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

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FORM 10-Q

(Mark One)

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|--------------------------------------------- | -----------------------------------------------------------------------------------------
|þ                                             | QUARTERLY
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF
1934 
|                                              |                                                                                          
|For the quarterly period ended March 31, 2009
|                                             
|OR                                           
|                                              |                                                                                          
|o                                             | TRANSITION
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF
1934

For the transition period from _________________ to
_________________

Commission File Number: 0-29804

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

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

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

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

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

Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o

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

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

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

As
of March 31, 2009, 6,673,752 shares of common stock, par value $.001 per share,
were outstanding, of which 2,463,153 shares were held by non-affiliates.

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SECURECARE TECHNOLOGIES, INC. 
FORM 10-Q 
CONTENTS

|               |                                                                                           |    |   
|-------------- | ----------------------------------------------------------------------------------------- | -- | --
|PART I         | FINANCIAL INFORMATION                                                                     |    |   
|               |                                                                                           |    |   
|Item
  1.      | Financial Statements                                                                      |    |   
|               |                                                                                           |    |   
|               | Balance
  Sheets at March 31, 2009 (unaudited) and December 31, 2008                      |    | 2 
|               |                                                                                           |    |   
|               | Statements
  of Operations (unaudited) for the three months ended March 31, 2009 and 2008 |    | 3 
|               |                                                                                           |    |   
|               | Statements
  of Cash Flows (unaudited) for the three months ended March 31, 2009 and 2008 |    | 4 
|               |                                                                                           |    |   
|               | Notes to
  Interim Financial Statements (unaudited)                                       |    | 5 
|               |                                                                                           |    |   
|Item 2.        | Managements
  Discussion and Analysis of Financial Condition and Results of Operations   |    | 16
|               |                                                                                           |    |   
|Item 4.        | Controls
  and Procedures                                                                 |    | 20
|               |                                                                                           |    |   
|PART II        | OTHER
  INFORMATION                                                                       |    |   
|               |                                                                                           |    |   
|Item 1.        | Legal
  Proceedings                                                                       |    | 21
|               |                                                                                           |    |   
|Item 2.        | Changes in
  Securities and Use of Proceeds                                               |    | 21
|               |                                                                                           |    |   
|Item 3.        | Defaults
  Upon Senior Securities                                                         |    | 21
|               |                                                                                           |    |   
|Item 4.        | Submission
  of Matters to a Vote of Security Holders                                     |    | 21
|               |                                                                                           |    |   
|Item 5.        | Other
  Information                                                                       |    | 21
|               |                                                                                           |    |   
|Item 6.        | Exhibits
  and Reports on Form 8-K                                                        |    | 21
|               |                                                                                           |    |   
|SIGNATURES     |                                                                                           | 23
|               |                                                                                           |    |   
|CERTIFICATIONS |                                                                                           | 24

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SECURECARE TECHNOLOGIES, INC. BALANCE SHEETS 
March 31, 2009 (Unaudited) and December 31, 2008

|                                                                                                                                                                         |  |             |             |      |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ----------- | ---- | - | ----------- | -
|                                                                                                                                                                         |  | 2009        |             | 2008 |  
|                                                                                                                                                                         |  |             |             |      |  
|                                                                                                                                                                         |  | (Unaudited) |             |      |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|ASSETS                                                                                                                                                                   |  |             |             |      |   |             |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Current assets                                                                                                                                                           |  |             |             |      |   |             |  
|Cash and cash equivalents                                                                                                                                                |  | $           | 27,158      |      | $ | 39,594      |  
|Accounts receivable - trade, net of
allowance for doubtful accounts of
  $1,502                                                                                          |  |             | 20,230      |      |   | 18,986      |  
|Prepaid expenses                                                                                                                                                         |  |             | 28,681      |      |   | 21,196      |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total current assets                                                                                                                                                     |  |             | 76,069      |      |   | 79,776      |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Property and equipment, net of accumulated depreciation
of $377,778
  and $362,202, respectively                                                                         |  |             | 50,318      |      |   | 55,444      |  
|Deposits                                                                                                                                                                 |  |             |            |      |   | 13,192      |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total assets                                                                                                                                                             |  | $           | 126,387     |      | $ | 148,412     |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|LIABILITIES AND
  SHAREHOLDERS DEFICIT                                                                                                                                  |  |             |             |      |   |             |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Current Liabilities                                                                                                                                                      |  |             |             |      |   |             |  
|Current portion of notes payable
(including $1,387,987 and $1,343,484
  to related parties, respectively), net of debt discount of $71,520 and
  $54,284, respectively   |  | $           | 2,557,483   |      | $ | 2,486,716   |  
|Related party advance                                                                                                                                                    |  |             | 5,000       |      |   |            |  
|Accounts payable - trade                                                                                                                                                 |  |             | 156,474     |      |   | 129,196     |  
|Accrued payroll                                                                                                                                                          |  |             | 185,722     |      |   | 181,752     |  
|Accrued payroll taxes, penalties and
interest - current                                                                                                                  |  |             | 152,175     |      |   | 131,987     |  
|Deferred revenue                                                                                                                                                         |  |             | 6,239       |      |   | 13,148      |  
|Accrued interest, including $127,669
and $101,115 to related parties,
  respectively                                                                                     |  |             | 253,890     |      |   | 198,504     |  
|Other accrued liabilities                                                                                                                                                |  |             | 4,691       |      |   | 4,432       |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total current liabilities                                                                                                                                                |  |             | 3,321,674   |      |   | 3,145,735   |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Notes payable (including $75,000 and $304,500 to related
parties,
  respectively), less current portion and net of debt discount of $33,516 and
  $106,369, respectively |  |             | 103,984     |      |   | 344,131     |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Non-current accrued payroll taxes, penalties and
interest                                                                                                                |  |             | 56,910      |      |   | 70,916      |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total liabilities                                                                                                                                                        |  |             | 3,482,568   |      |   | 3,560,782   |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Commitments and Contingencies (Note 2)                                                                                                                                   |  |             |             |      |   |             |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Shareholders deficit                                                                                                                                                    |  |             |             |      |   |             |  
|Preferred stock - $0.001 par value;
15,000,000 shares authorized,                                                                                                        |  |             |             |      |   |             |  
|Series A convertible preferred stock - 1,575,000 shares issued and
  outstanding (liquidation value of $1,575,000)                                                       |  |             | 1,575       |      |   | 1,575       |  
|Series B convertible preferred stock -
768,183 shares issued and
  outstanding (liquidation value of $845,001)                                                           |  |             | 768         |      |   | 768         |  
|Common stock - $0.001 par value;
50,000,000 shares authorized,
  6,673,752 and 2,316,448 shares issued and outstanding, respectively                                     |  |             | 6,674       |      |   | 2,316       |  
|Additional paid-in capital                                                                                                                                               |  |             | 37,365,179  |      |   | 36,941,082  |  
|Accumulated deficit                                                                                                                                                      |  |             | (40,730,377 | )    |   | (40,358,111 | )
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total shareholders
deficit                                                                                                                                              |  |             | (3,356,181  | )    |   | (3,412,370  | )
|                                                                                                                                                                         |  |             |             |      |   |             |  
|                                                                                                                                                                         |  |             |             |      |   |             |  
|Total liabilities and
shareholders deficit                                                                                                                              |  | $           | 126,387     |      | $ | 148,412     |  
|                                                                                                                                                                         |  |             |             |      |   |             |  

