securealert.htm

As Filed with the Securities and Exchange Commission on November 13, 2013

Registration No. 333-192329

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1/A

(Amendment No. 1)

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

SECUREALERT, INC.

(Name of Registrant As Specified in its Charter)

Utah	3669	87-0543981
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

150 West Civic Center Drive, Suite 400

Sandy, Utah 84070

Telephone: (801) 451-6141

(Address and Telephone Number of Principal Executive Offices)

Gordon Jesperson, Esq.

Chief Legal Counsel

150 West Civic Center Drive, Suite 400

Salt Lake City, UT 84070

Telephone: (801) 451-6141

(Name, Address and Telephone Number of Agent for Service)

Copies to:

Kevin R. Pinegar, Esq.

Wayne D. Swan, Esq.

Durham Jones & Pinegar, P.C.

111 East Broadway, Suite 900

Salt Lake City, UT 84111

Telephone: (801) 415-3000

Facsimile: (801) 415-3500

Approximate Date of Proposed Sale to the Public:

From time to time after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement the same offering: o

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. (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
		(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities Being Registered	Amount to be Registered (1)		Proposed Maximum Offering Price per Share(2)		Proposed Maximum Aggregate Offering Price(2)		Amount of Registration Fee

Common Stock, $0.00001 par value per share, issuable upon conversion of note		3,905,917	$	18.90	$	73,821,831	$	9,508

Total		3,905,917					$	9,508

(1) Pursuant to Rule 416 under the Securities Act, the shares being registered hereunder include such indeterminate number of shares of Common Stock as may be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends or similar transactions.

(2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act. The price per share and aggregate offering price are based on the closing sales price of the Registrant’s Common Stock on November 12, 2013, as reported on the OTC Markets (OTCQB).

The Registrant amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall hereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

3,905,917 Shares of Common Stock

This prospectus relates to the offer and resale by the selling shareholder identified in this prospectus of up to 3,905,917 shares (the “Shares”) of the common stock, par value $0.00001, (the “Common Stock”) of SecureAlert, Inc., a Utah corporation (“SecureAlert”), issued to the selling shareholder upon conversion of a promissory note held by and payable to the selling shareholder (the “Note”). The Note was made by SecureAlert under a Loan and Security Agreement between SecureAlert, Inc. and the selling shareholder on December 3, 2012. The Note was converted and the Shares issued to the selling shareholder on September 30, 2013.

We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale or other disposition of the Shares of Common Stock by the selling shareholder. Please refer to the section of this prospectus entitled “The Loan and Security Agreement” for a description of the loan transaction involving the Note and the section entitled “Selling Shareholder” for additional information regarding the selling shareholder. The selling shareholder may, from time to time, sell, transfer or otherwise dispose of any or all of the Shares on any exchange, market or trading facility on which the Common Stock is traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at various prices determined at the time of sale or at negotiated prices. See “Plan of Distribution” for more information about how the selling shareholder may sell the Shares.

We will pay the expenses incurred in registering the Shares, including legal and accounting fees. The selling shareholder will pay any commissions and selling expenses it may incur in connection with the sale of the Shares. See “Plan of Distribution.”

Our Common Stock is currently quoted on the OTC Markets (OTCQB) under the symbol “SCRA.” On November 12, 2013, the last reported sale price of our Common Stock was $18.90 per share.

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 4 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.

Neither the Securities and Exchange Commission nor any state securities regulators have approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is November 26, 2013.

TABLE OF CONTENTS

	Page

PROSPECTUS SUMMARY	1

CORPORATE INFORMATION	2

THE OFFERING	3

RISK FACTORS	4

Risks Related to our Company	4

Risks Related to our Business	4

Risks Related to our Common Stock	8

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	10

USE OF PROCEEDS	10

MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS	10

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12

BUSINESS	20

MANAGEMENT	29

EXECUTIVE COMPENSATION	36

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	37

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	39

THE LOAN AND SECURITY AGREEMENT	42

SELLING SHAREHOLDER	42

DESCRIPTION OF SECURITIES	43

PLAN OF DISTRIBUTION	45

LEGAL MATTERS	46

EXPERTS	46

WHERE YOU CAN FIND ADDITIONAL INFORMATION	47

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITY	47

FINANCIAL STATEMENTS	F-1

PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS	i

SIGNATURES	x

You should rely only on the information contained in this prospectus. We have not, and the selling shareholder has not, authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus is not an offer to sell, nor is the selling shareholder seeking an offer to buy, securities in any state where the offer or solicitation is not permitted. The information contained in this prospectus is complete and accurate as of the date on the front cover of this prospectus, but information may have changed since that date. We are responsible for updating this prospectus to ensure that all material information is included and we will update this prospectus to the extent required by law.

This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data and we do not make any representation as to the accuracy of the information.

PROSPECTUS SUMMARY

SecureAlert, Inc., a Utah corporation, is referred to as “SecureAlert,” “we,” “us,” “our,” or the “Company” throughout this prospectus. The items in the following summary are described in more detail later in this prospectus. This summary does not contain all of the information you should consider. Before investing in our securities, you should read the entire prospectus carefully, including the “Risk Factors” beginning on page 4 and the financial statements and related notes beginning on page F-1. Our fiscal year ends on September 30.

Overview

We were originally formed to manufacture and market medical diagnostic stains, solutions and related equipment. In July 2001, we expanded our product sales and monitoring services related to Personal Emergency Response Systems (“PERS”) and mobile Global Positioning System (“GPS”) tracking for the elderly. In 2006, we introduced the GPS tracking technology and monitoring business for the incarceration industry, which includes manufacturing, distributing, and monitoring mobile emergency and interactive GPS tracking products worn on the body that focus on the defendant and offender tracking, monitoring and intervention marketplace.

In fiscal year 2010, we spun off our medical diagnostic stain and PERS business in an entity known as ActiveCare, Inc., a Delaware corporation. At the end of fiscal year 2012, we sold our interest in Midwest Monitoring and Surveillance, Inc. to focus our resources on further developing our foreign markets. Early in fiscal year 2013, we sold our wholly-owned subsidiary, Court Programs of Florida, Inc. and related entities, as part of the same strategy.

Our Products and Services

We market and deploy offender management programs, combining patented GPS tracking technologies, full-time 24/7/365 intervention-based monitoring capabilities. Our vision is to be the global market leader for delivering the most reliable offender management solutions, which leverage superior intervention capabilities and integrated communication technologies. We believe that we currently deliver the only offender management technology which effectively integrates GPS, RF (Radio Frequency) and an interactive 3-way voice communication system into a single piece device, deployable worldwide.

Our ReliAlert™ and ReliAlert XC™ devices are manufactured in the United States and include a portfolio of products, e-Arrest Beacons and monitoring services designed to create “Jails without Walls,” and facilitate re-socializing offender populations. The products and services are customizable by offender types (e.g., domestic abusers, sexual predators, gang members, pre-trial defendants, or juvenile offenders) and offer practical solutions and options for the reintegration and effective re-socialization of select offenders safely back into society. Additionally, our proprietary software and device firmware support the dynamic accommodation of agency-established monitoring protocols, victim protection imperatives, geographic boundaries, work environments, school attendance, rehabilitation programs and sanctioned home restrictions. Our technologies are designed for domestic or international, federal, state and local agencies to provide location tracking of designated individuals within the criminal justice system and throughout a restricted geography.

Our GPS devices are securely attached around the offender’s ankle with a tamper resistant strap (steel cabling with optic fiber) that can be adjusted or removed without detection only by a supervising officer, and which is activated through services provided by our SecureAlert Monitoring Center (or other agency-based monitoring centers). Our monitoring devices feature our upgraded, patented, dual-steel banded SecureCuff™ strap for “at-risk” offenders who have qualified for electronic monitoring supervision, but who require an incremental level of security and supervision, provided through both hardware and monitoring services. Our monitoring and intervention centers act as an important link between the offender and the supervising officer, as intervention specialists persistently track and monitor the offender, initiating contact at the direction of the supervising agency and/or when the offender is in violation of any established restrictions or protocols.

The ReliAlert and ReliAlert XC units are intelligent devices with integrated computer circuitry and constructed from case-hardened plastics designed to promptly notify the intervention centers of any attempt made to breach applicable protocols, or to remove or otherwise tamper with the device or optical strap housing. Electronic monitoring provides for significantly enhanced probation and parole supervision, while also rationalizing the increased or earlier release of expensive-to-house low-risk, at-risk or moderate risk offender populations. We market our services on the basis that electronic monitoring and other supervisory programs provide cost-effective alternatives to incarceration or specific solutions for at-risk juveniles, domestic violence perpetrators and/or sexual predators, all of whom need careful monitoring and situational intervention to thwart repeat crimes. Due to the continuing economic crisis domestically and globally, it is our view that these incarceration costs are unsustainable, given ongoing state and federal budget reductions, facility-specific overcrowding concerns, increased rehabilitation imperatives and politicized re-socialization agendas.

In support of continually evolving rehabilitation and re-socialization initiatives of law enforcement and justice agencies in the United States and global markets, we have made the strategic decision to adopt and pursue a broader services charter than most electronic monitoring companies. Our “C.A.R.E.” programs support “Corrections” and “Accountability” objectives in concert with “Rehabilitation” and “Empowerment” agendas. Specifically, our technology is deployed to facilitate a stringent protocol enforcement capability which incorporates restricted movement provisions coupled with enablement of positive reinforcement communications to support of social worker interactions, ongoing ministry options and proactive access by authorized counselors and sponsors. We design our programs to be uniquely positioned to allow for regular, frequent, and positive interaction and daily affirmations with monitored offenders with the goal that they will become responsible and contributing members of society, even while living within the virtual “electronic fence” boundaries established through our proprietary technologies.

Corporate Information

Our principal executive office and monitoring facility is located at 150 West Civic Center Drive, Suite 400, Sandy, Utah 84070, and our telephone number is (801) 451-6141. Our website address is www.securealert.com. No information found on our website is part of this prospectus. Also, this prospectus may include the names of various government agencies or the trade names of other companies. Unless specifically stated otherwise, the use or display by us of such other parties’ names and trade names in this prospectus is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, any of these other parties.

Reverse Stock Split

On February 28, 2013, our shareholders approved a reduction in the authorized share capital of the Company to 15,000,000 shares of Common Stock, and authorized a reverse split to reduce the outstanding shares of the Company at a ratio of 200-for-1, which was implemented on March 25, 2013. Share and per share information for the prior periods has been retroactively adjusted in this prospectus to reflect the effects of the reverse stock split.

Risk Factors

Important factors that could cause actual results to differ materially from our expectations (“cautionary statements”) are disclosed under “Risk Factors” and elsewhere in this prospectus, including without limitation, in conjunction with the forward-looking statements included in this prospectus. All subsequent written and oral forward-looking statements attributable to us, or personas acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include:

·	Risks related to our ability to generate sufficient cash to finance our operations, which may not be successful;
·	Risks related to general economic conditions; if recovery from the recent recession continues to be slow or prolonged, it could continue to adversely affect our government agency customers and our reliance on third-party manufacturers and suppliers increases our risk of obtaining adequate, timing, and cost-effective product supplies;
·	How well we manage our business;
·	Competition that could negatively impact our business;
·	Risks associated with adequately maintaining security and preventing unauthorized access to electronic and other confidential information and data breaches;
·	Risks related to our information systems;
·	Our current lack of a Chief Executive Officer and our inability to identify, hire and subsequently integrate a new Chief Executive Officer;
·	Changes in regulations or enforcement that may adversely impact our business;
·	Risks relating to conducting business internationally, subjecting us to a variety of regulations, political interests and monetary fluctuations;
·	Disruptions in the capital markets could increase our costs of doing business; and
·	The possibility that the interests of our controlling shareholder may conflict with the interests of other shareholders or creditors.

The foregoing factors are not exhaustive and new factors may emerge or changes to the foregoing factors may occur that could impact our business. In addition, there may be other factors not presently known to us or which we currently consider to be immaterial that may cause our actual results of operations to differ materially from the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. You should review carefully the section captioned “Risk Factors” in this prospectus.

THE OFFERING

On December 3, 2012, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Sapinda Asia Limited (“Sapinda”), or the selling shareholder, pursuant to which it made available to us $16,640,000 (the “Loan”). In connection with the Loan, we entered into a convertible secured promissory note in the principal amount of $16,640,000 (the “Note”). By its terms, the Note was convertible into shares of our Common Stock, par value $0.00001 per share at a price of $4.50 per share. On August 13, 2013, we entered into an Acknowledgement and Agreement with the selling shareholder, pursuant to which we agreed to file with the Securities and Exchange Commission (“SEC”) the registration statement that includes this prospectus under the Securities Act of 1933, as amended, or the Securities Act, for the purpose of registering the resale of the shares of Common Stock underlying conversion of the Note (the “Shares”). On September 30, 2013, the selling shareholder exercised its right to convert the Note and we issued the Shares to be offered and sold by the selling shareholder under this prospectus.

The above descriptions of the Loan Agreement (including the Note) and the Acknowledgement and Agreement are qualified in their entirety by reference to Exhibits 10.30 and 10.33, respectively, to the registration statement of which this prospectus is a part, filed with the SEC on November 13, 2013.

Securities Offered

Common Stock offered by the selling shareholder	3,905,917 Shares
Common Stock outstanding prior to the offering	9,806,746 Shares
Common Stock outstanding after the offering	9,806,746 Shares
Use of proceeds	We will not receive any proceeds from the sale of the Shares by the selling shareholder in this offering. See “Use of Proceeds”.
Risk factors	An investment in the Shares involves a high degree of risk. See “Risk Factors” for a discussion of factors you should consider carefully before making an investment decision.
OTC Markets (OTCQB) symbol	SCRA

RISK FACTORS

Before you make a decision to invest in our securities, you should consider carefully the risks described below, together with other information in this prospectus. If any of the following events actually occur, our business, operating results, prospects or financial condition could be materially and adversely affected. This could cause the trading price of our Common Stock to decline and you may lose all or part of your investment. The risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also significantly impair our business operations and could result in a complete loss of your investment.

Risks Related to our Company

The financial statements contained in this prospectus for the year ended September 30, 2012 and for the nine months ended June 30, 2013, have been prepared on the basis that we will continue as a going concern, notwithstanding the fact that our financial performance and condition during the past few years raise substantial doubt as to our ability to do so. There is no assurance we will ever be profitable. In fiscal year 2012, we incurred a net loss of $17,458,107 and had negative cash flows from operating activities of $1,709,388, and as of June 30, 2013 we have an accumulated deficit of $254,707,653 compared to an accumulated deficit of $248,513,626 at September 30, 2012. These factors raise substantial doubt about our ability to continue as a going concern. The financial statements included in this prospectus do not include any adjustments that might result from the outcome of this uncertainty. Our plan with respect to this uncertainty is to focus on increasing the number of TrackerPAL™ and ReliAlert™ devices in the market place from which we will generate monitoring service revenue, reducing operating costs and raising capital through additional borrowings and or the sale of our equity securities. There can be no assurance that revenues will increase rapidly enough to offset operating losses and repay indebtedness. If we are unable to increase cash flows from operating activities or obtain additional financing, we will be unable to continue the development of our products and will likely cease operations.

Sales by certain of our shareholders of a substantial number of shares of our Common Stock in the public market, including the sale of the Shares in this offering, could adversely affect the market price of our Common Stock. A large number of outstanding shares of our Common Stock are held by several of our principal shareholders, including the selling shareholder. If any of these principal shareholders were to decide to sell large amounts of stock over a short period of time such sales could cause the market price of our Common Stock to decline.

We may not be able to generate sufficient cash from operations to satisfy our obligations. Our ability to finance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. Some of our obligations are past due and is owed to several vendors and suppliers critical to our operations. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our operations and to pay our obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our other obligations. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.

Risks Related to our Business

Budgetary issues faced by government agencies could adversely impact our future revenue. Our revenues are primarily derived from contracts with state, local and county government agencies in the United States and governments of Caribbean and Latin American nations. Many of these government agencies are experiencing budget deficits and may continue to do so. As a result, the amount spent by our current clients on equipment and services that we supply may be reduced or grow at rates slower than anticipated and it may be more difficult to attract additional government clients. In addition, since 2009, the industry has experienced a general decline in average daily lease rate for GPS tracking units. As a result of these factors, our ability to maintain or increase our revenues may be negatively affected.

As a result of our increased focus on a new business market, our business is subject to many of the risks of a new or start-up venture. Our business goals and strategy subjects us to the risks and uncertainties usually associated with companies in their early stages of development. If we are to be successful, we must accomplish the following, among other things:

·	Develop and introduce functional and attractive product and service offerings;
·	Increase awareness of our brand and develop consumer loyalty;
·	Respond to competitive and technological developments;
·	Increase gross profit margins;
·	Build an operational structure to support our business; and
·	Attract, retain and motivate qualified personnel.

If we fail to achieve these goals, that failure would have a material adverse effect on our business, prospects, financial condition and operating results. There is no assurance that a market for our products or services will continue to develop or that demand for our products and services will be sustainable. If the market fails to develop, develops more slowly than expected or becomes saturated with competitors, our business, financial condition and operating results would be materially adversely affected.

The selling shareholder is the beneficial owner of a significant percentage of our Common Stock, giving it and parties related to or affiliated with it substantial control, and limiting the influence of other shareholders on important policy and management issues. The selling shareholder is the beneficial owner of approximately 40% of our outstanding Common Stock as of October 18, 2013 (see “Security Ownership of Certain Beneficial Owners and Management” and “Selling Shareholder”). The selling shareholder is therefore able to effectively control our affairs and business, including the election of our directors and, subject to certain limitations, approval or preclusion of fundamental corporate transactions. This concentration of ownership may also have the effect of delaying or preventing or entering into a change of control transaction or making other transactions more difficult or impossible without their support. In addition, this equity holder may have an interest in pursuing acquisitions, divestitures, financing or other transactions that, in its judgment, could enhance its equity investments, even though such transactions may involve risk to us or to our other shareholders. Additionally, it may make investments in businesses that directly or indirectly compete with us, or may pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us.

There is no certainty that the market will accept our products and services. Our targeted markets may be slow to or may never accept our products or services. Governmental organizations may not use our products unless they determine, based on experience, advertising or other factors, that those products are a preferable alternative to currently available methods of tracking. In addition, decisions to adopt new tracking devices can be influenced by government administrators, regulatory factors, and other factors largely outside our control. No assurance can be given that key decision-makers will accept our new products, which could have a material adverse effect on our business, financial condition and results of operations.

We are dependent upon the services of our senior management team, and the failure to attract and retain such individuals could adversely affect our operations. We are dependent on the services, abilities and experience of our executive officers. The permanent loss of the services of any of these senior executives and any change in the composition of our senior management team could have a negative impact on our ability to execute on our business and operating strategies. We are currently evaluating candidates to hire as a Chief Executive Officer to take over from the interim CEO, a role currently filled by the Executive Committee of our Board of Directors.

We rely on significant suppliers for key products and cellular access. If we do not renew these agreements when they expire we may not continue to have access to these suppliers’ products or services at favorable prices or in volumes as we have in the past, which would reduce revenues and could adversely affect results of operations or financial condition. We have entered into an agreement with a national cellular access company for cellular services. We also rely currently on a single manufacturer for the manufacture of our TrackerPAL and ReliAlert devices. If any of these significant suppliers were to cease providing products or services to us, we would be required to seek alternative sources. There is no assurance that alternate sources could be located or that the delay or additional expense associated with locating alternative sources for these products or services would not materially and adversely affect our business and financial condition.

Our business subjects our research, development and ultimate marketing activities to current and possibly to future government regulations. The cost of compliance or the failure to comply with these regulations could adversely affect our business, results of operations and financial condition. Our monitoring device products are not subject to specific approvals from any governmental agency, although our products using cellular and GPS technologies must be manufactured in compliance with applicable rules and regulations of the Federal Communications Commission (“FCC”). There can also be no assurance that changes in the legal or regulatory framework or other subsequent developments will not result in limitation, suspension or revocation of regulatory approvals granted to us. Any such events, were they to occur, could have a material adverse effect on our business, financial condition and results of operations. We may be required to comply with FCC regulations for manufacturing practices, which mandate procedures for extensive control and documentation of product design, control and validation of the manufacturing process and overall product quality. Foreign regulatory agencies have similar manufacturing standards. Any third parties manufacturing our products or supplying materials or components for such products may also be subject to these manufacturing practices and mandatory procedures. If we, our management or our third-party manufacturers fail to comply with applicable regulations regarding these manufacturing practices, we could be subject to a number of sanctions, including fines, injunctions, civil penalties, delays, suspensions or withdrawals of market approval, seizures or recalls of product, operating restrictions and, in some cases, criminal prosecutions. Our products and related manufacturing operations may also be subject to regulation, inspection and licensing by other governmental agencies, including the Occupational Health and Safety Administration.

We face intense competition, including competition from entities that are more established and may have greater financial resources than we do, which may make it difficult for us to establish and maintain a viable market presence. Our current and expected markets are rapidly changing. Existing products and services and emerging products and services will compete directly with our products. Our technology competes directly with other technology, and, although we believe our technology has advantages over these competing systems, there can be no assurance that our technology will have advantages that are significant enough to cause users to adopt its use. Competition is expected to increase. Many of these competitors have products or techniques approved or in development and operate large, well-funded research and development programs in the field. Moreover, these companies and institutions may be in the process of developing technology that could be ultimately more effective than our products. We face competition based on product efficacy, availability of supply, marketing and sales capability, price and patent position. There can be no assurance that our competitors will not develop more effective or more affordable products.

