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

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FORM 10-K

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|  |                                                                                      
|- | -------------------------------------------------------------------------------------
|x | ANNUAL REPORT PURSUANT TO
 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

OR

|  |                                                                                          
|- | -----------------------------------------------------------------------------------------
|o | TRANSITION REPORT PURSUANT
 TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to _________

Commission File Number: 0-29804

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

|                                                                |  |                                     
|--------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                          |  | 82-0255758                          
|(State or other jurisdiction of incorporation or
 organization) |  | (I.R.S. Employer Identification No.)

1617 W. 6th Street, Suite C, Austin, Texas
78703, (512)447-3700(Address and
telephone number of principal executive offices)

Securities registered pursuant to Section 12(b) of the
Act:None

Securities registered pursuant to Section 12(g) of the
Act:Common Stock, $0.001
par value
(Title of class)

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.

| |       |  |     
| | ----- |  | ----
| | Yes o |  | No x

Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.

| |       |  |     
| | ----- |  | ----
| | Yes o |  | No x

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 x |  | No o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form
10-K.  x

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

|                            |                     |                         |                              
|--------------------------- | ------------------- | ----------------------- | -----------------------------
|Large accelerated
 filer  o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company
  x

Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).

Yes  o    No  x


As
of the last business day of the registrants most recently completed second
fiscal quarter, the approximate aggregate market value of the common stock held
by non-affiliates, based upon the closing price of the common stock as quoted
by the Over The Counter Bulletin Board (OTCBB) was $638,232. Shares of common
stock held by executive officers, directors and holders of more than 5% of the
outstanding common stock have been excluded. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.

As
of March 25, 2009, the registrant had 5,980,892 shares of common stock outstanding.

Documents Incorporated by Reference. None.

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SecureCare Technologies, Inc.
Form 10-K
For the Fiscal Year Ended December 31, 2008
INDEX

|         |                                                                                                                  |  | Page
|-------- | ---------------------------------------------------------------------------------------------------------------- |  | ----
|         |                                                                                                                  |  |     
|PART I   |                                                                                                                  |  |     
|Item 1.  | Business                                                                                                         |  | 3   
|Item 1A. | Risk Factors                                                                                                     |  | 10  
|Item 1B. | Unresolved Staff Comments                                                                                        |  | 15  
|Item 2.  | Properties                                                                                                       |  | 16  
|Item 3.  | Legal Proceedings                                                                                                |  | 16  
|Item 4.  | Submission of Matters to a Vote of Security Holders                                                              |  | 16  
|PART II  |                                                                                                                  |  |     
|Item 5.  | Market for Registrants Common Equity and Related Stockholder
 Matters and Issuer Purchases of Equity Securities |  | 16  
|Item 6.  | Selected Financial Data                                                                                          |  | 18  
|Item 7.  | Managements Discussion and Analysis of Financial Condition and
 Results of Operations                           |  | 18  
|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk                                                       |  | 21  
|Item 8.  | Financial Statements and Supplementary Data                                                                      |  | 21  
|Item 9.  | Changes in and Disagreements with Accountants on Accounting and
 Financial Disclosure                            |  | 22  
|Item 9A. | Controls and Procedures                                                                                          |  | 22  
|Item 9B. | Other Information                                                                                                |  | 22  
|Part III |                                                                                                                  |  |     
|Item 10. | Directors, Executive Officers and Corporate Governance                                                           |  | 22  
|Item 11. | Executive Compensation                                                                                           |  | 25  
|Item 12. | Security Ownership of Certain Beneficial Owners and Management
 and Related Stockholder Matters                  |  | 28  
|Item 13. | Certain Relationships and Related Transactions, and Director
 Independence                                       |  | 29  
|Item 14. | Principal Accounting Fees and Services                                                                           |  | 30  
|Part IV  |                                                                                                                  |  |     
|Item 15. | Exhibits and Financial Statement Schedules                                                                       |  | 30  

1

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PART 1

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This
report on Form 10-K contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. SecureCare Technologies, Inc. (SecureCare or the Company)
bases these forward-looking statements on its expectations and projections
about future events, which the Company has derived from the information
currently available to it. In addition,
from time to time, SecureCare or its representatives may make forward-looking
statements orally or in writing.
Furthermore, forward-looking statements may be included in SecureCares
filings with the Securities and Exchange Commission or press releases or oral
statements made by or with the approval of one of SecureCares executive
officers. For each of these
forward-looking statements, SecureCare claims the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. These
forward-looking statements relate to future events or SecureCares future
performance, including but not limited to:

| |   |                                                  
| | - | -------------------------------------------------
| | · | Possible or assumed future
 results of operations
| | · | Future revenue and
 earnings; and                
| | · | Business and growth
 strategies.                 

Forward-looking
statements are those that are not historical in nature, particularly those that
use terminology such as may, could, will, should, likely, expects, anticipates,
contemplates, estimates, believes, plans, projected, predicts, potential or
continue or the negative of these or similar terms. The statements contained in this Report that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding the Companys
expectations, beliefs, intentions or strategies regarding the future. Forward-looking statements are subject to
certain known and unknown risks and uncertainties that could cause actual
results to differ materially from those expressed in any forward-looking
statements. These risks and
uncertainties include, but are not limited to, the following important factors
with respect to SecureCare:

| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | the uncertainty of general
 business and economic conditions, including the potential for a slowdown in
 business and expenditures on medical information technology and software;                                             
| | · | the impact of competition,
 both expected and unexpected;                                                                                                                                                                      
| | · | our need for additional
 funds, and the difficulties we may face in obtaining such funds;                                                                                                                                      
| | · | the Companys inability to
 realize the anticipated benefits of strategic and operational initiatives
 related to increased productivity, new product development, technological
 advances, and the achievement of sales growth
| | · | those described under Risk
 Factors included in Item 1A of this document.                                                                                                                                                      

Forward-looking
statements are only predictions as of the date they are made and are not
guarantees of performance. All
forward-looking statements included in this document are based on information
available to SecureCare on the date of this Report on Form 10-K. Readers are
cautioned not to place undue reliance on forward-looking statements. The forward-looking events discussed in this
Report on Form 10-K and any other statements made from time to time by SecureCare
or its representatives may not occur and actual events and results may differ
materially and are subject to risks, uncertainties and assumptions about
SecureCare including without limitation those discussed elsewhere in this Form
10-K under the heading Risk Factors as well as those discussed elsewhere in
this Form 10-K, and the risks discussed in our Securities and Exchange
Commission filings. Except for their
on-going obligation to disclose material information as required by federal
securities laws, SecureCare is not obligated to publicly update or revise any
forward-looking statement, whether as a result of new information, future
events or otherwise. In light of these
risks, uncertainties and assumptions, the forward-looking events discussed in
this Report on Form 10-K and in other statements made from time-to-time by
SecureCare or its representatives might not occur.

WHERE YOU CAN GET MORE INFORMATION

The
Company will file annual, quarterly and current reports and certain other
information with the Securities Exchange Commission (SEC). Persons may read
and copy any materials the Company files with the SEC at the SECs public
reference room at 100 F Street, NE, Washington, D.C. 20549, on official
business days during the hours of 10 a.m. to 3 p.m. Eastern Time. Information
may be obtained from the public reference room by calling the SEC at
1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy
and information statements, and other information regarding issuers that file
electronically with the SEC at http://www.sec.gov.

2

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ITEM 1. BUSINESS

OVERVIEW

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

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

The
Companys Internet-based Sfax with Digital Signature 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.

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.

General

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

The September 20, 1999 Reorganization

On
September 20, 1999, Center Star Gold Mines entered into an Agreement and Plan
of Reorganization (the Reorganization Agreement) with Link.com, Inc. Pursuant
to the Reorganization Agreement, the shareholders of privately-held Link.com
agreed to exchange 100% of the issued and outstanding shares of common stock or
25,000 shares, in exchange for 10,388,898 shares of the Companys common stock
with a par value of $0.001. For accounting
purposes the acquisition of Link.com by the Company was treated as a
recapitalization of Link.com with Link.com as the acquirer (a reverse
acquisition). Accordingly, the historical financial statements are those of
Link.com and its predecessors. The Board of Directors approved a change of the
Companys name to Link.com, Inc. in September, 1999. On May 26, 2000, the
Companys name was changed to eClickMD, Inc.

Chapter 11 Reorganization - May 13, 2003

On
May 13, 2003 (the Commencement Date) the Company (the Debtor) filed a voluntary
petition under Chapter 11 of Title 11 of the United States Bankruptcy Code (the
Bankruptcy Code) in the United States Bankruptcy Court for the Western District
of Texas (the Bankruptcy Court), Case No. 03-12387. During the course of its Chapter 11 proceeding, the Company
operated its business and managed its assets as a debtor-in-possession pursuant
to sections 1107(a) and 1108 of the Bankruptcy Code.

On
December 2, 2003, after notice and a hearing, the bankruptcy court entered its
findings of fact, conclusions of law and order confirming the Debtors joint
plan of reorganization (the Plan) dated as of August 5, 2003 (the
Confirmation Order). The Plan became final and non-appealable on December 13,
2003. The effective date of the Plan was December 15, 2003. A copy of the Plan
(as amended by the bankruptcy courts confirmation order) is incorporated by
reference. The bankruptcy courts confirmation order is also incorporated
herein by reference.

On
April 22, 2004 the Company submitted a motion to modify the Plan after
confirmation (the Motion) to the bankruptcy court. On May 18, 2004, the order
granting the Motion to modify the Plan after confirmation was approved by the
bankruptcy court. On October 19, 2004, the bankruptcy court judge signed the
Companys Order of Final Decree which effectively closed the case.
The bankruptcy courts order granting the motion is incorporated herein by reference.

3

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Events Subsequent to the May 13, 2003 Reorganization

On
January 19, 2004, the Board of Directors of eClickMD, Inc. approved a 1.5 for
1 forward common stock Split (the Stock Split). On January 19, 2004, the shareholder holding shares representing
more than a majority of the shares of common stock entitled to vote consented
in writing to the Stock Split. The
Stock Split increased the number of shares of common stock issued and
outstanding, as approved in The Plan, from 10,000,000 to 15,000,000.

On
January 19, 2004, the Board of Directors of eClickMD, Inc. determined to
change the name of the Company to SecureCare Technologies, Inc. The purpose of
the name change was to more accurately reflect the Companys present business
and its activities as well as to facilitate the future development of its
business. Approval of the name change
required the affirmative consent of at least a majority of the outstanding shares
of the common stock of the Company. The shareholder entitled to vote more than
a majority of all the shares of common stock entitled to vote consented to the
name change on January 19, 2004.

The
Company filed an Amendment to its Corporate Charter with the State of Nevada on
February 24, 2004 affecting the Stock Split and the name change of the Company
to SecureCare Technologies, Inc.

In
its efforts to position the Company to raise the additional capital required to
execute its business plan, during 2006, the Company affected a significant
financial restructuring.

The
board of directors ratified a letter agreement (the Letter Agreement) on June
16, 2006 with a related party, Gryphon Opportunities Fund I, LLC (GOF) (its
majority shareholder on that date) in which GOF agreed to convert all of its
outstanding notes payable and accrued interest to common stock of the Company
and GOF agreed to release its lien on the Companys assets. Both of these actions were conditioned upon
the Company raising an aggregate of $570,000 in equity financing.

On
June 16, 2006, the Company had approximately 30 million shares of common stock
authorized remaining to be issued. To complete the equity financing and the
conversion of the GOF outstanding notes payable and accrued interest to common
stock, both at a price of approximately $.01 per common share, the Company
would have needed approximately 140 million authorized common shares.

As
a result, the Company authorized the creation of a new Mandatorially
Convertible Series C Preferred Stock (the Series C Stock) and commenced its
equity financing at an offering price of $2.72 per share of Series C Stock
(approximately $.01 per common share equivalent). Each share of Series C Stock
represented 200 common share equivalents. The Series C Stock had no conversion
rights unless and until the Company had sufficient authorized shares of common
stock available to permit the conversion of all of the shares of the Series C
Stock at a rate of 200 common shares for each share of Series C Stock. The
Series C Stock had no liquidation preference, dividend rights or any other
rights that were not included in the rights of the current common stock
holders.

The Company achieved
$570,000 in its equity financing on September 15, 2006 (the Commitment Date),
triggering the conversion of all of GOFs outstanding notes payable and accrued
interest, through the commitment date, of $600,967 and the release of the GOF
lien on the Companys assets.

Accordingly,
on November 13, 2006, upon filing its Certificate of Designation for the Series
C Stock with the State of Nevada, the Company immediately issued a total of
515,587 shares of Series C Stock including 251,903 shares issued in the equity
financing ($576,518 in total was raised by October 2, 2006) and 264,494 shares
issued to affect the conversion of GOFs notes and accrued interest.

To
further its financial restructuring efforts, on October 19, 2006 the Company
made a conversion offer to the remaining note holders to convert the balance of
$1,283,500 in notes payable and the related accrued interest of $262,917 to
Series C Stock. By December 31, 2006, the Company had received signed consents
from note holders accepting the conversion offer representing $1,020,000 in
notes payable and $208,328 in accrued interest. To affect these additional conversions the Company issued an
additional 540,605 shares of Series C Stock.

After
securing shareholder approval of a one for two hundred reverse common stock
split, on April 24, 2007, the Company amended its Articles of Incorporation
with the State of Nevada to reflect the reverse common stock split. Immediately
thereafter, the Companys 20,304,000 shares of common stock were changed into
approximately 101,520 shares of common stock and each of the Companys 1,058,835
issued and outstanding shares of Series C Stock were automatically converted to
200 shares of the Companys common stock for an aggregate of 211,767,000 shares
of common stock which were automatically converted into approximately 1,058,835
shares of common stock. The total number of common shares issued and
outstanding immediately following the reverse stock split was approximately
1,160,355. All share and per share amounts have been restated for all periods
presented to reflect the reverse stock split.

In
June 2007, in accordance with the terms and conditions of the Companys
original conversion offer, dated October 19, 2006, the Company received signed
consents from additional note holders representing $244,018 in notes payable
and accrued interest. To affect these additional conversions, the Company
issued 107,396 shares of common stock.

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.

4

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Our Solutions

To
solve inefficient and costly manual paper handling processes in the healthcare
industry, SecureCare Technologies has developed proprietary Internet based
applications that provide workflow solutions enabling documents to be sent,
signed and remotely viewed anywhere in the world, between providers of health
care, while protecting patient privacy as required by law.

The
Companys Internet-based Sfax with Digital Signature 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) workflow 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.

The
Companys Internet-based SecureCare.net portal is an electronic document
exchange and e-signature workflow solution. 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.
SecureCare.net enables any health record, form or prescription to move
electronically, securely and effortlessly from the point of generation 
whether pharmacy or home health agency, to its destination, such as a
physicians private office.

The
Company markets its services to customers throughout the United States,
currently operating from its Austin, Texas-based corporate headquarters. The
Companys combined solutions allow providers of health care to send and receive
health care information in two different ways:

| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| | · | Sfax - electronic fax management system with digital signature and
 annotation features, including document tracking and status
| | · | SecureCare.net
 - electronic form format with e-Signature                                                                      

The Sfax and SecureCare.net applications are written in Microsoft.Net
programming language and are easily integrated into almost any enterprise
software application. These solutions allow providers of healthcare to provide
their information electronically to the physician, at a significant cost and
time savings, while complying with the stringent security and privacy
regulations under HIPAA. Physician practices will benefit as well. The
physicians office can manage all faxes and electronic documents in a single
portal environment and route them to the appropriate person within the practice
for review and electronic signature, and eventually route it for return to the
sender. With integration into the patient management system or the electronic
medical record application (EMR) the documents can be mapped to the appropriate
patient file. We believe these solutions are a major step forward in reducing
the paper handling within a healthcare providers office and a physician
practice.

The Companys initial focus
is on five segments of the healthcare delivery model.

| |   |                                            
| | - | -------------------------------------------
| | · | National and Independent
 pharmacies       
| | · | Home Health Agencies and
 Hospice providers
| | · | Durable Medical Equipment
 providers       
| | · | Long Term Care providers                   
| | · | Physician practices                        

Within
these industry segments SecureCares addressable market is the document
exchange, e-signature and management of paperwork between the providers in each
segment listed above and their referring physicians.

Sfax
 a bi-directional, Internet-based electronic fax management system with
digital signature and annotation features, enables healthcare providers to
send, receive, sign and manage faxes from any application on any computer with
an Internet connection. This process includes functionality for tracking of
documents and it integrates into healthcare enterprise software vendors
applications. Sfax has the following features and functionality:

| |   |                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | It
 can be sold as a stand-alone product or it can be designed to be integrated
 into software vendor applications, or combined with SecureCare.net                                                                                                                                                                                                    
| | · | The
 digital signature feature provides every user with a true digital
 certificate, allowing a provider to sign each fax electronically with a few
 clicks of a mouse, from a secure, HIPAA-ready platform, saving healthcare
 providers significant amounts of time that would be spent scanning and
 printing faxes in order to physically sign them
| | · | It
 is an easily integrated electronic fax management system for almost all
 software applications - allowing users to type in or select a fax number from
 a directory and send the forms to a physician outside of the users electronic
 application                                                                                                 
| | · | The
 system operates on a HIPAA-ready platform, providing a complete log and audit
 trail for all documents, ensuring the secure transfer of sensitive patient
 health information, a feature virtually non-existent with manual faxing                                                                                                                
| | · | It
 allows end-users to immediately increase their productivity, reduce costs,
 and efficiently communicate all healthcare information to their physician
 base or other healthcare facilities                                                                                                                                                         
| | · | It
 can map electronically faxed documents to patient records                                                                                                                                                                                                                                                                                          

5

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SecureCare.net
 A fully integrated information portal, SecureCare.net, processes electronic
document exchange and e-Signature along with electronic faxing, Sfax.This fully integrated portal
is designed to completely eliminate the need for all paper-based forms or
documents. SecureCare.net has the following features and functionality:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | It
 requires no download; this allows for quick access to the application and
 easy portability into newer designed web portal systems most common in
 physician offices today                                                                                                                                                                                                                                                                                                                           
| | · | It
 is accessed by typing a web address into any browser, which connects to the
 SecureCare servers and displays the appropriate login screen                                                                                                                                                                                                                                                                                                                                                            
| | · | Its
 documents are saved, displayed and printed in PDF (Portable Document Format)
 format. PDF is a highly recognized document type and is being utilized in most
 healthcare document image systems                                                                                                                                                                                                                                                                                                     
| | · | Its
 integrated fax services (Sfax) allow users to type in a fax number and send
 the forms electronically to a physician who is not on the SecureCare.net
 portal                                                                                                                                                                                                                                                                                                                                       
| | · | Its
 documents can be exported into an image format to send to other EMR systems                                                                                                                                                                                                                                                                                                                                                                                                                         
| | · | The
 SecureCare system tracks, audits and provides a history related to the status
 of the documents and the complete history of the document as
 it moves through the SecureCare system; this audit and history trail
 can be used for documentation in case of audits                                                                                                                                                                                                                                  
| | · | Management
 reports give SecureCare.net users information to track the status of a
 patients document, including where the document is located and whether the
 physician or nurse has signed the document; turnaround time is monitored for
 the healthcare provider to better understand which physicians are prompt in
 returning documents; patient activity is reported to show a complete history
 of documents for each patient; all reports are saved, printed and displayed
 in the PDF format.

The Technology

SecureCare.nets
database is distributed, allowing for faster and broader scalability. The
multiple server and storage area network (SAN) configuration provides for
robust fail-over (data redundancy) and scalability. The SecureCare.net
application was built according to software standards currently in place, and
in accordance with healthcare regulations specific to using the Internet. The
SecureCare.net platform uses:

| |   |                                              
| | - | ---------------------------------------------
| | · | XML, SOAP, HTTP, HL7,
 HIPAA transaction sets
| | · | ANSI X12N                                    
| | · | Microsoft development
 solutions             

All
database information is stored in Microsoft SQL Server 2000 using encrypted XML
data. CryptoAPI is the encryption tool. Several web servers and database
servers are co-located in a third party facility that meets Internet
requirements and federal regulations for storing healthcare data. The
application uses open standards allowing for integration of other software as
well as exchange of data with both new and older systems alike.

Electronic
fax servers, Sfax, have been added and integrated into the SecureCare.net
application that has allowed the company to create a virtual fax server. A healthcare providers patient management
system is easily able to interface with Sfax by sending our application data in
an XML file.

The
Internet has the full potential to design and deploy universal standards such
as those that govern email and electronic data transactions. Many major vendors
- especially Microsoft, IBM and Sun - have developed standards such as XML
(Extensible Markup Language) and SOAP (Simple Object Access Protocol) that have
been adopted by the World Wide Web Consortium (W3C) which is responsible for
defining Internet-based standards. Committed to the efficiencies of universal standards,
both the SecureCare.net and Sfax platforms are built around Microsofts .NET
(Dot Net) framework within the standards and regulations of HIPAA and HL-7
(Health Level Seven messaging standards). The SecureCare platform provides
multiple levels of data encryption and security meeting the strictest
regulatory guidelines of the Centers for Medicare & Medicaid Services and
the Food and Drug Administration.

HIPAA and Federal IT Initiatives

Recent
and evolving federal regulations, several healthcare reform proposals, and new
government healthcare IT initiatives, are drivers of product development and
should accelerate industry adoption of SecureCares services. HIPAA is an
expansive regulatory scheme, which, among other objectives, is intended to
enhance the privacy and security of a patients protected health information
(PHI). We believe the significant federally mandated security and privacy
requirements have created a high barrier to entry for new and existing IT
solutions. SecureCares technical infrastructure was designed with HIPAA
regulatory compliance in mind.

Sales and Marketing

Management
believes the most effective way to penetrate our targeted markets is to sell
our services through established channel partners who have signed reseller
agreements with SecureCare. Our channel partners are the health care
information technology (HIT) companies and software vendors with enterprise and
billing software systems that are used to run our targeted end users businesses
(pharmacies, home health agencies, DME providers, Long Term Care facilities and
Physician practices). We intend to sell our services in an outsourced ASP
(application service provider) model that is integrated into the channel
partners software. The channel partner will sell the service in an integrated
module or as an add-on service to their software platform. There are
significant advantages to this strategy for everyone in the supply chain
including SecureCare, its channel partners and their end-user customer base.
SecureCares marketing efforts will be focused on selling to and supporting its
channel partner strategy.

6

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Competition

The
markets in which we compete are highly competitive and rapidly changing.
Although we believe there is no single company that directly competes with our
Sfax and SecureCare.net solutions, we are aware of efforts by other companies
to develop products or services to either compete directly with our solutions
or that could be used as an alternative to our solutions. These companies offer
fax products, web-based processing of medical forms and signature solutions,
that could compete with our solutions. Our Sfax solution will compete primarily
against traditional fax machine manufacturers, which are generally large and
well-established companies, providers of fax servers and related software. In
addition, Companies with which we do not presently directly compete may become
competitors in the future through their product development in the area of
secure online services and such companies may have greater financial,
technological and marketing resources than we do.

The History of Our Current Products Offerings

In
October of 2007 the company officially launched Sfax, a secure, Internet-based
fax management system designed specifically for health care providers. Sfax is
a bi-directional electronic faxing system enabling health care providers to
send, receive and manage faxes from any application on any computer with an
Internet connection. In February 2008, the Company released its digital
signature and annotation features for Sfax. In March 2008, the Company launched
its Sfax Web Services, providing SecureCares channel partners with a simple,
rapid and cost-effective method of integrating Sfax into any application
architecture.

