SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For The Quarterly Period Ended September 30, 2006

                           Commission File No. 0-29804


                          SecureCARE Technologies, Inc.
               (Exact name of registrant as specified in charter)


                                     Nevada
            (State or jurisdiction of incorporation or organization)


                                   82-0255758
                      (I.R.S. Employer Identification No.)


       3755 Capital of Texas Highway South, Suite 160E Austin, Texas 78704
                    (Address of principal executive offices)


                                 (512) 535-1205
                (Issuer's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

As of October 31, 2006, there were 20,304,000 shares of Common Stock, $.001 par
value of the registrant issued and outstanding.

Transitional Small Business Disclosure Format (check one) YES [ ] NO [X]

<PAGE>

                          SECURECARE TECHNOLOGIES, INC.
                                   FORM 10-QSB
                                    CONTENTS

                                                                        Page No.
                                                                        --------
PART I          FINANCIAL INFORMATION

      Item 1.   Financial Statements

                Balance Sheets at September 30, 2006(unaudited) and
                December 31, 2005                                             2

                Statements of Operations (unaudited) for the three months
                ended September 30, 2006 and 2005                             3

                Statements of Operations (unaudited) for the nine months
                ended September 30, 2006 and 2005                             4

                Statements of Cash Flows (unaudited) for the nine months
                ended September 30, 2006 and 2005                             5

                Notes to Interim Financial Statements (unaudited)             6

      Item 2.   Management's Discussion and Analysis of Financial
                Condition  and Results of Operations                         13

      Item 3.   Controls and Procedures                                      18


PART II         OTHER INFORMATION

      Item 1.   Legal Proceedings                                            19

      Item 2.   Changes in Securities and Use of Proceeds                    19

      Item 3.   Defaults Upon Senior Securities                              19

      Item 4.   Submission of Matters to a Vote of Security Holders          19

      Item 5.   Other Information                                            19

      Item 6.   Exhibits and Reports on Form 8-K                             19


SIGNATURES                                                                   20

CERTIFICATIONS


                                        1
<PAGE>
<TABLE>
<CAPTION>

                    SECURECARE TECHNOLOGIES, INC.
                           BALANCE SHEETS
        September 30, 2006 (Unaudited) and December 31, 2005


                               ASSETS
                                                                                   2006
                                                                                (Unaudited)        2005
                                                                               ------------    ------------

<S>                                                                            <C>             <C>
Current assets
    Cash and cash equivalents                                                  $    186,598    $      3,400
    Accounts receivable - trade, net of allowance for doubtful
      accounts of $10,000 and $5,000, respectively                                   33,119          42,936
    Prepaid expenses                                                                     --          14,905
                                                                               ------------    ------------
         Total current assets                                                       219,717          61,241

Property and equipment, net of accumulated depreciation of
     $425,612 and $361,490, respectively                                             29,699          93,822
Deferred financing fees, net of accumulated amortization of $84,546 and
    $79,032, respectively                                                                --           5,514
Deposits                                                                              5,852          97,830
                                                                               ------------    ------------

         Total assets                                                          $    255,268    $    258,407
                                                                               ============    ============

                LIABILITIES AND SHAREHOLDERS' DEFICIT

   Current Liabilities
    Notes payable, including $544,490 and $136,123 to a related party,
       respectively, net of debt discount of $1,962 and $14,164,
       respectively                                                            $  1,826,028    $  1,355,459
    Accounts payable - trade                                                        208,151         222,888
    Accrued payroll                                                                 239,774         222,436
    Accrued payroll taxes                                                           116,065         170,918
    Deferred revenue                                                                    486          16,183
    Accrued interest, including $57,585 and $37,652 to a related party              330,169         161,337
    Preferred stock pending issuance                                                570,518              --
    Other accrued liabilities                                                       200,336         111,629
                                                                               ------------    ------------
         Total current liabilities                                                3,491,527       2,260,850

   Related party notes payable, less current portion                                     --         408,367



   Other non-current liabilities                                                     43,136              --

Shareholders' deficit
    Preferred stock - $0.001 par value; 15,000,000 shares authorized:
    Series A preferred stock - 1,955,000 shares issued and outstanding
       (liquidation preference of $1.00 per share)                                    1,955           1,955
    Series B preferred stock - 1,427,273 shares issued
       and outstanding (liquidation preference of $1.10 per share)                    1,427           1,427
    Common stock - $0.001 par value;  50,000,000 shares authorized,
      20,304,000 and 20,004,000 shares issued and outstanding, respectively          20,304          20,004
    Additional paid-in capital                                                   12,795,140      12,630,770
    Receivable for the purchase of equity                                                --          (2,000)
    Accumulated deficit                                                         (16,098,221)    (15,062,966)
                                                                               ------------    ------------
         Total shareholders' deficit                                             (3,279,395)     (2,410,810)
                                                                               ------------    ------------

         Total liabilities and shareholders' deficit                           $    255,268    $    258,407
                                                                               ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                        2
<PAGE>
<TABLE>
<CAPTION>

                          SECURECARE TECHNOLOGIES, INC.
                      STATEMENTS OF OPERATIONS (UNAUDITED)
             For the Three Months Ended September 30, 2006 and 2005



                                                                                   2006            2005
                                                                               ------------    ------------
<S>                                                                           <C>            <C>
Revenues                                                                       $     61,866    $    108,774

Operating expenses
   Cost of revenues                                                                  38,150         203,926
   Selling, general and administrative                                              171,918         699,899
   Gain on debt settlement                                                          (31,143)             --
                                                                               ------------    ------------

   Operating loss                                                                  (117,059)       (795,051)

Interest expense (including $6,664 to a related party)                              (60,690)        (74,713)
                                                                               ------------    ------------

   Net loss attributable to common shareholders                                $   (177,749)   $   (869,764)
                                                                               ============    ============

Net loss per common share - basic and diluted                                  $      (0.01)   $      (0.04)
                                                                               ============    ============

Weighted average number of common shares outstanding -
   basic and diluted                                                             20,304,000      20,004,000
                                                                               ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                        3
<PAGE>
<TABLE>
<CAPTION>

                          SECURECARE TECHNOLOGIES, INC.
                      STATEMENTS OF OPERATIONS (UNAUDITED)
             For the Nine Months Ended September 30, 2006 and 2005


                                                                                   2006            2005
                                                                               ------------    ------------
<S>                                                                            <C>             <C>
Revenues                                                                       $    203,481    $    266,878

Operating expenses
   Cost of revenues                                                                 152,859         640,489
   Selling, general and administrative                                              774,848       1,871,203
   Loss on debt settlement, net                                                     120,998              --
                                                                               ------------    ------------

   Operating loss                                                                  (845,224)     (2,244,814)

Interest expense (including $19,933 to a related party)                            (190,031)       (151,851)
                                                                               ------------    ------------

   Net loss                                                                      (1,035,255)     (2,396,665)
   Deemed dividend upon issuance of convertible preferred stock                          --        (204,765)
                                                                               ------------    ------------

   Net loss attributable to common shareholders                                $ (1,035,255)   $ (2,601,430)
                                                                               ============    ============

Net loss per common share - basic and diluted                                  $      (0.05)   $      (0.13)
                                                                               ============    ============

Weighted average number of common shares outstanding -
   basic and diluted                                                             20,278,725      20,004,000
                                                                               ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                        4
<PAGE>
<TABLE>
<CAPTION>

                          SECURECARE TECHNOLOGIES, INC.
                      STATEMENTS OF CASH FLOWS (UNAUDITED)
              For the Nine Months Ended September 30, 2006 and 2005


                                                                                   2006            2005
                                                                               ------------    ------------
<S>                                                                            <C>             <C>
Cash flows from operating activities
     Net loss                                                                  $ (1,035,255)   $ (2,396,664)
     Adjustments to reconcile net loss to net cash used
       in operating activities:
        Depreciation and amortization                                                64,123          57,040
        Bad debt expense                                                             29,491          29,045
        Common stock issued for services                                             75,000              --
        Stock compensation expense                                                  138,542              --
        Loss on debt settlement, net                                                120,998              --
        Amortization of deferred compensation                                            --           2,867
        Amortization of deferred financing fees                                       5,514          29,086
        Amortization of debt discount                                                15,330          24,500
        Other non-cash interest expense                                                  --          23,187
        Increases and decreases in working capital accounts:
        Accounts receivable - trade                                                 (19,674)        (57,994)
        Prepaid expenses                                                             14,905          26,513
        Other current assets                                                             --              (1)
        Deposits                                                                     32,739              --
        Deferred revenue                                                            (15,697)         19,669
        Accounts payable - trade                                                      1,557          94,153
        Accrued liabilities                                                         185,107         230,166
                                                                               ------------    ------------
             Cash flows used by operating activities                               (387,320)     (1,918,433)