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

2

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SECURECARE TECHNOLOGIES, INC. STATEMENTS OF OPERATIONS (UNAUDITED) 
For the Three Months Ended March 31, 2009 and 2008

|                                                                                    |  |      |           |      |   |           |  
|----------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | -
|                                                                                    |  | 2009 |           | 2008 |  
|                                                                                    |  |      |           |      |  
|                                                                                    |  |      |           |      |   |           |  
|Revenues                                                                            |  | $    | 63,050    |      | $ | 36,754    |  
|                                                                                    |  |      |           |      |   |           |  
|Operating expenses                                                                  |  |      |           |      |   |           |  
|Cost of revenues                                                                    |  |      | 31,776    |      |   | 24,588    |  
|Selling, general and
administrative                                                 |  |      | 308,901   |      |   | 487,631   |  
|                                                                                    |  |      |           |      |   |           |  
|                                                                                    |  |      |           |      |   |           |  
|Operating loss                                                                      |  |      | (277,627  | )    |   | (475,465  | )
|                                                                                    |  |      |           |      |   |           |  
|Other income (expense)                                                              |  |      |           |      |   |           |  
|Other income                                                                        |  |      |          |      |   | 161       |  
|Interest expense (including $32,154 and
$15,491 to related parties,
  respectively) |  |      | (94,640   | )    |   | (202,146  | )
|                                                                                    |  |      |           |      |   |           |  
|                                                                                    |  |      |           |      |   |           |  
|Net loss                                                                            |  | $    | (372,266  | )    | $ | (677,450  | )
|                                                                                    |  |      |           |      |   |           |  
|                                                                                    |  |      |           |      |   |           |  
|Net loss per common share - basic and diluted                                       |  | $    | (0.09     | )    | $ | (0.40     | )
|                                                                                    |  |      |           |      |   |           |  
|                                                                                    |  |      |           |      |   |           |  
|Weighted average number of common shares outstanding
-basic and
  diluted           |  |      | 3,925,746 |      |   | 1,711,189 |  
|                                                                                    |  |      |           |      |   |           |  

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

3

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SECURECARE TECHNOLOGIES, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) 
For the Three Months Ended March 31, 2009 and 2008

|                                                                              |  |      |          |      |   |          |  
|----------------------------------------------------------------------------- |  | ---- | -------- | ---- | - | -------- | -
|                                                                              |  | 2009 |          | 2008 |  
|                                                                              |  |      |          |      |  
|                                                                              |  |      |          |      |   |          |  
|Cash flows from operating activities                                          |  |      |          |      |   |          |  
|Net loss                                                                      |  | $    | (372,266 | )    | $ | (677,450 | )
|Adjustments to reconcile net loss to
net cash used in operating
  activities: |  |      |          |      |   |          |  
|Depreciation and amortization                                                 |  |      | 15,575   |      |   | 15,182   |  
|Bad debt expense                                                              |  |      |         |      |   | 442      |  
|Stock compensation expense                                                    |  |      | 14,211   |      |   | 12,356   |  
|Amortization of debt discount                                                 |  |      | 33,531   |      |   | 171,827  |  
|Increases and decreases in operating
assets and liabilities:                  |  |      |          |      |   |          |  
|Accounts receivable - trade                                                   |  |      | (1,244   | )    |   | (435     | )
|Prepaid expenses                                                              |  |      | (7,485   | )    |   | (2,913   | )
|Deposits                                                                      |  |      | 13,192   |      |   | (20,552  | )
|Deferred revenue                                                              |  |      | (6,909   | )    |   |         |  
|Accounts payable - trade                                                      |  |      | 27,278   |      |   | 5,985    |  
|Accrued liabilities                                                           |  |      | 71,398   |      |   | 37,196   |  
|                                                                              |  |      |          |      |   |          |  
|Cash flows used in operating
activities                                       |  |      | (212,719 | )    |   | (458,362 | )
|                                                                              |  |      |          |      |   |          |  
|Cash flows from investing activities                                          |  |      |          |      |   |          |  
|Capital expenditures                                                          |  |      | (10,450  | )    |   | (6,987   | )
|                                                                              |  |      |          |      |   |          |  
|Cash flows from financing activities                                          |  |      |          |      |   |          |  
|Related party advance                                                         |  |      | 25,000   |      |   |         |  
|Payments on related party
advance                                             |  |      | (20,000  | )    |   |         |  
|Proceeds from common stock
sale                                               |  |      | 130,730  |      |   |         |  
|Proceeds allocated to notes
payable                                           |  |      | 70,458   |      |   | 238,823  |  
|Proceeds allocated to common
stock                                            |  |      | 4,545    |      |   | 116,807  |  
|                                                                              |  |      |          |      |   |          |  
|Cash flows provided by financing
activities                                   |  |      | 210,733  |      |   | 355,630  |  
|                                                                              |  |      |          |      |   |          |  
|                                                                              |  |      |          |      |   |          |  
|Net decrease in cash and cash equivalents                                     |  |      | (12,436  | )    |   | (109,719 | )
|                                                                              |  |      |          |      |   |          |  
|Cash and cash equivalents, beginning of period                                |  |      | 39,594   |      |   | 161,680  |  
|                                                                              |  |      |          |      |   |          |  
|                                                                              |  |      |          |      |   |          |  
|Cash and cash equivalents, end of period                                      |  | $    | 27,158   |      | $ | 51,961   |  
|                                                                              |  |      |          |      |   |          |  
|                                                                              |  |      |          |      |   |          |  
|Supplemental disclosures for cash flow
information:                           |  |      |          |      |   |          |  
|                                                                              |  |      |          |      |   |          |  
|Interest paid                                                                 |  | $    |         |      | $ | 7,515    |  
|                                                                              |  |      |          |      |   |          |  
|                                                                              |  |      |          |      |   |          |  
|Supplemental non-cash financing activity:                                     |  |      |          |      |   |          |  
|                                                                              |  |      |          |      |   |          |  
|Conversion of notes payable and accrued
interest to common stock              |  | $    | 278,969  |      | $ |         |  
|                                                                              |  |      |          |      |   |          |  

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

4

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SECURECARE TECHNOLOGIES, INC.

NOTES TO INTERIM FINANCIAL
STATEMENTS (Unaudited)

NOTE 1. NATURE OF OPERATIONS

SecureCare Technologies,
Inc. (the Company) provides Internet-based document exchange and e-signature
solutions for the healthcare industry.

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

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

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

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

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

BASIS OF PRESENTATION

The unaudited financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
in accordance with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the financial information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Results of operations for the three-month period ended
March 31, 2009, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2009.

Certain prior period amounts
have been reclassified to conform to current presentation.

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-K for the year ended
December 31, 2008.

5

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GOING CONCERN

The financial statements have
been prepared on the assumption that the Company will continue as a going
concern. The Company sustained a net loss of $372,266 for the three months
ended March 31, 2009. The Company has accumulated losses through March 31, 2009
of $40,730,377 (including a non-recurring loss on early extinguishment of debt
totaling $19,030,648 incurred in the fourth quarter of 2006). Cash used in
operating activities for the period ended March 31, 2009 aggregated $212,719.
Total liabilities at March 31, 2009 of $3,482,568 significantly exceed total
assets of $126,387. The Company is unable to meet all of its short-term
obligations because of shortages of cash. The Companys continued existence
depends upon the success of managements efforts to raise additional capital necessary
to meet the Companys obligations as they come due, and to obtain sufficient
capital to execute its business plan. The Company intends to obtain capital
primarily through issuances of debt or equity. There can be no degree of
assurance that the Company will be successful in completing additional
financing transactions. Failure to generate additional revenues, raise
additional capital or manage discretionary spending could have a material
adverse effect on the Companys ability to continue as a going concern and to
achieve its intended business objectives. The accompanying unaudited financial
statements do not include any adjustments to reflect the possible effects on
the recoverability and classification of assets or classification of
liabilities which may result from the inability of the Company to continue as a
going concern.

RECENT ACCOUNTING PRONOUNCEMENT

In December 2007, the FASB
issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R). SFAS
141R will significantly change the accounting for business combinations in a
number of areas including the treatment of contingent consideration,
contingencies, acquisition costs, IPR&D and restructuring costs. In
addition, under SFAS 141R, changes in deferred tax asset valuation allowances
and acquired income tax uncertainties in a business combination after the
measurement period will impact income tax expense. SFAS 141R was effective for
the Company beginning January 1, 2009. The provisions of SFAS 141R will impact
the Company if it is a party to a business combination after the pronouncement
is adopted.

6

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NOTE 2. SUMMARY OF SIGNFICANT ACCOUNTING PRINCIPLES

REVENUE RECOGNITION

The Company derives its
revenues from the following healthcare provider sources - recurring monthly
service fees, one-time training and setup fees and integration and
customization services as contracted.