The loss of a significant customer may affect our results of operations and business condition. During fiscal year 2013, two customers each accounted for 10% or more of sales as follows: Customer A (34%) and Customer B (10%). During the fiscal year ended September 30, 2013, we completed a contract with Customer A. A three-year contract with Customer B comes up for renewal in November 2013 and it is anticipated that we will continue providing services to this customer under a month-to-month agreement. The loss of either of these customers may result in lower revenues and limit cash available to grow our business and to achieve profitability.

Our business plan is subject to the risks of technological uncertainty, which may result in our products failing to be competitive or readily accepted in our markets. Some of the products we are currently evaluating likely will require further research and development efforts before they can be commercialized. There can be no assurance that our research and development efforts will be successful. In addition, the technology which we integrate or that we may expect to integrate with our product and service offerings is rapidly changing and developing. We face risks associated with the possible obsolescence of our technology and the risks of delay in the further development of our own technologies. Cellular coverage is not uniform throughout our current and targeted markets and GPS technology depends upon “line-of-sight” access to satellite signals used to locate the user. This limits the effectiveness of GPS if the user is in the lower floors of a tall building, underground or otherwise located where the signals have difficulty penetrating.

Our business plan anticipates significant growth through monitoring revenues and acquisitions. To manage the expected growth we will require capital and there is no assurance we will be successful in obtaining necessary additional funding. If we are successful in implementing our business plan, we may be required to raise additional capital to manage anticipated growth. Our actual capital requirements will depend on many factors, including but not limited to, the costs and timing of our ongoing business activities, the cost and timing of expanding our revenues, marketing and manufacturing activities, our ability to establish and maintain collaborative relationships, competing technological and market developments, the costs involved in preparing, filing, prosecuting, maintaining and enforcing and defending patent claims and other intellectual property rights, developments related to regulatory issues, and other factors, including many that are outside our control. To satisfy our capital requirements, we may seek to raise funds through borrowings as well as public or private financings, collaborative relationships or other arrangements. Any arrangement that includes the issuance of equity securities or securities convertible into our equity securities may be dilutive to shareholders (including the purchasers of the Shares), and debt financing, if available, may involve significant restrictive covenants that limit our ability to raise capital in other transactions. Collaborative arrangements, if necessary to raise additional funds, may require that we relinquish or encumber our rights to certain of our technologies, products or marketing territories. Any inability or failure to raise capital when needed could also have a material adverse effect on our business, financial condition and results of operations. There can be no assurance that any such financing, if required, will be available on terms satisfactory to us, if at all.

Our products are subject to the risks and uncertainties associated with the protection of intellectual property and related proprietary rights. We believe that our success depends in part on our ability to obtain and enforce patents, maintain trade secrets and operate without infringing on the proprietary rights of others in the United States and in other countries. We own 13 patents and have filed and intend to file additional patent applications in the United States and in key foreign jurisdictions relating to our technologies, improvements to those technologies and for specific products we may develop. There can be no assurance that patents will issue on any of these applications or that, if issued, any patents will not be challenged, invalidated or circumvented. The prosecution of patent applications and the enforcement of patent rights are expensive, and the expense may adversely affect our profitability and the results of our operations. In addition, there can be no assurance that the rights afforded by any patents will guarantee proprietary protection or competitive advantage. Our success will also depend, in part, on our ability to avoid infringing the patent rights of others. We must also avoid any material breach of technology licenses we may enter into with respect to our new products and services. Existing patent and license rights may require us to alter the designs of our products or processes, obtain licenses or cease certain activities. In addition, if patents have been issued to others that contain competitive or conflicting claims and such claims are ultimately determined to be valid and superior to our own, we may be required to obtain licenses to those patents or to develop or obtain alternative technology. If any licenses are required, there can be no assurance that we will be able to obtain any necessary licenses on commercially favorable terms, if at all. Any breach of an existing license or failure to obtain a license to any technology that may be necessary in order to commercialize our products may have a material adverse impact on our business, results of operations and financial condition. Litigation that could result in substantial costs may also be necessary to enforce patents licensed or issued to us or to determine the scope or validity of third-party proprietary rights. If our competitors prepare and file patent applications in the United States that claim technology also claimed by us, we may have to participate in proceedings declared by the United States Patent and Trademark Office to determine priority of invention, which could result in substantial costs, even if we eventually prevail. An adverse outcome could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require that we cease using such technology.

We also rely on trade secrets laws to protect portions of our technology for which patent protection has not yet been pursued or is not believed to be appropriate or obtainable. These laws may protect us against the unlawful or unpermitted disclosure of any information of a confidential and proprietary nature, including but not limited to our know-how, trade secrets, methods of operation, names and information relating to vendors or suppliers and customer names and addresses. We intend to protect this unpatentable and unpatented proprietary technology and processes, in addition to other confidential and proprietary information in part, by entering into confidentiality agreements with employees, collaborative partners, consultants and certain contractors. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets and other confidential and proprietary information will not otherwise become known or be independently discovered or reverse-engineered by competitors.

We conduct business internationally with a variety of sovereign governments and we are subject to a variety of regulations and political interests that could affect the timing of our payment for services and the duration of our contracts. We face the risk of systems interruptions and capacity constraints, possibly resulting in adverse publicity, revenue loss and erosion of customer trust. The satisfactory performance, reliability and availability of our network infrastructure are critical to our reputation and our ability to attract and retain customers and to maintain adequate customer service levels. We may experience temporary service interruptions for a variety of reasons, including telecommunications or power failures, fire, water damage, vandalism, computer bugs or viruses or hardware failures. We may not be able to correct a problem in a timely manner. Any service interruption that results in the unavailability of our system or reduces its capacity could result in real or perceived public safety issues that may affect customer confidence in our services and result in negative publicity that could cause us to lose customer accounts or fail to obtain new accounts. Any inability to scale our systems may cause unanticipated system disruptions, slower response times, degradation in levels of customer service, or impaired quality and speed of transaction processing. We are not certain that we will be able to project the rate or timing of increases, if any, in the use of our services to permit us to upgrade and expand our systems effectively or to integrate smoothly and newly developed or purchased modules with our existing systems.

General economic conditions may affect our revenue and harm our business. As widely reported, financial markets in the United States, Europe and Asia have been experiencing extreme disruption in the past several years. Unfavorable changes in economic conditions, including declining consumer confidence, inflation, recession or other changes, may lead our customers to delay or reduce purchases of our products and services, adversely affecting our results of operations and financial condition. Challenging economic conditions also may impair the ability of our customers or distributors to pay for products or services they have purchased, and as a result, our reserves for doubtful accounts and write-offs of accounts receivable could increase. Our cash flows may be adversely affected by delayed payments or underpayments by our customers. We are unable to predict the duration and severity of the current disruption in financial markets and adverse economic conditions in the United States and other countries.

Serious disruptions or catastrophic events, including geo-political events and weather may adversely affect our business and results of operations. Unforeseen public health issues, such as pandemics and epidemics, and geo-political events, such as civil unrest in a country in which our suppliers or customers are located or terrorist or military activities disrupting transportation, communications or utility systems, as well as natural disasters such as hurricanes, tornadoes, floods, earthquakes and other adverse weather and climate conditions, whether occurring in the U.S. or abroad, particularly during peak seasonal periods, could disrupt our operations or the operations of one or more of our vendors or customers located in the affected areas. Such occurrences could significantly impact our operating results and financial performance. As a result, our business could be adversely affected.

Risks Related to Our Common Stock

A decline in the price of our Common Stock could affect our ability to raise further working capital and adversely impact our operations and would severely dilute existing or future investors if we were to raise funds at lower prices. A prolonged decline in the price of our Common Stock could result in a reduction in our ability to raise capital. Because our operations have been financed through the sale of equity securities and convertible debt instruments, a decline in the price of our Common Stock could be especially detrimental to our continued operations. Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, there can be no assurance that we can raise additional capital or generate funds from operations sufficient to meet our obligations.

We believe the following factors could cause the market price of our Common Stock to continue to fluctuate widely and could cause our Common Stock to trade at a price below the price at which you purchase your Shares:

·	actual or anticipated variations in our quarterly operating results;
·	announcements of new services, products, acquisitions or strategic relationships by us or our competitors;
·	changes in accounting treatments or principles;
·	changes in earnings estimates by securities analysts and in analyst recommendations; and
·	general political, economic, regulatory and market conditions.

The market price for our Common Stock may also be affected by our ability to meet or exceed expectations of analysts or investors. Any failure to meet these expectations, even if minor, could materially adversely affect the market price of our Common Stock.

If we issue additional shares of Common Stock in the future, it will result in the dilution of our existing shareholders. Our Articles of Incorporation authorize the issuance of 15,000,000 shares of Common Stock. Our Board of Directors has the authority to issue additional shares of Common Stock up to the authorized capital stated in The Articles of Incorporation. The issuance of any such shares of Common Stock will result in a reduction of the book value or market price of the outstanding shares of our Common Stock. If we do issue any such additional shares of Common Stock, such issuance also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change of control of our corporation.

Trading of our Common Stock may be volatile and sporadic, which could depress the market price of our Common Stock and make it difficult for our shareholders to resell their shares. There is currently a limited market for our Common Stock and the volume of our Common Stock traded on any day may vary significantly from one period to another. Our Common Stock is quoted on OTC Market’s OTCQB. Trading in stock quoted on OTC Market’s OTCQB is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. The availability of buyers and sellers represented by this volatility could lead to a market price for our Common Stock that is unrelated to operating performance. Moreover, OTC Market’s OTCQB is not a stock exchange, and trading of securities quoted on OTC Market’s OTCQB is often more sporadic than the trading of securities listed on a stock exchange like NASDAQ. There is no assurance that a sufficient market will develop in the stock, in which case it could be difficult for our shareholders to resell their stock.

Our Board of Directors may authorize the issuance of preferred stock and designate rights and preferences that will dilute the ownership and voting interests of existing shareholders without their approval. Our Articles of Incorporation authorize us to issue up to 20,000,000 shares of preferred stock, at par value $0.0001. The Board of Directors is authorized to designate, and to determine the rights and preferences of any series or class of preferred stock. The Board of Directors may, without shareholder approval, issue shares of preferred stock with dividend, liquidation, conversion, voting or other rights which are senior to the Common Stock or which could adversely affect the voting power or other rights of the existing holders of outstanding shares of preferred stock or Common Stock. Additionally, the issuance of preferred stock may have the effect of decreasing the market price of the Common Stock and reduce the likelihood that common shareholders will receive dividend payments and payments upon liquidation. The issuance of additional shares of preferred stock may also adversely affect an acquisition or change in control. The Board of Directors has designated 85,000 shares of preferred stock as our Series D Preferred stock. Each share of Series D Preferred stock is convertible into 30 shares of Common Stock. Holders of the Series D Preferred stock may vote their shares on an as-converted basis on any issue presented for a vote of the shareholders, including the election of directors and the approval of certain transactions such as a merger or other business combination. As of October 30, 2013, there were 468 shares of Series D Preferred issued and outstanding, which were convertible into 14,040 shares of Common Stock.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” but are also contained elsewhere in this prospectus. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

The forward-looking statements contained in this prospectus involve a number of risks and uncertainties, many of which are outside of our control. Factors that could cause actual results to differ materially from projected results include, but are not limited to, those discussed in “Risk Factors” elsewhere in this prospectus. Readers are expressly advised to review and consider those Risk Factors. Although we believe that the assumptions underlying the forward-looking statements contained in this prospectus are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements will be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Furthermore, past performance in operations and share price is not necessarily indicative of future performance. Except as required by applicable laws including the securities laws of the United States, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

USE OF PROCEEDS

This prospectus relates to Shares of our Common Stock that may be offered and sold from time to time by the selling shareholder. We will not receive any proceeds upon the sale of the Shares by the selling shareholder.

MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Market Information

Our Common Stock is traded on the OTC Bulletin Board under the symbol “SCRA.OB.” The following table sets forth the range of high and low bid prices of our Common Stock as reported on the OTC Bulletin Board, adjusted to reflect the reverse stock split, for each of the periods indicated. The sales information is available online at http://otcbb.com.

Fiscal Year Ended September 30, 2012	High		Low
First Quarter ended December 31, 2011	$	20.00	$	13.20
Second Quarter ended March 31, 2012	$	15.40	$	8.00
Third Quarter ended June 30, 2012	$	10.80	$	5.60
Fourth Quarter ended September 30, 2012	$	7.80	$	4.00

Fiscal Year Ended September 30, 2013	High		Low
First Quarter ended December 31, 2012	$	14.60	$	3.22
Second Quarter ended March 31, 2013	$	14.60	$	11.00
Third Quarter ended June 30, 2013	$	14.70	$	7.00
Fourth Quarter ended September 30, 2013	$	20.90	$	14.40

Holders

As of October 30, 2013, there were approximately 2,500 holders of record of our Common Stock and 9,806,746 shares of Common Stock outstanding. We also have granted options and warrants for the purchase of 434,806 shares of Common Stock and 5,400 shares of Series D Preferred stock that may be converted into 162,000 shares of Common Stock. As of October 30, 2013, there were 468 shares of Series D Preferred stock outstanding, which are convertible into 14,040 shares of Common Stock and are voted on an as-converted basis with the outstanding Common Stock.

Dividends

Since incorporation, we have not declared any cash dividends on our Common Stock. We do not anticipate declaring cash dividends on our Common Stock for the foreseeable future. The Series D Preferred stock is entitled to dividends at the rate equal to 8% per annum calculated on the purchase amount actually paid for the shares or amount of debt converted. The dividend is payable in cash or shares of Common Stock at the sole discretion of the Board of Directors. To date all dividends payable on our preferred stock outstanding have been paid by issuance of shares of common or preferred stock. During the fiscal years ended September 30, 2013 and 2012, we recorded $1,042,897 and $2,480,298 in stock dividend expense, respectively, payable with respect to our outstanding preferred stock.

Dilution

The Board of Directors determines when and under what conditions and at what prices to issue stock. In addition, a significant number of shares of Common Stock are reserved for issuance upon exercise of purchase or conversion rights. The issuance of any shares of Common Stock for any reason will result in dilution of the equity and voting interests of existing shareholders.

Transfer Agent and Registrar

The transfer agent and registrar for our Common Stock is American Stock Transfer & Trust Company, 6201 15th Avenue, Brooklyn, New York, 11219.

Securities Authorized for Issuance under Equity Compensation Plans

Our Board of Directors has adopted two equity incentive plans: the 2006 Equity Incentive Award Plan or 2006 Plan, and the 2012 Equity Incentive Award Plan or 2012 Plan. These plans were approved by our shareholders on July 10, 2006 and December 21, 2011, respectively. We believe that incentives and stock-based awards focus employees on the objective of creating shareholder value and promoting the success of the Company, and that incentive compensation plans like the 2006 Plan and the 2012 Plan are an important attraction, retention and motivation tool for participants in the plans.

Under the 2006 Plan, no shares of Common Stock are available for issuance pursuant to awards granted under the plan. Under the 2012 Plan, 60,000 options or shares of Common Stock are available for awards. As of the date of this prospectus, awards for the purchase of 50,000 shares of Common Stock have been granted under the 2006 Plan and awards for the purchase of 30,000 shares of Common Stock have been granted under the 2012 Plan.

The following table includes information as of September 30, 2013 for all of our equity compensation plans:

Equity Compensation Plan Information
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		21,433	$	16.66		68,567

Equity compensation plans not approved by security holders		477,349	$	24.00		-

Total		498,782	$	24.00		68,567

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended September 30, 2012 and the nine months ended June 30, 2013, included elsewhere in this prospectus.

Our Business

We market and deploy offender management programs, combining patented GPS tracking technologies, fulltime 24/7/365 intervention-based monitoring capabilities and case management services.

Results of Operations

Fiscal Year Ended September 30, 2012

During the fiscal year ended September 30, 2012, we had net revenues of $19,791,492 compared to net revenues of $17,961,803 for the fiscal year ended September 30, 2011, an increase of $1,829,689, or approximately 10%. Revenues from monitoring services for the fiscal year ended September 30, 2012, totaled $17,778,337, compared to $16,410,292 for the same period ended 2011, resulting in an increase of $1,368,045 or approximately 8%. These revenues increased as a result of our continued expansion into the global market which contributed an additional $2,254,161 to monitoring revenues for the fiscal year ended September 30, 2012. Domestic revenues decreased by $424,473, or 3%, from the fiscal year ended September 30, 2011. This decrease resulted primarily from lowering our monitoring daily charge to compete in the domestic marketplace. Revenues from product sales for the fiscal year ended September 30, 2012 were $2,013,155, compared to $1,551,511 for the prior year, an increase of $461,644, or 30%. This increase was primarily due to the sale and installation of an onsite charging solution. For the years ended September 30, 2012 and 2011, revenues from one-piece activated GPS tracking devices supported entirely about a single limb of the monitored person totaled $8,360,697 and $6,505,056, respectively.

Cost of Revenues

During the fiscal year ended September 30, 2012, cost of revenues, excluding impairment of equipment and parts, totaled $11,418,012, compared to cost of revenues during the fiscal year ended September 30, 2011 of $9,565,959, an increase of $1,852,053. These net costs of revenues, as a percentage of net revenues, increased 5%, from 53% in 2011 to 58% in 2012. The increase in cost of revenues of $1,852,053 in 2012 resulted primarily from increases in the costs of the charging solution of $360,961, royalty fees of $853,623, communication costs of $311,764, and amortization expenses of $187,126.

Although there were increases in the cost of revenues, as stated above, the increase in communication costs in 2012 involve the costs associated with Subscriber Identity Modules (“SIM”) which are embedded in each TrackerPAL and ReliAlert device. The SIM enables the device to transfer voice and data information to a monitoring center. We incur a monthly charge for each SIM, regardless of whether or not the associated device generates revenue because the SIM cards are ordered and inserted into devices before the devices are sold or leased. Increases in these costs are expected as the number of activated devices increases.

Impairment costs for equipment and parts for the fiscal years ended September 30, 2012 and 2011 were $1,648,762 and $464,295, respectively. These costs resulted from disposals of obsolete inventory, monitoring equipment and parts as we continue to make enhancements to the device.

Amortization for the fiscal years ended September 30, 2012 and 2011, totaled $1,387,756 and $1,160,920, respectively. Amortization costs are based on a three-year useful life for TrackerPAL and ReliAlert devices. Devices that are leased or retained by us for future deployment or sale are amortized over three years. We believe this three-year life is appropriate due to rapid changes in electronic monitoring technology and the corresponding potential for obsolescence. Management periodically assesses the useful life of the devices for appropriateness.

We expect the cost of revenues, excluding impairment of equipment and parts, as a percentage of revenues to decrease in the foreseeable future due to (a) economies of scale realized through projected increases in revenues, and (b) further development of our proprietary software, enabling each operator to monitor more devices resulting in lower monitoring center costs.

Gross Profit and Margin

During the fiscal year ended September 30, 2012, gross profit totaled $6,724,718, or 34% of net revenues, compared to $7,931,549, or 44% of net revenues during the fiscal year ended September 30, 2011, a decrease of $1,206,831. Included in cost of revenues are costs attributable to impairment of inventory and monitoring equipment of $1,648,762 and $464,295 for the fiscal years ended September 30, 2012 and 2011, respectively. These impairment costs from disposal and reduction in value of obsolete monitoring equipment are expenses we expect to decrease in future periods. Excluding impairment costs, adjusted gross profit for the fiscal year ended September 30, 2012 was $8,373,480 or 42% of net revenues, compared to $8,395,844 or 47% of net revenues, for the same period in 2011, a decrease of $22,364.

Research and Development Expenses

During the fiscal year ended September 30, 2012, we incurred research and development expenses of $1,248,654 compared to similar expenses recognized during fiscal year 2011 totaling $1,453,994. This decrease of $205,340 is due primarily to a reduction in research and development staff.

Selling, General and Administrative Expenses

During the fiscal year ended September 30, 2012, our selling, general and administrative expenses totaled $15,405,742, compared to $15,652,303 for the fiscal year ended September 30, 2011. The decrease of $246,561 is the result of decreases in the following expenses: payroll, payroll taxes and employee benefits ($399,781), travel expenses ($213,387), and legal ($100,982). Consulting expense for the fiscal year ended September 30, 2012 was $3,911,027 compared to $2,681,718 for the fiscal year ended September 30, 2011, an increase of $1,229,309. The increase in consulting expenses resulted from modifications of outstanding stock options.

Other Income and Expense

For the fiscal year ended September 30, 2012, interest expense was $1,489,897, compared to $712,840 for the fiscal year ended September 30, 2011. This increase of $777,057 is a result primarily of the non-cash interest expense of $860,190 related to amortization of debt discounts on convertible debentures. Also included in interest expense is $59,575 related to amortization of debt discounts in connection with an acquisition, and $39,965 for re-pricing of warrants.

Net Loss

We had a net loss for the fiscal year ended September 30, 2012 totaling $17,458,107 (approximately $8.00 per share), compared to a net loss of $9,858,824 (approximately $6.00 per share) for the fiscal year ended September 30, 2011. This increase of $7,599,283 is due primarily to the impairment of goodwill of $5,514,395, impairment of monitoring equipment and parts of $1,184,467, royalties of $853,623, interest expense of $777,057, and settlement charges of $126,966.

