SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the Fiscal Year Ended December 31, 2005

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                         Commission file number 0-29804


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


                                     NEVADA
         --------------------------------------------------------------
         (State or other jurisdiction of incorporation or organization)


                                   82-0255758
                     ---------------------------------------
                     (I.R.S. Employer Identification Number)


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

Registrant's  telephone number,  including area code: (512) 228-3932  Securities
registered  pursuant to Section 12(b) of the Act:  None,  Securities  registered
pursuant to Section 12(g) of the Act:

                          COMMON STOCK, $.001 PAR VALUE
                          -----------------------------
                                (Title of class)

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 Registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B 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  Report  on Form  10-KSB or any
amendment to this Report on Form 10-KSB. [ ]

The issuer's  revenues for its most recent  fiscal year ended  December 31, 2005
were $387,159.

The aggregate  market value of the voting stock (which consists solely of shares
of Common Stock) held by  non-affiliates  of the Registrant as of March 31, 2006
(based upon the closing price) was $1,085,341.

Issuers  involved in Bankruptcy  Proceedings  During the Past Five Years.  Check
whether the issuer has filed all documents  and reports  required to be filed by
Section  12,  13 or 15  (d)  of the  Exchange  Act  after  the  distribution  of
securities under a plan confirmed by a court.

Yes [X] No [ ]

The number of shares of the issuer's  Common  Stock,  par value $.001 per share,
outstanding  as of December 31, 2005 was  20,004,000 of which  4,341,362  shares
were held by non-affiliates.

Documents Incorporated by Reference. Yes.

Transitional Small Business Issuer Format. Yes [ ] No [X]
<PAGE>

                                  RISK FACTORS

Some of the information in this Report on Form 10-KSB  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-KSB,  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-KSB  occur,  they  could  have a material
adverse effect on our business, operating results and financial condition.

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; Robert Woodrow,  President and Chief Executive Officer;  Neil Burley,
Chief  Operating  Officer and Principal  Financial and Accounting  Officer;  and
Eugene Fry,  Vice-President of Product  Development and Technology.  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
and patents. 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.

RISKS RELATED TO OUR HEALTHCARE  ELECTRONIC  DOCUMENT  EXCHANGE AND  E-SIGNATURE
SERVICES

WE ARE  ENGAGED IN A  BUSINESS  THAT  PROVIDES  HEALTHCARE  ELECTRONIC  COMMERCE
SERVICES AND THAT ONLY RECENTLY BEGAN TO GENERATE  REVENUES AND HAS 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,  SCTI or  SecureCare).
While we have  developed  or purchased  and  continue to develop  Internet-based
document exchange and e-signature solutions for the healthcare industry, we have
not  yet  delivered  some  of our  solutions.  We did  not  generate  our  first
electronic  document  exchange and e-signature  revenues until the quarter ended
September 30, 1999. As of December 31, 2005,  we had an  accumulated  deficit of
$15,062,965. 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  e-commerce  services  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  e-commerce,  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.

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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 2005,  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, we must integrate our architecture with
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.  Once we have deployed 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.

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,
Pennsylvania,  Florida,  Minnesota,  Wisconsin,  Michigan,  Oklahoma,  Missouri,
Indiana, Ohio, California,  Illinois, Kansas and New York. 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 home  healthcare  providers  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 Web-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
e-commerce  and   communications   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

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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.

OUR PROPOSED  EXPANSION  THROUGH  ACQUISITIONS 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:

o    the availability of suitable candidates,
o    the availability of funds to finance transactions, and
o    the availability of management resources to oversee the operation of
     resulting businesses.

Financing  for such  transactions  may come  from  several  sources,  including,
without limitation:

o    cash and cash equivalents on hand,
o    proceeds from new indebtedness, or
o    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:

o    substantial dilution of the percentage ownership of the Company's
     stockholders at the time of any such issuance, and
o    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:

o    loss of key employees or customers;
o    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;
o    failure to  maintain  the  quality of  services  that such  companies  have
     historically provided;
o    the need to coordinate geographically diverse organizations; and
o    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.

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o    Revenue  enhancements  from  cross-selling  complementary  services may not
     materialize as expected.
o    The  benefits  from the  combination  may be  offset by costs  incurred  in
     integrating the companies.
o    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.

RAPIDLY CHANGING  TECHNOLOGY MAY ADVERSELY  AFFECT OUR BUSINESS.  All businesses
which  rely on  technology,  including  the  healthcare  document  exchange  and
e-signature workflow solutions business that we are developing,  are subject to,
among other risks and uncertainties:

o    rapid technological change;
o    changing customer needs;
o    frequent new product introductions; and
o    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.

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. 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.

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.

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 since the closing
of the  Reorganization  in December  2003,  quarterly  revenue growth may not be
indicative  of future  performance.  Our revenues and  operating  results may be
adversely  affected  by a number of risks  and  uncertainties,  including  those
listed elsewhere in these risk factors.  As a result,  our revenues may not grow
at similar  levels in future  periods  and may remain  flat or decline  over any
given period.

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 following:

o    The development of  relationships  with marketing  partners and value-added
     resellers (VARs), and commerce service providers (CSPs);
o    The development and expansion of our sales force and marketing operations;
o    The  development and enhancement of existing and new products and services;
     and
o    The expansion of our management team.

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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:

o    Our  ability  to  retain  our  existing   customers   and  to  attract  new
     e-businesses, VARs and CSPs;
o    Customer acceptance of our pricing model;
o    Changes in the level of demand for our products or services;
o    Our success in expanding our sales and marketing programs;
o    The number, timing and significance of product enhancements and new product
     announcements by us or our competitors;
o    The length of our sales cycle;
o    The level of e-commerce transactions;
o    The  evolution of related  technology  and the  emergence of standards  and
     competing technology; and
o    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.

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  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,  take  advantage of future  opportunities  or respond to  competitive
pressures.

WE MAY BE  UNABLE  TO  ADEQUATELY  DEVELOP A  PROFITABLE  PROFESSIONAL  SERVICES
ORGANIZATION,  WHICH COULD AFFECT BOTH OUR OPERATING  RESULTS AND OUR ABILITY TO
ASSIST OUR CLIENTS WITH THE IMPLEMENTATION OF OUR PRODUCTS. We cannot be certain
that we can  attract,  retain  or  successfully  manage a  sufficient  number of
qualified professional services personnel. We believe that growth in our product
sales  depends on our ability to provide our clients with these  services and to
attract and educate  third-party  consultants  and service  providers to provide
similar services. As a result, we expect to significantly increase the number of
our services  personnel to meet these needs. New services personnel will require
extensive  training  and  education  and take time to reach  full  productivity.
Competition   for   qualified    services   personnel   with   the   appropriate
Internet-specific  knowledge is intense.  We are in a new emerging market, and a
limited number of people have the skills needed to provide the services that our
customers demand. To meet our needs for services personnel,  we may also need to
use more costly third-party  service providers and consultants to supplement our
own  professional  services   organization.   We  cannot  be  certain  that  our
professional  services revenue will exceed professional services costs in future
periods.  Difficulties  we may encounter in managing our growth could  adversely
affect our results of operations.

ITEM 1. BUSINESS
                                     General

SecureCARE  Technologies,  Inc., (the Company or SCTI) 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.

                                       6
<PAGE>

                      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
acquiror  (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 August 6, 2003, the Company filed a proposed  disclosure  statement and joint
plan of  reorganization,  dated August 5, 2003,  (the Plan) with the  bankruptcy
court.  On October 23, 2003,  after notice and a hearing,  the bankruptcy  court
signed the  disclosure  statement  order,  approving  the  Company's  disclosure
statement.  On October 24,  2003,  the Debtors  commenced  the  solicitation  of
holders of claims  entitled to vote to accept or reject the Plan. 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  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.  Capitalized  terms used but not defined herein shall
have the meaning assigned to them in the Plan.

The  bankruptcy  court's  confirmation  order  is also  incorporated  herein  by
reference.

The following is a summary of the material features of the Plan and is qualified
in its entirety by reference to the Plan itself.

Among  other  things,  the Plan  generally  provided  that all  existing  equity
interests and rights in the Debtor would be cancelled. The Debtor's sole secured
creditor  received ninety seven and one-half  percent (97.50%) of the new common
shares of the reorganized Debtor.  Unsecured creditors received two and one-half
percent  (2.50%)  of the new common  shares of the  reorganized  Debtor,  a cash
payment equal to two and one-half Percent (2.50%) of the amount of their allowed
claim, and an assignment of the Debtor's rights under a pre-petition judgment in
the amount of approximately $1 million,  entered in favor of the Debtor.  Equity
interest  holders in the Debtor each  received  150 shares of new common  stock,
regardless of the size of their pre-petition equity interests.  In addition,  in
connection  with the Plan,  the Company  recorded  $2,703,203  as a gain on debt
settlement  and  $168,667 as a gain on  cancellation  of an  executory  contract
during the year ended December 31, 2003.

On  April  22,  2004 the  Company  submitted  a  motion  to  modify  plan  after
confirmation  (the Motion) to the bankruptcy  court. The Motion consisted of the
following changes to the original confirmed Plan:

     1.) To change the Company  name to  SecureCARE  Technologies,  Inc.  versus
         Secure Care, Inc. as stated in the original plan;
     2.) To correct  the par value of the New Common  Stock to $0.001 from $0.01
         as stated in the original plan;
     3.) To authorize  15,000,000  shares of New Common Stock  (reflecting a 1.5
         for 1 forward stock split) versus  10,000,000 as stated in the original
         Plan;
     4.) To add certain  language to ensure that the New Common  Stock is freely
         tradable and non-restricted in any way.

On May 18, 2004, the order granting motion to modify 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.

                                       7
<PAGE>

              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.  (SCTI).  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,  2003  affecting  the Stock  Split and the name  change of the
Company to SecureCARE Technologies, Inc.