On
February 1, 2005, the Company announced the release of its new application,
SecureCare.net. This solution
transforms the costly, labor- and paper-intensive workflows between physicians
and home health services providers into a highly efficient and cost effective
electronic document exchange process.
SecureCare.net is easy to learn and simple to use, with current users
learning the solution in 10 minutes or less.
It requires only a browser (such as Internet Explorer) and access to the
Internet. Users can manage their
documents from anywhere the Internet is available.

State-of-the
art software development tools from the Microsoft dotNet development solutions
were used to speed the development and pave the road to an efficient
deployment. Additionally, early in
development, Microsoft design testing of the application was completed to allow
for a full, world-class evaluation of the application prior to release. A full review of the design and code was
completed in a simulated production environment with customized test scripts,
resulting in optimized performance and architecture.

SecureCare.net
offers extensive security, scalability and reliability. The new application is fully redundant and
scalable with a three-tier architecture that enables the Company to add
components as customer demand increases.
The new multiple server and SAN configuration, co-located in a
third-party facility, provides for robust fail-over. Data in the .net database is distributed among tables, making
information-finding faster, particularly for import functions.

In
July 2003, the Company began transitioning its peer-to-peer software solution
to a highly scale-able platform for mid to large-sized enterprises. This new
platform allowed the Company to leverage its home healthcare and physician
network by adding connections to medical equipment companies, pharmacies,
nursing homes, hospice, hospitals, research communities, lab companies and
insurance payors.

In
early November 2001, we began development of our third generation software. In
this generation of the product the SecureCare platform included dynamic forms
presentation and new user features that were robust and user friendly. The
SecureCare document viewer and forms presentation engine was designed to
accommodate larger enterprises in todays healthcare sectors. This new, third
generation technology, took advantage of the Windows(R) look and feel that is
most common in todays healthcare environment, and utilized the Internet as the
back-end communication pipeline to the SecureCare web services platform located
in the data center. The SecureCare database served up robust dynamic forms
through a small Windows client interface that was updated every time the user
began utilizing the application. User authentication and login was verified by
standard PKI (Public Key) with digital certificates. If the users name and
password did not match the digital certificates criteria then the users access
was disallowed. The digital certificate was stored in a certificate vault and
was only used during the current user session. This concept is truly innovative
and allows for ease of use and portability for the user. The certificate vault
can accommodate other digital certificates that are issued by other certificate
authorities, (Verisign (TM), Digital Trust(TM), Baltimore Security(TM), and
many others). The vault concept allowed SecureCare to manage the certificates
for the user. The third generation software was based on data manipulation and
presentation to the dynamic forms. This concept allowed the Company to
interface with already available data from other healthcare software
applications. The Company was able to interface with these large software
vendors that have market penetration already established and allowed these
vendors to become HIPAA -ready at the same time. If the direct interface
solution was not feasible or could not be physically implemented, the Company
developed a solution to accommodate this problem. This solution included a
printer driver that could be selected in all Windows applications that converts
any document into a XML image that the SecureCare platform could interpret and
present to the user in an image of the form. Signature/date templates could be
created on this form image and then sent on to the physicians and nurses for
signature.

The
Company has contracted with Sungard Availability Services (Sungard) to house
and maintain the Companys server-farm which hosts our ASP application.
Sungards MAX architecture begins with their direct connectivity to multiple
Tier 1 backbones. Inside, Sungard has built a fully redundant, self-healing
network, which consistently routes our customer traffic over the highest
performance backbone. Sungard engineers constantly monitor and upgrade this
architecture to stay ahead of the bandwidth growth. If a backbone goes down, a
local fiber gets cut or a hardware component fails, our customers can still
access the application through a sophisticated fail over system. Sungard will
protect the network perimeter with a security product called Check Point
FireWall-1TM, state-of-the art inspection Internet firewall technology.
Residing at the lowest software layer, FireWall-1TM inspects every packet that
crosses our link to the Internet. A comprehensive inspection policy will
significantly reduce the chances of unauthorized access to our data and
applications. FireWall-1TM does not affect system performance and is
transparent to authorized users and applications.

7

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Currently,
the Companys SecureCare.net product is licensed to approximately 1,400
physicians, of which approximately 567 were active in 2008 and 28 home health
care provider locations located in Texas, Louisiana, North Carolina, Florida,
Minnesota, Wisconsin, Virginia, Oklahoma, Missouri and Alabama. Home healthcare
agencies are charged a monthly fee per provider location utilizing the
software. In addition there are
one-time training and set-up fees and integration and customization charges as
contracted. Currently, physicians are not charged for utilizing the software.

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 health care.

Product Evolution

The
Companys first product, DocLink, was released in January 1997. This product
furnished health care providers with a means to send doctors orders (and other
vital patient information) to a physicians office, where the orders would then
be reviewed and authorized by the physician on his or her desktop computer.
DocLink allowed a home care provider to scan a medical order and send it to a
physician. At the doctors office, DocLink alerted the physician with a youve
got mail type icon, where the physician could read the order on the screen and
affix his or her electronic signature by invoking a password. DocLink
automatically delivered the signed order back to the home care provider and
automatically printed the order to be stored in the paper chart. While the
physician was reviewing orders, DocLink could provide him or her with a timing
routine, which also fed a database that furnished per-patient oversight billing
reports.

DocLink
was a Microsoft Windows-based application that operated on the currently
available versions of Windows, and it provided an electronic link between
doctors and home health care agencies to expedite the processing of paperwork.
The electronic link consisted of original documents that must be electronically
sent to the physician, electronically signed by the physician, and returned to
the provider. A health care agency simply clicked on a graphical button on a
Windows screen to scan a document into the software, and clicked on another
graphical button to send the orders/documents to the physician for review. The
physician logged into the system using his/her encrypted password and began
reading and signing the orders with electronic signature verification on the
screen. Once completed, DocLink automatically sent this information back to the
health care agency. The Companys services reduced administrative paperwork,
resulting in savings for our clients and significantly expedited the
reimbursement process, which directly resulted in a lower average number of
outstanding accounts receivable days for our clients. Research had shown that
most physicians and home health care agencies neglected the signature
attainment portion of the paper work process due to the overwhelming
difficulties and liabilities associated with the typical paper based process.
Utilizing SecureCares software simplified and expedited a previously difficult
and tedious process into a significant income-producing component of a
physicians business practice through implementation of the Care Plan Oversight
(CPO) billings.

Medicare
increased CPO billing rates between 17% and 22% for the year 2000 to get more
physicians to bill for and review documents coming from home health agencies.
Many physicians overlooked the CPO billings, primarily due to the increased
paperwork to manually track the billing. In a research report prepared for the
Massachusetts Medical Society regarding care plan oversight charges from
Medicare, it was reported that 89.8% of respondents did not submit these
charges for payment. There was a significant relationship between physician
specialty and whether or not a respondent submitted this charge. A very low
percentage of overall respondents submitted this charge. When asked, Why not?
the majority of respondents (57.6%) reported that they were not aware of this
charge. Forty two percent (42.4%) reported other reasons. The verbatim
responses indicated that the respondents did not submit this charge because: 1)
the time required is not worth the compensation, 2) they are not paid even when
they do submit the charge, and 3) insufficient time is spent on care plan
oversight. Fear of audit and lack of billing system capability was also
mentioned. Our software product, DocLink automatically tracked the time spent
on CPO and produced reports that could be used as the source document for
billing. DocLink solved these issues and passed HCFA (Health Care Financing
Administration) and OIG (Office of Inspector General) audits conducted by the
Federal Government.

In
September 1999 the Company launched its first Internet site with its first
completely Web-based application called net.Care. This software provided
verification regarding whether services rendered to a patient were eligible for
reimbursement. The net.Care application was a Web-enabled product that was
developed by the Company in conjunction with several clinical and
administrative professionals in home health care to verify whether services
rendered by a provider to a patient were eligible for reimbursement. In 1999,
the HCFA implemented OASIS (the Outcomes Assessment Information Set). This
program allowed home health care providers to upload an OASIS file, which was a
project implemented by the HCFA. The primary focus of the project was to
improve the quality of care; however, OASIS became the financial determinant of
reimbursement for home health care. OASIS determined eligibility for Medicare
as well as appropriateness of care and actual payment rates. There were many
instances in the assessment form that allowed the home health care agency to
contradict other portions of the assessment, albeit minor, thereby disallowing
proper charges for payment. Using net.Care as an audit tool helped to discover
such discrepancies before the information was sent to the state clinical
regulatory agencies or HCFA. This allowed changes to be implemented prior to
the submission of the data. These
changes could be performed in minutes, whereas a manual audit could take one to
two hours. The net.Care product reduced the labor costs associated with the
time nurses spent on reviewing data in a patients paper chart. It also reduced the chance of claims
rejections for documentation deficiencies. The product was also designed to
detect conflicting nurse responses; to assist with the coordination and
preparation of a patients plan of care; to recognize patients who may not be
eligible for particular services; and to make suggestions for completion of the
patients plan of treatment.

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On
June 30, 2000, the Company acquired certain assets of LuRo Associates, dba
Health Tech, Inc., a developer of financial and accounting software designed
for the health care industry. The
Company exited this business effective December 31, 2004.

On
November 15, 2000, the Company released its Internet-based ASP software product
called ClickMD that enabled health care providers to communicate and validate
pertinent and private information to physicians and other ancillary providers
while keeping the data secure. It
reduced costs typically incurred in terms of the time and expense required to
communicate such information manually. This product furnished health care
providers with a means to send doctors orders (and other vital patient
information) to a physicians office, where the orders would then be reviewed
and authorized by the physician on his or her desktop computer. ClickMD allowed
a home care provider to scan in an order and send it to a physician. At the
doctors office, ClickMD alerted the physician with a youve got mail type
icon, where the physician could read the order on the screen and affix his or
her electronic signature by invoking a password. ClickMD automatically
delivered the signed order back to the home care provider through the ASP and
automatically printed the order to be stored in the paper chart. While the
physician was reviewing orders, ClickMD could provide him or her with a timing
routine, which also fed a database that furnished per-patient oversight billing
reports.

Intellectual Property

Management
believes that the SecureCare business model and software products are
unique. Currently, the company is not
pursuing any of the applications for patents previously submitted that were in
various stages of the patent-granting process, some or all of which are now in
the abandonment stage. No assurance can
be given that any patent will be granted, however, or that any patent granted
would provide meaningful protection, or that any patent granted to the Company
will not be found to infringe upon any patents granted to others. The Company
has already received trademarks and servicemarks on a number of its product
features and functions. In October
2003, the Company was granted trademark protection to SecureCare, the brand
name of its primary product line.

Government Regulation

Participants
in the healthcare industry are subject to extensive and frequently changing
regulation at the federal, state and local levels. The Internet and its
associated technologies are also subject to government regulation. Many
existing laws and regulations, when enacted, did not anticipate the methods of
healthcare Internet-based document exchange and e-signature capabilities that
the Company is developing. The Company believes, however, that these laws and
regulations may nonetheless be applied to the Companys healthcare business.
The Company believes that its products adhere to all applicable regulations
including CMS and HIPAA Internet based information mandates.

Current
laws and regulations that may affect the healthcare Internet-based electronic
document exchange and e-signature industry relate to the following:

|  |                                                                                                                               
|- | ------------------------------------------------------------------------------------------------------------------------------
| | Confidential patient
 medical record information;                                                                             
|  |                                                                                                                               
| | The electronic
 transmission of information from physicians offices to agencies, pharmacies,
 and other healthcare providers;
|  |                                                                                                                               
| | The use of software
 applications in the diagnosis, cure, treatment, mitigation or prevention of
 disease;                    
|  |                                                                                                                               
| | Health maintenance
 organizations, insurers, healthcare service providers and/or employee health
 benefit plans; and          
|  |                                                                                                                               
| | The relationships between
 or among healthcare providers.                                                                     

Future
developments in laws that govern online activities (for example, laws that
impose Internet taxes or require costly technical requirements) might inhibit
the growth of the Internet and create uncertainty in the market, or in some
other manner have an adverse effect on the Internet. These developments could, in turn, increasingly have a material
adverse effect on our business, prospects, financial condition and results of
operations.

Employees

As
of December 31, 2008, the Company had six full-time employees, including two
employees in sales, marketing and support, two employees in technology
development and two employees in finance and accounting. The Company also had
one part-time employee. The Companys ability to achieve its operational and
financial objectives in the future is dependent on its ability to continue to
attract, integrate, retain and motivate highly qualified technical and customer
support personnel. A competitive environment exists for attracting such
personnel. When the Company expands its operations, additional employees will
be necessary.

Available Information

Our
website is www.sfaxme.com. We make available on this website free of
charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and amendments to those reports pursuant to Section
13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we
electronically file such material with or furnish such information to the
Securities and Exchange Commission.

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ITEM 1A. RISK FACTORS

Some
of the information in this Report on Form 10-K contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as may, will, expect,
anticipate, believe, estimate, and continue or similar words. You should read
statements that contain these words carefully because they (1) discuss our
future expectations; (2) contain projections of our future results of operation
or of our future financial condition; or (3) state other forward-looking
information. We believe it is important to communicate our expectations to
people that may be interested. However, unexpected events may arise in the
future that we are not able to predict or control. The risk factors that we
describe in this section, as well as any other cautionary language in this
Report on Form 10-K, give examples of the types of uncertainties that may cause
our actual performance to differ materially from the expectations we describe
in our forward-looking statements. You should know that if the events described
in this section and elsewhere in this Report on Form 10-K occur, they could
have a material adverse effect on our business, operating results and financial
condition.

RISKS RELATED TO
BUSINESS

DEPENDENCE
ON MANAGEMENT. The Companys success depends to a large degree upon the skills
of its senior management team and current key employees and upon its ability to
identify, hire, and retain additional sales, marketing, technical and financial
personnel. The Company may be unable to retain its existing key personnel or
attract and retain additional key personnel. The Company depends particularly
upon the following key executives: Dr. Richard Corlin, Chairman of the Board;
Dennis Nasto, Principal Executive Officer and member of the Board of Directors;
Neil Burley, Chief Financial Officer and Principal Financial and Accounting
Officer; David Vineyard, Chief Technology Officer; and Eugene Fry,
Vice-President of Operations and Chief Compliance Officer. The Company does not
have employment contracts with these officers and key employees. The Company
does not maintain key person life insurance for any of its officers or key
employees. The Company also does not require its executives or its employees to
enter non-competition agreements with the Company. However, the Company does
seek to protect its confidential information through confidentiality
agreements. The loss of any of its key officers and employees or the failure to
attract, integrate, motivate, and retain additional key employees could have a
material adverse effect on the Companys business. Additionally, the Company
must attract additional, qualified sales staff.

WE
ARE ENGAGED IN A BUSINESS THAT PROVIDES HEALTHCARE ELECTRONIC COMMERCE SERVICES
AND WE HAVE INCURRED NET LOSSES SINCE INCEPTION. We began our current operations in the fall of 1999 upon the
closing of our reorganization with Link.com, Inc., a privately-held Nevada
corporation. We were originally incorporated under the name Center Star Gold
Mines, Inc. for the prior purpose of exploring commercial gold deposits, and we
owned various unpatented mining claims near Grangeville, Idaho. We abandoned
our last mining claim in 1995. Upon our reorganization with Link.com, Inc. (the
Reorganization) we changed our business to the healthcare e-commerce industry,
specifically connecting physicians, home health agencies and nursing homes via
electronic document exchange and e-signature solutions. In August 2000 we
changed our name to eClickMD, Inc. (or eClickMD). In February of 2004 we
changed our name to SecureCare Technologies, Inc. (the Company, or SecureCare).
We have developed or purchased and continue to develop Internet-based document
exchange and e-signature solutions for the healthcare industry. We did not
generate our first electronic document exchange and e-signature revenues until
the quarter ended September 30, 1999. As of December 31, 2008, we had an
accumulated deficit of $40,358,111. We expect to continue to incur significant
development, deployment and sales and marketing expenses in connection with our
business and to continue to incur operating losses for at least the next fiscal
year. We may never achieve or sustain profitability. The provision of services
using Internet technology in the healthcare e-commerce industry is a developing
business that is inherently riskier than businesses in industries where
companies have established operating histories.

WE
WILL NOT BECOME PROFITABLE UNLESS WE ACHIEVE SUFFICIENT LEVELS OF PHYSICIAN
PENETRATION AND MARKET ACCEPTANCE OF OUR SERVICES. Our business model depends
upon usage by a large number of physicians with a high volume of healthcare
transactions and the sale of home healthcare Internet-based document exchange
and e-signature solutions to home healthcare providers and other healthcare
constituents. The acceptance by physicians and other healthcare providers of
our products and services will require adoption of new methods of conducting
business and exchanging information. We cannot be assured that physicians or
other health care providers will integrate our services into their office
workflow, or that the healthcare market will accept our services as a
replacement for traditional methods of conducting healthcare transactions. The
healthcare industry uses existing computer systems that may be unable to access
our Web-based solutions. Customers using existing systems may refuse to adopt
new systems when they have made extensive investment in hardware, software and
training for existing systems or if they perceive that our products or services
will not adequately protect proprietary information. Failure to achieve broad
physician or health care organization penetration or successfully contracting
with healthcare participants, would have a material adverse effect on our
business.

Achieving
market acceptance for our products and services will require substantial
marketing efforts and expenditure of significant funds to create awareness and
demand by participants in the healthcare industry. Our management believes that
we must gain significant market share with our services before our competitors
introduce alternative services with features similar to our services. There can
be no assurance that we will be able to succeed in positioning our services as
a preferred method for healthcare Internet-based electronic document exchange
and e-signature, or that any pricing strategy that we develop will be
economically viable or acceptable to the market. Failure to successfully market
our products and services would have a material adverse effect on our business,
financial condition and operating results.

OUR
BUSINESS PROSPECTS WILL SUFFER IF WE ARE NOT ABLE TO QUICKLY AND SUCCESSFULLY
DEPLOY OUR SYSTEMS AND PRODUCTS. We believe that our business prospects will
suffer if we do not deploy our services quickly. We began allowing access to
our Web-based electronic document exchange and e-signature solutions system in
November of 2000 and intend to expand deployment of access to our Web-based
products and services during the year 2009 and future years, although there can
be no assurance that we will be able to continue to do so during this time, or
at all. In order to deploy our services, in some cases, we must integrate our
architecture with our channel partners, physicians, payers and home
healthcare providers systems. We will need to expend substantial resources to
integrate our systems with the existing computer systems of large healthcare
organizations, home health care organizations and physicians. We have limited
experience in doing so, and may experience delays in the integration process.
These delays would, in turn, delay our ability to generate revenue from our
services and may have a material adverse effect on our business, financial
condition and operating results. As we continue to deploy our electronic document
exchange and e-signature products and services, we may need to expand and adapt
it to accommodate additional users, increased transaction volumes and changing
customer requirements. This expansion and adaptation could be costly. We may be
unable to expand or adapt our network infrastructure to meet additional demand
or our customers changing needs on a timely basis and at a commercially
reasonable cost, or at all. Any failure to deploy, expand or adapt our system
quickly could have a material adverse effect on the Companys business,
financial condition and operating results.

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WE
DO NOT CURRENTLY HAVE A SUBSTANTIAL CUSTOMER BASE AND OUR REVENUES WILL
INITIALLY COME FROM HOME HEALTHCARE PROVIDERS IN A SMALL NUMBER OF GEOGRAPHIC
MARKETS. We currently do not have a substantial customer base. In addition, we
expect that initially we will generate a significant portion of our revenue
from providing our products and services in Texas, Louisiana, North Carolina,
Virginia, Florida, Minnesota, Wisconsin, Oklahoma, Missouri, and Alabama. If we
do not generate as much revenue in this market or from these home healthcare
providers as expected, or expand to additional markets and to other providers
of healthcare as expected, our revenue could be significantly reduced, which
would have a material adverse effect on our business, financial condition and
operating results.

WE
ARE SUBJECT TO SIGNIFICANT COMPETITION. Our business operates in a highly
competitive environment. Many healthcare industry participants are
consolidating to create integrated healthcare delivery systems with greater
market power. As the healthcare industry consolidates, competition to provide
products and services to industry participants will become more intense and the
importance of establishing a relationship with each industry participant will
become greater. These industry participants may try to use their market power
to negotiate price reductions for our products and services. If forced to
reduce our prices, our operating results could suffer if we cannot achieve
corresponding reductions in our expenses.

WE
MAY EXPERIENCE SIGNIFICANT DELAYS IN GENERATING REVENUES FROM OUR SERVICES
BECAUSE POTENTIAL CUSTOMERS COULD TAKE A LONG TIME TO EVALUATE THE PURCHASE OF
OUR SERVICES. A key element of our strategy is to market our services directly
to large healthcare organizations, including home health care and durable
medical equipment organizations. We do not control many of the factors that
will influence physicians, home healthcare providers and suppliers buying
decisions. We expect that the sales and implementation process will be lengthy
and will involve some technical evaluation and commitment of capital and other
resources by home healthcare agencies, physicians, payers and suppliers. The
sale and implementation of our services are subject to delays due to such
organizations internal budgets and procedures for approving large capital
expenditures and deploying new workflow technologies within their networks.

OUR
BUSINESS WILL SUFFER IF THE INTEGRITY AND SECURITY OF OUR SYSTEMS ARE
INADEQUATE. If we are successful in delivering our Internet-based electronic
document exchange and e-signature solutions to the healthcare industry, our
business could be harmed if we or our present or future customers were to
experience any system delays, failures or loss of data. Although we do have
significant safeguards in place for emergencies, the occurrence of a
catastrophic event or other system failure at our facilities could interrupt
our operations or result in the loss of stored data. In addition, we will
depend on the efficient operation of Internet connections from customers to our
systems. These connections, in turn, depend on the efficient operation of Web
browsers, Internet service providers and Internet backbone service providers.
In the past, Internet users have occasionally experienced difficulties with
Internet and online services due to system failures. Any disruption in Internet
access provided by third parties could have a material adverse effect on our
business, financial condition and operating results. Furthermore, we will be
dependent on hardware suppliers for prompt delivery, installation and services
of equipment used to deliver our services.

DESPITE
THE IMPLEMENTATION OF SECURITY MEASURES, OUR INFRASTRUCTURE MAY BE VULNERABLE
TO DAMAGE FROM PHYSICAL BREAK-INS, COMPUTER VIRUSES, PROGRAMMING ERRORS,
ATTACKS BY HACKERS OR SIMILAR DISRUPTIVE PROBLEMS. A material security breach
could damage our reputation or result in liability to us. We retain
confidential customer information in our processing center and on our servers.
An experienced computer user who is able to access our computer systems could
gain access to confidential Company information. Furthermore, we may not have a
timely remedy to secure our system against any hacker who has been able to
penetrate our system. Therefore, it is critical that our facilities and
infrastructure remain and are perceived by the marketplace to be secure. The
occurrence of any of these events could result in the interruption, delay or
cessation of service, which could have a material adverse effect on our
business, financial condition and operating results. A significant barrier to
Internet-based electronic document exchange and e-signature are the issues
presented by the secure transmission of confidential information over public
networks. We rely on encryption and authentication technology licensed from
third parties to secure Internet transmission of and access to confidential
information. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography, or other events or developments
will not result in a compromise or breach of the methods used to protect
customer transaction data. A party who is able to circumvent security measures
could misappropriate or alter proprietary information or cause interruptions in
operations. If any such compromise of our security or misappropriation of
proprietary information were to occur, it could have a material adverse effect
on our business, financial condition and operating results. We may be required
to expend significant capital and other resources to protect against such
security breaches or to alleviate problems caused by security breaches. We may
also be required to spend significant resources and encounter significant
delays in upgrading our systems to incorporate more advanced encryption and
authentication technology as it becomes available. Concerns over the security
of the Internet and other online transactions and the privacy of users may also
inhibit the growth of the Internet and other online services generally, and our
services in particular, especially as a means of conducting commercial and/or
healthcare-related transactions. There can be no assurance that our security
measures will prevent security breaches or that failure to prevent such
breaches will not have a material adverse effect on our business, financial
condition and operating results.

