UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington,
D.C. 20549

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FORM 10-Q

(Mark One)

|                                              |                                                                                           
|--------------------------------------------- | ------------------------------------------------------------------------------------------
|þ                                             | QUARTERLY
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                              |                                                                                           
|For the quarterly period ended March 31, 2008
|                                             
|OR                                           
|                                              |                                                                                           
|o                                             | TRANSITION
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to
_______________

Commission File Number: 0-29804

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

|                                                                 |  |                                        
|---------------------------------------------------------------- |  | ---------------------------------------
|Nevada                                                           |  | 82-0255758                             
|(State or other jurisdiction of
  incorporation or organization) |  | (I.R.S. Employer 
  Identification No.)
|                                                                 |  |                                        
|1617 W. 6th Street, Suite C                                      |  |                                        
|Austin, TX                                                       |  | 78703                                  
|(Address of principal executive offices)                         |  | (Zip Code)                             

(512) 447-3700(Registrants telephone number, including area code)

N/A (Former name, former address and former fiscal year, if
changed since last report)

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

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

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

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

As of March 31, 2008,
1,802,027 shares of common stock, par value $.001 per share, were outstanding,
of which 858,270 shares were held by non-affiliates.

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SECURECARE TECHNOLOGIES, INC.
FORM 10-Q
CONTENTS

|               |  |                                                                                           |   
|-------------- |  | ----------------------------------------------------------------------------------------- | --
|PART
  I       |  | FINANCIAL
  INFORMATION                                                                   |   
|               |  |                                                                                           |   
|Item 1.        |  | Financial
  Statements                                                                    |   
|               |  |                                                                                           |   
|               |  | Balance Sheets at March 31, 2008 (unaudited) and December 31,
  2007                      | 2 
|               |  |                                                                                           |   
|               |  | Statements of Operations (unaudited) for the three months ended
  March 31, 2008 and 2007 | 3 
|               |  |                                                                                           |   
|               |  | Statements of Cash Flows (unaudited) for the three months ended
  March 31, 2008 and 2007 | 4 
|               |  |                                                                                           |   
|               |  | Notes to Interim Financial Statements (unaudited)                                         | 5 
|               |  |                                                                                           |   
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and
  Results of Operations   | 15
|               |  |                                                                                           |   
|Item 4.        |  | Controls and Procedures                                                                   | 19
|               |  |                                                                                           |   
|PART II        |  | OTHER INFORMATION                                                                         |   
|               |  |                                                                                           |   
|Item 1.        |  | Legal Proceedings                                                                         | 20
|               |  |                                                                                           |   
|Item 2.        |  | Changes in Securities and Use of Proceeds                                                 | 20
|               |  |                                                                                           |   
|Item 3.        |  | Defaults Upon Senior Securities                                                           | 20
|               |  |                                                                                           |   
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                       | 20
|               |  |                                                                                           |   
|Item 5.        |  | Other Information                                                                         | 20
|               |  |                                                                                           |   
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                          | 20
|               |  |                                                                                           |   
|SIGNATURES     |  |                                                                                           |   
|               |  |                                                                                           |   
|CERTIFICATIONS |  |                                                                                          

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SECURECARE TECHNOLOGIES, INC.BALANCE SHEETS
March 31, 2008 (Unaudited) and December 31, 2007

|                                                                                                                                                                         |  |             |             |      |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ----------- | ---- | - | ----------- | -
|                                                                                                                                                                         |  | 2008        |             | 2007 |  
|                                                                                                                                                                         |  |             |             |      |  
|                                                                                                                                                                         |  | (Unaudited) |             |      |  
|ASSETS                                                                                                                                                                   |  |             |             |      |   |             |  
|Current assets                                                                                                                                                           |  |             |             |      |   |             |  
|Cash and cash equivalents                                                                                                                                                |  | $           | 51,961      |      | $ | 161,680     |  
|Accounts receivable - trade, net of
  allowance for doubtful accounts of $2,000                                                                                          |  |             | 19,563      |      |   | 19,569      |  
|Prepaid expenses                                                                                                                                                         |  |             | 15,166      |      |   | 12,253      |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total current assets                                                                                                                                                     |  |             | 86,690      |      |   | 193,502     |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Property and equipment, net of accumulated
  depreciation of  $313,742 and
  $484,263, respectively                                                                      |  |             | 79,854      |      |   | 88,049      |  
|Deposits                                                                                                                                                                 |  |             | 26,404      |      |   | 5,852       |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total assets                                                                                                                                                             |  | $           | 192,948     |      | $ | 287,403     |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|LIABILITIES
  AND SHAREHOLDERS DEFICIT                                                                                                                                  |  |             |             |      |   |             |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Current Liabilities                                                                                                                                                      |  |             |             |      |   |             |  
|Current portion of notes payable (including
  $875,130 and $431,500 to related parties, respectively), net of debt discount
  of $535,931 and $400,633, respectively     |  | $           | 1,390,199   |      | $ | 856,867     |  
|Accounts payable - trade                                                                                                                                                 |  |             | 219,158     |      |   | 213,175     |  
|Accrued payroll                                                                                                                                                          |  |             | 101,417     |      |   | 101,417     |  
|Accrued payroll taxes and penalties and
  interest - current                                                                                                             |  |             | 160,119     |      |   | 125,517     |  
|Accrued interest, including $24,577 and
  $29,091 to related parties, respectively                                                                                       |  |             | 82,005      |      |   | 60,012      |  
|Other accrued liabilities                                                                                                                                                |  |             | 20,719      |      |   | 30,590      |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total current liabilities                                                                                                                                                |  |             | 1,973,617   |      |   | 1,387,578   |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Notes payable (including $35,000 and
  $298,000 to related parties, respectively), less current portion and net of
  debt discount of $74,064 and $264,382, respectively |  |             | 63,436      |      |   | 186,118     |  
|Non-current accrued payroll taxes and penalties
  and interest                                                                                                           |  |             | 137,912     |      |   | 147,437     |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total liabilities                                                                                                                                                        |  |             | 2,174,965   |      |   | 1,721,133   |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Shareholders deficit                                                                                                                                                    |  |             |             |      |   |             |  
|Preferred stock - $0.001 par value;
  15,000,000 shares authorized:                                                                                                      |  |             |             |      |   |             |  
|Series A preferred stock - 1,775,000 and 1,875,000
  shares issued and outstanding, respectively (liquidation preference of $1.00
  per share)                           |  |             | 1,775       |      |   | 1,875       |  
|Series B preferred stock - 1,222,728 and
  1,336,364 shares issued and outstanding, respectively (liquidation preference
  of $1.10 per share)                           |  |             | 1,223       |      |   | 1,336       |  
|Common stock - $0.001 par value; 50,000,000
  shares authorized, 1,802,027 and 1,658,706 shares issued and outstanding,
  respectively                                   |  |             | 1,802       |      |   | 1,659       |  
|Additional paid-in capital                                                                                                                                               |  |             | 36,494,749  |      |   | 36,365,516  |  
|Accumulated deficit                                                                                                                                                      |  |             | (38,481,566 | )    |   | (37,804,116 | )
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total shareholders deficit                                                                                                                                              |  |             | (1,982,017  | )    |   | (1,433,730  | )
|                                                                                                                                                                         |  |             |             |      |   |             |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total liabilities and shareholders
deficit                                                                                                                              |  | $           | 192,948     |      | $ | 287,403     |  
|                                                                                                                                                                         |  |             |             |      |   |             |  