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

SOFTWARE AND SOFTWARE DEVELOPMENT COSTS

The Company capitalizes
costs related to computer software developed or obtained for internal use in
accordance with the American Institute of Certified Public Accountants
Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use and is depreciated using the
straight-line method over the estimated useful life of the software, generally
two years. At March 31, 2009, capitalized software development costs totaled
$235,750, less accumulated amortization of $222,052 and is included in property
and equipment in the accompanying balance sheet. No software development costs
were incurred or capitalized during the three month period ended March 31,
2009.

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
asset exceeds its fair value. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell.

PROPERTY AND EQUIPMENT

Property and equipment are
recorded at cost. The Company provides for depreciation of property and
equipment using the straight-line method over the estimated useful lives of the
depreciable assets ranging from two to five years. Maintenance and repairs are
expensed as incurred. Replacements and betterments are capitalized.
Depreciation expense for the three months ended March 31, 2009 and 2008 was
$15,575 and $15,182, respectively.

STOCK-BASED COMPENSATION

The Company accounts for
stock-based compensation in accordance with SFAS No. 123 (revised 2004),
Share-Based Payment,(SFAS No. 123R). 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 less
estimated forfeitures. Compensation cost is recognized over the awards
requisite service period. The Company grants newly issued shares of common
stock upon exercise of stock options.

7

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STOCK-BASED COMPENSATION (Continued)

The Company accounts for
equity instruments issued to non-employees in accordance with the provisions of
SFAS No. 123R and Emerging Issues Task Force (EITF) Issue No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services. All transactions
in which goods or services are the consideration received for the issuance of
equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date of the fair value of
the equity instrument issued is the earlier of the date on which the
counterpartys performance is complete or the date on which it is probable that
performance will occur.

2008 Plan

The Board of Directors of
the Company approved the SecureCare Technologies, Inc. 2008 Stock Option Plan
(the 2008 Plan) on July 2, 2008. The Company has reserved 500,000 shares of
common stock for issuance under the 2008 Plan. In accordance with the terms of
the 2008 Plan, the exercise price of each option granted may not be less than
the fair market value of common stock at the date of grant, without prior
approval of the Board of Directors. Options are exercisable according to the
terms set out in the option agreement, not to exceed ten years. All options
granted by the Company under its 2008 Plan are restricted stock awards under
rules promulgated by the Securities and Exchange Commission.

The Company granted 480,000
options under the 2008 Plan on July 29, 2008 at an exercise price of $0.75 per
share of which 310,000 options vested immediately and 170,000 options will vest
ratably over a two year period (24 months). On August 12, 2008, the Company
granted an additional 10,000 options under the 2008 Plan at an exercise price
of $1.01. These options will vest ratably over a two year period (24 months).
On October 1, 2008, the Company granted an additional 10,000 options under the
2008 Plan at an exercise price of $0.30. These options will vest ratably over a
two year period (24 months). Due to the resignation of one member of the Board
of Directors on November 16, 2008, a total of 10,000 vested options were
cancelled on February 16, 2009. Due to an employee who left the Company on
October 31, 2008 a total of 21,875 unvested options were forfeited on that date
and on January 31, 2009 a total of 3,125 options were cancelled. An additional
employee left the Company on January 28, 2009 and as a result 7,500 unvested
options were forfeited on that date.

At March 31, 2009, under the
2008 Plan, the Company had 457,500 options outstanding of which 353,333 were
exercisable.

2007 Plan

The Board of Directors of
the Company approved the SecureCare Technologies, Inc. 2007 Stock Option Plan
(the 2007 Plan) on August 15, 2007. The Company has reserved 425,000 shares
of common stock for issuance under the 2007 Plan. In accordance with the terms
of the 2007 Plan, the exercise price of each option granted may not be less
than the fair market value of common stock at the date of grant, without prior
approval of the Board of Directors. Options are exercisable according to the
terms set out in the option agreement, not to exceed ten years. All options
granted by the Company under its 2007 Plan are restricted stock awards under
rules promulgated by the Securities and Exchange Commission.

The Company granted 420,834
options under the 2007 Plan on August 15, 2007 at an exercise price of $0.80
per share of which 410,834 options vested immediately and 833 options vested
between August 15, 2007 and November 15, 2007. Due to an employee who left the Company
on November 15, 2007, 9,167 options were forfeited and on February 15, 2008,
833 options were cancelled. On February 22, 2008, the Company granted an
additional 10,000 options under the 2007 Plan at an exercise price of $1.25.
Those options vested immediately. On January 31, 2009, 56,667 vested options
were cancelled due to an employee who left the Company on October 31, 2008.

At March 31, 2009, under the
2007 Plan, the Company had 364,167 options outstanding, all of which were
exercisable.

2004 Plan

The Board of Directors of
the Company approved the SecureCare Technologies, Inc. 2004 Stock Option Plan
(the 2004 Plan) on December 31, 2004. The Company has reserved 10,000 shares
of common stock for issuance under the 2004 Plan. In accordance with the terms
of the 2004 Plan, the exercise price of each option granted may not be less
than the fair market value of common stock at the date of grant, without prior
approval of the Board of Directors. Options are exercisable according to the
terms set out in the option agreement, not to exceed ten years. All options
granted by the Company under its 2004 Plan are restricted stock awards under
rules promulgated by the Securities and Exchange Commission.

At March 31, 2009, under the
2004 Plan, the Company had 1,250 options outstanding, all of which were
exercisable.

For the three months ended
March 31, 2009 and 2008, the compensation expense associated with stock options
was $14,211 and $12,356, respectively.

8

---



STOCK-BASED COMPENSATION (Continued)

The following tables
summarize the activity under all stock option plans for the three months ended
March 31, 2009:

|                                              |  |                                     |         |                                     |   |                                                   |  |                             |              |  |   |   | 
|--------------------------------------------- |  | ----------------------------------- | ------- | ----------------------------------- | - | ------------------------------------------------- |  | --------------------------- | ------------ |  | - | - | 
|                                              |  | 2008
  Stock Option Plan            |        
|                                              |  |                                     |        
|                                              |  | Three
  Months Ended March 31, 2009 |        
|                                              |  |                                     |        
|                                              |  | Shares                              |         | Weighted
  Average
  Exercise Price |   | Weighted
  Average
  Remaining
  Contractual Term |  | Aggregate
  Intrinsic Value |             
|                                              |  |                                     |         |                                     |   |                                                   |  |                             |             
|Outstanding at January 1, 2009                |  |                                     | 478,125 |                                     | $ | 0.75                                              |  |                             | 9.59
  years |  | $ |  | 
|                                              |  |                                     |         |                                     |   |                                                   |  |                             |              |  |   |   | 
|Granted                                       |  |                                     |        |                                     | $ |                                                  |  |                             | 
  years    |  |   |   | 
|Exercised                                     |  |                                     |        |                                     | $ |                                                  |  |                             | 
  years    |  |   |   | 
|Cancelled                                     |  |                                     | (13,125 | )                                   | $ | 0.75                                              |  |                             | 
  years    |  |   |   | 
|Forfeitures                                   |  |                                     | (7,500  | )                                   | $ | 0.75                                              |  |                             | 
  years    |  |   |   | 
|                                              |  |                                     |         |                                     |   |                                                   |  |                             |              |  |   |   | 
|Outstanding at March 31, 2009                 |  |                                     | 457,500 |                                     | $ | 0.74                                              |  |                             | 9.34
  years |  | $ |  | 
|                                              |  |                                     |         |                                     |   |                                                   |  |                             |              |  |   |   | 
|                                              |  |                                     |         |                                     |   |                                                   |  |                             |              |  |   |   | 
|Vested and expected to vest at March 31, 2009 |  |                                     | 457,500 |                                     | $ | 0.74                                              |  |                             | 9.34
  years |  | $ |  | 
|Options exercisable at March 31, 2009         |  |                                     | 353,333 |                                     | $ | 0.74                                              |  |                             | 9.34
  years |  | $ |  | 