                               Our Business Today

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

                               Industry Background

Healthcare is a highly fragmented,  local industry.  Nearly half of the nation's
600,000  physicians  work in practices  with only one or two doctors and most of
the country's 5,000 hospitals operate  independently,  according to the American
Medical Association  (Gravitz,  2000). Annual spending for healthcare,  however,
was  more  than  $1  trillion  in  1996,  and  it  is  expected  to  grow  at an
unprecedented  pace.  According to the Centers for Medicare & Medicaid  Services
(CMS),  formerly  Health  Care  Financing  Administration  (HCFA),  health  care
spending  is  expected  to reach $2.1  trillion  by 2007.  It is  expected  that
spending on healthcare  will  represent 17 percent of the GDP in 2007  (Whitten,
Steinfield & Hellmich, 2001).

Healthcare is one of the most paper-intensive industries. In fact, some industry
analysts  say  that  inefficiencies  account  for as much  as 25% of  this  $1.3
trillion industry  (Cunningham,  2000). With no single entity that could enforce
technology guidelines,  the government stepped in to mandate technology security
and  patient  confidentiality  in  1996.  Enforcement  of the  Health  Insurance
Portability  and  Accountability  Act  ("HIPAA")  is forcing  latent  technology
adopters to move quickly,  or risk stiff penalties for  non-compliance.  While a
few healthcare  organizations are well on their way to implementing  HIPAA-ready
technology,  the vast majority  underestimated the amount of time they will need
and the  significance  of the work involved to comply (Lanser,  2001).  This has
caused a  heightened  sense of urgency  within the  healthcare  industry to move
quickly to adopt  HIPAA-ready  technology.  HIPAA was  enacted by  Congress  and
signed into law in August,  1996. This act primarily addressed the protection of
health  insurance  coverage  when an  individual  changed or lost their job.  In
addition,  HIPAA  included  the  Administrative  Simplification  Act,  which was
intended to simplify and standardize the transmission of information between and
among health plans, providers and payors. At the same time the Act addressed the
privacy and security of an individual's health information.

The Act is implemented through regulations,  some of which have been established
and  some of  which  are  still  being  formulated  by the  accountable  federal
agencies.  The  first  mandated  implementation  of any of the  regulations  was
October, 2002, for the transmission of certain information between health plans,
providers and payors. The U.S.  Department of Health and Human Services predicts
that unifying the  healthcare  market with a  standardized  technology  solution
would save the industry over $29.9 billion during the next 10 years,  however, a
universal technology solution that enables one healthcare professional to easily
share   information   with  another  has  not  existed   until  the   SecureCARE
Technologies, Inc. solution was developed and offered to the market.

                                       8
<PAGE>

                               Market Opportunity

The Market Size

Our initial market opportunity is significant and consists of:

o    Approximately   47,000  home  healthcare  agencies  (HHA)  durable  medical
     equipment providers (DME)and Hospices
o    Approximately  200,000  physicians who refer patients to HHA, Hospice,  and
     DME providers
o    More than 8.5 million  Medicare  patients who use home  healthcare  service
     each month

This represents more than $223 million dollars of potential  annual revenue from
the sale of SCTI applications.

The Business Challenge for SCTI Customers

For home health  providers,  processing  patient care  documents  means spending
hours  completing  forms,  fixing  errors,  resubmitting  corrected  forms,  and
mailing,  faxing, or hand-delivering  them to physicians for required signature.
Getting  physician  signatures means waiting weeks, or even months.  Home health
providers  cannot bill Medicare for their services until the original  signature
is received back from the physician. This has a significant negative effect on a
home healthcare agency's cash flow.

For  physicians the problem is compounded  because their office is  overburdened
more than ever by the hassles of manually processing patient care documents they
receive from home healthcare  agencies,  hospice and durable  medical  equipment
suppliers.  There are constant errors, endless corrections,  increased risks and
missed  opportunities  to charge for  delivered  services and increase  practice
revenue.  These  headaches  and others waste the  physician's  time and increase
overhead.  What's more,  most  physicians  miss  billing for key Medicare  codes
associated  with the  paperwork  from home  healthcare  agencies and hospices --
resulting in the loss of significant revenue.  SCTI management estimates that an
average family practice  physician with 20 Medicare patients per month that they
certify for home healthcare  loses  approximately  $18,000 a year in revenue the
table because of ineffective paper processes and the inability to track and bill
key Medicare codes.

The Solution Offered by SCTI

SecureCARE  Technologies,  Inc. delivers a HIPAA-ready,  Internet-based document
exchange and e-signature solution - for physicians and clinics,  home healthcare
agencies,  hospice and durable medical equipment  providers.  These applications
enable the  exchange of every type of patient  care  document  with  push-button
speed  and  ease-of-use.  Using  SecureCARE.net,  healthcare  providers  enjoy a
complete end-to-end online system that allows them to electronically send, sign,
receive,  track, manage, and file all documents - thereby,  positively impacting
workflow  productivity,  risk prevention and profitability.  Management believes
there is no other electronic document exchange application  available today that
delivers the same level of workflow functionality and operational benefits. More
importantly,  SecureCARE.net  tracks billable activities for the physician;  the
required  information  to bill these codes is frequently not captured due to the
difficulty in manually  tracking the time spent by the  physician,  but they can
represent  significant  revenue  for the  physician  practice.  SecureCARE.net's
ability  to  capture  and track  the  information  for  these  already-delivered
services,  enabling the physician to bill these codes,  is a key driver in terms
of physician adoption of this new software.

Added Value for Home Healthcare Providers

Unlike  any  other  electronic   document  management  system  available  today,
SecureCARE.net  gives  home  health  providers  a new  way  to  build  physician
relationships.  First,  physicians  using  Secure.net  will find it easier to do
business with home healthcare providers that use SecureCARE.net.  Secondly,  the
system  automatically  tracks  physician Care Plan Oversight (CPO) time for home
health and hospice, and home healthcare  certification and recertification,  and
therefore,  physicians enjoy a new opportunity to capture additional revenue for
care they already  provide.  Home  healthcare  providers who use SecureCARE .net
offer added value to their  physician  relationships  thereby  increasing  their
likelihood of increased referrals.

Added Value for Physicians

Unlike  any  other  electronic   document  management  system  available  today,
SecureCARE.net  gives physician practices a new way to boost  profitability,  by
providing them an automated way to track and bill Medicare for the time spent on
Care Plan Oversight  (CPO) for Homecare ($125* per event) and Hospice ($130* per
event). In addition,  SecureCARE.net  tracks  Certification ($75* per event) and
Re-certification  ($57* per event) codes for homecare.  Most physician practices
do not bill for these  codes due to their  inability  to  effectively  track and
manage the paper flow from the homecare providers. These billing codes translate
into a significant  opportunity for the physician to capture additional revenue.
Based on Medicare  statistics,  management  calculated that, on average,  when a
physician certifies 20 patients a month for homecare and he is able to track the
care using  SecureCARE  .net and submits  claims to Medicare,  he or she can add
approximately  $18,000 - $30,000* a year to practice  revenue for work he or she
is already  doing.  Adding  Re-certifications  and CPO billing  increases  their
revenue even more. Now physicians can automatically capture this valuable source
of "lost"  revenue  with  SecureCARE.net  without  doing any more work or adding
costly equipment or staff.

*   National averages from Medicare 2004

                                       9
<PAGE>

                        SCTI's Uniqueness in the Industry

SCTI believes that its  application,  SecureCARE.net  is uniquely able to create
economic motivators for healthcare  professionals.  Engagement of our technology
is  secure,  simple  and  affordable.  The  Company's  user-friendly  technology
requires no IT resources for implementation or maintenance.

SecureCARE.net is Internet-based and requires no upfront capital investment.  It
is  implemented  in less  than a day and is easy to use  with  minimal  computer
skills required.  Deployment of  SecureCARE.net  can reduce overhead costs for a
medium-sized home healthcare agency (approximately 300 patient census) by almost
$100,000 per year, and capture  significant lost billable revenue for physicians
providing  home   healthcare.   In  addition,   SecureCARE.net   has  no  direct
competition.

      HIPAA Compliance Challenges                     SCTI Solutions
------------------------------------------  ------------------------------------
Limited Budgets                             Affordable monthly subscription fees
------------------------------------------  ------------------------------------
Limited Internal IS Resources               24x7 technical site support
------------------------------------------  ------------------------------------
Multiple Legacy Systems                     Open-platform technology using XML
                                            and HL7 standards for easy
                                            integration
------------------------------------------  ------------------------------------
Limited Technical Knowledge                 No Installation Required
------------------------------------------  ------------------------------------
Limited Knowledge of HIPAA Requirements     System is based on HIPAA standards
                                            and requirements. If using the SCTI
                                            system, there is no additional
                                            knowledge regarding HIPAA guidelines
                                            required to maintain compliance
------------------------------------------  ------------------------------------
Limited Resources for Archiving             All workflow documents passing
                                            patient data into the SCTI database
                                            platform are archived for user
                                            access throughout the term of the
                                            contract
------------------------------------------  ------------------------------------

The Internet-based Document Exchange and e-Signature Business Solution

Home healthcare  executives  founded SCTI in 1996 to address  inefficiencies  in
workflow processes between agencies and physicians. The real opportunity for the
Company  occurred  when  the  U.S.  government  released  the  Health  Insurance
Portability  and  Accountability  Act  (HIPAA),  that  mandated   Internet-based
electronic  storage and transmission of patient data be  standardized,  secured,
and  subjected  to rigorous  privacy  rules for  providers to be  reimbursed  by
Medicare.  SCTI launched a  comprehensive  effort to enhance its e-signature and
digital certificate technology to adhere to these standards.  Today, the Company
has a number of  applications  for  patents  in  various  stages  of the  patent
granting  process.  No  assurance  can be given that any patent will be granted,
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 on a number of its product
features and functions.