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

2

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SECURECARE TECHNOLOGIES, INC.STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended March 31, 2008 and 2007

|                                                                                   |  |      |           |      |   |          |  
|---------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | -------- | -
|                                                                                   |  | 2008 |           | 2007 |  
|                                                                                   |  |      |           |      |  
|                                                                                   |  |      |           |      |   |          |  
|Revenues                                                                           |  | $    | 36,754    |      | $ | 34,841   |  
|                                                                                   |  |      |           |      |   |          |  
|Operating expenses                                                                 |  |      |           |      |   |          |  
|Cost of revenues                                                                   |  |      | 24,588    |      |   | 19,706   |  
|Selling, general and administrative                                                |  |      | 487,631   |      |   | 241,773  |  
|                                                                                   |  |      |           |      |   |          |  
|                                                                                   |  |      |           |      |   |          |  
|Operating loss                                                                     |  |      | (475,465  | )    |   | (226,638 | )
|                                                                                   |  |      |           |      |   |          |  
|Other income (expense)                                                             |  |      |           |      |   |          |  
|Other income                                                                       |  |      | 161       |      |   | 1,621    |  
|Interest expense (including $11,873 and
  $3,135 to related parties, respectively) |  |      | (202,146  | )    |   | (61,123  | )
|                                                                                   |  |      |           |      |   |          |  
|                                                                                   |  |      |           |      |   |          |  
|Net loss                                                                           |  | $    | (677,450  | )    | $ | (286,140 | )
|                                                                                   |  |      |           |      |   |          |  
|Amortization of deemed dividend upon
  issuance of convertible preferred stock     |  |      |          |      |   | (336,926 | )
|                                                                                   |  |      |           |      |   |          |  
|                                                                                   |  |      |           |      |   |          |  
|Net loss attributable to common
  shareholders                                     |  | $    | (677,450  | )    | $ | (623,066 | )
|                                                                                   |  |      |           |      |   |          |  
|                                                                                   |  |      |           |      |   |          |  
|Net loss per common share - basic and
  diluted                                    |  | $    | (0.40     | )    | $ | (6.14    | )
|                                                                                   |  |      |           |      |   |          |  
|                                                                                   |  |      |           |      |   |          |  
|                                                                                   |  |      |           |      |   |          |  
|Weighted average number of common shares
  outstanding - basic and diluted         |  |      | 1,711,189 |      |   | 101,520  |  
|                                                                                   |  |      |           |      |   |          |  

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

3

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SECURECARE TECHNOLOGIES, INC.STATEMENTS OF CASH FLOWS (UNAUDITED) 
For the Three Months Ended March 31, 2008 and 2007

|                                                                                                               |  |      |          |      |   |          |  
|-------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | ---- | - | -------- | -
|                                                                                                               |  | 2008 |          | 2007 |  
|                                                                                                               |  |      |          |      |  
|Cash flows from operating
  activities                                                                         |  |      |          |      |   |          |  
|Net loss                                                                                                       |  | $    | (677,450 | )    | $ | (286,140 | )
|Adjustments to reconcile net loss to net
  cash used in operating activities:                                  |  |      |          |      |   |          |  
|Depreciation and amortization                                                                                  |  |      | 15,182   |      |   | 10,371   |  
|Bad debt expense                                                                                               |  |      | 442      |      |   | 2,524    |  
|Stock compensation expense                                                                                     |  |      | 12,356   |      |   |         |  
|Amortization of debt discount                                                                                  |  |      | 171,827  |      |   | 45,932   |  
|Increases and decreases in working capital
  accounts:                                                         |  |      |          |      |   |          |  
|Accounts receivable - trade                                                                                    |  |      | (435     | )    |   | (1,706   | )
|Prepaid expenses                                                                                               |  |      | (2,913   | )    |   | 309      |  
|Deposits                                                                                                       |  |      | (20,552  | )    |   |         |  
|Accounts payable - trade                                                                                       |  |      | 5,985    |      |   | (46,907  | )
|Accrued liabilities                                                                                            |  |      | 37,196   |      |   | (17,364  | )
|                                                                                                               |  |      |          |      |   |          |  
|Cash flows used in operating activities                                                                        |  |      | (458,362 | )    |   | (292,981 | )
|                                                                                                               |  |      |          |      |   |          |  
|Cash flows from investing activities                                                                           |  |      |          |      |   |          |  
|Capital expenditures                                                                                           |  |      | (6,987   | )    |   |         |  
|Capitalized software development costs                                                                         |  |      |         |      |   | (31,250  | )
|                                                                                                               |  |      |          |      |   |          |  
|Cash flows used in investing activities                                                                        |  |      | (6,987   | )    |   | (31,250  | )
|                                                                                                               |  |      |          |      |   |          |  
|Cash flows from financing activities                                                                           |  |      |          |      |   |          |  
|Proceeds from notes payable                                                                                    |  |      | 355,630  |      |   | 313,000  |  
|                                                                                                               |  |      |          |      |   |          |  
|Cash flows provided by financing
activities                                                                    |  |      | 355,630  |      |   | 313,000  |  
|                                                                                                               |  |      |          |      |   |          |  
|Net decrease in cash and cash equivalents                                                                      |  |      | (109,719 | )    |   | (11,231  | )
|                                                                                                               |  |      |          |      |   |          |  
|Cash and cash equivalents, beginning of
  period                                                               |  |      | 161,680  |      |   | 130,150  |  
|                                                                                                               |  |      |          |      |   |          |  
|                                                                                                               |  |      |          |      |   |          |  
|Cash and cash equivalents, end of period                                                                       |  | $    | 51,961   |      | $ | 118,919  |  
|                                                                                                               |  |      |          |      |   |          |  
|                                                                                                               |  |      |          |      |   |          |  
|Supplemental disclosures for cash flow
  information:                                                          |  |      |          |      |   |          |  
|                                                                                                               |  |      |          |      |   |          |  
|Fair value of warrants issued and
  beneficial conversion feature in connection with issuance of notes payable |  | $    |         |      | $ | 313,000  |  
|                                                                                                               |  |      |          |      |   |          |  
|                                                                                                               |  |      |          |      |   |          |  
|Interest paid                                                                                                  |  | $    | 7,515    |      | $ |         |  
|                                                                                                               |  |      |          |      |   |          |  
|                                                                                                               |  |      |          |      |   |          |  
|Amortization of deemed dividend upon
  issuance of convertible preferred stock                                 |  | $    |         |      | $ | 336,926  |  
|                                                                                                               |  |      |          |      |   |          |  
|                                                                                                               |  |      |          |      |   |          |  
|Relative fair value of common stock issued in
  connection with issuance of notes payable                      |  | $    | 116,807  |      | $ |         |  
|                                                                                                               |  |      |          |      |   |          |  

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

4

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SECURECARE TECHNOLOGIES, INC.

NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. NATURE OF OPERATIONS

SecureCares
management believes that the Company is a leading provider of Internet-based
document exchange and e-signature solutions for the healthcare industry.

The Companys
proprietary technology offers workflow solutions that enable documents to be
sent, retrieved, signed and remotely viewed anywhere in the world, between
providers of healthcare, while protecting patient privacy as required by law.

The Companys
Internet-based Sfax with Digital Signature and annotation features is the only
secure EFR (electronic fax record) that is 100 percent dedicated to the
healthcare industry. The product is a HIPAA-ready (Health Insurance Portability
and Accountability Act) work flow solution that saves end-users up to 95
percent of the time and up to 80 percent of the cost of manual faxing. It
provides a complete log and audit trail for all fax documents and completely
eliminates the manual paper processing of fax documents. Sfax is distributed
to end-users through the Companys network of health care software vendors and
value-added resellers and is sold as an easily integrated, add-on module to
existing health care applications or as a stand-alone solution.

The Companys
Internet-based SecureCare.net portal is an electronic document exchange and
e-signature workflow solution that was built with Microsofts dotNet
state-of-the art development tools. The SecureCare.net portal is tailored to
the needs of physicians, clinics and home healthcare, hospice and durable
medical equipment providers. This end-to-end solution offers a money-saving
approach to accessing information and managing time-consuming forms and
authorizations. It eliminates paper while enhancing the physicians ability to
capture fees for otherwise unbilled time and services.

The Company
markets its services to customers throughout the United States; currently
operating from its Austin, Texas-based corporate headquarters.

The Company
intends to continue 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 and will be developed that will enhance the Companys
position in the physicians office and in the offices of other providers of
healthcare. 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.

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-month
period ended March 31, 2008, are not necessarily indicative of the results that
may be expected for the year ending December 31, 2008.

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, 2007.

GOING CONCERN

The financial
statements have been prepared on the assumption that the Company will continue
as a going concern. The Company sustained a net loss of $677,450 for the three
months ended March 31, 2008. The Company has accumulated losses through March
31, 2008 of $38,481,566 (including a non-recurring loss on early extinguishment
of debt totaling $19,030,648 incurred in the fourth quarter of 2006).
Cash used in operating
activities for the period ended March 31, 2008 aggregated $458,362. Total liabilities at March
31, 2008 of $2,174,965 significantly exceed total assets of $192,948. 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.

5

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RECENT ACCOUNTING PRONOUNCEMENTS

In September
2006, the Financial Accounting Standards Board issued SFAS No. 157, Fair Value
Measurements. This Statement defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements.
This Statement establishes a fair value hierarchy about the assumptions used to
measure fair value and clarifies assumptions about risk and the effect of a
restriction on the sale or use of an asset. On February 12, 2008, the FASB
issued FSP No. FAS 157-2, Effective Date of FASB Statement No. 157, which delays
the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on at least an annual basis; the statement is effective
for fiscal years beginning after December 31, 2008. Upon adoption, the
provisions of SFAS No. 157 are to be applied prospectively with limited
exceptions. Management is currently evaluating the impact that the full adoption of
SFAS No. 157 will have on the financial position of the Company.

In December 2007, the FASB
issued SFAS No. 141(R) (SFAS No. 141(R)), Business
Combinations, which replaces SFAS No. 141 and issued SFAS No. 160 (SFAS
No.160 ), Noncontrolling Interests in Consolidated Financial Statements,
an amendment of ARB No. 51. These two new standards will change the accounting for
and the reporting for business combination transactions and noncontrolling
(minority) interests in the consolidated financial statements, respectively. SFAS No.
141(R) will change how business acquisitions are accounted for and will impact financial
statements both on the acquisition date and in subsequent periods. SFAS No. 160 will
change the accounting and reporting for minority interests, which will be recharacterized
as noncontrolling interests and classified as a component of equity. These two standards
will be effective for the Company in the first quarter of fiscal year 2010. SFAS No.
141(R) will be applied prospectively. SFAS No. 160 requires retrospective application of
most of the classification and presentation provisions. All other requirements of SFAS No.
160 shall be applied prospectively. Early adoption is prohibited for both standards.
 The adoption of SFAS No. 141(R) and SFAS No. 160 will not have an impact on the
Companys current Consolidated Financial Statements.

6

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NOTE 2. SUMMARY OF SIGNFICANT ACCOUNTING
PRINCIPLES

REVENUE RECOGNITION

The Company
derives its revenues from the following 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) collectability 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 collectability 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 where 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.

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 is depreciated
using the straight-line method over the estimated useful life of the software,
generally two years. At March 31, 2008, capitalized software development costs
totaled $235,750, less accumulated amortization of $189,177. No software
development costs were incurred or capitalized during the three month period ended March 31,
2008.

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.

PROPERTY AND EQUIPMENT

Property and
equipment are recorded at cost. The Company provides for depreciation of its
property and equipment using the straight-line method over the estimated useful
life of the depreciable assets ranging from two to five years. Maintenance and
repairs are expensed as incurred. Replacements and betterments are capitalized.

Depreciation
expense for the three months ended March 31, 2008 and 2007 was $15,182 and
$10,371, respectively. In March 2008, the Company retired $185,703 of fully
depreciated property and equipment, resulting in no gain or loss in the period.

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). 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, less estimated
forfeitures.

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
less 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.

7

---



STOCK-BASED COMPENSATION (Continued)

The Company
accounts for equity instruments issued to non-employees in accordance with the
provisions of SFAS No. 123 as amended and Emerging Issues Task Force (EITF)
Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.
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. 2007 Stock
Option Plan (the 2007 Plan) on August 15, 2007. The Company has reserved
425,000 shares of common stock for issuance under the 2007 Plan. In accordance
with the terms of the 2007 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. All options granted by the Company under its 2007 Plan are restricted
stock awards under rules promulgated by the Securities and Exchange Commission.

The Company
granted 420,834 options under the 2007 Plan on August 15, 2007 at an exercise
price of $0.80 per share. Of the options granted under the 2007 Plan, 410,834
options vested immediately and 833 options vested between August 15, 2007 and
November 15, 2007. On November 15, 2007, 9,167 options were forfeited and on February
15, 2008, 833 options were canceled. On February 22, 2008, the Company granted
an additional 10,000 options under the 2007 Plan at an exercise price of $1.25.
These options vested immediately.

The Company
calculates the fair value of each option award on the date of the grant using
the Black-Scholes option-pricing model. Using the Black-Scholes option pricing
model, we used the following weighted-average assumptions to value the options
issued in the first quarter of 2008: Risk free interest rate, 3.79%; expected
life, 4 years; expected dividend yield, 0%; and daily annualized volatility of
250%.

At March 31,
2008, under the 2007 Plan, the Company had 420,834 options outstanding, of
which 420,834 were exercisable.