|                                              |  |                                     |         |                                     |   |                                                   |  |                             |              |  |   |   | 
|--------------------------------------------- |  | ----------------------------------- | ------- | ----------------------------------- | - | ------------------------------------------------- |  | --------------------------- | ------------ |  | - | - | 
|                                              |  | 2007
  Stock Option Plan            |        
|                                              |  |                                     |        
|                                              |  | Three
  Months Ended March 31, 2009 |        
|                                              |  |                                     |        
|                                              |  | Shares                              |         | Weighted
  Average
  Exercise Price |   | Weighted
  Average
  Remaining
  Contractual Term |  | Aggregate
  Intrinsic Value |             
|                                              |  |                                     |         |                                     |   |                                                   |  |                             |             
|Outstanding at January 1, 2009                |  |                                     | 420,834 |                                     | $ | 0.81                                              |  |                             | 8.62
  years |  | $ |  | 
|                                              |  |                                     |         |                                     |   |                                                   |  |                             |              |  |   |   | 
|Granted                                       |  |                                     |        |                                     | $ |                                                  |  |                             | 
  years    |  |   |   | 
|Exercised                                     |  |                                     |        |                                     | $ |                                                  |  |                             | 
  years    |  |   |   | 
|Cancelled                                     |  |                                     | (56,667 | )                                   | $ | 0.81                                              |  |                             | 
  years    |  |   |   | 
|Forfeitures                                   |  |                                     |        |                                     | $ |                                                  |  |                             | 
  years    |  |   |   | 
|                                              |  |                                     |         |                                     |   |                                                   |  |                             |              |  |   |   | 
|Outstanding at March 31, 2009                 |  |                                     | 364,167 |                                     | $ | 0.81                                              |  |                             | 8.35
  years |  | $ |  | 
|                                              |  |                                     |         |                                     |   |                                                   |  |                             |              |  |   |   | 
|                                              |  |                                     |         |                                     |   |                                                   |  |                             |              |  |   |   | 
|Vested and expected to vest at March 31, 2009 |  |                                     | 364,167 |                                     | $ | 0.81                                              |  |                             | 8.35
  years |  | $ |  | 
|Options exercisable at March 31, 2009         |  |                                     | 364,167 |                                     | $ | 0.81                                              |  |                             | 8.35
  years |  | $ |  | 

|                                              |  |                                     |       |                                     |   |                                                   |  |                             |              |  |   |   | 
|--------------------------------------------- |  | ----------------------------------- | ----- | ----------------------------------- | - | ------------------------------------------------- |  | --------------------------- | ------------ |  | - | - | 
|                                              |  | 2004
  Stock Option Plan            |      
|                                              |  |                                     |      
|                                              |  | Three
  Months Ended March 31, 2009 |      
|                                              |  |                                     |      
|                                              |  | Shares                              |       | Weighted
  Average
  Exercise Price |   | Weighted
  Average
  Remaining
  Contractual Term |  | Aggregate
  Intrinsic Value |             
|                                              |  |                                     |       |                                     |   |                                                   |  |                             |             
|Outstanding at January 1, 2009                |  |                                     | 1,250 |                                     | $ | 200.00                                            |  |                             | 5.92 years   |  | $ |  | 
|                                              |  |                                     |       |                                     |   |                                                   |  |                             |              |  |   |   | 
|Granted                                       |  |                                     |      |                                     | $ |                                                  |  |                             | 
  years    |  |   |   | 
|Exercised                                     |  |                                     |      |                                     | $ |                                                  |  |                             | 
  years    |  |   |   | 
|Cancelled                                     |  |                                     |      |                                     | $ |                                                  |  |                             | 
  years    |  |   |   | 
|Forfeitures                                   |  |                                     |      |                                     | $ |                                                  |  |                             | 
  years    |  |   |   | 
|                                              |  |                                     |       |                                     |   |                                                   |  |                             |              |  |   |   | 
|Outstanding at March 31, 2009                 |  |                                     | 1,250 |                                     | $ | 200.00                                            |  |                             | 5.67
  years |  | $ |  | 
|                                              |  |                                     |       |                                     |   |                                                   |  |                             |              |  |   |   | 
|                                              |  |                                     |       |                                     |   |                                                   |  |                             |              |  |   |   | 
|Vested and expected to vest at March 31, 2009 |  |                                     | 1,250 |                                     | $ | 200.00                                            |  |                             | 5.67
  years |  | $ |  | 
|Options exercisable at March 31, 2009         |  |                                     | 1,250 |                                     | $ | 200.00                                            |  |                             | 5.67
  years |  | $ |  | 

The aggregate intrinsic
value which is $0 at March 31, 2009 is calculated as the difference between the
exercise price of the underlying awards and the quoted price of the Companys
common stock, $0.07 at March 31, 2009.

The Company calculates the
fair value of each option award on the date of grant using the Black-Scholes
option-pricing model. There were no new options granted under any of the stock
option plans during the three months ended March 31, 2009.

As of March 31, 2009 there
was $73,825 in total unrecognized compensation costs related to unvested
options

9

---



CONTINGENCIES

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

USE OF ESTIMATES

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

INCOME TAXES

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

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

LOSS PER COMMON SHARE

Basic net loss per share is
computed by dividing net loss by the weighted average number of common shares
outstanding for the period. Diluted net loss per share is computed by dividing
net loss by the weighted average number of common shares and dilutive common
stock equivalents outstanding for the period. Common stock equivalents for the
three month periods ended March 31, 2009 and 2008 totaling 1,427,189 and
962,209, respectively, have been excluded from the computation since such
inclusion would have an anti-dilutive effect.

10

---



NOTE 3. NOTES PAYABLE

Notes payable at March 31,
2009 and December 31, 2008 consist of the following:

|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | --------- | ----------- | - | ------------ | - | ----------- | --------- | - | - | -------- | -
|                                                                                                                                                             |  | 2009         |           | 2008        |  
|                                                                                                                                                             |  |              |           |             |  
|                                                                                                                                                             |  | Short
  Term |           | Long
  Term |   | Short
  Term |   | Long
  Term |          
|                                                                                                                                                             |  |              |           |             |   |              |   |             |          
|Note payable to Phoebe Holdings, Inc. at 7.5%,
unsecured. Note is in
  default as of May 1, 2005. Interest rate increased to 9.5% after default.             |  | $            | 63,500    |             | $ |             |   | $           | 63,500    |   | $ |         |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|Related party note payable bearing interest at 6%,
unsecured. Note is
  in default as of December 3, 2008.                                                   |  |              | 75,000    |             |   |             |   |             | 75,000    |   |   |         |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|Related party note payable bearing interest at 6%,
unsecured.
  Principal and interest due August 17, 2009                                                   |  |              | 25,003    |             |   |             |   |             |          |   |   |         |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|Bridge Financing Summary                                                                                                                                     |  |              |           |             |   |              |   |             |           |   |   |          |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|Convertible bridge notes payable bearing interest at
7.5%, including
  $122,500 to related parties, unsecured. Principal and interest due December,
  2009   |  |              | 187,500   |             |   |             |   |             | 187,500   |   |   |         |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|Convertible bridge notes payable bearing interest at
7.5%, including
  $62,500 to related parties, unsecured. Principal and interest due January,
  2010     |  |              | 62,500    |             |   |              |   |             |          |   |   | 62,500   |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|Convertible bridge notes payable bearing interest at
7.5%, including
  $167,000 to related parties, unsecured. Principal and interest due February,
  2010   |  |              | 250,500   |             |   |              |   |             |          |   |   | 250,500  |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|Convertible bridge notes payable bearing interest at
7.5%, including
  $50,000 to related parties, unsecured. Principal and interest due April, 2010         |  |              |          |             |   | 82,500       |   |             |          |   |   | 82,500   |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|Convertible bridge notes payable bearing interest at
7.5%, including
  $25,000 to related parties, unsecured. Principal and interest due May, 2010           |  |              |          |             |   | 55,000       |   |             |          |   |   | 55,000   |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|Bridge notes payable bearing interest at 9%, including
$935,984 to
  related parties, unsecured. Principal and interest due December 31, 2009                |  |              | 1,965,000 |             |   |             |   |             | 1,965,000 |   |   |         |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|Bridge notes payable bearing interest at 8%, including
$210,000 to
  related parties, unsecured. Principal and interest converted to common stock
  in 2009. |  |              |          |             |   |             |   |             | 250,000   |   |   |         |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|                                                                                                                                                             |  | $            | 2,629,003 |             | $ | 137,500      |   | $           | 2,541,000 |   | $ | 450,500  |  
|Less: unamortized debt
discount                                                                                                                              |  |              | (71,520   | )           |   | (33,516      | ) |             | (54,284   | ) |   | (106,369 | )
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  
|Total notes payable                                                                                                                                          |  | $            | 2,557,483 |             | $ | 103,984      |   | $           | 2,486,716 |   | $ | 344,131  |  
|                                                                                                                                                             |  |              |           |             |   |              |   |             |           |   |   |          |  

