s patent. On January
      27, 2008, the Company became subject to royalty payments which escalate over
      time on activated, unmodified equipment in the field. As of June 30, 2008,
      the
      Company has expensed $65,698 and accrued $10,049 of settlement royalty costs.
      The Company entered into the Settlement Agreement without admission of liability
      and solely to avoid the expense and uncertainty of litigation.





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




**Note
      9. Subsequent Events**




On
      July
      3, 2008, the Company executed a $500,000 sale-leaseback arrangement with AHK
      consistent with the terms outlined in Note 5. The agreement was executed July
      3 rd and the
      cash was received by the Company on July 7 th .
      The
      effect of the transaction was an increase to cash and long term debt of
      $500,000. The execution of this lease reduced the remaining capital lease
      facilities in place for future monitoring equipment purchases to
      $650,000.




Page
          11




**Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations.**




**General**




Discussions
      of certain matters contained in this Quarterly Report on Form 10-Q 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-Q, 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
      6. Management’s Discussion and Analysis or Plan of Operation”* contained in the Company’s Form 10-KSB filed for the year ended December 31,
      2007.




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.




**Overview**




iSECUREtrac
      develops, markets, leases and services products that assist in “monitoring
      compliance and modifying behavior” of individuals who are under the supervision
      of the criminal justice system and social service agencies, primarily in the
      United States.




The
      Company’s principal sources of revenue are daily leasing of electronic
      monitoring equipment including access to the corresponding web-based monitoring
      software, and providing administrative, field and support services, generally
      charged on a per offender basis.




**Results
      of Operations**





***Total
      Revenues***


For
      the
      three month and six month periods ended June 30, 2008, the Company had total
      revenue of $2,355,681 and $4,857,992, respectively compared to $2,250,473 and
      $4,405,091 for the same periods in 2007 which represent an increase of 4.7%
      and
      10.3%.





The
      Company’s principal sources of revenue (equipment leasing and administrative,
      field and support services) for the three and six months ended June 30, 2008
      increased 8.0% and 12.0% over the comparable periods in 2007.





The
      increase in revenue is a result of an increase in the number of units under
      lease and an increase in the number of units utilizing the Company’s
      administrative, field and support services.





***Cost
      of Revenues***


Cost
      of
      revenues represents all direct costs related to delivery of monitoring equipment
      including amortization of the acquisition costs, repairs and maintenance of
      the
      monitoring equipment, transportation costs, settlement royalty costs,
      communication costs associated with the equipment, as well as costs to upgrade
      existing units for advancements in technology. Certain costs such as
      communication costs, shipping and amortization increased during the three and
      six months ended June 30, 2008 compared to the same periods for 2007, as a
      result of additional units under lease. Royalty payments began as a result
      of
      the settlement signed with ProTech Monitoring (see Note 8 to the Financial
      Statements) These increases were offset by reductions in equipment upgrade
      and
      repair costs resulting in total cost of revenues for the three and six months
      ended June 30, 2008 increasing $54,436 (6%) and $281,331 (16%) respectively
      compared to the same periods in 2007.





Page
          12





***Research
      and Development Expenses***


Research
      and Development (R&D) expenses represent the on-going direct costs
      associated with the development of the Company’s proprietary hardware and
      software including staffing expenses for the Company’s own engineers and
      software developers, the cost of outside contracted engineering and design,
      and
      the actual costs of components, prototypes, and testing equipment and services
      used in the product development functions.





Research
      and Development expenses for the three and six months ended June 30, 2008 were
      $328,747 and $668,558 respectively which represent, a decrease of $84,368 (20%)
      and $217,666 (25%) compared to the same periods in 2007. The main reason for
      the
      decrease in R&D costs over the comparable periods was the completion of the
      development and testing of the Company’s next generation product, the System
      5000, in the fourth quarter of 2007.




***Sales,
      General and Administrative Expenses***


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 payroll, taxes and benefits and related travel for
      executive, sales, administrative, customer support and accounting staff. In
      addition these costs include rent on property, corporate communications, office
      leases and supplies, marketing, advertising, trade shows, recruiting and
      training expenses, professional fees and bad debt expense.