The Board of
Directors of the Company approved the SecureCare Technologies, Inc. 2004 Stock
Option Plan (the 2004 Plan) on December 31, 2004. The Company has reserved
10,000 shares of common stock for issuance under the 2004 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 March 31, 2008, under the 2004 Plan, the
Company had 1,250 options outstanding, of which 1,250 were exercisable. All
options granted by the Company under its 2004 Plan are restricted stock awards
under rules promulgated by the Securities and Exchange Commission. There were
no new options granted, exercised or cancelled under the 2004 Plan during the
three months ended March 31, 2008.

For the three
months ended March 31, 2008 and 2007, the compensation expense associated with
stock options was $12,356 and $0, respectively. The impact on the Companys
results of operations of recording stock-based compensation for the three
months ended March 31, 2008 was as follows:

|                                                                          |  |                                     |        | 
|------------------------------------------------------------------------- |  | ----------------------------------- | ------ | 
|                                                                          |  | Three Months Ended
  March 31, 2008 |       
|                                                                          |  |                                     |       
|Selling, general and administrative                                       |  | $                                   | 12,356 | 
|                                                                          |  |                                     |        | 
|                                                                          |  |                                     |        | 
|Impact on net loss to common
  shareholders                               |  | $                                   | 12,356 | 
|                                                                          |  |                                     |        | 
|Impact on net loss per share to
  common shareholders (basic and diluted) |  | $                                   | .01    | 
|                                                                          |  |                                     |        | 

8

---



STOCK-BASED COMPENSATION (Continued)

The following
tables summarize the activity under both stock option plans for the three
months ended March 31, 2008:

|                                                |  |                                   |         |                                     |   |                                                   |  |                             |            |  |   |   | 
|----------------------------------------------- |  | --------------------------------- | ------- | ----------------------------------- | - | ------------------------------------------------- |  | --------------------------- | ---------- |  | - | - | 
|                                                |  | 2007 Stock Option Plan            |        
|                                                |  |                                   |        
|                                                |  | Three Months Ended March 31, 2008 |        
|                                                |  |                                   |        
|                                                |  | Shares                            |         | Weighted
  Average
  Exercise Price |   | Weighted
  Average
  Remaining
  Contractual Term |  | Aggregate
  Intrinsic Value |           
|                                                |  |                                   |         |                                     |   |                                                   |  |                             |           
|Outstanding
  at January 1, 2008                |  |                                   | 411,667 |                                     | $ | 0.80                                              |  |                             | 9.58 years |  |   |   | 
|                                                |  |                                   |         |                                     |   |                                                   |  |                             |            |  |   |   | 
|Granted                                         |  |                                   | 10,000  |                                     | $ | 1.25                                              |  |                             | 9.83 years |  |   |   | 
|Exercised                                       |  |                                   |        |                                     | $ |                                                  |  |                             |  years    |  |   |   | 
|                                                |  |                                   |         |                                     |   |                                                   |  |                             |            |  |   |   | 
|Cancelled                                       |  |                                   | (833    | )                                   | $ |                                                  |  |                             |  years    |  |   |   | 
|Forfeitures                                     |  |                                   |        |                                     | $ |                                                  |  |                             |  years    |  |   |   | 
|                                                |  |                                   |         |                                     |   |                                                   |  |                             |            |  |   |   | 
|Outstanding
  at March 31, 2008                 |  |                                   | 420,834 |                                     | $ | 0.81                                              |  |                             | 9.35 years |  | $ |  | 
|                                                |  |                                   |         |                                     |   |                                                   |  |                             |            |  |   |   | 
|                                                |  |                                   |         |                                     |   |                                                   |  |                             |            |  |   |   | 
|Vested
  and expected to vest at March 31, 2008 |  |                                   | 420,834 |                                     | $ | 0.81                                              |  |                             | 9.35 years |  | $ |  | 
|Options
  exercisable at March 31, 2008         |  |                                   | 420,834 |                                     | $ | 0.81                                              |  |                             | 9.35 years |  | $ |  | 
|                                                |  |                                   |         |                                     |   |                                                   |  |                             |            |  |   |   | 

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, $0.51
at March 31, 2008.

|                                                |  |                                   |       |                                     |   |                                                   |  |                               |           |  |   |   | 
|----------------------------------------------- |  | --------------------------------- | ----- | ----------------------------------- | - | ------------------------------------------------- |  | ----------------------------- | --------- |  | - | - | 
|                                                |  | 2004 Stock Incentive Plan         |      
|                                                |  |                                   |      
|                                                |  | Three Months Ended March 31, 2008 |      
|                                                |  |                                   |      
|                                                |  | Shares                            |       | Weighted
  Average
  Exercise Price |   | Weighted
  Average
  Remaining
  Contractual Term |  | Aggregate
  Intrinsic
  Value |          
|                                                |  |                                   |       |                                     |   |                                                   |  |                               |          
|Outstanding
  at January 1, 2008                |  |                                   | 1,250 |                                     | $ | 200.00                                            |  |                               | 6.7 years |  |   |   | 
|Granted                                         |  |                                   |      |                                     |   |                                                   |  |                               |           |  |   |   | 
|Exercised                                       |  |                                   |      |                                     |   |                                                   |  |                               |           |  |   |   | 
|Cancelled                                       |  |                                   |      |                                     |   |                                                   |  |                               |           |  |   |   | 
|                                                |  |                                   |       |                                     |   |                                                   |  |                               |           |  |   |   | 
|Outstanding
  at March 31, 2008                 |  |                                   | 1,250 |                                     | $ | 200.00                                            |  |                               | 6.7 years |  | $ |  | 
|                                                |  |                                   |       |                                     |   |                                                   |  |                               |           |  |   |   | 
|Vested
  and expected to vest at March 31, 2008 |  |                                   | 1,250 |                                     | $ | 200.00                                            |  |                               | 6.7 years |  | $ |  | 
|Options
  exercisable at March 31, 2008         |  |                                   | 1,250 |                                     | $ | 200.00                                            |  |                               | 6.7 years |  | $ |  | 

COMMITMENTS AND CONTINGENCIES

On March 7,
2008, the Company received a letter from an attorney for an investor demanding
payment on a promissory note issued in 2004 with a principal balance of
$63,500. Another party has advised the Company that it is the legal owner of
the promissory note. No legal action has been commenced and the Company is
attempting to resolve the matter between the parties. The promissory note has
been carried on the Companys books as a liability and management does not
believe that the outcome of this matter will have a material effect on the
Companys financial position, operating results or cash flows. However, there
can be no assurance that any legal proceeding that develops as a result of this
matter will not have a material impact.

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 fair value for stock based compensation,
software services revenue recognition, capitalization of software development
costs and depreciation of fixed assets. Actual results could differ from these
estimates.

9

---



INCOME TAXES

Deferred
income taxes are recognized for the tax consequences of temporary differences
by applying enacted statutory tax rates applicable to future years to
differences between financial statement carrying amounts and the tax basis of
existing assets and liabilities. Under the asset and liability method, the
effect on deferred taxes of a change in tax rates is recognized in income in
the period that includes the enactment date.

Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense or benefit is the payable or
refund for the period plus or minus the change during the period in deferred
tax assets and liabilities.

In January
2007, the Company adopted the Financial Accounting Standards Board
Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109 (FIN 48). This Interpretation
clarifies the accounting for uncertainty in income taxes recognized in a
companys financial statements. FIN 48 requires companies to determine whether
it is more likely than not that a tax position will be sustained upon
examination by the appropriate taxing authorities before any part of the
benefit can be recorded in the financial statements. It also provides guidance
on the recognition, measurement and classification of income tax uncertainties,
along with any related interest and penalties. The Company did not recognize
any adjustments to its financial statements as a result of the implementation
of FIN 48.

LOSS PER COMMON SHARE

Basic net loss
per share is computed by dividing net loss by the weighted average number of
common shares outstanding for the year. Diluted net loss per share is computed
by dividing net loss by the weighted average number of common shares and
dilutive common stock equivalents outstanding for the year. Common stock
equivalents for the three month periods ended March 31, 2008 and 2007
 totaling 962,209 and 433,297, respectively, have been
excluded from the computation since such inclusion would have an anti-dilutive
effect.

10

---



NOTE 3.
NOTES PAYABLE

Notes payable at March 31, 2008 and December 31, 2007
consist of the following:

|                                                                                                                                                        |  |            |           |           |   |            |   |           |           |   |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | --------- | --------- | - | ---------- | - | --------- | --------- | - | - | -------- | -
|                                                                                                                                                        |  | 2008       |           | 2007      |  
|                                                                                                                                                        |  |            |           |           |   |            |   |           |          
|                                                                                                                                                        |  | Short Term |           | Long Term |   | Short Term |   | Long Term |          
|Note payable to Phoebe Holdings, Inc. at 7.5%, (9.5% after default) Note is in default
  as of May 1, 2005, unsecured                                   |  |            | 63,500    |           |   |           |   |           | 63,500    |   |   |         |  
|                                                                                                                                                       
|Convertible bridge note payable bearing interest at 6% Principal and
  interest due December 4, 2008, unsecured, including $30,000 to related
  parties |  |            | 45,000    |           |   |           |   |           | 45,000    |   |   |         |  
|                                                                                                                                                       
|Related party convertible bridge note payable bearing interest at 6%
Principal and interest due December 4, 2008, unsecured                             |  |            | 15,000    |           |   |           |   |           | 15,000    |   |   |         |  
|                                                                                                                                                       
|Related party convertible bridge note payable bearing interest at 6%
 Principal and interest due December 6, 2008, unsecured                            |  |            | 15,000    |           |   |           |   |           | 15,000    |   |   |         |  
|                                                                                                                                                       
|Convertible bridge note payable bearing interest at 6% Principal and interest due December
  18, 2008, unsecured                                        |  |            | 50,000    |           |   |           |   |           | 50,000    |   |   |         |  
|                                                                                                                                                       
|Related party convertible bridge note payable bearing interest at 6%
  Principal and interest due December 18, 2008, unsecured                          |  |            | 12,500    |           |   |           |   |           | 12,500    |   |   |         |  
|                                                                                                                                                       
|Convertible bridge note payable bearing interest at 6% Principal and
  interest due December 27, 2008, unsecured                                        |  |            | 50,000    |           |   |           |   |           | 50,000    |   |   |         |  
|                                                                                                                                                       
|Convertible bridge note payable bearing interest at 6% Principal and
  interest due January 18, 2009, unsecured                                         |  |            | 50,000    |           |   |           |   |           |          |   |   | 50,000   |  
|                                                                                                                                                       
|Related party convertible bridge note payable bearing interest at 6%
  Principal and interest due January 18, 2009, unsecured                           |  |            | 12,500    |           |   |           |   |           |          |   |   | 12,500   |  
|                                                                                                                                                       
|Related party convertible bridge note payable bearing interest at 6% Principal due February 7, 2009,
  interest payable semi-annually, unsecured        |  |            | 83,500    |           |   |           |   |           |          |   |   | 83,500   |  
|                                                                                                                                                       
|Related party convertible bridge note payable bearing interest at 6%
  Principal due February 12, 2009, interest payable semi-annually, unsecured       |  |            | 83,500    |           |   |           |   |           |          |   |   | 83,500   |  
|                                                                                                                                                       
|Related party convertible bridge note payable bearing interest at 6%
  Principal due February 15, 2009, interest payable semi-annually, unsecured       |  |            | 83,500    |           |   |           |   |           |          |   |   | 83,500   |  
|                                                                                                                                                       
|Convertible bridge note payable bearing interest at 6% Principal due
  April 17, 2009, interest payable semi-annually, unsecured                        |  |            |          |           |   | 25,000     |   |           |          |   |   | 25,000   |  
|                                                                                                                                                       
|Convertible bridge note payable bearing interest at 6% Principal due
  April 17, 2009, interest payable semi-annually, unsecured                        |  |            |          |           |   | 7,500      |   |           |          |   |   | 7,500    |  
|                                                                                                                                                       
|Convertible bridge note payable bearing interest at 6% Principal due
  April 19, 2009, interest payable semi-annually, unsecured                        |  |            |          |           |   | 25,000     |   |           |          |   |   | 25,000   |  
|                                                                                                                                                       
|Convertible bridge note payable bearing interest at 6% Principal due
  April 26, 2009, interest payable semi-annually, unsecured                        |  |            |          |           |   | 25,000     |   |           |          |   |   | 25,000   |  
|                                                                                                                                                       
|Related party convertible bridge note payable bearing interest at 6%
  Principal due May 9, 2009, interest payable semi-annually, unsecured             |  |            |          |           |   | 15,000     |   |           |          |   |   | 15,000   |  
|                                                                                                                                                       
|Related party convertible bridge note payable bearing interest at 6%
  Principal due May 9, 2009, interest payable semi-annually, unsecured             |  |            |          |           |   | 10,000     |   |           |          |   |   | 10,000   |  
|                                                                                                                                                       
|Convertible bridge note payable bearing interest at 6% Principal due
  May 9, 2009, interest payable semi-annually, unsecured                           |  |            |          |           |   | 10,000     |   |           |          |   |   | 10,000   |  
|                                                                                                                                                       
|Convertible bridge note payable bearing interest at 6% Principal due
  May 9, 2009, interest payable semi-annually, unsecured                           |  |            |          |           |   | 10,000     |   |           |          |   |   | 10,000   |  
|                                                                                                                                                       
|Related party convertible bridge note payable bearing interest at 6%
  Principal due May 11, 2009, interest payable semi-annually, unsecured            |  |            |          |           |   | 10,000     |   |           |          |   |   | 10,000   |  
|                                                                                                                                                       
|Note payable to Investor bearing interest at 6% Principal and interest
  due May 30, 2008, unsecured                                                    |  |            | 50,000    |           |   |           |   |           | 50,000    |   |   |         |  
|                                                                                                                                                       
|Bridge notes payable bearing interest at 6% Principal and
  interest due December 31, 2008,
  including $539, 630 to related parties, unsecured         |  |            | 1,312,130 |           |   |           |   |           | 956,500   |   |   |         |  
|                                                                                                                                                        |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                        |  | $          | 1,926,130 |           | $ | 137,500    |   |           | 1,257,500 |   | $ | 450,500  |  
|Less:
  unamortized debt discount                                                                                                                       |  |            | (535,931  | )         |   | (74,064    | ) |           | (400,633  | ) |   | (264,382 | )
|                                                                                                                                                        |  |            |           |           |   |            |   |           |           |   |   |          |  
|Total notes
  payable                                                                                                                                   |  | $          | 1,390,199 |           | $ | 63,436     |   |           | 856,867   |   | $ | 186,118  |  
|                                                                                                                                                        |  |            |           |           |   |            |   |           |           |   |   |          |  

