SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

                  For The Quarterly Period Ended June 30, 2006

                           Commission File No. 0-29804


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


                                     Nevada
            (State or jurisdiction of incorporation or organization)


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


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


                                 (512) 228-3932
                (Issuer's telephone number, including area code)


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

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

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

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

<PAGE>

                          SECURECARE TECHNOLOGIES, INC.
                                   FORM 10-QSB
                                    CONTENTS

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

      Item 1.   Financial Statements

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

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

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

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

                Notes to Interim Financial Statements (unaudited)         6

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

      Item 3.   Controls and Procedures                                  19


PART II         OTHER INFORMATION

      Item 1.   Legal Proceedings                                        19

      Item 2.   Changes in Securities and Use of Proceeds                19

      Item 3.   Defaults Upon Senior Securities                          19

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

      Item 5.   Other Information                                        19

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


SIGNATURES                                                               20

CERTIFICATIONS                                                           21

                                        1
<PAGE>
<TABLE>
<CAPTION>

                         SECURECARE TECHNOLOGIES, INC.
                                 BALANCE SHEETS
                JUNE 30, 2006 (UNAUDITED) and DECEMBER 31, 2005

                                     ASSETS
                                     ------

                                                                                             2006            2005
                                                                                         ------------    ------------
                                                                                          (Unaudited)
<S>                                                                                      <C>             <C>
Current assets
    Cash and cash equivalents                                                            $    118,144    $      3,400
    Accounts receivable - trade, net of allowance for doubtful
    accounts of $10,000 and $5,000, respectively                                               21,219          42,936
    Prepaid expenses                                                                               --          14,905
                                                                                         ------------    ------------
         Total current assets                                                                 139,363          61,241

Property and equipment, net of accumulated depreciation of
    $404,238 and $361,490, respectively                                                        51,074          93,822
Deferred financing fees, net of accumulated amortization of $84,546 and
    $79,032, respectively                                                                          --           5,514
Deposits                                                                                        5,852          97,830
                                                                                         ------------    ------------

         Total assets                                                                    $    196,289    $    258,407
                                                                                         ============    ============
                      LIABILITIES AND SHAREHOLDERS' DEFICIT
                      -------------------------------------

   Current Liabilities
    Current portion of notes payable, including $190,572 and
      $136,123 to a related party, respectively, net of
       debt discount of $5,467 and $14,164, respectively                                 $  1,468,604    $  1,355,459
    Accounts payable - trade                                                                  218,339         222,888
    Accrued payroll                                                                           313,371         222,436
    Accrued payroll tax liabilities                                                           157,983         170,918
    Deferred revenue                                                                            3,059          16,183
    Accrued interest                                                                          272,984         161,337
    Advance on letter agreement (See Note 7)                                                  275,000              --
    Other accrued liabilities                                                                 199,034         111,629
                                                                                         ------------    ------------
         Total current liabilities                                                          2,908,374       2,260,850

   Related party notes payable, less current portion                                          353,919         408,367

   Other non-current liabilities                                                               57,517              --

   Commitments and contingencies                                                                   --              --

Shareholders' deficit
    Preferred stock - $0.001 par value; 15,000,000 shares authorized:
    Series A preferred stock - 1,955,000 shares issued and outstanding
       (liquidation preference of $1.00 per share)                                              1,955           1,955
    Series B preferred stock - 1,427,273 shares issued
       and outstanding (liquidation preference of $1.10 per share)                              1,427           1,427
    Common stock - $0.001 par value;  50,000,000 shares authorized,
      20,304,000 and 20,004,000 shares issued and outstanding, respectively                    20,304          20,004
    Additional paid-in capital                                                             12,775,265      12,630,770
    Receivable for the purchase of equity                                                      (2,000)         (2,000)
    Accumulated deficit                                                                   (15,920,472)    (15,062,966)
                                                                                         ------------    ------------
         Total shareholders' deficit                                                       (3,123,521)     (2,410,810)
                                                                                         ------------    ------------
         Total liabilities and shareholders' deficit                                     $    196,289    $    258,407
                                                                                         ============    ============
</TABLE>

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

                                        2
<PAGE>
<TABLE>
<CAPTION>

                         SECURECARE TECHNOLOGIES, INC.
                      STATEMENTS OF OPERATIONS (UNAUDITED)
               FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND 2005

                                                                         2006            2005
                                                                     ------------    ------------
<S>                                                                  <C>             <C>
Revenues                                                             $     50,647    $     90,336

Operating expenses
   Cost of revenues                                                        36,402         246,115
   Selling, general and administrative                                    232,453         659,326
                                                                     ------------    ------------

   Operating loss                                                        (218,208)       (815,105)

Other expenses
   Interest expense (including $6,644 and $6,644 to a
       related party, respectively)                                       (62,991)        (36,627)
                                                                     ------------    ------------

   Net loss                                                              (281,199)       (851,732)
   Deemed dividend upon issuance of convertible preferred stock                --          (6,364)
                                                                     ------------    ------------

   Net loss available to common shareholders                         $   (281,199)   $   (858,096)
                                                                     ============    ============
Net loss per common share -
  basic and diluted                                                  $      (0.01)   $      (0.04)
                                                                     ============    ============
Weighted average number of common shares outstanding -
  basic and diluted                                                    20,304,000      20,004,000
                                                                     ============    ============
</TABLE>

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

                                        3
<PAGE>
<TABLE>
<CAPTION>

                         SECURECARE TECHNOLOGIES, INC.
                      STATEMENTS OF OPERATIONS (UNAUDITED)
                FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005


                                                                         2006            2005
                                                                     ------------    ------------
<S>                                                                  <C>             <C>
Revenues                                                             $    141,615    $    158,104

Operating expenses
   Cost of revenues                                                       114,708         436,563
   Selling, general and administrative                                    602,932       1,171,304
   Loss on lease settlement                                               152,141              --
                                                                     ------------    ------------