The
      Company’s SG&A expenses for the three months ended March 31, 2008 and 2007
      and the six months ended June 30, 2008 and 2007 are further detailed in the
      following table:





**3 Months**
              **Ended**
              **March 31, 2008**
            
            **3 Months**
              **Ended**
              **June 30, 2008**
            
            **6 Months**
              **Ended**
              **June 30, 2008**
            
            **3 Months**
              **Ended**
              **March 31, 2007**
            
            **3 Months**
              **Ended**
              **June 30, 2007**
            
            **6 Months**
              **Ended**
              **June 30, 2007****Detail
                of Sales, General & Administrative expenses (SG&A)**Litigation
                and settlement expenses
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            1,595
            
            $
            88,880
            
            $
            90,475Management
                restructuring expenses
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            59,511
            
            
            59,511Consulting
                expenses - Sarbanes-Oxley
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            58,445
            
            
            58,445Other
                sales, general and administrative expenses
            
            
            2,251,803
            
            
            2,046,532
            
            
            4,298,335
            
            
            2,065,632
            
            
            2,021,902
            
            
            4,087,534**Total
                SG&A**
            
            $
            2,251,803
            
            $
            2,046,532
            
            $
            4,298,335
            
            $
            2,067,227
            
            $
            2,228,738
            
            $
            4,295,965




Page
          13




***2*** ***nd*** ***Quarter 2008 vs. 2*** ***nd*** ***Quarter 2007***





For
      the
      three months ended June 30, 2008, SG&A expenses decreased $182,206 to
      $2,046,532 from $2,228,738 incurred in the comparable period in 2007.
      Significant increases and decreases of SG&A expense in the comparable
      periods are highlighted below:




o
            Litigation
                and settlement expenses, management restructuring expenses and consulting
                expenses related to Sarbanes-Oxley decreased approximately $207,000.




o
            Compensation
                expense increased approximately $142,000 due to the increase in staffing
                levels made in mid 2007 in customer facing areas such as sales, repair
                and
                our monitoring center.




o
            Travel
                & Entertainment decreased approximately $50,000 due to cost controls
                implemented in Q2 of 2008.




o
            Bad
                Debt expense decreased approximately $33,000 as a result of management’s
                evaluation of the receivable
                portfolio.




o
            Various
                other expenses including consulting and customer relations decreased
                an
                aggregate of approximately $34,000.




***Year-to-date
      2008 vs. Year-to-date 2007:***





For
      the
      six months ended June 30, 2008, SG&A expenses increased $2,370 to $4,298,335
      from $4,295,965 incurred in the comparable period in 2007. Significant increases
      and decreases of SG&A expense in the comparable periods are highlighted
      below:




o
            Litigation
                and settlement expenses, management restructuring expenses and consulting
                fees in connection with Sarbanes-Oxley decreased approximately $208,000.




o
            Compensation
                expense including benefits increased approximately $400,000 due to
                the
                increase in staffing levels made in mid 2007 in customer facing areas
                such
                as sales, repair and our monitoring center.




o
            Travel
                & Entertainment decreased approximately $59,000.




o
            Stock
                option expenses increased approximately $50,000 as a result of the
                stock
                options issued by the Company in January 2008.  There were fewer
                stock options issued in the first half of
                2007.




o
            Damaged/Scrapped
                Component costs decreased approximately $38,000 due to the peak in
                this
                expense item 1stquarter 2007.




o
            Various
                other expenses including Bad Debt Expense, Insurance Expense, Dues/Fees
                and other consulting fees declined an aggregate of approximately
                $143,000.




Page
          14




***Cost
      Reduction Plan Implemented during the 2*** ***nd*** ***Quarter***





During
      the first quarter of 2008, the executive team began the process of evaluating
      the Company’s cost structure and began to take actions to control expenditures,
      most particularly in the Sales, General and Administrative area.





The
      net
      result of these actions is expected to be a reduction of expenses of
      approximately $1,100,000 on an annual basis, of which $977,000 relates to
      SG&A, the remaining $123,000 relates to R&D . The timing of the actions
      taken resulted in minimal impact on the SG&A expenses in the three months
      and six months ending June 30, 2008. The full benefit of these reductions are
      not expected to be realized until the three months ending December 31, 2008.
      We
      believe that the following quarter to quarter comparison illustrates the effect
      of this cost reduction plan.




***2*** ***nd*** ***Quarter 2008 vs. 1*** ***st*** ***Quarter 2008***




For
      the
      three months ended June 30, 2008 , SG&A expenses decreased $205,271 from the
      three months ended March 31, 2008. Significant decreases are outlined
      below:




o
            Compensation
                expense decreased approximately $71,000 as a result of the Cost Reduction
                Plan outlined above as well as open positions in the three months
                ended
                June 30, 2008.




o
            Consulting
                fees, not related to Sarbanes-Oxley, decreased approximately $48,000
                as a
                result of the Cost Reduction Plan outlined
                above.




o
            Legal
                fees decreased approximately $39,000 mainly as a result of the Company’s
                annual reporting in the three months ending March 31,
                2008




o
            Travel
                & Entertainment decreased approximately $48,000 as a result of the
                Cost Reduction Plan outlined above.