11

---



NOTE 3. NOTES PAYABLE (Continued)

Bridge Financing Summary  June 2007 through March 2008

On June 13,
2007, the Board of Directors approved, effective June 1, 2007, the issuance of
a series of Notes Payable (the Financing) totaling $1,500,000 maturing on
December 31, 2008, with a stated interest rate of 6% per annum, with principal
and interest payable at maturity. The Company has the option to extend the
maturity date of the notes an additional twelve months. The stated interest
rate on these notes during the optional extension period is 9% per annum. The
Notes Payable have attached shares of the Companys stock in the form of one
share of common stock for each $2.50 invested into the offering for a total of
up to 600,000 shares of common stock to be issued, of which 524,852 shares have
been issued as of March 31, 2008, related to the notes entered into as of March
31, 2008.

From January
1, 2008 through March 31, 2008 the Company received a total of $355,630 in
gross proceeds from issuance of the notes payable. In addition, the Company
issued 142,252 shares of common stock to the participating investors. These
shares were valued at a range of $0.51 to $1.65 per share resulting in a total
fair value of $533,605. The Company allocated the proceeds received between the
notes payable and the shares of common stock issued based on the relative fair
values at the date of issuance. Based on the relative fair value calculations,
the Company allocated $116,807 of the $355,630 in proceeds to the shares of
common stock issued and the remaining $238,823 to the notes payable. The debt
discount amount of $116,807 is being amortized as a component of interest
expense over the life of the notes, ranging from nine to twelve months.

As of March
31, 2008, the Company has received a total of $1,312,130 in gross proceeds from
issuance of the notes payable. In addition, the Company has issued 524,852
shares of common stock to the participating investors. These shares were valued
at a range of $0.51 to $6.00 per share resulting in a total fair value of
$2,495,305. The Company allocated the proceeds received between the notes
payable and the shares of common stock issued based on the relative fair values
at the date of issuance. Based on the relative fair value calculations, the
Company allocated $533,890 of the $1,312,130 in proceeds to the shares of
common stock issued and the remaining $778,240 to the notes payable. The debt
discount amount of $533,890 is being amortized as a component of interest
expense over the life of the notes, ranging from nine to eighteen months.

Bridge Financing Summary  January 2007 through May 2007

At March 31,
2008, the Company has $638,000 in outstanding two year 6% convertible bridge
notes payable, for which the Company has issued 255,200 warrants to purchase
common stock at $5.00 per share. These warrants were valued at a range of $5.91
to $29.91 per warrant resulting in a total fair value of $3,249,819. The
Company allocated the proceeds received between the notes payable and the
detachable warrants based on the relative fair values at the date of issuance.
Based on the relative fair value calculations, the Company allocated $512,817
of the $638,000 in proceeds to the detachable warrants and the remaining
$125,183 to the notes payable. The notes also contained a conversion feature
allowing the note holders to convert the notes into common shares at a
conversion price of $2.50 per share. The Company calculated a beneficial
conversion feature in the amount of $3,146,817; however, the value of the
beneficial conversion feature may not exceed the proceeds allocated to the
notes payable under the relative fair value calculations. As a result, the
value of the beneficial conversion feature is limited to $125,183, which is the
amount of the proceeds allocated to notes payable. The debt discount amount of
$638,000 ($512,817 related to the fair value of the warrants and $125,183
related to the beneficial conversion feature) is being amortized as a component
of interest expense over the life of the notes (twenty-four months).

Other

As of March
31, 2008, the Company is in default on the principal amount of $63,500 in an
unsecured note payable.

In February
2008, the Company paid interest of $7,515 on the portion of its Bridge IV
Financing notes payable that require semi-annual interest payments. The entire
$7,515 paid was to related parties.

12

---



NOTE 4. SHAREHOLDERS DEFICIT

In February
2008, the holder of 100,000 shares of Series A Convertible preferred stock and
113,636 shares of Series B Convertible preferred stock voluntarily converted
these preferred stock shares to 500 and 569 shares of common stock,
respectively.

During the
three months ended March 31, 2008, in conjunction with $355,630 in gross
proceeds from issuance of notes payable, the Company issued 142,252 shares of
common stock to the participating investors (see Note 3 for additional
information).

The holders of the Series A preferred stock are entitled to vote upon
all matters upon which holders of the common stock have the right to vote, and
shall be entitled to the number of votes equal to the largest number of full
shares of common stock into which the shares of preferred stock, pursuant to
certain conversion and anti-dilution rights, could be converted on the
appropriate record date. The holders of the Series A preferred stock are
entitled to receive out the assets of the corporation legally available
therefore, dividends at the rate of 5 percent of the stated value ($1.00 per
share), payable on an annual basis, either in cash or in shares of the
Companys common stock, par value $0.001 per share, based on the fair market
value of the common stock on the date the dividend is declared, at the option
of the Company. The holders of the Series A preferred stock will have
preference in payment of dividends over the holders of common stock. Dividends
on the Series A preferred stock are payable when declared by the board of
directors. As of March 31, 2008, no dividends on the Series A preferred stock
have been declared. The period for which dividends will be paid will be
determined by the board of directors at the time of dividend declaration. The
Certificate of Designation for the Series A preferred stock does not provide a
specific provision for the accumulation of dividends; therefore no dividends or
dividends payable have been recorded as of March 31, 2008. In the event of a
liquidation, dissolution or winding-up of the Company, either voluntary or
involuntary, the holders of the shares of Series A preferred stock then issued
and outstanding are entitled to be paid out of the assets of the Company
available for distribution to its shareholders, before any payment is made to
the holders of shares of common stock or upon any other series of preferred
stock of the Company that is junior to the Series A preferred stock, an amount
per share equal to the stated value.

The holders of the Series B preferred stock are entitled to vote upon
all matters upon which holders of the common stock have the right to vote, and
shall be entitled to the number of votes equal to the largest number of full
shares of common stock into which the shares of preferred stock, pursuant to
certain conversion and anti-dilution rights, could be converted on the
appropriate record date. The holders of the Companys Series B preferred stock
are not entitled to receive any dividends. In the event of a liquidation,
dissolution or winding-up of the Company, either voluntary or involuntary, the
holders of the shares of the Companys Series A preferred stock and the Series
B preferred stock then issued and outstanding are entitled to be paid out of
the assets of the Company available for distribution to its shareholders on a
pari passu basis, before any payment is made to the holders of shares of common
stock or upon any other series of Preferred Stock of the Company that is junior
to the Series A Preferred Stock and the Series B preferred stock, an amount per
share equal to the stated value.