OUR
OPERATIONS WILL ALSO BE DEPENDENT ON THE DEVELOPMENT AND MAINTENANCE OF
SOFTWARE. Although we intend to use all necessary means to ensure the efficient
and effective development and maintenance of software, both activities are
extremely complex, and thus, are frequently characterized by unexpected
problems and delays.

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IN
THE EVENT THAT WE PROPOSE EXPANSION THROUGH ACQUISITIONS, IT MAY BE DIFFICULT
TO IMPLEMENT AND MAY EXPOSE US TO ADDITIONAL RISK. We may seek to acquire
businesses that are complementary to our core businesses. Such emphasis is not,
however, intended to limit, in any manner our ability to pursue acquisition
opportunities in other related businesses or in other industries. We may enter
into further acquisitions, joint ventures, strategic alliances or other
business combinations. These transactions may materially change the nature and
scope of our business. Although our management will endeavor to evaluate the
risks inherent in any particular transaction, there can be no assurance that we
will properly ascertain all such risks. In addition, no assurances can be given
that we will succeed in consummating any such transactions, that such
transactions will ultimately provide us with the ability to offer the services
described or that we will be able to successfully manage or integrate any
resulting business. The success of our acquisition program will depend on,
among other things, the availability of suitable candidates, the availability
of funds to finance transactions, and the availability of management resources
to oversee the operation of resulting businesses. Financing for such
transactions may come from several sources, including, without limitation cash
and cash equivalents on hand, proceeds from new indebtedness, or proceeds from
the issuance of additional common stock, preferred stock, convertible debt or
other securities. The issuance of
additional securities, including common stock, or other convertible securities
could result in substantial dilution of the percentage ownership of the
Companys stockholders at the time of any such issuance, and substantial
dilution of our earnings per share. The proceeds from any financing may be used
for costs associated with identifying and evaluating prospective candidates,
and for structuring, negotiating, financing and consummating any such
transactions and for other general corporate purposes. We do not intend to seek
stockholder approval for any such transaction or security issuance unless
required by applicable law or regulation.

INTEGRATING
OUR BUSINESS OPERATIONS WITH BUSINESSES WE MAY ACQUIRE IN THE FUTURE, MAY BE
DIFFICULT AND MAY HAVE A NEGATIVE IMPACT ON OUR BUSINESS. We may acquire
additional businesses in the future. The integration of companies or businesses
that we may acquire in the future involves the integration of separate
companies that have previously operated independently and have different
corporate cultures. The process of combining such companies may be disruptive
to their businesses and may cause an interruption of, or a loss of momentum in,
such businesses as a result of the following difficulties, among others, loss
of key employees or customers; possible inconsistencies in standards, controls,
procedures and policies among the companies being combined and the need to
implement and harmonize company-wide financials, accounting, information and
other systems; failure to maintain the quality of services that such companies
have historically provided; the need to coordinate geographically diverse
organizations; and the diversion of managements attention from our day-to-day
business and that of any company or business that we may acquire, as a result
of the need to deal with the above disruptions and difficulties and/or the
possible need to add management resources to do so. Such disruptions and
difficulties, if they occur, may cause us to fail to realize the benefits that
we currently expect to result from such integration and may cause material
adverse short- and long-term effects on our operating results and financial
condition.

UNCERTAINTIES
IN REALIZING BENEFITS FROM A COMBINATION. Even if we are able to integrate the
operations of an acquired company or business into the company successfully,
there can be no assurance that such integration will result in the realization
of the full benefits that we expect to result from such integration or that
such benefits will be achieved within the time frame that we expect. Revenue
enhancements from cross-selling complementary services may not materialize as
expected. The benefits from the combination may be offset by costs incurred in
integrating the companies. The benefits from the transaction may also be offset
by increases in other expenses, by operating losses or by problems in the
business unrelated to the transaction.

DEPENDENCE
ON PROPRIETARY TECHNOLOGY. The success of our business is dependent to a
significant extent on our ability to protect the proprietary and confidential
aspects of our technology. Although we have filed multiple provisional patent
applications on some of our processes, our technology is not patented and
existing copyright laws offer only limited practical protection. Currently, the
company is not pursuing any of the applications for patents previously
submitted that were in various stages of the patent-granting process, some of
all of which are now in the abandonment stage. No assurance can be given that
any patent will be granted, however, or that any patent granted would provide
meaningful protection, or that any patent granted to the Company will not be
found to infringe upon any patents granted to others. The Company has already
received trademarks and servicemarks on a number of its product features and
functions. In October 2003, the Company
was granted trademark protection to SecureCare, the brand name of its primary
product line. We rely on a combination of trade secret, copyright and trademark
laws, license agreements, nondisclosure and other contractual provisions and
technical measures to establish and protect our proprietary rights. There can
be no assurance that the legal protections afforded to us or the steps taken
will be adequate to prevent misappropriation of our technology. In addition,
these protections do not prevent independent third-party development of
competitive products or services. Our management believes that our products,
services, trademarks and other proprietary rights do not infringe upon the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not assert infringement claims against us or that any such
assertion will not require us to enter into a license agreement or royalty
arrangement with the party asserting the claim. As competing healthcare
information systems increase in complexity and overall capabilities or the
functionality of these systems further overlap, providers of such systems may
become increasingly subject to infringement claims. Responding to and defending
any such claims may distract the attention of our management and otherwise have
a material adverse effect on our business, financial condition and operating
results.

WE
MAY NOT BE ABLE TO SECURE FUNDING IN THE FUTURE NECESSARY TO OPERATE OUR
BUSINESS AS PLANNED. We require substantial working capital to fund our
business. We have had and are experiencing significant operating losses and
negative cash flow from operations since the closing of the Reorganization in
December 2003 and expect this to continue for the foreseeable future. In
addition, we may incur significant capital expenditures in connection with our
planned expansion of our products and services. Our capital requirements depend
on several factors, including the rate of market acceptance of our products and
services, our ability to expand our customer base, increased sales and
marketing expenses, the growth of the number of our employees and related
expenses and other factors. If capital requirements vary materially from those
currently planned, we will require additional financing sooner than
anticipated. If additional funds are raised through issuance of equity
securities, the percentage ownership of our stockholders will be reduced, and
these equity securities may have rights, preferences or privileges senior to
those of the holders of our common stock. Additional financing may not be
available when needed on terms favorable to us or at all. If adequate funds are
not available or are not available on acceptable terms, we may be unable to
develop or enhance our products and services, adequately support and maintain
relationships with key partners and customers, or take advantage of future
opportunities or respond to competitive pressures.

12

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THE
SUCCESSFUL OPERATION OF OUR BUSINESS DEPENDS UPON THE SUPPLY OF CRITICAL
ELEMENTS AND MARKETING RELATIONSHIPS FROM OTHER COMPANIES. We depend upon third parties for several
critical elements of our business, including various technology,
infrastructure, customer service and marketing components. We rely on private
third-party providers for our Internet and telephony connections and for
co-location of a significant portion of our communications servers. Any
disruption in the services provided by any of these suppliers, or any failure
by them to handle current or higher volumes of activity could have a material
adverse effect on our business, prospects, financial condition, operating
results and cash flows. To obtain new
customers, we have channel partner reseller and sales agent agreements with
health care information technology (HIT) companies and other software vendors.
These arrangements typically are not exclusive and do not extend over a
significant period of time. Failure to continue these relationships on terms
that are acceptable to us or to continue to create additional relationships
could have a material adverse effect on our business, prospects, financial
condition, operating results and cash flow.

WE
ARE EXPOSED TO RISK IF WE CANNOT MAINTAIN OR ADHERE TO OUR INTERNAL CONTROLS
AND PROCEDURES. We have established and
continue to maintain, assess and update our internal controls and procedures
regarding our business operations and financial reporting. Our internal controls
and procedures are designed to provide reasonable assurances regarding our
business operations and financial reporting. However, because of the inherent
limitations in this process, internal controls and procedures may not prevent
or detect all errors or misstatements. To the extent our internal controls are
inadequate or not adhered to by our employees, our business, financial
condition and operating results could be materially adversely affected.

If
we are not able to maintain internal controls and procedures in a timely
manner, or without adequate compliance, we may be unable to accurately report
our financial results or prevent fraud and may be subject to sanctions or
investigations by regulatory authorities such as the Securities and Exchange Commission. Any such action, or restatement of
prior-period financial results, could harm our business or investors
confidence in our company, and could cause our stock price to fall.

GOING
CONCERN. The financial statements have
been prepared on the assumption that the Company will continue as a going
concern. The Company sustained net losses of $2,553,995 and $2,386,373 for the
years ended December 31, 2008 and 2007, respectively. The Company has accumulated losses through December 31, 2008 of
$40,358,111 (including a non-recurring loss on early extinguishment of debt
totaling $19,030,648 incurred in the fourth quarter of 2006 and $381,358
incurred in the second quarter of 2007).
Cash used in operating activities for the same periods aggregated
$1,374,549 and $1,347,530, respectively. Total liabilities at December 31, 2008
of $3,560,782 significantly exceed total assets of $148,412. As of the date of
this report, the Company is unable to meet all of its short-term obligations
because of shortages of cash. The
Companys continued existence depends upon the success of managements efforts
to raise additional capital necessary to meet the Companys obligations as they
come due, and to obtain sufficient capital to execute its business plan. The
Company intends to obtain capital primarily through issuances of debt or
equity. There can be no degree of assurance that the Company will be successful
in completing additional financing transactions. Failure to generate additional
revenues, raise additional capital or manage discretionary spending could have
a material adverse effect on the Companys ability to continue as a going
concern and to achieve its intended business objectives. The accompanying
unaudited financial statements do not include any adjustments to reflect the
possible effects on the recoverability and classification of assets or
classification of liabilities which may result from the inability of the
Company to continue as a going concern.

RISKS RELATED TO
INDUSTRY

RAPIDLY
CHANGING TECHNOLOGY MAY ADVERSELY AFFECT OUR BUSINESS. All businesses which
rely on technology, including the healthcare electronic document exchange and
e-signature workflow solutions business that we are developing, are subject to,
among other risks and uncertainties, rapid technological change, changing
customer needs, frequent new product introductions, and evolving industry
standards.

Internet
technologies are evolving rapidly, and the technology used by any
Internet-based business is subject to rapid change and obsolescence. These
market characteristics are exacerbated by the emerging nature of the market and
the fact that many companies are expected to introduce new Internet products
and services in the near future. In addition, use of the Internet may decrease
if alternative protocols are developed or if problems associated with increased
Internet use are not resolved. As the communications, computer and software
industries continue to experience rapid technological change, we must be able
to quickly and successfully modify our services so that we adapt to such
changes. There can be no assurance that we will not experience difficulties
that could delay or prevent the successful development and introduction of our
healthcare document exchange and e-signature work-flow solutions services or
that we will be able to respond to technological changes in a timely and
cost-effective manner. Moreover, technologically superior products and services
could be developed by competitors. These factors could have a material adverse
effect upon our business, financial condition and operating results.

THE
DESIRABILITY OF OUR SERVICES IS CONTINGENT ON OUR ABILITY TO CONTINUE TO COMPLY
WITH PRESENT AND FUTURE GOVERNMENT REGULATIONS. Our services may be subject to
extensive and frequently changing regulation at federal, state and local
levels. The Internet and its associated technologies are also subject to
government regulation. Many existing laws and regulations, when enacted, did
not anticipate the methods of healthcare solutions we are developing. We
believe, however, that these laws and regulations may nonetheless be applied to
our healthcare solutions business. It may take years to determine the extent to
which existing laws and regulations governing general issues of property
ownership, sales and other taxes, libel, negligence and personal privacy are
applicable to the Internet. Laws and regulations may also be adopted in the
future that address Internet-related issues, including security, privacy and
encryption, pricing, content, copyrights and other intellectual property;
contracting and selling over the Internet; and distribution of products and
services over the Internet. Accordingly, our healthcare solutions business may
be affected by current regulations as well as future regulations specifically
targeted to this new segment of the healthcare industry. While our products are
designed to aid our customers compliance with certain government regulations,
changes in these regulations or their repeal could reduce the need for our
products.

13

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RISKS RELATED TO
STOCK

OUR
LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO FORECAST OUR REVENUES AND
EXPENSES. Our limited operating history makes it difficult to forecast our
future revenues and expenses. Although our revenues increased from December
2007 to December 2008, quarterly revenue growth may not be indicative of future
performance. Revenues for the twelve months ended December 31, 2008 were
$179,587 compared to $134,065 for the twelve months ended December 31, 2007. This 34% increase in sales resulted from an
increase in sales of the Companys flagship product, Sfax, in 2008.

We
base our forecast for expenses, in part, on future revenue projections. We
incur expenses in advance of revenues, and we may not be able to quickly reduce
spending if our revenues are lower than expected. In particular, we expect to
incur additional costs and expenses related to the development of relationships
with our channel partners, the enterprise and billing software systems that are
used to run our targeted end users businesses (pharmacies, home health
agencies, DME providers, Long Term Care facilities and Physician practices),
the development and expansion of our sales force, the development and
enhancement of existing and new products and services, and the expansion of our
management team.

We
expect that our business, stock price, operating results and financial
condition could be materially adversely affected if our revenues do not meet
our projections or our net losses are greater than expected.

The
expected fluctuations of our quarterly results could cause our stock price to
fluctuate or decline.

We
expect that our quarterly operating results will fluctuate significantly in the
future based upon a number of factors, many of which are not within our
control. We plan to further increase our operating expenses in order to expand
our sales and marketing activities and broaden our product offerings. We base
our operating expenses on anticipated market growth, and our operating expenses
are relatively fixed in the short term. As a result, if our revenues are lower
than we expect, our quarterly operating results may not meet the expectations
of public market analysts or investors, which could cause the market price of
our common stock to decline. Our quarterly results may fluctuate in the future
as a result of many other factors, including the following:

|  |                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------
| | Our
 ability to retain our existing customers and to attract new channel partners;                                   
| | Customer
 acceptance of our pricing model;                                                                           
| | Changes
 in the level of demand for our products or services;                                                        
| | Our
 success in expanding our sales and marketing programs;                                                          
| | The
 number, timing and significance of product enhancements and new product
 announcements by us or our competitors;
| | The
 length of our sales cycle;                                                                                      
| | The
 level of Internet-based electronic document exchange and e-signature
 transactions;                             
| | The
 evolution of related technology and the emergence of standards and competing
 technology; and                   
| | Changes
 in the level of our operating expenses.                                                                     

These
risks and uncertainties are particularly significant for companies such as ours
that are in the evolving market for Internet-based products and services. In
addition, other factors that may affect our quarterly results are set forth
elsewhere in these risk factors. As a result of these and other factors, our
revenues and expenses may not be predictable.

Due
to the uncertainty surrounding our revenues and expenses, we believe that
quarter-to-quarter comparisons of our historical operating results may not be
meaningful and our historical operating results should not be relied upon as an
indicator of our future performance.

RISKS RELATED TO
GROWTH

PRICE
ADJUSTMENTS COULD DECREASE NEW CUSTOMER SIGN UP RATES, INCREASE CANCELLATION
RATES, OR DECREASE REVENUE WHICH COULD ADVERSELY AFFECT OUR FINANCIAL
RESULTS. While management is currently
comfortable with our pricing strategy, responding to unforeseen opportunities
or changes in technology may result in adjustments to our pricing
strategy. Price increases may decrease
new customer sign up rates or increase cancellation rates, which could
adversely affect our financial results.
Price decreases, due to competition or market penetration, could also
adversely affect our financial results.

INCREASED
COST OF EMAIL TRANSMISSIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS. We rely on email for the
delivery of our fax notification. If
regulations or other changes in the industry lead to a charge associated with
the sending or receiving of email messages, the cost of providing our services
would increase and, if significant, could adversely affect our business,
prospects, financial condition, operating results and cash flow.

14

---



IF
WE EXPERIENCE EXCESSIVE CREDIT CARD CHARGES OR CANNOT MEET EVOLVING CREDIT CARD
COMPANY MERCHANT STANDARDS IMPOSED BY CREDIT CARD COMPANIES, WE COULD LOSE THE
RIGHT TO ACCEPT CREDIT CARDS FOR PAYMENT AND OUR SUBSCRIBER BASE COULD DECREASE
SIGNIFICANTLY. In 2008 we began offering
credit cards as a means for our customer base to pay for our services, and we
anticipate that in the future a large number of customers will take advantage
of this feature. We could incur losses
from claims that the customer did not authorize the credit card transaction to
purchase our service. If the number of
unauthorized credit card transactions becomes excessive, we could be assessed
substantial fines for excessive charge-backs and we could lose the right to
accept credit cards for payment. In
addition, as they have recently done, credit card companies may again change
the merchant standards required to utilize their services. If we are unable to
meet these new standards we could be unable to accept credit cards and our paid
customer base could significantly decrease, which could have a material adverse
effect on our business, prospects, financial condition, operating results and
cash flow.

OUR
BUSINESS COULD SUFFER IF WE CANNOT OBTAIN TELEPHONE NUMBERS, ARE PROHIBITED
FROM OBTAINING TELEPHONE NUMBERS OR ARE LIMITED TO DISTRIBUTING NUMBERS TO ONLY
CERTAIN CUSTOMERS.

Our
future success depends on our ability to (i) procure large quantities of
telephone numbers in the United States and foreign countries in desirable
locations at a reasonable cost and (ii) offer our services to our prospective customers
without restrictions. Our ability to procure and distribute telephone numbers
depends on factors such as applicable regulations, the practices of
telecommunications carriers that provide telephone numbers, the cost of these
telephone numbers and the level of demand for new telephone numbers. Failure to
obtain telephone numbers in a timely and cost-effective manner or regulatory
restrictions on our ability to market our services without restriction may
hinder or prevent us from entering some foreign markets or hamper our growth in
domestic markets, and may have a material adverse effect on our business,
prospects, financial condition, operating results and cash flows.


In
addition, future growth in our customer base, together with growth in the customer
bases of providers of other fax and/or voicemail to email and unified messaging
services, may increase the demand for large quantities of telephone numbers,
which could lead to insufficient capacity and an inability on our part to
acquire the necessary telephone numbers to accommodate our future growth.

OUR
BUSINESS WILL BE HIGHLY DEPENDENT ON OUR BILLING SYSTEM. A significant part of our revenues depends
on prompt and accurate billings processes.
Customer billing is a highly complex process, and our billings system
must efficiently interface with third party systems, such as those of credit
card processing companies. Our ability to accurately and efficiently bill our
subscribers is dependent on the successful operation of our billing system and
the third party systems upon which we rely, such as our credit card processor,
and our ability to provide these third parties the information required to
process transactions. In addition, our ability to offer new paid services or
alternative-billing plans is dependent on our ability to customize our billing
system. As the number of our paid customers continues to grow, we will need to
continue to automate our billing systems and procedures. We are in the process
of upgrading our current billing system to meet the needs of our growing
subscriber base. Any failure to properly implement the upgraded system or to
manage the new system and procedural transitions could impair our ability to
properly bill our current customers or attract and service new customers. In addition,
any failures or errors in our current billing systems or procedures or
resulting from any upgrades to our billing systems or procedures could
materially and adversely affect our business and financial results.

OUR
FAILURE TO PROPERLY MANAGE GROWTH COULD HARM OUR BUSINESS. We are preparing for rapid growth and
anticipating expansion into new markets and countries. We expect this expansion to place a
significant strain on our management, operational and financial resources. As a result, we must be ready to expand and
adapt our operational infrastructure and increase the number of our personnel
in certain areas. Our business relies
on our data systems, billing systems for our fee based and other services, and
other operational and financial reporting and control systems. All of these
systems will become increasingly complex due to the growing diversification and
complexity of our business and to acquisitions of new businesses with different
systems. To manage further growth, we
will need to continue to automate, improve or replace our data, billing and
other existing operational, customer service and financial systems, procedures
and controls. In particular, as our services for which we bill users grow, any
failure of our billing systems to accommodate the increasing number of
transactions and accurately bill users could adversely affect our business and
ability to collect revenue. These upgrades and improvements will require a
dedication of resources and in some cases are likely to be complex. Any failure
to properly implement and manage these systems and procedural transitions could
impair our ability to attract and service customers, and could cause us to
incur higher operating costs and delays in the execution of our business plan.
If we cannot manage growth effectively, our business and operating results
could suffer.

WE
MAY BE SUBJECT TO RISKS FROM INTERNATIONAL OPERATIONS. If management feels it makes sense to expand
our business operations to countries outside of the United States, our future
results could be materially adversely affected by a variety of uncontrollable
and changing factors including, among others, foreign currency exchange rates;
political or social unrest or economic instability in a specific country or
region; trade protection measures and other regulatory requirements which may
affect our ability to provide our services; difficulties in staffing and
managing international operations; and adverse tax consequences, including
imposition of withholding or other taxes on payments by subsidiaries and
affiliates. Any or all of these factors could have a material adverse impact on
our future business, prospects, financial condition, operating results and cash
flows. In addition, if we expand to new international markets, we will have
very limited experience in marketing and operating our services in such
markets. In addition, certain international markets may be slower than domestic
markets in adopting the Internet and so our operations in international markets
may not develop at a rate that supports our level of investments.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

15

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ITEM 2. PROPERTIES

On
February 9, 2008, the Company relocated its principal executive office to
approximately 1,520 square feet of leased office space at a new location in
Austin, Texas. The Company has leased this new location for two years. The
company believes that its facilities are adequate for the Companys current
operations and that additional leased space can be obtained when required.

All
of our network equipment is housed at our co-location facility in Austin,
Texas.

ITEM 3. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No
matters were submitted to a vote of security holders during the fourth quarter
of 2008.

PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

Market Information

On
May 21, 2007 the Companys stock began trading on the Over-The-Counter Bulletin
Board under the new symbol SCUC. The
stock symbol change was made to reflect a 1 for 200 reverse stock split of the
Companys common stock that was affected on the National Association of Securities
Dealers OTCBB. Prior to May 21, 2007
the Companys stock symbol was SCUI (from the period December 28, 2004 through
May 18, 2007). The following table sets
forth the range of high and low prices as reported on the National Association
of Securities Dealers OTCBB for the periods indicated. The quotations reflect inter-dealer prices
without retail mark-up, mark-down or commission, and may not necessarily
represent actual prices. All prices
below have been restated for all periods presented to reflect a 1 for 200
reverse stock split of the Companys common stock that was affected on the
National Association of Securities Dealers OTCBB on May 21, 2007.

|                           |  |      |      |     |   |      | 
|-------------------------- |  | ---- | ---- | --- | - | ---- | 
|Fiscal Year 2008           |  | High |      | Low |  
|                           |  |      |      |     |  
|Quarter Ended March 31     |  | $    | 1.65 |     | $ | 0.51 | 
|Quarter Ended June 30      |  | $    | 0.95 |     | $ | 0.51 | 
|Quarter Ended September 30 |  | $    | 1.01 |     | $ | 0.27 | 
|Quarter Ended December 31  |  | $    | 0.30 |     | $ | 0.10 | 

|                           |  |      |       |     |   |      | 
|-------------------------- |  | ---- | ----- | --- | - | ---- | 
|Fiscal Year 2007           |  | High |       | Low |  
|                           |  |      |       |     |  
|Quarter Ended March 31     |  | $    | 14.00 |     | $ | 6.00 | 
|Quarter Ended June 30      |  | $    | 7.00  |     | $ | 6.00 | 
|Quarter Ended September 30 |  | $    | 6.00  |     | $ | 0.80 | 
|Quarter Ended December 31  |  | $    | 1.57  |     | $ | 1.50 | 

16

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The common stock is deemed to be a penny stock as that term is
defined in Rule 3a51-1 promulgated under the Securities Exchange Act of
1934 (the Exchange Act).