Liquidity and Capital Resources

We have not historically financed operations entirely from cash flows from operating activities. During the fiscal year ended September 30, 2012, we funded our operating and investing activities through sale and issuance of debt and equity securities. The cash provided by these transactions was used by us to (i) pay operating expenses, including the costs associated with our monitoring center, (ii) purchase monitoring equipment and parts, (iii) pay down various debt and accounts payable, and (iv) pay general and administrative expenses, including the salaries of our employees, officers, and consultants and other expenses as described below.

As of September 30, 2012, we had unrestricted cash of $695,111, compared to unrestricted cash of $949,749 as of September 30, 2011. As of September 30, 2012, we had a working capital deficit of $13,600,345, compared to a working capital deficit of $1,201,955 as of September 30, 2011. The decrease in working capital in fiscal year 2012 primarily resulted from the royalty repurchase agreement and borrowings from the issuance of our convertible debentures.

During fiscal year 2012, our operating activities used cash of $1,709,388, compared to $6,809,513 used during fiscal year 2011. This improvement in cash used from operating activities of $5,100,125 resulted primarily from an increase in revenues of $1,829,689 and improved collections of accounts receivable of $3,780,843.

Investing activities during the fiscal year ended September 30, 2012, used cash of $2,720,944, compared to $3,716,554 during the fiscal year ended September 30, 2011. The decrease in cash used by investing activities of $995,610 during fiscal year 2012 resulted primarily from the decrease in cash used for the purchase of monitoring equipment and payments related to an acquisition during the fiscal year ended September 30, 2011.

Financing activities during the fiscal year ended September 30, 2012, provided $4,175,694 of net cash compared to $10,349,584 during the fiscal year ended September 30, 2011.

During the fiscal year ended September 30, 2012, we made net payments of $906,478 on notes payable, $207,578 on related-party notes payable, and $1,147,250 of commissions paid in connection with capital raised. During fiscal year 2012, we had proceeds of $2,004,000 from the issuance of Series D Convertible Preferred stock, proceeds of $500,000 from the issuance of convertible debentures, proceeds of $2,900,000 from the issuance of convertible debentures to related-parties and $1,033,000 from the issuance of Common Stock to a related party.

During the fiscal year ended September 30, 2011, we made net payments of $635,657 on notes payable and $188,634 on a related-party line of credit. During the fiscal year 2011, we had net proceeds of $10,344,603 from the issuance of Series D Convertible Preferred stock and net proceeds of $829,272 from related-party notes payable.

During fiscal year ended September 30, 2012, we incurred a net loss of $17,458,107 and negative cash flows from operating activities of $1,709,388, compared to a net loss of $9,858,824 and negative cash flows from operating activities of $6,809,513 for the fiscal year ended September 30, 2011. As of September 30, 2012, our working capital deficit was $13,600,345, stockholders’ equity was $4,427,137, and accumulated deficit totaled $248,513,626.

Continuing Operations – Nine months ended June 30, 2013, compared to nine months ended June 30, 2012

Revenues

For the nine months ended June 30, 2013, we had revenues from operations of $13,081,610, compared to $10,116,610 for the nine months ended June 30, 2012, an increase of $2,965,000 (29%). Of these revenues, $12,617,534 and $8,572,595 were from monitoring and other related services, an increase of $4,044,939 (47%). The increase was primarily attributed to an increase in international monitoring of $3,776,862 for the nine months ended June 30, 2013, compared to the same period ended in 2012.

Product revenues decreased $1,079,939 (70%) from $1,544,015 for the nine months ended June 30, 2012 to $464,076 for the nine months ended June 30, 2013. Revenues in 2012 included one-time revenues of $1,071,983 from the development of a charging solution for an international customer.

Cost of Revenues

During the nine months ended June 30, 2013, cost of revenues totaled $6,617,239, compared to cost of revenues during the nine months ended June 30, 2012 of $5,035,758, an increase of $1,581,481. The increase in cost of revenues resulted primarily from increases of $764,000 in royalties, $450,000 in impairment of equipment and $505,775 in costs in connection with the development of a charging solution for an international customer described above.

Depreciation for the nine months ended June 30, 2013 and 2012 totaled $1,009,089 and $987,863, respectively. Depreciation costs are based on a three-year useful life for TrackerPAL® and ReliAlert™ devices. Devices that are leased or retained by us for future deployment or sale are amortized over three years. We believe this three-year life is appropriate due to rapid changes in electronic monitoring technology and the corresponding potential for obsolescence. Management periodically assesses the useful life of the devices for appropriateness.

We expect the cost of revenues as a percentage of revenues to decrease in the foreseeable future due to (a) economies of scale realized through projected increases in revenues, and (b) further development of our proprietary software, enabling each operator to monitor more devices resulting in lower monitoring center costs.

Gross Profit and Margin

During the nine months ended June 30, 2013, gross profit totaled $6,464,371, or 49% of net revenues, compared to $5,080,852, or 50% of net revenues during the nine months ended June 30, 2012, an improvement of $1,383,519, due to higher net revenues.

Research and Development Expenses

During the nine months ended June 30, 2013, we incurred research and development expenses of $668,269 compared to research and development expenses for the nine months ended June 30, 2012 totaling $987,215. These research and development costs were incurred to improve efficiency in the software, firmware and hardware of our products and services.

Selling, General and Administrative Expenses

During the nine months ended June 30, 2013, our selling, general and administrative expenses totaled $6,238,783, compared to $10,838,842 for the nine months ended June 30, 2012. The decrease of $4,600,059 is primarily the result of reductions in consulting expense ($3,551,188); legal and professional fees ($389,404); and payroll expense ($599,151), offset by an increase in international taxes ($195,842).

Other Income and Expense

For the nine months ended June 30, 2013, interest expense was $5,939,171, compared to $992,334 for the nine months ended June 30, 2012. This increase in interest expense includes non-cash expenses of $5,194,397 and $592,482 related to the amortization of debt discount in connection with convertible debentures that were issued from February 2012 to February 2013.

Net Loss

We had a net loss from continuing operations for the nine months ended June 30, 2013 totaling $6,612,386, compared to a net loss of $7,551,159 for the nine months ended June 30, 2012. This improvement in net loss of $938,773 is due primarily to a decrease in a reduction of selling, general, and administrative expenses.

Discontinued Operations - Nine months ended June 30, 2013, compared to nine months ended June 30, 2012

Effective October 1, 2012, we sold all of the issued and outstanding capital stock of our subsidiary, Midwest Monitoring and Surveillance, Inc. (“Midwest”), to the former principals of Midwest. Because Midwest was a component of our consolidated entity, this sale requires discontinued operations reporting treatment of the Midwest operations.

We also sold to the former principal of our wholly owned subsidiary, Court Programs, Inc. (“Court Programs”), all of the issued and outstanding capital stock of Court Programs and its affiliated entities, effective January 1, 2013. Because these entities were a component of our consolidated entity, this sale requires discontinued operations reporting treatment of their operations.

A summary of the operating results of discontinued operations for the nine months ended June 30, 2013 and 2012 is as follows:

	Nine Months Ended June 30,
	2013			2012
Revenues	$	477,298		$	5,135,887
Cost of revenues		(163,487	)		(3,102,773	)
Gross profit		313,811			2,033,114
Selling, general and administrative		(319,976	)		(2,166,014	)
Loss from operations		(6,165	)		(132,900	)
Other income		(295	)		(45,715	)
Net loss from discontinued operations	$	(6,460	)	$	(178,615	)

Liquidity and Capital Resources

During the nine months ended June 30, 2013, we were able to finance our business in part from cash flows from operating activities. During the nine months ended June 30, 2013, we supplemented cash flows to finance our business from the sale and issuance of related-party notes payable, providing net cash proceeds from financing activities of $2,512,112.

As of June 30, 2013, we had unrestricted cash of $4,030,960 and working capital of $5,715,346, compared to unrestricted cash of $458,029 and a working capital deficit of $13,600,345 as of September 30, 2012. For the nine months ended June 30, 2013, our operating activities provided cash of $1,438,750 compared to $1,894,016 of cash used in operating activities for the nine months ended June 30, 2012.

We used cash of $523,121 for investing activities during the nine months ended June 30, 2013, compared to $1,645,495 of cash used in investing activities in the nine months ended June 30, 2012.

Financing activities for the nine months ended June 30, 2013, provided cash of $2,512,112, compared to $3,175,673 for the nine months ended June 30, 2012. For the nine months ended June 30, 2013, we received proceeds of $2,800,000 from the issuance of a convertible debenture from a related-party entity. Cash decreased by $287,888 due to principal payments made on notes payable. Cash provided by financing activities was used to support operating activities.

On February 1, 2013, we entered into a revolving loan agreement with the selling shareholder wherein we may borrow up to $1,200,000 at an interest rate of 3% per annum for unused funds and 10% per annum for borrowed funds. As of June 30, 2013, no advances have been made under this loan. The loan terminates on June 30, 2014.

Cash flow from discontinued operations for the nine months ended June 30, 2013, provided cash of $145,190, compared to $232,606 for the nine months ended June 30, 2012.

Going Concern

We have incurred recurring net losses and negative cash flows from operating activities for the fiscal years ended September 30, 2012 and 2011. In addition, we have accumulated deficits of $248,513,626 and $231,055,519 as of September 30, 2012 and 2011, respectively. These factors raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. In order for us to continue as a going concern, we must generate positive cash flows from operating activities and obtain the necessary funding to meet our projected capital investment requirements.

Management’s plans with respect to this uncertainty include raising additional capital through borrowing, from the issuance of preferred or Common Stock or debt securities, and by expanding the market for our ReliAlert portfolio of products. There can be no assurance that revenues will increase rapidly enough to offset operating losses and repay debts. If we are unable to increase cash flows from operating activities or obtain additional financing, we will be unable to continue the development of our products and may have to cease operations.

Inflation

We do not believe that inflation has had a material impact on our historical operations or profitability.

Critical Accounting Policies

In Note (2) to the audited Consolidated Financial Statements for the fiscal year ended September 30, 2012, we discussed those accounting policies that are considered to be significant in determining the results of operations and our financial position.

The preparation of financial statements requires management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, warranty obligations, product liability, revenue, and income taxes. We base our estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities. The actual results may differ from these estimates under different assumptions or conditions.

With respect to inventory reserves, revenue recognition, impairment of long-lived assets and allowance for doubtful accounts receivables, we apply critical accounting policies discussed below in the preparation of our financial statements.

Inventory Reserves

The nature of our business requires maintenance of sufficient inventory on hand at all times to meet the requirements of our customers. We record inventory and raw materials at the lower of cost, or market, which approximates actual cost. General inventory reserves are maintained for the possible impairment of the inventory. Impairment may be a result of slow moving or excess inventory, product obsolescence or changes in the valuation of the inventory. In determining the adequacy of reserves, management analyzes the following, among other things:

·	Current inventory quantities on hand;
·	Product acceptance in the marketplace;
·	Customer demand;
·	Historical sales;
·	Forecast sales;
·	Product obsolescence; and
·	Technological innovations.

Any modifications to these estimates of reserves are reflected in cost of revenues within the statement of operations during the period in which such modifications are determined necessary by management.

Revenue Recognition

Our revenue has historically been from two sources: (i) monitoring services; and (ii) product sales.

Monitoring Services

Monitoring services include two components: (a) lease contracts in which we provide monitoring services and lease devices to distributors or end users and we retain ownership of the leased device; and (b) monitoring services purchased by distributors or end users who have previously purchased monitoring devices and opt to use our monitoring services.

We typically lease our devices under one-year contracts with customers that opt to use our monitoring services. However, these contracts may be cancelled by either party at any time with 30 days notice. Under our standard leasing contract, the leased device becomes billable on the date of activation or 7 to 21 days from the date the device is assigned to the lessee, and remains billable until the device is returned. We recognize revenue on leased devices at the end of each month that monitoring services have been provided. In those circumstances in which we receive payment in advance, we record these payments as deferred revenue.

Product Sales

We may sell monitoring devices in certain situations to our customers. In addition, we may sell equipment in connection with the building out and setting up a monitoring center on behalf of customers. We recognize product sales revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer and the customer cannot return the devices or equipment, prices are fixed or determinable (including sales not being made outside the normal payment terms) and collection is reasonably assured. When purchasing products (such as TrackerPAL and ReliAlert devices), customers may, but are not required to, enter into one of our monitoring service contracts. We recognize revenue on monitoring services for customers that have previously purchased devices at the end of each month that monitoring services have been provided.

We sell and install standalone tracking systems that do not require our ongoing monitoring. We have experience in component installation costs and direct labor hours related to this type of sale and can typically reasonably estimate costs, therefore we recognize revenue over the period in which the installation services are performed using the percentage-of-completion method of accounting for material installations. We typically use labor hours or costs incurred to date as a percentage of the total estimated labor hours or costs to fulfill the contract as the most reliable and meaningful measure that is available for determining a project’s progress toward completion. We evaluate our estimated labor hours and costs and determine the estimated gross profit or loss on each installation for each reporting period. If it is determined that total cost estimates are likely to exceed revenues, we accrue the estimated losses immediately.

Multiple Element Arrangements

The majority of our revenue transactions do not have multiple elements. However, on occasion, we enter into revenue transactions that have multiple elements. These may include different combinations of products or monitoring services that are included in a single billable rate. These products or monitoring services are delivered over time as the customer utilizes our services. For revenue arrangements that have multiple elements, we consider whether the delivered devices have standalone value to the customer, there is objective and reliable evidence of the fair value of the undelivered monitoring services, which is generally determined by surveying the price of competitors’ comparable monitoring services, and the customer does not have a general right of return. Based on these criteria, we recognize revenue from the sale of devices separately from the monitoring services provided to the customer as the products or monitoring services are delivered.

Other Matters

We consider an arrangement with payment terms longer than our normal terms not to be fixed or determinable, and we recognize revenue when the fee becomes due. Normal payment terms for the sale of monitoring services and products are due upon receipt to 30 days. We sell our devices and services directly to end users and to distributors. Distributors do not have general rights of return. Also, distributors have no price protection or stock protection rights with respect to devices we sell to them. Generally, title and risk of loss pass to the buyer upon delivery of the devices.

We estimate our product returns based on historical experience and maintain an allowance for estimated returns, which is recorded as a reduction to accounts receivable and revenue.

Shipping and handling fees charged to customers are included as part of net revenues. The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenues.

Impairment of Long-lived Assets

We review our long-lived assets for impairment when events or changes in circumstances indicate that the book value of an asset may not be recoverable and in the case of goodwill, at least annually. We evaluate whether events and circumstances have occurred which indicate possible impairment as of each balance sheet date. We use an equity method of the related asset or group of assets in measuring whether the assets are recoverable. If the carrying amount of an asset exceeds its market value, an impairment charge is recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset. Impairment of long-lived assets is assessed at the lowest levels for which there is an identifiable fair market value that is independent of other groups of assets. As of September 30, 2012 and 2011, we impaired goodwill from Court Programs by $2,488,068 and $0, respectively and impaired goodwill from Midwest by $3,026,327 and $0, respectively, for a total goodwill impairment for the fiscal year ended September 30, 2012 and 2011 of $5,514,395 and $0, respectively.

Allowance for Doubtful Accounts

We must make estimates of the collectability of accounts receivable. In doing so, we analyze accounts receivable and historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies, which are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

Accounting for Stock-Based Compensation

We recognize compensation expense for stock-based awards expected to vest on a straight-line basis over the requisite service period of the award based on their grant date fair value. We estimate the fair value of stock options using a Black-Scholes option pricing model which requires us to make estimates for certain assumptions regarding risk-free interest rate, expected life of options, expected volatility of stock and expected dividend yield of stock.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our shareholders.

BUSINESS

Our Business

We market and deploy offender management programs, combining patented GPS tracking technologies, fulltime 24/7/365 intervention-based monitoring capabilities and case management services. Our vision is to be the global market leader for delivering the most reliable offender management solutions, which leverage superior intervention capabilities and integrated communication technologies. We believe that we currently deliver the only offender management technology, which effectively integrates GPS, RF (Radio Frequency) and an interactive 3-way voice communication system into a single piece device, deployable worldwide. Through our patented electronic monitoring technologies and services, we empower law enforcement, corrections and rehabilitation professionals with offender, defendant, probationer and parolee programs, which grant convicted criminals and pre-trial suspects an accountable opportunity to be “free from prison”. This provides for greater public safety at a lower cost compared to incarceration or traditional resource-intensive alternatives.

By way of explanation, GPS technology utilizes highly accurate clocks on 24 satellites orbiting the earth owned and operated by the United States Department of Defense. These satellites are designed to transmit their identity, orbital parameters and the correct time to earthbound GPS receivers at all times. Supporting the satellites are several radar-ranging stations maintaining exact orbital parameters for each satellite and transmitting that information to the satellites for rebroadcast at frequencies between 1500 and 1600 MHz. A GPS receiver (or engine) scans the frequency range for GPS satellite transmissions. If the receiver can detect three satellite transmissions, algorithms within the engine deduce its location, usually in terms of longitude and latitude, on the surface of the earth as well as the correct time. If the receiver can detect four or more GPS satellite transmissions, it can also deduce its own elevation above sea level. The effectiveness of GPS technology is limited by obstructions between the device and the satellites and, therefore, service can be interrupted or may not be available at all if the user is located in the lower floors of high-rise buildings or underground.

Our ReliAlert and ReliAlert XC devices are manufactured in the United States and include a portfolio of products, e-Arrest Beacons and monitoring services designed to create “Jails without Walls”, while re-socializing offender populations. The products and services are customizable by offender types (e.g., domestic abusers, sexual predators, gang members, pre-trial defendants, or juvenile offenders) and offer practical solutions and options for the reintegration and effective re-socialization of select offenders safely back into society. Additionally, our proprietary software and device firmware support the dynamic accommodation of agency-established monitoring protocols, victim protection imperatives, geographic boundaries, work environments, school attendance, rehabilitation programs and sanctioned home restrictions. Our technologies are designed for domestic or international, federal, state and local agencies to provide location tracking of designated individuals within the criminal justice system and throughout a restricted geography.

Our GPS devices are securely attached around the offender’s ankle with a tamper resistant strap (steel cabling with optic fiber) that can be adjusted or removed without detection only by a supervising officer, and which is activated through services provided by our SecureAlert Monitoring Center (or other agency-based monitoring centers). We deploy our upgraded, patented, dual-steel banded SecureCuff strap for “at-risk” offenders who have qualified for electronic monitoring supervision, but who require an incremental level of security and supervision, provided through both hardware and monitoring services. Our monitoring and intervention centers act as an important link between the offender and the supervising officer, as intervention specialists persistently track and monitor the offender, initiating contact at the direction of the supervising agency and/or when the offender is in violation of any established restrictions or protocols. The ReliAlert and ReliAlert XC units are intelligent devices with integrated computer circuitry and constructed from case-hardened plastics designed to promptly notify the intervention centers of any attempt made to breach applicable protocols, or to remove or otherwise tamper with the device or optical strap housing.

According to the Bureau of Justice Bulletin published November 2012, 4,814,200 adults were under community supervision at the end of 2011. At year end 2010, 4,887,900 adults were on probation, resulting in a 2% decline from a year ago. Additionally, an estimated 853,900 adults were on parole during 2011. The Bureau of Justice statistics define “probation” and “parole” as follows:

·	Probation is a court-ordered period of correctional supervision in the community, generally as an alternative to incarceration. In some cases, probation can be a combined sentence of incarceration followed by a period of community supervision.
·	Parole is a period of conditional supervised release in the community following a prison term. It includes parolees released through discretionary or mandatory supervised release from prison, those released through other types of post-custody conditional supervision, and those sentenced to a term of supervised release.

Electronic monitoring provides for significantly enhanced probation and parole supervision, while also rationalizing the increased or earlier release of expensive-to-house low-risk, at-risk or moderate risk offender populations. From a budgetary perspective, reports on file with us indicate that the average daily cost of incarcerating an inmate ranges from $65 to $475, or more, depending upon facility type, adult or juvenile, security level, services rendered, available amenities and jurisdiction. We market our services on the basis that electronic monitoring and other supervisory programs provide cost-effective alternatives to incarceration or specific solutions for at-risk juveniles, domestic violence perpetrators and/or sexual predators, all of whom need careful monitoring and situational intervention to thwart repeat crimes. Due to the continuing economic crisis domestically and globally, it is our view that these incarceration costs are unsustainable, given ongoing state and federal budget reductions, facility-specific overcrowding concerns, increased rehabilitation imperatives and politicized re-socialization agendas.

In our view, electronic monitoring provides reliable, public safety-centric alternatives to incarceration for low and moderate risk offenders (adult and juvenile), early release for good behavior initiatives, work release programs, sentencing diversions and accelerated halfway house deployments. Furthermore, we estimate that for between 10 to 20% of the traditional costs of incarceration or for roughly one-third the variable costs (which include, for example, inmate daily food, laundry, uniforms, medical, and guard overtime), our electronic monitoring solutions can provide reliable alternatives to incarceration, supporting real-time location tracking, interactive voice access and intervention-based contact, thus reducing the potential for subsequent or repeat offenses. Importantly, the price of our monitoring and intervention solutions ranges from $2.74 to $10.00 per day or up to a 90% reduction from the costs of incarceration. The ongoing budget crisis and the lingering impact of “the Great Recession” continue to move many jurisdictions to adopt or reconsider adopting “pay-to-stay,” “offender pay,” “parent pay,” or “partial pay” programs with the effect of shifting the burden of incarceration or tracking and monitoring costs in whole or part directly to the offender and defraying some or all of the costs to the public.