Cash flows from financing activities
     Borrowing on notes payable                                                          --         600,000
     Payments on notes payable                                                           --         (36,500)
     Capital Contribution                                                                --         100,000
     Proceeds from preferred stock pending issuance                                 570,518       1,238,194
                                                                               ------------    ------------
        Cash flows provided by financing activities                                 570,518       1,901,694

Net increase (decrease) in cash and cash equivalents                                183,198         (16,739)

Cash and cash equivalents, beginning of period                                        3,400          50,847
                                                                               ------------    ------------

Cash and cash equivalents, end of period                                       $    186,598    $     34,108
                                                                               ============    ============

Supplemental Schedule of Non-Cash Investing and Financing Activities:

Deemed dividend upon issuance of convertible preferred stock                   $         --    $    204,765
                                                                               ============    ============

Contribution of common stock by majority shareholder in
   conjunction with conversion of note payable and accrued interest            $         --    $     77,000
                                                                               ============    ============

Conversion of note payable and accrued interest into common stock              $         --    $     53,193
                                                                               ============    ============

Warrants issued in connection with notes payable                               $         --    $      4,866
                                                                               ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                        5
<PAGE>

                          SECURECARE TECHNOLOGIES, INC.
                NOTES TO INTERIM FINANCIAL STATEMENTS (Unaudited)

NOTE 1.  NATURE OF OPERATIONS

SecureCARE Technologies, Inc. (the Company or SCTI), formerly eClickMD, Inc.,
was originally incorporated in Idaho in 1961. During 1998, the Company changed
its domicile to the State of Nevada and is now a Nevada Corporation.

The Company provides Internet-based document exchange and e-signature solutions
for the healthcare industry. The Company's customers include physicians, clinics
and home healthcare, hospice and durable medical equipment providers.
SecureCARE's technology eliminates paper, while enhancing the physicians ability
to capture fees for otherwise unbilled time and services, uniquely and directly
impacting the physicians revenue. SecureCARE.net is a secure, HIPAA-ready
(Health Insurance and Portability Act) tracking and reporting tool that
streamlines operations while providing physicians with additional revenue
opportunities. The Company markets its services to customers throughout the
United States, currently operating from its Austin, Texas-based corporate
headquarters.

BASIS OF PRESENTATION

The unaudited financial statements have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information and in accordance with the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
financial information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Results of operations for the three
and nine-month periods ended September 30, 2006, are not necessarily indicative
of the results that may be expected for the year ending December 31, 2006.

These financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's Annual Report on Form
10-KSB for the year ended December 31, 2005.

GOING CONCERN

The financial statements for the nine months ended September 30, 2006 were
prepared on the assumption that the Company will continue as a going concern.
The Company sustained a net loss of $1,035,255 for the nine months ended
September 30, 2006. The Company has accumulated losses through September 30,
2006 of $16,098,221. Cash used in operating activities for the nine-month
periods ended September 30, 2006 and 2005 totaled $387,320 and $1,918,433,
respectively. Total liabilities at September 30, 2006 of $3,534,663
significantly exceeds total assets of $255,268 and a significant amount of our
debt is in default. As of the date of this report, the Company is unable to meet
all of its short-term obligations because of shortages of cash. The Company's
continued existence depends upon the success of management's efforts to raise
additional capital necessary to meet the Company's obligations as they come due,
and to obtain sufficient capital to execute its business plan. The Company
intends to obtain capital primarily through issuances of debt or equity. There
can be no degree of assurance that the Company will be successful in completing
additional financing transactions. Failure to generate additional revenues,
raise additional capital or manage discretionary spending could have a material
adverse effect on the Company's ability to continue as a going concern and to
achieve its intended business objectives. The accompanying unaudited financial
statements do not include any adjustments to reflect the possible effects on the
recoverability and classification of assets or classification of liabilities
which may result from the inability of the Company to continue as a going
concern.

NOTE 2.  SUMMARY OF SIGNFICANT ACCOUNTING PRINCIPLES

REVENUE RECOGNITION

The Company derives its revenues from the following home healthcare provider
sources - recurring monthly service fees, one-time training and set-up fees and
integration and customization services as contracted. The Company recognizes
revenue in accordance with SEC Staff Accounting Bulletin No. 104, Revenue
Recognition (SAB 104). SAB 104 generally requires that four basic criteria must
be met before revenue can be recognized: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred or services have been rendered;
(3) the fee is fixed and determinable; and (4) collectibility is reasonably
assured. Determination of criteria (3) and (4) are based on management's
judgments regarding the fixed nature of the fee charged for services rendered
and the collectibility of those fees. Should changes in conditions cause
management to determine these criteria are not met for certain sales, revenue
recognized for any reporting period could be adversely affected. In instances
when any one of the four criteria is not met, the Company will either defer
recognition of the monthly service fees until the criteria are met or will
recognize the recurring monthly service fees on a ratable basis. Recognition of
revenue resulting from one-time training and set-up fees, which is billed
upfront, is deferred and amortized over the life of the corresponding
arrangements and is included in deferred revenue in the accompanying financial
statements.

                                       6
<PAGE>

SOFTWARE AND SOFTWARE DEVELOPMENT COSTS

The Company capitalizes costs related to computer software developed or obtained
for internal use in accordance with the American Institute of Certified Public
Accountants Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" and amortizes these
costs using the straight-line method over the estimated useful life of the
software, generally two to three years.

LONG-LIVED ASSETS

Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the undiscounted future net
cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the net asset exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.

STOCK-BASED COMPENSATION

On January 1, 2006, the Company adopted the modified prospective method of SFAS
No. 123 (revised 2004), "Share-Based Payment" ("SFAS No. 123R"), which is a
revision of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"). SFAS No. 123R supersedes APB Opinion No. 25, and amends SFAS No. 95,
"Statement of Cash Flows". SFAS No. 123R requires that all share-based payments
to employees, including the grant of employee stock options, be recognized in
the income statement based on their fair values. Under the modified prospective
application, SFAS No. 123R is applied to new awards and awards modified,
repurchased or cancelled after the effective date. Compensation cost for the
portion of awards for which requisite service has not been rendered that are
outstanding as of the effective date is recognized as the requisite service is
rendered on or after the effective date. The Compensation cost for the portion
of awards is based on the grant date fair value of those awards as calculated
for pro-forma disclosure under SFAS No. 123. The Company's financial statements
as of and for the first quarter of 2006 reflect the impact of adopting SFAS No.
123R. In accordance with the modified prospective method, the Company's
financial statements for the prior periods have not been restated to reflect,
and do not include, the impact of SFAS No. 123R.

Stock-based compensation expense recognized during the period is based on the
value of the portion of the stock-based payment awards that is ultimately
expected to vest. As stock-based compensation expense recognized in the
statement of operations for the first quarter of 2006 is based on awards
ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS
No. 123R requires forfeitures to be estimated at the time of grant and revised,
if necessary, in subsequent periods if actual forfeitures differ from those
estimates.

The adoption of SFAS No. 123R will require the Company to record material
non-cash stock compensation expenses. While the adoption of SFAS No. 123R is not
expected to have a substantial effect on the Company's financial condition or
cash flows, it is expected to have a significant effect on the Company's result
of operations. The future impact of the adoption of SFAS No. 123R cannot be
currently predicted as it will depend on the Company's future decisions to issue
share-based payments.

Prior to January 1, 2006, the Company accounted for stock-based employee
compensation arrangements in accordance with provisions of Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", and
complied with the disclosure provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" as amended by SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure -- an Amendment of FASB
Statement No. 123". Under APB Opinion No. 25, compensation expense for employees
is based on the excess, if any, on the date of grant, of the fair value of the
Company's stock over the exercise price and is recognized on a straight-line
basis over the vesting term of the option.

The Company accounts for equity instruments issued to non-employees based upon
the fair value of the awards. All transactions in which goods or services are
the consideration received for the issuance of equity instruments are accounted
for based on the fair value of the consideration received or the fair value of
the equity instrument issued, whichever is more reliably measurable. The
measurement date of the fair value of the equity instrument issued is the
earlier of the date on which the counterparty's performance is complete or the
date on which it is probable that performance will occur.