In November 2001,  another  fortuitous  event for the Company  occurred when the
government  released an extremely  complex security standard for patient privacy
mandating that healthcare  providers maintain an audit trail of anyone who views
or handles patient records.  Failure to adhere to these  regulations will result
in stiff legal and financial penalties for healthcare professionals.  Mainstream
health  professionals,  who  have  procrastinated  in  the  retooling  of  their
practices,  are now scrambling to secure an affordable HIPAA-ready solution that
offers quick implementation and "out-of-the-box" usability.

The modifications to accommodate these regulations for healthcare  professionals
are on a scale of the Y2K requirements  that all business  organizations  had to
meet for the new Millennium.  SCTI is perfectly positioned to capitalize on this
opportunity.  The Company  has the  experience  and the  industry  knowledge  to
efficiently  and  economically  transition  healthcare  providers to comply with
government regulations.

                                       10
<PAGE>

The Company has  transitioned  its  peer-to-peer  software  solution to a highly
scale-able platform for mid to large-sized enterprises. This new platform allows
the Company to leverage  its home  healthcare  and  physician  network by adding
connections to medical equipment companies, pharmacies, nursing homes, hospices,
hospitals, research communities, lab companies and insurance payors, all of whom
must conform to HIPAA.

A significant and distinct advantage SCTI has over other technology companies is
the ability to penetrate  the  physician's  desktop.  Unlike  other  HIPAA-ready
solutions that focus on the billing side of a practice, SecureCare.net automates
physician  workflow at the point of  patient-care  management.  This  difference
enables healthcare  professionals to meet regulatory compliance without changing
their normal workflow  pattern.  Typically,  an intense paper or fax transaction
sequence occurs between  physicians and healthcare  providers to manage the plan
of care,  report changes in condition,  document verbal orders,  report clinical
oversight and process billing activities.

                                  Our Products

On  February  1,  2005,  SCTI  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,  whether at work,  home or on vacation.  The
solution works where the user works,  improving efficiencies and driving revenue
-- all in a highly secure, HIPAA-ready environment.

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  storage  area  network  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 users access
was disallowed.  The digital  certificate was stored in a certificate  vault and
was only used during the current user session.  SecureCARE  has filed for patent
protection on the certificate  vault concept.  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 SCTI 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  Inflow.net to house and maintain the Company's
server-farm  which  hosts our ASP  application.  Inflow.net's  MAX  architecture
begins with Inflow's direct  connectivity to multiple Tier 1 backbones.  Inside,
Inflow has built a fully redundant,  self-healing  network,  which  consistently
routes our  customer  traffic  over the  highest  performance  backbone.  Inflow
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. Inflow 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.

                                       11
<PAGE>

Currently,  the  SCTI  products  are  licensed  to  approximately  1,400  active
physicians  and 93  home  health  care  provider  locations  located  in  Texas,
Louisiana,  North  Carolina,   Pennsylvania,   Florida,  Minnesota,   Wisconsin,
Michigan,  Oklahoma,  Missouri, Indiana, Ohio, California,  Illinois, Kansas and
New York.  Home Health  Care  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 utilize  the  Internet  to  provide  browser-initiated
healthcare  document  exchange and  e-signature  solutions  that  facilitate the
confidential,  on-line exchange of healthcare  information for many participants
in the healthcare industry. Based on the technology and products in place, other
applications  can be  developed  that will  enhance  the  Company's  position in
physician's  offices,  home  healthcare  agencies,  and other  providers such as
nursing homes, pharmacies,  durable medical equipment providers, and information
sites.

                                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  Technologies'  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 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 do 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 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.

                                       12
<PAGE>

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.  The  company  currently  has a number of  applications  for  patents in
various stages of the  patent-granting  process.  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.

                            Our Technology Platform

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,  the  SecureCARE  platform  is  built  around  Microsoft's
revolutionary  .NET (Dot Net) framework  within the standards and regulations of
HIPAA (Health  Insurance  Portability and  Accountability  Act) 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 and
Medicaid Services and the Food and Drug Administration.

Healthcare  providers have been wrestling with  coordination  of care imposed by
the disparate software systems utilized by the typical patient's  providers.  To
overcome this hurdle,  SCTI technology  allows providers to  inter-connect  with
disparate databases housing patient information, retrieve identified data points
(pharmacy,  laboratory,  etc) and  insert  this  data into an  electronic  "care
document".

The SCTI secure electronic  "email" system transmits the care document and other
patient concerns between authorized parties.  This electronic system enables the
patient's care team to coordinate  patient care through the sharing of accurate,
real-time patient data between all authorized stakeholders.

SCTI's preeminent  SecureCARE.net  platform adds logic to data moving across the
system to expedite workflow and facilitate  smarter decisions  regarding patient
care.  This  innovative  approach  coupled  with  the fact  that  SecureCARE.net
technology works with existing workflow is defining new standards for technology
companies  seeking  to  address  the HIPAA  regulation  needs of the  healthcare
industry.

                                   Competition

We believe that SecureCARE  provides  comprehensive  workflow  automation  tools
between  healthcare  providers  and  physicians  and  that  we  have  no  direct
competitor.  Several  companies compete in some of our business  segments.  Trac
Medical targets the electronic  certificate of medical  necessity  sector and is
focused on the DME market.  Trac Medical is a subsidiary of AuthentiDate,  which
is  involved  in several  industry  segments  but not  strictly  in  healthcare.
Although  Trac Medical has  contracted  with a large  customer in the CMN market
they have made no significant  progress in gaining  physician  adoption  largely
because the company's targeted customer based is the home healthcare provider or
agency rather than the physician.  Additionally, CMNs do not represent a revenue
generation opportunity for physicians. McKesson Corporation introduced a product
that competes with SecureCARE in the home healthcare agency market.  McKesson is
offering the product  exclusively to its customer base. This solution only works
with the home health  software from McKesson and does not integrate with its own
hosted software solution.  It is expensive and most providers and physicians are
not adopting it. Furthermore and most importantly,  McKesson's solution does not
provide  physicians  one channel  within  which to interact  with their  various
providers.

                                       13
<PAGE>

Verisign, Lexign and AuthentiDate are certificate authority companies looking to
expand into healthcare with their digital certificate offerings. These companies
are either  extremely  narrowly focused on one specific niche or too generalized
to take advantage of the wide opportunities available in our sector.

SecureCARE's  key  advantage  over  such  companies  lies in the  fact  that the
solutions offered fit into the day-to-day workflow of all health care providers.
The user is in  compliance,  the cost of  operational  overhead  is lowered  and
significant  improvements in data document  management are made.  Physicians are
attracted  to  SecureCARE   Technologies'   solution  for  its   simplicity  and
convenience,   and  its  ability  to   generate   additional   revenue   through
certification,  re-certification  and care plan oversight  (CPO)  billing.  This
additional  source of Medicare  revenue for reviewing and approving  home health
and  hospice  patient  orders is  virtually  untapped,  and can add  significant
revenue  to a  typical  physician's  practice.  Another  feature  attractive  to
physicians is SecureCARE's ability to provide any type of document that requires
the physician's signature - from all provider sources.  Physicians need a single
way to work  with the  multiple  providers  from  whom  they  receive  documents
requiring their signed approval on a daily basis.

                       Home Healthcare Provider Economics

Home  healthcare  providers  are adopting  SecureCARE  based on the economics of
efficiency, cash flow and profitability as detailed below.

--------------------------------- ----------------------------------------------
HHA, Hospice & DME Advantages     SecureCARE Benefits
--------------------------------- ----------------------------------------------
Improves Workflow Efficiency      SecureCARE drives the highest level of office
                                  productivity in multiple ways:

                                  o Eliminates all time-consuming paper document
                                  sorting, filing, and hand mailing activities.

                                  o Allows DMEs to electronically generate CMNs
                                  and complete on their computer or import from
                                  their practice management software, thereby,
                                  eliminating the hassles and wasted time of
                                  manual CMN creation.

                                  o Lets them send documents to physicians with
                                  a button-click instead of stamps, envelopes,
                                  or hand delivery.

                                  o Streamlines any back-and-forth document
                                  exchange between DMEs and the physicians'
                                  offices. Significantly reduces errors on the
                                  physician side and redos that are common with
                                  most CMNs.

                                  o Speeds up the communication process from
                                  weeks down to minutes, because doctors just
                                  click a button to enter their e-signatures.

                                  o Files, logs, tracks, and organizes all
                                  patient care documents in one convenient
                                  location.

                                  o Allows for integrating SecureCARE with
                                  practice management software, for effortless
                                  data updates and virtual elimination of
                                  duplicate data entry.
--------------------------------- ----------------------------------------------
Reduces Risk                      SecureCARE delivers tight controls to support
                                  medical fraud risk management activities:

                                  o Ensures a HIPPA-ready and CMS-approved
                                  process for electronically exchanging signed
                                  documents.

                                  o Logs a complete document audit trail,
                                  detailing who processed each document,
                                  what they did, and when they did it.

                                  o Reduces the errors common with paper-based
                                  forms processing systems.

                                       14
<PAGE>

--------------------------------- ----------------------------------------------
Boosts Profitability              SecureCARE immediately lowers operating costs
                                  and boosts revenue because it:

                                  o Eliminates all of the wasted time, hassles,
                                  delays, and errors of paper document exchange.


                                  o Eliminates the hard costs of faxing,
                                  mailing, and hand delivering, including
                                  stamps, envelopes, and staff travel time.

                                  o Frees staff to spend more time on patient
                                  care and less time processing paper documents.

                                  o Increases cash flow by speeding up the
                                  process in which the required physician
                                  signature is obtained shortening the billing
                                  cycle.

                                  o Increases referrals by making it easier and
                                  more desirable for doctors to do business with
                                  HHAs and Hospices.
--------------------------------- ----------------------------------------------

                               Physician Economics

Physicians are adopting  SecureCARE  based on the economics of efficiency,  risk
reduction and increased profitability as detailed below.