Penny stocks
are stocks:

|  |                                                                                                                                                                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | with a price of less than $5.00 per share;                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                      
|· | that are not traded on a recognized national exchange;                                                                                                                                                                                                                                             
|  |                                                                                                                                                                                                                                                                                                      
|· | whose prices are not quoted on the Nasdaq automated quotation system
 (Nasdaq listed stock must have a price of not less than $5.00 per share); or                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                      
|· | issued by companies with net tangible assets less than $2.0 million
 (if the issuer has been in continuous operation for at least three years) or
 $5.0 million (if in continuous operation for less than three years), or with
 average revenues of less than $6.0 million for the last three years.

Section
15(g) of the Exchange Act and Rule 15g-2 promulgated under the Securities Act
require broker/dealers dealing in penny stocks to provide potential investors
with a document disclosing the risks of penny stocks and to obtain manually
signed and dated written receipt of the document before effecting a transaction
in a penny stock for the investors account. Compliance with such requirements
may make it more difficult for holders of the common stock to resell their
shares to third parties or otherwise which could have a material adverse affect
on the liquidity and market price of the common stock.

Holders

As of December 31, 2008, the
Company had 1,334 holders of record of its common stock.

Dividends

The
Company has not declared or paid cash dividends on its common stock and
presently has no plans to do so. Any change in the Companys dividend policy
will be at the sole discretion of the Board of Directors and will depend on the
Companys profitability, financial condition, capital needs, future loan
covenants, general economic conditions, future prospects and other factors
deemed relevant by the Board of Directors. The Company currently intends to
retain earnings for use in the operation and expansion of the Companys
business and does not anticipate paying cash dividends in the foreseeable
future.

Recent Sales of Unregistered Securities

For
the three and twelve month periods ended December 31, 2008, the Company issued
250,000 and 653,400 unregistered shares of its common stock, respectively, in
conjunction with the issuance of notes payable. Please refer to Note 3 in the
accompanying financial statements for additional details regarding the
Companys issuance of notes payable with attached shares of common stock.

Equity Compensation Information

The following table
summarizes securities authorized for issuance under our equity compensation
plans as of December 31, 2008:

|                                                           |  |                                                                           |  |                                                          |      |                                                                                                |        | 
|---------------------------------------------------------- |  | ------------------------------------------------------------------------- |  | -------------------------------------------------------- | ---- | ---------------------------------------------------------------------------------------------- | ------ | 
|                                                           |  | Number
 of securities to
 be issued upon exercise
 of outstanding options |  | Weighted-average
 exercise price of
 outstanding options |      | Number
 of securities
 remaining available for
 future issuance underequity compensation plans |       
|                                                           |  |                                                                           |  |                                                          |      |                                                                                                |       
|Equity compensation plans approved by security holders     |  |                                                                          |  | $                                                        |     |                                                                                                |        | 
|Equity compensation plans not approved by security holders |  | 900,209                                                                   |  | $                                                        | 1.05 |                                                                                                | 34,971 | 
|                                                           |  |                                                                           |  |                                                          |      |                                                                                                |       
|Total                                                      |  | 900,209                                                                   |  | $                                                        | 1.05 |                                                                                                | 34,971 | 
|                                                           |  |                                                                           |  |                                                          |      |                                                                                                |       

The
number of securities remaining available for future issuance includes 8,750
under the 2004 Stock Option Plan, 4,166 under the 2007 Stock Option Plan and
21,875 under the 2008 Stock Option Plan.

17

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ITEM 6. SELECTED FINANCIAL DATA

Not Required.

ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The
following discussion should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto included elsewhere in
this Report on Form 10-K. The discussion in this section of this Report on Form
10-K contains forward-looking statements that involve risks and uncertainties.
The Companys actual results could differ materially from those discussed
herein. Factors that could cause or contribute to such differences include, but
are not limited to, those discussed in this section, those discussed in Risk
Factors and those discussed elsewhere in this Report on Form 10-K.

Forward Looking Statements

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

Overview

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

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

The
Companys Internet-based Sfax with Digital Signature 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.

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.

18

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of
operations are based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States
of America (GAAP). The preparation of these financial statements requires us
to make estimates, assumptions and judgments that affect the reported amounts
of assets, liabilities, revenues and expenses and related disclosures of
contingent assets and liabilities. On an on-going basis, we evaluate these
estimates, assumptions and judgments. We base our 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 materially differ from these estimates under different assumptions or
conditions. If actual results were to differ from these estimates materially,
the resulting changes could have a material adverse effect on our financial
statements. We consider the following accounting policies to be the most
important to the portrayal of our financial condition and that require the most
subjective judgment.

REVENUE RECOGNITION

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

SOFTWARE AND SOFTWARE DEVELOPMENT COSTS

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

LONG-LIVED ASSETS

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

STOCK-BASED COMPENSATION

The
Company uses the modified prospective method of SFAS No. 123 (revised 2004),
Share-Based Payment (SFAS No. 123R), which is a revision of SFAS No. 123,
Accounting for Stock-Based Compensation (SFAS No. 123). SFAS No. 123R
supersedes APB Opinion No. 25, and amends SFAS No. 95, Statement of Cash
Flows. SFAS No. 123R requires that all share-based payments to employees,
including the grant of employee stock options, be recognized in the income
statement based on their fair values. Under the modified prospective
application, SFAS No. 123R is applied to new awards and awards modified,
repurchased or cancelled after the effective date. Compensation cost for the
portion of awards for which requisite service has not been rendered that are
outstanding as of the effective date is recognized as the requisite service is
rendered on or after the effective date. The Compensation cost for the portion
of awards is based on the grant date fair value of those awards, less estimated
forfeitures.

Stock-based
compensation expense recognized during the period is based on the value of the
portion of the stock-based payment awards that is ultimately expected to vest
less estimated forfeitures. SFAS No. 123R requires forfeitures to be estimated
at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.

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

19

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RECENT ACCOUNTING PRONOUNCEMENTS

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

In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities,
which allows companies the option to measure financial assets or liabilities at
fair value and include unrealized gains and losses in net income rather than
equity. This becomes available when the Company fully adopts SFAS 157,
which will be fiscal year 2009. The Company is analyzing the expected impact
from adopting this statement on its financial statements, but currently does
not believe its adoption will have a significant impact on the financial
position or results of operations of the Company.

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 is
effective for fiscal years beginning after December 15, 2008. The
provisions of SFAS 141R will impact the Company if it is a party to a business
combination after the pronouncement is adopted.

Results of Operations

Year Ended December 31, 2008 Compared to Year Ended December
31, 2007

Revenues
for the twelve months ended December 31, 2008 were $179,587 compared to
$134,065 for the twelve months ended December 31, 2007. This 34% increase in
revenues 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 $117,391 for the twelve months ended December 31, 2008
compared to $116,094 for the twelve months ended December 31, 2007. This 1%
increase is primarily attributable to higher depreciation expense of $27,000
related to the capitalization of the Sfax-related assets put into service
during 2007 and higher annual support fees on its Sfax-related assets of $2,000
offset by lower outside IT development work of $18,000 and lower Telco-related
costs of $10,000, resulting from a change in its primary Telco provider that
the Company made in 2008.

Selling,
general and administrative expenses were $1,652,176 for the twelve months ended
December 31, 2008 compared to $1,561,274 for the twelve months ended December
31, 2007. This 6% increase in expenses was primarily attributable to increased
salaries and benefits and other people and people-related expenses, including
travel and entertainment, of $191,618. Public relations expenses increased
$20,000 in 2008, reflecting the Companys investments into these programs in
early 2008. Occupancy charges increased $32,052 in relation to expenses
resulting from new office space and property taxes. Director and Officer
insurance expense increased $20,908 in 2008. Telephone-related expenses
increased $11,268 in 2008 primarily due to the costs associated with installing
a T1 line and higher cellular phone and conference calling expenses. Audit and
tax-related services fees increased $8,782 in 2008. Offsetting these higher
expenses is a decrease of $45,000 in financial consulting expense in 2008 that
resulted from the issuance of 7,500 shares of common stock to Mercom Capital
Group, LLC for investor relation services in 2007, coupled with lower stock
compensation expense of $49,814 in 2008 and lower outside financial consulting
costs of $19,154. In addition, SOX compliance consulting expenses decreased
$27,566 in 2008. At December 31, 2008 the Company adjusted its accrual for
payroll taxes owed and the related penalties and interest on these taxes, based
on a revision of the estimated interest rate associated with its installment
agreement with the Internal Revenue Service, resulting in lower penalties and
interest expense on payroll taxes of $46,350. All other corporate G&A
expenses decreased $7,257 in 2008.

Bad
debt expense was $442 for the twelve months ended December 31, 2008 compared to
$2,524 for the twelve months ended December 31, 2007.

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

Interest
expense for the twelve months ended December 31, 2008 was $964,852 compared to
$463,333 for the same period in 2007. Higher debt discount amortization in 2008
of $424,629 resulted from the issuance of notes payable from December 2006
through December 2008. This issuance of notes payable resulted in a higher debt
load, contributing to an increase of $81,817 in interest expense. Other
miscellaneous interest charges were $4,926 lower in 2008.

20

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For
the twelve months ended December 31, 2008 there was no loss on early
extinguishment of debt. Loss on early extinguishment of debt totaled $381,358
for the twelve months ended December 31, 2007. In late June 2007, in accordance
with the terms and conditions of the Companys original conversion offer, dated
October 19, 2006, to convert the principal amounts of notes payable and accrued
interest to common stock, the Company received signed consents from additional
note holders accepting the conversion offer representing $200,000 in notes
payable and $44,018 in accrued interest. To affect these additional
conversions, the Company issued 107,396 shares of common stock. The difference
between the net carrying amount of the extinguished debt and the reacquisition
price of the extinguished debt, totaling $381,358 was recognized as a loss in
the period of extinguishment.

LIQUIDITY AND CAPITAL RESOURCES

Net
cash flows used in operating activities for the twelve month period ended
December 31, 2008 totaled $1,374,549. Net cash flows used in operating activities
for the twelve month period ended December 31, 2007 was $1,347,530. The
increase in net cash used by operating activities in 2008 is primarily due to
the Companys investments in additional resources and programs, as required by
its business plan, to complete certain technology development projects and
initiate growth in its revised business model, primarily people and
people-related cash-based expenses of approximately $111,000, public relations
expenses of $20,000, occupancy charges of $32,000, Director and Officer
insurance expense of $21,000, telephone related expenses of $11,000 and higher
audit and tax related expenses of $8,800. These uses of cash in 2008 were
offset by lower SOX compliance charges of $27,500 and an increase in cash
resulting from the change in working capital accounts, primarily increases in
accrued liabilities resulting from interest expense accruals of $138,000 and
additions to accrued payroll of $80,000.

Cash
flows used in investing activities totaled $31,037 for the twelve months ended
December 31, 2008 and consisted entirely of capitalized expenditures. Cash
flows used in investing activities totaled $77,940 for the twelve months ended
December 31, 2007 and consisted partially of capitalized expenditures and
partially of capitalized software development costs.

Net
cash flow provided by financing activities was $1,283,500 for the twelve months
ended December 31, 2008 and consisted entirely of the issuance of notes payable
totaling $1,333,500
($1,027,208 in proceeds allocated to notes payable and $306,292 in proceeds
allocated to the attached shares of common stock)
partially offset by repayment of a note payable totaling
$50,000. Cash flow provided by financing activities was $1,457,000
($695,813 in proceeds allocated to notes payable and $417,083 in proceeds
allocated to the attached shares  of common stock and $344,104 in proceeds
allocated to the common stock purchase warrants)
 for the
twelve months ended December 31, 2007 and consisted entirely of the issuance of
notes payable.

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

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 $2,553,995 for
the twelve months ended December 31, 2008. The Company has accumulated losses
through December 31, 2008 of $40,358,111 (including a non-recurring loss on
early extinguishment of debt totaling $19,030,648 incurred in the fourth
quarter of 2006 and $381,358 incurred in the second quarter of 2007). Cash used
in operating activities for the period ended December 31, 2008 aggregated
$1,374,549. Total liabilities at December 31, 2008 of $3,560,782 significantly
exceed total assets of $148,412. As of the date of this report, the Company is
unable to meet all of its short-term obligations because of shortages of cash.
The Companys continued existence depends upon the success of managements
efforts to raise additional capital necessary to meet the Companys obligations
as they come due, and to obtain sufficient capital to execute its business
plan. The Company intends to obtain capital primarily through issuances of debt
or equity. There can be no degree of assurance that the Company will be
successful in completing additional financing transactions. Failure to generate
additional revenues, raise additional capital or manage discretionary spending
could have a material adverse effect on the Companys ability to continue as a
going concern and to achieve its intended business objectives. The accompanying
unaudited financial statements do not include any adjustments to reflect the
possible effects on the recoverability and classification of assets or
classification of liabilities which may result from the inability of the
Company to continue as a going concern.

Inflation

The Company believes that
inflation generally has not had a material impact on its operations or
liquidity to date.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Not Required.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

All
financial statements meeting the requirements of Regulation S-X and the
supplementary financial information required by Item 302 of Regulation S-K are
set forth at the pages indicated at Item 15(a) and are incorporated here by reference.

21

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ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a)
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, SecureCares management,
with the participation of Dennis Nasto, our principal executive officer, and
Neil Burley, our principal financial officer, carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934). In designing and evaluating its disclosure controls and procedures,
management recognized that disclosure controls and procedures, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the disclosure controls and procedures are
met. Additionally, in designing disclosure controls and procedures, management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible disclosure controls and procedures. The design of any
disclosure controls and procedures also is based in part upon certain
assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Based upon that evaluation, Messrs. Nasto and
Burley concluded that these disclosure controls and procedures were effective
as of the end of the period covered in this report.

(b)
Managements Report on Internal Control Over Financial Reporting
The Companys management is responsible for establishing and maintaining
adequate internal control over financial reporting for the Company. In order to
evaluate the effectiveness of internal control over financial reporting, as
required by Section 404 of the Sarbanes-Oxley Act, management has conducted an
assessment, including testing, using the criteria in Internal Control - Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Companys system of internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Because of its inherent
limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. Based on its assessment, management has
concluded that the Companys internal control over financial reporting was
effective as of December 31, 2008. Managements report was not subject to
attestation by the Companys registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
Company to provide only managements report in this annual report.

(c)
Changes in Internal Control over Financial Reporting
There was no change in internal control over financial reporting (as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during
the fourth quarter of our year ended December 31, 2008 that has materially
affected or is reasonably likely to materially affect SecureCares internal
control over financial reporting.

This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting pursuant to
temporary rules of the Securities and Exchange Commission that permit us to
provide only managements report in this annual report.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE

The
following table sets forth the age and position of each of the Companys
executive officers, directors and key employees at December 31, 2008:

|                    |  |     |  |                                                                         
|------------------- |  | --- |  | ------------------------------------------------------------------------
|Name                |  | Age |  | Position                                                                
|                    |  |     |  |                                                                         
|Richard
 Corlin, MD |  | 68  |  | Chairman
 of the Board of Directors and Principal Medical Officer       
|                    |  |     |  |                                                                         
|Dennis
 Nasto       |  | 50  |  | Chief Executive Officer, Principal
 Executive Officer and Director      
|                    |  |     |  |                                                                         
|Joseph
 Larter      |  | 69  |  | Director                                                                
|                    |  |     |  |                                                                         
|Neil
 Burley        |  | 48  |  | Chief Financial Officer, Vice-President
 and Principal Financial Officer
|                    |  |     |  |                                                                         
|Eugene
 Fry         |  | 47  |  | Senior
 Vice-President, Operations and Principal Compliance Officer     
|                    |  |     |  |                                                                         
|David
 Vineyard     |  | 44  |  | Chief
 Technology Officer                                               

22

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Richard
Corlin, MD has been a director since September 23, 2000 and became Chairman of
the Board of Directors and Principal Medical Officer in August, 2002. He is a
gastroenterologist in private practice in Santa Monica, California and was
President of the American Medical Association (AMA) from July 2001 to July
2002. Prior to becoming President, Dr. Corlin served as Speaker of the AMAs
House of Delegates for five years. He has been active in the affairs of the AMA
for the past twenty years, having served for nine years as a member and then
Chair of the AMA Council on Long Range Planning and Development. From 1994 to
1998, Dr. Corlin served as a member of the Advisory Committee to the Director
of the National Institute of Health. Dr. Corlin served as President of the
California Medical Association (CMA) from 1992 to 1993, was Vice Speaker and
Speaker of the CMA House of Delegates for nine years, and a member of its Board
of Trustees for twelve years. He chaired numerous committees of the CMA
including the Finance Committee, the Liaison Committee to State Hospital
Medical Staffs, and was an active member of the CMA Speakers Bureau on Tort
Reform. Dr. Corlin is a graduate of Rutgers University, and received his M.D.
degree from Hahnemann Medical College. Following residency training at
Hahnemann, Dr. Corlin served as a Lt. Commander in the United States Public
Health Service, Heart Disease and Stroke Control Program from 1968 to 1970. He
then took a gastroenterology fellowship at UCLA. He is a fellow of the American
College of Physicians, is a member of both the American Gastroenterology Association
and the American Society of Internal Medicine, and is a Past President of the
Southern California Society of Gastrointestinal Endoscopy. He is also the
Chairman of the Audio Digest Foundation, a provider of continuing medical
education to healthcare professionals, a member of the Board of Governors of
Marathon Multimedia, a subsidiary of Audio Digest Foundation that provides
information management solutions to medical societies, Chairman of Landes
Slezak Group, a subsidiary of Audio Digest Foundation that records sound and
video of professional association meetings, and an assistant clinical professor
at the University of California-Los Angeles School of Medicine. Dr. Corlin was
Vice Chairman of American Sound and Video in 2000 when it filed a petition for
reorganization pursuant to Chapter 11 under the U.S. Bankruptcy Code. The
proceeding was converted to Chapter 7 under the U.S. Bankruptcy Code and the
company was liquidated.

Dennis
Nasto has been a director and Chief Executive Officer (Principal Executive Officer) of the company since
November 2006 when he was rehired by the Board of Directors. Previously he was
Vice-President of Sales, Marketing and Customer Support from August, 2003
through September 2004. He became Senior Vice-President Sales and Marketing in
October 2004. Mr. Nastos original employment term with the Company ended
December 9, 2005 as a result of the Companys implementation of a significant
cost reduction program. He has over twenty (20) years of executive experience
in sales and marketing in the healthcare industry. Prior to joining the
Company, Mr. Nasto, from 2001 to 2002, was Director of Sales at ResMed
Corporation, a leading home health respiratory equipment manufacturer. Mr.
Nasto has been successful, during the past eighteen years in building high-energy
sales teams at both small and large companies including Kimberly-Clarke
Professional Healthcare, a major medical/surgical supply manufacturer, where he
was employed as District Sales Manager from 1983 to 1991, and from STERIS
Corporation, a leading medical device company, where he held positions as Vice
President of Sales-Americas, Vice President National Accounts and Vice
President of Sterilization Services from 1991 to 1998. From 2000 to 2001, Mr.
Nasto also served as President of X10NET, a start up venture that focused on
bringing Web-based workflow solutions to the physician marketplace.

Joseph
Larter joined the board of directors on April 2, 2008. Mr. Larter is based in
the United Kingdom, with offices in Bungay, Suffolk and a U.S.-based residence
in Vero Beach, Florida. He has extensive business interests around the world
and has developed varied businesses from the ground up for over 50 years. In
1958, he founded Larters Estates, a business in the construction of houses and
holiday homes in East Anglia and Wales, which he later sold. In 1971, Mr.
Larter started a company known as Pleasureworld, a development company
specializing in the construction of holiday homes and tourist attractions,
including one of the first theme parks in the United Kingdom. Mr. Larter
currently sits on the board of, or is a major shareholder in, a number of
varied successful businesses including Collaborate MD, a medical billing and
services company based in Orlando, Florida, ReefLive Aquarium Park Inc., a
tourism development company in Barbados, and Northbank Wine Estates in New
Zealand.

Neil
Burley has served the Company as Chief Financial Officer (Vice-President and Principal Financial Officer)
since July 2002. He originally joined the Company in October of 2001. Mr.
Burley is primarily responsible for the development of the Companys financial
model, optimization of cash flow and all aspects of finance and accounting. He
is a well-seasoned financial executive with over 20 years of experience. From
June, 1982 to April, 1996 Mr. Burley worked at Pennzoil Company where he held a
variety of accounting and finance positions, including responsibility for all
internal and external (SEC) financial reporting for the Manufacturing and
Marketing Divisions. He joined Compaq Computer Corporation in April 1996, and
served as Director of Corporate Financial Planning and Analysis in his last
year there. In this role he functioned as a senior financial advisor to the
Principal Financial Officer and Corporate Controller of this Fortune 500
Company. He led a professional team in the development and preparation of
consolidated financial reports, board presentations, speech materials,
quarterly budgets, earnings targets and financial forecasts for all company
regions and business units. In May 2000, he left Compaq to accept equity
participation and a senior management role as VP Finance and Controller in the
start-up of a managed data storage services company, StorageProvider, Inc. In
this role he assumed financial leadership responsibility for the strategic
planning, staffing, budgeting, and management of the entire finance and
accounting infrastructure. Mr. Burley graduated from Louisiana State University
and is a Texas Certified Public Accountant.

Eugene
Fry joined the Company in October of 2001. He is primarily responsible for
ensuring the competitive viability of the Companys products. He has over
fifteen (15) years of information technology experience spanning across system
analysis/engineering, sales, field service and operations. From 1996 to 1999
Mr. Fry was employed by Turner Collie and Braden, a major engineering firm,
where he was responsible for designing and upgrading new technology and
ensuring that implementation was coordinated and successful throughout the
organizations multiple offices. Prior to that, from 1994 to 1996 he was
employed by Pacific Atlantic Group SA in Buenos Aires, Argentina, where he
created an infrastructure for a U.S. affiliate to distribute, market, and
manufacture a vending machine product in Argentina and other Latin American companies.
Mr. Fry holds various technical certifications and expertise in various
protocols, operating systems, and software. He holds a B. S. in Computer
Science from Almeda University and College.

23

---



David
Vineyard joined the Company in October, 2007. Prior to his promotion to Chief
Technology Officer on December 19, 2008, Mr. Vineyard served as the Companys
Development Director and Lead Systems Engineer. Prior to joining the Company,
from February 2006 to October 2007, Mr. Vineyard was a senior web and software
developer/engineer, providing contract development work for clients in the
Austin, Texas area including The Texas Department of Health and Human Services,
Charles Schwab and Express Digital Graphics. From March 2005 to January 20065
he was the development director/lead architecht for Trick Dog Studios, LLC.
From October of 2004 through March of 2005 he was the lead software developer
for Express Digital Graphics. From May of 2003 to October 2004 he was the CEO
and lead software engineer for Instream Systems, LLC and provided technology
services to such companies as Dell Computer Corporation, Sperry Marine, Vought
Aircraft and others. From December 2002 to May 2003 he was the development
director for Brady Systems Integration. Prior to December 2002, Mr. Vineyard
held a variety of analyst/consultant/lead architect positions with companies
such as IBM (World Trade Customer Support) and The Delphi Groupe, Inc. Mr.
Vineyard attended the University of Texas at Austin.

Board Composition

Our
Bylaws provide that the Board of Directors shall consist of three members. The
number of directors may from time to time be increased or decreased to not less
than one nor more than fifteen by action of the Board of Directors. The
directors shall be elected at the annual meeting of stockholders and each
director shall hold office until his successor is elected and qualified.