The Board of Directors of the Company approved the SecureCARE Technologies, Inc.
2004 Stock Option Plan on December 3, 2004. The Company has reserved 2,000,000
shares of common stock for issuance under this Plan. The exercise price of each
option granted may not be less than the fair market value of common stock at the
date of grant, without prior approval of the Board of Directors. Options are
exercisable according to the terms set out in the option agreement, not to
exceed ten years. At September 30, 2006 the Company had 250,000 options
outstanding, of which 228,339 were exercisable. All options granted by the
Company are restricted stock awards under rules promulgated by the Securities
and Exchange Commission

The Company adopted SFAS No. 123R using the modified prospective transition
method beginning January 1, 2006. Accordingly, during the nine month period
ended September 30, 2006, the Company recorded stock-based compensation expense
for options granted prior to, but not yet vested, as of January 1, 2006, as if
the fair value method required for pro forma disclosure under SFAS No. 123 were
in effect for expense recognition purposes, adjusted for estimated forfeitures.
There were no new options issued during the nine months ended September 30,
2006. As SFAS No. 123R requires that stock-based compensation expense be based
on awards that are ultimately expected to vest, stock based compensation expense

                                       7
<PAGE>

for the three and nine-month periods ended September 30, 2006 totaled $21,875
and $138,542, respectively. The impact on the Company's results of operations of
recording stock-based compensation for the three and nine-month periods ended
September 30, 2006 was as follows:
<TABLE>
<CAPTION>

                                                           Three Months Ended       Nine Months Ended
                                                           September 30, 2006       September 30, 2006
                                                           ------------------       ------------------
<S>                                                        <C>                      <C>
Selling, general and administrative                        $           21,875       $          138,542
                                                           ------------------       ------------------

Impact on net loss to common shareholders                  $           21,875       $          138,542
                                                           ==================       ==================
Impact on net loss per share to common shareholders
 (basic and diluted)                                       $           (0.001)      $           (0.007)
                                                           ------------------       ------------------
</TABLE>

The Company calculates the fair value of each option award on the date of grant
using the Black-Scholes option-pricing model. There were no new options issued
during the nine months ended September 30, 2006.

The following table summarizes the activity under the Plan for the nine month
ended September 30, 2006:
<TABLE>
<CAPTION>

                                                                             2004 Stock Incentive Plan
                                                           ------------------------------------------------------------
                                                                     Nine Months Ended September 30, 2006
                                                           ------------------------------------------------------------
                                                                                              Weighted
                                                                            Weighted          Average         Aggregate
                                                                             Average          Remaining       Intrinsic
                                                               Shares     Exercise Price   Contractual Term     Value
                                                           ------------------------------------------------------------
<S>                                                           <C>        <C>                <C>          <C>
Outstanding at January 1, 2006                                1,349,608    $       1.01       .81 years
Granted                                                              --
Exercised                                                            --
Cancelled                                                    (1,099,608)   $       1.01
                                                           ------------
Outstanding at September 30, 2006                               250,000    $       1.00       .18 years    $         --
                                                           ============
Vested and expected to vest at September 30, 2006               250,000    $       1.00       .18 years    $         --
Options exercisable at September 30, 2006                       228,339    $       1.00       .18 years    $         --
</TABLE>

The aggregate intrinsic value is calculated as the difference between the
exercise price of the underlying awards and the quoted price of the Company's
common stock, $0.16, at September 30, 2006. No options were "in-the-money" at
September 30, 2006. No options were exercised during the nine months ended
September 30, 2006 and 2005.

As of September 30, 2006 there was approximately $15,163 of total unrecognized
compensation cost related to unvested options. The cost is expected to be
recognized over a weighted-average period of 0.18 years.

Prior to the adoption of SFAS No. 123R, the Company provided the disclosures
required under SFAS No. 123, as amended by SFAS No.148. Employee stock-based
compensation expense recognized under SFAS No. 123R was not reflected in the
Company's result of operations for the nine months ended September 30, 2005 for
employee stock option awards as all options were granted with an exercise price
equal to the market value of the underlying common stock on the date of grant.
Previously reported amounts have not been restated.

If the Company had recognized compensation expense on a straight-line basis over
the vesting term of the options based upon the fair value at the grant date for
options granted to employees, officers and directors during the nine months
ended September 30, 2005 the pro forma effect on net loss attributable to common
shareholders and net loss per share attributable to common shareholders would
have been as follows:

                                       8
<PAGE>
<TABLE>
<CAPTION>

                                                                          Nine Months Ended        Three Months Ended
                                                                          September 30, 2005       September 30, 2005
                                                                          ------------------       ------------------
<S>                                                                       <C>                      <C>
         Net loss to common shareholders as reported                      $       (2,601,430)      $         (869,764)
         Add:  Stock-based employee compensation expense included
               in reported net loss                                                    2,867                    2,867
         Deduct: Stock-based employee compensation expense determined
               under fair value based method                                        (485,510)                (151,997)
                                                                          ------------------       ------------------

         Pro forma net loss                                               $       (3,084,073)      $       (1,018,894)
                                                                          ==================       ==================
         Net loss per share to common shareholders:
           As reported - basic and diluted                                $            (0.13)      $            (0.04)
                                                                          ==================       ==================

           Pro forma - basic and diluted                                  $            (0.15)      $            (0.05)
                                                                          ==================       ==================
</TABLE>

COMMITMENTS AND CONTINGENCIES

On April 7, 2005 a lawsuit was filed by Norman K. Best, a former officer of the
Company, against SecureCARE Technologies, Inc. The lawsuit is identified as
cause number GN501073 and was filed in the 353rd Judicial District Court of
Travis County, Texas as "Norman K. Best versus SecureCARE Technologies, Inc."
The lawsuit alleges that the Company breached the terms of its agreements with
Mr. Best by failing to tender 50,000 shares of common stock of SecureCARE
Technologies, Inc. which were granted to him in January 2004. The grant date
fair value of the 50,000 shares was not material. The Company responded to this
lawsuit on May 13, 2005, by filing a general denial, denying all the allegations
raised by the Plaintiff. On July 8, 2005, the Company filed a series of
responses to the plaintiff's request for admission. The Company was initially
required to produce all documents related to the plaintiff's request for
production by August 14, 2006. On August 25, 2006, the Company settled this
lawsuit with Mr. Best. The Company agreed to tender the 50,000 shares of
SecureCARE Technologies, Inc. common stock that were previously granted to him.
The Company also agreed to a monetary payment of $10,000 to be paid in five
monthly installments of $2,000 each. Accordingly, at September 30, 2006, the
Company has recorded a liability of $8,000 for the balance of payments due on
the monetary portion of this settlement.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the Financial Statements and the reported amount of
revenues and expenses during the reporting period. The Company's most
significant estimates relate to software services revenue recognition,
capitalization of software development costs and depreciation of fixed assets.
Actual results could differ from these estimates.

                                       9
<PAGE>

NOTE 3. NOTES PAYABLE

Notes payable at September 30, 2006 and December 31, 2005 consist of the
following:
<TABLE>
<CAPTION>

                                                                         2006                   2005
                                                                     -----------     ----------------------------
                                                                      Short Term      Short Term       Long Term
                                                                     ------------    ------------    ------------
<S>                                                                  <C>             <C>             <C>
Note payable to related party bearing interest at 5%,
  principal and interest due September 30, 2010, secured
  by a security interest in the assets and intellectual property
  of the Company; interest payments in default as of
  September 2, 2004; principal payments in default as of
  October 1, 2005                                                    $    544,490    $    136,123    $    408,367

Note payable to investors bearing flat interest at 60%
  Note is in default as of April 28, 2006, unsecured                       50,000          50,000              --

Note payable to investors bearing interest at 18%
  Note is in default as of October 28, 2005, unsecured                     75,000          75,000              --

Note payable to investors bearing interest at 18%
  Note is in default as of October 29, 2005, unsecured                    150,000         150,000              --

Note payable to investors bearing interest at 18%
  Note is in default as of December 2, 2005, unsecured                    125,000         125,000              --

Note payable to investors bearing interest at 18%
  Note is in default as of December 4, 2005, unsecured                     50,000          50,000              --

Note payable to investors bearing interest at 18%
  Note is in default as of December 15, 2005, unsecured                    50,000          50,000              --

Note payable to investors bearing interest at 7.5%
  Note is in default as of February 13, 2006, unsecured                   220,000         220,000              --

Note payable to investors bearing interest at 7.5%
  Note is in default as of March 2, 2006, unsecured                       150,000         150,000              --

Note payable to investors bearing interest at 7.5%
  Note is in default as of March 9, 2006, unsecured                       150,000         150,000              --

Note payable to Phoebe Holdings, Inc. at 7.5%,
  Note is in default as of May 1, 2006, unsecured                          63,500          63,500              --

Convertible bridge note payable bearing interest at 12%
  Principal and interest due October 31, 2006, unsecured                   50,000          50,000              --

Convertible bridge note payable bearing interest at 12%
  Principal and interest due November 6, 2006, unsecured                   25,000          25,000              --