In support of these continually evolving rehabilitation and re-socialization initiatives, which extend to law enforcement and justice agencies beyond the U.S and into other global markets, we have made the strategic decision to adopt and pursue a broader services charter than most electronic monitoring companies. Our “C.A.R.E.” programs support “Corrections” and “Accountability” objectives in concert with “Rehabilitation” and “Empowerment” agendas. Specifically, our technology is deployed to facilitate a stringent protocol enforcement capability which incorporates restricted movement provisions coupled with enablement of positive reinforcement communications to support of social worker interactions, ongoing ministry options and proactive access by authorized counselors and sponsors. We design our programs to be uniquely positioned to allow for regular, frequent, and positive interaction and daily affirmations with monitored offenders with the goal that they will become responsible and contributing members of society, even while living within the virtual “electronic fence” boundaries established through our proprietary technologies.

Our Strategy

Our global growth strategy is to empower worldwide national security officials, law enforcement, corrections departments and rehabilitation professionals with sole-sourced offender management solutions, which integrate reliable intervention technologies supporting re-socialization or mandated monitoring initiatives. The use of our interactive services and intervention products is intended to provide law enforcement and judiciaries alike, with the ability to provide offenders a level of unmatched “real-time” accountability, while preserving public safety costs that are lower than with the cost of traditional incarceration or other transitional service offerings.

We intend to accomplish our global strategy through the “value-driven” yet profitable deployment of a portfolio of proprietary and non-proprietary GPS/RF real-time monitoring and intervention products and services, which can also include alcohol and drug tracking and testing on behalf of corrections, probation, law enforcement and rehabilitation personnel worldwide, all in support of offender reformation, re-socialization and recidivism reduction initiatives.

Our exclusive portfolio of products and services balances the need to dynamically track and monitor offenders with the opportunity to positively encourage and transform offenders, with the aim of reducing recidivism rates through our proprietary C.A.R.E programs and client-adapted initiatives.

We will continue to innovate, develop and deploy adaptive, cost-effective and reliable interactive technologies, which meet the ever-changing needs of our global clients, while providing value-driven and enhanced public safety services. Our goal is to continue to manufacture proprietary technologies, while also procuring complementary, best-in-class technologies through world-class companies such as Alcohol Monitoring Services (AMS), which markets SCRAM continuous alcohol monitoring devices and/or 3M, which markets the E3 Presence Monitoring, MEMS Alcohol Monitoring and TRaCE Inmate Tracking products.

In summary, we are committed to delivering a superior proprietary and non-proprietary portfolio of reliable, intervention monitoring products and services for the global offender management marketplace, where we are currently targeting pilots and deployments throughout the world in various regions (North America, Latin America, the Caribbean, Australasia, Africa and Europe). We have shown meaningful international growth since fiscal year 2010, which we anticipate to continue during this next fiscal year and which will remain a concerted focus for the Company.

Marketing

Over the past two years, we expanded our electronic monitoring operations, both domestically as well as internationally. Growth was aided by the lack of public funding to expand prisons, as well as a widening view that society needs to look at alternative ways of sentencing offenders, as well as keeping track of certain types of offenders, such as those convicted of sexual or domestic violence offenses, that have been released from custody. These views and the harsh economic and funding realities gave rise to the wider implementation of electronic monitoring programs globally.

With our unique and patented functionality, we are poised to take advantage of these opportunities. In particular demand was the patented two- and three-way voice communication of our ReliAlert device, and our SecureCuff steel reinforced band. These two features contributed heavily to a 50% increase in active devices in the United States and its territories from both existing and new customers, particularly for high risk and juvenile populations. Other SecureAlert features, including the real-time posting of location traces and flexible mapping, were instrumental in winning other key accounts.

We are committed to make continuous enhancements to both the ReliAlert device line and our TrackerPAL tracking and monitoring software. Device enhancements centered on componentry designed to expand the life span and robustness of the devices, enhance GPS sensitivity, and increase battery operation time. The life expectancy of a ReliAlert device is now expected to be longer than predecessor devices under normal operating conditions. The latest ReliAlert devices also have greater GPS sensitivity which enables better GPS coverage in impaired reception environments. Initial battery operation time of the latest ReliAlert devices has tested at 48-49 hours versus the prior time of 41-42 hours, at 5 minute tracking.

TrackerPAL software was also enhanced in several areas. Key among these enhancements were changes to security and password conventions. We take the security of our systems and data seriously. We have established a program to make such changes on a periodic basis to help ensure the utmost security. We also added new features to the software designed to assist our distributor and multi-location customers more easily manage their multiple locations. Additionally, we provided enhancements and options in the areas of participant registration functionality, device activation and deactivation, alarm notification and reporting.

It is our intention to continually upgrade existing solutions and work with customers and partners to develop next generation ideas and solutions. In order to better enable such initiatives, we sold several of our Court Programs operations and disposed of our interest in Court Programs early in fiscal year 2013. The Court Programs model is fundamentally a services business, while our strategic purpose is to produce and globally deploy leading edge offender tracking technology and monitoring services. While the Court Programs approach served as a good outlet for our core offerings, like any business, it required management attention and investment to continue to grow. Rather than continuing to divert executive management attention and investment dollars from our core operations, we converted the offices to distributorships owned by local operators who know and are part of the communities they serve. The distributorships will continue to distribute our offerings, but will also independently continue to grow by leveraging the strong customer, office and employee bases already in place.

Research and Development Program

During the fiscal year ended September 30, 2013, we spent $987,934 on research and development, compared to research and development expenditures of $1,248,654 in the fiscal year ended September 30, 2012. These costs of $987,934 were to further develop our TrackerPAL and ReliAlert portfolio of products and services.

Monitoring Center

During fiscal year 2013, we continued to realize productivity enhancements and additions to our key core competency and differentiator, our Intervention Monitoring Center. Productivity gains were achieved through monitoring software enhancements as well as continuous optimization of processes and procedures and ongoing training. The Intervention Monitoring Center employs bilingual Spanish-speaking staff who provide 24/7 Spanish-language coverage. The bilingual staff addresses the needs of both domestic and international Spanish-speaking customers.

Strategic Relationship

Inovar, Inc. located in Logan Utah, is a leading contract electronics manufacturer dedicated to providing flexible solutions to OEMs (original equipment manufacturers) in the fast growing segments of the electronics, medical, and aerospace industries and the military. Inovar is ISO 9001:2000 and ISO 13485:2003 certified to provide the most comprehensive and value-added services to our customers. Inovar currently provides several key components for our ReliAlert products.

Competition

We encounter GPS, house arrest and case management competition from traditional and evolving competitors. There is also significant consolidation of our industry. Our primary competitors include the following companies:

·	GEO Care, Inc. – Boca Raton, Florida (purchased and consolidated BI Incorporated, Boulder, Colorado in 2011) – This international company provides a wide variety of private correctional services from facilities operation and management to correctional health care services. BI Incorporated has been providing intensive community supervision services and technologies for more than 20 years to criminal justice agencies throughout the United States.
·	G4S plc – Crawley, Sussex, England – This international company is reportedly the world’s leading international security solutions group.
·	iSECUREtrac Corp., Omaha, Nebraska – This company supplies electronic monitoring equipment for tracking and monitoring persons on pretrial release, probation, parole, or work release.
·	Omnilink Systems, Inc., Alpharetta, Georgia – This company provides a one-piece device combined with GPS and Sprint cellular networks to electronically track an individual.
·	3M Electronic Monitoring, Odessa, Florida (purchased and consolidated Attenti Group, (ElmoTech and ProTech) in 2011) – This company has satellite tracking software technology that operates in conjunction with GPS and wireless communication networks.
·	Satellite Tracking of People, LLC – Houston, Texas – This company provides GPS tracking systems and services to government agencies.
·	Sentinel Offender Services, LLC, Augusta, Georgia (purchased and consolidated G4S’ US Offender Monitoring operation in 2012) – This company supplies monitoring and supervision solutions for the offender population. Through their acquisition and consolidation of G4S’ US Offender Monitoring operation, they expanded their customer base to which they provide electronic monitoring of offenders, prison and detention center management and transitional support services. Through this acquisition, it is believed that they also now resell Omnilink’s active GPS device.

We also face competition from small and regional companies that provide electronic monitoring technology along with localized case management and/or monitoring services. Some of these entities utilize less well-known technologies or are resellers of the above competitors’ products. We do not believe there is reliable publicly available information to indicate our relative market share or that of our competitors.

Dependence on Major Customers

For our year ended September 30, 2013, one customer accounted for $1,622,327 (10%) of our total revenues and another customer accounted for $5,252,960 (34%) of our total revenues. In addition, the latter customer accounted for $2,450,984 (12%) of our total revenues for the fiscal year ended September 30, 2012. No other customer represented more than 10% of total revenues for the fiscal years ended September 30, 2013 or 2012.

Dependence on Major Suppliers

We purchase cellular services from several suppliers. The cost to us for these services during the fiscal years ended September 30, 2013 and 2012, was approximately $974,709 and $961,994, respectively. Our cellular costs increased by approximately 1% in 2013 compared to 2012, due to the increase in the number of monitoring devices assigned to customers.

Product Returns

During fiscal year 2012, we made improvements to the ReliAlert and ReliAlert XC devices as well as internal processes to improve product reliability and reduce product returns including some of the following:

•	Improving case design to enhance waterproofing for our ReliAlert and ReliAlert XC devices.
•	Strengthening our inspection process and developing new tests for incoming parts from suppliers.
•	Designing new software to program and test devices, reducing the risk of “user error” while configuring units for deployment;

Intellectual Property

Trademarks

We have developed and use trademarks in our business, particularly relating to our corporate and product names. We own seven trademarks that are registered with the United States Patent and Trademark Office plus one trademark registered in Mexico and one in Canada. We are in the process of applying for four additional trademarks. Federal registration of a trademark in the United States enables the registered owner of the mark to bar the unauthorized use of the registered mark in connection with a similar product in the same channels of trade by any third-party anywhere in the United States, regardless of whether the registered owner has ever used the trademark in the area where the unauthorized use occurs. We may file additional applications for the registration of our trademarks in foreign jurisdictions as our business expands under current and planned distribution arrangements. Protection of registered trademarks in some jurisdictions may not be as extensive as the protection provided by registration in the United States.

The following table summarizes our trademark registrations and applications:

Trademark	Application Number	Registration Number	Status/Next Action
Mobile911®	75/615,118	2,437,673	Registered
Mobile911 Siren with 2-Way Voice Communication & Design®	76/013,886	2,595,328	Registered
MobilePAL®	78/514,031	3,035,577	Registered
HomePAL®	78/514,093	3,041,055	Registered
PAL Services®	78/514,514	3,100,192	Registered
TrackerPAL®	78/843,035	3,345,878	Registered
Mobile911®	78/851,384	3,212,937	Registered
TrackerPAL®	CA 1,315,487	749,417	Registered
TrackerPAL®	MX 805,365	960954	Registered
ReliAlert™	85/238,049	In process	Pending
HomeAware™	85/238,064	In process	Pending
SecureCuff™	85/238,058	In process	Pending
TrueDetect™	85/237,202	In process	Pending

Patents

We have 12 patents issued and three patents pending in the United States. At foreign patent offices we have one patent issued and 13 patents pending. We are also preparing patents that will be filed in other countries in the coming year. The following tables summarize information regarding our patents and patent applications. There is no assurance given that the pending applications will be granted or that they will, if granted, contain all of the claims currently included in the applications.


Domestic Patents	Application#	Date Filed	Patent#	Issued	Status

Emergency Phone for Automatically Summoning Multiple Emergency Response Services	09/173645	16-Oct-98	6226510	1-May-01	Issued

Combination Emergency Phone and Personal Audio Device	09/185191	`	6285867	4-Sep-01	Issued

Panic Button Phone	09/044497	19-Mar-98	6044257	28-Mar-00	Issued

Interference Structure for Emergency Response System Wristwatch	09/651523	29-Aug-00	6366538	2-Apr-02	Issued

Emergency Phone With Alternate Number Calling Capability	09/684831	10-Oct-00	7092695	15-Aug-06	Issued

Remote Tracking and Communication Device	11/202427	10-Aug-05	7330122	12-Feb-08	Issued

Remote Tracking System and Device With Variable Sampling and Sending Capabilities Based on Environmental Factors	11/486991	14-Jul-06	7545318	9-Jun-09	Issued

Alarm and Alarm Management System for Remote Tracking Devices	11/486992	14-Jul-06	7737841	15-Jun-10	Issued

Remote Tracking and Communication Device	12/028088	8-Feb-08	7804412	28-Sep-10	Issued

A Remote Tracking System with a Dedicated Monitoring Center	11/486976	14-Jul-06	7936262	3-May-11	Issued

Alarm and Alarm Management System for Remote Tracking Devices	12/792572	2-Jun-10	8013736	6-Sep-11	Issued

Remote Tracking and Communication Device	12/875988	3-Sep-10	8031077	4-Oct-11	Issued

A Remote Tracking Device and a System and Method for Two-Way Voice Communication Between the Device and a Monitoring Center	11/486989	14-Jul-06	-	-	Pending

A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device	12/399151	6-Mar-09	-	-	Pending

Tracking Device Incorporating Enhanced Security Mounting Strap	12/818,453	18-Jun-10	-	-	Pending


International Patents	Application#	Date Filed	Patent#	Issued	Status

Remote Tracking and Communication Device - Mexico	MX/a/2008/ 1932	4-Aug-06	278405	6-Oct-10	Issued

Remote Tracking and Communication Device - EPO	6836098.1	4-Aug-06	-	-	Pending

Remote Tracking and Communication Device - Brazil	PI0614742.9	4-Aug-06	-	-	Pending

Remote Tracking and Communication Device - Canada	2617923	4-Aug-06	-	-	Pending

A Remote Tracking System with a Dedicated Monitoring Center - EPO	7812596	3-Jul-07	-	-	Pending

A Remote Tracking System with a Dedicated Monitoring Center - Brazil	PI0714367.2	3-Jul-07	-	-	Pending

Secure Strap Mounting System For an Offender Tracking Device - EPO	10 009 091.9	1-Sep-10	-	-	Pending

Secure Strap Mounting System For an Offender Tracking Device - Brazil	Filed. Number not yet available	28-Feb-11	-	-	Pending

Secure Strap Mounting System For an Offender Tracking Device - Mexico	X/a/2011/002283	28-Feb-11	-	-	Pending

Secure Strap Mounting System For an Offender Tracking Device - Canada	2732654	28-Feb-11	-	-	Pending

A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device - Brazil	PI0909172-6	1-Sep-10	-	-	Pending

A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device - Mexico	9680	2-Sep-10	-	-	Pending

A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device - Canada	MX/a/2010/ 2717866	3-Sep-10	-	-	Pending

A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device - EPO	9716860.3	6-Oct-10	-	-	Pending

License Agreement

During the fiscal year ended September 30, 2010, we entered into a cross-licensing agreement with Satellite Tracking of People, LLC (“STOP”) accessing four patents that enhanced our positions into the areas of Crime Scene Correlation, augmenting GPS locationing with cellular network-based locationing, and confinement using RF-based beacon.

Royalty Agreement

On August 4, 2011, with an effective date of July 1, 2011, we entered into an agreement (the “Royalty Agreement”) with Borinquen Container Corp., a corporation organized under the laws of the Commonwealth of Puerto Rico (“Borinquen”) pursuant to which we purchased Borinquen’s wholly-owned subsidiary, International Surveillance Services Corporation, a Puerto Rico corporation (“ISS”) in consideration of 310,000 shares of our Common Stock, valued at the market price on the date of the Royalty Agreement at $16.40 per share, or $5,084,000. We also granted to Borinquen a royalty in the amount of 20% of our net revenues from the sale or lease of our monitoring devices and monitoring services within a territory comprised of South and Central America, the Caribbean, Spain and Portugal, for a term of 20 years. The royalty payments were due quarterly through June 30, 2031.

On February 1, 2013, we redeemed the royalty held by Borinquen for a cash payment of $10,768,555, using proceeds from the Loan made to us by the selling shareholder. We have capitalized the total cost of the royalty purchase commitment, $10,768,555, as a non-current asset and recorded a loan payable to Borinquen to reflect the obligations under that agreement. We will amortize the asset over the remaining term of the Royalty Agreement (19 years), subject to periodic tests for impairment. For more information about the Loan, see “The Loan and Security Agreement” on page 43, below.

Trade Secrets

We own certain intellectual property, including trade secrets that we seek to protect, in part, through confidentiality agreements with employees and other parties, although some employees who are involved in research and development activities have not entered into these agreements. Even where these agreements exist, there can be no assurance that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets will not otherwise become known to or independently developed by competitors.

We intend to protect our legal rights concerning intellectual property by all appropriate legal action. Consequently, we may become involved from time to time in litigation to determine the enforceability, scope, and validity of any of the foregoing proprietary rights. Any patent litigation could result in substantial cost and divert the efforts of management and technical personnel.

Seasonality

Given the consistency in recurring domestic monitoring revenues by customer throughout 2012, we detected no apparent seasonality in our business. However, as in previous years, incremental domestic deployment opportunities slow down in the months of July and August. We believe that this is due to the unavailability of many judges, probation directors and other key parole officials, who observe a traditional vacation season during these two months.

Environment

We are not aware of any instance in which we have contravened federal, state, or local laws relating to protection of the environment or in which we otherwise may be subject to liability for environmental conditions that could materially affect operations.

Employees

As of October 30, 2013, we had 92 full-time employees and 8 part-time employees. None of the employees are represented by a labor union or subject to a collective bargaining agreement. We have never experienced a work stoppage and management believes that the relations with employees are good.

Additional Available Information

Our principal executive offices and facilities are located at 150 West Civic Center Drive, Suite 400, Sandy, Utah 84070. Our telephone number is (801) 451-6141. We maintain a web site at www.securealert.com. The information found on, or otherwise accessible through, our website, is not incorporated information, and does not form a part of this prospectus. We make available, free of charge at our corporate website copies of our annual reports filed with the United States Securities and Exchange Commission (“SEC”) on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and all amendments to these reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act. All reports filed us with the SEC are available free of charge via the EDGAR system through the SEC website at www.sec.gov. In addition, the public may read and copy materials we have filed with the SEC at the SEC’s public reference room located at 450 Fifth St., N.W., Washington, D.C. 20549.

Legal Proceedings

We are party to the following legal proceedings:

Lazar Leybovich et al v. SecureAlert, Inc. On March 29, 2012, Lazar Leybovich, Dovie Leybovich and Ben Leybovich filed a complaint in the 11th Circuit Court in and for Miami-Dade County, Florida alleging breach of contract with regard to certain Stock Redemption Agreements with the Company. The complaint was subsequently withdrawn by the plaintiffs. An amended complaint was filed by the plaintiffs on November 15, 2012. We believe these allegations are inaccurate and intend to defend the case vigorously. We have not accrued any potential loss as the probability of incurring a material loss is deemed remote by management, after consultation with legal counsel.

Larry C. Duggan v. Court Programs of Florida, Inc. and SecureAlert, Inc. On March 26, 2012, Mr. Duggan filed a complaint in the 9th Circuit Court in and for Orange County, Florida alleging malicious prosecution, abuse of process and negligent infliction of emotional distress against us and our former subsidiary. The case resulted from actions of a former agent of our former subsidiary. We intend to defend this matter. We have not accrued any potential loss as the probability of incurring a material loss is deemed remote by management, after consultation with legal counsel.

Integratechs v. SecureAlert, Inc. On March 14, 2013, Integratechs, Inc. filed a suit in the Fourth Judicial District Court of Utah County, claiming the Company breached a contract for computer services and intentionally interfered with its economic relations. The Company believes the allegations are inaccurate and will defend the case vigorously.

Christopher P. Baker v. SecureAlert, Inc. In February 2013, Mr. Baker filed suit against the Company in the Third Judicial District Court in and for Salt Lake County, State of Utah. Mr. Baker asserts that the Company breached a 2006 consulting agreement with him and claims damages of not less than $210,000. The Company disputes plaintiff’s claims and will defend the case vigorously. No accrual for a potential loss has been made as the Company believes the probability of incurring a material loss is remote.

MANAGEMENT

Directors and Executive Officers

The following table sets forth information about the members of our Board of Directors as of September 30, 2013:

Name	Age	Position

David S. Boone	53	Director
Guy Dubois	55	Director
Rene Klinkhammer	33	Director
Winfried Kunz	48	Director
Dan L. Mabey	62	Director
George F. Schmitt	70	Director

David S. Boone is the CEO of Paranet Solutions, LLC, in Dallas, Texas. He became a director of our Company on December 21, 2011. He has served in executive roles with a variety of publicly traded and start-up organizations including Kraft General Foods, Sears, PepsiCo, Safeway and Belo Corporation, as well as serving as the CFO of Intira Corporation. In addition, he has served as a consultant with the Boston Consulting Group. Mr. Boone was CEO, President and Director of American CareSource Holdings from 2005 to 2011, a NASDAQ traded company. In addition, he was the 2009 Ernst and Young Entrepreneur of the Year winner for Health Care in the Southwest Region. Mr. Boone serves on a number of private company boards and serves on the board of the Texas Kidney Foundation. Mr. Boone graduated from the University of Illinois, cum laude, in 1983 majoring in accounting. Mr. Boone is a Certified Public Accountant. He received his master’s degree in business administration from Harvard in 1989.