No Committees of the Board of Directors; No Financial Expert

We
do not presently have a separately constituted audit committee, compensation
committee, nominating committee, executive committee or any other committees of
our Board of Directors. Nor do we have an audit committee financial expert.
As such, our entire Board of Directors acts as our audit committee.

Potential Conflicts of Interest

Since
we do not have an audit or compensation committee comprised of independent
directors, the functions that would have been performed by such committees are
performed by our Directors. Thus, there is a potential conflict of interest in
that our Directors and officers have the authority to determine issues
concerning management compensation and audit issues that may affect management
decisions. We are not aware of any other conflicts of interest with any of our
executives or Directors.

Director Independence

We
are not subject to listing requirements of any national securities exchange or
national securities association and, as a result, we are not at this time
required to have our Board comprised of a majority of independent directors.
We have not determined whether or not any of our Directors currently meet the
definition of independent as promulgated by the rules and regulations of the
American Stock Exchange.

Involvement in Legal Proceedings

The
Company is not aware of involvement in any legal proceedings by its directors
or executive officers during the past five years that are material to an
evaluation of the ability or integrity of such director or executive officer.

Compliance with Section 16(a) of The Exchange Act.

Section
16(a) of the Securities Exchange Act of 1934, as amended, requires that our
directors, executive officers and persons who beneficially own more than 10% of
a registered class of our equity securities to file with the SEC initial
reports of ownership and reports of changes of ownership of our common stock
and other equity securities. To our knowledge, based solely upon a review of
copies of such reports and amendments thereto furnished to us and written
representations that no other reports were required during and with respect to
the year ended December 31, 2008, all Section 16(a) filing requirements
applicable to our current officers, directors and beneficial owners of more
than 10% of our common stock were complied with except as follows: (i) One of
our beneficial owners, David McCall, was late filing a Form 3, (ii) David
Vineyard, Chief Technology Officer, was late filing a Form 4. As of the date of
this filing, all required reports have been filed and there were no
transactions reported that would entitle the Company to recapture any short
swing profits as defined in Section 16(a).

Code of Ethics

The
Board of Directors of the Company adopted the SecureCare Technologies, Inc.
Ethics and Business Compliance Procedures (the Code) at its meeting on
December 17, 2007. Such Code applies to our officers, directors and employees.
A copy of the Code is available on our website at www.sfaxme.com.

24

---



ITEM 11. EXECUTIVE COMPENSATION

The
particulars of compensation paid to the following persons during the twelve
month period ended December 31, 2008 are set out in the summary compensation
table below:

| |   |                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Our Chief Executive
 Officer (Principal Executive Officer and Director)                                                                                                                                                                                                                                   
| | · | Our Chief Financial
 Officer (Principal Financial Officer)                                                                                                                                                                                                                                                
| | · | Our Board of Director
 Members                                                                                                                                                                                                                                                                            
| | · | Each of our two most
 highly compensated executive offers, other than the Principal Executive
 Officer and the Principal Financial Officer, who were serving as executive
 officers at December 31, 2008                                                                                                  
| | · | Our Former President,
 Chief Executive Officer and Director, and our Former Executive Vice-President
 and Chief Operating Officer; these individuals were not serving as executive
 officers at December 31, 2008 but are included in the summary compensation
 table for historical presentation purposes

|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |            |  |  |         |  |  |   | 
|-------------------------------------------------------- |  | ------------------- |  | ---------------------- | ------- | ----- |  | --------------------------- |  | ------------------------------------- | - | ------------------------------------------------------ |  | ---------- |  |  | ------- |  |  | - | 
|                                                         |  | Annual Compensation |  | Long-Term Compensation
|                                                         |  |                     |  |                       
|                                                         |  | Year                |  | Salary                 |         | Bonus |  | Other
 Annual
 Compensation |  | Restricted
 Stock
 Awards
 (# Shares) |   | Common Shares
 Underlying
 Options Granted
 (# Shares) |  | All
 Other
|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |           
|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |            |  |  |         |  |  |   | 
|Richard F. Corlin, MD (1)                                |  | 2008                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 50,000  |  |  | 0 | 
|Chairman and Chief Medical Officer                       |  | 2007                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  | 2006                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |            |  |  |         |  |  |   | 
|Joseph Larter, Director (2)                              |  | 2008                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 200,000 |  |  | 0 | 
|                                                         |  | 2007                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  | 2006                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |            |  |  |         |  |  |   | 
|Dennis Nasto, Chief Executive Officer (3)                |  | 2008                |  |                        | 150,000 |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 100,000 |  |  | 0 | 
|Principal Executive Officer and Director                 |  | 2007                |  |                        | 180,000 |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 141,667 |  |  | 0 | 
|                                                         |  | 2006                |  |                        | 30,000  |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |            |  |  |         |  |  |   | 
|Tom Linhard, Former Director (4)                         |  | 2008                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 10,000  |  |  | 0 | 
|                                                         |  | 2007                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  | 2006                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |            |  |  |         |  |  |   | 
|Allen Stamy, Former Director (5)                         |  | 2008                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  | 2007                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  | 2006                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |            |  |  |         |  |  |   | 
|Neil Burley, Chief Financial Officer (6)                 |  | 2008                |  |                        | 99,996  |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 50,000  |  |  | 0 | 
|Vice President and Principal Financial
 Officer          |  | 2007                |  |                        | 175,500 |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 141,667 |  |  | 0 | 
|                                                         |  | 2006                |  |                        | 58,667  |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |            |  |  |         |  |  |   | 
|David Vineyard (7)                                       |  | 2008                |  |                        | 90,000  |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 20,000  |  |  | 0 | 
|Chief Technology Officer                                 |  | 2007                |  |                        | 18,750  |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 10,000  |  |  | 0 | 
|                                                         |  | 2006                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |            |  |  |         |  |  |   | 
|Eugene Fry (8)                                           |  | 2008                |  |                        | 84,996  |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 25,000  |  |  | 0 | 
|Vice-President, Operations and Chief
 Compliance Officer |  | 2007                |  |                        | 165,750 |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 70,833  |  |  | 0 | 
|                                                         |  | 2006                |  |                        | 46,000  |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |            |  |  |         |  |  |   | 
|Robert J. Woodrow (9)                                    |  | 2008                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|Former President, Chief Executive Officer
 and Director  |  | 2007                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  | 2006                |  |                        | 3,000   |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  |                     |  |                        |         |       |  |                             |  |                                       |   |                                                        |  |            |  |  |         |  |  |   | 
|William OLoughlin, Former Executive                     |  | 2008                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|Vice-President and Chief Operating Officer (10)          |  | 2007                |  |                        | 19,844  |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 
|                                                         |  | 2006                |  |                        | 0       |       |  | 0                           |  |                                       | 0 |                                                        |  | 0          |  |  | 0       |  |  | 0 | 

|    |                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Dr. Corlin has been a director since September 23, 2000. He became
 Chairman of the Board and Chief Medical Officer in August, 2002.                                                                                                                                         
|    |                                                                                                                                                                                                                                                                              
|    | On July 29, 2008, Dr. Corlin was granted options to purchase 50,000
 shares of common stock issued pursuant to the SecureCare Technologies, Inc. Year 2008 Stock Option Plan. These options vested immediately.                                                              
|    |                                                                                                                                                                                                                                                                              
|(2) | Mr. Larter joined the Board of Directors on April 2, 2008. On July
 20, 2008, Mr. Larter was granted options to purchase 200,000 shares of common
 stock issued pursuant to the SecureCare Technologies, Inc. Year 2008 Stock
 Option Plan. These options vested immediately.

25

---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Mr. Nasto has been a director and Chief Executive Officer since
 November 6, 2006. He is the Companys Principal Executive Officer.                                                                                                                                                                                                                                                                                                    
|    | Mr. Nastos annual salary at December 31, 2008 is $180,000. Mr. Nasto
 received cash compensation of $150,000 in 2008 and he accrued additional
 salary of $30,000 through December 31, 2008.                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On July 29, 2008, Mr. Nasto was granted options to purchase 100,000
 shares of common stock issued pursuant to the SecureCare Technologies, Inc.                                                                                                                                                                                                                                                                                       
|    | Year 2008 Stock Option Plan. 50,000 of these options vested
 immediately and 50,000 of these options vest ratably over a twenty-four month
 period.                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On August 17, 2007, Mr. Nasto was granted options to purchase 141,667
 shares of common stock issued pursuant to the SecureCare Technologies, Inc.
 Year 2007 Stock Option Plan. These options vested immediately.                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In 2006, Mr. Nasto was paid $30,000 in cash compensation from the
 date of his employment, November 6, 2006 through December 31, 2006.                                                                                                                                                                                                                                                                                                 
|    | In addition, from July to October 2006, Mr. Nasto was paid $54,738 as
 an outside marketing consultant to the Company, excluding $4,285 in reimbursed
 out of pocket expenses.                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(4) | Mr. Linhard joined the Board of Directors on April 2, 2008. On July
 20, 2008, Mr. Linhard was grated options to purchase 10,000 shares of common
 stock issued pursuant to the SecureCare Technologies, Inc. Year 2008 Stock
 Option Plan. These options vested immediately. Mr. Linhard resigned from the
 Board of Directors on November 16, 2008.                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(5) | Mr. Stamy joined the Board of Directors on August 8, 2002. He
 resigned from the Board of Directors on April 2, 2008.                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(6) | Mr. Burley has been Chief Financial Officer since July 2002. He is a
 Vice-President and is the Companys Principal Financial Officer.                                                                                                                                                                                                                                                                                                 
|    | Mr. Burleys annual salary at December 31, 2008 is $120,000. Mr.
 Burley received cash compensation of $99,996 in 2008 and he accrued
 additional salary of $20,004 through December 31, 2008.                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On July 29, 2008 Mr. Burley was granted options to purchase 50,000
 shares of common stock issued pursuant to the SecureCare Technologies, Inc. Year 2008 Stock Option Plan. These options vest ratably over a
 twenty-four month period.                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Mr. Burleys annual salary at 12/31/07 was $120,000. Mr. Burleys
 total cash compensation of $175,500 in 2007 included payment of $55,500 in
 wages accrued for but not paid in 2005 and 2006.                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On August 17, 2007, Mr. Burley was granted options to purchase
 141,667 shares of common stock issued pursuant to the SecureCare
 Technologies, Inc. Year 2007 Stock Option Plan. These options vested
 immediately.                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Mr. Burley received cash compensation in 2006 of $58,667 and he
 accrued additional salary of $43,000 through December 31, 2006.                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(7) | Mr. Vineyard joined the Company on October 16, 2007. He was promoted
 to Chief Technology Officer on December 18, 2008.                                                                                                                                                                                                                                                                                                                
|    | Mr. Vineyards annual salary at December 31, 2008 is $90,000. Upon
 his promotion to Chief Technology Officer, the Company committed to grant Mr.
 Vineyard options to purchase 100,000 shares of common stock, when the options
 become available, upon Board of Director approval of the 2009 SecureCare
 Technologies, Inc. Stock Option Plan. As of the date of the filing of this
 10-K report, the options have not been granted.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On July 29, 2008 Mr. Vineyard was granted options to purchase 20,000
 shares of common stock issued pursuant to the SecureCare Technologies, Inc. Year 2008 Stock Option Plan. These options vest ratably over a
 twenty-four month period.                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On February 22, 2008, Mr. Vineyard was granted options to purchase
 10,000 shares of common stock issued pursuant to the SecureCare Technologies,
 Inc. Year 2007 Stock Option Plan. These options vested immediately.                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(8) | Mr. Fry has been a full time employee of the Company since October
 2001.                                                                                                                                                                                                                                                                                                                                                              
|    | Mr. Frys annual salary at December 31, 2008 is $102,000. Mr. Fry
 received cash compensation of $84,996 ins 2008 and he accrued additional
 salary of $17,004 through December 31, 2008.                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On July 29, 2008 Mr. Fry was granted options to purchase 25,000
 shares of common stock issued pursuant to the SecureCare Technologies, Inc. Year 2008 Stock Option Plan. These options vest ratably over a
 twenty-four month period.                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Mr. Frys annual salary at 12/31/07 was $102,000. Mr. Frys total
 cash compensation of $165,750 in 2007 included payment of $63,750 in wages
 accrued for but not paid in 2005 and 2006.                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On August 17, 2007, Mr. Fry was granted options to purchase 70,833
 shares of common stock issued pursuant to the SecureCare Technologies, Inc.
 Year 2007 Stock Option Plan. These options vested immediately.                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Mr. Fry received cash compensation in 2006 of $46,000 and he accrued
 additional salary of $45,000 through December 31, 2005.                                                                                                                                                                                                                                                                                                          

26

---



|     |                                                                                                                                                                                                                                                                                                                                                                                                            
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(9)  | Effective June 16, 2006, the Board of Directors accepted Mr.
 Woodrows resignation as a member of the Board of Directors and as President
 and Chief Executive Officer.                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                            
|     | Mr. Woodrow received cash compensation in 2006 of $3,000 and he
 accrued additional salary of $37,500 through June 16, 2006.                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                            
|(10) | Mr. OLoughlin was Executive Vice-President and Chief Operating
 officer from October 1, 2004 through December 9, 2005.                                                                                                                                                                                                                                                                                    
|     | Mr. OLoughlins employment with the Company ended December 9, 2005,
 as a result of the Companys implementation of a significant cost reduction
 program. Pursuant to a wage claim filed by Mr. OLoughlin with the Texas
 Workforce Commission in January, 2006 claiming his accrued salary of $20,000
 through December 31, 2005, the Company paid the wages owed, totaling $19,844,
 in January, 2007.

Outstanding Equity Awards

On
July 29, 2008, in accordance with the Companys Year 2008 Stock Option Plan,
the Company granted 360,000 stock options, at $0.75 per share, to the members
of the Board of Directors including 200,000 options granted to Joseph Larter,
50,000 options granted to Richard Corlin, 100,000 options granted to Dennis
Nasto and 10,000 options granted to Tom Linhard. A total of 310,000 of the
options granted vested immediately and 50,000 of the options granted to Dennis
Nasto will vest ratably on a monthly basis over a period of twenty-four months.
At December 31, 2008 all 360,000 stock options granted to the various board
members are outstanding, of which 320,417 are fully vested and 39,583 had not
vested. All of the non-vested stock options, totaling 39,853 options at
December 31, 2008 are held by Dennis Nasto.

In
addition, on July 29, 2008, in accordance with the Companys Year 2008 Stock
Option Plan, the Company granted 95,000 stock options, at $0.75 per share, to
its three most highly compensated executive officers (excluding the Chief
Executive Officer) including 50,000 options granted to Neil Burley, 25,000
options granted to Eugene Fry and 20,000 options granted to David Vineyard.
These options vest ratably on a monthly basis over a period of twenty four
months. In addition, on February 22, 2008, in accordance with the Companys
Year 2007 Stock Option Plan, the Company granted 10,000 stock options, at $1.25
per share, to David Vineyard. These options vested immediately. At December 31,
2008 all 105,000 stock options granted to the Companys three most highly
compensated executive offers (excluding the Chief Executive Officer) are
outstanding, of which 29,792 are fully vested and 75,208 had not vested.

On
August 15, 2007, in accordance with the Companys Year 2007 Stock Option Plan,
the Company granted a total of 354,167 stock options, at $0.80 per share, to
the Companys three most highly compensated executive officers including
141,667 options to Dennis Nasto, 141,667 options to Neil Burley and 70,833
options to Eugene Fry. These options vested immediately. At December 31, 2008
all 354,167 options granted to the Companys three most highly compensated
executive offers are outstanding and fully vested.

Compensation of Directors

Our
Directors do not receive cash compensation for their services. To the extent
our directors incur out-of-pocket expenses in performance of their duties as a
director of the Company, we reimburse the director for these out-of-pocket
expenses.

Employment Contracts, Termination of Employment,
Change-in-Control Arrangements

There
are no employment or other contracts or arrangements with our officers or
Directors. There are no compensation plans or arrangements, including payments
to be made by us, with respect to our officers and Directors that would result
from the resignation, retirement or any other termination of such Directors or
officers from us. There are no arrangements for Directors, officers or
employees that would result from a change-in-control. However, the stock
options granted to the Companys officers and Directors will become fully
vested upon a change in control of the Company, in accordance with the terms of
the Stock Option Plans.

27

---



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The
following table sets forth certain information regarding the beneficial
ownership of the Companys common stock as of December 31, 2008 by (I) each of
our Directors, (ii) each of our Executive Officers, (iii) each person who is
known by us to own beneficially more than 5% of the common stock and (iv) all
Directors and Officers as a group.

SecureCare Technologies, Inc.
Common Stock Affiliated Ownership Structure
12/31/2008

|                                       |  |                  |         |            |  |  |    |   | 
|-------------------------------------- |  | ---------------- | ------- | ---------- |  |  | -- | - | 
|Name                                   |  | Number of Shares |         | Percentage | 
|                                       |  |                  |         |            | 
|                                       |  |                  |         |            |  |  |    |   | 
|Richard F.
 Corlin, MD                 |  |                  | 5,216   |            |  |  | 0  | % | 
|                                       |  |                  |         |            |  |  |    |   | 
|Dennis Nasto                           |  |                  | 20,750  |            |  |  | 1  | % | 
|                                       |  |                  |         |            |  |  |    |   | 
|Neil Burley                            |  |                  | 1,075   |            |  |  | 0  | % | 
|                                       |  |                  |         |            |  |  |    |   | 
|Gene Fry                               |  |                  | 1,000   |            |  |  | 0  | % | 
|                                       |  |                  |         |            |  |  |    |   | 
|Joe Larter                             |  |                  | 417,657 |            |  |  | 18 | % | 
|                                       |  |                  |         |            |  |  |    |   | 
|David McCall                           |  |                  | 354,961 |            |  |  | 15 | % | 
|                                       |  |                  |         |            |  |  |    |   | 
|Michael
 Benton                        |  |                  | 153,250 |            |  |  | 7  | % | 
|                                       |  |                  |         |            |  |  |    |   | 
|Ian McIntyre                           |  |                  | 126,754 |            |  |  | 5  | % | 
|                                       |  |                  |         |            |  |  |    |   | 
|All
 Directors and Officers as a Group |  |                  | 445,698 |            |  |  | 19 | % | 

Changes in Control

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

28

---



Equity Compensation Information

The following table
summarizes securities authorized for issuance under our equity compensation
plans as of December 31, 2008:

|                                                           |  |                                                                         |         |  |                                                         |      |  |                                                                                                  |        | 
|---------------------------------------------------------- |  | ----------------------------------------------------------------------- | ------- |  | ------------------------------------------------------- | ---- |  | ------------------------------------------------------------------------------------------------ | ------ | 
|                                                           |  | Number
 of securities to be issued upon exercise of outstanding options |         |  | Weighted-average
 exercise price of outstanding options |      |  | Number
 of securities
 remaining available for
 future issuance under
 equity compensation plans |       
|                                                           |  |                                                                         |         |  |                                                         |      | 
|                                                          
|Equity compensation plans approved by security
holders     |  |                                                                         |        |  | $                                                       |     |  |                                                                                                  |        | 
|Equity compensation plans not approved by security
holders |  |                                                                         | 900,209 |  | $                                                       | 1.05 |  |                                                                                                  | 34,971 | 
|                                                           |  |                                                                         |         |  |                                                         |      |  |                                                                                                  |        | 
|Total                                                      |  |                                                                         | 900,209 |  | $                                                       | 1.05 |  |                                                                                                  | 34,971 | 
|                                                           |  |                                                                         |         |  |                                                         |      |  |                                                                                                  |        | 

The
number of securities remaining available for future issuance includes 8,750
under the 2004 Stock Option Plan, 4,166 under the 2007 Stock Option Plan and
21,875 under the 2008 Stock Option Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE

From
January 1, 2008 through December 31, 2008 the Company issued a total of
$592,320 in notes payable and 320,128 shares of common stock to related
parties. Of this total, $325,320 were 6% notes payable initially due December
31, 2008 and these notes had attached shares of the Companys common stock
totaling 130,128 shares in accordance with the terms and conditions of the
Financing and the Extension to parties classified as related parties at
December 31, 2008. An additional $190,000 in notes issued were 8% notes payable
initially due December 31, 2009 and these notes had attached shares of the
companys common stock totaling 190,000 shares in accordance with the terms and
conditions of the New Notes to parties classified as related parties at
December 31, 2008. And, the company issued a 6% six month note for $75,000 in
principal amount to a related party on July 3, 2008.

From
January 1, 2008 through December 31, 2008, the Company paid interest of $5,760
to related parties at December 31, 2008, on the portion of its notes payable
that required semi-annual interest payments.

On
June 20, 2008, the Company paid in full an unsecured note payable due to a
related party in the amount of $50,000, plus accrued interest of
$1,664.

At
December 31, 2008, the Company has outstanding $1,211,320 in related party
notes payable, including $120,000 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 $262,000 of these related party notes payable were 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 104,800 shares to be issued), for which the Company
issued 104,800 warrants to purchase common stock at $5.00 per share. These
related party notes 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 ($262,000 to related parties)
between December 2006 and May 2007 (the Notes). The Notes and the related
accrued interest originally mature 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 26,380 related party 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 also. 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 ($262,000 to related parties) of notes
outstanding.

A
total of $684,320 of these related party notes payable are 6% notes payable
initially due December 31, 2008 with principal and interest payable at
maturity. The Company has the option to extend the maturity date of the notes
an additional twelve months. The stated interest rate on these notes during the
optional extension period is 9% per annum. The notes have attached shares of
the Companys common stock in the form of one share of common stock for each
$2.50 investing into the offering. In addition, in conjunction with the
issuance of the notes payable, the Company has issued 273,728 shares of common
stock to these related parties. In November of 2008, the Company notified the
holders of the $684,320 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.

29

---



A
total of $190,000 of these related party notes payable are 8% notes payable initially
due December 31, 2009 with principal and interest payable at maturity. The
notes have attached shares of the Companys common stock in the form of one
share of common stock for each $1.00 investing into the offering. In addition,
in conjunction with the issuance of the notes payable, the Company has issued
190,000 shares of common stock to these related parties.

At
December 31, 2008, 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 $77,582 at December 31, 2008, 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 December
31, 2008.

At
December 31, 2008, the Company has $68,919 in accrued interest due on the notes
payable to related parties.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The
Board of Directors has reviewed the following audit fees the Company has paid
to the independent public accountants for purposes of considering whether such
fees are compatible with maintaining the auditors independence. The policy of
the Board of Directors is to pre-approve all audit services performed by its
independent public accountants before the services are performed.

Audit
Fees. Estimated fees billed for service rendered by KBA Group LLP for the
reviews of Forms 10-QSB and for the audits of the financial statements of the
Company were $75,197 for 2008 and $71,205 for 2007. Fees billed for tax related
services were $24,312 in 2008 and $14,500 in 2007. Additionally, fees billed
for other services totaled $0 for 2008 and $5,000 for 2007.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES

(a)     (1)
 (2) Financial Statements of SecureCare Technologies, Inc.:

|                                                         |  |                
|-------------------------------------------------------- |  | ---------------
|                                                         |  | Page Number (s)
|Report of
 Independent Registered Public Accounting Firm |  | 31             
|Balance
 Sheets                                          |  | 32             
|Statements
 of Operations                                |  | 34             
|Statements
 of Changes in Shareholders Deficit          |  | 35             
|Statements
 of Cash Flows                                |  | 37             
|Notes to
 Financial Statements                           |  | 39             

All other
schedules have been omitted since the required information is contained in
Financial Statements or because such schedules are not required.

(a) (3)
Exhibits: See Index to Exhibits on page 58. The Exhibits listed in the
accompanying Index of Exhibits are filed or incorporated by reference as part of
this report.

30

---



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
SecureCare Technologies, Inc.