Convertible bridge note payable bearing interest at 12%
  Principal and interest due November 7, 2006, unsecured                   25,000          25,000              --

Convertible bridge note payable bearing interest at 12%
  Principal and interest due November 21, 2006, unsecured                  50,000              --              --

Convertible bridge note payable bearing interest at 12%
  Principal and interest due November 24, 2006, unsecured                  40,000          40,000              --

Convertible bridge note payable bearing interest at 12%
  Principal and interest due November 28, 2006, unsecured                  10,000          10,000              --
                                                                     ------------    ------------    ------------

                                                                        1,827,990       1,369,623         408,367

Less: unamortized debt discount                                            (1,962)        (14,164)             --
                                                                     ------------    ------------    ------------
Total notes payable                                                  $  1,826,028    $  1,355,459    $    408,367
                                                                     ============    ============    ============
</TABLE>

                                       10
<PAGE>

On June 16, 2006, the Company's Board of Directors ratified a letter agreement
(the "Letter Agreement"), dated June 7, 2006, with a related party, Gryphon
Opportunities Fund I, LLC ("GOF"), relating to future financing and
recapitalization of the Company. Pursuant to the Letter Agreement, GOF agreed to
convert its notes payable and accrued interest to common stock of the Company
and to release its lien on the Company's assets. Both of these actions were
conditioned upon the Company receiving an aggregate of $570,000 in equity
financing. The raising of the equity financing was effectively completed on
September 15, 2006 (the "Commitment Date") in the amount of $570,518. As of
October 2, 2006, the Company had raised a total of $576,518 in the equity
financing.

As of the Commitment Date, the Company had only approximately 30 million shares
of common stock authorized remaining to be issued. To complete the conversion of
the GOF notes payable and accrued interest of $544,490 and $56,477,
respectively, offered at a conversion price of $0.01 per common share
equivalent, the Company needed approximately 53 million authorized common shares
(the GOF conversion offer was triggered upon achievement of the minimum required
equity financing on September 15, 2006). As a result, the Company authorized the
issuance of a new Mandatorially Convertible Series C Preferred Stock series to
GOF (264,494 shares of Series C Stock). The Series C Stock has no conversion
rights unless and until the Company has sufficient authorized shares of common
stock available to permit the conversion of all of the shares of Series C Stock
at a rate of 200 common shares for each share of Series C Stock. In addition,
the Series C Stock has no liquidation preference, dividend rights or any other
rights that are not included in the rights of the current common stock holders.
The Company filed its Certificate of Designation for the Series C Stock with the
State of Nevada on November 13, 2006 (the "acceptance date"); therefore, as of
the acceptance date , the Series C Stock shares are now authorized, designated
and issuable to effect the conversion of the GOF notes payable and accrued
interest. Effective November 13, 2006 the Company issued 264,494 shares of
Series C Stock to GOF to affect the conversion of GOF's notes payable and
accrued interest of $544,490 and $56,477, respectively.

On October 19, 2006 the Company made a conversion offer to the remaining note
holders to convert the balance of $1,283,500 in notes payable and the related
accrued interest of $262,197 (as of September 15, 2006) to Series C Stock. The
Company believes that a majority of the note holders will accept the conversion
offer in the fourth quarter of 2006. If all of the remaining note holders accept
the conversion offer, the Company will be required to issue an additional
680,282 shares of Series C Stock which would convert to approximately 136
million common shares.

Once the Company increases the number of its authorized shares, the newly issued
Series C Stock will immediately be converted into common shares at the
conversion ratio of 200 common shares for 1 share of Series C Stock.

As of March 2, 2006, the Company is in default on the principle amount of
$520,000 in a series of 7.5% Senior Subordinated Notes Payable, issued to a
group of seven investors in February and March of 2004. In addition, accrued
interest on these notes as of September 30, 2006 is approximately $115,000. The
notes may be extended at the option of the Company for an additional six months.
If the notes are extended, the Company must issue one share of Common Stock for
each $4.00 principal and accrued interest on the Notes that are extended, or a
total of approximately 159,000 shares of Common Stock. As of the date of this
filing, the Company has not elected the option of extending the notes for an
additional six months.

In October 2005, in conjunction with $150,000 in 12% convertible bridge notes
payable issued pursuant to agreement with Argilus Capital Partners, the Company
issued 30,000 warrants to purchase one share of common stock at a price equal to
the lesser of 75% of the per share purchase price on the closing date or $0.75
per share. These warrants were valued at a range of $0.313 to $0.424 per warrant
resulting in a total fair value of $10,323. This amount was recorded as a debt
discount and is being amortized as a component of interest expense over the life
of the notes (thirteen months).

In September 2005, in conjunction with $50,000 in 12% convertible bridge notes
payable issued pursuant to agreement with Argilus Capital Partners, the Company
issued 10,000 warrants to purchase one share of common stock at a price equal to
the lesser of 75% of the per share purchase price on the closing date or $0.75
per share. These warrants were valued at $0.487 per warrant resulting in a total
fair value of $4,866. This amount was recorded as a debt discount and is being
amortized as a component of interest expense over the life of the notes
(thirteen months).

In November 2004, in conjunction with the 7.5% senior subordinated note payable
to Phoebe Holdings, Inc., the Company issued 50,000 shares of common stock.
These shares were valued at $0.15 per share resulting in a total fair value of
$7,500. This amount was recorded as debt discount and is being amortized as a
component of interest expense over the life of the note (six months).

During February and March 2004, in conjunction with the 7.5% senior subordinated
notes payable to investors, the Company issued 520,000 shares of common stock.
These shares were valued at $0.10 per share resulting in a total fair value of
$52,000. This amount was recorded as debt discount and is being amortized as a
component of interest expense over the life of the notes (two-years).

                                       11
<PAGE>

NOTE 4. SHAREHOLDERS' DEFICIT

On January 24, 2006 the Company entered into a consulting agreement with an
individual, Howard Alweil, (the "Consultant") for services related to locating
qualified executive personnel and reviewing the implementation strategy of the
Company's public relations and marketing efforts. As compensation for those
services, the Company agreed to issue the Consultant 300,000 registered shares
of the Company's common stock, to be registered under a Registration Statement
on Form S-8 or any other available form as soon as was practicable after the
execution and delivery of the consulting agreement. Accordingly, the Company
filed a Form S-8 Registration Statement Under the Securities Act of 1933 on
February 10, 2006. The Company recorded $75,000 in financial consulting expenses
related to the issuance of the 300,000 shares of common stock which were valued
at $0.25 per share on January 24, 2006.

On April 4, 2006, the Company entered into a Loan Agreement (the "Loan
Agreement") with Euro Financial Fidelity, Inc. ("EFF") which provided for a loan
to the Company of $7,000,000 (the "Loan"). The Company had the right to
terminate the Loan Agreement at any time by written notice to EFF if the loan
was not funded by June 15, 2006. The Company notified EFF on October 6, 2006
that it was terminating the Loan Agreement, effective immediately, as no funding
was ever received.

NOTE 5.  ACCRUED PAYROLL TAXES

As of September 30, 2006, the Company owes $116,065 in accrued payroll taxes.
Estimated additional penalties and interest assessed on these taxes total
$97,788 (included in other current liabilities) at September 30, 2006. The
Company is currently working with the IRS to establish a five year payment plan
in which the accrued payroll taxes and the related penalties and interest
amounts will be paid. The Company expects to commence payments on this five year
payment plan in the first quarter of 2007.

The Company received a Notice of Federal Tax Lien by the Internal Revenue
Service (IRS) dated May 24, 2006. The Tax Lien was filed with the Secretary of
State in Texas. The Lien is in favor of the United States on all property and
rights to property belonging to the Company for the amount of these taxes, and
additional penalties, interest, and costs that may accrue. The Lien will remain
in place until such time that the Company pays its obligation in full to the
IRS. The Company expects to commence a monthly payment plan in the fourth
quarter of 2006 in which it will pay the balance of the obligation off over a
period of five years.

NOTE 6.  LOSS ON DEBT SETTLEMENT

The Company was notified on January 20, 2006, that it was in default under its
master electronic equipment lease primarily due to its failure to pay the base
monthly rental payments after October 2005. On February 20, 2006, the Company
returned approximately $300,000 of the hardware and software to the lessor,
retaining approximately $14,000 of the original leased property. The notice of
default on the lease did not relieve, suspend or waive the Company's continued
responsibility for the monthly rental payments for the balance of the initial
lease term. As of February 20, 2006, the Company had approximately $59,000 of
its original lease deposit amount of $124,717 in tact. The Company restructured
the remaining amount owed under the lease for an additional twenty-four months.
The net amount owed included an offset credit given for the lease deposit of
$59,239. The restructured balance totaled $107,102. Accordingly, in conjunction
with the restructured lease, the Company recorded a loss on debt settlement in
the first quarter of 2006 totaling $166,341 to reflect complete consumption of
the lease deposit of $59,239 and the remaining lease liability of $107,102.