***Interest
      Expense, Net***


Net
      interest expense represents the total interest expense incurred by the Company
      reduced by the interest income earned by the Company during the year. Net
      interest expense for the three and six months ended June 30, 2008 was $263,545
      and $509,305 respectively compared to $112,327 and $218,378 compared to the
      same
      periods in 2007. The increase is attributable to the increase in equipment
      purchased under capital leases, as well as the additional borrowings from
      Crestpark LP, Inc. in late 2007. As a result of the additional borrowing from
      Crestpark LP, Inc. and the Company’s continuing use of capital leases to finance
      its equipment purchases, we expect to see net interest expense continue to
      grow
      throughout 2008.




***Net
      Loss***


The
      Company’s net loss for the three and six months ended June 30, 2008 was
      $1,231,264 and $2,654,220 respectively compared to $1,397,392 and $2,750,160
      compared to the same periods in 2007, for the reasons described above.





Page
          15




***Preferred
      Stock Dividends and Accretion***


For
      the
      three and six months ended June 30, 2008, preferred stock dividends and
      accretion totaled $305,190, and $610,380, respectively, as compared to $286,224
      and $569,841 for the same periods in 2007. This increase was due to compounding
      interest on accrued but unpaid dividends on our Series C Preferred Stock. The
      Series C Exchangeable Preferred Stock accrues interest at a cumulative
      compounded rate of 8.0% per annum.




**Liquidity
      and Capital Resources**




For
      the
      six months ended June 30, 2008, the Company used $1,820,250 of cash in operating
      activities, used another $2,043,111 in investing activities, and generated
      $1,126,891 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, 2008 of $2,736,470. For the same period of 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 through the first half of 2007 resulted in a decrease
      in the balance of cash of $2,315,175.




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, 2008, the Company had approximately $706,242 in cash and cash equivalents.
      These resources are what remain of the additional amount borrowed by the Company
      in the fourth quarter of 2007 under its secured loan from Crestpark LP, Inc.
      (“Crestpark”) an affiliate of Mykonos 6420 LP (“Mykonos”), the sole holder of
      the Company’s Series C Preferred Stock (the “Crestpark Note”). The total amount
      of the Crestpark Note is $11,877,475. Principal on the Crestpark Note is due
      on
      the earlier of (i) July 1, 2010 or (ii) the first date on which the Company
      either issues equity securities or arranges for additional indebtedness (other
      than trade indebtedness incurred in the ordinary course of its business) in
      a
      transaction or series of transactions which generates aggregate net proceeds
      to
      the Company of not less than the then current principal amount outstanding
      under
      the Crestpark Note, plus all accrued but unpaid interest. The Company may prepay
      the Crestpark Note at any time without premium or penalty. The Crestpark Note
      provides, among other things, that $6,455,250 of the borrowings thereunder
      bears
      interest at 7.0% per annum and that such interest will be due and payable at
      maturity of the Crestpark Note. The remaining $5,422,225 of borrowings (the
      “Floating Tranche”) under the Crestpark Note bears interest at a floating rate
      equal to 2% over the prime rate (the “Base Rate”). The portion of the interest
      on the Floating Tranche determined by the Base Rate will be payable at maturity,
      but the remaining portion of the interest representing the 2% premium over
      the
      Base Rate is payable monthly. Borrowings under the Crestpark Note are secured
      by
      a first security interest in all of the assets of the Company except that
      Crestpark’s security interest in certain monitoring equipment is subordinate to
      the interest of AHK under capital lease facilities described below. The terms
      of
      the Crestpark Note were approved by a Special Committee of the Board of
      Directors consisting solely of disinterested directors.




As
      of
      June 30, 2008, the Company had remaining capital lease facilities in place
      to
      finance the future acquisition of approximately $1,150,000 of monitoring
      equipment with AHK Leasing, LLC (“AHK”), a company controlled by three
      stockholders, one of which is a current director. Subsequent to June 30, 2008,
      the Company executed an additional $500,00 lease as described in Note 9 to
      the
      Financial Statements included in this report. Under these sale-leaseback
      arrangements, the Company sells the inventory to AHK and then leases the
      equipment back. AHK has indicated that it will continue to provide lease
      financing for additional monitoring equipment throughout 2008. Maturity dates
      on
      these capital leases run from June 2009 to July 2011. 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 10.00% to 12.50%. As
      of
      June 30, 2008, the aggregate balance on these capital leases totaled $2,253,353,
      of which $1,072,243 is current and the balance of $1,181,110 is classified
      as
      long-term debt.