   Operating loss                                                        (728,166)     (1,449,763)

Other expenses
   Interest expense (including $13,289 and $13,289 to a
       related party, respectively)                                      (129,340)        (77,138)
                                                                     ------------    ------------

   Net loss                                                              (857,506)     (1,526,901)
   Deemed dividend upon issuance of convertible preferred stock                --        (204,765)
                                                                     ------------    ------------

   Net loss available to common shareholders                         $   (857,506)   $ (1,731,666)
                                                                     ============    ============
Net loss per common share -
  basic and diluted                                                  $      (0.04)   $      (0.09)
                                                                     ============    ============
Weighted average number of common shares outstanding -
  basic and diluted                                                    20,264,221      20,004,000
                                                                     ============    ============
</TABLE>

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

                                       4
<PAGE>
<TABLE>
<CAPTION>

                         SECURECARE TECHNOLOGIES, INC.
                      STATEMENTS OF CASH FLOWS (UNAUDITED)
             FOR THE THREE SIX MONTHS ENDED JUNE 30, 2006 AND 2005

                                                                    2006           2005
                                                                ------------   ------------
<S>                                                             <C>            <C>
Cash flows from operating activities
    Net loss                                                    $   (857,506)  $ (1,526,901)
    Adjustments to reconcile net loss to net cash used
      in operating activities:
       Depreciation and amortization                                  42,748         35,666
       Bad debt expense                                               29,491          7,985
       Common stock issued for services                               75,000             --
       Stock compensation expense                                    116,667             --
       Loss on lease settlement                                      152,141             --
       Amortization of deferred financing fees                         5,514         20,089
       Amortization of debt discount                                  11,825         18,000
       Increases and decreases in working capital accounts:
       Accounts receivable - trade                                    (7,774)       (48,092)
       Prepaid Expenses                                               14,905         22,725
       Deposits                                                       32,739             --
       Deferred revenue                                              (13,124)        15,002
       Accounts payable - trade                                       (4,549)        70,431
       Accrued liabilities                                           241,667        185,749
                                                                ------------   ------------
            Cash flows used in operating activities                 (160,256)    (1,199,346)


Cash flows from financing activities
    Payments on notes payable                                             --        (36,499)
    Proceeds from issuance of preferred stock                             --      1,188,193
    Advance on letter agreement                                      275,000             --
                                                                ------------   ------------
       Cash flows provided by financing activities                   275,000      1,151,694
                                                                ------------   ------------

Net increase (decrease) in cash and cash equivalents                 114,744        (47,652)

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

Cash and cash equivalents, end of period                        $    118,144   $      3,195
                                                                ============   ============
</TABLE>

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

                                       5
<PAGE>

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

NOTE 1.  NATURE OF OPERATIONS

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

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

BASIS OF PRESENTATION

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

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

GOING CONCERN

The financial statements for the six months ended June 30, 2006 were prepared on
the assumption that the Company will continue as a going concern. The Company
sustained a net loss of $857,506 for the six months ended June 30, 2006. The
Company has accumulated losses through June 30, 2006 of $15,920,472. Cash used
in operating activities for the six-month periods ended June 30, 2006 and 2005
totaled $160,256 and $1,199,346, respectively. Total liabilities at June 30,
2006 of $3,319,810 significantly exceed total assets of $196,289. As of the date
of this report, the Company is unable to meet all of its short-term obligations
due because of shortages of cash. The Company's continued existence depends upon
the success of management's efforts to raise additional capital necessary to
meet the Company's obligations as they come due, and to obtain sufficient
capital to execute its business plan. The Company intends to obtain capital
primarily through issuances of debt or equity. There can be no degree of
assurance that the Company will be successful in completing additional financing
transactions. Failure to generate additional revenues, raise additional capital
or manage discretionary spending could have a material adverse effect on the
Company's ability to continue as a going concern and to achieve its intended
business objectives. The accompanying unaudited financial statements do not
include any adjustments to reflect the possible effects on the recoverability
and classification of assets or classification of liabilities which may result
from the inability of the Company to continue as a going concern.

NOTE 2.  SUMMARY OF SIGNFICANT ACCOUNTING PRINCIPLES

REVENUE RECOGNITION

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

SOFTWARE AND SOFTWARE DEVELOPMENT COSTS

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

                                       6
<PAGE>

LONG-LIVED ASSETS

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

STOCK-BASED COMPENSATION

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

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

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

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

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

The Board of Directors of the Company approved the SecureCARE Technologies, Inc.
2004 Stock Option Plan on December 3, 2004. The Company has reserved 2,000,000
shares of common stock for issuance under this Plan. The exercise price of each
option granted may not be less than the fair market value of common stock at the
date of grant, without prior approval of the Board of Directors. Options are
exercisable according to the terms set out in the option agreement, not to
exceed ten years. At June 30, 2006 the Company had 624,859 options outstanding,
of which 571,948 were exercisable. All options granted by the Company are
restricted stock awards under rules promulgated by the Securities and Exchange
Commission

The Company adopted SFAS No. 123R using the modified prospective transition
method beginning January 1, 2006. Accordingly, during the six month period ended
June 30, 2006, the Company recorded stock-based compensation expense for options
granted prior to, but not yet vested, as of January 1, 2006, as if the fair
value method required for pro forma disclosure under SFAS No. 123 were in effect
for expense recognition purposes, adjusted for estimated forfeitures. There were
no new options issued during the six months ended June 30, 2006. As SFAS No.
123R requires that stock-based compensation expense be based on awards that are
ultimately expected to vest, stock based compensation expense for the three and
six-month periods ended June 30, 2006 totaled $51,042 and $116,667,
respectively. The impact on the Company's results of operations of recording
stock-based compensation for the three and six-month periods ended June 30, 2006
was as follows:

                                       7
<PAGE>
<TABLE>
<CAPTION>

                                                        Three Months Ended   Six Months Ended
                                                           June 30, 2006      June 30, 2006
                                                           -------------      -------------
<S>                                                        <C>                <C>
Selling, general and administrative                        $      51,042      $     116,667
                                                           -------------      -------------

Impact on net loss to common shareholders                  $      51,042      $     116,667
                                                           =============      =============
Impact on net loss per share to common shareholders
 (basic and diluted)                                       $      (0.003)     $      (0.006)
                                                           -------------      -------------

</TABLE>

The Company  calculated the fair value of each option award on the date of grant
using the  Black-Scholes  option-pricing  model. The following  assumptions were
used for the period ended June 20, 2005. There were no new options issued during
the six months ended June 30, 2006.