The Company made its first payment on the restructured lease in July 2006. In
August 2006, the Company was notified by the lessor that a partial credit of
$14,849 was being issued to the Company, against the restructured balance, for
the equipment returned to the lessor in February 2006. Therefore, the Company
recorded a gain on debt settlement of $14,849 in the third quarter of 2006. At
September 30, 2006, the restructured balance due totaled $82,058 (net of the
credit for returned equipment of $14,849 and payments made during the third
quarter totaling $10,194).

The Company was notified on February 21, 2006, that it was in default under the
lease for its principal executive office located in Austin, Texas, due to its
failure to timely pay the base monthly rental. The Company was directed to
vacate the premises no later than February 28, 2006. The Company vacated the
premises on February 28, 2006 and temporarily relocated its principal executive
office to an alternative location in Austin, Texas in approximately 300 square
feet of leased office space. The lessor has agreed to extinguish the lease and
will require the Company to pay its outstanding base monthly rental amounts owed
through February 28, 2006, totaling $47,433, including applicable late fees.
Because the original lease was a three-year, sliding scale square-footage rate
lease, and the square-footage rates increased in years two and three, as of
February 28, 2006 the Company had recorded $14,200 in additional rent expense to
average out the three-year total rent expense. Because the lessor agreed to
extinguish the lease as of February 28, 2006 the Company reversed its additional
rent expense accrual of $14,200, resulting in a reduction in the loss on debt
settlement recognized in the first quarter of 2006.

In addition, in the third quarter of 2006, the Company settled outstanding
payables with two of its trade vendors for less than the original amounts owed
and recorded $16,294 as gain on debt settlement.

                                       12
<PAGE>

Note 7.  SUBSEQUENT EVENT

On June 16, 2006, the Company's Board of Directors ratified a letter agreement
(the "Letter Agreement"), dated June 7, 2006, with a related party, Gryphon
Opportunities Fund I, LLC ("GOF"), relating to future financing and
recapitalization of the Company. Pursuant to the Letter Agreement, GOF agreed to
convert its notes payable and accrued interest to common stock of the Company
and to release its lien on the Company's assets. Both of these actions were
conditioned upon the Company receiving an aggregate of $570,000 in equity
financing. The raising of the equity financing was effectively completed on
September 15, 2006 (the "Commitment Date") in the amount of $570,518. As of
October 2, 2006, the Company had raised a total of $576,518 in the equity
financing.

As of the Commitment Date, the Company had only approximately 30 million shares
of common stock authorized remaining to be issued. To complete the equity
financing of $576,518 (offered at a price of $0.01 per common share equivalent )
and the conversion of the GOF notes payable and accrued interest of $544,490 and
$56,477, respectively, also offered at a conversion rice of $0.01 per common
share equivalent (the GOF conversion offer was triggered upon achievement of the
minimum required equity financing on September 15, 2006), the Company needed
approximately 104 million authorized common shares. As a result, the Company
authorized issuance of a new Mandatorially Convertible Series C Preferred Stock
series ("the Series C Stock") to the new equity investors (251,093 shares of
Series C Stock) and to GOF (264,494 shares of Series C Stock). The Series C
Stock has no conversion rights unless and until the Company has sufficient
authorized shares of common stock available to permit the conversion of all of
the shares of Series C Stock at a rate of 200 common shares for each share of
Series C Stock. In addition, the Series C Stock has no liquidation preference,
dividend rights or any other rights that are not included in the rights of the
current common stock holders. The Company filed its Certificate of Designation
for the Series C Stock with the State of Nevada on November 13, 2006 (the
"acceptance date"); therefore, as of the acceptance date , the Series C Stock
shares are now authorized, designated and issuable to the new equity investors
and to effect the conversion of the GOF notes payable and accrued interest. At
September 30, 2006, because the Series C Stock had not been authorized or
designated, the equity financing of $570,518 is classified as preferred stock
pending issuance on the balance sheet.

Effective November 13, 2006 the Company issued 253,733 shares of Series C Stock
to the new equity investors representing $576,518 in equity financing completed
as of October 2, 2006 and 264,494 shares to GOF to affect the conversion of
GOF's notes payable and accrued interest of $544,490 and $56,477, respectively.

On October 19, 2006 the Company made a conversion offer to the remaining note
holders to convert the balance of $1,283,500 in notes payable and the related
accrued interest of $262,197 (as of September 15, 2006) to Series C Stock. The
Company believes that a majority of the note holders will accept the conversion
offer in the fourth quarter of 2006. If all of the remaining note holders accept
the conversion offer, the Company will be required to issue an additional
680,282 shares of Series C Stock which would convert to approximately 136
million common shares. As of the date of this filing, the Company has received
signed consents from note holders accepting the conversion offer representing
$970,000 in notes payable and $174,578 in accrued interest. To affect these
conversions the Company has issued an additional 503,744 shares of Series C
Stock.

The new investors (representing $576,518 in equity financing) coupled with the
conversion to Series C Stock of the GOF notes and accrued interest, and the
remaining note holders' notes payable and accrued interest on the notes
(assuming all note holders agree to the conversion) will own approximately 90%
of the Company's outstanding equity upon completion of the recapitalization.

Once the Company increases the number of its authorized shares, the newly issued
Series C Stock will immediately be converted into common shares at the
conversion ratio of 200 common shares for 1 share of Series C Stock.

For the full terms of the Letter Agreement, reference is made to the Company's
Form 8-K, filed with the Securities and Exchange Commission on June 22, 2006,
which is incorporated by reference.

ITEM 2. MANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

                           Forward Looking Statements

This Quarterly Report on Form 10-QSB contains "forward-looking" statements as
such term is defined in the Private Securities Litigation Reform Act of 1995 and
information relating to the Company that is based on the beliefs of the
Company's management as well as assumptions made by and information currently
available to the Company's management. When used in this report, the words
"anticipate," "believe," "estimate," "expect" and "intend" and words or phrases
of similar import, as they relate to the Company or Company management, are
intended to identify forward-looking statements. Such statements reflect the
current risks, uncertainties and assumptions related to certain factors
including, without limitations, competitive factors, general economic
conditions, customer relations, relationships with vendors, the interest rate
environment, governmental regulation and supervision, seasonality, distribution
networks, product introductions and acceptance, technological change, changes in
industry practices, onetime events and other factors described herein and in
other filings made by the company with the Securities and Exchange Commission.
Based upon changing conditions, should any one or more of these risks or
uncertainties materialize, or should any underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. The Company does not intend to update
these forward-looking statements.

OVERVIEW

Management believes that the Company is the leading provider of Internet-based
document exchange and e-signature solutions for the healthcare industry. Built
with state-of-the art development tools from the Microsoft dotNET development
solutions, SecureCARE.net is tailored to the needs of physicians, clinics and

                                       13
<PAGE>

home healthcare, hospice and durable medical equipment providers. These
end-to-end solutions offer a revolutionary approach to accessing information and
managing time-consuming forms and authorizations. SecureCARE's easy to use
technology eliminates paper, while enhancing the physicians ability to capture
fees for otherwise unbilled time and services, uniquely and directly impacting
the physicians revenue. SecureCARE.net is a highly secure, HIPAA-ready tracking
and reporting tool that streamlines operations while providing physicians with
additional revenue opportunities. The Company markets its services to customers
throughout the United States, currently operating from its Austin, Texas-based
corporate headquarters.

The Company intends to utilize the Internet to provide browser initiated
healthcare document exchange and e-signature solutions that facilitate the
confidential, on-line exchange of healthcare information for many participants
in the healthcare industry. Based on the technology and products in place, other
applications can be developed that will enhance the Company's position in the
physician's office and home health agencies and other providers such as nursing
homes, pharmacies, durable medical equipment providers, and information sites.
These services using Internet technology in the healthcare industry are subject
to risks, including but not limited to those associated with competition from
existing companies offering similar services, rapid technological change,
development risks, management of growth and a minimal previous record of
operations or earnings.

On December 9, 2005, the Company implemented a staff reduction of approximately
sixteen employees in what was expected to be a temporary cost reduction in
response to the failure of the Company to obtain necessary financing to fund
operations. The Company intended to secure a banking or investment partner and
it downsized its cost structure to preserve its value and operate from its
current sales revenues during this interim period. A cost contained operating
plan, including four full-time employees and additional part-time resources, was
implemented to support the Company's physician and home healthcare provider
customer base and to maintain its technology platform. As additional investment
capital is attracted, the Company will resume its aggressive marketing, sales
and product development initiatives. The Company implemented a personnel and
cost reduction program that reduced its monthly cash requirements by
approximately $200,000.