--------------------------------- ----------------------------------------------
Physician Practice Advantages     SecureCARE Benefits
--------------------------------- ----------------------------------------------
Improves Workflow Efficiency      SecureCARE drives the highest level of office
                                  productivity in multiple ways:

                                  o Eliminates all time-consuming paper document
                                  sorting, filing, and hand mailing activities.

                                  o Eliminates the common mistakes that cause
                                  document "redos" by electronically flagging
                                  errors.

                                  o Allows physician practices to receive every
                                  document in one centralized computer
                                  application from all home healthcare agencies,
                                  hospice, DMEs, infusion therapy providers,
                                  etc.

                                  o Allows access to files on any computer with
                                  Internet access.
--------------------------------- ----------------------------------------------
Reduces Risk                      SecureCARE delivers tight controls to support
                                  medical fraud risk management activities:

                                  o Logs a complete document audit trail,
                                  detailing who processed each document, what
                                  they did, and when they did it.

                                       15
<PAGE>

                                  o Reduces the errors common with paper-based
                                  systems.

                                  o Uses HIPPA-ready digital certificates and
                                  true handwritten signatures stored in a
                                  digital vault.
--------------------------------- ----------------------------------------------
Boosts Profitability              SecureCARE lowers operating costs and boosts
                                  practice revenue because it:

                                  o Eliminates all of the wasted time, hassles,
                                  delays, and errors of paper document exchange.

                                  o Frees physician and staff to spend more time
                                  on patient care and less time processing paper
                                  documents.

                                  o Provides an electronic tracking system for
                                  Home Healthcare Certifications,
                                  Recertifications, and Care Plan Oversight for
                                  HHA and Hospice: it automatically tracks and
                                  reports the billable time spent on these
                                  activities.

                                  o Costs nothing to use - SecureCARE.net is
                                  completely free for physicians and their staff
                                  complements of SecureCARE Technologies, Inc.
--------------------------------- ----------------------------------------------


                          Marketing and Sales Strategy

The overall objective of the sales and marketing plan is to establish SecureCARE
as  the  healthcare   industry's  leading   electronic   document  exchange  and
e-signature  software  applications  used  by  healthcare  providers  and  their
referring  physicians.   The  objective  is  to  attract  large  multi-specialty
physician  groups  that refer  patients  to home  health  agencies,  hospice and
durable medical equipment providers.

Home health providers who receive patient referrals from physicians implementing
the  solution  are  encouraged  to sign up in  order  to  benefit  from its many
advantages.  When physicians use the software,  key activities are automatically
tracked  that can be used for  billing  home health and  hospice  services.  The
average physician can capture $18,000 - $30,000 a year in lost billings for work
they are already doing.  Paper systems  currently in use today make it extremely
difficult  to capture the data needed to  effectively  bill for  Medicare  codes
related to certification and  re-certification  of home healthcare  patients and
care plan oversight for home healthcare and hospice patients. Simply put, when a
physician  can earn money without  having to do additional  work it makes for an
easier sell. This is a proven model.

To accomplish the Company's aggressive sales goals, three primary strategies and
tactics have been implemented:

     1.) Create demand for SecureCARE  from the physicians who refer patients to
     HHA,  hospice  and DME  providers.  (Family  Practice,  Internal  Medicine,
     Oncology,  Cardiology,  Orthopedics,  and  Urology  are the  top  physician
     specialty admitters in home healthcare agencies (HHA), hospice and DME).

     o   Using the sales  organization  and the assistance of the large regional
         physician  groups with a high referral base,  home health,  hospice and
         DMEs are identified and called on.

     o   Advertise  and  exhibit  at key  industry  trade  shows  that  focus on
         physician specialties that refer to HHA, hospice and DME.

     o   Hire additional direct sales staff to drive growth.

     2.)  Market  SecureCARE  through  the  industry  leading  Group  Purchasing
     Organization (GPO) and key industry trade associations.

     3.) Integrate SecureCARE with the industry leading software vendors.

                                       16
<PAGE>

     Today  integrations  have been  completed or started with some of the major
     software  vendors  in  the  HME/HHA  market.  These  include:  CareCentric,
     Siemens,  Computers Unlimited,  Computer Applications  Unlimited,  TeamDME,
     McKesson  Information  Solutions,  DME Works,  ScanHealth,  Symphony Rehab,
     Dynamic Energy and Forelogic. Successful integration means two things.

         1.) Customers will have greater workflow efficiencies.

         2.) Doors to market to the customer  base of each  software  vendor are
         open.

     The plan is to eventually  integrate with all software  vendors.  This will
     happen as more home  health  providers  are  signed who use  software  from
     vendors not already integrated.

In  summary,  SecureCARE  is  well  positioned  today  to  become  the  dominant
electronic  document  exchange with  e-signature  software  application  used by
physicians and the home healthcare  providers they refer business to. SecureCARE
is the only solution  available  today that can close the gap in terms of making
the healthcare environment completely paperless.

                              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
e-commerce that the Company is developing.  The Company believes,  however, that
these  laws  and  regulations  may  nonetheless  be  applied  to  the  Company's
healthcare e-commerce business. The Company believes that its products adhere to
all  applicable  regulations  including  CMS and HIPAA  Internet  based  medical
e-commerce mandates. See Risk Factors above.

Current HIPAA Timelines:

The  Health  and Human  Services  Department  (HHS) is  continuing  to  develop,
publish,  and ratify rules  regarding  HIPAA.  The privacy rule was published on
December 28, 2000.
<TABLE>
<CAPTION>

Summary of the Current State of HIPAA Standards:

Standard                         NPRM Published?   Final Rule Published?   Compliance Date
------------------------------- ----------------- ----------------------- -----------------
<S>                             <C>               <C>                     <C>
Transactions and Code Sets       Yes. 05/07/1998      Yes. 08/17/2000        10/16/2003
------------------------------- ----------------- ----------------------- -----------------
National Provider Identifier     Yes. 05/07/1998      Yes. 01/23/2004        05/23/2008
------------------------------- ----------------- ----------------------- -----------------
National Employer Identifier     Yes. 06/16/1998      Yes. 05/31/2002        08/01/2005
------------------------------- ----------------- ----------------------- -----------------
Security                         Yes. 08/12/1998      Yes. 04/20/2003        04/21/2006
------------------------------- ----------------- ----------------------- -----------------
Privacy                          Yes. 11/03/1999      Yes. 12/28/2000        04/14/2004
------------------------------- ----------------- ----------------------- -----------------
National Health Plan             No Expected Date     No Expected Date     No Expected Date
Identifier
------------------------------- ----------------- ----------------------- -----------------
Claims Attachments               No Expected Date     No Expected Date     No Expected Date
------------------------------- ----------------- ----------------------- -----------------
Enforcement                      No Expected Date     No Expected Date     No Expected Date
------------------------------- ----------------- ----------------------- -----------------
National Individual Identifier       On Hold             On Hold              On Hold
------------------------------- ----------------- ----------------------- -----------------
</TABLE>

Current laws and regulations that may affect the healthcare  e-commerce industry
relate to the following:

o    Confidential patient medical record information;

o    The electronic  transmission  of information  from  physicians'  offices to
     agencies, pharmacies, and other healthcare providers;

o    The  use of  software  applications  in  the  diagnosis,  cure,  treatment,
     mitigation or prevention of disease;

                                       17
<PAGE>

o    Health maintenance  organizations,  insurers,  healthcare service providers
     and/or employee health benefit plans; and

o    The relationships between or among healthcare providers.

                                    Employees

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

Therefore,  as of December 31, 2005,  the Company had four  full-time  employees
remaining,  including three employees in technology  development and maintenance
and one employee in finance and  accounting.  The Company also had two part-time
employees  (two  accounting  interns).  In  addition,  the Company  utilized one
outside consultant in the capacity of President and Chief Executive Officer. 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.

ITEM 2. PROPERTIES

At December 31, 2005, the Company's  principal  executive  office was located in
Austin,  Texas in  approximately  6,375 square feet of leased office space.  The
company entered into a three-year lease effective  November 1, 2004. The monthly
lease rate for the first year of the lease was $8,500.  The  monthly  lease rate
for the second and third years of the lease is $10,630. The Company was notified
on February 21, 2006,  that it was in default under the lease due to its failure
to timely pay the base  monthly  rental.  The Company was directly to vacate the
premises no later than  February 28, 2006.  The Company  vacated the premises on
February 28, 2006 and temporarily relocated its principal executive office to an
alternative location in Austin, Texas in approximately 300 square feet of leased
office  space.  The company  believes that its  facilities  are adequate for the
Company's  current  operations and that additional  leased space can be obtained
when its expansion plans commence.

ITEM 3.  LEGAL PROCEEDINGS

On April 7, 2005 a lawsuit was filed by Norman K. Best, a former  officer of the
Company,  against  SecureCARE  Technologies,  Inc. The lawsuit is  identified as
cause number  GN501073  and was filed in the 353rd  Judicial  District  Court of
Travis County,  Texas as "Norman K. Best versus SecureCARE  Technologies,  Inc."
The lawsuit  alleges that the Company  breached the terms of its agreements with
Mr.  Best by  failing  to tender  50,000  shares of common  stock of  SecureCARE
Technologies,  Inc.  which were  granted to him.  The Company  responded to this
lawsuit on May 13, 2005, by filing a general denial, denying all the allegations
raised  by the  Plaintiff.  On July 8,  2005,  the  Company  filed a  series  of
responses to the plaintiff's request for admission.  The Company was required to
produce all documents  related to the plaintiff's  request for production by May
2, 2006. As of the date of this filing,  the Company has asked the plaintiff for
a further  extension  of this  request for  production.  Although no loss can be
estimated  in regard to this  lawsuit we do not believe that the outcome of this
matter will have a material effect on our financial position,  operating results
or cash flows.  However,  there can be no assurance  that this legal  proceeding
will not have a material impact.