We have audited the accompanying balance sheets of SecureCare
Technologies, Inc. (the Company) as of December 31, 2008 and 2007 and the
related statements of operations, changes in shareholders deficit, and cash
flows for the years then ended. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of SecureCare
Technologies, Inc. as of December 31, 2008 and 2007, and the results of its
operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.

As described in Note A, the accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. The
Company has experienced recurring losses, has generated recurring negative cash
flows from operations and has liabilities significantly in excess of assets at
December 31, 2008. These conditions raise substantial doubt about the Companys
ability to continue as a going concern. Managements plan with regard to these
matters is also described in Note A. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

/s/ KBA Group LLP
Dallas, Texas
March 30, 2009

31

---



SecureCare Technologies, Inc.BALANCE SHEETS
December 31, 2008 and 2007

ASSETS

|                                                                                                         |  |      |         |      |   |         | 
|-------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | 
|                                                                                                         |  | 2008 |         | 2007 |  
|                                                                                                         |  |      |         |      |  
|Current assets                                                                                           |  |      |         |      |   |         | 
|Cash and cash
 equivalents                                                                               |  | $    | 39,594  |      | $ | 161,680 | 
|Accounts
 receivable - trade, net of allowance for doubtful accounts of $1,502 and $2,000,
 respectively |  |      | 18,986  |      |   | 19,569  | 
|Prepaid expenses                                                                                         |  |      | 21,196  |      |   | 12,253  | 
|                                                                                                         |  |      |         |      |   |         | 
|Total current
 assets                                                                                    |  |      | 79,776  |      |   | 193,502 | 
|                                                                                                         |  |      |         |      |   |         | 
|Property and
 equipment, net of accumulated depreciation of $362,202 and $484,263,
 respectively         |  |      | 55,444  |      |   | 88,049  | 
|Deposits                                                                                                 |  |      | 13,192  |      |   | 5,852   | 
|                                                                                                         |  |      |         |      |   |         | 
|                                                                                                         |  |      |         |      |   |         | 
|Total assets                                                                                             |  | $    | 148,412 |      | $ | 287,403 | 
|                                                                                                         |  |      |         |      |   |        

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

32

---



SecureCare Technologies, Inc.
BALANCE SHEETS - CONTINUED
December 31, 2008 and 2007

LIABILITIES AND SHAREHOLDERS DEFICIT

|                                                                                                                                                                   |  |      |             |      |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ----------- | ---- | - | ----------- | -
|                                                                                                                                                                   |  | 2008 |             | 2007 |  
|                                                                                                                                                                   |  |      |             |      |  
|Current
 liabilities                                                                                                                                               |  |      |             |      |   |             |  
|Current portion
 of notes payable, including $1,006,820 and $416,500 to related parties, respectively, net of debt
 discount of $54,284 and $400,633, respectively |  | $    | 2,486,716   |      | $ | 856,867     |  
|Accounts payable
 - trade                                                                                                                                          |  |      | 129,196     |      |   | 213,175     |  
|Accrued payroll                                                                                                                                                    |  |      | 181,752     |      |   | 101,417     |  
|Accrued payroll
 taxes, penalties and interest - current                                                                                                           |  |      | 131,987     |      |   | 125,517     |  
|Deferred revenue                                                                                                                                                   |  |      | 13,148      |      |   |            |  
|Accrued interest,
 including $68,919 and $17,930 to related parties, respectively                                                                                  |  |      | 198,504     |      |   | 60,012      |  
|Other accrued
 liabilities                                                                                                                                         |  |      | 4,432       |      |   | 30,590      |  
|                                                                                                                                                                   |  |      |             |      |   |             |  
|Total current
 liabilities                                                                                                                                         |  |      | 3,145,735   |      |   | 1,387,578   |  
|                                                                                                                                                                   |  |      |             |      |   |             |  
|Notes
 payable (including $204,500 to related parties), less current portion and net
 of debt discount of $106,369 and $264,382, respectively                      |  |      | 344,131     |      |   | 186,118     |  
|                                                                                                                                                                   |  |      |             |      |   |             |  
|Non-current
 accrued payroll taxes, penalties and interest                                                                                                         |  |      | 70,916      |      |   | 147,437     |  
|                                                                                                                                                                   |  |      |             |      |   |             |  
|                                                                                                                                                                   |  |      |             |      |   |             |  
|Total Liabilities                                                                                                                                                  |  |      | 3,560,782   |      |   | 1,721,133   |  
|                                                                                                                                                                   |  |      |             |      |   |             |  
|Shareholders
 deficit                                                                                                                                             |  |      |             |      |   |             |  
|Preferred stock -
 $0.001 par value; 15,000,000 shares authorized,                                                                                                 |  |      |             |      |   |             |  
|Series A
convertible preferred stock - 1,575,000 and 1,875,000 shares issued and outstanding,
 respectively (liquidation preference of $1.00 per share)            |  |      | 1,575       |      |   | 1,875       |  
|Series B convertible
 preferred stock - 768,183 and 1,336,364 shares issued and outstanding,
 respectively (liquidation preference of $1.10 per share)             |  |      | 768         |      |   | 1,336       |  
|Common stock -
 $0.001 par value; 50,000,000 shares authorized, 2,316,448 and 1,658,706
 shares issued and outstanding, respectively                               |  |      | 2,316       |      |   | 1,659       |  
|Additional
 paid-in capital                                                                                                                                        |  |      | 36,941,082  |      |   | 36,365,516  |  
|Accumulated
 deficit                                                                                                                                               |  |      | (40,358,111 | )    |   | (37,804,116 | )
|                                                                                                                                                                   |  |      |             |      |   |             |  
|Total
 shareholders deficit                                                                                                                                       |  |      | (3,412,370  | )    |   | (1,433,730  | )
|                                                                                                                                                                   |  |      |             |      |   |             |  
|                                                                                                                                                                   |  |      |             |      |   |             |  
|Total liabilities
 and shareholders deficit                                                                                                                       |  | $    | 148,412     |      | $ | 287,403     |  
|                                                                                                                                                                   |  |      |             |      |   |             |  

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

33

---



SecureCare Technologies, Inc.STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2008 and 2007

|                                                                                    |  |      |            |      |   |            |  
|----------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                                    |  | 2008 |            | 2007 |  
|                                                                                    |  |      |            |      |  
|Revenues                                                                            |  | $    | 179,587    |      | $ | 134,065    |  
|Operating
 expenses                                                                 |  |      |            |      |   |            |  
|Cost of revenues                                                                    |  |      | 117,391    |      |   | 116,094    |  
|Selling, general
 and administrative                                                |  |      | 1,652,176  |      |   | 1,561,274  |  
|Loss on early
 extinguishment of debt                                               |  |      |           |      |   | 381,358    |  
|                                                                                    |  |      |            |      |   |            |  
|                                                                                    |  |      |            |      |   |            |  
|Operating loss                                                                      |  |      | (1,589,980 | )    |   | (1,924,661 | )
|                                                                                    |  |      |            |      |   |            |  
|Other income
 (expense)                                                             |  |      |            |      |   |            |  
|Other income                                                                        |  |      | 837        |      |   | 1,621      |  
|Interest expense
 (including $56,970 and $23,468 to
 related parties, respectively) |  |      | (964,852   | )    |   | (463,333   | )
|                                                                                    |  |      |            |      |   |            |  
|                                                                                    |  |      |            |      |   |            |  
|Net loss                                                                            |  | $    | (2,553,995 | )    | $ | (2,386,373 | )
|                                                                                    |  |      |            |      |   |            |  
|Amortization of
 deemed dividend upon issuance of convertible preferred stock       |  |      |           |      |   | (393,080   | )
|                                                                                    |  |      |            |      |   |            |  
|Net loss
 attributable to common shareholders                                       |  | $    | (2,553,995 | )    | $ | (2,779,453 | )
|                                                                                    |  |      |            |      |   |            |  
|                                                                                    |  |      |            |      |   |            |  
|Net loss per
 common share - basic and diluted                                      |  | $    | (1.29      | )    | $ | (2.72      | )
|                                                                                    |  |      |            |      |   |            |  
|Weighted-average
 number of common shares outstanding - basic and diluted           |  |      | 1,975,344  |      |   | 1,020,836  |  
|                                                                                    |  |      |            |      |   |            |  

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

34

---



SecureCare Technologies, Inc.STATEMENTS OF CHANGES IN SHAREHOLDERS DEFICIT
For the Years Ended December 31, 2008 and 2007

|                                                                                                       |  |                 |           |                 |   |                 |   |              |           |        |   |        |   |        |            |        |   |        |   |  |           |  |   |       |  
|------------------------------------------------------------------------------------------------------ |  | --------------- | --------- | --------------- | - | --------------- | - | ------------ | --------- | ------ | - | ------ | - | ------ | ---------- | ------ | - | ------ | - |  | --------- |  | - | ----- | -
|                                                                                                       |  | Series A        |           | Series B        |   | Series C        |   |              |          
|                                                                                                       |  | Preferred Stock |           | Preferred Stock |   | Preferred Stock |   | Common Stock |          
|                                                                                                       |  |                 |           |                 |   |                 |   |              |          
|                                                                                                       |  | Shares          |           | Amount          |   | Shares          |   | Amount       |           | Shares |   | Amount |   | Shares |            | Amount |  
|                                                                                                       |  |                 |           |                 |   |                 |   |              |           |        |   |        |   |        |            |        |  
|                                                                                                      
|Balance at
 December 31, 2006                                                                          |  |                 | 1,955,000 |                 | $ | 1,955           |   |              | 1,427,273 |        | $ | 1,427  |   |        | 1,058,835  |        | $ | 1,059  |   |  | 101,520   |  | $ | 102   |  
|                                                                                                       |  |                 |           |                 |   |                 |   |              |           |        |   |        |   |        |            |        |   |        |   |  |           |  |   |       |  
|Conversion of
 Series A preferred stock to common stock                                                |  |                 | (80,000   | )               |   | (80             | ) |              |          |        |   |       |   |        |           |        |   |       |   |  | 400       |  |   | (0    | )
|Conversion of
 Series B preferred stock to common stock                                                |  |                 |          |                 |   |                |   |              | (90,909   | )      |   | (91    | ) |        |           |        |   |       |   |  | 455       |  |   | (0    | )
|Mandatory conversion
 of Series C preferred stock to common stock                                      |  |                 |          |                 |   |                |   |              |          |        |   |       |   |        | (1,058,835 | )      |   | (1,059 | ) |  | 1,058,835 |  |   | 1,059 |  
|Issuance of
 common stock in connection with the extinguishment of notes payable and
 accrued interest |  |                 |          |                 |   |                |   |              |          |        |   |       |   |        |           |        |   |       |   |  | 107,396   |  |   | 107   |  
|Issuance of
 common stock for services                                                                 |  |                 |          |                 |   |                |   |              |          |        |   |       |   |        |           |        |   |       |   |  | 7,500     |  |   | 8     |  
|Issuance of
 common stock in connection with the issuance of notes payable                             |  |                 |          |                 |   |                |   |              |          |        |   |       |   |        |           |        |   |       |   |  | 382,600   |  |   | 383   |  
|Stock
 compensation expense                                                                            |  |                 |          |                 |   |                |   |              |          |        |   |       |   |        |           |        |   |       |   |  |          |  |   |      |  
|Beneficial
 conversion feature of convertible notes payable                                            |  |                 |          |                 |   |                |   |              |          |        |   |       |   |        |           |        |   |       |   |  |          |  |   |      |  
|Issuance of
 warrants in connection with notes payable                                                 |  |                 |          |                 |   |                |   |              |          |        |   |       |   |        |           |        |   |       |   |  |          |  |   |      |  
|Net loss for the
 year                                                                                 |  |                 |          |                 |   |                |   |              |          |        |   |       |   |        |           |        |   |       |   |  |          |  |   |      |  
|                                                                                                       |  |                 |           |                 |   |                 |   |              |           |        |   |        |   |        |            |        |   |        |   |  |           |  |   |       |  
|                                                                                                       |  |                 |           |                 |   |                 |   |              |           |        |   |        |   |        |            |        |   |        |   |  |           |  |   |       |  
|Balance at
 December 31, 2007                                                                          |  |                 | 1,875,000 |                 | $ | 1,875           |   |              | 1,336,364 |        | $ | 1,336  |   |        |           |        | $ |       |   |  | 1,658,706 |  | $ | 1,659 |  
|                                                                                                       |  |                 |           |                 |   |                 |   |              |           |        |   |        |   |        |            |        |   |        |   |  |           |  |   |       |  
|Conversion of
 Series A preferred stock to common stock                                                |  |                 | (300,000  | )               |   | (300            | ) |              |          |        |   |       |   |        |           |        |   |       |   |  | 1,500     |  |   | 1     |  
|Conversion of
 Series B preferred stock to common stock                                                |  |                 |          |                 |   |                |   |              | (568,181  | )      |   | (568   | ) |        |           |        |   |       |   |  | 2,842     |  |   | 3     |  
|Issuance of
 common stock in connection with the issuance of notes payable                             |  |                 |          |                 |   |                |   |              |          |        |   |       |   |        |           |        |   |       |   |  | 653,400   |  |   | 653   |  
|Stock compensation
 expense                                                                            |  |                 |          |                 |   |                |   |              |          |        |   |       |   |        |           |        |   |       |   |  |          |  |   |      |  
|Net loss for the
 year                                                                                 |  |                 |          |                 |   |                |   |              |          |        |   |       |   |        |           |        |   |       |   |  |          |  |   |      |  
|                                                                                                       |  |                 |           |                 |   |                 |   |              |           |        |   |        |   |        |            |        |   |        |   |  |           |  |   |       |  
|                                                                                                       |  |                 |           |                 |   |                 |   |              |           |        |   |        |   |        |            |        |   |        |   |  |           |  |   |       |  
|Balance at
 December 31, 2008                                                                          |  |                 | 1,575,000 |                 | $ | 1,575           |   |              | 768,183   |        | $ | 768    |   |        |           |        | $ |       |   |  | 2,316,448 |  | $ | 2,316 |  
|                                                                                                       |  |                 |           |                 |   |                 |   |              |           |        |   |        |   |        |            |        |   |        |   |  |           |  |   |       |  

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

35

---



SecureCare Technologies, Inc.
STATEMENTS OF CHANGES IN SHAREHOLDERS DEFICIT - CONTINUED
For the Years Ended December 31, 2008 and 2007

|                                                                                                       |  |                              |            |                      |   |             |   |   |            |  
|------------------------------------------------------------------------------------------------------ |  | ---------------------------- | ---------- | -------------------- | - | ----------- | - | - | ---------- | -
|                                                                                                       |  | Additional
 Paid-in
 Capital |            | Accumulated
 Deficit |   | Total       |  
|                                                                                                       |  |                              |            |                      |   |             |  
|Balance at
 December 31, 2006                                                                          |  | $                            | 34,490,006 |                      | $ | (35,417,744 | ) | $ | (923,194   | )
|                                                                                                       |  |                              |            |                      |   |             |   |   |            |  
|Conversion of
 Series A preferred stock to common stock                                                |  |                              | 80         |                      |   |            |   |   |           |  
|Conversion of
 Series B preferred stock to common stock                                                |  |                              | 90         |                      |   |            |   |   |           |  
|Mandatory
 conversion of Series C preferred stock to common stock                                      |  |                              |           |                      |   |            |   |   |           |  
|Issuance of
 common stock in connection with the extinguishment of notes payable and
 accrued interest |  |                              | 644,269    |                      |   |            |   |   | 644,376    |  
|Issuance of
 common stock for services                                                                 |  |                              | 44,993     |                      |   |            |   |   | 45,000     |  
|Issuance of
 common stock in connection with the issuance of notes payable                             |  |                              | 416,700    |                      |   |            |   |   | 417,083    |  
|Stock
 compensation expense                                                                            |  |                              | 318,878    |                      |   |            |   |   | 318,878    |  
|Beneficial
 conversion feature of convertible notes payable                                            |  |                              | 106,396    |                      |   |            |   |   | 106,396    |  
|Issuance of
 warrants in connection with notes payable                                                 |  |                              | 344,104    |                      |   |            |   |   | 344,104    |  
|Net loss for the
 year                                                                                 |  |                              |           |                      |   | (2,386,373  | ) |   | (2,386,373 | )
|                                                                                                       |  |                              |            |                      |   |             |   |   |            |  
|                                                                                                       |  |                              |            |                      |   |             |   |   |            |  
|Balance at
 December 31, 2007                                                                          |  | $                            | 36,365,516 |                      | $ | (37,804,116 | ) | $ | (1,433,730 | )
|                                                                                                       |  |                              |            |                      |   |             |   |   |            |  
|Conversion of
 Series A preferred stock to common stock                                                |  |                              | 299        |                      |   |            |   |   |           |  
|Conversion of
 Series B preferred stock to common stock                                                |  |                              | 565        |                      |   |            |   |   |           |  
|Issuance of
 common stock in connection with the issuance of notes payable                             |  |                              | 305,639    |                      |   |            |   |   | 306,292    |  
|Stock
 compensation expense                                                                            |  |                              | 269,063    |                      |   |            |   |   | 269,063    |  
|Net loss for the
 year                                                                                 |  |                              |           |                      |   | (2,553,995  | ) |   | (2,553,995 | )
|                                                                                                       |  |                              |            |                      |   |             |   |   |            |  
|                                                                                                       |  |                              |            |                      |   |             |   |   |            |  
|Balance at
 December 31, 2008                                                                          |  | $                            | 36,941,082 |                      | $ | (40,358,111 | ) | $ | (3,412,370 | )
|                                                                                                       |  |                              |            |                      |   |             |   |   |            |  

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

36

---



SecureCare Technologies, Inc.

STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2008 and 2007

|                                                                             |  |      |            |      |   |            |  
|---------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                             |  | 2008 |            | 2007 |  
|                                                                             |  |      |            |      |  
|                                                                             |  |      |            |      |   |            |  
|Cash flows from operating activities                                         |  |      |            |      |   |            |  
|Net loss                                                                     |  | $    | (2,553,995 | )    | $ | (2,386,373 | )
|Adjustments to reconcile net loss to net
 cash used in operating activities: |  |      |            |      |   |            |  
|Depreciation and amortization                                                |  |      | 63,642     |      |   | 35,167     |  
|Bad debt expense                                                             |  |      | 442        |      |   | 2,524      |  
|Common stock issued for services                                             |  |      |           |      |   | 45,000     |  
|Gain on extinguishment of liabilities                                        |  |      | (10,649    | )    |   |           |  
|Stock compensation expense                                                   |  |      | 269,063    |      |   | 318,878    |  
|Loss on early extinguishment of debt                                         |  |      |           |      |   | 381,358    |  
|Amortization of debt discount                                                |  |      | 810,654    |      |   | 386,026    |  
|Increases and decreases in working capital
 accounts:                        |  |      |            |      |   |            |  
|Accounts receivable - trade                                                  |  |      | 141        |      |   | (6,017     | )
|Prepaid expenses                                                             |  |      | (8,943     | )    |   | (10,170    | )
|Deposits                                                                     |  |      | (7,340     | )    |   |           |  
|Deferred revenue                                                             |  |      | 13,148     |      |   |           |  
|Accounts payable - trade                                                     |  |      | (73,330    | )    |   | (7,615     | )
|Accrued liabilities                                                          |  |      | 122,618    |      |   | (106,308   | )
|                                                                             |  |      |            |      |   |            |  
|Cash flows used in operating activities                                      |  |      | (1,374,549 | )    |   | (1,347,530 | )
|                                                                             |  |      |            |      |   |            |  
|Cash flows from investing activities                                         |  |      |            |      |   |            |  
|Capital expenditures                                                         |  |      | (31,037    | )    |   | (25,940    | )
|Capitalized software development costs                                       |  |      |           |      |   | (52,000    | )
|                                                                             |  |      |            |      |   |            |  
|Cash flows used in investing activities                                      |  |      | (31,037    | )    |   | (77,940    | )
|                                                                             |  |      |            |      |   |            |  
|Cash flows from financing activities                                         |  |      |            |      |   |            |  
|Payment of notes payable                                                     |  |      | (50,000    | )    |   |           |  
|Proceeds allocated to notes payable                                          |  |      | 1,027,208  |      |   | 695,813    |  
|Proceeds allocated to common stock                                           |  |      | 306,292    |      |   | 417,083    |  
|Proceeds allocated to common stock purchase
 warrants                        |  |      |           |      |   | 344,104    |  
|                                                                             |  |      |            |      |   |            |  
|Cash flows provided by financing
activities                                  |  |      | 1,283,500  |      |   | 1,457,000  |  

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

37

---



SecureCare Technologies, Inc.

STATEMENTS OF CASH FLOWS - CONTINUED
For the Years Ended December 31, 2008 and 2007

|                                                                                                  |  |      |          |      |   |         | 
|------------------------------------------------------------------------------------------------- |  | ---- | -------- | ---- | - | ------- | 
|                                                                                                  |  | 2008 |          | 2007 |  
|                                                                                                  |  |      |          |      |  
|Net increase (decrease) in cash and cash
 equivalents                                             |  |      | (122,086 | )    |   | 31,530  | 
|                                                                                                  |  |      |          |      |   |         | 
|Cash and cash equivalents, beginning of
 year                                                     |  |      | 161,680  |      |   | 130,150 | 
|                                                                                                  |  |      |          |      |   |         | 
|Cash and cash equivalents, end of year                                                            |  | $    | 39,594   |      | $ | 161,680 | 
|                                                                                                  |  |      |          |      |   |         | 
|                                                                                                  |  |      |          |      |   |         | 
|Supplemental disclosures for cash flow
 information:                                              |  |      |          |      |   |         | 
|                                                                                                  |  |      |          |      |   |         | 
|Interest paid                                                                                     |  | $    | 13,304   |      | $ | 11,640  | 
|                                                                                                  |  |      |          |      |   |         | 
|                                                                                                  |  |      |          |      |   |         | 
|Conversion of note payable and accrued
 interest in to common stock                               |  | $    |         |      | $ | 244,018 | 
|                                                                                                  |  |      |          |      |   |         | 
|                                                                                                  |  |      |          |      |   |         | 
|Amortization of deemed dividend upon
 issuance of convertible preferred stock                     |  | $    |         |      | $ | 393,080 | 
|                                                                                                  |  |      |          |      |   |         | 
|                                                                                                  |  |      |          |      |   |         | 
|Issuance of common stock in connection with
 extinguishment of notes payable and accrued interest |  | $    |         |      | $ | 644,376 | 
|                                                                                                  |  |      |          |      |   |         | 

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

38

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE A - BACKGROUND AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

39

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE A - BACKGROUND AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

GOING CONCERN

The financial statements have been prepared on the assumption that the
Company will continue as a going concern. The Company sustained net losses of
$2,553,995 and $2,386,373 for the years ended December 31, 2008 and 2007,
respectively. The Company has accumulated losses through December 31, 2008 of
$40,358,111 (including a non-recurring loss on early extinguishment of debt
totaling $19,030,648 incurred in the fourth quarter of 2006 and $381,358
incurred in the second quarter of 2007). Cash used in operating activities for
the same periods aggregated $1,374,549 and $1,347,530, respectively. Total
liabilities at December 31, 2008 of $3,560,7852 significantly exceed total
assets of $148,412. As of the date of this report, the Company is unable to
meet all of its short-term obligations because of shortages of cash. The
Companys continued existence depends upon the success of managements efforts
to raise additional capital necessary to meet the Companys obligations as they
come due, and to obtain sufficient capital to execute its business plan. The
Company intends to obtain capital primarily through issuances of debt or
equity. There can be no degree of assurance that the Company will be successful
in completing additional financing transactions. Failure to generate additional
revenues, raise additional capital or manage discretionary spending could have
a material adverse effect on the Companys ability to continue as a going
concern and to achieve its intended business objectives. The accompanying
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.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR
DOUBTFUL ACCOUNTS

Trade accounts receivable are stated at the amount the Company expects
to collect. The Company maintains allowances for doubtful accounts for
estimated losses resulting from the inability of its customers to make required
payments. Management considers the following factors when determining the
collectibility of specific customer accounts: customer credit-worthiness, past
transaction history with the customer, current economic industry trends, and
changes in customer payment terms. The Companys accounts receivable are not
secured. If the financial condition of the Companys customers were to
deteriorate, adversely affecting their ability to make payments, additional
allowances would be required. Based on managements assessment, the Company
provides for estimated uncollectible amounts through a charge to earnings and
an increase to a valuation allowance. Balances that remain outstanding after
the Company has used reasonable collection efforts are written off through a
charge to the valuation allowance.