On April 4, 2006, the Company entered into a Loan Agreement (the "Loan
Agreement") with Euro Financial Fidelity, Inc. ("EFF") which provided for a loan
to the Company of $7,000,000 (the "Loan"). The Company had the right to
terminate the Loan Agreement at any time by written notice to EFF if the loan
was not funded by June 15, 2006. The Company notified EFF on October 6, 2006
that it was terminating the Loan Agreement, effective immediately, as no funding
was ever received.

On June 16, 2006, the Company's Board of Directors ratified a letter agreement
(the "Letter Agreement"), dated June 7, 2006, with a related party, Gryphon
Opportunities Fund I, LLC ("GOF"), relating to future financing and
recapitalization of the Company. Pursuant to the Letter Agreement, GOF agreed to
convert its notes payable and accrued interest to common stock of the Company
and to release its lien on the Company's assets. Both of these actions were
conditioned upon the Company receiving an aggregate of $570,000 in equity
financing. The raising of the equity financing was effectively completed on
September 15, 2006 (the "Commitment Date") in the amount of $570,518. As of
October 2, 2006, the Company had raised a total of $576,518 in the equity
financing. For additional information see Footnote 7 - Subsequent Event.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

The discussion and analysis of our financial condition and results of operations
are based on our unaudited financial statements, which have been prepared
according to U.S. generally accepted accounting principles. In preparing these
financial statements, we are required to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosures of contingent assets and liabilities. We evaluate these
estimates on an on-going basis. We base these estimates on historical experience
and on various other assumptions that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities. Actual results may differ from
these estimates under different assumptions or conditions. We consider the
following accounting policies to be the most important to the portrayal of our
financial condition and that require the most subjective judgment.

REVENUE RECOGNITION

The Company derives its revenues from the following home healthcare provider
sources - recurring monthly service fees, one-time training and set-up fees and
integration and customization services as contracted. The Company recognizes
revenue in accordance with SEC Staff Accounting Bulletin No. 104, Revenue
Recognition (SAB 104). SAB 104 generally requires that four basic criteria must
be met before revenue can be recognized: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred or services have been rendered;
(3) the fee is fixed and determinable; and (4) collectibility is reasonably
assured. Determination of criteria (3) and (4) are based on management's
judgments regarding the fixed nature of the fee charged for services rendered
and the collectibility of those fees. Should changes in conditions cause
management to determine these criteria are not met for certain sales, revenue
recognized for any reporting period could be adversely affected. In instances
when any one of the four criteria is not met, the Company will either defer
recognition of the monthly service fees until the criteria are met or will
recognize the recurring monthly service fees on a ratable basis. Recognition of
revenue resulting from one-time training and set-up fees, which are billed
upfront, is deferred and amortized over the life of the corresponding
arrangements and is included in deferred revenue in the accompanying financial
statements.

                                       14
<PAGE>

SOFTWARE AND SOFTWARE DEVELOPMENT COSTS

The Company capitalizes costs related to computer software developed or obtained
for internal use in accordance with the American Institute of Certified Public
Accountants Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" and amortizes these
costs using the straight-line method over the estimated useful life of the
software, generally two to three years.

LONG-LIVED ASSETS

Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the undiscounted future net
cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the net asset exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.

STOCK-BASED COMPENSATION

On January 1, 2006, the Company adopted the modified prospective method of SFAS
No. 123 (revised 2004), "Share-Based Payment" ("SFAS No. 123R"), which is a
revision of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"). SFAS No. 123R supersedes APB Opinion No. 25, and amends SFAS No. 95,
"Statement of Cash Flows". SFAS No. 123R requires that all share-based payments
to employees, including the grant of employee stock options, be recognized in
the income statement based on their fair values. Under the modified prospective
application, SFAS No. 123R is applied to new awards and awards modified,
repurchased or cancelled after the effective date. Compensation cost for the
portion of awards for which requisite service has not been rendered that are
outstanding as of the effective date is recognized as the requisite service is
rendered on or after the effective date. The Compensation cost for the portion
of awards is based on the grant date fair value of those awards as calculated
for pro-forma disclosure under SFAS No. 123. The Company's financial statements
for the three and six month periods ended June 30, 2006 reflect the impact of
adopting SFAS No. 123R. In accordance with the modified prospective method, the
Company's financial statements for the prior periods have not been restated to
reflect, and do not include, the impact of SFAS No. 123R.

Stock-based compensation expense recognized during the period is based on the
value of the portion of the stock-based payment awards that is ultimately
expected to vest. As stock-based compensation expense recognized in the
statement of operations for the three and nine month periods ended September 30,
2006 is based on awards ultimately expected to vest, it has been reduced for
estimated forfeitures. SFAS No. 123R requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.

The adoption of SFAS No. 123R will require the Company to record material
non-cash stock compensation expenses. While the adoption of SFAS No. 123R is not
expected to have a substantial effect on the Company's financial condition or
cash flows, it is expected to have a significant effect on the Company's result
of operations. The future impact of the adoption of SFAS No. 123R cannot be
currently predicted as it will depend on the Company's future decisions to issue
share-based payments.

Prior to January 1, 2006, the Company accounted for stock-based employee
compensation arrangements in accordance with provisions of Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", and
complied with the disclosure provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" as amended by SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure -- an Amendment of FASB
Statement No. 123". Under APB Opinion No. 25, compensation expense for employees
is based on the excess, if any, on the date of grant, of the fair value of the
Company's stock over the exercise price and is recognized on a straight-line
basis over the vesting term of the option.

The Company accounts for equity instruments issued to non-employees based upon
the fair value of the awards. All transactions in which goods or services are
the consideration received for the issuance of equity instruments are accounted
for based on the fair value of the consideration received or the fair value of
the equity instrument issued, whichever is more reliably measurable. The
measurement date of the fair value of the equity instrument issued is the
earlier of the date on which the counterparty's performance is complete or the
date on which it is probable that performance will occur.

RESULTS OF OPERATIONS

Three months ended September 30, 2006 compared to three months ended September
30, 2005

Revenues for the three months ended June 30, 2006 were $61,866 compared to
$108,774 for the three months ended June 30, 2005. This 43% decrease in sales
reflects customer attrition. Since the Company implemented a staff reduction of
approximately 16 employees on December 9, 2005, it has experienced a customer
attrition rate near 45% of its paying home healthcare provider locations,
resulting in lower revenue in 2006.

Management believes that significant revenue growth will begin in the next
twelve months if the Company is able to raise the additional capital required to
execute its marketing and sales strategy.

                                       15
<PAGE>

Costs of revenues were $38,150 for the three months ended September 30, 2006
compared to $203,926 for the three months ended September 30, 2005. This 81%
decrease in cost of revenues was primarily attributable to the staff reductions
the Company implemented in December 2005 resulting in lower salaries and
benefits and other employee-related expenses of $112,000, lower operating lease
expenses of $49,000, resulting from the Company returning approximately $300,000
in leased hardware and software in February, 2006 and lower other expenses of
$7,000 (including T1 line costs and co-location facility costs).

Selling, general and administrative expenses were $171,918 for the three months
ended September 30, 2006 compared to $699,899 for the three months ended
September 30, 2005. This 75% decrease in expenses was primarily attributable to
the staff reductions the Company implemented in December 2005 resulting in lower
salaries and benefits and other employee-related expenses of $413,000 and lower
travel and entertainment expenses of $64,000. Investor relations and related
costs decreased $29,000 in 2006 due to the Company discontinuing its investor
relations program as a part of its overall cost reduction plan implemented in
December 2005. Bad debt expense was $21,000 lower in 2006. Other corporate
general and administrative expenses, including building rent, insurance,
telephone, cellular phone, office supplies and postage expenses decreased
$81,000 in 2006. Partially offsetting these lower expenses were higher marketing
consulting expenses in 2006 of $39,000 resulting from the Company hiring an
outside consultant to assist in various market research and business plan
development efforts. The Company also recognized $21,875 in stock compensation
expense for stock options vested during the third quarter of 2006 due to its
January 1, 2006, adoption of SFAS No. 123R using the modified prospective
transition method, which contributed to higher expenses in 2006. In addition,
legal settlement expenses were $10,000 higher in 2006 due to the settlement of a
lawsuit. In the third quarter of 2006 the Company accrued an additional $16,300
in penalties and interest charges on back payroll taxes owed for the third and
fourth quarters of 2005, contributing to higher expense in 2006.