Guy Dubois is our Chairman since February 2013 and became a director in December 2012. Mr. Dubois is a Director at Singapore-based Tetra House Pte. Ltd., that provides consulting and advisory services worldwide. Mr. Dubois was Chief Executive Officer of gategroup AG from September 2008 until April 2011. He previously held the positions of President, Executive Vice President Finance and Administration, Chief Administrative Officer and Chief Financial Officer of Gate Gourmet Holding LLC. He has served as a manager of the Board of Managers of Gate Gourmet Holding LLC from March 2007 until April 2011 and as a member of the Board of gategroup AG from February 2008 until April 2011. Prior to joining Gate Gourmet in July 2003, Mr. Dubois was Vice President Finance, Administration, Demand and Supply Chain for Roche’s Vitamins Inc. in New Jersey from 2000 to 2003. Prior to which he was Area Manager, Finance and Administration for Roche’s Vitamins Asia-Pacific Pte. Ltd. in Singapore from 1997 to 1999, and Finance Manager from 1995 to 1997. Mr. Dubois worked in corporate finance for Hoffman-La Roche in 1994. Mr. Dubois also served on the European Organization for Nuclear Research (CERN) team in Switzerland in various roles, including Treasurer and Chief Accountant, Manager General Accounting and Financial Accountant from 1989 to 1994. He also worked with IBM in Sweden from 1984 to 1988 as Product Support Specialist for Financial Applications. He attended the Limburg Business School in Diepenbeek, Belgium, and has a degree in Financial Science and Accountancy. Mr. Dubois’ appointment to the Board of Directors was a requirement of a financing arrangement with the selling shareholder as part of the terms of the Loan Agreement.

Rene Klinkhammer became a director in January 2010. He graduated from European Business School, Oestrich-Winkel, Germany, in 2004, with an MBA-equivalent degree in business administration. His majors were Banking, Finance and International Management. After graduating, Mr. Klinkhammer joined Deutsche Bank’s Investment Banking Division as an analyst in the Corporate Finance Advisory Group, specializing in mergers and acquisitions, along with debt and equity financing transactions for larger German clients of the bank. From 2007 to June 2013, Mr. Klinkhammer worked for Sapinda Holding B.V. and its subsidiaries, a group of privately-owned investment companies with offices in Amsterdam, Berlin, London and other major cities around the world. Since July 2013, Mr. Klinkhammer works for Anoa Capital S.A., Luxembourg based provider of innovative financing solutions, as Head of Origination. For the past six years, Mr. Klinkhammer has worked with us as both an investor and advisor.

Winfried Kunz became a director on December 21, 2011. He studied Business Administration and Economics from 1984 -1989 at the Universities in Munich and Cologne. In 1985 he started working as a system analyst and from 1987 – 1998 as a management consultant for German, British and American companies in the information technology business, where he served in executive positions. Mr. Kunz worked as an executive at Precision Software Ltd., Contact Software International Inc., and Symantec Corp. For more than 15 years, Mr. Kunz has worked as an independent consultant and managing partner of Asecon GmbH, a company he founded in 1997, developing and implementing investor innovative business models for residential properties with a focus in Munich for his own portfolio and for third parties. For more than 10 years he has been a consultant to JK Wohnbau GmbH, a Munich-based real estate developer, where he served as COO from 2009 until the company’s initial public offering in 2010. From 2009 to 2011, Mr. Kunz has also worked with us as an investor.

Dan L. Mabey became a director on December 21, 2011. He is the President of Bighorn Oil and Gas, an energy development company (Casper, Wyoming), and he has served in both public and private company leadership positions in the high-tech industry including President of 1-2-1 View digital signage company (Singapore), Chief Operating Officer and Director of In Media Corporation IPTV service company (California), President of Interactive Devices, Inc. a video compression company (Folsom, California) and Vice President of Broadcast International, a satellite broadcast company ( Salt Lake City, Utah). From 1990 until 2002, Mr. Mabey was Director of the State of Utah Department of Economic Development International Business Development Office, growing Utah exports from $700 million to $3.6 billion a year. He helped recruit the 2002 Winter Olympics to Salt Lake City, Utah, and managed international business development for the games. Throughout his career, Mr. Mabey has been active in civic and community organizations and is the recipient of numerous service awards. He is also the co-inventor or lead inventor on six patents and the sole inventor of a seventh. Mr. Mabey received a Masters of Public Administration (MPA) degree from Idaho State University in 1978 and a B.A. degree from Boise State University in 1974.

George F. Schmitt became a director on December 21, 2011. He is a director and CEO of MBTH Technology Holdings. He has held this position since December, 2010. Mr. Schmitt is also a director of XG Technology, Inc. a publicly traded company, Kentrox and Calient. Mr. Schmitt previously served as a director of TeleAtlas, Objective Systems Integrators, Omnipoint and LHS Group. Mr. Schmitt is a principal of Sierra Sunset II, LLC and serves as a Trustee of St. Mary’s College. In addition, Mr. Schmitt has served as a director of many privately held companies including Voice Objects, Knowledge Adventure, Jungo and Cybergate, among others. Mr. Schmitt has also served as Financial Vice President of Pacific Telesis and chaired the audit committee of Objective Systems Integrations and TeleATLAS. Mr. Schmitt received an M.S. in Management from Stanford University, where he was a Sloan Fellow, and a B.A. in Political Science from Saint Mary’s College.

Board of Directors

Election and Meetings+

Directors hold office until the next annual meeting of the shareholders and until their successors have been elected or appointed and duly qualified. Executive officers are appointed by the Board of Directors and hold office until their successors are appointed and duly qualified. Vacancies on the Board which are created by the retirement, resignation or removal of a director may be filled by the vote of the remaining members of the Board, with such new director serving the remainder of the term or until his/her successor shall be elected and qualify.

The Board of Directors is elected by and is accountable to our shareholders. The Board establishes policy and provides strategic direction, oversight, and control. The Board met 18 times during fiscal year 2013. All directors attended at least 80% of the meetings of the Board and the committees of the Board of Directors, of which they are members.

Director Independence

The Board of Directors intends to comply with the director independence standards of the NASDAQ Stock Market, including NASDAQ Rule 4200(a)(15). The Board determined the independence of all directors based on the NASDAQ standards and asserts that George F. Schmitt, Winfried Kunz, David S. Boone, Rene Klinkhammer and Dan L. Mabey meet the standards to be considered independent. The Board has not appointed a lead independent director.

Shareholder Communications with Directors

If we receive correspondence from our shareholders that is addressed to the Board of Directors, we forward it to every director or to the individual director to whom it is addressed. Shareholders who wish to communicate with the directors may do so by sending their correspondence to the directors c/o SecureAlert, Inc., 150 West Civic Center Drive, Suite 400, Sandy, Utah 84070.

Involvement in Certain Legal Proceedings

There are no material proceedings to which any director or executive officer or any associate of any such director or officer is a party adverse to us or has a material interest adverse to our Company.

Except as discussed below, no director or executive officer has been involved in any of the following events during the past ten years:

·	any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
·	any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
·	being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
·	being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
·	being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and- desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
·	being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

An executive of gategroup holdings AG, an airline catering company headquartered in Switzerland was convicted in a Danish court in September 2012 of fraud and embezzlement involving that company’s assets. Guy Dubois, a director of the Company since December 2012, was Chief Executive Officer of gategroup holdings AG at the time the executive committed the acts leading to her conviction, voluntarily resigned from gategroup holdings AG in 2011. The Zurich State Prosecutor initiated an investigation in 2011 focused on whether other individuals, including Mr. Dubois were aware of or benefitted personally from the fraud and embezzlement that occurred. Mr. Dubois, who has indicated he was unaware of any of these activities at the time they were being committed, has been cooperating with that investigation.

Committees of the Board of Directors

The Board of Directors has a separately-designated standing Audit Committee, Compensation Committee, and Nominating Committee. These committees assist the Board of Directors to perform its responsibilities and make informed decisions. Charters for these committees are posted on our website, www.securealert.com.

Audit Committee. The primary duties of the Audit Committee are to oversee (i) management’s conduct of our financial reporting process, including reviewing the financial reports and other financial information provided by the Company, and reviewing our systems of internal accounting and financial controls, (ii) our independent auditors’ qualifications and independence and the audit and non-audit services provided to the Company and (iii) the engagement and performance of our independent auditors. The Audit Committee assists the Board in providing oversight of our financial and related activities, including capital market transactions. The Audit Committee has a charter, a copy of which is available on our website at www.securealert.com.

The Audit Committee meets with our Chief Financial Officer and with our independent registered public accounting firm and evaluates the responses by the Chief Financial Officer both to the facts presented and to the judgments made by our independent registered public accounting firm. The Audit Committee met four times during both fiscal years 2012 and 2013 and all members of the Audit Committee attended at least 75% of the committee’s meetings.

Members of the Audit Committee as of September 30, 2013, are Messrs. Boone, Schmitt and Kunz. Each member of the Audit Committee satisfies, according to the full Board of Directors, the definition of independent director as established in the NASDAQ Listing Standards. All of the members of the Audit Committee are financially literate. In accordance with Section 407 of the Sarbanes-Oxley Act of 2002, the Board of Directors designated David S. Boone as the Audit Committee’s “Audit Committee Financial Expert” as defined by the applicable regulations promulgated by the Securities and Exchange Commission.

The Audit Committee reviewed and discussed the matters required by United States auditing standards required by the Public Company Accounting Oversight Board (“PCAOB”) and our audited financial statements for the fiscal year ended September 30, 2013 with management and our independent registered public accounting firm. The Audit Committee has received the written disclosures and the letter from our independent registered public accounting firm required by Independence Standards Board No. 1, and the Audit Committee has discussed with the independent registered public accounting firm the independent registered public accounting firm's independence.

Compensation Committee. Members of the committee are Messrs. Mabey, Boone, and Schmitt. The committee elected Mr. Mabey as the Chairman of the Committee. The Compensation Committee met two times during fiscal year 2012. Members of the Compensation Committee are appointed by the Board of Directors. Messrs. Mabey, Boone, and Schmitt are independent directors, as determined by the Board of Directors in accordance with the NASDAQ listing standards. The Compensation Committee is governed by a charter approved by the Board of Directors, a copy of which is available on the Company’s website www.securealert.com.

The Compensation Committee has responsibility for developing and maintaining an executive compensation policy that creates a direct relationship between pay levels and corporate performance and returns to shareholders. The Committee monitors the results of such policy to assure that the compensation payable to our executive officers provides overall competitive pay levels, creates proper incentives to enhance shareholder value, rewards superior performance, and is justified by the returns available to shareholders.

The Compensation Committee also acts on behalf of the Board of Directors in administering compensation plans approved by the Board, in a manner consistent with the terms of such plans (including, as applicable, the granting of stock options, restricted stock, stock units and other awards, the review of performance goals established before the start of the relevant plan year, and the determination of performance compared to the goals at the end of the plan year). The Committee reviews and makes recommendations to the Board with respect to new compensation incentive plans and equity-based plans; reviews and recommends the compensation of the Company’s directors to the full Board for approval; and reviews and makes recommendations to the Board on changes in major benefit programs of executive officers of the Company.

Nominating and Corporate Governance Committee. Mr. Schmitt serves as the chair of the Nominating and Corporate Governance Committee. Messrs. Kunz and Klinkhammer also currently serve as members of this committee. The Nominating Committee has the responsibility for identifying and recommending candidates to fill vacant and newly created Board positions, setting corporate governance guidelines regarding director qualifications and responsibilities, and planning for senior management succession.

The Nominating and Corporate Governance Committee is required to review the qualifications and backgrounds of all directors and nominees (without regard to whether a nominee has been recommended by shareholders), as well as the overall composition of the Board of Directors, and recommend a slate of directors to be nominated for election at the annual meeting of shareholders, or, in the case of a vacancy on the Board of Directors, recommend a director to be elected by the Board to fill such vacancy. The Nominating Committee held one meeting during fiscal 2013.

Code of Ethics. We have established a Code of Business Ethics that applies to our officers, directors and employees. The Code of Business Ethics contains general guidelines for conducting our business consistent with the highest standards of business ethics, and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. We will post on our website www.securealert.com any amendments to or waivers from a provision of our Code of Business Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions and that relates to any element of the Code of Business Ethics.

Executive Officers

The following table sets forth certain information regarding our principal executive officer and principal financial and accounting officer as of September 20, 2013:

Name	Age	Position

Executive Committee of Board of Directors		Principal Executive Officer
Chad D. Olsen	42	Chief Financial Officer

The Executive Committee of the Board of Directors was established to act temporarily in the principal executive officer function following the resignation of John L. Hastings, III in October 2012. Mr. Hastings had served as our President since June 2008 and as Chief Executive Officer since June 2011. Current members of the Executive Committee are Guy Dubois and David S. Boone. Mr. Dubois was, on April 16, 2013, granted warrants equal to $300,000 for his additional work as a director and member of the Board’s Executive Committee. This grant is of warrants to purchase 64,665 shares of Common Stock at an exercise price of $9.00 per share; that vest in equal monthly increments over a period of one year or immediately upon the hiring of a new Chief Executive Officer. These warrants were valued at the date of grant using the Black-Scholes model. The Board of Directors has not determined a timeline for the hiring of a new Chief Executive Officer.

Chad D. Olsen became our Chief Financial Officer in January 2010. Prior to that time, he served as our corporate controller since September 2001. From 1992 to 1997, Mr. Olsen worked in the banking and investment industry where he assisted clients with tax, investment and banking services. From 1997 to 2001, Mr. Olsen worked with a certified public accounting firm performing tax, auditing, and business advisory services. Additionally, Mr. Olsen owned and operated his own accounting practice performing tax, accounting, and consulting services. Mr. Olsen received a Bachelor of Science Degree in Accounting from Brigham Young University.

Employment Agreements

We have no employment agreements with any Named Executive Officer.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) requires our officers, directors, and persons who beneficially own more than 10% of our Common Stock to file reports of ownership and changes in ownership with the SEC. Officers, directors, and greater-than-ten-percent shareholders are also required by the SEC to furnish us with copies of all Section 16(a) forms that they file.

Based solely upon a review of these forms that were furnished to us, we believe that all reports required to be filed by these individuals and persons under Section 16(a) were filed during fiscal year 2013 and that such filings were timely except the following:

·	Mr. Klinkhammer, a director, filed two late Form 4s reporting two transactions; and
·	Mr. Schmitt, a director, filed two late Form 4s reporting two transactions.
·	Mr. Dubois, a director, filed two late Form 4s reporting two transactions.
·	Mr. Boone, a director, filed one late Form 4 reporting one transaction.
·	Mr. Mabey, a director, filed one late Form 4 reporting one transaction.
·	Mr. Kunz, a director, filed one late Form 4 reporting one transaction.

Compensation of Directors

The table below summarizes the compensation paid by us to our non-employee directors for the fiscal year ended September 30, 2013 who are serving as directors as of October 18, 2013:

(a)	(b)		(c)		(d)		(e)
	Fees earned		Stock awards		Option awards		Total
Name	($)		($)		($)		($)
David S. Boone	$	-	$	-	$	76,385	$	76,385
Guy Dubois	$	-	$	-	$	335,322	$	335,322
Rene Klinkhammer	$	-	$	7,500	$	46,859	$	54,359
Winfried Kunz	$	-	$	-	$	55,706	$	55,706
Dan L. Mabey	$	-	$	15,000	$	35,047	$	50,047
George F. Schmitt	$	-	$	-	$	55,706	$	55,706

Effective January 1, 2012, the Company accrued $2,500 per month for each director to be issued in shares of Common Stock valued on the last date of the quarter or the director may elect warrants in the amount of three times the amount had the director elected to take shares, valued at the date of grant using the Black-Scholes valuation method. Additionally, the Chairman of the Audit Committee accrues $5,000 per month rather than $2,500. Mr. Dubois became a director in December 2012 and our Chairman on February 28, 2013. Amount indicated includes the fair market value on the date of grant of warrants to purchase 73,413 shares of Common Stock granted to Mr. Dubois with exercise prices ranging from $9.00 to $19.46 and expiring from March 2015 to September 2015, valued using the Black-Scholes model.

The table below summarizes outstanding warrants previously issued to our current non-employee directors for compensation as of September 30, 2013:

	Grant	Expiration	Exercise		Number of		Compensation
Name	Date	Date	Price		Options		Expense

Winfried Kunz	3/22/13	3/21/15	$	12.58		8,943	$	43,809
7/1/13		6/30/15	$	14.70		2,040	$	11,811
10/1/13		9/30/15	$	19.46		1,140	$	8,848

George F. Schmitt	3/22/13	3/21/15	$	12.58		8,943	$	43,809
7/1/13		6/30/15	$	14.70		2,040	$	11,811
10/1/13		9/30/15	$	19.46		1,140	$	8,848

Rene Klinkhammer	1/20/10	1/19/15	$	26.00		1,000	$	21,036
3/22/13		3/21/15	$	12.58		8,943	$	43,809
7/1/13		6/30/15	$	14.70		2,040	$	11,811

David S. Boone	3/22/13	3/21/15	$	12.58		8,943	$	43,809
7/1/13		6/30/15	$	14.70		4,083	$	23,640
10/1/13		9/30/15	$	19.46		2,280	$	17,698

Dan L. Mabey	3/22/13	3/21/15	$	12.58		8,943	$	43,809

Guy Dubois	3/22/13	3/21/15	$	12.58		2,385	$	11,682
4/16/13		4/15/15	$	9.00		64,665	$	300,000
7/1/13		6/30/15	$	14.70		4,083	$	23,640

Reimbursement of Expenses

We reimburse travel expenses of members of the Board of Directors for their attendance at Board meetings and other necessary business travel.

Compensation Risks Assessment

As required by rules adopted by the SEC, management has made an assessment of our compensation policies and practices with respect to all employees to determine whether risks arising from those policies and practices are reasonably likely to have a material adverse effect on us. In doing so, management considered various features and elements of the compensation policies and practices that discourage excessive or unnecessary risk taking. As a result of the assessment, we have determined that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us.

EXECUTIVE COMPENSATION

Summary Compensation

Set out in the following summary compensation table are the particulars of compensation paid to the following persons:

·	our principal executive officer (note, we currently have no principal executive officer, rather the executive committee of the Board of Directors acts as our principal executive officer and compensation for the members of this committee is included in the Director Compensation table above);
·	each of our two most highly compensated executive officers who were serving as executive officers at the end of the fiscal year ended September 30, 2013 who had total compensation exceeding $100,000, (with the principal executive officer, the Named Executive Officers); and
·	up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the most recently completed financial year, who we will collectively refer to as the named executive officers, for our fiscal years ended September 30, 2013 and 2012.

Name and
Principal						Stock		Option		All Other
Position	Year	Salary		Bonus		Awards		Awards		Compensation		Total
( a )	( b )	( c )		( d )		( e )		( f )		( g )		( h )
Chad D. Olsen (2)	2013	$	192,000	$	-	$	-	$	-	$	8,740	$	200,740
Chief Financial Officer	2012	$	192,000	$	35,000	$	124,000	$	432,352	$	42,195	$	825,547

Bernadette Suckel (3)	2013	$	168,000	$	-	$	-	$	-	$	8,061	$	176,061
Managing Director Global	2012	$	168,000	$	35,000	$	77,500	$	270,219	$	7,950	$	558,669
Customer Service

(1)	Mr. Olsen has served as our Chief Financial Officer since January 2010. Prior to his appointment as Chief Financial Officer, Mr. Olsen was our controller. Column (g) includes additional compensation for paid-time off, health, dental, life and vision insurance.
(2)	Mrs. Suckel has served as Managing Director of Global Customer Service and Account Management of the Company since June 2008. Column (g) includes additional compensation for health, dental, life and vision insurance.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth for each Named Executive Officer certain information concerning outstanding equity awards as of September 30, 2013:

Name	Number of securities underlying unexercised options (#) exercisable		Number of securities underlying unexercised options (#) unexercisable		Equity incentive plan awards: Number of underlying		Option exercise price ($)		Option expiration date	Number of shares or units of stock that have not vested (#)		Market value of shares or units of stock that have not vested ($)		Equity incentive plan awards: Number of Unearned shares, units or other rights that have not vested (#)

Chad D. Olsen		1,000		-		-	$	15.00	1/15/14		-		-		-
		125		-		-	$	15.00	3/14/14		-		-		-
		3,590		-		-	$	15.00	9/29/15		-		-		-
		30,000		-		-	$	16.66	9/29/14		-		-		-

Bernadette Suckel		1,000		-		-	$	60.00	1/15/14		-		-		-
		18,750		-		-	$	16.66	9/29/14		-		-		-
		3,500		-		-	$	30.00	9/29/15		-		-		-

We have adopted our 2012 Plan and our 2006 Plan. We have also granted individual plans to certain executives and directors in the form of stock purchase warrants, which are included in the table above.

Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers.

Compensation Risks Assessment

As required by rules adopted by the SEC, our management has made an assessment of our compensation policies and practices with respect to all employees to determine whether risks arising from those policies and practices are reasonably likely to have a material adverse effect on us. In doing so, management considered various features and elements of the compensation policies and practices that discourage excessive or unnecessary risk taking. As a result of the assessment, management has determined that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

We have two classes of voting securities issued and outstanding: our Common Stock and our Series D Preferred. The following table presents information regarding beneficial ownership as of October 4, 2013 (the “Table Date”), of all classes of our voting securities by (1) each shareholder known to us to be the beneficial owner of more than 5% of any class of our voting securities; (2) each of our Named Executive Officers serving as of the Table Date; (3) each of our directors serving as of the Table Date; and (4) all of our executive officers and directors as a group.