11

---



NOTE 3. NOTES PAYABLE (Continued)

Bridge
Financing Summary  Notes Payable Issued January 2009 through March 2009

On September 22, 2008 the
Board of Directors approved the issuance of a new series of notes payable (the
New Notes) totaling $500,000 maturing on December 31, 2009, with a stated
interest rate of 8% per annum with principal and interest payable at maturity.
The New Notes have attached shares of the Companys common stock in the form of
one share of common stock for each $1.00 invested into the offering for a total
of up to 500,000 shares to be issued.

From January 1, 2009 through
March 31, 2009 the Company received a total of $50,000 in gross proceeds from
the New Notes. In addition, the Company issued 50,000 shares of common stock to
the participating investors. These shares were valued at $0.10 per share based
on the fair value of the Companys common stock on the date of issuance
resulting in a total fair value of $5,000. The Company allocated the proceeds
received between the notes payable and the shares of common stock issued based
on their relative fair values at the date of issuance. Based on the relative
fair value calculations, the Company allocated $4,545 of the $50,000 in
proceeds to the shares of common stock issued and the remaining $45,455 to the
notes payable. The debt discount amount of $4,545 is being amortized as a
component of interest expense over the life of the notes (eleven months).

From October 1, 2008 through
March 31, 2009 the Company received a total of $300,000 in gross proceeds from
the New Notes. In addition, the Company issued 300,000 shares of common stock
to the participating investors. These shares were valued at a range of $0.10 to
$0.30 per share based on the fair value of the Companys common stock on the
date of issuance resulting in a total fair value of $40,500. The Company
allocated the proceeds received between the notes payable and the shares of
common stock issued based on their relative fair values at the date of
issuance. Based on the relative fair value calculations, the Company allocated
$34,661 of the $300,000 in proceeds to the shares of common stock issued and
the remaining $265,339 to the notes payable. The debt discount amount of
$34,661 was being amortized as a component of interest expense over the life of
the notes (eleven to fifteen months).

Effective February 1, 2009
the Company made an offer to the holders of the New Notes, representing
$300,000 in principal amount outstanding, to convert the New Notes to shares of
the Companys common stock at a rate of one share of common stock to be issued
for each $0.10 in principal amount converted for a total of up to 3,000,000
shares of common stock to be issued (the Offer). On February 1, 2009, the
date of the Offer, the holders of the New Notes, twelve note holders in total,
owned 59.5% of the outstanding common stock of the Company. As of March 4,
2009, the Company had received signed consents from the twelve New Note holders
consenting to the conversion offer representing the entire $300,000 in
principal amount outstanding. As of the date of conversion of the individual
New Notes, which occurred between February 17, 2009 and March 4, 2009, the
Company had accrued interest totaling $5,600. Payment of this accrued interest
was waived by the consenting note holders. In addition, the Company had
amortized $8,029 of the debt discount on the New Notes which originally totaled
$34,661; therefore the unamortized debt discount on the New Notes totaled
$26,631 as of the date of the conversion of the individual New Notes. The Company
accounted for this conversion of New Notes into 3,000,000 shares of common
stock as a capital contribution by the twelve note holders, who owned 59.5% of
the outstanding common stock of the Company on the Offer date, February 1, 2009
and who owned 72.1% of the outstanding common stock of the Company on March 31,
2009.

Bridge
Financing Summary  Funding Received June 2007 through July 2008

On June 13, 2007, the Board
of Directors approved, effective June 1, 2007, the issuance of a series of
Notes Payable (the Financing) totaling $1,500,000 maturing on December 31,
2008, with a stated interest rate of 6% per annum, with principal and interest
payable at maturity. The Company has the option to extend the maturity date of
the notes an additional twelve months. The stated interest rate on these notes
during the optional extension period is 9% per annum.

On April 2, 2008, the Board
of Directors approved a $500,000 increase (the Extension) to the $1,500,000
Financing, initially approved June 13, 2007, to a total of $2,000,000. The
Financing and Extension Notes Payable have attached shares of the Companys
stock in the form of one share of common stock for each $2.50 invested into the
offering for a total of up to 800,000 shares of common stock to be issued, of
which 786,000 shares have been issued as of December 31, 2008.

From January 1, 2008 through
December 31, 2008 the Company received a total of $1,008,500 in gross proceeds
from the Financing and Extension. In addition, the Company issued 403,400 shares
of common stock to the participating investors. These shares were valued at a
range of $0.51 to $1.65 per share based on the fair value of the Companys
common stock on the date of issuance resulting in a total fair value of
$1,397,936. The Company allocated the proceeds received between the notes
payable and the shares of common stock issued based on the relative fair values
at the date of issuance. Based on the relative fair value calculations, the
Company allocated $276,176 of the $1,008,500 in proceeds to the shares of
common stock issued and the remaining $732,324 to the notes payable. At
December 31, 2008 the debt discount amount of $276,176 had been fully amortized
as a component of interest expense over the original life of the notes.

12

---



NOTE 3. NOTES PAYABLE (Continued)

As of March 31, 2009, the
Company has received a total of $1,965,000 in gross proceeds from issuance of
notes payable in the Financing and the Extension. In addition, the Company has
issued 786,000 shares of common stock to the participating investors. These
shares were valued at a range of $0.51 to $6.00 per share based on the fair
value of the Companys common stock on the date of issuance resulting in a
total fair value of $3,359,636. The Company allocated the proceeds received
between the notes payable and the shares of common stock issued based on the
relative fair values at the date of issuance. Based on the relative fair value
calculations, the Company allocated $693,260 of the $1,965,000 in proceeds to
the shares of common stock issued and the remaining $1,271,740 to the notes
payable. The debt discount amount of $693,260 has been fully amortized as a
component of interest expense over the original life of the notes.

In November 2008, the
Company notified the holders of the Notes Payable issued in the Financing and
the Extension, totaling $1,965,000 in principal amount of the 6% notes payable,
initially due December 31, 2008, that it was exercising its option to extend
the maturity date one year to December 31, 2009. Effective January 1, 2009, the
interest rate on these notes increased to 9% per annum.

Bridge
Financing Summary  Funding Received December 2006 through May 2007

At March 31, 2009, the
Company has $638,000 in outstanding two year 6% convertible bridge notes payable
(convertible to common stock at a rate of $2.50 per share for a total of up to
255,200 shares to be issued), for which the Company has issued 255,200
warrants to purchase common stock at $5.00 per share. These warrants were
valued at a range of $5.91 to $29.91 per warrant resulting in a total fair
value of $3,249,819. The Company allocated the proceeds received between the
notes payable and the detachable warrants based on the relative fair values at
the date of issuance. Based on the relative fair value calculations, the
Company allocated $512,817 of the $638,000 in proceeds to the detachable
warrants and the remaining $125,183 to the notes payable. The notes also
contained a conversion feature allowing the note holders to convert the notes
into common shares at a conversion price of $2.50 per share. The Company
calculated a beneficial conversion feature in the amount of $3,146,817;
however, the value of the beneficial conversion feature may not exceed the
proceeds allocated to the notes payable under the relative fair value
calculations. As a result, the value of the beneficial conversion feature is
limited to $125,183, which is the amount of the proceeds allocated to notes
payable. The debt discount amount of $638,000 ($512,817 related to the fair value
of the warrants and $125,183 related to the beneficial conversion feature) was
being amortized as a component of interest expense over the original life of
the notes (twenty-four months).