NOTE 5. ACCRUED PAYROLL TAXES

At March 31, 2008, the Company owes $184,531 in accrued payroll taxes
and $113,500 in related penalties and interest, the majority of which is
related to taxes owed from calendar year 2005. These amounts are classified as
follows on the accompanying balance sheet:

|                       |  |         |         |             |   |         |  |   |         | 
|---------------------- |  | ------- | ------- | ----------- | - | ------- |  | - | ------- | 
|                       |  | Current |         | Non-Current |   | Total   | 
|                       |  |         |         |             |   |         | 
|                       |  |         |         |             |   |         | 
|Accrued Payroll Taxes  |  | $       | 100,440 |             | $ | 84,091  |  | $ | 184,531 | 
|Penalties and Interest |  |         | 59,679  |             |   | 53,821  |  |   | 113,500 | 
|                       |  |         |         |             |   |         |  |   |         | 
|Total                  |  | $       | 160,119 |             | $ | 137,912 |  | $ | 298,031 | 
|                       |  |         |         |             |   |         |  |   |         | 

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 obligations in full
to the IRS. On March 1, 2007 the Company commenced an IRS-approved five year
monthly payment plan to pay a majority of the delinquent payroll taxes and
related interest and penalties totaling $170,384 at March 31, 2008. The Company
will make monthly payments of $5,000 over the course of the five year plan.

13

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NOTE 6. LEASE COMMITMENTS

The Company
relocated its principal executive office to a new location in Austin, Texas in
February of 2008. The new location was leased until February 28, 2010. This
lease required the Company to prepay six months of rent totaling $17,617, as
well as pay a refundable lease deposit of $2,936. The lease agreement also
contains provisions for future rent increases. The total amount of rental
payments due over the lease term is being charged to rent expense on the
straight-line method over the term of the lease. The difference between rent
expense recorded and the amount paid is recorded as Deferred Rent Obligation,
which is included in Other Accrued Liabilities in the accompanying balance
sheet.

NOTE 7. SUBSEQUENT EVENTS

On April 2,
2008, the Board of Directors approved a $500,000 increase of the $1,500,000
Notes Payable Financing, initially approved June 13, 2007, to a total of
$2,000,000. The additional funds will be invested in various strategic projects
and other resources required to support the planned growth of the Company in
2008. The Notes Payable have attached shares of the Companys stock in the form
of one share of common stock for each $2.50 invested into the offering for a
total of up to 800,000 shares of common stock to be issued, of which 524,852
shares have been issued as of March 31, 2008. The Company has commenced with
the securing of written consents from each of the previous subscribers into the
$1,500,000 Notes Payable Financing, consenting to the increase of $500,000. As
of the date of this filing all but one previous subscriber has consented.

Subsequent to
March 31, 2008 and through May 6, 2008, the Company received an additional
$375,000 in gross proceeds from the issuance of notes payable, including
$100,000 to related parties. The Company also issued 150,000 shares of common
stock to the participating investors, including 40,000 shares to related
parties.

On April 4,
2008, the Company filed a Form 8-K dated April 2, 2008 reporting under item
5.02 (Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers)
that it had appointed two new members to its Board of Directors, Mr. Joseph
Larter and Mr. Tom Linhard. In addition, the Company reported that Mr. Allen
Stamy had retired from the Board of Directors.

14

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

Forward Looking Statements

This Quarterly
Report on Form 10-Q 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

SecureCares
management believes that the Company is a leading provider of Internet-based
document exchange and e-signature solutions for the healthcare industry.

The Companys
proprietary technology offers workflow solutions that enable documents to be
sent, retrieved, signed and remotely viewed anywhere in the world, between
providers of healthcare, while protecting patient privacy as required by law.

The Companys
Internet-based Sfax with Digital Signature and annotation features is the only
secure EFR (electronic fax record) that is 100 percent dedicated to the
healthcare industry. The product is a HIPAA-ready (Health Insurance Portability
and Accountability Act) work flow solution that saves end-users up to 95
percent of the time and up to 80 percent of the cost of manual faxing. It
provides a complete log and audit trail for all fax documents and completely
eliminates the manual paper processing of fax documents. Sfax is distributed
to end-users through the Companys network of health care software vendors and
value-added resellers and is sold as an easily integrated, add-on module to
existing health care applications or as a stand-alone solution.

The Companys
Internet-based SecureCare.net portal is an electronic document exchange and
e-signature workflow solution that was built with Microsofts dotNet
state-of-the art development tools. The SecureCare.net portal is tailored to
the needs of physicians, clinics and home healthcare, hospice and durable
medical equipment providers. This end-to-end solution offers a money-saving
approach to accessing information and managing time-consuming forms and
authorizations. It eliminates paper while enhancing the physicians ability to
capture fees for otherwise unbilled time and services.

The Company
markets its services to customers throughout the United States; currently
operating from its Austin, Texas-based corporate headquarters.

The Company
intends to continue 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 and will be developed that will enhance the Companys
position in the physicians office and in the offices of other providers of
healthcare. 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.

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.

15

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REVENUE RECOGNITION

The Company
derives its revenues from the following 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) collectability 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 collectability 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 where 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.

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 is depreciated
using the straight-line method over the estimated useful life of the software,
generally two years. SOP 98-1 provides guidance on determining whether computer
software is internal-use software and guidance on accounting for proceeds of
computer software originally developed or obtained for internal use and then
subsequently sold to the public. It also provides guidance on capitalization of
the costs incurred for computer software developed or obtained for internal
use.

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, less estimated
forfeitures.

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
less 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 Company
accounts for equity instruments issued to non-employees in accordance with the
provisions of SFAS No. 123 as amended and Emerging Issues Task Force (EITF)
Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services. 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.

16

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RESULTS OF OPERATIONS

Three months
ended March 31, 2008 compared to three months ended March 31, 2007:

Revenues for
the three months ended March 31, 2008 were $36,754 compared to $34,841 for the
three months ended March 31, 2007. This 5% increase in sales is primarily
attributed to revenue from the Companys new flagship product, Sfax. The
Company launched Sfax, with its initial functionality in October of 2007. The
Company completed significant functionality upgrades in February of 2008 with
the addition of the Digital Signature and annotation features. The Sfax digital
signature feature provides every registered user with a true digital
certificate, enabling users to sign each fax digitally from a secure,
HIPAA-ready platform. This feature saves health care providers significant
amounts of time and money that otherwise would be spent scanning and printing
faxes in order to physically sign them. Special annotation features allow users
to edit faxed documents with tools such as check marks, boxes and rubber
stamps.

In March of
2008 the Company completed development of its web service integration tools to
provide its channel partners, health care information technology (HIT)
companies and software vendors, with a simple, rapid and cost-effective method
of integrating Sfax into any application architecture.