We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and dispositive power with respect to all securities they beneficially own. As of the Table Date, the applicable percentage ownership is based on 9,805,503 shares of Common Stock issued and outstanding and 468 shares of Series D issued and outstanding, convertible into 14,040 shares of Common Stock. In computing the number of shares of Common Stock and Series D Preferred beneficially owned by a person and the applicable percentage ownership of that person, we deemed outstanding shares of Common Stock or Series D Preferred subject to warrants, options and convertible debt or other securities held by that person that are currently exercisable or exercisable within 60 days of the Table Date. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.

Beneficial ownership representing less than 1% of the issued and outstanding shares of a class is denoted with an asterisk (“*”). Holders of Common Stock are entitled to one vote per share and holders of Series D are entitled to 30 votes per share and vote with the Common Stock shareholders on an as-converted basis.



	Title or Class of Securities:

Name and Address of	Common Stock					Series D Preferred Stock
Beneficial Owner (1)	Shares		%			Shares		%

5% Beneficial Owners:
Sapinda Asia Limited (2)		3,905,917		39.8	%		-		-
Advance Technology Investors, LLC (3)		581,288		5.9	%		-		-

Directors and Named Executive Officers:
David S. Boone (4)		15,306		*			-		-
Guy Dubois (5)		73,413		*			-		-
Rene Klinkhammer (6)		12,363		*			-		-
Winfried Kunz (7)		12,123		*			-		-
Dan Mabey (8)		10,008		*			-		-
George Schmitt (9)		18,906		*			-		-
Chad D. Olsen (10)		40,925		*			207		44.2	%

All directors and executive officers as a group (7 persons)		183,044		1.8	%		207		44.2	%

(1)	Except as otherwise indicated, the business address for these beneficial owners is c/o the Company, 150 West Civic Center Drive, Suite 400, Sandy, Utah 84070.
(2)	Address is Rooms 803-4, 8F, Hang Seng Bank Building, 200 Hennessy Road, Wanchai, Hong Kong. Based on a Form 4 filed by Sapinda Asia Limited on November 5, 2013.
(3)	Includes 573,965 shares of Common Stock owned of record by Advance Technology Investors, LLC. In addition, we have included 7,323 shares of Common Stock owned of record by U/W Mark Weidman Trust. Address is 154 Rock Hill Road, Spring Valley, NY 10977.
(4)	Mr. Boone is a director and a member of the Board of Directors’ executive committee. Includes 15,306 shares of Common Stock issuable upon exercise of stock purchase warrants.
(5)	Mr. Dubois is a director and Chairman of the Board of Directors; he is also a member of the executive committee of the Board of Directors. Includes 73,413 shares of Common Stock issuable upon exercise of stock purchase warrants.
(6)	Mr. Klinkhammer is a director. Includes 380 shares of Common Stock owned of record and 11,983 shares of Common Stock issuable upon exercise of stock purchase warrants.
(7)	Mr. Kunz is a director. Includes 12,123 shares of Common Stock issuable upon exercise of stock purchase warrants.
(8)	Mr. Mabey is a director. Includes 1,065 shares of Common Stock owned of record and 8,943 shares of Common Stock issuable upon exercise of stock purchase warrants.
(9)	Mr. Schmitt is a director. Includes 6,783 shares of Common Stock owned of record and 12,123 shares of Common Stock issuable upon exercise of stock purchase warrants.
(10)	Mr. Olsen is our Chief Financial Officer. Includes 34,715 shares issuable upon exercise of vested stock purchase warrants, as well as 6,210 shares of Common Stock issuable upon conversion of 207 shares of Series D Preferred stock.

Changes in Control

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change of control of our Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We have entered into certain transactions with related parties during the fiscal year ended September 30, 2013. These transactions consist mainly of financing transactions and service agreements. Transactions with related parties are reviewed and approved by the independent and disinterested members of the Board of Directors.

Royalty Agreement

On August 4, 2011, with an effective date of July 1, 2011, we entered into an agreement (the “Royalty Agreement”) with Borinquen (a shareholder) to purchase its wholly-owned subsidiary ISS for 310,000 shares of our Common Stock, valued at the market price on the date of the Royalty Agreement at $16.40 per share, or $5,084,000. As additional consideration, we also granted Borinquen a royalty in the amount of 20% of our net revenues from the sale or lease of monitoring devices and monitoring services within a territory comprised of South and Central America, the Caribbean, Spain and Portugal, for a term of 20 years. The royalty payments were due quarterly through June 30, 2031.

On February 1, 2013, we entered into an agreement with Sapinda Asia and Borinquen (the Settlement and Royalty and Share Buy Back Agreement) to complete the repurchase of the royalty (at a cost of $11,616,982) and to pay accrued royalty expenses (totaling $1,383,018) for a total payment of $13,000,000. To finance this redemption, we borrowed $16,700,000 from Sapinda Asia. We used $13,000,000 toward the redemption of the royalty and to pay off accrued royalty fees and used $3,700,000 of the loan for operating capital. (See “Loan and Security Agreement” on page 43 for additional information about this loan transaction and related transactions involving Sapinda Asia.)

Revolving Loan Agreement

On February 1, 2013, we entered into a revolving loan agreement with Sapinda Asia (the “Revolving Loan”). Under this arrangement, we may borrow up to $1,200,000 at an interest rate of 3% per annum for unused funds and 10% per annum for borrowed funds. As of September 30, 2013, no advances have been made under this loan and we had accrued $23,868 in interest liability on the Revolving Loan. On October 24, 2013 we drew down the full $1,200,000 for use in a performance bond as required under a contract with an international customer.

Related-Party Service Agreement

Subsequent to June 30, 2013, we entered into an agreement with Paranet Solutions, LLC to provide the following primary services: 1) procurement of hardware and software necessary to ensure that vital databases are available in the event of a disaster (backup and disaster recovery system); and 2) providing the security of all data and the integrity of such data against all loss of data, misappropriation of data by Paranet, its employees and affiliates. David S. Boone, a director and member of our Executive Committee, is the Chief Executive Officer of Paranet.

As consideration for these services, we agreed to pay Paranet $4,500 per month. The arrangement can be terminated by either party for any reason upon ninety (90) days written notice to the other party.

Additional Related Party Transactions; Summary of Obligations

	2013			2012

Note payable in connection with the redemption of a royalty agreement for $10,768,555. The note required installment payments and was paid off by the proceeds of the Loan.	$	-		$	10,050,027

Note payable in connection with the purchase of the remaining ownership of Court Programs, Inc., interest at 12% per annum, with monthly payments of $10,000. This note was assumed through the sale of Court Programs, Inc.		-			46,693

We received $500,000 from Mr. Derrick, a shareholder and former officer. This was converted into 111,112 shares of Common Stock.		-			500,000

Convertible debenture with an interest rate of 8% per annum. The debenture matured December 17, 2012 and was secured by the domestic patents. The debenture and accrued interest was converted into 117,784 shares of Common Stock.		-			500,000

Convertible debenture with an interest rate of 8% per annum. The debenture matured December 17, 2012 and was secured by the domestic patents. The debenture and accrued interest was converted into 472,548 shares of Common Stock.		-			2,000,000

We received $16,700,000 through the issuance of a convertible debenture to selling shareholder with an interest rate of 8% per annum. The debenture matures on August 14, 2014. On September 30, 2013, $16,640,000 plus accrued interest of 936,627 was converted into 3,905,917 shares of Common Stock. The remaining balance of $60,000 plus accrued interest of $3,143 was paid in cash on October 3, 2013.		60,000			1,288,693

Total related-party debt obligations		60,000			14,385,413
Less current portion		(60,000	)		(12,654,701	)
Long-term debt, net of current portion	$	-		$	1,730,712

The following table summarizes our future maturities of related-party debt obligations as of September 30, 2013:

Fiscal Year	Total
2014	$	60,000
2015		-
Thereafter		-
Total	$	60,000

Recent Transactions

We evaluated subsequent events through the date the accompanying consolidated financial statements were issued. Subsequent to September 30, 2013, the following events occurred:

·	We issued to directors for services rendered during the 4th fiscal quarter ended September 30, 2013, warrants to purchase 6,840 shares of Common Stock with an exercise price of $19.46 per share, valued at the date of grant at $53,091 using the Black-Scholes model.

·	We issued to directors for services rendered during the 4th fiscal quarter ended September 30, 2013, 760 shares of Common Stock, valued at the date of grant at $15,000.

·	We issued 483 shares of Common Stock to Series D Preferred shareholders for dividends earned during the 4th fiscal quarter ended September 30, 2013.

·	We advanced $1,200,000 from a line-of-credit to be used with other available cash on hand to issue a bond for an international customer in the amount of $3,382,082.

Except as described above, there has been no transaction, since October 1, 2013, or currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest.

·	any of our directors or executive officers;

·	any beneficial owner of shares carrying more than 5% of the voting rights attached to our outstanding shares of Common Stock; and

·	any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.

Compensation of Named Executive Officers and Directors

For information regarding compensation of Named Executive Officers and directors, please see “Executive Compensation.”

Director Independence

The Board of Directors intends to comply with the director independence standards of the NASDAQ Stock Market, including NASDAQ Rule 4200(a)(15). The Board determined based on the NASDAQ standards that George F. Schmitt, Winfried Kunz, David S. Boone, Rene Klinkhammer, and Dan L. Mabey meet the NASDAQ standards to be considered independent. The Board has not appointed a lead independent director.

Specifically, none of these directors:

•	has been at any time during the past three years employed by us or by any parent or subsidiary of the Company;
•	has accepted or has a family member who accepted any compensation from us in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than compensation for board or board committee service;
•	is a family member of an individual who is, or at any time during the past three years was, employed by us as an executive officer;
•	is, or has a family member who is, a partner in, or a controlling stockholder or an executive officer of, any organization to which we made, or from which we received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient's consolidated gross revenues for that year, or $200,000, whichever is more;
•	is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of our executive officers serve on the compensation committee of such other entity; or
•	is, or has a family member who is, a current partner of our outside auditor, or was a partner or employee of our outside auditor who worked on our audit at any time during any of the past three years.

THE LOAN AND SECURITY AGREEMENT

On September 5, 2012, we entered into an agreement to redeem the royalty from Borinquen, as discussed on page 28, above. To finance our obligations under that agreement, on December 3, 2012, we entered into the Loan and Security Agreement (the “Loan”) with Sapinda Asia. Under the Loan, Sapinda Asia agreed to lend us $16,640,000 at a rate of 8% interest per annum. We were unable to complete the redemption of the royalty by the extended completion date under the September 5, 2012 agreement due to lack of funds.

On February 1, 2013, we entered into a Settlement and Royalty and Share Buy Back Agreement with Borinquen and Sapinda Asia to repurchase the royalty for a price of $13,000,000. The funds to purchase the royalty were provided by Sapinda Asia under the Loan. As a condition to the Loan, we agreed to appoint Guy Dubois to our Board of Directors as a representative and nominee of Tetra House Pte. Ltd. We also agreed to complete an exchange offer to retire a minimum of 90% of our issued and outstanding shares of Series D Preferred stock.

On May 29, 2013, we settled certain disputed payments under the Loan and on August 13, 2013 we entered into an Acknowledgement and Agreement resolving those and all other compensation issues under the Loan. As part of the Acknowledgement and Agreement, we also agreed to file the registration statement of which this prospectus forms a part to provide for the offer and sale of the Shares issuable upon conversion of the principal and interest payable to Sapinda Asia under the Loan.

On September 30, 2013, Sapinda Asia exercised its right to convert the principal and accrued interest under the Loan in exchange for the issuance of 3,905,917 shares of Common Stock at a conversion price of $4.50 per Share stated in the original Note under the Loan.

SELLING SHAREHOLDER

This prospectus relates to the possible resale by Sapinda Asia as the selling shareholder of the Shares, which were issued to the selling shareholder pursuant to the exercise of its conversion right under the Note.

The selling shareholder, may, from time to time, offer and sell pursuant to this prospectus any or all of the Shares that we have issued to it pursuant to the conversion of the Note. The selling shareholder may sell some, all or none of its Shares. We do not know how long the selling shareholder will hold the Shares before selling them, and we currently have no agreements, arrangements or understandings with the selling shareholder regarding the resale of any of the Shares.

The following table presents information regarding the selling shareholder and the Shares that it may offer and sell from time to time under this prospectus. The table is prepared based on information supplied to us by the selling shareholder, and reflects its holdings as of October 18, 2013. The selling shareholder has represented to us that neither the selling shareholder nor any of its affiliates have held a position or office, or had any other material relationship, with us or any of our predecessors or affiliates.

As used in this prospectus, the term “selling shareholder” includes Sapinda Asia Limited and any donees, pledgees, transferees or other successors in interest selling the Shares received after the date of this prospectus from selling shareholder as a gift, pledge or other non-sale related transfer. Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act. The percentage of shares beneficially owned prior to the offering is based on 9,806,746 shares of our Common Stock actually outstanding as of October 18, 2013.

Selling Shareholder	Shares Benefcially Owned Before this Offering (1)	Percentage of Outstanding Shares Beneficially Owned Before this Offering	Shares to be Sold in this Offering (2)	Shares Benefcially Owned After this Offering (2)	Percentage of Outstanding Shares Beneficially Owned After this Offering

Sapinda Asia Limited	3,905,917	39.8%	3,905,917	0	0.0%

Footnotes:

(1)	Includes the 3,905,917 Shares offered hereby.
(2)	Assumes the sale of all of the Shares offered hereby.

DESCRIPTION OF SECURITIES

Common Stock

Authorized and Outstanding

We are authorized to issue up to 15,000,000 shares of Common Stock, par value $0.0001 per share, of which 9,805,503 shares are outstanding as of September 30, 2013.

Voting

Holders of our Common Stock each have one vote per share. Our directors are elected by the vote of a plurality of the Common Stock represented in person or by proxy at such meeting and entitled to vote on the election of directors. A majority of the outstanding shares of Common Stock constitute a quorum. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors.

Upon our dissolution, our shareholders will be entitled to receive pro rata all assets remaining available for distribution to shareholders after payment of all liabilities and provision for the liquidation of any shares of Preferred Stock with preferential liquidation rights, if any, at the time outstanding. Our common shareholders have no conversion, preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the Common Stock.

Preferred Stock

Authorized and Outstanding

We are authorized to issue up to 20,000,000 shares of Preferred Stock, par value $0.0001 per share. As of the date of this prospectus, we have the following shares of Preferred Stock outstanding.

Series D Preferred

Our Board of Directors has designated 85,000 shares of Preferred Stock as our Series D Convertible Preferred Stock (the “Series D Preferred”), and established the designations, rights and preferences for the Series D Preferred. As of September 30, 2013, there were 468 shares of Series D Preferred issued and outstanding.

As subsequently amended, the Certificate of Designation of Rights and Preferences provides the holders of the Series D Preferred are entitled to the following preferences and other rights.

Rank. The Series D Preferred ranks senior as to liquidation rights to the Common Stock, and all other classes and series of equity securities which by their terms do not rank senior to the Series D Preferred (collectively with the Common Stock, “Junior Stock”). The Series D Preferred is subordinate and ranks junior to all indebtedness of the Company.

Payment of Dividends. Dividends declared by the Board of Directors are payable on the Series D Preferred on a pro rata basis with the Common Stock and all of our other equity securities ranking pari passu with the Common Stock as to the payment of dividends, before certain distributions are paid on, or declared and set apart for Junior Stock, other than the Common Stock. In addition, we are prohibited from declaring, paying or setting apart for payment any dividend or making any distribution on Junior Stock (other than dividends or distributions payable in shares of the Junior Stock) unless, at the time of such dividend or distribution, we have paid all unpaid dividends on the outstanding shares of Series D Preferred. Holders of the Series D Preferred are entitled to receive quarterly dividends accrued on March 31, June 30, September 30, and December 31 of each year, cumulative dividends on the Series D Preferred at the rate per share equal to 8% per annum, payable in cash or shares of Common Stock at the sole discretion of the Board of Directors. If a dividend is paid in shares of Common Stock, the number of shares to be issued will be based on the average per share market price of the Common Stock for the 14-day period immediately preceding the applicable accrual date (i.e., March 31, June 30, September 30, or December 31, as the case may be). Dividends are paid quarterly, no later than the thirtieth (30th) day following the end of the accrual period.

Voting Rights. Except as otherwise required by Utah law and in the Certificate, the Series D Preferred will vote with the Common Stock on an as-converted basis. Each share of Series D Preferred entitles the holder thereof to 300 votes. The Common Stock into which the Series D Preferred is convertible, upon issuance, has all of the same voting rights as other issued and outstanding Common Stock.

Liquidation Preference. Holders of the Series D Preferred are entitled to preferences upon liquidation, dissolution or winding up of the Company, voluntary or involuntary, before any payment is made or any assets distributed to holders of any Junior Stock.

Conversion. Each holder of Series D Preferred has the right to convert the Series D Preferred into shares of Common Stock under certain circumstances. Each share of Series D Preferred is convertible into 30 shares of Common Stock, subject to adjustment as provided in the Certificate.

Optional Redemption. At any time on or after December 1, 2010, we have the right, exercisable at our option, to redeem from funds legally available therefore, all or any portion of the then-outstanding and unconverted shares of the Series D Preferred at a price that is equal to 120% of the original purchase price of the shares redeemed. Any redemption of less than all of the Series D Preferred will be pro rata among the holders of the Series D Preferred based on the number of shares of Series D Preferred held by each holder of record at the time of such partial redemption.

Undesignated Preferred Stock

The ability to authorize and issue undesignated Preferred Stock may enable our Board of Directors to render more difficult or discourage an attempt to change control of the Company by means of a merger, tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, the Board of Directors were to determine that a takeover proposal is not in our best interest, the Board of Directors could cause shares of Preferred Stock to be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group.

Utah Anti-Takeover Law and Articles and Bylaws Provisions

Certain provisions of our Articles of Incorporation and Bylaws, and of applicable Utah State corporation law, have the effect of making more difficult an acquisition of control of the Company in a transaction not approved by the Board of Directors. Specifically, Article VIII of the Articles of Incorporation provides that the affirmative vote of the holders of not less than two-thirds of the outstanding shares of our voting stock is required for approval of the following types of transactions:

•	Merger or consolidation with another entity if the other entity or its affiliates are directly or indirectly the beneficial owners of more than 10% of the total voting power of all of the outstanding shares of our voting stock (defined as a “Related Corporation”), or
•	The sale or exchange of all or substantially all of our assets to a Related Corporation, or
•	The issuance or delivery of our stock or other securities in exchange for payment for any properties or assets or the securities of a Related Corporation or the merger of any our affiliates with or into a Related Corporation or any of its affiliates.

Any amendment of Article VIII requires the affirmative vote of the holders of not less than two-thirds of the outstanding shares of our voting stock.

PLAN OF DISTRIBUTION

We are registering the Shares issued to the selling shareholder upon conversion of the Note to permit the resale of these Shares of Common Stock by the selling shareholder from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale of the Shares by the selling shareholder. We will bear all fees and expenses incident to our obligation to register the Shares.

The Shares offered by this prospectus is being offered by the selling shareholder. The Shares may be sold or distributed from time to time by the selling shareholder directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of the Shares offered by this prospectus could be effected in one or more of the following methods:

·	ordinary brokers’ transactions;
·	transactions involving cross or block trades;
·	through brokers, dealers, or underwriters who may act solely as agents
·	“at the market” into an existing market for the Common Stock;
·	in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents;
·	in privately negotiated transactions; or
·	any combination of the foregoing.

In order to comply with the securities laws of certain states, if applicable, the Shares may be sold only through registered or licensed brokers or dealers. In addition, in certain states, the Shares may not be sold unless they have been registered or qualified for sale in the state or an exemption from the state’s registration or qualification requirement is available and complied with.

The selling shareholder and any broker-dealer participating in the distribution of the Shares may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the Shares is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of Shares being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling shareholder and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers. The selling shareholder may indemnify any broker-dealer that participates in transactions involving the sale of the Shares against certain liabilities, including liabilities arising under the Securities Act. We know of no existing arrangements between the selling shareholder or any other shareholder, broker, dealer, underwriter or agent relating to the sale or distribution of the Shares offered by this prospectus. We will pay the expenses incident to the registration, offering, and sale of the Shares to the selling shareholder; provided, however, that the selling shareholder is solely responsible for the payment of any fee or commission payable to any broker-dealer in connection with the sale of the Shares.

Brokers, dealers, underwriters or agents participating in the distribution of the Shares as agents may receive compensation in the form of commissions, discounts, or concessions from the selling shareholder and/or purchasers of the Shares for whom the broker-dealers may act as agent. The compensation paid to a particular broker-dealer may be less than or in excess of customary commissions. Neither we nor the selling shareholder can presently estimate the amount of compensation that any agent will receive.

The selling shareholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the Shares by the selling shareholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the Shares to engage in market-making activities with respect to the Shares. All of the foregoing may affect the marketability of the Shares and the ability of any person or entity to engage in market-making activities with respect to the Shares.

This offering will terminate on the date that all Shares offered by this prospectus have been sold by the selling shareholder or may be sold by the selling shareholder without restriction under Rule 144(b)(1)(i) under the Securities Act.

Our Common Stock is quoted on the OTCQB under the symbol “SCRA”.

LEGAL MATTERS

The validity of the securities being offered by this prospectus has been passed upon for us by Durham Jones & Pinegar, P.C., Salt Lake City, Utah.

EXPERTS

Hansen Barnett & Maxwell LLP, our independent registered public accounting firm, has audited our balance sheets as of September 30, 2012 and 2011 and the related statements of operations, changes in capital, deficit and cash flows for the years then ended. We have included our financial statements in this prospectus and elsewhere in the registration statement of which it is a part in reliance on Hansen Barnett & Maxwell LLP’s report, given on their authority as experts in accounting and auditing.