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

None.

                                       18
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

In July 2004,  Spartan  Securities Group,  Ltd.  (Spartan) filed Form 15 (c)2-11
with the National  Association of Securities  Dealers (NASD) to make a market in
the new Common  Stock issued under the Plan.  The Company  received  notice from
Spartan that the NASD, on December 13, 2004,  had cleared  Spartan's  request to
submit a quote of $0.01 Bid, $1.25 Ask on the OTCBB for SecureCARE Technologies,
Inc.  Common Stock under the trading  symbol  "SCUI".  The stock first traded on
December 28, 2004 with an opening  price of $0.05 per share and a closing  price
of $1.75 per share on  December  28,  2004 (these  quotes  reflect  inter-dealer
prices without retail mark-up,  mark-down or commission, and may not necessarily
represent actual prices).

The  following  table sets forth the range of high and low prices as reported on
the  National  Quotation  Bureau  Pink  Sheets 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.

                  Fiscal Year 2005                   High               Low
         ---------------------------------           -----             -----
         Quarter Ended March 31                      $3.00             $0.75
         Quarter Ended June 30                       $1.08             $0.40
         Quarter Ended September 30                  $0.75             $0.41
         Quarter Ended December 31                   $0.69             $0.15

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:

     o   with a price of less than $5.00 per share;
     o   that are not traded on a "recognized" national exchange;
     o   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
     o   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.

As of December 31, 2005,  the Company had 1,329  holders of record of its Common
Stock.

                                       19
<PAGE>

ITEM 6. 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-KSB.  The  discussion  in this section of this Report on
Form  10-KSB  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-KSB.

                           Forward Looking Statements

This Annual Report on Form 10-KSB 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

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

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

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

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

                                       20
<PAGE>

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.

                   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)  collectibility  is
reasonably  assured.  Determination  of  criteria  (3)  and  (4)  are  based  on
management's  judgments  regarding  the  fixed  nature  of the fee  charged  for
services  rendered  and the  collectibility  of those  fees.  Should  changes in
conditions  cause management to determine these criteria are not met for certain
sales,  revenue recognized for any reporting period could be adversely affected.
In  instances  when any one of the four  criteria is not met,  the Company  will
either defer  recognition of the monthly service fees until the criteria are met
or will  recognize  the  recurring  monthly  service  fees on a  ratable  basis.
Recognition of revenue  resulting from one-time  training and set up fees, which
are billed upfront, is deferred and amortized over the life of the corresponding
arrangements and is included in deferred  revenue in the accompanying  financial
statements.

SOFTWARE AND SOFTWARE DEVELOPMENT COSTS

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

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS 123(R), "Share-Based Payment," which is a
revision of SFAS 123 "Accounting for  Stock-Based  Compensation"  and supersedes
APB Opinion 25, "Accounting for Stock Issued to Employees".  SFAS 123(R) focuses
primarily  on  share-based  payments  for  employee  services,  requiring  these
payments to be recorded  using a  fair-value-based  method.  The use of APB 25's
intrinsic  value method of accounting  for employee stock options will no longer
be allowed. As a result, the fair value of stock options granted to employees in
the  future  will be  required  to be  expensed.  The  impact on the  results of
operations of the Company will be dependent on the number of options granted and
the fair value of those  options.  The  Company  will adopt FASB 123R  effective
January 1, 2006, using the modified prospective method.

The Company is  evaluating  the impact of adopting SFAS 123R and expects that it
will record substantial  non-cash stock compensation  expenses.  The adoption of
SFAS  123R  is not  expected  to  have a  significant  effect  on the  Company's
financial  condition or cash flows but is expected to have a significant  effect
on the  Company's  results of  operations.  The future impact of the adoption of
SFAS 123R cannot be  predicted at this time because it will depend on the levels
of share-based payments granted by the Company in the future. However, had the

                                       21
<PAGE>

Company  adopted SFAS 123R in prior  periods,  the impact of the standard  would
have  approximated the impact of SFAS 123 as described in the pro forma net loss
attributable to common  shareholders  included in the  Stock-Based  Compensation
policy footnote.

                              Results of Operations

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Revenues

Revenues for the twelve months ended December 31, 2005 were $387,159 compared to
$210,871 for the same period in 2004. This 84 percent increase in sales reflects
a return on the  investments  the Company made in the latter part of 2004 and in
2005 to expand its sales-force  and its related sales and marketing  activities.
This strong  marketplace  momentum is reflected  in the number of the  Company's
signed and billable home healthcare provider  locations,  totaling 120 locations
at the end of  December  2005,  representing  a 48%  increase  over the 81 total
providers  at the end  December  2004.  In April  through  December  of 2005 the
Company  billed  $29,222  in  up-front,  one-time  training  and  set  up  fees,
recognizing  revenue of $13,038 and deferring revenue of $16,184 to be amortized
over the life of the corresponding arrangements.

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

Costs of revenues were  $860,691 for the twelve  months ended  December 31, 2005
compared to $491,328  for the twelve  months ended  December 31, 2004.  This 75%
increase  in cost of  revenues  was  primarily  attributable  to an  increase in
headcount in the  technology  and  customer  support  departments,  resulting in
higher payroll,  payroll-related and employee benefits expense for the period of
approximately  $120,000.  These  investments  were made in order to complete the
initial  development and on-going  enhancements and maintenance of the Company's
SecureCARE.net  application,  introduced  to the  market in  February  2005.  In
addition,  the Company increased the resources  deployed within customer support
and  training  to support  significant  revenue  growth  during the  period.  In
February  2005,  the Company  entered into an  operating  lease for hardware and
related  software to upgrade its entire  production  application  and  corporate
infrastructure.  This  resulted  in an increase in  operating  lease  expense of
approximately   $180,000.   Also,  in  February  2005,  the  Company   completed
development  of $170,000 in internal use  software,  resulting in an increase in
amortization  expense in 2005 of  $77,000.  Partially  offsetting  these  higher
expenses were lower co-location facility expenses of approximately $8,000.

Selling,  general and  administrative  expenses were  $2,271,575  for the twelve
months ended  December 31, 2005  compared to  $1,892,369  for the twelve  months
ended   December  31,  2004.   This  20%  increase  in  expenses  was  primarily
attributable  to  an  increase  in  headcount  and  overall   salaries  for  the
twelve-month  period,  resulting in higher  payroll,  payroll-related,  employee
benefit and recruiting expenses for the period of approximately  $490,000.  With
an increased active customer base, an expanded sales and marketing strategy, and
successful fundraising, the Company increased the employee total to position the
Company to accomplish management's objectives. In the third quarter of 2005, the
Company  incurred  approximately  $45,000 in penalties  and  interest  that were
assessed  on payroll  taxes owed.  Other  corporate  general and  administrative
expenses,  including  building rent and insurance expenses increased $115,000 in
2005.  Financial consulting expense was $199,000 in 2005 compared to $337,500 in
2004. This  significant  reduction in expense in 2005 resulted from the issuance
of warrants in December  2004.  On December  28,  2004,  the Company  recognized
214,500 in financial  consulting expense related to 200,000 warrants issued to a
consulting firm leading its investor relations program. Other expenses partially
offsetting these higher expenses  included lower stock  compensation  expense of
$71,000,  lower legal and related fees of $53,000,  lower advertising expense of
$15,000, and lower software consulting expenses of $11,000.

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

Interest  expense for the twelve  months  ended  December  31, 2005 was $216,798
compared to $102,825 in 2004. This $113,973 increase  resulted  primarily from a
higher debt load in 2005. In addition,  on September  26, 2005,  the holder of a
30-day,  $50,000  promissory  note  agreed to  convert  the  principle,  accrued
interest and late fees,  totaling  $53,183 into 110,000  shares of the Company's
common stock.  Gryphon  Opportunities Fund I, LLC, a majority shareholder of the
Company,  contributed  110,000 shares of common stock to Company, at $0.70 cents
per share,  effecting a $77,000 capital contribution.  The exchange of the note,
totaling  $53,193 in principle,  accrued  interest and  penalties,  into 110,000
shares of common stock of the Company,  resulted in the Company's recognition of
a deemed  interest  expense of $23,188.  Also  contributing  to higher  interest
expense in 2005 was of an increase in the amortization of the deferred financing
fees and the debt discount associated with the debt that was issued in the first
quarter of 2004 and a note  payable  that was issued in November  2004  totaling
$5,500.

                                       22
<PAGE>

                         Liquidity and Capital Resources

Net cash used by operating  activities  for the year ended December 31, 2005 and
2004 totaled $2,099,141 and $2,199,809, respectively. Decreased net uses of cash
in 2005 resulted primarily from the Company's  implementation of a personnel and
cost reduction plan in December 2005.

Net cash  provided by financing  activities  was  $2,051,694  for the year ended
December  31,  2005 and  consisted  of the  issuance of the  Company's  Series B
Convertible Preferred Stock and borrowings on notes payable, partially offset by
payments  on notes  payable.  Net cash  provided  by  financing  activities  was
$2,492,615 year ended December 31, 2004 and consisted  primarily of the issuance
of the Company's  Series A Convertible  Preferred  Stock and borrowings on notes
payable.

From  January 1, 2005 through  December  31, 2005,  and pursuant to a Consulting
Agreement with a related party, Gryphon Financial Securities  Corporation,  Inc.
(the Placement  Agent),  the Company received funds through a private  placement
(the Placement). The Company issued an aggregate of 1,245,455 shares of Series B
preferred stock, with a $1.10 per share stated value, initially convertible into
one share of the  Company's  common  stock,  par value $.001 per share,  for net
proceeds of approximately  $1,238,000.  The Placement Agent and the investors in
the financing  received  warrants to purchase an aggregate of 281,818  shares of
common stock at an exercise  price of $1.25 per share for each $5.00 of Series B
preferred  stock  purchased,  with 32,727 warrants issued to the Placement Agent
and 249,091  warrants issued to the investors.  These warrants expire in January
through July of 2010.