On August 6, 2008, the Board
of Directors approved a Note Extension Terms and Conditions Offer (the
Offer), to the note holders who have invested in this financing, totaling
$638,000 in principal amounts between December 2006 and May 2007 (the Notes).
The Notes and the related accrued interest originally matured between December
2008 and May 2009; however, the Offer included a one-year extension of the
maturity date of the Notes. In exchange for agreeing to the one-year extension,
the Note holders were offered an increased interest rate from 6% to 7.5% during
the extension period, a re-pricing of the stock purchase warrants sold in
connection with the Notes from $5.00 per share to $2.50 per share, and the
Offer granted the Note holders the right, exercisable at their sole discretion,
to receive common stock at a price of $1.50 per share in lieu of accrued
interest at the extended maturity date (representing a total of up to 67,420
shares of common stock to be issued). An analysis of the fair value of the
warrants after the Offer consideration resulted in immaterial changes to the
original fair value calculation; therefore, no accounting adjustment has been
made, with the exception of the debt discount amortization, which the remaining
amount is now being amortized over the 12 month extension period.

As of September 30, 2008 the
Company had received written consents to the Offer from Note holders
representing the entire $638,000 principal amount of notes outstanding.

Other

In 2008, the Company paid
interest of $11,640 on the portion of the $638,000 in principal of notes
outstanding that required semi-annual interest payments. As of December 31,
2008, upon acceptance of the Offer by all the Note holders representing the
entire $638,000 principal amount of notes outstanding, all of the Notes now
require payment of interest at the extended maturity date.

As of March 31, 2009, the
Company is in default on the principal amount of $63,500 in an unsecured note
payable and $75,000 in an unsecured related party note payable. The related
party waived the Companys non-compliance with the terms of the note as of
March 31, 2009.

On February 17, 2009 the
Company issued a six-month, 6% unsecured note totaling $25,003 to a related
party.

On February 25, 2009, the
Company received a short-term operating advance from a related party in the
amount of $25,000. A portion of this related-party advance was repaid on March
30, 2009. As of March 31, 2009 the outstanding balance on the short-term,
related party operating advance is $5,000.

13

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NOTE 3. NOTES PAYABLE (Continued)

Future maturities of notes
payable at March 31, 2009 are as follows:

|      |  |   |           | 
|----- |  | - | --------- | 
|2009  |  | $ | 2,629,003 | 
|2010  |  |   | 137,500   | 
|      |  |   |           | 
|      |  |   |           | 
|Total |  | $ | 2,766,503 | 
|      |  |   |           | 

NOTE 4. SHAREHOLDERS DEFICIT

During the three months
ended March 31, 2009, in conjunction with $50,000 in gross proceeds from
issuance of notes payable (the New Notes), the Company issued 50,000 shares
of common stock to the participating investors (see Note 3 for additional
information).

Effective February 1, 2009
the Company made an offer to the holders of the New Notes, representing
$300,000 in principal amount outstanding, to convert the New Notes to shares of
the Companys common stock at a rate of one share of common stock to be issued
for each $0.10 in principal amount converted for a total of up to 3,000,000 shares
of common stock to be issued (the Offer). On February 1, 2009, the date of
the Offer, the holders of the New Notes, twelve note holders in total, owned
59.5% of the outstanding common stock of the Company. As of March 4, 2009, the
Company had received signed consents from the twelve New Note holders
consenting to the conversion offer representing the entire $300,000 in
principal amount outstanding and waiving the accrued interest on the New Notes,
through the conversion dates that totaled $5,600. The Company accounted for
this conversion of New Notes into 3,000,000 shares of common stock as a capital
contribution by the twelve note holders, who owned 59.5% of the outstanding
common stock of the Company on the Offer date, February 1, 2009 and who owned 72.1%
of the outstanding common stock of the Company on March 31, 2009 (see Note 3
for additional information). The net carrying amount of the debt plus accrued
interest on the date of conversion totaled $278,969 and approximated the fair
value of the 3,000,000 shares issued in conversion of the New Notes, based on
the closing market price of the stock issued on the date of conversion.

Effective February 1, 2009
the Company commenced a $400,000 fund raise (the Fund Raise) to provide the
Company with additional working capital through an offering of its common stock
to qualified investors, at a price of $0.10 per share for up to 4,000,000
shares of common stock to be issued if the entire $400,000 in funds is raised.
From February 1, 2009 through March 31, 2009, the Company raised a total of
$130,730 in funds from its Fund Raise and the Company issued 1,307,304 shares
of common stock to the participating investors. Of the 1,307,304 shares issued
in the Fund Raise, 1,182,304 shares were issued to investors who owned shares
of common stock of the Company prior to the Fund Raise and 125,000 shares were
issued to an investor who was not an owner of common stock of the Company prior
to the Fund Raise.

NOTE 5. ACCRUED PAYROLL TAXES

At March 31, 2009, the
Company owes $140,722 in accrued payroll taxes and $68,363 in related penalties
and interest, the majority of which is related to taxes owed from calendar year
2005. These amounts are classified as follows on the accompanying balance
sheet:

|                       |  |         |         |             |   |        |  |   |         | 
|---------------------- |  | ------- | ------- | ----------- | - | ------ |  | - | ------- | 
|                       |  | Current |         | Non-Current |   | Total  | 
|                       |  |         |         |             |   |        | 
|                      
|Accrued payroll taxes  |  | $       | 106,297 |             | $ | 34,425 |  | $ | 140,722 | 
|Penalties and interest |  |         | 45,878  |             |   | 22,485 |  |   | 68,363  | 
|                       |  |         |         |             |   |        |  |   |         | 
|Total                  |  | $       | 152,175 |             | $ | 56,910 |  | $ | 209,085 | 
|                       |  |         |         |             |   |        |  |   |         | 

The Company received a
Notice of Federal Tax Lien by the Internal Revenue Service (IRS) dated May 24,
2006 (Lien). The Lien was filed with the Secretary of State in Texas. The
Lien is in favor of the United States on all property and rights to property
belonging to the Company for the amount of these taxes, and additional
penalties, interest, and costs that may accrue. The Lien will remain in place
until such time that the Company pays its obligations in full to the IRS. On
March 1, 2007 the Company commenced an IRS-approved five year monthly payment
plan to pay a majority of the delinquent payroll taxes and related interest and
penalties totaling $111,697 at March 31, 2009. The Company will make monthly
payments of $5,000 over the course of the five year plan.

14

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NOTE 5. ACCRUED PAYROLL TAXES (Continued)

On March 27, 2009 the
Company received an Inquiry Regarding Records from the Employment Development
Department of the State of California (EDD) related to information requested
for the EDD to commence an audit of the Companys payroll history in the State
of California from July 1, 2003 through March 31, 2009. The EDD audit was
completed and the Company received a Proposed Notice of Assessment on April 8,
2009 in the amount of $65,537, including $50,929 for withholding taxes,
unemployment insurance, employment training taxes and disability insurance and
$14,608 in additional penalties and interest due to the state of California
related to payroll periods from July 1, 2003 through March 31, 2009. In
accordance with the Proposed Notice of Assessment, the Company accrued an
additional $6,907 in penalties and interest at March 31, 2009. At March 31,
2009, the Company has accrued a total of $65,537 for amounts owed to the EDD.
The Company is currently working with the EDD to commence an installment
payment agreement for the total amounts owed, in which the Company will make an
approximate 10% payment at the beginning of the installment agreement period,
of $7,000, and the remainder of the amounts owed would be paid on a twenty four
month installment agreement of approximately $2,600 per month. The Company
anticipates the installment agreement will commence in May, 2009. As of the
date of this filing the installment agreement has not commenced. The total
amounts owed to the EDD are classified as a current liability in the
accompanying balance sheet. The EDD has informed the Company that upon approval
of the installment agreement a Notice of State Tax Lien will be filed for the
outstanding liabilities.