                                                         Six Months Ended
                                                           June 30, 2005
                                                           -------------
        Risk-free interest rates                                 5%
        Expected lives                                           4 years
        Dividend                                                 0%
        Expected volatility                                     100%
        Weighted average volatility                             100%

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

                                                                                2004 Stock Incentive Plan
                                                           ----------------------------------------------------------------------
                                                                              Six Months Ended June 30, 2006
                                                           ----------------------------------------------------------------------
                                                                                                 Weighted
                                                                                Weighted         Average
                                                                                Average          Remaining          Aggregate
                                                                Shares       Exercise Price   Contractual Term   Intrinsic Value
                                                           ----------------------------------------------------------------------
<S>                                                            <C>          <C>                    <C>            <C>
Outstanding at January 1, 2006                                 1,349,608      $        1.01          .81 years
Granted                                                               --
Exercised                                                             --
Cancelled                                                       (724,749)     $        1.02
                                                           -------------
Outstanding at June 30, 2006                                     624,859      $        1.00          .43 years      $          --
                                                           =============
Vested and expected to vest at June 30, 2006                     624,859      $        1.00          .43 years      $          --
Options exercisable at June 30, 2006                             571,948      $        1.00          .43 years      $          --
</TABLE>

The aggregate intrinsic value is calculated as the difference between the
exercise price of the underlying awards and the quoted price of the Company's
common stock, $0.15, at June 30, 2006. No options were "in-the-money" at June
30, 2006. No options were exercised during the six months ended June 30, 2006
and 2005.

As of June 30, 2006 there was approximately $37,037 of total unrecognized
compensation cost related to unvested options. The cost is expected to be
recognized over a weighted-average period of 0.43 years.

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

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

                                       8
<PAGE>
<TABLE>
<CAPTION>

                                                                   Six Months Ended   Three Months Ended
                                                                    June 30, 2005       June 30, 2005
                                                                    -------------       -------------
<S>                                                                 <C>
Net loss to common shareholders as reported                         $  (1,731,666)      $    (858,096)
Deduct: Stock-based employee compensation expense determined
   under fair value based method                                         (333,513)           (205,439)
                                                                    -------------       -------------

Pro forma net loss                                                  $  (2,065,179)      $  (1,063,535)
                                                                    =============       =============
Net loss per share to common shareholders:
  As reported - basic and diluted                                   $       (0.09)      $       (0.04)
                                                                    =============       =============

  Pro forma - basic and diluted                                     $       (0.10)      $       (0.05)
                                                                    =============       =============
</TABLE>

COMMITMENTS AND CONTINGENCIES

On April 7, 2005 a lawsuit was filed by Norman K. Best, a former officer of the
Company, against SecureCARE Technologies, Inc. The lawsuit is identified as
cause number GN501073 and was filed in the 353rd Judicial District Court of
Travis County, Texas as "Norman K. Best versus SecureCARE Technologies, Inc."
The lawsuit alleges that the Company breached the terms of its agreements with
Mr. Best by failing to tender 50,000 shares of common stock of SecureCARE
Technologies, Inc. which were granted to him. The Company responded to this
lawsuit on May 13, 2005, by filing a general denial, denying all the allegations
raised by the Plaintiff. On July 8, 2005, the Company filed a series of
responses to the plaintiff's request for admission. The Company is required to
produce all documents related to the plaintiff's request for production by
August 14, 2006. Although no loss can be estimated in regard to this lawsuit we
do not believe that the outcome of this matter will have a material effect on
our financial position, operating results or cash flows. However, there can be
no assurance that this legal proceeding 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 software services revenue recognition,
capitalization of software development costs and depreciation of fixed assets.
Actual results could differ from these estimates.


                                       9
<PAGE>
<TABLE>
<CAPTION>

NOTE 3. NOTES PAYABLE

Notes payable at June 30, 2006 and December 31, 2005 consist of the following:

                                                                                  2006                         2005
                                                                       --------------------------   --------------------------
                                                                       Short Term      Long Term    Short Term      Long Term
                                                                       -----------    -----------   -----------    -----------
<S>                                                                    <C>            <C>           <C>            <C>
  Note payable to related party bearing interest at 5%,
      principal and interest due September 30, 2010, secured
      by a security interest in the assets and intellectual property
      of the Company; interest payments in default as of
      September 2, 2004; principal payments in default as of
      October 1, 2005                                                  $   190,571    $   353,919   $   136,123    $   408,367

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                                                         1,474,071        353,918     1,369,623        408,367

      Less: unamortized debt discount                                       (5,467)            --       (14,164)            --

                                                                       -----------    -----------   -----------    -----------
      Total notes payable                                              $ 1,468,604    $   353,918   $ 1,355,459    $   408,367
                                                                       -----------    -----------   -----------    -----------
</TABLE>

                                       10
<PAGE>

As of June 30, 2006 and 2005, the Company had principal amounts of $544,490 in
notes payable to a related party, Gryphon Opportunities Fund I, LLC. During the
six-month periods ended June 30, 2006 and 2005, there were no principal
repayments on these notes payable.