The Company issued a series of short-term notes payable totaling $550,000 during
2005.  Of this debt  offering,  $450,000 was sold through a series of promissory
notes with a 90-day term and  interest of 1% per month.  On the  maturity  date,
each of the note holders have the option to convert the total  principle  amount
and accrued  interest due on the promissory note to equity at a conversion price
equal to the price  established  and  approved by the Board of  Directors on the
next round of debt or equity  financing.  If the principle  and interest  remain
unpaid  after 90 days,  the interest  rate will  increase to 1.5% as long as any
portion of the note remains outstanding.

The  additional  $100,000 of this debt offering was  structured  under  separate
terms. $50,000 was sold as a 60-day note, with an interest rate of 5% per month,
or 60%  annualized.  If the principle and interest  remain unpaid for 10 days or
more following the end of the term, an additional late penalty  equivalent to 5%
of such  payment will be  assessed.  As of December 31, 2005,  the holder of the
note agreed to extend the term of the note with the same interest rate of 5% per
month, or 60% annualized.  The remaining $50,000 was sold as a 30-day note, with
a flat  interest rate of 2.5% to be paid at the end of the term. As of September
26,  2005,  the  principle  and  interest  remained  unpaid on this note 10 days
following the end of the 30-day term. Accordingly,  a late penalty of $2,563, 5%
of the $51,250  outstanding  balance,  was assessed.  On September 26, 2005, the
holder of a 30-day,  $50,000  promissory  note agreed to convert the  principle,
accrued  interest and late fees,  totaling  $53,183  into 110,000  shares of the
Company's  common  stock.   Gryphon   Opportunities  Fund  I,  LLC,  a  majority
shareholder  of the  Company,  contributed  110,000  shares of  common  stock to
Company, at $0.70 cents per share, effecting a $77,000 capital contribution. The
exchange  of the note,  totaling  $53,193 in  principle,  accrued  interest  and
penalties,  into 110,000 shares of common stock of the Company,  resulted in the
Company's recognition of a deemed interest expense of $23,188.

On September 16, 2005, in order to provide immediate working capital of $150,000
to the Company,  the Company  structured a special terms  agreement with Gryphon
Opportunities Fund, I LLC ("Gryphon"),  the majority shareholder of the Company,
and four outside investors in which these investors would immediately contribute
$150,000  to the  Company.  In  return  Gryphon  agreed  to  contribute  454,546
outstanding common shares to the Company to be purchased by these five investors
at a purchase  price equal to 50% of the closing price of the  Company's  common
stock on that day, which was quoted on the NASD Over the Counter Bulletin Board,
at $0.66. In addition to the share issuances, each investor received warrants to
purchase  common  stock,  also issued by Gryphon,  equal to the number of shares
purchased.  These  warrants  have an  exercise  price of $1.50  per  share and a
five-year  life. This offering was initially  limited to $150,000,  with a total
issuance  by Gryphon of 454,546  common  stock  shares and  454,546  warrants to
purchase common stock. The Company recognized a total capital  contribution from
Gryphon of $150,000.

On September 27, 2005 the officers and directors of the Company structured a 12%
convertible  bridge note placement  agreement with Argilus Capital Partners (the
"Placement  Agent").  Under the terms of the agreement  (the  "Placement"),  the
Company may draw up to $500,000 in four installments of $125,000 each, dependent
on its ability to raise matching funds, dollar-for-dollar, and show satisfactory
performance  versus budget in the fourth  quarter of 2005.  All notes sold under
this  agreement,  either to Argilus  Capital  Partners or through the raising of
matching funds,  are 13-month,  12% convertible  promissory  notes attached to 3
year warrants to purchase common shares equal to 20% of the  investment,  with a
an exercise  price of the lesser of 75% of the per share  purchase  price on the
closing date or $0.75 per share.  Pursuant to the agreement  with  Argilus,  the
Company sold $150,000,  12% convertible  bridge notes  representing a portion of
the matching  funds  necessary to draw on the first  $125,000  installment  from
Argilus in September  and October of 2005.  30,000  warrants to purchase  common
stock at  exercise  prices  ranging  from  $0.34 to $0.53 were  attached  to the
convertible bridge note.

The Company has limited cash resources and intends to raise  additional  capital
through the  issuance of debt or equity.  The Company  believes  the  additional
capital will allow it to continue its marketing efforts in its core products and
develop and add new functional enhancements to the browser-based versions of its
products.  The availability of cash through such resources is not assured and if
the Company is not able to raise  enough  cash,  the Company  might be forced to
limit its operations and marketing  activities,  or ultimately cease operations.
The financial  statements  for the year ended December 31, 2005 were prepared on
the assumption that the Company will continue as a going concern.  . The Company
sustained net operating  losses of $2,985,285 and $2,270,875 for the years ended
December 31, 2005 and 2004, respectively, and has accumulated losses through

                                       23
<PAGE>

December 31, 2005 of $15,062,966. Cash used in operating activities for the same
periods aggregated $2,099,141 and $2,199,809, respectively. Total liabilities at
December 31, 2005 of $2,669,217 exceed total assets of $258,407.  As of the date
of this report, the Company is unable to meet all of its short-term  obligations
as they fall due because of shortages of cash. The Company's continued existence
depends upon the success of  management's  efforts to raise  additional  capital
necessary  to meet the  Company's  obligations  as they come due,  and to obtain
sufficient  capital to execute its business plan. The Company  intends to obtain
capital primarily through issuances of debt or equity. There can be no degree of
assurance that the Company will be successful in completing additional financing
transactions.  Failure to generate additional revenues, raise additional capital
or manage  discretionary  spending  could have a material  adverse effect on the
Company's  ability to  continue as a going  concern and to achieve its  intended
business  objectives.  The  accompanying  audited  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 7. FINANCIAL STATEMENTS

The  consolidated  financial  statements  of the  Company  are  included  herein
beginning on page F-1.

ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

None.

ITEM 8A. CONTROLS AND PROCEDURES.

CONTROLS AND PROCEDURES

Members of our management,  including Neil Burley,  our Chief Financial  Officer
and Principal Accounting and Financial Officer, have evaluated the effectiveness
of our  disclosure  controls  and  procedures,  as defined by  paragraph  (e) of
Exchange  Act Rules 13a-15 or 15d-15,  as of December  31, 2005,  the end of the
period covered by this report. Based upon that evaluation,  Mr. Burley concluded
that our disclosure controls and procedures are effective.

INTERNAL CONTROL OVER FINANCIAL REPORTING.

There were no changes in our  internal  control over  financial  reporting or in
other factors identified in connection with the evaluation required by paragraph
(d) of  Exchange  Act Rules  13a-15 or 15d-15  that  occurred  during the fourth
quarter ended December 31, 2005 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

ITEM 8B. OTHER INFORMATION.

None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT.

The  following  table sets forth the age and  position of each of the  Company's
executive officers, directors and key employees at December 31, 2005:



Name                    Age     Position
-----                   ---     --------

Richard F. Corlin, MD    65     Chairman of the Board of Directors and Chief
                                Medical Officer

Robert J. Woodrow        64     President, Chief Executive Officer and Director

Allen Stamy              64     Director

Laszlo Meszaros          66     Director

Robert McMillan          73     Director

William O'Loughlin       54     Executive Vice-President and Chief Operating
                                Officer

Dennis Nasto             47     Senior Vice-President, Sales and Marketing

Neil Burley              45     Vice-President and Chief Financial Officer

Eugene Fry               44     Senior Vice-President, Product and Technology
                                Development and Chief Compliance Officer

                                       24
<PAGE>

Richard F. Corlin,  MD has been a director  since  September 23, 2000 and became
Chairman of the Board of Directors and Chief 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  and  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,  and  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.

Robert J.  Woodrow  joined the Board of Directors of the Company in May 2002 and
became Chief Operating Officer in September 2002. He became President in January
2004 and more recently was appointed  President and Chief Executive Officer.  He
has been an advisor and member of the Board of Directors of numerous early stage
information technology companies during the past 15 years, including,  from 1991
to  1999,   Voice   Technology   Group,  a  manufacturer   and   distributor  of
telecommunications  components that has been acquired by Intel  Corporation.  He
served as  President  and CEO of  Viewfacts  Meloche  Inc.,  a private  learning
systems and market research company, from 1990 to 1994. He has also been CFO and
COO of Compuware,  a global software and professional services firm. He has also
held chief technology  positions at Continental  Information  Systems, a leasing
and  financial  services  company,  from  1994  to  1996  and  Agway,  Inc.,  an
agricultural cooperative, from 1964 to 1984. He has been a visiting Professor at
Syracuse  University's  Graduate  School of  Management  and was Chairman of the
Curriculum  Board while he  completed  his Ph.D.  curriculum  requirements.  Mr.
Woodrow  also  is  currently  a  Director  of  MicroLanguage  Inc.,  a  software
development  company  specializing in internet data security,  and Vice Chairman
and a Director of XGear Technologies, Inc., a web-based medical services billing
company.  He holds a B.S.  from  Bentley  College  and an  M.B.A.  from  Cornell
University.