NOTE 6. SUBSEQUENT EVENTS

From April 1, 2009 through
May 14, 2009 the Company raised an additional $101,696 in funds from its Fund
Raise and the Company issued an additional 1,016,960 shares of common stock to
the participating investors, all of whom previously owned shares of common
stock of the Company. As of May 14, 2009 the Company has a total of 7,690,712
shares of common stock issued and outstanding.

15

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

Forward Looking Statements

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

OVERVIEW

SecureCare Technologies,
Inc. (the Company) provides Internet-based document exchange and e-signature
solutions for the healthcare industry.

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

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

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

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

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

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

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

16

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REVENUE RECOGNITION

The Company derives its
revenues from the following healthcare provider sources - recurring monthly
service fees, one-time training and setup fees and integration and
customization services as contracted.

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

SOFTWARE AND SOFTWARE DEVELOPMENT COSTS

The Company capitalizes
costs related to computer software developed or obtained for internal use in
accordance with the American Institute of Certified Public Accountants
Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use and is depreciated using the
straight-line method over the estimated useful life of the software, generally
two years. SOP 98-1 provides guidance on determining whether computer software
is internal-use software and guidance on accounting for proceeds of computer
software originally developed or obtained for internal use and then
subsequently sold to the public. It also provides guidance on capitalization of
the costs incurred for computer software developed or obtained for internal
use.

LONG-LIVED ASSETS

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

STOCK-BASED COMPENSATION

The Company accounts for
stock-based compensation in accordance with SFAS No. 123 (revised 2004),
Share-Based Payment, (SFAS No. 123R). 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 less
estimated forfeitures. Compensation cost is recognized over the awards
requisite service period. The Company grants newly issued shares of common
stock upon exercise of stock options.

The Company accounts for
equity instruments issued to non-employees in accordance with the provisions of
SFAS No. 123R and Emerging Issues Task Force (EITF) Issue No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services. All transactions
in which goods or services are the consideration received for the issuance of
equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date of the fair value
of the equity instrument issued is the earlier of the date on which the
counterpartys performance is complete or the date on which it is probable that
performance will occur.

17

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RESULTS OF OPERATIONS

Three months ended March 31,
2009 compared to three months ended March 31, 2008:

Revenues for the three
months ended March 31, 2009 were $63,050 compared to $36,754 for the three
months ended March 31, 2008. This 72% increase in sales is primarily attributed
to revenue from the Companys new flagship product, Sfax. The Company launched
Sfax, with its initial functionality in October of 2007. The Company completed
significant functionality upgrades in February of 2008 with the addition of the
Digital Signature and annotation features. In March of 2008 the Company
completed development of its web service integration tools to provide its
channel partners, health care information technology (HIT) companies and
software vendors, with a simple, rapid and cost-effective method of integrating
Sfax into any application architecture.

Costs of revenues were
$31,776 for the three months ended March 31, 2009 compared to $24,588 for the
three months ended March 31, 2008. This 29% increase is primarily attributable
to Telco infrastructure and related costs associated with growth in the
Companys Sfax product, coupled with a one-time Telco-related expense credit
that was received in the first quarter of 2008.

Selling, general and
administrative expenses were $308,901 for the three months ended March 31, 2009
compared to $487,631 for the three months ended March 31, 2008. This 37%
decrease in expense was primarily attributable to a series of cost reduction
actions the Company instituted in mid-2008 that focused on conserving its
available cash without sacrificing its revenue growth-related investments. People
and people-related expenses decreased approximately $111,000 primarily due to
lower salaries and wages of $41,000 resulting from fewer employees in 2009,
lower human resource consulting fees of $26,000 due to placement fees paid in
2008 for new employees hired, lower penalties and interest on employment taxes
owed of $21,000 and lower travel and entertainment expenses of $20,000.
Investor and public relations expenses decreased $20,900 in 2009 as a result of
the Company terminating these services in mid-2008. Professional fees,
including legal, audit and taxation services and SOX compliance consulting
services decreased $27,800 in 2009, primarily due to the one-time SOX 404
internal control compliance documentation and related costs incurred in the
first quarter of 2009. Occupancy costs were $14,900 lower in 2009 resulting
from lower property taxes paid after the Company was successful in getting the
assessed value of the Companys property base lowered by the property tax
authorities. Marketing and related costs were $3,800 lower in 2009. All other
corporate general and administrative expenses were $8,400 lower. Offsetting
these lower expenses was a non-recurring credit in the first quarter of 2008
for statutory accounts payable adjustments made totaling $10,400.

Interest expense for the
three months ended March 31, 2009 was $94,640 compared to $202,146 for the same
period in 2008. Debt discount amortization in 2009 was $138,296 lower than 2008
as the majority of the debt discount associated with the issuance of notes
payable from December 2006 through December 2008 has been amortized, in
accordance with the life of the notes. The issuance of notes payable in 2008
and in the first quarter of 2009 coupled with an increase in the stated
interest rate on certain portions of the Companys outstanding debt contributed
to an increase in interest expense in 2009 of $31,478 (see Note 3 for
additional information).

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows used in
operating activities for the three-month period ended March 31, 2009 totaled
$212,719. Net cash flows used in operating activities for the three-month
period ended March 31, 2008 was $458,362. The decrease was primarily
attributable to a series of cost reduction actions the Company instituted in
mid-2008 that focused on conserving its available cash without sacrificing its
revenue growth-related investments, coupled with the favorable effects of
increases in accounts payable trade and accrued liabilities.

Cash flows used in investing
activities totaled $10,450 and $6,987 for the three months ended March 31, 2009
and 2008, respectively, and consisted entirely of capitalized expenditures.

Net cash provided by
financing activities was $210,733 for the three months ended March 31,2009 and
consisted of proceeds from the issuance of notes payable, proceeds from a
related-party advance and proceeds from the sale of the Companys common stock,
partially offset by a partial repayment of the related-party advance. Net cash
provided by financing activities was $355,630 for the three months ended March
31, 2008 and consisted entirely of proceeds from the issuance of notes payable.

The Company has limited cash
resources and intends to raise additional capital through the issuance of debt
or equity in order to sustain operations. 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.

18

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LIQUIDITY AND CAPITAL RESOURCES (Continued)

The financial statements
have been prepared on the assumption that the Company will continue as a going
concern. The Company sustained a net loss of $372,266 for the three months
ended March 31, 2009. The Company has accumulated losses through March 31, 2009
of $40,730,377 (including a non-recurring loss on early extinguishment of debt
totaling $19,030,648 incurred in the fourth quarter of 2006). Cash used in
operating activities for the period ended March 31, 2009 aggregated $212,719.
Total liabilities at March 31, 2009 of $3,482,568 significantly exceed total
assets of $126,387. The Company is unable to meet all of its short-term
obligations because of shortages of cash. The Companys continued existence
depends upon the success of managements efforts to raise additional capital
necessary to meet the Companys obligations as they come due, and to obtain
sufficient capital to execute its business plan. The Company intends to obtain
capital primarily through issuances of debt or equity. There can be no degree
of assurance that the Company will be successful in completing additional
financing transactions. Failure to generate additional revenues, raise
additional capital or manage discretionary spending could have a material
adverse effect on the Companys ability to continue as a going concern and to
achieve its intended business objectives. The accompanying unaudited financial
statements do not include any adjustments to reflect the possible effects on
the recoverability and classification of assets or classification of liabilities
which may result from the inability of the Company to continue as a going
concern.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

From January 1, 2009 through
March 31, 2009 the Company issued $16,300 in 8% notes payable initially due
December 31, 2009 and these notes had attached shares of the Companys common
stock totaling 16,300 shares in accordance with the terms and conditions of the
New Notes to parties classified as related parties at March 31, 2009 (see Note
3 for additional information related to the New Notes).

From October 1, 2008 through
March 31, 2009 the Company issued a total of $226,300 in 8% notes payable
initially due December 31, 2009 and the notes had attached shares of the
Companys common stock totaling 226,300 shares in accordance with the terms and
conditions of the New Notes to parties classified as related parties at March
31, 2009.