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          16




The
      Company believes that its current working capital, combined with the expected
      amounts available through lease financing for our monitoring equipment described
      above are sufficient to meet its liquidity needs through 2008.   In the
      early part of 2009, depending on the results of operations for 2008, it is
      probable the Company will need additional equity or debt financing to have
      sufficient capital to satisfy liquidity needs  in
      2009.  The Company does not have any irrevocable commitments to provide any
      such additional capital at this time and there is no assurance that such
      additional equity or debt financing will be available. However,
      the Company has begun discussions with a major shareholder regarding additional
      debt financing with the intention of having an agreement in place during the
      4 th Quarter
      of 2008.  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.




**Application
      of Critical Accounting Estimates**




Management
      uses estimates and assumptions in preparing our financial statements in
      accordance with accounting principles generally accepted in the United States.
      These estimates and assumptions affect the reported amounts of assets and
      liabilities, the disclosure of contingent assets and liabilities, and the
      reported revenues and expenses. Periodically, we evaluate our estimates and
      assumptions based upon historical experience and various other factors and
      circumstances. Management believes that our estimates and assumptions are
      reasonable under the circumstances; however, actual results may vary from these
      estimates and assumptions under different future circumstances. We do not
      believe that any of the accounting estimates are critical at this time, however
      we expect to continue to review our accounting estimates in order to determine
      if any of these accounting estimates are critical. For further discussion of
      our
      significant accounting policies, refer to Note 1 – “Nature of Business and
      Significant Accounting Policies” to the Consolidated Financial Statements in our
      Annual Report on Form 10-KSB for the fiscal year ended December 31,
      2007.




**Off-Balance
      Sheet Arrangements**





We
      do not
      have any off-balance sheet arrangements.




**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk**





Management
      does not believe that there is any material market risk exposure with respect
      to
      derivative or other financial instruments that would require disclosure under
      this item.




**Item
      4T. 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
          17




The
      Company’s principal executive officer and principal financial officer determined
      that 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
          18




**PART
      II. OTHER INFORMATION**




**Item
      1. Legal Proceedings.**




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




**Item
      1A. Risk Factors.**




Not
      Applicable




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




On
      May 5,
      2008, the Company issued a total of 5,556 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.**




None




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


The
      annual meeting of stockholder was held on April 30, 2008. At the annual meeting,
      stockholders voted to:




(i)
            elect
                three directors of the Company by the holders of the Common Stock
                to serve
                for a one-year term;




(ii)
            elect
                three directors of the Company by the holders of the Series C Preferred
                Stock to serve for a one-year term;
                and




(iii)
            ratify
                the appointment of McGladrey & Pullen, LLP as our independent auditors
                for the fiscal year ending December 31,
                2008




There
      were 10,782,756 shares of Common Stock entitled to vote at the meeting, of
      which
      7,923,280 (73.48%) were represented at the meeting, and 1,000,000 shares of
      Series C Preferred Stock entitled to vote at the meeting, of which 100% were
      represented at the meeting.




Page
          19




The
      voting results were as follows:




**Election
      of Directors by holders of Common Stock**




Name
            
            For
            
            Authority
                WithheldRoger
                J. Kanne
            
            7,802,712
            
            120,568Peter
                A. Michel
            
            7,802,712
            
            120,568Ravi
                Nath
            
            7,802,712
            
            120,568




**Election
      of Directors by holders of Series C Preferred Stock**




Name
            
            For
            
            Authority
                WithheldRobert
                Korba
            
            1,000,000
            
            -Joseph
                Ethridge
            
            1,000,000
            
            -Bruce
                Leadbetter
            
            1,000,000
            
            -




**Ratification
      of Auditors**




For
            
            Against
            
            Abstained7,705,662
            
            203,481
            
            14,186




As
      a
      result, each nominee for director was elected to the Board of Directors for
      the
      term set forth above and the appointment of McGladrey & Pullen, LLP as our
      independent auditors for the fiscal year ending December 31, 2008 was duly
      ratified by the stockholders.




**Item
      5. Other Information.**




None




**Item
      6. Exhibits.**




3.1
              
              Amended
                  and Restated Certificate of Incorporation of the Company, as amended
                  (3)3.2
              
              Restated
                  Bylaws of the Company (1)3.3
              
              Certificate
                  of Designations, Preferences and Rights of Series C 8% Cumulative,
                  Compounding Exchangeable Preferred Stock of the Company
                  (2)4.1
              
              Form
                  of Common Stock Certificate (1)31.1
              
              Certification
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.31.2
              
              Certification
                  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.32
              
              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).*
  Page
            20


**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 12, 2008


By:
              /s/
                  Lincoln ZehrLincoln
                  Zehr*Chief
                  Financial Officer*Dated:
                  August 12, 2008


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          21