Management expects that operating expenses will increase over the next twelve to
eighteen months if the Company is able to raise the additional capital required
to make the necessary investments in technology development and enhancements and
in its planned marketing, sales and support programs.

Gain on lease settlement totaled $31,143 for the three months ended September
30, 2006. The Company was notified on January 20, 2006, that it was in default
under its master electronic equipment lease primarily due to its failure to pay
the base monthly rental payments after October 2005. On February 20, 2006, the
Company returned approximately $300,000 of the hardware and software to the
lessor, retaining approximately $14,000 of the original leased property. The
notice of default on the lease did not relieve, suspend or waive the Company's
continued responsibility for the monthly rental payments for the balance of the
initial lease term. As of February 20, 2006, the Company had approximately
$59,000 of its original lease deposit amount of $124,717 in tact. The Company
restructured the remaining amount owed under the lease for an additional
twenty-four months. The net amount owed included an offset credit given for the
lease deposit of $59,239. The restructured balance totaled $107,102.
Accordingly, in conjunction with the restructured lease, the Company recorded a
loss on debt settlement in the first quarter of 2006 totaling $166,341 to
reflect complete consumption of the lease deposit of $59,239 and the remaining
lease liability of $107,102. The Company made its first payment on the
restructured lease in July 2006. In August 2006, the Company was notified by the
lessor that a partial credit of $14,849 was being issued to the Company, against
the restructured balance, for the equipment returned to the lessor in February
2006. Therefore, the Company recorded a gain on debt settlement of $14,849 in
the third quarter of 2006. At September 30, 2006, the restructured balance due
totaled $82,058 (net of the credit for returned equipment of $14,849 and
payments made during the third quarter totaling $10,194).

In addition, in the third quarter of 2006, the Company settled outstanding
payables with two of its trade vendors for less than the original amounts owed
and recorded $16,294 as gain on debt settlement.

Interest expense for the three months ended September 30, 2006 was $60,960
compared to $74,713 in 2005. Lower interest expense in 2006 primarily resulted
from the fact that on September 26, 2005, the holder of a 30-day, $50,000
promissory note agreed to convert the principle, accrued interest and late fees,
totaling $53,183 into 110,000 shares of the Company's common stock. Gryphon
Opportunities Fund I, LLC, a majority shareholder of the Company, contributed
110,000 shares of common stock to the Company, at $0.70 per share, effecting a
$77,000 capital contribution. The exchange of the note, totaling $53,193 in
principal, accrued interest and penalties, into 110,000 shares of common stock
of the Company, resulted in the Company's recognition of a deemed interest
expense of $23,188. In addition, amortization of debt discount and deferred
financing fees were $11,300 higher in 2005. Partially offsetting these were
higher interest expense in 2006 of approximately $24,000, reflecting a higher
debt load resulting from notes payable the Company issued in the second, third
and fourth quarters of 2005.

Nine months ended September 30, 2006 compared to nine months ended September 30,
2005

Revenues for the nine months ended September 30, 2006 were $203,481 compared to
$266,878 for the nine months ended September 30, 2005. This 24% decrease in
sales reflects customer attrition and reduced billings for application downtime
in April and June of 2006. Since the Company implemented a staff reduction of
approximately 16 employees on December 9, 2005, it has experienced a customer
attrition rate near 45% of its paying home healthcare provider locations,
resulting in lower revenue in 2006. In addition, because of technological issues
that resulted in periods of application downtime in the months of April and June
of 2006, the Company provided two weeks of service free to each of its customers
in these two months, resulting in reduced billings.

Management believes that significant revenue growth will begin in the next
twelve months if the Company is able to raise the additional capital required to
execute its marketing and sales strategy.

                                       16
<PAGE>

Costs of revenues were $152,859 for the nine months ended September 30, 2006
compared to $640,489 for the nine months ended September 30, 2005. This 76%
decrease in cost of revenues was primarily attributable to the staff reductions
the Company implemented in December 2005 resulting in lower salaries and
benefits and other employee-related expenses of $370,000, lower operating lease
expenses of $98,000, resulting from the Company returning approximately $300,000
in leased hardware and software in February, 2006 and lower custom form design
expenses of $22,000.

Selling, general and administrative expenses were $774,848 for the nine months
ended September 30, 2006 compared to $1,871,203 for the nine months ended
September 30, 2005. This 59% decrease in expenses was primarily attributable to
the staff reductions the Company implemented in December 2005 resulting in lower
salaries and benefits and other employee-related expenses of $817,000 and lower
travel and entertainment expenses of $180,000. Investor relations and related
costs decreased $57,000 in 2006. Other marketing costs, including marketing
materials, product marketing and tradeshow and press release expenses were
approximately $34,000 lower in 2006. Other corporate general and administrative
expenses, including computer and software expenses, building rent, insurance,
telephone, cellular phone, legal and postage expenses decreased $190,000 in
2006. On January 24, 2006 the Company entered into a consulting agreement with
an individual, Howard Alweil (the "Consultant") for services related to locating
qualified executive personnel and reviewing the implementation strategy of the
Company's public relations and marketing efforts. As compensation for those
services, the Company agreed to issue 300,000 registered shares of the Company's
Common Stock, to be registered under a Registration Statement on Form S-8 or any
other available form as soon as was practicable after the execution and delivery
of the consulting agreement. Accordingly, the Company filed a Form S-8
Registration Statement under the Securities Act of 1933 on February 10, 2006. In
the first quarter of 2006, the Company recorded $75,000 in financial consulting
expenses related to the issuance of the 300,000 shares of common stock which
were valued at $0.25 per share on January 24, 2006, resulting in higher
financial consulting expense in 2006. The Company also recognized $138,542 in
stock compensation expense for stock options vested during the first nine months
of 2006 due to its January 1, 2006, adoption of SFAS No. 123R using the modified
prospective transition method, which contributed to higher expenses in 2006.
Other higher expenses in 2006 were penalties and interest charges on state sales
taxes of $8,500 and IT consulting costs of $7,000. In addition, legal settlement
expenses were $10,000 higher in 2006 due to the settlement of a lawsuit. In the
third quarter of 2006 the Company accrued an additional $16,300 in penalties and
interest charges on back payroll taxes owed for the third and fourth quarters of
2005, contributing to higher expense in 2006.

Management expects that operating expenses will increase over the next twelve to
eighteen months if the Company is able to raise the additional capital required
to make the necessary investments in technology enhancements and in its planned
marketing, sales and support programs.

Loss on debt settlement expenses totaled $120,998 for the nine months ended
September 30, 2006.

The Company was notified on January 20, 2006, that it was in default under its
master electronic equipment lease primarily due to its failure to pay the base
monthly rental payments after October 2005. On February 20, 2006, the Company
returned approximately $300,000 of the hardware and software to the lessor,
retaining approximately $14,000 of the original leased property. The notice of
default on the lease did not relieve, suspend or waive the Company's continued
responsibility for the monthly rental payments for the balance of the initial
lease term. As of February 20, 2006, the Company had approximately $59,000 of
its original lease deposit amount of $124,717 in tact. The Company restructured
the remaining amount owed under the lease for an additional twenty-four months.
The net amount owed included an offset credit given for the lease deposit of
$59,239. The restructured balance totaled $107,102. Accordingly, in conjunction
with the restructured lease, the Company recorded a loss on debt settlement in
the first quarter of 2006 totaling $166,341 to reflect complete consumption of
the lease deposit of $59,239 and the remaining lease liability of $107,102. The
Company made its first payment on the restructured lease in July 2006. In August
2006, the Company was notified by the lessor that a partial credit of $14,849
was being issued to the Company, against the restructured balance, for the
equipment returned to the lessor in February 2006. Therefore, the Company
recorded a gain on debt settlement of $14,849 in the third quarter of 2006. At
September 30, 2006, the restructured balance due totaled $82,058 (net of the
credit for returned equipment of $14,849 and payments made during the third
quarter totaling $10,194).

The Company was notified on February 21, 2006, that it was in default under the
lease for its principal executive office located in Austin, Texas, due to its
failure to timely pay the base monthly rental. The Company was directed to
vacate the premises no later than February 28, 2006. The Company vacated the
premises on February 28, 2006 and temporarily relocated its principal executive
office to an alternative location in Austin, Texas in approximately 300 square
feet of leased office space. The lessor has agreed to extinguish the lease and
will require the Company to pay its outstanding base monthly rental amounts owed
through February 28, 2006, totaling $47,433, including applicable late fees.
Because the original lease was a three-year, sliding scale square-footage rate
lease, and the square-footage rates increased in years two and three, as of
February 28, 2006 the Company had recorded $14,200 in additional rent expense to
average out the three-year total rent expense. Because the lessor agreed to
extinguish the lease as of February 28, 2006 the Company reversed its additional
rent expense accrual of $14,200, resulting in a reduction in the loss on debt
settlement recognized in the first quarter of 2006.