Allen Stamy has been a director  since August,  2002.  From February 1996 to the
present,  Mr. Stamy has served as the President and Chief Operating  Officer and
more  recently  Chief  Executive  Officer of  Audio-Digest  Foundation.  He also
provides management oversight to its subsidiary, Marathon Multimedia, and to CME
Unlimited,  a medical  conference  capture  and  e-commerce  business.  Prior to
joining  Audio-Digest  Foundation,  Mr. Stamy worked in education and technology
industries where he has had experience in sales,  product management,  marketing
and general management.  He previously worked for National Computer Systems from
1990 to 1995, Science Research Associates from 1988 to 1990, and IBM Corporation
from 1967 to 1988. At IBM, he managed a full product line  including new product
development  and  distributed  products  through a national  direct sales force,
direct response marketing and complementary  third-party  distribution channels.
He specialized in opening the Pacific Rim markets for IBM's small  computers and
peripherals and managed the small system product  portfolio.  Mr. Stamy earned a
Bachelor of Business  Administration  from the University of Iowa and a Master's
of Business  Administration  from the University of Chicago. He is a director of
MedePass Inc.,  which provides  secure  transmission of medical  information,  a
member of the Board of  Governors  of  Marathon  Multimedia,  and a Director  of
Landes Slezak Group.  Mr. Stamy also was a Director of American  Sound and Video
from 1998 to 2000,  when it filed a petition for  reorganization  under the U.S.
Bankruptcy Code and later was liquidated, as described above.

Laszlo  Meszaros joined the Board of Directors of the Company on April 25, 2005.
Mr.  Meszaros  has over forty  years  experience  in data and voice  processing,
telecommunications technology, management,  administration,  sales and marketing
and operations. For twenty-five of these years he was an entrepreneur who

                                       25
<PAGE>

started private companies that resulted in significant growth and profitability.
He is an investor,  advisor and  business  consultant  in the United  States and
Europe.  He was  appointed  vice  president of business  development  with Intel
Corporation when the company acquired Voice  Technologies Group (VTG), a leading
provider of computer telephony integration technology,  in June 2000, and served
in that capacity for one year. Mr. Meszaros was the founder, chairman and CEO of
VTG prior to its  acquisition.  Before founding VTG in 1989, he was the founder,
chairman and CEO of COM-PRO,  a nationally  recognized,  privately-held  systems
software and professional  services company based in Buffalo,  New York. He also
served as the director of management information systems for Erie County Central
Police Services, and was a sales and marketing executive for Computer Task Group
and data systems  manager for Roswell Park  Memorial  Research  Institute,  both
based in Buffalo,  New York.  On January 11,  2006,  Mr.  Meszaros  notified the
Company  that he  resigned  his  position  on the Board of  Directors  effective
December 14, 2005.

Robert  McMillan joined the Board of Directors of the Company on April 22, 2005.
Since June 2002, Mr.  McMillan has served as the first  non-physician  member of
the Board of Trustees of the American Medical Association and he is chair of its
audit  committee.  Since  August  of 2002,  he has been a member of the Board of
Directors for WellChoice, Inc., (NYSE: WC), the largest health insurance company
in New York, and is chairman of its investment committee. He was also a director
of  Empire  BlueCross  BlueShield/Empire  HealthChoice  from  December  1994  to
November 2002. In addition,  he has been of Counsel to the law firm of Bee Ready
Fishbein Hatter & Donovan,  LLP in Mineola,  NY, since March 2005. Prior to that
he was partner of the law firm of Fischbein Badillo Wagner Harding in Mellville,
NY, and a predecessor firm. Mr. McMillan also served as a member of the Board of
Directors of the Panama Canal  Commission  from  November  1989 through  October
1994,  and as Chairman of the Board from  October  1993 to October  1994.  As an
executive of Avon Products, Inc. for seventeen years during the 1970s and 1980s,
he held various positions including corporate vice president of the Asia Pacific
Profit  Center from  January  1977 to January  1988.  On January 27,  2006,  Mr.
McMillan  notified the Company that he would be resigning  his position from the
Board of Directors effective March 1, 2006.

William  O'Loughlin  joined  SecureCARE  Technologies,  Inc. in October  2004 as
Executive  Vice-President and Chief Operating Officer. He is responsible for all
aspects of SecureCARE's product and technology  development,  implementation and
integration,  customer service and support,  including  training and the overall
operations of the company.  Prior to joining  SecureCARE,  Mr. O'Loughlin worked
for WellChoice,  Inc.  (formerly Empire Blue Cross Blue Shield) from 1971 - 2000
where he held many different positions spanning information technology, business
operations, quality assurance and strategic negotiations.  Most recently, he was
a member of the  operating  committee  and Senior Vice  President  of  Strategic
Alliances.   Mr.  O'Loughlin  successfully  led  corporate  negotiations  for  a
multi-year,  multi-faceted  contract  resulting in several  hundred  millions in
funding to  modernize  the  company's  IT  applications,  including  a new claim
engine, while eliminating millions in corporate expenses. Earlier, as the Senior
Vice  President  of  Business  Technology  Development  from  2000 to 2002,  Mr.
O'Loughlin  created and led the team  responsible for designing and developing a
Java 2 Enterprise  Edition compliant  framework to support rapid development and
code reuse in different business applications.  He led the team that developed a
multi-functional  website with direct, real-time mainframe connectivity ensuring
24x7  availability.  From  1997 to 2000,  Mr.  O'Loughlin  served  as the  Chief
Information  Officer at Empire  managing  100+ core and  ancillary  applications
including  all data  center  functions.  It was  during  this  time  that he led
corporate  activities for year 2000  compliance  culminating in an incident free
implementation.  He also  reorganized  the data center  processes  and  business
principles,  installed a virtual tape subsystem with a significant  reduction in
staff and executed  multi-year  contracts with large mainframe  software vendors
resulting  in  multiple  millions in  savings.  His tenure as Chief  Information
Officer was preceded by a position as the Vice President of Systems from 1996 to
1997. In this role, Mr. O'Loughlin  successfully  consolidated  seven processing
systems to one integrated real time system servicing over three million members.
Mr.  O'Loughlin  gained first hand business  experience as the Vice President of
Membership,  Billing & Group Accounts Customer Service from 1995 to 1996 and the
Vice President of Senior Accounts from 1993-1995. In these roles, Mr. O'Loughlin
provided for corporate wide systemic solutions,  performing process redesign and
implementing  improvements  including  automation of membership  enrollment  and
methodologies in cash reconciliation.  Mr. O'Loughlin graduated Beta Gamma Sigma
from Baruch College with an MBA in Computer  Methodology.  He also holds a BS in
Computer Science from Brooklyn  College.  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.

Dennis Nasto has been  employed  with the Company since August 2003 and 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
(18) 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 was focused on  bringing  Web-based  workflow  solutions  to the  physician
marketplace.  Since  joining the Company,  Mr. Nasto has engaged over forty (40)
independent sales representatives,  on behalf of the Company, along with two (2)
regional sales managers,  significantly adding to the Company's sales force, and
making it, the Company  believes,  one of the largest  sales  forces in the home
health care software  business.  Mr. Nasto's  employment  with the Company ended
December 9, 2005,  as result of the  Company's  implementation  of a significant
cost reduction program.

                                       26
<PAGE>

Neil Burley has served the Company as Chief  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.  Mr.  Burley  spent a
significant  amount  of time 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 at
Compaq.  In this role he functioned as a senior  financial  advisor to the Chief
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.

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.

No reporting person failed to file on a timely basis reports required by section
16(a) of the Exchange Act since such  reporting  persons  became subject to such
reporting requirements during 2005.

Code of Ethics

Due to limited  resources,  the Company  has not adopted a code of  professional
ethics for its  principal  executive  officer,  principal  financial  officer or
persons performing  similar  functions.  The Company intends to create and adopt
its code of ethics during the calendar year 2006.

                                       27
<PAGE>

<TABLE>
<CAPTION>

ITEM 10.  EXECUTIVE COMPENSATION

                                                            Annual Compensation                       Long-Term Compensation
                                              ----------------------------------------------   ------------------------------------
                                                                                               Restricted   Common Shares
                                                                                   Other         Stock        Underlying
                                                                                   Annual        Awards    Options Granted    All
                                                 Year    Salary       Bonus     Compensation   (# Shares)     (# Shares)     Other
                                              -------   --------   ----------   ------------   -----------   ------------   -------
<S>                                              <C>         <C>          <C>            <C>     <C>                  <C>      <C>
Richard F. Corlin, MD (1) (2)                    2005          0            0              0             0              0         0
Chairman and Chief Medical Officer               2004          0            0              0       515,000              0         0
                                                 2003          0            0              0        60,000              0         0

Robert J. Woodrow (1) (3)                        2005     70,000            0              0             0              0         0
President, Chief Executive Officer               2004     69,000            0              0     1,000,000        500,000         0
   and Director                                  2003     39,000            0              0       187,500              0         0

Allen Stamy, Director (1) (4)                    2005          0            0              0             0        100,000         0
                                                 2004          0            0              0             0              0         0
                                                 2003          0            0              0             0              0         0

Robert McMillan, Director (13)                   2005          0            0              0             0        100,000         0
                                                 2004          0            0              0             0              0         0
                                                 2003          0            0              0             0              0         0

Laszlo Mezaros (14)                              2005          0            0              0             0        100,000         0
Former Director                                  2004          0            0              0             0              0         0
                                                 2003          0            0              0             0              0         0

William O'Loughlin, Executive Vice-President     2005    100,000            0              0             0              0         0
   and Chief Operating Officer (5)               2004     35,000            0              0             0        300,000         0
                                                 2003          0            0              0             0              0         0

Dennis Nasto (6) (16)                            2005    105,695            0              0             0              0         0
Senior Vice-President, Sales and Marketing       2004     92,394            0              0       150,000        150,000         0
                                                 2003     29,959            0              0             0              0         0

Neil Burley (1) (7)                              2005     85,000            0              0             0              0         0
Vice President and Chief Financial Officer       2004     91,083            0              0       215,000        150,000         0
                                                 2003     67,773            0              0             0              0         0

Eugene Fry (1) (8)                               2005     75,000            0              0             0              0         0
Vice-President, Product and Technology           2004     90,084            0              0       200,000        100,000         0
   Development and Chief Compliance Officer      2003     69,693            0              0             0              0         0

N.K. "Skip" Best (9)                             2005          0            0              0             0              0         0
Vice-President, Business Development             2004     45,700            0              0             0              0         0
                                                 2003      5,000            0              0             0              0         0

Marion Robert Rice (10)                          2005          0            0              0             0              0         0
Former Director and CEO                          2004          0            0              0             0              0         0
                                                 2003     26,062            0              0             0              0         0

Andy W. McBee (11)                               2005          0            0              0             0              0         0
Former Director                                  2004          0            0              0             0              0         0
                                                 2003          0            0              0             0              0         0

Gary Humberson (1) (12)                          2005          0            0              0             0              0         0
Former Director                                  2004          0            0              0             0              0         0
                                                 2003          0            0              0             0              0         0
</TABLE>

(1)  On May 13, 2003 (the  "Commencement  Date"),  the Company 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.  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  dated as of August 5, 2003 (the "Confirmation
     Order").  The  Effective  Date  of the  Plan  was  December  15,  2003.  In
     accordance  with  the  terms  of  Article  IV  ("Treatment  of  Claims  and
     Interests")  and Article VI  ("Issuance  of New  Shares") of the  confirmed
     Plan,  all existing  equity rights in the Debtor (the  "Company"),  whether
     vested or unvested,  including the Common Stock and Preferred  Stock of the
     Debtor were  cancelled  on the  Effective  Date,  December  15,  2003.  All
     holdings by Directors  and Officers of the Company of of  Restricted  Stock
     Awards and Common Stock underlying options granted were cancelled Effective
     December 15, 2003.