PROPERTY AND EQUIPMENT

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

Depreciation expense for the years ended December 31, 2008 and 2007 was
$63,642 and $35,167, respectively. In March, 2008, the Company retired $185,703
of fully depreciated property and equipment, resulting in no gain or loss.

40

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE A - BACKGROUND AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 December 31, 2008, capitalized software
development costs totaled $235,750, less accumulated amortization of $213,833.
During the twelve month period ended December 31, 2008 no software development
costs were capitalized. During the twelve month periods ended December 31, 2008
and December 31, 2007, amortization of capitalized software development costs
totaled $32,874 and $18,042, respectively.

INCOME TAXES

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

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

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

REVENUE RECOGNITION

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

The Company recognizes revenue in accordance with SEC Staff Accounting
Bulletin No. 104, Revenue Recognition (SAB 104). SAB 104 generally requires
that four basic criteria must be met before revenue can be recognized: (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred or services
have been rendered; (3) the fee is fixed and determinable; and (4)
collectibility is reasonably assured. Determination of criteria (3) and (4) are
based on managements judgments regarding the fixed nature of the fee charged
for services rendered and the collectibility of those fees. Should changes in
conditions cause management to determine these criteria are not met for certain
sales, revenue recognized for any reporting period could be adversely affected.
In instances 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.

LOSS PER COMMON SHARE

Basic net loss per share is computed by dividing net loss by the
weighted average number of common shares outstanding for the year. Diluted net
loss per share is computed by dividing net loss by the weighted average number
of common shares and dilutive common stock equivalents outstanding for the
year. Common stock equivalents for the years ended December 31, 2008 and 2007
totaling 1,504,481 and 954,110, respectively, have been excluded from the
computation since such inclusion would have an anti-dilutive effect.

41

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE A - BACKGROUND AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

LONG-LIVED ASSETS

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

STOCK-BASED COMPENSATION

The Company uses the modified prospective method of SFAS No. 123
(revised 2004), Share-Based Payment (SFAS No. 123R). SFAS No. 123R
supersedes APB Opinion No. 25, and amends SFAS No. 95, Statement of Cash
Flows. SFAS No. 123R requires that all share-based payments to employees,
including the grant of employee stock options, be recognized in the income
statement based on their fair values. Under the modified prospective
application, SFAS No. 123R is applied to new awards and awards modified,
repurchased or cancelled after the effective date. Compensation cost for the
portion of awards for which requisite service has not been rendered that are
outstanding as of the effective date is recognized as the requisite service is
rendered on or after the effective date. The compensation cost for the portion
of awards is based on the grant date fair value of those awards, less estimated
forfeitures.

Stock-based compensation expense recognized during the period is based
on the value of the portion of the stock-based payment awards that is
ultimately expected to vest less estimated forfeitures. SFAS No. 123R requires
forfeitures to be estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those estimates.

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

42

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE A - BACKGROUND AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

USE OF ESTIMATES

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

RECENT ACCOUNTING PRONOUNCEMENTS

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

In February 2007, the FASB issued SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities, which allows
companies the option to measure financial assets or liabilities at fair value
and include unrealized gains and losses in net income rather than equity. This
becomes available when the Company fully adopts SFAS 157, which will be
fiscal year 2009. The Company is analyzing the expected impact from adopting
this statement on its financial statements, but currently does not believe its
adoption will have a significant impact on the financial position or results of
operations of the Company.

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 is effective for fiscal years
beginning after December 15, 2008. The provisions of SFAS 141R will impact
the Company if it is a party to a business combination after the pronouncement
is adopted.

43

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE B - PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2008 and 2007 consists of the
following:

|                                                 |  |      |          |      |   |          |  
|------------------------------------------------ |  | ---- | -------- | ---- | - | -------- | -
|                                                 |  | 2008 |          | 2007 |  
|                                                 |  |      |          |      |  
|Computer equipment and software                  |  | $    | 408,162  |      | $ | 559,774  |  
|Furniture and office equipment                   |  |      | 9,484    |      |   | 12,538   |  
|                                                 |  |      |          |      |   |          |  
|                                                 |  |      | 417,646  |      |   | 572,312  |  
|                                                 |  |      |          |      |   |          |  
|Less: accumulated depreciation and
 amortization |  |      | (362,202 | )    |   | (484,263 | )
|                                                 |  |      |          |      |   |          |  
|Net property and equipment                       |  | $    | 55,444   |      | $ | 88,049   |  
|                                                 |  |      |          |      |   |          |  

Computer equipment and software includes $235,750 at December 31, 2008
and 2007 in costs capitalized in the development of software held for internal
use.

44

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE C - NOTES PAYABLE

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

|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------- | --------- | --------- | - | ---------- | - | --------- | --------- | - | - | -------- | -
|                                                                                                                                                                                                       |  | 2008       |           | 2007      |  
|                                                                                                                                                                                                       |  |            |           |           |  
|                                                                                                                                                                                                       |  | Short Term |           | Long Term |   | Short Term |   | Long Term |          
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Note payable to Phoebe Holdings, Inc.
at
 7.5%, unsecured.                                                                                                                                             |  | $          | 63,500    |           | $ |           |   | $         | 63,500    |   | $ |         |  
|Note is in default as of May 1, 2005.
 Interest rate increased to 9.5% after default.                                                                                                                  |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Related party note payable bearing
 interest at 6%, unsecured.                                                                                                                                         |  |            | 75,000    |           |   |           |   |           |          |   |   |         |  
|Note is in default as of December 3,
 2008.                                                                                                                                                            |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Note payable bearing interest at
 6%, unsecured.                                                                                                                                                       |  |            |          |           |   |           |   |           | 50,000    |   |   |         |  
|Principal and interest due May 30,
2008                                                                                                                                                                |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Bridge Financing
Summary                                                                                                                                                                               |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Convertible bridge notes payable
bearing
 interest at 7.5%, including $57,500 to related parties, unsecured.                                                                                           |  |            | 187,500   |           |   |           |   |           | 187,500   |   |   |         |  
|Principal and interest due December,
2009                                                                                                                                                              |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Convertible bridge notes payable
bearing
 interest at 7.5%, including $12,500 to related parties, unsecured.                                                                                           |  |            |          |           |   | 62,500     |   |           |          |   |   | 62,500   |  
|Principal and interest due January,
2010                                                                                                                                                               |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Convertible bridge notes payable
bearing
 interest at 7.5%, including $167,000 to related parties, unsecured.                                                                                          |  |            |          |           |   | 250,500    |   |           |          |   |   | 250,500  |  
|Principal and interest due February,
2010                                                                                                                                                              |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Convertible bridge notes payable
bearing
 interest at 7.5%, unsecured.                                                                                                                                 |  |            |          |           |   | 82,500     |   |           |          |   |   | 82,500   |  
|Principal and interest due April,
2010                                                                                                                                                                 |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Convertible bridge notes payable
bearing
 interest at 7.5%, including $25,000 to related parties, unsecured.                                                                                           |  |            |          |           |   | 55,000     |   |           |          |   |   | 55,000   |  
|Principal and interest due May,
2010                                                                                                                                                                   |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Bridge notes payable bearing interest
at
 6%, including $684,320 and $359,000 to related parties, unsecured.                                                                                           |  |            | 1,965,000 |           |   |           |   |           | 956,500   |   |   |         |  
|Principal and interest originally due
 December 31, 2008; however, automatic note extensions of 1 year were
 exercised during 2008, with an adjusted interest rate of 9% during the
 extension period. |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Bridge notes payable bearing interest
at
 8%                                                                                                                                                           |  |            | 250,000   |           |   |           |   |           |          |   |   |         |  
|Principal and interest due December 31,
 2009, including $190,000 to related parties, unsecured                                                                                                        |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|                                                                                                                                                                                                       |  | $          | 2,541,000 |           | $ | 450,500    |   | $         | 1,257,500 |   | $ | 450,500  |  
|Less: unamortized debt
discount                                                                                                                                                                        |  |            | (54,284   | )         |   | (106,369   | ) |           | (400,633  | ) |   | (264,382 | )
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  
|Total notes payable                                                                                                                                                                                    |  | $          | 2,486,716 |           | $ | 344,131    |   | $         | 856,867   |   | $ | 186,118  |  
|                                                                                                                                                                                                       |  |            |           |           |   |            |   |           |           |   |   |          |  

45

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE C - NOTES PAYABLE (Continued)

Bridge Financing Summary  Funding Received October 2008 through
December 2008

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 October 1, 2008 through December 31, 2008 the Company received a
total of $250,000 in gross proceeds from the New Notes. In addition, the
Company issued 250,000 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 $285,500. 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 $30,116 of the $250,000 in proceeds to the
shares of common stock issued and the remaining $219,884 to the notes payable.
The debt discount amount of $30,116 is being amortized as a component of
interest expense over the life of the notes (twelve to fifteen months).

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.

As of December 31, 2008, 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.

46

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE C - NOTES PAYABLE (Continued)

Bridge Financing Summary  Funding Received December 2006 through May
2007

At December 31, 2008, 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 December 31, 2008, 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 December 31, 2008.

In June 2007, in accordance with the terms and conditions of the
Companys original conversion offer, dated October 19, 2006, to convert the
principal amounts of notes payable and accrued interest through September 15,
2006, to common stock, the Company received signed consents from additional
note holders accepting the conversion offer representing $200,000 in notes
payable and $44,018 in accrued interest. To affect these additional
conversions, the Company issued 107,396 shares of common stock. The difference
between the net carrying amount of the extinguished debt and the reacquisition
price of the extinguished debt, totaling $381,358 was recognized as a loss in
the period of extinguishment.

Future maturities of notes payable at December 31, 2008 are as follows:

|      |  |   |           | 
|----- |  | - | --------- | 
|2009  |  | $ | 2,541,000 | 
|2010  |  |   | 450,500   | 
|      |  |   |           | 
|      |  |   |           | 
|Total |  | $ | 2,991,500 | 
|      |  |   |           | 

47

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE D  LEASE COMMITMENTS
The Company relocated its principal executive office to a new location
in Austin, Texas in February 2008. The new premise contains approximately 1,520
square feet and was leased under a two year non-cancelable operating lease
agreement, which expires on February 28, 2010. The terms of the operating lease
required the Company to pay a refundable lease deposit of $2,936 and $17,617 in
pre-paid rent, to be applied to the rents due in months 18  24 of the lease
term. The current portion of the pre-paid rent, totaling $13,213 is classified
as a prepaid expense and the non-current portion of the pre-paid rent, totaling
$4,404 is classified as a deposit in the accompanying balance sheet at December
31, 2008. The lease agreement also contained provisions for future rent increases.
The difference between rent expense recorded and amount paid is recorded as
deferred rent obligation, which is included in Other Accrued Liabilities in
the accompanying balance sheet.

Rent expense totaled $37,813 and $18,550 for the years ended December
31, 2008 and 2007, respectively.

Future minimum lease payments under the non-cancelable office
facilities operating lease at December 31, 2008 are as follows:

|      |  |   |        | 
|----- |  | - | ------ | 
|2009  |  | $ | 35,061 | 
|2010  |  |   | 4,404  | 
|      |  |   |        | 
|Total |  | $ | 39,465 | 
|      |  |   |        | 

The Company was notified on January 20, 2006, that it was in default
under its master electronic equipment lease primarily due to its failure to pay
the base monthly rental payments after October 2005. On February 20, 2006, the
Company returned approximately $300,000 of the hardware and software to the
lessor, retaining approximately $14,000 of the original leased property. The
notice of default on the lease did not relieve, suspend or waive the Companys
continued responsibility for the monthly rental payments for the balance of the
initial lease term. As of February 20, 2006, the Company had approximately
$59,000 of its original lease deposit amount of $124,717 in tact. The Company
restructured the remaining amount owed under the lease for an additional
twenty-four months. The net amount owed included an offset credit given for the
lease deposit of $59,239. The restructured balance totaled $107,102 as of
February 20, 2006. The Company made its first payment on the restructured lease
in July 2006. In August 2006, the Company was notified by the lessor that a
partial credit of $14,849 was being issued to the Company, against the
restructured balance, for the equipment returned to the lessor in February
2006. At December 31, 2007, the restructured balance due totaled $30,342 and
was included in other accrued liabilities. The entire amount of $30,342 was
paid in 2008.

NOTE E - INCOME TAXES

At December 31, 2008 and 2007 deferred tax assets and liabilities are
comprised of the following:

|                                 |  |      |            |      |   |            |  
|-------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                 |  | 2008 |            | 2007 |  
|                                 |  |      |            |      |  
|Current deferred
 tax asset      |  | $    | 511        |      | $ | 680        |  
|Non-current
 deferred tax asset: |  |      |            |      |   |            |  
|Stock based compensation         |  |      | 252,159    |      |   | 160,678    |  
|Net operating loss               |  |      | 5,515,472  |      |   | 5,019,646  |  
|Less
 valuation allowance        |  |      | (5,768,142 | )    |   | (5,181,004 | )
|                                 |  |      |            |      |   |            |  
|Net deferred
 tax asset          |  | $    |           |      | $ |           |  
|                                 |  |      |            |      |   |            |  

Non-current deferred tax assets principally result from net operating
losses. The current deferred tax asset results from the allowance for doubtful
receivables which is not currently deducted for income tax reporting purposes.
The December 31, 2008 and 2007 deferred tax assets have a 100% valuation allowance
due to the uncertainty of generating future taxable income.

Differences between the statutory federal income tax rate and the
effective rate for the years ended December 31, 2008 and 2007 are as follows:

|                                        |  |  |       |   |  |       |  
|--------------------------------------- |  |  | ----- | - |  | ----- | -
|                                        |  |  | 2008  |   |  | 2007  |  
|                                        |  |  |       |   |  |       |  
|                                        |  |  |       |   |  |       |  
|Income tax
 provision at statutory rate |  |  | 34.0  | % |  | 34.0  | %
|                                        |  |  |       |   |  |       |  
|Permanent
 differences                  |  |  | (11.0 | ) |  | (12.0 | )
|Change in
 valuation allowance          |  |  | (23.0 | ) |  | (22.0 | )
|                                        |  |  |       |   |  |       |  
|                                        |  |  | 0.0   | % |  | 0.0   | %
|                                        |  |  |       |   |  |       |  

48

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE E - INCOME TAXES (Continued)

The Company has a net operating loss carry forward of approximately
$16,200,000 at December 31, 2008. All net operating losses of the Company
generated prior to 2003 were eliminated through the bankruptcy process.
Accordingly, the net operating loss at December 31, 2008 consists of losses
that were generated subsequent to the bankruptcy filing. The net operating loss
carryover will begin to expire in 2024. The net operating loss carryover may be
limited in the event of an ownership change as defined in Section 382 of the
Internal Revenue Code.

NOTE F - SHAREHOLDERS DEFICIT

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

In April 2008, the holder of 45,455 shares of Series B Convertible
preferred stock voluntarily converted these preferred stock shares to 227
shares of common stock.

In May 2008, the holder of 200,000 shares of Series A Convertible
preferred stock and 409,090 shares of Series B Convertible preferred stock
voluntarily converted these preferred stock shares to 1,000 and 2,046 shares of
common stock, respectively.

During the twelve months ended December 31, 2008, in conjunction with
$1,258,500 in gross proceeds from issuance of notes payable, the Company issued
653,400 shares of common stock to the participating investors (see Note 3 for
additional information).

In November 2007 the holder of 80,000 shares of Series A Convertible
preferred stock and 90,909 shares of Series B Convertible preferred stock
voluntarily converted these preferred stock shares to 400 and 455 shares of
common stock, respectively.

On February 28, 2007, the Board of Directors of the Company commenced
written solicitation of the holders of its common stock and its Series C Stock,
as of February 23, 2007 (the Record Date) to grant the Companys Board of
Directors discretionary authority to effect a reverse stock split of two
hundred for one in order for the Company to have sufficient shares to meet its
existing obligations. This proposed reverse stock split did not change the
number of shares of common stock (50,000,000) that the Company is authorized to
issue. After completion of the taking of written shareholder consents, of the
approximate 232 million shares and share equivalents entitled to vote on the
proposal, approximately 167 million or 72% voted in favor of the proposal;
approximately 85,000 or .04% voted against the proposal and .01% abstained.

On April 24, 2007 (the Effective Date) the Company amended its
articles of incorporation with the State of Nevada to affect a 1 for 200
reverse stock split of its common stock. As a result of the reverse stock
split, effective April 24, 2007, the Companys 20,304,000 issued and
outstanding shares of common stock were changed into approximately 101,520
shares of common stock (after giving effect to rounding) and each of the
Companys 1,058,835 issued and outstanding shares of Series C Mandatorially
Convertible Preferred Stock were automatically converted into 200 shares of the
Companys common stock for an aggregate of 211,767,000 shares of common stock
which were automatically changed into approximately 1,058,835 shares of common
stock. The total number of common shares issued and outstanding immediately
following the reverse stock split was approximately 1,160,355. All share and
per share amounts have been restated for all periods presented to reflect this
reverse stock split.

49

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE F  SHAREHOLDERS DEFICIT (Continued)

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

In accordance with the Certificate of
Designation of the Series A convertible preferred stock (the Series A Stock),
each share of the Series A Stock initially had a par value of $.001 and a stated value of
$1.00 per share. Each share of the Series A Stock was initially convertible into a number
of shares of Common Stock determined by dividing the (i) stated value by (ii) the
conversion price in effect on the conversion date. The conversion price at which shares of
common stock were initially issuable upon conversion of the shares of the Series A Stock
was $1.00 per share. Therefore, initially each share of Series A Stock converted to one
share of common stock. On April 24, 2007, after securing shareholder approval for one for
two hundred reverse stock split, the number of shares issuable upon conversion of the
Series A Stock was adjusted from one share to 1/200th of a share. At December
31, 2008 the Company had 1,575,000 shares of Series A Stock outstanding. These shares
would convert to 7,875 shares of common stock, if all of the outstanding Series A Stock
was converted.

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

In accordance with the Certificate of
Designation of the Series B convertible preferred stock (the Series B Stock),
each share of the Series B Stock initially had a par value of $.001 and a stated value of
$1.10 per share. Each share of the Series B Stock was initially convertible into a number
of shares of Common Stock determined by dividing the (i) stated value by (ii) the
conversion price in effect on the conversion date. The conversion price at which shares of
common stock were initially issuable upon conversion of the shares of the Series B Stock
was $1.10 per share. Therefore, initially each share of Series B Stock converted to one
share of common stock. On April 24, 2007, after securing shareholder approval for one for
two hundred reverse stock split, the number of shares issuable upon conversion of the
Series B Stock was adjusted from one share to 1/200th of a share. At December
31, 2008 the Company had 768,183 shares of Series B Stock outstanding. These shares would
convert to 3,841 shares of common stock, if all of the outstanding Series B Stock was
converted.

50

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE G - STOCK OPTIONS AND WARRANTS

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). On October
31, 2008 a total of 21,875 options were forfeited.

At December 31, 2008, under the 2008 Plan, the Company had 478,125
options outstanding of which 346,667 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.

At December 31, 2008, under the 2007 Plan, the Company had 420,834
options outstanding, of which 420,834 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. There were no new options granted,
exercised or cancelled under the 2004 Plan during the year ended December 31,
2008.

At December 31, 2008, under the 2004 Plan, the Company had 1,250
options outstanding, of which 1,250 were exercisable.

51

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE G  STOCK OPTIONS AND WARRANTS
(Continued)

For the twelve months ended December 31, 2008 and 2007, the
compensation expense associated with stock options was $269,063 and $318,878,
respectively.