In addition, in the third quarter of 2006, the Company settled outstanding
payables with two of its trade vendors for less than the original amounts owed
and recorded $16,294 as gain on debt settlement.

Interest expense for the nine months ended September 30, 2006 was $188,923
compared to $151,851 in 2005. Higher interest expense in 2006, was primarily
attributable to a higher debt load, resulting from notes payable the Company
issued in the second, third and fourth quarters of 2005.

                                       17
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Net cash used by operating activities for the nine-months ended September 30,
2006 and 2005 totaled $387,320 and $1,918,433, respectively. Decreased net uses
of cash in 2006 resulted primarily from the staff reductions the Company
implemented in December 2005.

Net cash provided by financing activities was $570,518 for the nine months ended
September 30, 2006 consisted of proceeds from preferred stock pending issuance.

To facilitate additional short-term and long-term investment financing, on June
16, 2006, the Company's Board of Directors ratified a letter agreement (the
"Letter Agreement"), dated June 7, 2006, with a related party, Gryphon
Opportunities Fund I, LLC ("GOF"), relating to future financing and
recapitalization of the Company. Pursuant to the Letter Agreement, GOF agreed to
convert its notes payable and accrued interest to common stock of the Company
and to release its lien on the Company's assets. Both of these actions were
conditioned upon the Company receiving an aggregate of $570,000 in equity
financing. The raising of the equity financing was effectively completed on
September 15, 2006 (the "Commitment Date") in the amount of $570,518. As of
October 2, 2006, the Company had raised a total of $576,518 in the equity
financing. For additional information see Footnote 7 - Subsequent Event.

The Company has limited cash resources and intends to raise additional capital
through the issuance of debt or equity. The Company believes the additional
capital will allow it to continue its marketing efforts in its core products and
develop and add new functional enhancements to the browser-based versions of its
products. The availability of cash through such resources is not assured and if
the Company is not able to raise enough cash, the Company might be forced to
limit its operations and marketing activities, or ultimately cease operations.

The financial statements for the nine months ended September 30, 2006 were
prepared on the assumption that the Company will continue as a going concern.
The Company sustained a net loss of $1,035,255 for the nine months ended
September 30, 2006. The Company has accumulated losses through September 30,
2006 of $16,098,221. Cash used in operating activities for the nine-month
periods ended September 30, 2006 and 2005 totaled $387,320 and $1,918,433,
respectively. Total liabilities at September 30, 2006 of $3,534,663
significantly exceeds total assets of $255,268 and a significant portion of our
debt is in default. As of the date of this report, the Company is unable to meet
all of its short-term obligations because of shortages of cash. The Company's
continued existence depends upon the success of management's efforts to raise
additional capital necessary to meet the Company's obligations as they come due,
and to obtain sufficient capital to execute its business plan. The Company
intends to obtain capital primarily through issuances of debt or equity. There
can be no degree of assurance that the Company will be successful in completing
additional financing transactions. Failure to generate additional revenues,
raise additional capital or manage discretionary spending could have a material
adverse effect on the Company's ability to continue as a going concern and to
achieve its intended business objectives

RELATED PARTY TRANSACTIONS

On June 16, 2006, the Company's Board of Directors ratified a letter agreement
(the "Letter Agreement"), dated June 7, 2006, with a related party, Gryphon
Opportunities Fund I, LLC ("GOF"), relating to future financing and
recapitalization of the Company. Pursuant to the Letter Agreement, GOF agreed to
convert its notes payable and accrued interest to common stock of the Company
and to release its lien on the Company's assets. Both of these actions were
conditioned upon the Company receiving an aggregate of $570,000 in equity
financing. The raising of the equity financing was effectively completed on
September 15, 2006 (the "Commitment Date") in the amount of $570,518. As of
October 2, 2006, the Company had raised a total of $576,518 in the equity
financing.

As of the Commitment Date, the Company had only approximately 30 million shares
of common stock authorized remaining to be issued. To complete the conversion of
the GOF notes payable and accrued interest of $544,490 and $56,477,
respectively, offered at a conversion price of $0.01 per common share
equivalent, the Company needed approximately 53 million authorized common shares
(the GOF conversion offer was triggered upon achievement of the minimum required
equity financing on September 15, 2006). As a result, the Company authorized
issuance of a new Mandatorially Convertible Series C Preferred Stock series to
GOF (264,494 shares of Series C Stock). The Series C Stock has no conversion
rights unless and until the Company has sufficient authorized shares of common
stock available to permit the conversion of all of the shares of Series C Stock
at a rate of 200 common shares for each share of Series C Stock. In addition,
the Series C Stock has no liquidation preference, dividend rights or any other
rights that are not included in the rights of the current common stock holders.
The Company filed its Certificate of Designation for the Series C Stock with the
State of Nevada on November 13, 2006 (the "acceptance date"); therefore, as of
the acceptance date , the Series C Stock shares are now authorized, designated
and issuable to effect the conversion of the GOF notes payable and accrued
interest. Effective November 13, 2006 the Company issued 264,494 shares to GOF
to affect the conversion of GOF's notes payable and accrued interest of $544,490
and $56,477, respectively.

ITEM 3. CONTROLS AND PRODCECURES

Members of our management, including Neil Burley, our Chief Financial Officer
and Principal Accounting and Financial Officer, have evaluated the effectiveness

                                       18
<PAGE>

of our disclosure controls and procedures, as defined by paragraph (e) of
Exchange Act Rules 13a-15 or 15d-15, as of September 30, 2006, the end of the
period covered by this report. Based upon that evaluation, Mr. Burley concluded
that our disclosure controls and procedures are effective.

INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting or in
other factors identified in connection with the evaluation required by paragraph
(d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter
ended September 30, 2006 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.

                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings

On April 7, 2005 a lawsuit was filed by Norman K. Best, a former officer of the
Company, against SecureCARE Technologies, Inc. The lawsuit is identified as
cause number GN501073 and was filed in the 353rd Judicial District Court of
Travis County, Texas as "Norman K. Best versus SecureCARE Technologies, Inc."
The lawsuit alleges that the Company breached the terms of its agreements with
Mr. Best by failing to tender 50,000 shares of common stock of SecureCARE
Technologies, Inc. which were granted to him in January 2004. The grant date
fair value of the 50,000 shares was not material. The Company responded to this
lawsuit on May 13, 2005, by filing a general denial, denying all the allegations
raised by the Plaintiff. On July 8, 2005, the Company filed a series of
responses to the plaintiff's request for admission. The Company was initially
required to produce all documents related to the plaintiff's request for
production by August 14, 2006. On August 25, 2006, the Company settled this
lawsuit with Mr. Best. The Company agreed to tender the 50,000 shares of
SecureCARE Technologies, Inc. common stock that were previously granted to him.
The Company also agreed to a monetary payment of $10,000 to be paid in five
monthly installments of $2,000 each. Accordingly, at September 30, 2006, the
Company has recorded a liability of $8,000 for the balance of payments due on
the monetary portion of this settlement.

Item 2. Changes in Securities

None.

Item 3. Defaults Upon Senior Securities

None.

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

None.


Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

a)       EXHIBITS

         3.11     Certificate of Voting Powers, Designations, Preferences and
                  Rights of Series C Contingently Mandatorially Convertible
                  Preferred Stock

         4.6      Specimen Certificate Series C Contingently Mandatorially
                  Convertible Preferred Stock

         10.6     Form of Series C Contingently Mandatorially Convertible
                  Preferred Stock Subscription Agreement

         31.1     Certification of the Chief Executive Officer pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002

         31.2     Certification of the Chief Financial Officer pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002

         32       Certifications of the Chief Executive Officer and Chief
                  Financial Officer pursuant to 18 U.S.C. Section 1350, as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002

b)       REPORTS ON FORM 8-K

         None.

                                       19
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                       SecureCare Technologies, Inc.
                                       (Registrant)


Date:  November 20, 2006               By: /s/ DENNIS NASTO
                                           -------------------------------------
                                           Dennis Nasto
                                           Chief Executive Officer and Director



Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


NAME                                        TITLE              DATE

/s/ DENNIS NASTO                Chief Executive Officer        November 20, 2006
-------------------------       and Director
Dennis Nasto


/s/ NEIL BURLEY                 Chief Financial Officer        November 20, 2006
-------------------------       (Principal Financial and
Neil Burley                     Accounting Officer)




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