At June 30, 2006, the required monthly interest payments on these notes payable,
due to commence on September 1, 2004, were not made by the Company to Gryphon
Opportunities Fund I, LLC. At June 30, 2006, the required monthly principal
payments on these notes payable, due to commence on September 1, 2005, were not
made by the Company to Gryphon Opportunities Fund I, LLC. Gryphon Opportunities
Fund I, LLC waived the Company's non-compliance with the terms of the note
payable agreements as of June 30, 2006 and through July 1, 2007.

As of March 2, 2006, the Company is in default on the principle amount of
$520,000 in a series of 7.5% Senior Subordinated Notes Payable, issued to a
group of seven investors in February and March of 2004. In addition, accrued
interest on these notes as of June 30, 2006 was approximately $99,500. The notes
may be extended at the option of the Company for an additional six months. If
the notes are extended, the Company must issue one share of Common Stock for
each $4.00 principal and accrued interest on the Notes that are extended, or a
total of approximately 155,000 shares of Common Stock. As of the date of this
filing, the Company has not elected the option of extending the notes for an
additional six months

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

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

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

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

Future maturities of notes payable at June 30, 2006 are as follows:

        2006                           $ 1,474,071
        2007                               108,898
        2008                               108,898
        2009                               108,898
        2010                                27,225
                                       -----------
        Total                          $ 1,827,990
                                       ===========

NOTE 4. SHAREHOLDERS' DEFICIT

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

On April 4, 2006, the Company entered into a Loan Agreement (the "Loan
Agreement") with Euro Financial Fidelity, Inc. ("EFF") which provides for a loan
to the Company of $7,000,000 (the "Loan"). The Company has the right to
terminate the Loan Agreement at any time by written notice to EFF if the loan
was not funded by June 15, 2006. As of the date of this filing the loan has not
been funded and the Company has not terminated the loan agreement. The Loan, if
funded, will be represented by a ten year, 6% promissory note (the "Note")
providing for quarterly payments of accrued interest only commencing April 1,
2007 and a balloon payment of all accrued interest and principal on April 1,
2016. The Loan Agreement restricts the Company's use of the Loan proceeds to
certain items agreed to by the Company and EFF. Payment of the Note and


                                       11
<PAGE>

performance by the Company under the terms of the Loan Agreement are secured by
1,000 shares of newly authorized Series C Contingently Convertible Preferred
Stock (the "Series C Stock"). Each share of Series C Stock is convertible into
56,000 shares of the Company's common stock (an aggregate of 56,000,000 shares)
upon the Company's default under the Note and Loan Agreement, but otherwise has
no voting rights, no rights to receive dividends nor any liquidation preference.
Since the Company does not have sufficient shares of its common stock authorized
to meet this contingent obligation, the Company agreed in the Loan Agreement to
increase its authorized shares of common stock at its next shareholders'
meeting. The Company will also take such actions as are required to timely
register the shares which are contingently issuable upon conversion of the
Series C Stock. Upon repayment of the Loan, the Series C Stock will have no
further rights. The issuance of the Series C Stock was exempt from registration
by reason of Section 4(2) of the Securities Act of 1933, as amended, as not
involving any public offering. Because the loan was not funded as of June 30,
2006, the Company has not recorded in its accounts the impact of the issuance of
the Series C Stock.

On June 16, 2006, the Company's Board of Directors ratified a letter agreement
(the "Letter Agreement"), dated June 7, 2006, with Gryphon Opportunities Fund I,
LLC ("GOF") relating to future financing and recapitalization of the Company.
Pursuant to the Letter Agreement, GOF agreed to release its lien on the
Company's assets conditioned upon the Company receiving an aggregate of $570,000
in equity financing (as of the date of this filing $355,000 has been received).
Highlights of the Letter Agreement include:

         o        A requirement that the Company raise an initial $570,000 in
                  equity financing
         o        Upon completion of a total of $570,000 in equity financing, a
                  recapitalization of the Company will be effected
         o        The new investors (representing $570,000 in equity financing)
                  coupled with a conversion to common stock of notes payable and
                  accrued interest on the notes payable, totaling $1,827,990 and
                  $271,000, respectively, will own 90% of the Company's
                  outstanding equity
         o        Contemplates a 200 for 1 reverse stock split with the Company
                  having approximately 1,330,000 common shares outstanding
                  thereafter
         o        Conditions that upon the Company raising a minimum of
                  $1,000,000 in additional investment capital, GOF agrees to
                  relinquish certain rights to effect the Company's business
                  operations, including, but not limited to, the right to object
                  to the placing of liens on the Company's assets
         o        Requires the Company to seek equal treatment of all creditors
                  and shareholders
         o        Allows Younis Zubchevich, the principal of GOF, for the next
                  three years, to act as an observer at all Board of Director
                  meetings and to recommend a Board member appointment, subject
                  to Board approval

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

In accordance with the Letter Agreement, for the three-month period ended June
30, 2006, the Company received funds of $275,000 of which $255,000 was received
from current investors and $20,000 was received from new investors. These funds
were accounted for as advances on the Letter Agreement, a current liability, at
June 30, 2006. When the Company raises the required total funds of $570,000,
effecting the recapitalization of the Company, these advances on the Letter
Agreement will be converted to common stock of the Company at a conversion
price, adjusted for the 200 for 1 reverse stock split, of approximately $2.22
per share.

NOTE 5.  PAYROLL TAXES

As of June 30, 2006, the Company owes $157,983 in accrued payroll taxes for
years 2004 and 2005. Additional penalties and interest assessed on these taxes
total $81,488 at June 30, 2006.