The following tables summarize the activity under all stock option
plans for the years ended December 31, 2008 and 2007:

|                                                 |  |                                        |         |                                   |   |                                                |  |                            |             |  |   |   | 
|------------------------------------------------ |  | -------------------------------------- | ------- | --------------------------------- | - | ---------------------------------------------- |  | -------------------------- | ----------- |  | - | - | 
|                                                 |  | 2008
 Stock Option Plan                |        
|                                                 |  |                                        |        
|                                                 |  | Twelve
 Months Ended December 31, 2008 |        
|                                                 |  |                                        |        
|                                                 |  | Shares                                 |         | Weighted
 Average
 Exercise Price |   | Weighted
 Average
 Remaining
 Contractual Term |  | Aggregate
 Intrinsic Value |            
|                                                 |  |                                        |         |                                   |   |                                                |  |                            |            
|Outstanding at January 1, 2008                   |  |                                        |        |                                   | $ |                                               |  |                            | 
 years    |  | $ |  | 
|                                                 |  |                                        |         |                                   |   |                                                |  |                            |             |  |   |   | 
|Granted                                          |  |                                        | 500,000 |                                   | $ | 0.75                                           |  |                            | 9.59
 years |  |   |   | 
|Exercised                                        |  |                                        |        |                                   | $ |                                               |  |                            | 
 years    |  |   |   | 
|Cancelled                                        |  |                                        |        |                                   | $ |                                               |  |                            | 
 years    |  |   |   | 
|Forfeitures                                      |  |                                        | (21,875 | )                                 | $ | 0.75                                           |  |                            | 
 years    |  |   |   | 
|                                                 |  |                                        |         |                                   |   |                                                |  |                            |             |  |   |   | 
|Outstanding at December 31, 2008                 |  |                                        | 478,125 |                                   | $ | 0.75                                           |  |                            | 9.59
 years |  | $ |  | 
|                                                 |  |                                        |         |                                   |   |                                                |  |                            |             |  |   |   | 
|                                                 |  |                                        |         |                                   |   |                                                |  |                            |             |  |   |   | 
|Vested and expected to vest at December 31, 2008 |  |                                        | 478,125 |                                   | $ | 0.75                                           |  |                            | 9.59
 years |  | $ |  | 
|Options exercisable at December 31, 2008         |  |                                        | 346,667 |                                   | $ | 0.75                                           |  |                            | 9.59
 years |  | $ |  | 

|                                                  |  |                                                 |         |                                   |   |                                                |  |                            |             |  |   |   | 
|------------------------------------------------- |  | ----------------------------------------------- | ------- | --------------------------------- | - | ---------------------------------------------- |  | -------------------------- | ----------- |  | - | - | 
|                                                  |  | 2007
 Stock Option Plan                         |        
|                                                  |  |                                                 |        
|                                                  |  | Twelve
 Months Ended December 31, 2008 and 2007 |        
|                                                  |  |                                                 |        
|                                                  |  | Shares                                          |         | Weighted
 Average
 Exercise Price |   | Weighted
 Average
 Remaining
 Contractual Term |  | Aggregate
 Intrinsic Value |            
|                                                  |  |                                                 |         |                                   |   |                                                |  |                            |            
|Outstanding at January 1,
 2007                   |  |                                                 |        |                                   | $ |                                               |  |                            |            |  | $ |  | 
|                                                  |  |                                                 |         |                                   |   |                                                |  |                            |             |  |   |   | 
|Granted                                           |  |                                                 | 420,834 |                                   | $ | 0.80                                           |  |                            | 9.58
 years |  |   |   | 
|Exercised                                         |  |                                                 |        |                                   | $ |                                               |  |                            |            |  |   |   | 
|Cancelled                                         |  |                                                 |        |                                   | $ |                                               |  |                            |            |  |   |   | 
|Forfeitures                                       |  |                                                 | (9,167  | )                                 | $ | 0.80                                           |  |                            |            |  |   |   | 
|                                                  |  |                                                 |         |                                   |   |                                                |  |                            |             |  |   |   | 
|Outstanding at December 31,
 2007                 |  |                                                 | 411,667 |                                   | $ | 0.80                                           |  |                            | 9.58
 years |  | $ |  | 
|                                                  |  |                                                 |         |                                   |   |                                                |  |                            |             |  |   |   | 
|Granted                                           |  |                                                 | 10,000  |                                   | $ | 1.25                                           |  |                            | 9.08
 years |  |   |   | 
|Exercised                                         |  |                                                 |        |                                   | $ |                                               |  |                            | 
 years    |  |   |   | 
|Cancelled                                         |  |                                                 | (833    | )                                 | $ | 0.80                                           |  |                            | 
 years    |  |   |   | 
|Forfeitures                                       |  |                                                 |        |                                   | $ |                                               |  |                            | 
 years    |  |   |   | 
|                                                  |  |                                                 |         |                                   |   |                                                |  |                            |             |  |   |   | 
|Outstanding at December 31,
 2008                 |  |                                                 | 420,834 |                                   | $ | 0.81                                           |  |                            | 8.62
 years |  | $ |  | 
|                                                  |  |                                                 |         |                                   |   |                                                |  |                            |             |  |   |   | 
|                                                 
|Vested and expected to vest
 at December 31, 2008 |  |                                                 | 420,834 |                                   | $ | 0.81                                           |  |                            | 8.62
 years |  | $ |  | 
|Options exercisable at
 December 31, 2008         |  |                                                 | 420,834 |                                   | $ | 0.81                                           |  |                            | 8.62
 years |  | $ |  | 

52

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE G - STOCK OPTIONS AND WARRANTS
(Continued)

|                                                  |  |                                                 |       |                                   |   |                                                |  |                             |             |  |   |   | 
|------------------------------------------------- |  | ----------------------------------------------- | ----- | --------------------------------- | - | ---------------------------------------------- |  | --------------------------- | ----------- |  | - | - | 
|                                                  |  | 2004
 Stock Option Plan                         |      
|                                                  |  |                                                 |      
|                                                  |  | Twelve
 Months Ended December 31, 2008 and 2007 |      
|                                                  |  |                                                 |      
|                                                  |  | Shares                                          |       | Weighted
 Average
 Exercise Price |   | Weighted
 Average
 Remaining
 Contractual Term |  | Aggregate
 Intrinsic
 Value |            
|                                                  |  |                                                 |       |                                   |   |                                                |  |                             |            
|Outstanding at January 1,
 2007                   |  |                                                 | 1,250 |                                   | $ | 200.00                                         |  |                             | 6.92
 years |  | $ |  | 
|Granted                                           |  |                                                 |      |                                   |   |                                                |  |                             |             |  |   |   | 
|Exercised                                         |  |                                                 |      |                                   |   |                                                |  |                             |             |  |   |   | 
|Cancelled                                         |  |                                                 |      |                                   |   |                                                |  |                             |             |  |   |   | 
|Forfeitures                                       |  |                                                 |      |                                   |   |                                                |  |                             |             |  |   |   | 
|                                                  |  |                                                 |       |                                   |   |                                                |  |                             |             |  |   |   | 
|Outstanding at December 31,
 2007                 |  |                                                 | 1,250 |                                   | $ | 200.00                                         |  |                             | 6.92
 years |  | $ |  | 
|                                                  |  |                                                 |       |                                   |   |                                                |  |                             |             |  |   |   | 
|Granted                                           |  |                                                 |      |                                   |   |                                                |  |                             |             |  |   |   | 
|Exercised                                         |  |                                                 |      |                                   |   |                                                |  |                             |             |  |   |   | 
|Cancelled                                         |  |                                                 |      |                                   |   |                                                |  |                             |             |  |   |   | 
|Forfeitures                                       |  |                                                 |      |                                   |   |                                                |  |                             |             |  |   |   | 
|                                                  |  |                                                 |       |                                   |   |                                                |  |                             |             |  |   |   | 
|Outstanding at December 31,
 2008                 |  |                                                 | 1,250 |                                   | $ | 200.00                                         |  |                             | 5.92
 years |  | $ |  | 
|                                                  |  |                                                 |       |                                   |   |                                                |  |                             |             |  |   |   | 
|Vested and expected to vest
 at December 31, 2008 |  |                                                 | 1,250 |                                   | $ | 200.00                                         |  |                             | 5.92
 years |  | $ |  | 
|Options exercisable at
 December 31, 2008         |  |                                                 | 1,250 |                                   | $ | 200.00                                         |  |                             | 5.92
 years |  | $ |  | 

The aggregate
intrinsic value which is $0 at December 31, 2008 is calculated as the
difference between the exercise price of the underlying awards and the quoted
price of the Companys common stock, $0.10 at December 31, 2008.

As of December
31, 2008 there was $111,715 in total unrecognized compensation costs related to
unvested options.

Warrants

For the twelve
months ended December 31, 2008 the Company did not issue any additional
purchase warrants.

For the year
ended December 31, 2007 in conjunction with the issuance of $450,500 in 6%
convertible bridge notes payable, the Company issued 180,200 warrants to
purchase one share of common stock at $5.00 per share (See Note C  Notes
Payable).

A summary of changes in the Companys
purchase warrants follows:

|                             |  |          |         |                           |   |                | 
|---------------------------- |  | -------- | ------- | ------------------------- | - | -------------- | 
|                             |  | Total    |        
|                             |  |          |        
|                             |  | Warrants |         | Range of
 Exercise Prices |  
|                             |  |          |         |                           |  
|Outstanding
 at 12/31/06 (1) |  |          | 89,736  |                           | $ | 2.50 - 226.00  | 
|                             |  |          |         |                           |   |                | 
|Granted (1)                  |  |          | 180,200 |                           |   | 2.50           | 
|Exercised                    |  |          |        |                           |   |               | 
|Cancelled                    |  |          |        |                           |   |               | 
|                             |  |          |         |                           |   |                | 
|Outstanding
 at 12/31/07 (1) |  |          | 269,936 |                           | $ | 2.50 - $226.00 | 
|                             |  |          |         |                           |   |                | 
|                             |  |          |         |                           |   |                | 
|Granted                      |  |          |        |                           |   |               | 
|Exercised                    |  |          |        |                           |   |               | 
|Cancelled                    |  |          | (950    | )                         |   | 226.00         | 
|                             |  |          |         |                           |   |                | 
|Outstanding
 at 12/31/08     |  |          | 268,986 |                           | $ | 2.50 - $226.00 | 
|                             |  |          |         |                           |   |                | 

(1) 75,000 warrants issued in 2006 and 180,200 warrants issued in 2007,
all originally priced at $5.00 per share were re-priced to $2.50 per share in
the third quarter of 2008 in accordance with the Companys Note Extension Offer
Terms and Conditions. For additional information see Note C.

During the year ended December 31, 2008, a total of 950 warrants were
cancelled due to the contractual life of these warrants expiring between March
31, 2008 and October 27, 2008.

53

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE G - STOCK OPTIONS AND WARRANTS
(Continued)

Summary

The following
table summarizes information about compensatory stock options outstanding at
December 31, 2008:

|                           |  |                           |  |                                             |            |                               |  |                     |        |                               |         |  |  |   |        | 
|-------------------------- |  | ------------------------- |  | ------------------------------------------- | ---------- | ----------------------------- |  | ------------------- | ------ | ----------------------------- | ------- |  |  | - | ------ | 
|Stock Options Outstanding  |  | Stock Options Exercisable | 
|                           |  |                           | 
|Range
 of
 Exercise Prices |  | Number
 Outstanding       |  | Weighted
 Avg.
 Remaining
 Contractual Life |            | Weighted
 Avg
 Exercise Price |  | Number
 Exercisable |        | Weighted
 Avg
 Exercise Price |        
|$0.00
 - $0.30             |  | 10,000                    |  |                                             | 9.75 years |                               |  | $                   | 0.30   |                               | 1,250   |  |  | $ | 0.30   | 
|$0.75
 - $0.80             |  | 868,959                   |  |                                             | 9.60 years |                               |  | $                   | 0.77   |                               | 754,168 |  |  | $ | 0.78   | 
|$1.00
  $1.25             |  | 20,000                    |  |                                             | 9.40 years |                               |  | $                   | 1.13   |                               | 12,083  |  |  | $ | 1.21   | 
|$200.00
 - $200.00         |  | 1,250                     |  |                                             | 5.92 years |                               |  | $                   | 200.00 |                               | 1,250   |  |  | $ | 200.00 | 
|                           |  |                           |  |                                             |            |                               |  |                     |        |                               |         |  |  |   |        | 

The following table summarizes
information about other non-compensatory warrants outstanding at December
31, 2008:

|                          |  |                      |  |                                            |            |                              |  |                     |        |                              |         |  |  |   |        | 
|------------------------- |  | -------------------- |  | ------------------------------------------ | ---------- | ---------------------------- |  | ------------------- | ------ | ---------------------------- | ------- |  |  | - | ------ | 
|Warrants Outstanding      |  | Warrants Exercisable | 
|                          |  |                      | 
|Range of
 Exercise Prices |  | Number
 Outstanding  |  | Weighted Avg.
 Remaining
 Contractual Life |            | Weighted Avg
 Exercise Price |  | Number
 Exercisable |        | Weighted Avg
 Exercise Price |        
|$2.50
 - $100.00          |  | 255,200              |  |                                            | 3.11 years |                              |  | $                   | 2.50   |                              | 255,200 |  |  | $ | 2.50   | 
|$100.01
 - $200.00        |  | 11,945               |  |                                            | 0.50 years |                              |  | $                   | 200.00 |                              | 11,945  |  |  | $ | 200.00 | 
|$200.01
 - $400.00        |  | 1,591                |  |                                            | 1.17 years |                              |  | $                   | 250.00 |                              | 1,591   |  |  | $ | 250.00 | 
|$400.01
 - $700.00        |  | 250                  |  |                                            | 0.24 years |                              |  | $                   | 700.00 |                              | 250     |  |  | $ | 700.00 | 
|                          |  |                      |  |                                            |            |                              |  |                     |        |                              |         |  |  |   |        | 

The weighted average grant date fair value of options granted during
2007 was $0.77. Using the Black-Scholes option pricing model, we used the
following weighted-average assumptions to value the options granted during
2007: risk free interest rate, 4.61%; expected life, 4 years; expected dividend
yield, 0%; and daily annualized volatility of 211%.

The weighted average grant date fair value of options granted during
2008 was $0.75. Using the Black-Scholes option pricing model, we used the
following weighted-average assumptions to value the options issued in the third
and fourth quarters of 2008: Third Quarter - risk free interest rate, 4.04%;
expected life, 4 years; expected dividend yield, 0%; and daily annualized
volatility of 247%; Fourth Quarter - risk free interest rate, 3.770%; expected
life, 4 years; expected dividend yield, 0%; and daily annualized volatility of
276%;

NOTE H - RELATED PARTY TRANSACTIONS

From January 1, 2008 through December 31, 2008 the Company issued a
total of $592,320 in notes payable and 320,128 shares of common stock to
related parties. Of this total, $325,320 were 6% notes payable initially due
December 31, 2008 and these notes had attached shares of the Companys common
stock totaling 130,128 shares in accordance with the terms and conditions of
the Financing and the Extension to parties classified as related parties at
December 31, 2008. An additional $190,000 in notes issued were 8% notes payable
initially due December 31, 2009 and these notes had attached shares of the
companys common stock totaling 190,000 shares in accordance with the terms and
conditions of the New Notes to parties classified as related parties at
December 31, 2008. And, the company issued a 6% six month note for $75,000 in
principal amount to a related party on July 3, 2008.

From January 1, 2008 through December 31, 2008, the Company paid interest
of $5,760 to related parties at December 31, 2008, on the portion of its notes
payable that required semi-annual interest payments.

On June 20, 2008, the Company paid in full an unsecured note payable
due to a related party in the amount of $50,000, plus accrued interest of
$1,664.

54

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE H - RELATED PARTY TRANSACTIONS
(Continued)

At December 31, 2008, the Company has outstanding $1,211,320 in related
party notes payable, including $120,000 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 $262,000 of these related party notes payable were 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 104,800 shares to be issued), for which
the Company issued 104,800 warrants to purchase common stock at $5.00 per
share. These related party notes 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 ($262,000 to related
parties) between December 2006 and May 2007 (the Notes). The Notes and the
related accrued interest originally mature 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 26,380 related party 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 also. 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 ($262,000 to related
parties) of notes outstanding.

A total of $684,320 of these related party notes payable are 6% notes
payable initially due December 31, 2008 with principal and interest payable at
maturity. The Company has the option to extend the maturity date of the notes
an additional twelve months. The stated interest rate on these notes during the
optional extension period is 9% per annum. The notes have attached shares of
the Companys common stock in the form of one share of common stock for each
$2.50 investing into the offering. In addition, in conjunction with the
issuance of the notes payable, the Company has issued 273,728 shares of common
stock to these related parties. In November of 2008, the Company notified the
holders of the $684,320 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.

A total of $190,000 of these related party notes payable are 8% notes
payable initially due December 31, 2009 with principal and interest payable at
maturity. The notes have attached shares of the Companys common stock in the
form of one share of common stock for each $1.00 investing into the offering.
In addition, in conjunction with the issuance of the notes payable, the Company
has issued 190,000 shares of common stock to these related parties.

At December 31, 2008, 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 $77,582 at December 31, 2008, 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 December 31, 2008.

At December 31, 2008, the Company has $68,919 in accrued interest due
on the notes payable to related parties.

NOTE I - CONCENTRATIONS OF CREDIT RISK

The Company extends unsecured credit in the normal course of business
to virtually all of its customers. The Companys accounts receivable are
subject to potential credit risk. The Company has provided an allowance for
doubtful accounts which reflects its estimates of uncollectible amounts. The
maximum exposure assuming non-performance by the customers is the amount shown
on the balance sheet at the date of non-performance.

At December 31, 2008 one customer accounted for 54% of accounts
receivable. This customer also accounted for 37% of the Companys revenue for
the twelve months ended December 31, 2008. At December 31, 2007 one customer
accounted for 52% of accounts receivable. This customer also accounted for 50%
of the Companys revenue for the twelve months ended December 31, 2007.

Cash is maintained in financial institutions which, at times, may
exceed Federal Deposit Insurance Corporation insured amounts. However, the
Company mitigates its risk by assuring that cash is maintained in high quality
credit institutions.

55

---



SecureCare Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007

NOTE J  ACCRUED PAYROLL TAXES

At December 31, 2008, the Company owes $133,359 in accrued payroll taxes
and $69,544 in related penalties and interest, the majority of which is related
to payroll taxes and related penalties and interest owed from calendar year
2005. These amounts are classified as follows on the accompanying balance
sheet:

|                        |  |         |         |             |   |        |  |   |         | 
|----------------------- |  | ------- | ------- | ----------- | - | ------ |  | - | ------- | 
|                        |  | Current |         | Non-Current |   | Total  | 
|                        |  |         |         |             |   |        | 
|Accrued
 Payroll Taxes  |  | $       | 90,461  |             | $ | 42,898 |  | $ | 133,359 | 
|Penalties
 and Interest |  |         | 41,526  |             |   | 28,018 |  |   | 69,544  | 
|                        |  |         |         |             |   |        |  |   |         | 
|Total                   |  | $       | 131,987 |             | $ | 70,916 |  | $ | 202,903 | 
|                        |  |         |         |             |   |        |  |   |         | 

The Company received a Notice of Federal Tax Lien by the Internal
Revenue Service (IRS) dated May 24, 2006. The Tax Lien was filed with the
Secretary of State in Texas. The Lien is in favor of the United States on all
property and rights to property belonging to the Company for the amount of
these taxes, and additional penalties, interest, and costs that may accrue. The
Lien will remain in place until such time that the Company pays its obligations
in full to the IRS. On March 1, 2007 the Company commenced an IRS-approved five
year monthly payment plan (the Installment Agreement) to pay a majority of
the delinquent payroll taxes and related interest and penalties totaling
$124,890 at December 31, 2008. The Company will make monthly payments of $5,000
over the course of the five year plan.

NOTE K  LOSS ON EARLY EXTINGUISHMENT OF DEBT

In June 2007, in accordance with the terms and conditions of the
Companys original conversion offer, dated October 19, 2006, to convert the
principal amounts of notes payable and accrued interest to common stock, the
Company received signed consents from additional note holders accepting the
conversion offer representing $200,000 in notes payable and $44,018 in accrued
interest. To affect these additional conversions, the Company issued 107,396
shares of common stock. The difference between the net carrying amount of the
extinguished debt and the reacquisition price of the extinguished debt,
totaling $381,358 was recognized as a loss in the period of extinguishment.

NOTE L  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.

NOTE M  SUBSEQUENT EVENTS

In accordance with the issuance of a new series of notes payable (the
New Notes) approved by the Board of Directors on September 22, 2008, from
January 1, 2009 through January 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.

Effective February 1, 2008 the Company initiated two private offerings
of its common stock. The first offering is for accredited investors to purchase
up to 4,000,000 shares of common stock at $0.10 per share (the Stock Offer).
The second offering is for holders of certain of the Companys indebtedness
represented by $300,000 principal amount of promissory notes to exchange their
notes for common stock at the rate of one share for each $0.10 in principal
amount of notes outstanding for a total of up to 3,000,000 shares (the
Exchange Offer). Each of the offerings commenced on February 1, 2009. As of
March 25, 2009, 614,444 shares had been sold for $61,444 and $300,000 principal
amount of notes had been exchanged for 3,000,000 shares. As a result of these
issues, the number of shares of common stock, par value $.001 per share, that
the Company has issued and outstanding as of March 25, 2009 totals 5,980,892.

Each of the offers, the Stock Offer and the Exchange Offer were
conducted pursuant to the exemption provided pursuant to Regulation D under the
Securities Act of 1933, as amended, and analogous state laws. The Company did
not grant any registration rights to the investors in the offerings. The
Company will not receive any proceeds from the Exchange Offer and will use the
proceeds of the Stock Offer as working capital. The Company incurred only
nominal expenses in connection with the two offerings.

56

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SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) 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, on March 30, 2009.

| |                               |                                           
| | ----------------------------- | ------------------------------------------
| | SecureCare Technologies, Inc.
| |                               |                                           
| | By:                           | /s/ Dennis Nasto                          
| |                               |                                           
| |                               | Dennis Nasto, Chief Executive Officer     
| |                               | (Principal Executive Officer and Director)

Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated, in each case on
March 30, 2009.

|     |              |       |                                                                      
|---- | ------------ | ----- | ---------------------------------------------------------------------
|NAME |              | TITLE
|/s/  | Dennis Nasto |       | Chief Executive Officer(Principal Executive Officer and Director)    
|     |             
|     | Dennis Nasto |      
|     |              |       |                                                                      
|/s/  | Neil Burley  |       | Chief Financial Officer
 (Principal Financial and Accounting Officer)
|     |             
|     | Neil Burley  |      

57

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Index to Exhibits

The following
exhibits are filed with this Annual Report on Form 10-K or are incorporated
herein by reference as indicated below (numbered in accordance with Item 601 of
Regulation S-K). We shall furnish copies of exhibits for a reasonable fee
(covering the expense of furnishing copies) upon request. Unless otherwise
indicated, all exhibits incorporated by reference are filed under SEC file
number 0-29804.

|       |  |                                                                                                                                             
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                 
|       |  |                                                                                                                                             
|       |  |                                                                                                                                             
|3.1    |  | Articles of Incorporation of the Company
 (1)                                                                                               
|       |  |                                                                                                                                             
|3.2    |  | Articles of Amendment to Articles of
 Incorporation (1)                                                                                     
|       |  |                                                                                                                                             
|3.3    |  | Bylaws of Company (1)                                                                                                                       
|       |  |                                                                                                                                             
|3.4    |  | Definitive Proxy Statement Dated February
 28, 2007 (2)                                                                                     
|       |  |                                                                                                                                             
|3.5    |  | Articles of Amendment to the Articles of
 Incorporation filed with the State of Nevada on February 25, 2004. (3)                            
|       |  |                                                                                                                                             
|3.6    |  | Articles of Amendment to the Articles of
 Incorporation filed with the State of Nevada on April 24, 2007. (4)                               
|       |  |                                                                                                                                             
|3.7    |  | Joint Plan of Reorganization Dated August
 5, 2003, as amended by the Bankruptcy Courts Confirmation Order Dated
 December 2, 2003 (5)     
|       |  |                                                                                                                                             
|3.8    |  | The Bankruptcy Courts Confirmation Order
 Dated December 2, 2003 (5)                                                                       
|       |  |                                                                                                                                             
|3.9    |  | The Bankruptcy Courts Order Granting
 Motion to Modify Plan After Confirmation Dated May 18, 2004 (6)                                      
|       |  |                                                                                                                                             
|4.1    |  | Form of 8% Promissory note, initially due
 December 31, 2009                                                                                
|       |  |                                                                                                                                             
|4.2    |  | Bridge Financing Form of Subscription
 Agreement Effective October 1, 2008                                                                  
|       |  |                                                                                                                                             
|4.3    |  | Form of 6% Promissory Note, initially due
 December 31, 2008 issued in the Financing Extension (7)                                          
|       |  |                                                                                                                                             
|4.4    |  | The Financing Extension Form of
 Subscription Agreement (7)                                                                                 
|       |  |                                                                                                                                             
|4.5    |  | Form of 6% Promissory Note initially due
 December 31, 2008 (8)                                                                             
|       |  |                                                                                                                                             
|4.6    |  | Form of 6%, 6 Month Promissory Note                                                                                                         
|       |  |                                                                                                                                             
|10.1   |  | SecureCare Technologies, Inc. Year 2008
 Stock Option Plan (7)                                                                              
|       |  |                                                                                                                                             
|10.2   |  | SecureCare Technologies, Inc. Year 2007
 Stock Option Plan (8)                                                                              
|       |  |                                                                                                                                             
|14.1   |  | SecureCare Technologies, Inc. Ethics
 Policy, as adopted December 17, 2007 (8)                                                              
|       |  |                                                                                                                                             
|31.1   |  | Certifications of Chief Executive Officer
 Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the
 Sarbanes-Oxley Act of 2002

58

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|       |  |                                                                                                                                                     
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                         
|       |  |                                                                                                                                                     
|       |  |                                                                                                                                                     
|31.2   |  | Certifications of 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 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 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 original registration statement on
Form 10-SB, filed with the Securities Exchange Commission on January 11, 1999,
File No. 0-29804.

(2)
Incorporated by reference to the Companys Definitive Proxy Statement filed
with the Securities and Exchange Commission on February 28, 2007, File No.
0-29804.

(3)
Incorporated by reference to the Companys Annual Report 10-KSB for the
year-ended December 31, 2003.

(4)
Incorporated by reference to the Companys Form 8-K filed with the Securities
and Exchange Commission on April 25, 2007, file number 0-29804.

(5)
Incorporated by reference to the Companys Form 8-K Filed with the Securities
and Exchange Commission on December 15, 3003, file number 0-29804.

(6)
Incorporated by reference to the Companys Annual Report 10-KSB for the
year-ended December 31, 2004.

(7)
Incorporated by reference to the Company Quarterly Report 10-Q for the
quarter-ended June 30, 2008.

(8) Incorporated by reference
to the Companys Annual Report 10-KSB for the year-ended December 31, 2007.

59

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