Enabled by its
Sfax product launch and a series of additional development activities,
management believes it has positioned the Company for significant revenue
growth in 2008. With an estimated 14.9 billion fax pages sent and received
annually in its targeted medical industry segments, the Company believes that
the potential work-flow efficiencies to be realized and the corresponding
reductions in overhead costs to be achieved by end-users of Sfax are on an
industry-transforming order of magnitude.

The Company
has completed a series of fund-raisings that supported it through the
commercial launch of Sfax and its more recent development activities, while
providing additional working capital.

Costs of
revenues were $24,588 for the three months ended March 31, 2008 compared to
$19,706 for the three months ended March 31, 2007. This 25% increase is
primarily attributable to higher depreciation expense related to the
capitalization of the Sfax-related assets put into service during 2007.

Selling,
general and administrative expenses were $487,631 for the three months ended
March 31, 2008 compared to $241,773 for the three months ended March 31, 2007.
This 102% increase in expenses was primarily attributable to increased salaries
and benefits and other employee-related expenses, including travel and
entertainment, of $148,386. Investor and public relations expenses increased
$21,000 in 2008, reflecting the Companys investments into these programs in
mid-2007. In 2008, marketing and marketing consulting increased $17,000
resulting from expenses incurred in association with the full-scale February
2008 launch of its Sfax product with Digital signature and annotation
features. Professional fees, including legal, audit and SOX compliance
consulting services increased $28,000 in 2008. In addition, stock compensation
expense, resulting from stock options granted in the first quarter of 2008
totaled $12,356, contributing to higher expenses.

Interest
expense for the three months ended March 31, 2008 was $202,146 compared to
$61,123 for the same period in 2007. Higher debt discount amortization in 2008
of $125,895 resulted from the issuance of notes payable from December 2006
through March 2008.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows
used in operating activities for the three-month period ended March 31, 2008
totaled $458,362. Net cash flows used in operating activities for the
three-month period ended March 31, 2007 was $292,981. The increase in net cash
used by operating activities in 2008 is primarily due to the Companys
investments in additional resources, as required by its business plan to
initiate growth in its revised business model, primarily people and
people-related expenses of $148,386. In addition investor and public relations
expenses increased $21,000 in 2008, reflecting the Companys investments into
these programs in mid-2007, marketing and marketing consulting increased
$17,000 resulting from expenses incurred in association with the full-scale
February 2008 launch of its Sfax product with Digital signature and annotation
features, and professional fees, including legal, audit and SOX compliance
consulting services increased $28,000 in 2008. This is partially offset by an
increase in accrued liabilities of approximately $43,182.

Cash flows
used in investing activities totaled $6,987 for the three months ended March
31, 2008 and consisted entirely of capitalized expenditures.

Net cash
provided by financing activities was $355,630 for the three months ended March
31, 2008 and consisted entirely of proceeds from the issuance of notes payable.

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.

17

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LIQUIDITY AND CAPITAL RESOURCES (Continued)

The financial
statements for the three months ended March 31, 2008 were prepared on the
assumption that the Company will continue as a going concern. The Company
sustained a net loss of $677,450 for the three months ended March 31, 2008. The
Company has accumulated losses through March 31, 2008 of $38,481,566 (including
a non-recurring loss on early extinguishment of debt totaling $19,030,648
incurred in the fourth quarter of 2006). Cash used in operating activities for
the three-month period ended March 31, 2008 totaled $458,362. Total liabilities
at March 31, 2008 of $2,174,965 significantly exceed total assets of $192,948.
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.

CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS

From January
1, 2008 through March 31, 2008 the Company issued $180,630 in 6% notes payable
initially due December 31, 2008 and 72,252 shares of common stock, in
accordance with the terms and conditions of the Financing approved by the Board
of Directors in June of 2007, to related parties.

In February
2007, the Company paid interest of $7,515 to related parties on the portion of
its Bridge IV Financing notes payable that require semi-annual interest
payments.

At March 31,
2008, the Company has outstanding $910,130 in related party notes payable. A
total of $370,500 of these related party notes payable were issued as two year,
6% convertible bridge notes (convertible at $2.50 per share), for which the
Company issued 148,200 warrants to purchase common stock at $5.00 per share.
These related party notes begin maturing in December of 2008 through May of
2009. The balance of $539,630 in related party notes payable are 6% notes payable
initially due December 31, 2008 with principal and interest payable at
maturity. The Company has the option to extend the maturity date of the notes
an additional twelve months. The stated interest rate on these notes during the
optional extension period is 9% per annum. The notes have attached shares of
the Companys common stock in the form of one share of common stock for each
$2.50 investing into the offering. In addition, in conjunction with the
issuance of the notes payable, the Company has issued 215,852 shares of common
stock to these related parties.

At March 31,
2008, the Company has $24,577 in accrued interest on the notes payable to
related parties.

18

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ITEM 4. CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures

We maintain
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our Securities Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
SECs rules and forms, and that such information is accumulated and communicated
to our management, including our Principal Executive Officer and Principal
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, as ours are designed to do, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

As of March
31, 2008, we carried out an evaluation, under the supervision and with the
participation of our management, including our Principal Executive Officer and
Principal Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that
evaluation, our Principal Executive Officer and Principal Financial Officer
concluded that our disclosure controls and procedures are effective in enabling
us to record, process, summarize and report information required to be included
in our periodic SEC filings within the required time period.

(b)  Changes in Internal Controls

There have
been no changes in our internal control over financial reporting that occurred
during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

19

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PART II
OTHER INFORMATION

Item 1. Legal Proceedings

On March 7,
2008, the Company received a letter from an attorney for an investor demanding
payment on a promissory note issued in 2004 with a principal balance of
$63,500. Another party has advised the Company that it is the legal owner of
the promissory note. No legal action has been commenced and the Company is
attempting to resolve the matter between the parties. The promissory note has
been carried on the Companys books as a liability and management does not
believe that the outcome of this matter will have a material effect on the
Companys financial position, operating results or cash flows. However, there
can be no assurance that any legal proceeding that develops as a result of this
matter will not have a material impact.

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

31.1
Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

31.2
Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

32
Certifications of the Principal Executive Officer and Principal 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

On February 7,
2008, the Company filed a Form 8-K, dated February 4, 2008 reporting under item
8.01 (other events) that the Company began a phased announcement of the launch
of its Digital Signature and annotation features for its flagship product Sfax
.

20

---



SIGNATURES

Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                    |     |                                                                       
|------------------- | --- | ----------------------------------------------------------------------
|                    |     | SECURECARE
  TECHNOLOGIES, INC.                                       
|                    |     |                                                                       
|                    | By: | /s/ DENNIS
  NASTO                                                    
|                    |     |                                                                       
|                    |     | DENNIS NASTO                                                          
|                    |     | Chief Executive Officer and Director
  (Principal Executive Officer)  
|                    |     |                                                                       
|                    | By: | /s/ NEIL
  BURLEY                                                     
|                    |     |                                                                       
|                    |     | NEIL BURLEY                                                           
|                    |     | Chief Financial Officer
  (Principal Financial and Accounting Officer)
|                    |     |                                                                       
|Date: May 9,
  2008 |     |                                                                       

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