The Company received a Notice of Federal Tax Lien by the Internal Revenue
Service (IRS) dated May 24, 2006. The Tax Lien was filed with the Secretary of
State in Texas. The Lien is in favor of the United States on all property and
rights to property belonging to the Company for the amount of these taxes, and
additional penalties, interest, and costs that may accrue. The Lien will remain
in place until such time that the Company pays its obligation in full to the
IRS. As of the date of this filing the Company has paid $60,000 to the IRS for
partial payment of this obligation. The Company expects to commence a monthly
payment plan in August 2006 in which it will pay the balance of the obligation
off over a period of five years.

NOTE 6.  LOSS ON LEASE SETTLEMENT EXPENSES

The Company was notified on January 20, 2006, that it was in default under its
master electronic equipment lease primarily due to its failure to pay the base
monthly rental payments after October 2005. On February 20, 2006, the Company
returned approximately $300,000 of the hardware and software to the lessor,
retaining approximately $14,000 of the original leased property. The notice of
default on the lease did not relieve, suspend or waive the Company's continued
responsibility for the monthly rental payments for the balance of the initial
lease term. As of February 20, 2006, the Company had approximately $59,000 of
its original lease deposit amount of $124,717 in tact. The Company has
restructured the remaining amount owed under the lease for an additional
twenty-four months. The net amount owed included an offset credit given for the
lease deposit of $59,000. The restructured balance totals $107,102 and the
Company expects to commence payments on the restructured lease in August 2006.
Accordingly, in conjunction with the restructured lease, the Company recorded a
loss on lease settlement in the first quarter of 2006 totaling $166,431 to
reflect complete consumption of the lease deposit of $59,239 and the remaining
lease liability of $107,102.

                                       12
<PAGE>

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

NOTE 7.  ADVANCE ON LETTER AGREEMENT

On June 16, 2006, the Company's Board of Directors ratified a letter agreement
(the "Letter Agreement"), dated June 7, 2006, with Gryphon Opportunities Fund I,
LLC ("GOF") relating to future financing and recapitalization of the Company.
Pursuant to the Letter Agreement, GOF agreed to release its lien on the
Company's assets conditioned upon the Company receiving an aggregate of $570,000
in equity financing (as of the date of this filing $355,000 has been received).
Highlights of the Letter Agreement include:

         o        A requirement that the Company raise an initial $570,000 in
                  equity financing
         o        Upon completion of a total of $570,000 in equity financing, a
                  recapitalization of the Company will be effected
         o        The new investors (representing $570,000 in equity financing)
                  coupled with a conversion to common stock of notes payable and
                  accrued interest on the notes payable, totaling $1,827,990 and
                  $271,000, respectively, will own 90% of the Company's
                  outstanding equity
         o        Contemplates a 200 for 1 reverse stock split with the Company
                  having approximately 1,330,000 common shares outstanding
                  thereafter
         o        Conditions that upon the Company raising a minimum of
                  $1,000,000 in additional investment capital, GOF agrees to
                  relinquish certain rights to effect the Company's business
                  operations, including, but not limited to, the right to object
                  to the placing of liens on the Company's assets
         o        Requires the Company to seek equal treatment of all creditors
                  and shareholders
         o        Allows Younis Zubchevich, the principal of GOF, for the next
                  three years, to act as an observer at all Board of Director
                  meetings and to recommend a Board member appointment, subject
                  to Board approval

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

In accordance with the Letter Agreement, for the three-month period ended June
30, 2006, the Company received funds of $275,000 of which $255,000 was received
from current investors and $20,000 was received from new investors. These funds
were accounted for as advances on the Letter Agreement, a current liability, at
June 30, 2006. When the Company raises the required total funds of $570,000,
effecting the recapitalization of the Company, these advances on the Letter
Agreement will be converted to common stock of the Company at a conversion
price, adjusted for the 200 for 1 reverse stock split, of approximately $2.22
per share.

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

                           Forward Looking Statements

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

OVERVIEW

Management believes that the Company is the leading provider of Internet-based
document exchange and e-signature solutions for the healthcare industry. Built
with state-of-the art development tools from the Microsoft dotNET development
solutions, SecureCARE.net is tailored to the needs of physicians, clinics and
home healthcare, hospice and durable medical equipment providers. These
end-to-end solutions offer a revolutionary approach to accessing information and
managing time-consuming forms and authorizations. SecureCARE's easy to use
technology eliminates paper, while enhancing the physicians ability to capture
fees for otherwise unbilled time and services, uniquely and directly impacting
the physicians revenue. SecureCARE.net is a highly secure, HIPAA-ready tracking
and reporting tool that streamlines operations while providing physicians with

                                       13
<PAGE>

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

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

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

On April 4, 2006, the Company entered into a Loan Agreement (the "Loan
Agreement") with Euro Financial Fidelity, Inc. ("EFF") which provides for a loan
to the Company of $7,000,000 (the "Loan"). The Company has the right to
terminate the Loan Agreement at any time by written notice to EFF if the loan
was not funded by June 15, 2006. As of the date of this filing the loan has not
been funded and the Company has not terminated the loan agreement. The Loan, if
funded, will be represented by a ten year, 6% promissory note (the "Note")
providing for quarterly payments of accrued interest only commencing April 1,
2007 and a balloon payment of all accrued interest and principal on April 1,
2016. The Loan Agreement restricts the Company's use of the Loan proceeds to
certain items agreed to by the Company and EFF. Payment of the Note and
performance by the Company under the terms of the Loan Agreement are secured by
1,000 shares of newly authorized Series C Contingently Convertible Preferred
Stock (the "Series C Stock"). Each share of Series C Stock is convertible into
56,000 shares of the Company's Common Stock (an aggregate of 56,000,000 shares)
upon the Company's default under the Note and Loan Agreement, but otherwise has
no voting rights, no rights to receive dividends nor any liquidation preference.
Since the Company does not have sufficient shares of its common stock authorized
to meet this contingent obligation, the Company agreed in the Loan Agreement to
increase its authorized shares of common stock at its next shareholders'
meeting. The Company will also take such actions as are required to timely
register the shares which are contingently issuable upon conversion of the
Series C Stock. Upon repayment of the Loan, the Series C Stock will have no
further rights. The issuance of the Series C Stock was exempt from registration
by reason of Section 4(2) of the Securities Act of 1933, as amended, as not
involving any public offering. Because the loan was not funded as of June 30,
2006, the Company has not recorded in its accounts the impact of the issuance of
the Series C Stock.