Effective February 1, 2009
the Company made an offer to the holders of the New Notes, representing a total
of $300,000 in principal amount outstanding, including $226,300 to related
parties, to convert the New Notes to shares of the Companys common stock at a
rate of one share of common stock to be issued for each $0.10 in principal
amount converted for a total of up to 3,000,000 shares of common stock to be
issued, including 2,263,000 to be issued to the related parties (the Offer).
On February 1, 2009, the date of the Offer, the holders of the New Notes,
twelve note holders in total, six of whom are classified as related parties,
owned 59.5% of the outstanding common stock of the Company. As of March 4,
2009, the Company had received signed consents from the twelve New Note holders
consenting to the conversion offer representing the entire $300,000 in
principal amount outstanding. The Company accounted for this conversion of New
Notes into 3,000,000 shares of common stock (2,263,000 shares issued to related
parties) as a capital contribution by the twelve note holders, who owned 59.5%
of the outstanding common stock of the Company on the Offer date, February 1,
2009 and who owned 72.1% of the outstanding common stock of the Company on
March 31, 2009.

At March 31, 2009, the
Company has outstanding $1,462,987 in related party notes payable, including
$50,000 payable to Joseph Larter, Director, $293,510 payable to entities in
which Joseph Larter, Director, exercises a direct control and $50,000 payable
to Dennis Nasto, Chief Executive Officer and Director.

A total of $427,000 of these
related party notes payable were initially issued as two year, 6% convertible
bridge notes (convertible to common stock at a rate of $2.50 per share for a
total of up to 170,800 shares to be issued), for which the Company issued
170,800 warrants to purchase common stock at $5.00 per share. These related
party notes initially began maturing in December of 2008 through May of 2009.
On August 6, 2008, the Board of Directors approved a Note Extension Terms and
Conditions Offer (the Offer), to the note holders who have invested in this
financing, totaling $638,000 in principal amount ($427,000 to related parties)
between December 2006 and May 2007 (the Notes). The Notes and the related
accrued interest originally matured between December 2008 and May 2009;
however, the Offer included a one-year extension of the maturity date of the
Notes. In exchange for agreeing to the one-year extension the Note holders were
offered an increased interest rate from 6% to 7.5% during the extension period,
a re-pricing of the stock purchase warrants sold in connection with the Notes
from $5.00 per share to $2.50 per share, and the Offer granted the Note holders
the right, exercisable at their sole discretion, to receive common stock at a
price of $1.50 per share in lieu of accrued interest at the extended maturity
date (representing a total of up to 45,380 related party shares of common stock
to be issued). As of September 30, 2008 the Company had received written
consents to the Offer from Note holders representing the entire $638,000 in
principal amount ($427,000 to related parties) of notes outstanding.

A total of $935,984 of these
related party notes payable are 6% notes payable initially due December 31,
2008 with principal and interest payable at maturity and these notes had
attached shares of the Companys common stock totaling 374,394 shares in
accordance with the terms and conditions of the notes. In November of 2008, the
Company notified the related party holders of the $935,984 in principal amount
of the 6% notes payable, initially due December 31, 2008, that it was exercising
its option to extend the maturity date one year to December 31, 2009. Effective
January 1, 2009, the interest rate on these notes increased to 9% per annum.

19

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)

At March 31, 2009 the
Company has outstanding a $75,000 six month 6% unsecured note payable to a
related party. Principal and accrued interest on this note, totaling $78,708 at
March 31, 2009, was initially due December 3, 2008. At December 31, 2008 the
Company was in default on the note. The holder of the note waived the Companys
non-compliance with the terms of the note as of March 31, 2009.

At March 31, 2009 the
Company has outstanding a $25,003 six month 6% unsecured note payable to a
related party. Principal and interest on this note is due August 17, 2009.

At March 31, 2009, the
Company has $127,669 in accrued interest due on the notes payable to related
parties.

Effective February 1, 2009
the Company commenced a $400,000 fund raise to provide the Company with
additional working capital through an offering of its common stock to qualified
investors, at a price of $0.10 per share for up to 4,000,000 shares of common
stock to be issued if the entire $400,000 in funds is raised. From February 1,
2009 through March 31, 2009, the Company raised a total of $130,734 in funds
from its Fund Raise, including $67,655 from parties classified as related
parties at March 31, 2009 and the Company issued 1,307,304 shares of common
stock to the participating investors, including 676,550 shares issued to
related parties. Of the 1,307,304 shares issued in the Fund Raise, 1,182,304
shares were issued to investors who owned shares of common stock of the Company
prior to the Fund Raise and 125,000 shares were issued to an investor who was
not an owner of common stock of the Company prior to the Fund Raise.

ITEM 4. CONTROLS AND PRODCECURES

(a) Evaluation of Disclosure Controls and Procedures

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

As of March 31, 2009, we
carried out an evaluation, under the supervision and with the participation of
our management, including our Principal Executive Officer and Principal
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934. Based upon that evaluation, our
Principal Executive Officer and Principal Financial Officer concluded that our
disclosure controls and procedures are effective in enabling us to record,
process, summarize and report information required to be included in our
periodic SEC filings within the required time period.

(b) Changes in Internal Controls

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

20

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PART II 
OTHER INFORMATION

Item 1. Legal Proceedings

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

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

4.1   Form of 8% Promissory
Note, initially due December 31, 2009 (1)

4.2   Bridge Financing Form of
Subscription Agreement Effective October 1, 2008 (1)

4.3   Form of 6%, 6 Month
Promissory Note issued February 17, 2009

4.4   Form of Subscription
Agreement for Exchange Offer (2)

4.5   Form of Subscription
Agreement for Stock Offer (2)

4.6   Form of Revised
Subscription Agreement for Stock Offer (3)

31.1   Certifications of the
Chief Executive Officer pursuant to Rule 13a-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

31.2   Certifications of the
Chief Financial Officer pursuant to Rule 13a-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

32.1   Certifications of the
Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002

32.2   Certifications of the
Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002

(1)   Incorporated by
reference to the Companys Annual Report 10-K for the year-ended December 31,
2008.

(2)   Incorporated by
reference to the Companys Form 8-K dated February 17, 2009 and filed with the
Commission on February 23, 2009

(3)   Incorporated by
reference to the Companys Form 8-K dated April 30, 2009 and filed with the
Commission on May 4, 2009

21

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b)    REPORTS ON FORM 8-K

On May 4, 2009 the Company
filed a Form 8-K, dated April 30, 2009 reporting under Item 3.02 Unregistered
Sales of Equity Securities that the Company had sold an aggregate of more than
5% of its previously reported issued and outstanding shares of common stock

On April 2, 2009 the Company
filed a Form 8-K, dated March 30, 2009 reporting under Item 3.02 Unregistered
Sales of Equity Securities that the Company had sold an aggregate of more than
5% of its previously reported issued and outstanding shares of common stock

On March 5, 2009 the Company
filed a Form 8-K, dated February 27, 2009 reporting under Item 3.02
Unregistered Sales of Equity Securities that the Company had sold an
aggregate of more than 5% of its previously reported issued and outstanding shares
of common stock

On February 23, 2009 the
Company filed a Form 8-K, dated February 17, 2009 reporting under Item 3.02
Unregistered Sales of Equity Securities that the Company had sold an
aggregate of more than 5% of its previously reported issued and outstanding
shares of common stock

22

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SIGNATURES

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

|                   |                                 |                                               
|------------------ | ------------------------------- | ----------------------------------------------
|                   | SECURECARE TECHNOLOGIES,
  INC.
|                   |                                 |                                               
|                   | By:                             | /s/ DENNIS NASTO                              
|                   |                                 |                                               
|                   |                                 | DENNIS NASTO                                  
|                   |                                 | Chief Executive Officer
  and Director        
|                   |                                 | (Principal Executive
  Officer)               
|                   |                                 |                                               
|                   |                                 |                                               
|                   | By:                             | /s/ NEIL BURLEY                               
|                   |                                 |                                               
|                   |                                 | NEIL BURLEY                                   
|                   |                                 | Chief Financial Officer                       
|                   |                                 | (Principal Financial and
  Accounting Officer)
|                   |                                 |                                               
|Date: May 14, 2009 |                                

23

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