On September 23, 2013, Hansen, Barnett & Maxwell, P.C. (“HBM”) resigned as our independent registered public accounting firm. HBM recently entered into an agreement with Eide Bailly LLP (“Eide Bailly”), pursuant to which Eide Bailly acquired the operations of HBM, and certain of the professional staff and partners of HBM joined Eide Bailly either as employees or partners of Eide Bailly and will continue to practice as members of Eide Bailly. Concurrent with the resignation of HBM, we, through and with the approval of our Audit Committee, engaged Eide Bailly as its independent registered public accounting firm.

Prior to engaging Eide Bailly, we did not consult with Eide Bailly regarding the application of accounting principles to a specific completed or contemplated transaction or regarding the type of audit opinions that might be rendered by Eide Bailly on our financial statements, and Eide Bailly did not provide any written or oral advice that was an important factor considered by us in reaching a decision as to any such accounting, auditing or financial reporting issue.

The reports of HBM regarding our financial statements for the fiscal years ended September 30, 2012 and 2011 contained a going concern note. Other than the foregoing, the reports of HBM did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the years ended September 30, 2012 and 2011, and during the period from September 30, 2012 through September 23, 2013, the date of resignation, there were no disagreements with HBM on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of HBM would have caused it to make reference to such disagreement in its reports.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We filed with the Securities and Exchange Commission a registration statement under the Securities Act for the Shares Stock in this offering. This prospectus does not contain all of the information in the registration statement and the exhibits and schedule that were filed with the registration statement. For further information with respect to us and our Common Stock, we refer you to the registration statement and the exhibits and schedule that were filed with the registration statement. Statements contained in this prospectus about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration statement and the exhibits and schedules that were filed with the registration statement may be inspected without charge at the Public Reference Room maintained by the Securities and Exchange Commission at 100 F Street, N.E. Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from the Securities and Exchange Commission upon payment of the prescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.

We file periodic reports under the Securities Exchange Act of 1934, including annual, quarterly and special reports, and other information with the Securities and Exchange Commission. These periodic reports and other information are available for inspection and copying at the regional offices, public reference facilities and website of the Securities and Exchange Commission referred to above.

We make available free of charge on or through our internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITY

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

SECUREALERT, INC.

FINANCIAL STATEMENTS

F - 1

SecureAlert, Inc.

Consolidated Financial Statements

September 30, 2012 and 2011

F - 2

Index to Consolidated Financial Statements

	Page

Report of Independent Registered Public Accounting Firm	F-4

Consolidated Balance Sheets as of September 30, 2012 and 2011	F-5

Consolidated Statements of Operations for the fiscal years ended September 30, 2012 and 2011	F-6

Consolidated Statements of Stockholders’ Equity for the fiscal years ended September 30, 2011 and 2012	F-7

Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2012 and 2011	F-9

Notes to Consolidated Financial Statements	F-11

Assets	2012			2011
Current assets:
Cash	$	695,111		$	949,749
Accounts receivable, net of allowance for doubtful accounts of $772,000 and $996,122, respectively		2,864,542			4,150,427
Note receivable, current portion		156,190			90,000
Prepaid expenses and other		1,979,172			1,082,581
Inventory, net of reserves of $192,000 and $127,016, respectively		630,566			579,779
Total current assets		6,325,581			6,852,536
Property and equipment, net of accumulated depreciation of $2,562,323 and $2,530,591, respectively		677,493			1,086,633
Monitoring equipment, net of accumulated amortization of $3,179,310 and $3,608,388, respectively		3,325,110			3,461,985
Note receivable, net of current portion		112,492			125,000
Goodwill		375,000			5,889,395
Royalty Purchase Commitment		10,768,555			-
Intangible assets, net of accumulated amortization of $801,905 and $485,393, respectively		4,874,679			5,191,191
Other assets		74,815			78,509
Total assets	$	26,533,725		$	22,685,249

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable (including $0 and $505,977 respectively due to a related party, see Note 5)		2,444,632			2,840,845
Accrued liabilities		3,001,062			2,713,230
Dividends payable		630,528			541,797
Deferred revenue		422,183			162,331
Current portion of long-term related-party debt		12,793,303			754,896
Current portion of long-term debt		634,218			1,041,392
Total current liabilities		19,925,926			8,054,491
Long-term related-party debt, net of current portion		1,730,712			116,852
Long-term debt, net of current portion		449,950			898,598
Total liabilities		22,106,588			9,069,941

Stockholders’ equity:
Preferred stock:
Series D 8% dividend, convertible, voting, $0.0001 par value: 85,000 shares designated; 48,763 and 44,845 shares outstanding, respectively (aggregate liquidation preference of $28,476,086)		5			5
Common stock, $0.0001 par value: 15,000,000 shares authorized; 3,096,642 and 2,518,117 shares outstanding, respectively		310			252
Additional paid-in capital		252,940,448			244,670,570
Accumulated deficit		(248,513,626	)		(231,055,519	)
Total equity		4,427,137			13,615,308
Total liabilities and stockholders’ equity	$	26,533,725		$	22,685,249

	2012			2011
Revenues:
Products	$	2,013,155		$	1,551,511
Monitoring and other related services		17,778,337			16,410,292
Total revenues		19,791,492			17,961,803

Cost of revenues:
Products		1,596,759			651,113
Monitoring and other related services		9,821,253			8,914,846
Impairment of monitoring equipment and parts (Note2)		1,648,762			464,295
Total cost of revenues		13,066,774			10,030,254

Gross profit		6,724,718			7,931,549

Operating expenses:
Selling, general and administrative (including $3,576,194 and $1,530,646, respectively, of compensation expense paid in stock, stock options / warrants or as a result of amortization of stock-based compensation)		15,405,742			15,652,303
Research and development		1,248,654			1,453,994
Settlement expense		403,678			276,712
Impairment of goodwill (Note 2)		5,514,395			-

Loss from operations		(15,847,751	)		(9,451,460	)

Other income (expense):
Loss on disposal of equipment		(23,865	)		(300,338	)
Change from estimate to actual on acquisition costs		110,342			-
Redemption of SecureAlert Monitoring Series A Preferred		-			16,683
Interest income		11,445			13,072
Interest expense (including $963,233 and $42,351, respectively, paid in stock, stock options / warrants)		(1,489,897	)		(712,840	)
Currency exchange rate gain (loss)		(28,358	)		(173	)
Other income, net		(190,023	)		576,232
Net loss		(17,458,107	)		(9,858,824	)
Net loss (income) attributable to non-controlling interest		-			(31,750	)
Net loss attributable to SecureAlert, Inc.		(17,458,107	)		(9,890,574	)
Dividends on Series D Preferred stock		(2,480,298	)		(2,029,996	)
Net loss attributable to SecureAlert, Inc. common stockholders	$	(19,938,405	)	$	(11,920,570	)
Net loss per common share, basic and diluted	$	(0.04	)	$	(0.03	)
Weighted average common shares outstanding, basic and diluted		547,034,000			380,659,000


															Preferred
	Preferred Stock						Common Stock					Additional			Stock
	Series D											Paid-in			Subscription			Accumulated			Non-Controlling
	Shares			Amount			Shares			Amount		Capital			Receivable			Deficit			Interest			Total
Balance as of October 1, 2010		35,407		$	4			1,400,116		$	141	$	224,529,724		$	(50,000	)	$	(221,164,945	)	$	(185,073	)		3,129,851

Issuance of common stock for:

Conversion of Series D Preferred stock		(22,735	)		(2	)		682,050			68		(66	)		-			-			-			0

Dividends from SMI Series A Preferred stock		-			-			4,908			-		97,349			-			-			-			97,349

Services		-			-			1,250			-		21,310			-			-			-			21,310

Acquisition of subsidiaries		-			-			323,526			32		5,322,032			-			-			153,323			5,475,387

Dividends from Series D Preferred stock		-			-			106,535			11		2,043,298			-			-			-			2,043,309

Cancellation of shares		-			-			(269	)		-		-			-			-			-			-

Vesting and re-pricing of stock options		-			-			-			-		1,231,836			-			-			-			1,231,836

Beneficial conversion feature recorded as interest expense		-			-			-			-		42,351			-			-			-			42,351

Series D Preferred dividends		-			-			-			-		(2,029,996	)		-			-			-			(2,029,996	)

Issuance of Series D Preferred stock in connection with forbearance agreements		280			-			-			-		140,000			-			-			-			140,000

Issuance of Series D Preferred stock for Board of Director fees		25			-			-			-		12,500			-			-			-			12,500

Issuance of Series D Preferred stock for prepaid commissions		987			-			-			-		493,500			-			-			-			493,500

Issuance of Series D Preferred stock in connection with debt and accrued interest		4,669			-			-			-		2,334,632			-			-			-			2,334,632

Issuance of Series D Preferred stock for cash		26,037			3			-			-		10,344,600			-			-			-			10,344,603

Cancellation of Series D Preferred stock		(100	)		-			-			-		(50,000	)		50,000			-			-			-

Issuance of Series D Preferred stock in connection with services		275			-			-			-		137,500			-			-			-			137,500

Net loss		-			-			-			-		-			-			(9,890,574	)		31,750			(9,858,824	)

Balance as of September 30, 2011		44,845		$	5			2,518,117		$	252	$	244,670,570		$	-		$	(231,055,519	)	$	-		$	13,615,308



	Preferred Stock					Common Stock				Additional
	Series D									Paid-in			Accumulated
	Shares			Amount		Shares		Amount		Capital			Deficit			Total
Balance as of October 1, 2011		44,845		$	5		2,518,117	$	252	$	244,670,570		$	(231,055,519	)	$	13,615,308

Issuance of common stock for:
Conversion of Series D Preferred stock		(90	)		-		2,700		-		-			-			-
Royalty payment		-			-		71,969		7		819,965			-			819,972
Services		-			-		4,315		-		40,000			-			40,000
Debt		-			-		8,449		1		118,279			-			118,280
Dividends from Series D Preferred stock		-			-		210,689		21		2,391,547			-			2,391,568
Employee compensation		-			-		121,700		12		732,622			-			732,634
Board of director fees		-			-		3,000		-		48,060			-			48,060
Cash		-			-		155,704		17		1,032,983			-			1,033,000

Vesting and re-pricing of stock options		-			-		-		-		1,405,500			-			1,405,500

Acceleration of vesting and cancellation of stock warrants		-			-		-		-		1,398,060			-			1,398,060

Beneficial conversion feature recorded as interest expense		-			-		-		-		1,475,000			-			1,475,000

Series D Preferred dividends		-			-		-		-		(2,480,298	)		-			(2,480,298	)

Issuance of common stock warrant to settle a lawsuit		-			-		-		-		253,046			-			253,046

Issuance of common stock warrants for Board of Director fees		-			-		-		-		105,042			-			105,042

Issuance of common stock warrants for consulting fees		-			-		-		-		33,357			-			33,357

Repricing of common stock warrants in connection with debt and accrued interest		-			-		-		-		39,965			-			39,965

Issuance of Series D Preferred stock for cash		4,008			-		-		-		2,004,000			-			2,004,000

Commission paid in connection with capital raise		-			-		-		-		(1,147,250	)		-			(1,147,250	)

Net loss		-			-		-		-		-			(17,458,107	)		(17,458,107	)

Balance as of September 30, 2012		48,763		$	5		3,096,642	$	310	$	252,940,448		$	(248,513,626	)	$	4,427,137

	2012			2011
Cash flows from operating activities:
Net Loss	$	(17,458,107	)	$	(9,858,824	)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		2,078,127			1,793,557
Common stock issued for services		40,000			21,310
Issuance of common stock to employees for cancellation of warrants		2,130,694			-
Series D Preferred stock issued for services		-			137,500
Vesting and re-pricing of stock options		1,405,500			1,231,836
Amortization of debt discount		923,268			61,493
Settlement expense		-			276,712
Origination fees recorded in connection with debt		-			25,000
Common stock warrants repriced in connection with related-party debt		39,965			-
Change in redemption value in connection with SMI Series A Preferred stock		-			(16,682	)
Increases in related-party line of credit for services		-			515,536
Impairment of goodwill		5,514,395			-
Impairment of monitoring equipment and parts		1,648,762			464,295
Issuance of Series D Preferred shares in connection with forbearance		-			140,000
Loss on disposal of property and equipment		23,865			300,338
Disposal of property and equipment as employee compensation		2,790			-
Loss on forgiveness of note receivable		22,750			-
Loss on disposal of monitoring equipment and parts		205,489			95,583
Change in assets and liabilities:
Accounts receivable, net		1,054,267			(2,726,576	)
Notes receivable		88,061			(170,000	)
Inventories		(410,521	)		(502,648	)
Prepaid expenses and other assets		(892,897	)		232,014
Accounts payable		487,264			1,042,579
Accrued expenses		1,127,088			46,023
Deferred revenue		259,852			81,441
Net cash used in operating activities		(1,709,388	)		(6,809,513	)

Cash flow from investing activities:
Purchase of property and equipment		(112,163	)		(215,528	)
Net proceeds from the sale of property and equipment		136,618			-
Purchase of monitoring equipment and parts		(2,745,399	)		(3,066,026	)
Cash acquired through acquisition		-			10,000
Payment related to acquisition		-			(400,000	)
Issuance of note receivable		-			(45,000	)
Net cash used in investing activities		(2,720,944	)		(3,716,554	)

Cash flow from financing activities:
Principal payments on related-party line of credit		-			(188,634	)
Borrowings on related-party notes payable		2,980,000			1,780,911
Principal payments on related-party notes payable		(3,187,578	)		(951,639	)
Proceeds from notes payable		3,962			1,283,800
Principal payments on notes payable		(910,440	)		(1,919,457	)
Borrowings on related-party convertible debentures		2,900,000			-
Borrowings on convertible debentures		500,000			-
Proceeds from issuance of common stock		1,033,000			-
Proceeds from issuance of Series D Convertible Preferred stock		2,004,000			10,344,603
Commissions paid in connection with capital raise		(1,147,250	)		-
Net cash provided by financing activities		4,175,694			10,349,584
Net increase (decrease) in cash		(254,638	)		(176,483	)
Cash, beginning of year		949,749			1,126,232
Cash, end of year	$	695,111		$	949,749

	2012		2011
Cash paid for interest	$	444,644	$	816,178
Supplemental schedule of non-cash investing and financing activities:
Issuance of shares of common stock, respectively forpayment of SecureAlert Monitoring, Inc. Series A Preferred stock dividends		-		97,349
Note payable issued to acquire monitoring equipment and property andequipment		69,000		274,148
Issuance of shares of Series D Convertible Preferred stock for conversion of debt, accrued liabilities and interest		-		2,334,632
Issuance of shares of common stock in connection withSeries D Preferred stock dividends		2,391,568		2,043,309
Non-controlling interest assumed through acquisition of subsidiaries		-		153,322
Issuance of shares of common stock from the conversion of Series D Preferred stock		54		13,641
Series D Preferred stock dividends earned		2,480,298		2,029,996
Accrued liabilities and notes recorded in connection with the acquisition ofMidwest Monitoring & Surveillance, Inc.		-		1,187,946
Cancellation of shares of common stock, respectively, for services		-		5
Cancellation of subscription receivable		-		50,000
Issuance of Series D Preferred stock for prepaid commissions		-		493,500
Issuance of shares of common stock in connection with the acquisition of Midwest Monitoring & Surveillance, Inc.		-		238,064
Issuance of shares of common stock in connection with the acquisition of International Surveillance Services Corp., net of cash acquired		-		5,087,921
Issuance of Series D Preferred stock to settle accrued liabilities		-		12,500
Acquisition of accounts receivable from International Surveillance ServicesCorp. ownership		-		84,338
Acquisition of accounts payable and accrued liabilities from International Surveillance Services Corp. ownership		-		13,921
Issuance of stock warrants, respectively, for settlement of debt		253,046		-
Issuance of common stock warrants, respectively, for Boardof Director fees		105,042		-
Issuance of shares of common stock, respectively, for Board ofDirector fees		48,060		-
Issuance of shares of common stock, respectively, for related- party royalty		819,972		-
Issuance of shares of common stock, respectively, for settlement of debt		118,280		-
Issuance of common stock warrants, respectively, to aconsultant for services		33,357		-
Beneficial conversion feature recorded with convertible debentures		473,334		-
Beneficial conversion feature recorded with related-party convertible debentures		1,001,666		-
Note receivable issued for outstanding accounts receivable net of accounts payable due		168,116		-
Settlement of note payable upon sale of property and equipment		56,794		-
Acquisition of property and equipment as payment against note receivable		3,623		-
Liabilities and notes payable paid through issuance of related-party convertible debt debt		1,000,000		-
Acquisition of royalty purchase commitment through issuance of note payable		10,768,555		-

	2012		%			2011		%

Customer A	$	681,781		24	%	$	-		-

Customer B	$	475,800		17	%	$	347,553		7	%

Customer C	$	-		-		$	1,995,804		39	%

	2012			2011
Raw materials	$	822,566		$	706,795
Reserve for damaged or obsolete inventory		(192,000	)		(127,016	)
Total inventory, net of reserves	$	630,566		$	579,779

	2012			2011
Equipment, software and tooling	$	2,409,031		$	2,390,329
Automobiles		372,339			398,890
Building		-			377,555
Leasehold improvements		134,941			132,820
Furniture and fixtures		323,505			317,630
Total property and equipment before accumulated depreciation		3,239,816			3,617,224
Accumulated depreciation		(2,562,323	)		(2,530,591	)

Property and equipment, net of accumulated depreciation	$	677,493		$	1,086,633

	2012			2011
Monitoring equipment	$	6,504,420		$	7,070,373
Less: accumulated amortization		(3,179,310	)		(3,608,388	)
Monitoring equipment, net of accumulated depreciation	$	3,325,110		$	3,461,985

	Court Programs, Inc.					Midest Monitoring & Surveillance, Inc.
	2012			2011		2012			2011
Gross carrying amount, beginning of period	$	2,488,068		$	2,488,068	$	3,401,327		$	1,421,995
Additions		-			-		-			1,979,332
Impairments		(2,488,068	)		-		(3,026,327	)		-
Gross carrying amount, end of period	$	-		$	2,488,068	$	375,000		$	3,401,327

	Fiscal Years Ended
	September 30,
	2012		2011
United States of America	$	14,075,140	$	14,499,613
Latin American Countries		2,450,984		2,533,483
Caribbean Countries and Commonwealths		3,217,651		912,504
Other Foreign Countries		47,717		16,203
Total	$	19,791,492	$	17,961,803

	Net Property and Equipment				Net Monitoring Equipment
	2012		2011		2012		2011
United States of America	$	677,493	$	1,082,453	$	2,328,139	$	3,352,614
Latin American Countries		-		-		719,171		32,919
Caribbean Countries and Commonwealths		-		4,180		263,782		71,687
Other Foreign Countries		-		-		14,018		4,765
Total	$	677,493	$	1,086,633	$	3,325,110	$	3,461,985

	2012		2011
Conversion of debt and accrued interest and loan origination fees		172,699,722		-
Conversion of Series D Preferred stock		292,578,000		269,070,000
Exercise of outstanding common stock options and warrants		67,356,493		99,178,202
Exercise and conversion of outstanding Series D Preferred stock
warrants		32,400,000		31,200,000
Total common stock equivalents		565,034,215		399,448,202

	Midwest Monitoring & Surveillance			Court Programs, Inc.			Bishop Rock Software			Patent			International Surveillance Services Corp.			Total

Goodwill	$	375,000		$	-		$	-		$	-		$	-		$	375,000
Other intangible assets
Trade name		120,000			99,000			10,000			-			-			229,000
Software		-			-			380,001			-			-			380,001
Customer relationships		-			6,000			-			-			-			6,000
Patent license agreement		-			-			-			50,000			-			50,000
Non-compete agreements		2,000			6,000			-			-			-			8,000
Royalty agreement		-			-			-			-			5,003,583			5,003,583
Total other intangible assets		122,000			111,000			390,001			50,000			5,003,583			5,676,584
Accumulated amortization		(40,664	)		(43,700	)		(390,001	)		(14,816	)		(312,724	)		(801,905	)
Other intangible assets, net of accumulated amortization		81,336			67,300			-			35,184			4,690,859			4,874,679
Total goodwill and other intangible assets, net of amortization	$	456,336		$	67,300		$	-		$	35,184		$	4,690,859		$	5,249,679

	2012		2011
Accrued payroll, taxes and employee benefits	$	701,537	$	749,509
Accrued royalties		641,446		-
Accrued consulting		352,072		370,658
Accrued taxes - foreign and domestic		271,240		-
Accrued board of directors fees		265,000		153,101
Accrued other expenses		197,512		110,810
Accrued acquisition costs payable in cash		149,626		272,500
Accrued acquisition costs payable in cash to a related-party		149,626		272,500
Accrued settlement costs		50,000		276,712
Accrued outside services		38,630		28,294
Accrued interest		37,937		26,329
Accrued warranty and manufacturing costs		30,622		66,622
Accrued indigent fees		28,518		39,175
Accrued cost of revenues		28,397		42,026
Accrued cellular costs		27,662		32,299
Accrued administration fees		16,609		29,900
Accrued legal costs		14,628		215,895
Accrued inventory costs		-		26,900
Total accrued expenses	$	3,001,062	$	2,713,230

	2012			2011

Settlement liability from patent infringement suit and countersuit settled in February 2010. The liability will be paid quarterly through March 2013.	$	200,000		$	500,000

Notes issued in connection with the acquisition of a subsidiary. Quarterly cash payments mature on January 2014. These notes bear no interest. Balance on notes reflects debt discount of $16,939 and $55,388, respectively. The effective interest rate is 15% per annum. Subsequent to fiscalyear ended September 30, 2012, this debt was assumed through the sale of Midwest Monitoring & Surveillance, Inc. to former owners of the company.		233,061			369,612

Capital leases with effective interest rates that range between 8.51% and 17.44%. Leases mature between November 2012 and March 2016.		272,508			335,366

Note payable due to the Small Business Administration ("SBA"). Note bears interest at 4.00% and matures April 2037. The note is secured by Court Programs, Inc.		201,204			215,288

Automobile loans with several financial institutions secured by the vehicles. Interest rates range between 0.0% and 8.9%, due through February 2016.		137,888			181,146

Unsecured revolving line of credit with a bank, with an interest rate of 9.25%, $10,493 and $10,568, was available for withdrawal under the line of credit, respectively.		39,507			39,432

Secured note bearing an interest rate of 18%. The note matured in November 2011.		-			225,000

Note payable to a financial institution bearing interest at 6.37%. The note was secured by property which was sold during the fiscal year.		-			70,156

Notes payable for testing equipment with an interest rate of 8%. The notes were secured by testing equipment. The notes matured in December 2011.		-			3,237

Notes payable for monitoring equipment. Interest rates range between 7.8% to 18.5% and matured in November 2011. The notes were secured by monitoring equipment.		-			753

Total debt obligations		1,084,168			1,939,990
Less current portion		(634,218	)		(1,041,392	)
Long-term debt, net of current portion	$	449,950		$	898,598

	Shares Under Option			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding as of September 30, 2010		27,740,451		$	0.36
Granted		75,000,000		$	0.08
Expired		(3,562,249	)	$	0.32

Outstanding as of September 30, 2011		99,178,202		$	0.13
Granted		10,900,000		$	0.09
Expired / Cancelled		(42,721,709	)	$	0.11

Outstanding as of September 30, 2012		67,356,493		$	0.14	2.09 years	$ -
Exercisable as of September 30, 2012		65,371,254		$	0.14	2.09 years	$ -

Fiscal Years	Amount
2013	$	300,000
2014		300,000
2015		300,000
Thereafter		-
Total	$	900,000

·	Level one — Quoted market prices in active markets for identical assets or liabilities;

·	Level two — Inputs other than level one inputs that are either directly or indirectly observable; and;

·	Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.;

	Level 1		Level 2		Level 3		Total

Fair Value of Goodwill	$	-	$	-	$	375,000	$	375,000

1)	20,760,551 shares of common stock were issued for fourth quarter Series D Preferred stock dividends, valued at $630,528.