On June 16, 2006, the Company's Board of Directors ratified a letter agreement
(the "Letter Agreement"), dated June 7, 2006, with Gryphon Opportunities Fund I,
LLC ("GOF") relating to future financing and recapitalization of the Company.
Pursuant to the Letter Agreement, GOF agreed to release its lien on the
Company's assets conditioned upon the Company receiving an aggregate of $570,000
in equity financing (as of the date of this filing $355,000 has been received).
Highlights of the Letter Agreement include:

         o        A requirement that the Company raise an initial $570,000 in
                  equity financing
         o        Upon completion of a total of $570,000 in equity financing, a
                  recapitalization of the Company will be effected
         o        The new investors (representing $570,000 in equity financing)
                  coupled with a conversion to common stock of notes payable and
                  accrued interest on the notes payable, totaling $1,827,990 and
                  $271,000, respectively, will own 90% of the Company's
                  outstanding equity
         o        Contemplates a 200 for 1 reverse stock split with the Company
                  having approximately 1,330,000 common shares outstanding
                  thereafter
         o        Conditions that upon the Company raising a minimum of
                  $1,000,000 in additional investment capital, GOF agrees to
                  relinquish certain rights to effect the Company's business
                  operations, including, but not limited to, the right to object
                  to the placing of liens on the Company's assets
         o        Requires the Company to seek equal treatment of all creditors
                  and shareholders
         o        Allows Younis Zubchevich, the principal of GOF, for the next
                  three years, to act as an observer at all Board of Director
                  meetings and to recommend a Board member appointment, subject
                  to Board approval

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

In accordance with the Letter Agreement, for the three-month period ended June
30, 2006, the Company received funds of $275,000 of which $255,000 was received
from current investors and $20,000 was received from new investors. These funds
were accounted for as advances on the Letter Agreement, a current liability, at
June 30, 2006. When the Company raises the required total funds of $570,000,
effecting the recapitalization of the Company, these advances on the Letter
Agreement will be converted to common stock of the Company at a conversion
price, adjusted for the 200 for 1 reverse stock split, of approximately $2.22
per share.

                                       14
<PAGE>

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

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

REVENUE RECOGNITION

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

SOFTWARE AND SOFTWARE DEVELOPMENT COSTS

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

LONG-LIVED ASSETS

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

STOCK-BASED COMPENSATION

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

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

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

                                       15
<PAGE>

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

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

RESULTS OF OPERATIONS

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

Revenues for the three months ended June 30, 2006 were $50,647 compared to
$90,336 for the three months ended June 30, 2005. This 44% decrease in sales
reflects customer attrition and reduced billings for application downtime in
April and June of 2006. Since the Company implemented a staff reduction of
approximately 16 employees on December 9, 2005, it has experienced a customer
attrition rate near 34% of its paying home healthcare provider locations,
resulting in lower revenue in 2006. In addition, because of technological issues
that resulted in periods of application downtime in the months of April and June
of 2006, the Company provided two weeks of service free to each of its customers
in these two months, resulting in reduced billings.

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

Management believes that revenues will grow significantly over the next twelve
to eighteen months if the Company is able to raise the additional capital
required to execute its marketing and sales strategy.

Costs of revenues were $36,402 for the three months ended June 30, 2006 compared
to $246,115 for the three months ended June 30, 2005. This 85% decrease in cost
of revenues was primarily attributable to the staff reductions the Company
implemented in December 2005 resulting in lower salaries and benefits and other
employee-related expenses of $154,000, lower operating lease expenses of
$49,000, resulting from the Company returning approximately $300,000 in leased
hardware and software in February, 2006 and lower custom form design expenses of
$8,000.

Selling, general and administrative expenses were $232,453 for the three months
ended June 30, 2006 compared to $659,326 for the three months ended June 30,
2005. This 65% decrease in expenses was primarily attributable to the staff
reductions the Company implemented in December 2005 resulting in lower salaries
and benefits and other employee-related expenses of $316,000 and lower travel
and entertainment expenses of $70,000. Investor relations and related costs
decreased $26,000 in 2006. Other marketing costs, including marketing consulting
and materials and tradeshow and press release expenses were approximately
$15,000 lower in 2006. Other corporate general and administrative expenses,
including computer expenses (the cost of purchased laptops), building rent,
insurance, telephone, cellular phone and postage expenses decreased $92,000 in
2006. Partially offsetting these lower expenses were higher bad debt expenses of
$17,000, penalties and interest charges on state sales taxes of $9,000, higher
accounting and related expenses of $5,000 and increased legal expenses of
$3,500. The Company also recognized $51,042 in stock compensation expense for
stock options vested during the second quarter of 2006 due to its January 1,
2006, adoption of SFAS No. 123R using the modified prospective transition
method, which contributed to higher expenses in 2006.

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

Interest expense for the three months ended June 30, 2006 was $62,991 compared
to $36,627 in 2005. Higher interest expense in 2006, was primarily attributable
to a higher debt load, resulting from notes payable the Company issued in the
second, third and fourth quarters of 2005.

Six months ended June 30, 2006 compared to six months ended June 30, 2005

Revenues for the six months ended June 30, 2006 were $141,615 compared to
$158,104 for the six months ended June 30, 2005. This 10% decrease in sales

                                       16
<PAGE>

reflects customer attrition and reduced billings for application downtime in
April and June of 2006. Since the Company implemented a staff reduction of
approximately 16 employees on December 9, 2005, it has experienced a customer
attrition rate near 34% of its paying home healthcare provider locations,
resulting in lower revenue in 2006. In addition, because of technological issues
that resulted in periods of application downtime in the months of April and June
of 2006, the Company provided two weeks of service free to each of its customers
in these two months, resulting in reduced billings.

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

Management believes that revenues will grow significantly over the next twelve
to eighteen months if the Company is able to raise the additional capital
required to execute its marketing and sales strategy.

Costs of revenues were $114,708 for the six months ended June 30, 2006 compared
to $436,563 for the six months ended June 30, 2005. This 74% decrease in cost of
revenues was primarily attributable to the staff reductions the Company
implemented in December 2005 resulting in lower salaries and benefits and other
employee-related expenses of $260,000, lower operating lease expenses of
$49,000, resulting from the Company returning approximately $300,000 in leased
hardware and software in February, 2006 and lower custom form design expenses of
$19,000.

Selling, general and administrative expenses were $602,932 for the six months
ended June 30, 2006 compared to $1,171,304 for the six months ended June 30,
2005. This 49% decrease in expenses was primarily attributable to the staff
reductions the Company implemented in December 2005 resulting in lower salaries
and benefits and other employee-related expenses of $444,000 and lower travel
and entertainment expenses of $116,000. Investor relations and related costs
decreased $57,000 in 2006. Other marketing costs, including marketing consulting
and materials and tradeshow and press release expenses were approximately
$60,000 lower in 2006. Other corporate general and administrative expenses,
including computer expenses , building rent, insurance, telephone, cellular
phone, legal and postage expenses decreased $133,000 in 2006. On January 24,
2006 the Company entered into a consulting agreement with an individual, Howard
Alweil (the "Consultant") for services related to locating qualified executive
personnel and reviewing the implementation strategy of the Company's public
relations and marketing efforts. As compensation for those services, the Company
agreed to issue 300,000 registered shares of the Company's Common Stock, to be
registered under a Registration Statement on Form S-8 or any other available
form as soon as was practicable after the execution and delivery of the
consulting agreement. Accordingly, the Company filed a Form S-8 Registration
Statement under the Securities Act of 1933 on February 10, 2006. In the first
quarter of 2006, the Company recorded $75,000 in financial consulting expenses
related to the issuance of the 300,000 shares of common stock which were valued
at $0.25 per share on January 24, 2006, resulting in higher financial consulting
expense in 2006. The Company also recognized $116,667 in stock compensation
expense for stock options vested during the first and second quarters of 2006
due to its January 1, 2006, adoption of SFAS No. 123R using the modified
prospective transition method, which contributed to higher expenses in 2006.
Other higher expenses in 2006 were bad debt expense of $22,000 and penalties and
interest charges on state sales taxes of $10,000.

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

Loss on lease settlement expenses totaled $152,141 for the six months ended June
30, 2006.

The Company was notified on January 20, 2006, that it was in default under its
master electronic equipment lease primarily due to its failure to pay the base
monthly rental payments after October 2005. On February 20, 2006, the Company
returned approximately $300,000 of the hardware and software to the lessor,
retaining approximately $14,000 of the original leased property. The notice of
default on the lease did not relieve, suspend or waive the Company's continued
responsibility for the monthly rental payments for the balance of the initial
lease term. As of February 20, 2006, the Company had approximately $59,000 of
its original lease deposit amount of $124,717 in tact. The Company has
restructured the remaining amount owed under the lease for an additional
twenty-four months. The net amount owed included an offset credit given for the
lease deposit of $59,000. The restructured balance totals $107,102 and the
Company expects to commence payments on the restructured lease in August 2006.
Accordingly, in conjunction with the restructured lease, the Company recorded a
loss on lease settlement in the first quarter of 2006 totaling $166,431 to
reflect complete consumption of the lease deposit of $59,239 and the remaining
lease liability of $107,102.

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

                                       17
<PAGE>

February 28, 2006 the Company had recorded $14,200 in additional rent expense to
average out the three-year total rent expense. Because the lessor agreed to
extinguish the lease as of February 28, 2006 the Company reversed its additional
rent expense accrual of $14,200, resulting in a reduction in the loss on lease
settlement recognized in the first quarter of 2006.

Interest expense for the six months ended June 30, 2006 was $129,340 compared to
$77,138 in 2005. Higher interest expense in 2006, was primarily attributable to
a higher debt load, resulting from notes payable the Company issued in the
second, third and fourth quarters of 2005.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used by operating activities for the six-months ended June 30, 2006 and
2005 totaled $160,256 and $1,199,346, respectively. Decreased net uses of cash
in 2006 resulted primarily from the staff reductions the Company implemented in
December 2005.

Net cash provided by financing activities was $275,000 for the six months ended
June 30, 2006, and relates to amounts received under the Letter Agreement.

To facilitate additional short-term and long-term investment financing, on June
16, 2006, the Company's Board of Directors ratified a letter agreement (the
"Letter Agreement"), dated June 7, 2006, with Gryphon Opportunities Fund I, LLC
("GOF") relating to future financing and recapitalization of the Company.
Pursuant to the Letter Agreement, GOF agreed to release its lien on the
Company's assets conditioned upon the Company receiving an aggregate of $570,000
in equity financing (as of the date of this filing $355,000 has been received).
Highlights of the Letter Agreement include:

         o        A requirement that the Company raise an initial $570,000 in
                  equity financing
         o        Upon completion of a total of $570,000 in equity financing, a
                  recapitalization of the Company will be effected
         o        The new investors (representing $570,000 in equity financing)
                  coupled with a conversion to common stock of notes payable and
                  accrued interest on the notes payable, totaling $1,827,990 and
                  $271,000, respectively, will own 90% of the Company's
                  outstanding equity
         o        Contemplates a 200 for 1 reverse stock split with the Company
                  having approximately 1,330,000 common shares outstanding
                  thereafter
         o        Conditions that upon the Company raising a minimum of
                  $1,000,000 in additional investment capital, GOF agrees to
                  relinquish certain rights to effect the Company's business
                  operations, including, but not limited to, the right to object
                  to the placing of liens on the Company's assets
         o        Requires the Company to seek equal treatment of all creditors
                  and shareholders
         o        Allows Younis Zubchevich, the principal of GOF, for the next
                  three years, to act as an observer at all Board of Director
                  meetings and to recommend a Board member appointment, subject
                  to Board approval