2)	Effective October 1, 2012, the Company entered into a Stock Purchase Agreement whereby two former principals of Midwest purchased from the Company all the issued and outstanding capital stock of Midwest for $750,000, payable as follows: (a) forgiveness of $650,000 in debt obligations owed by the Company to the former Midwest principals, and (b) cash of $100,000 payable under a note on or before April 1, 2013.

3)	The Company’s Chief Executive Officer, John L. Hastings, III resigned from all executive positions with the Company and as a director. The Board of Directors formed an Executive Committee comprised of directors George Schmitt and Winfried Kunz to temporarily fulfill the duties of the principal executive officer until a new Chief Executive Officer is hired.

4)	On December 3, 2012 the Board of Directors appointed Guy Dubois as a director to fill the vacancy resulting from Mr. Hastings’ resignation and to fulfill a condition of the Loan and Security Agreement entered into with Sapinda Asia to appoint to the Board of Directors a representative of Tetra House Pte., Ltd.

5)	On December 3, 2012, SecureAlert entered into a Loan and Security Agreement with Sapinda Asia whereby Sapinda Asia will loan SecureAlert $16,640,000. The loan will accrue interest at a rate of 8 percent per annum and includes a loan origination fee of $640,000, which was forfeited under the terms of the Loan and Security Agreement when Sapinda Asia failed to timely fund the loan in full. The loan is convertible into shares of common stock at $0.0225 per share and matures on June 17, 2014. Subsequent to the fiscal year ended September 30, 2012, the Company received $2,800,000 under the Loan and Security Agreement. The proceeds of the loan will be used to redeem the royalty obligation previously granted to Borinquen and for general corporate purposes. The loan is secured, after such loan is fully funded, by all of the intellectual property and other assets of the Company and by the royalty. In the event of default of the Company, Sapinda Asia shall have the right to purchase a 20 percent royalty on revenues from certain countries by reducing the outstanding principal of the loan in amount of $10,739,426. The failure to fully fund the loan resulted in the Company’s default under the terms of the royalty buy-back agreement and Borinquen terminated the agreement on December 26, 2012. Sapinda Asia and Borinquen are negotiating to cure the default and complete the purchase on behalf of the Company.


SecureAlert, Inc.

FORM 10-Q

For the Quarterly Period Ended June 30, 2013

INDEX

			Page
PART I. FINANCIAL INFORMATION

Item 1	Financial Statements

		Condensed Consolidated Balance Sheets (Unaudited)	F-31
		Condensed Consolidated Statements of Operations (Unaudited)	F-32
		Condensed Consolidated Statements of Cash Flows (Unaudited)	F-33
		Notes to Condensed Consolidated Financial Statements (Unaudited	F-35

	June 30,			September 30,
Assets	2013			2012
Current assets:
Cash	$	4,030,960		$	458,029
Accounts receivable, net of allowance for doubtful accounts of $338,000 and $772,000, respectively		2,912,897			2,411,701
Note receivable, current portion		196,116			74,801
Prepaid expenses and other		1,873,640			1,760,579
Inventory, net of reserves of $192,000 and $192,000, respectively		443,721			630,566
Current assets from discontinued operations		-			989,905
Total current assets		9,457,334			6,325,581
Property and equipment, net of accumulated depreciation of $2,055,798 and $1,889,041, respectively		352,388			506,599
Monitoring equipment, net of accumulated depreciation of $1,572,572 and $669,929, respectively		2,113,641			3,171,947
Note receivable, net of current portion		-			112,492
Intangible assets, net of accumulated amortization of $1,035,017 and $789,996, respectively		15,635,550			15,517,617
Other assets		80,375			65,597
Non-current assets from discontinued operations, net of accumulated depreciation of $0 and $2,837,498, respectively		-			833,892
Total assets	$	27,639,288		$	26,533,725

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	296,682		$	1,830,075
Accrued liabilities		3,336,656			2,439,451
Dividends payable		9,325			630,528
Deferred revenue		8,708			354,570
Current portion of long-term related-party debt		-			12,654,701
Current portion of long-term debt, net of debt discount		90,617			339,151
Current liabilities from discontinued operations		-			1,677,450
Total current liabilities		3,741,988			19,925,926
Long-term related-party debt, net of current portion and debt discount		5,934,012			1,730,712
Long-term debt, net of current portion		61,929			85,680
Long-term liabilities from discontinued operations		-			364,270
Total liabilities		9,737,929			22,106,588

Stockholders’ equity:
Preferred stock:
Series D 8% dividend, convertible, voting, $0.0001 par value: 85,000 shares designated; 468 and 48,763 shares outstanding, respectively (aggregate liquidation preference of $467,507)		1			5
Common stock, $0.0001 par value: 15,000,000 shares authorized; 5,896,294 and 3,096,642 shares outstanding, respectively		590			310
Additional paid-in capital		272,608,421			252,940,448
Accumulated deficit		(254,707,653	)		(248,513,626	)
Total equity		17,901,359			4,427,137
Total liabilities and stockholders’ equity	$	27,639,288		$	26,533,725

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Revenues:
Products	$	165,029		$	151,610		$	464,076		$	1,544,015
Monitoring and other related services		2,520,185			2,848,096			12,617,534			8,572,595
Total revenues		2,685,214			2,999,706			13,081,610			10,116,610

Cost of revenues:
Products		86,773			88,789			199,785			553,004
Monitoring and other related services		1,508,878			1,431,551			6,417,454			4,482,754
Total cost of revenues		1,595,651			1,520,340			6,617,239			5,035,758

Gross profit		1,089,563			1,479,366			6,464,371			5,080,852

Operating expenses:
Selling, general and administrative (including non-cash expenses of $100,964, $2,471,664, $233,474 and $3,777,921, respectively, of compensation expense paid in stock, stock options and warrants or as a result of amortization of stock-based compensation)		2,075,796			4,494,197			6,238,783			10,838,842
Settlement expense		-			-			350,000			-
Research and development		269,072			310,810			668,269			987,215

Loss from continuing operations		(1,255,305	)		(3,325,641	)		(792,681	)		(6,745,205	)

Other income (expense):
Currency exchange rate gain (loss)		(59,940	)		35,633			(122,331	)		(30,033	)
Loss on disposal of equipment		(94	)		-			(1,459	)		(216	)
Interest expense (including non-cash expenses of $2,390,915, $602,729, $5,200,842, and $680,088, respectively, paid in stock, stock options and warrants, or re-pricing of warrants, or amortization of debt discount)		(2,737,220	)		(654,426	)		(5,939,171	)		(992,334	)
Other income (expense), net		(80,204	)		42,503			243,256			216,629
Net loss from continuing operations		(4,132,763	)		(3,901,931	)		(6,612,386	)		(7,551,159	)
Gain on disposal of discontinued operations		-			-			424,819			-
Net loss from discontinued operations		-			(245,978	)		(6,460	)		(178,615	)
Net loss		(4,132,763	)		(4,147,909	)		(6,194,027	)		(7,729,774	)
Dividends on Series D Preferred stock		(9,325	)		(623,678	)		(1,033,470	)		(1,849,771	)
Net loss attributable to SecureAlert, Inc. common stockholders	$	(4,142,088	)	$	(4,771,587	)	$	(7,227,497	)	$	(9,579,545	)
Net loss per common share, basic and diluted from continuing operations	$	(0.70	)	$	(1.49	)	$	(1.51	)	$	(2.92	)
Net loss per common share, basic and diluted from discontinued operations	$	-		$	(0.09	)	$	-		$	(0.07	)
Weighted average common shares outstanding, basic and diluted		5,886,000			2,624,305			4,387,000			2,584,315

	Three Months Ended June 30,				Nine Months Ended June 30,
	2013		2012		2013		2012
United States of America	$	1,887,630	$	1,812,588	$	5,427,973	$	5,674,412
Latin American Countries		-		283,045		5,252,960		2,167,938
Caribbean Countries and Commonwealths		778,450		891,335		2,348,245		2,241,591
Other Foreign Countries		19,134		12,738		52,432		32,669
Total	$	2,685,214	$	2,999,706	$	13,081,610	$	10,116,610

	Net Property and Equipment				Net Monitoring Equipment
	June 30, 2013		September 30, 2012		June 30, 2013		September 30, 2012
United States of America	$	352,388	$	506,599	$	1,038,215	$	2,174,976
Latin American Countries		-		-		914,325		719,171
Caribbean Countries and Commonwealths		-		-		157,679		263,782
Other Foreign Countries		-		-		3,422		14,018
Total	$	352,388	$	506,599	$	2,113,641	$	3,171,947

	June 30, 2013		June 30, 2012
Conversion of debt and accrued interest		3,846,758		416,667
Conversion of Series D Preferred stock		14,040		1,463,490
Exercise of outstanding common stock options and warrants		437,432		365,961
Exercise and conversion of outstanding Series D Preferred stock warrants		162,000		162,000
Total common stock equivalents		4,460,230		2,408,118

	Borinquen Container Corporation			International Surveillance Services Corp.			Patent			Total

Other intangible assets:
Patent license agreement	$	-		$	-		$	50,000		$	50,000
Royalty agreement		11,616,984			5,003,583			-			16,620,567
Total intangible assets		11,616,984			5,003,583			50,000			16,670,567
Accumulated amortization		(515,676	)		(500,358	)		(18,983	)		(1,035,017	)

Intangible assets, net of accumulated amortization	$	11,101,308		$	4,503,225		$	31,017		$	15,635,550


	Shares Under Option/ Warrant			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding as of September 30, 2012		336,782		$	28.00
Granted		129,651		$	10.79
Expired / Cancelled		(29,000	)	$	60.01

Outstanding as of June 30, 2013		437,433		$	20.59	1.57 years	$	506,361
Exercisable as of June 30, 2013		377,064		$	22.19	1.54 years	$	214,560

	Total Equity
Balance at September 30, 2012	$	4,427,137
Issuance of common stock for:
Dividends from Series D Preferred stock		1,654,673
Services		143,724
Debt		3,156,493
Fractional shares disposed due to reverse stock split		(1,996	)
Issuance of warrants to a director for services rendered		318,344
Vesting of stock options and warrants		81,407
Series D Preferred dividends		(1,033,470	)
Beneficial conversion feature related to convertible debenture		15,349,074
Net loss		(6,194,027	)
Balance at June 30, 2013	$	17,901,359

1)	799 shares of common stock were issued for the 3rd fiscal quarter Series D Preferred stock dividends, valued at $9,325.

2)	Warrants to purchase 14,286 shares of common stock for two years with an exercise price of $14.70 per share, valued on July 1, 2013 the date of the grant, were issued to board members and valued at $82,715. These warrants are fully vested at date of issuance.

3)	680 shares of common stock were issued to a board member for payment of services rendered from March 2013 through June 30, 2013, valued at $10,000.

4)	The Company entered into a related-party service agreement to provide a backup and disaster recovery system and other services (see Note 15).

5)	The Company entered into an acknowledgement and agreement with Sapinda Asia whereby the Company agreed to waive the penalties and any other “out of pocket” expenses owed by Sapinda Asia under the Loan and Sapinda Asia acknowledges that it is not owed an origination fee. Both Parties have also agreed to accelerate the conversion of the loan to reduce the accumulation of interest debt under the Loan. Sapinda Asia commits and is bound to convert all principal and accrued interest under the Loan into common stock of the Company no later than 15 calendar days following the effective date of a registration statement with the Securities and Exchange Commission to register such shares, which the Company has agreed to file in a timely manner.

	Amount to
	be Paid
SEC registration fee	$	9,508
Printing and engraving expenses	$	5,000
Legal fees and expenses	$	30,000
Accounting fees and expenses	$	15,000
Transfer agent and registrar fees and expenses	$	1,000
Miscellaneous expenses	$	1,000

Total	$	61, 508

Exhibit Number	Title of Document

3(i)(1)	Articles of Incorporation (incorporated by reference to our Registration Statement and Amendments thereto on Form 10-SB, effective December 1, 1997).

3(i)(2)	Amendment to Articles of Incorporation for Change of Name (previously filed as Exhibit on Form 10-KSB for the fiscal year ended September 30, 2001).

3(i)(3)	Amendment to Articles of Incorporation Amending Rights and Preferences of Series A Preferred Stock (previously filed as Exhibit on Form 10-KSB for the fiscal year ended September 30, 2001).

3(i)(4)	Amendment to Articles of Incorporation Adopting Designation of Rights and Preferences of Series B Preferred Stock (previously filed as Exhibit on Form 10- QSB for the six months ended March 31, 2002).

3(i)(5)	Certificate of Amendment to the Designation of Rights and Preferences Related to Series A 10% Cumulative Convertible Preferred Stock of SecureAlert, Inc. (incorporated by reference to our annual report on Form 10-KSB for the fiscal year ended September 30, 2001).

3(i)(6)	Certificate of Amendment to the Designation of Rights and Preferences Related to Series C 8% Convertible Preferred Stock of SecureAlert, Inc. (incorporated by reference to our Current Report on Form 8-K, filed with the Commission on March 24, 2006).

3(i)(7)	Articles of Amendment to Articles of Incorporation filed July 12, 2006 (previously filed as exhibits to our current report on Form 8-K filed July 18, 2006, and incorporated herein by reference).

3(i)(8)	Articles of Amendment to the Fourth Amended and Restated Designation of Right and Preferences of Series A 10% Convertible Non-Voting Preferred Stock of SecureAlert, Inc. (previously filed as Exhibit on Form 10-QSB for the nine months ended June 30, 2007, filed in August 2007).

3(i)(9)	Articles of Amendment to the Designation of Right and Preferences of Series A Convertible Redeemable Non-Voting Preferred Stock of SecureAlert, Inc. (previously filed as Exhibit on Form 10-QSB for the nine months ended June 30, 2007, filed in August 2007).

3(i)(10)	Articles of Amendment to the Articles of Incorporation and Certificate of Amendment to the Designation of Rights and Preferences Related to Series D 8% Convertible Preferred Stock of SecureAlert, Inc. (previously filed as Exhibit on Form 10-K filed in January 2010).

3(i)(11)	Articles of Amendment to the Articles of Incorporation filed March 28, 2011 (previously filed as Exhibit on Form 8-K filed April 4, 2011).

3(i)(12)	Articles of Amendment to the Articles of Incorporation of SecureAlert, Inc., filed August 1, 2011 (previously filed as Exhibit on Form 10-Q filed August 15, 2011).

3(i)(13)	Articles of Amendment to the Articles of Incorporation of SecureAlert, Inc., filed December 28, 2011 (previously filed as Exhibit to Definitive Proxy Statement, filed October 25, 2011)

3(i)(14)	Articles of Amendment to the Articles of Incorporation of SecureAlert, Inc., filed April 11, 2013 (previously filed as Exhibit on Form 10-Q filed May 15, 2013).

3(ii)	Bylaws (incorporated by reference to our Registration Statement on Form 10-SB, effective December 1, 1997).

3(iii)	Amended and Restated Bylaws (previously filed in February 2011 as an Exhibit to the Form 10-Q for the three months ended December 31, 2010).

4.01	2006 Equity Incentive Award Plan (previously filed in August 2006 as an Exhibit to the Form 10- QSB for the nine months ended June 30, 2006).

4.02	2012 Equity Incentive Award Plan (previously filed as Exhibit to Definitive Proxy Statement, filed October 25, 2011).

5.1	Opinion of Durham Jones & Pinegar*

10.01	Distribution and Separation Agreement (incorporated by reference to our Registration Statement and Amendments thereto on Form 10-SB, effective December 1, 1997).

10.02	1997 Stock Incentive Plan of the Company, (incorporated by reference to our Registration Statement and Amendments thereto on Form 10-SB, effective December 1, 1997).

10.03	1997 Transition Plan (incorporated by reference to our Registration Statement and Amendments thereto on Form 10-SB, effective December 1, 1997).

10.04	Securities Purchase Agreement for $1,200,000 of Series A Preferred Stock (incorporated by reference to our Registration Statement and Amendments thereto on Form 10-SB, effective December 1, 1997).

10.05	Loan Agreement (as amended) dated June 2001 between ADP Management and the Company (incorporated by reference to our annual report on Form 10-KSB for the fiscal year ended September 30, 2001).

10.06	Loan Agreement (as amended and extended) dated March 5, 2002 between ADP Management and the Company, effective December 31, 2001 (filed as an Exhibit to our quarterly report on Form 10-QSB for the quarter ended December 31, 2001).

10.07	Agreement with ADP Management, Derrick and Dalton (April 2003) (previously filed as Exhibit on Form 10-QSB for the six months ended March 31, 2003)

10.08	Security Agreement between Citizen National Bank and the Company (previously filed with Form 8-K in July 2006).

10.09	Promissory Note between Citizen National Bank and the Company (previously filed with Form 8-K in July 2006).

10.10	Common Stock Purchase Agreement dated as of August 4, 2006 (previously filed as an Exhibit to our current report on Form 8-K filed August 7, 2006 and incorporated herein by reference).

10.11	Change in Terms Agreement between Citizen National Bank and the Company (previously filed as Exhibit on Form 10-KSB for the fiscal year ended September 30, 2006)

10.12	Securities Purchase Agreement between the Company and VATAS Holding GmbH, a German limited liability company (previously filed with Form 8-K in November 2006).

10.13	Common Stock Purchase Warrant between the Company and VATAS Holding GmbH dated November 9, 2006 (previously filed as Exhibit on Form 10-QSB for the three months ended December 31, 2006, filed in February 2007).

10.14	Settlement Agreement and Mutual Release between the Company and Michael Sibbett and HGR Enterprises, LLC, dated as of February 1, 2007 (previously filed as Exhibit on Form 10-QSB for the three months ended December 31, 2006, filed in February 2007).

10.15	Distributor Sales, Service and License Agreement between the Company and Seguridad Satelital Vehicular S.A. de C.V., dated as of February 5, 2007 (previously filed as Exhibit on Form 10-QSB for the three months ended December 31, 2006, filed in February 2007).

10.16	Distributor Agreement between the Company and QuestGuard, dated as May 31, 2007. Portions of this exhibit were redacted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission (previously filed as Exhibit on Form 10-QSB for the nine months ended June 30, 2007, filed in August 2007).

10.17	Stock Purchase Agreement between the Company and Midwest Monitoring & Surveillance, Inc., dated effective December 1, 2007 (previously filed as Exhibit on Form 10-KSB for the fiscal year ended September 30, 2007, filed in January 2008).

10.18	Stock Purchase Agreement between the Company and Court Programs, Inc., Court Programs of Florida Inc., and Court Programs of Northern Florida, Inc., dated effective December 1, 2007 (previously filed as Exhibit on Form 10-KSB for the fiscal year ended September 30, 2007, filed in January 2008).

10.19	Sub-Sublease Agreement between the Company and Cadence Design Systems, Inc., a Delaware corporation, dated March 10, 2005 (previously filed as Exhibit on Form 10-KSB/A for the fiscal year ended September 30, 2007, filed in June 2008).