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

In accordance with the Letter Agreement, for the three-month period ended June
30, 2006, the Company received funds of $275,000 of which $255,000 was received
from current investors and $20,000 was received from new investors. These funds
were accounted for as advances on the Letter Agreement, a current liability, at
June 30, 2006. When the Company raises the required total funds of $570,000,
effecting the recapitalization of the Company, these advances on the Letter
Agreement will be converted to common stock of the Company at a conversion
price, adjusted for the 200 for 1 reverse stock split, of approximately $2.22
per share.

Net cash provided by financing activities was $1,151,694 for six months ended
June 30, 2005 and consisted primarily of proceeds from issuance of its Series B
Convertible Preferred Stock.

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

The financial statements for the six months ended June 30, 2006 were prepared on
the assumption that the Company will continue as a going concern. The Company
sustained a net loss of $857,506 for the six months ended June 30, 2006. The
Company has accumulated losses through June 30, 2006 of $15,920,472. Cash used
in operating activities for the six-month periods ended June 30, 2006 and 2005
totaled $160,256 and $1,199,346, respectively. Total liabilities at June 30,
2006 of $3,319,810 significantly exceed total assets of $196,289. As of the date
of this report, the Company is unable to meet all of its short-term obligations
due 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.

                                       18
<PAGE>

RELATED PARTY TRANSACTIONS

As of June 30, 2006 and 2005, the Company had principal amounts of $544,490 in
notes payable to a related party, Gryphon Opportunities Fund I, LLC. During the
six-month periods ended June 30, 2006 and 2005, there were no principal
repayments on these notes payable.

At June 30, 2006, the required monthly interest payments on these notes payable,
due to commence on September 1, 2004, were not made by the Company to Gryphon
Opportunities Fund I, LLC. At June 30, 2006, the required monthly principal
payments on these notes payable, due to commence on September 1, 2005, were not
made by the Company to Gryphon Opportunities Fund I, LLC. Gryphon Opportunities
Fund I, LLC waived the Company's non-compliance with the terms of the note
payable agreements as of June 30, 2006 and through July 1, 2007.

ITEM 3. CONTROLS AND PRODCECURES

Members of our management, including Neil Burley, our Chief Financial Officer
and Principal Accounting and Financial Officer, have evaluated the effectiveness
of our disclosure controls and procedures, as defined by paragraph (e) of
Exchange Act Rules 13a-15 or 15d-15, as of June 30, 2006, the end of the period
covered by this report. Based upon that evaluation, Mr. Burley concluded that
our disclosure controls and procedures are effective.

INTERNAL CONTROL OVER FINANCIAL REPORTING

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


                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings

On April 7, 2005 a lawsuit was filed by Norman K. Best, a former officer of the
Company, against SecureCARE Technologies, Inc. The lawsuit is identified as
cause number GN501073 and was filed in the 353rd Judicial District Court of
Travis County, Texas as "Norman K. Best versus SecureCARE Technologies, Inc."
The lawsuit alleges that the Company breached the terms of its agreements with
Mr. Best by failing to tender 50,000 shares of common stock of SecureCARE
Technologies, Inc. which were granted to him. The Company responded to this
lawsuit on May 13, 2005, by filing a general denial, denying all the allegations
raised by the Plaintiff. On July 8, 2005, the Company filed a series of
responses to the plaintiff's request for admission. The Company is required to
produce all documents related to the plaintiff's request for production by
August 14, 2006. Although no loss can be estimated in regard to this lawsuit we
do not believe that the outcome of this matter will have a material effect on
our financial position, operating results or cash flows. However, there can be
no assurance that this legal proceeding 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 Chief Executive Officer pursuant
                           to Section 302 of the Sarbanes-Oxley Act of 2002

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

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

                                       19
<PAGE>

         b)       REPORTS ON FORM 8-K

         On April 6, 2006 the Company filed a Form 8-K, dated April 4, 2006
reporting under Items 1.01, 3.02 and 9.01 that it entered into a Loan Agreement
with Euro Financial Fidelity for a loan of $7,000,000 to be secured by
56,000,000 shares of a newly authorized Series C Contingently Convertible
Preferred Stock.

         On June 22,2006 the Company filed a Form 8-K, dated June 16, 2006
reporting under Items 1.01, 8.01 and 9.01 that it had ratified a letter
agreement dated June 7, 2006 with Gryphon Opportunities Fund I, LLC relating to
future financing and recapitalization of the Company. It also reported that it
accepted the resignation of Robert Woodrow, President and CEO and a Director of
SecureCARE Technologies, Inc.


                                   SIGNATURES

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

                                       SecureCare Technologies, Inc.
                                       (Registrant)


Date:  August 11, 2006                 By: /s/ NEIL BURLEY
                                           -------------------------------------
                                           Neil Burley
                                           Chief Financial Officer
                                           (Principal Accounting Officer)
                                           And Interim Chief Executive Officer


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


NAME                       TITLE

/s/ NEIL BURLEY            Chief Financial Officer         Date: August 11, 2006
---------------------      (Principal Financial and
Neil Burley                Accounting Officer)and
                           Interim Chief Executive Officer



                                       20