(2)  Dr. Corlin has been a director since September 23, 2000. He became Chairman
     of the Board and Chief Medical Officer in August,  2002.  500,000 shares of
     Common  Stock  were  awarded  to Dr.  Corlin by the Board of  Directors  on
     January 20, 2004, of which 250,000  shares would have been  forfeited if he
     resigned  from the Board of  Directors  prior to January 20,  2005.  15,000
     shares of Common Stock were awarded to Dr. Corlin by the Board of Directors
     on June 18, 2004.  60,000 shares of Common Stock were awarded to Dr. Corlin
     by the Board of Directors on March 12, 2003 as a bonus award.  These 60,000
     shares were cancelled effective December 15, 2003.

                                       28
<PAGE>

(3)  Mr.  Woodrow has been a director since May 13, 2002. Mr. Woodrow has served
     as Chief Operating  Officer since September 1, 2002. He became President on
     December 29, 2003 and was appointed  President and Chief Execuitve  Officer
     in October 2004.  Mr.  Woodrow was hired as an outside  consultant.  He was
     paid, on average in 2004,  $5,750 per month in cash  compensation  plus all
     reasonable and customary travel and other expenses related to the execution
     of his duties.  Mr.  Woodrow's net compensation in 2005 of $55,700 included
     $70,000 in monthly  payments that averaged  $7,500 per month for the months
     in which he was paid net of $14,300 in unreimbursed out of pocket expenses.
     Mr. Woodrow also accrued  additional salary of $20,000 through December 31,
     2005.  1,000,000  shares of Common Stock were awarded to Mr. Woodrow by the
     Board of Directors on January 20, 2004, of which 500,000  shares would have
     been forfeited if he resigned from the Board of Directors  prior to January
     20, 2005. On December 3, 2004 Mr.  Woodrow was granted  options to purchase
     500,000   shares  of  Common  Stock  issued   pursuant  to  the  SecureCARE
     Technologies,  Inc. Year 2004 Stock Option Plan.  187,500  shares of Common
     Stock were  awarded to Mr.  Woodrow by the Board of  Directors on March 12,
     2003 in accordance  with his original  consulting  contract.  These 187,500
     shares were cancelled effective December 15, 2003. 375,000 shares of Common
     Stock and options to purchase  750,000  shares of Common Stock were awarded
     to Mr. Woodrow by the Board of Directors on September 1, 2002 in accordance
     with is  original  consulting  contract.  The  375,000  shares and  750,000
     options were  cancelled  effective  December 15, 2003.  On May 13, 2002 Mr.
     Woodrow was  granted  options to purchase  150,000  shares of Common  Stock
     issued pursuant to the Company's 2000 Director's Option Plan. These 150,000
     options were cancelled on December 15, 2003.

(4)  Mr.  Stamy has been a  director  since  August 8, 2002.  100,000  shares of
     Common Stock were awarded to Mr. Stamy by the Board of Directors on January
     20, 2004, of which 50,000  shares would have been  forfeited if he resigned
     from the Board of Directors prior to January 20, 2005.

(5)  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. Prior to October 1,
     2004, Mr. O'Loughlin was retained on a consulting basis and was compensated
     $10,000 for those consulting  services.  On December 3, 2004 Mr. O'Loughlin
     was  granted  options to purchase  300,000  shares of Common  Stock  issued
     pursuant to the SecureCARE Technologies,  Inc. Year 2004 Stock Option Plan.
     Mr.  O'Loughlin's  employment  with the Company  ended on December 9, 2005.
     Therefore 178,356 of the options had vested at the date of termination; the
     remaining 121,644 were cancelled. Mr. O'Loughlin received cash compensation
     in 2005 of $100,000  and he accrued  additional  salary of $20,000  through
     December 31, 2005.

(6)  Mr. Nasto was Vice President of Sales,  Marketing and Customer Support from
     August,  2003 through  December 9, 2005.  Mr. Nasto's  employment  with the
     Company ended December 9, 2005, as a result of the Company's implementation
     of  a  significant  cost  reduction   program.   Mr.  Nasto  became  Senior
     Vice-President,  Sales and Marketing in October,  2004.  150,000  shares of
     Common  Stock  were  awarded  by the  Board of  Directors  on  January  20,
     2004.These shares vested on October 1, 2004 and were issued contingent upon
     Mr. Nasto being  employed by the Company on October 1, 2004.On  December 3,
     2004 Mr.  Nasto was granted  options to purchase  150,000  shares of Common
     Stock issued pursuant to theSecureCARE  Technologies,  Inc. Year 2004 Stock
     Option Plan. Mr. Nasto's  employment  with the Company ended on December 9,
     2005.   Therefore  76,233  of  the  options  had  vested  at  the  date  of
     termination;  the remaining 73,767 were cancelled.  Mr. Nasto received cash
     compensation  in 2005 of  $105,695  and he  accrued  additional  salary  of
     $20,572 through December 31, 2005.

(7)  Mr. Burley has been Chief Financial Officer since July 2002. 215,000 shares
     of Common Stock were awarded by the Board of directors on January 20, 2004.
     These shares vested on October 1, 2004 and were issued  contingent upon Mr.
     Burley  being  employed by the  Company on October 1, 2004.  On December 3,
     2004 Mr. Burley was granted  options to purchase  150,000  shares of Common
     Stock issued pursuant to the SecureCARE Technologies,  Inc. Year 2004 Stock
     Option Plan. Mr. Burley  received cash  compensation in 2005 of $85,000 and
     he accrued additional salary of $10,366 through December 31, 2005.

(8)  Mr. Fry has been a full time  employee of the Company  since  October 2001.
     200,000  shares of Common  Stock were  awarded by the Board of Directors on
     January 20, 2004.  These  shares  vested on October 1, 2004 and were issued
     contingent  upon Mr. Fry being  employed by the Company on October 1, 2004.
     On December 3, 2004 Mr. Fry was granted options to purchase  100,000 shares
     of Common Stock issued pursuant to the SecureCARE  Technologies,  Inc. Year
     2004 Stock  Option  Plan.  Mr. Fry received  cash  compensation  in 2005 of
     $75,000 and he accrued  additional  salary of $15,416 through  December 31,
     2005.

(9)  Mr. Best was hired as Vice  President of Business  Development  on March 1,
     2004.  Prior to  December  1, 2003,  Mr.  Best was working on behalf of the
     Company  exclusively  on a  commission  basis  plus  reimbursement  for all
     reasonable  travel and other  expenses  incurred on behalf of the  Company.
     Effective  December 1, 2003,  Mr. Best was paid a recoverable  draw against
     future commissions of $5,000 per month.  50,000 shares of Common Stock were
     awarded by the Board of Directors on January 20, 2004.  These shares vested
     on October 1, 2004 and their  issuance was  contingent  upon Mr. Best being
     employed with the Company on October 1, 2004.  Mr. Best's  employment  with
     the  Company  ended on  September  7, 2004;  therefore  the shares were not
     issued.

                                       29
<PAGE>

(10) Mr. Rice served as President and Chief Executive Officer of eClickMD,  Inc.
     since its  Reorganization  in September,  1999 through April 2003. Mr. Rice
     received  cash  compensation  in  Year  2002  of  $42,188  and  he  accrued
     additional  salary of $48,750 through  December 31, 2002. Mr. Rice received
     cash compensation in Year 2003 of $26,062.  Mr. Rice resigned as CEO of the
     Company on April 22, 2003.  Mr. Rice  resigned as a director of the Company
     on September 10, 2003.

(11) Mr. McBee served as a director and Assistant  Secretary from September 1999
     through  November  2002. Mr. McBee resigned as a director of the Company on
     November 25, 2002.

(12) Mr.  Humberson  served as a director  from October 2001 through April 2003.
     Mr.  Humberson  was granted  options to purchase  150,000  shares of common
     stock issued pursuant to the Company's 2000 Director's  Option Plan.  These
     150,000 options were cancelled on December 15, 2003. Mr. Humberson resigned
     as a director of the Company on April 16, 2003.

(13) Robert  McMillan joined the Board of Directors on April 25, 2005. The Board
     granted Mr.  McMillan  options to purchase  100,000  shares of common stock
     upon  appointment  as director.  50,000  options  vested  immediately;  the
     remaining  vested  ratably  over the  following  12  months.  Mr.  McMillan
     resigned from the Board of Directors on March 1, 2006.

(14) Laszlo  Mezaros joined the Board of Directors on April 25, 2005. On January
     11, 2006, Mr. Meszaros notified the Company that he resigned from the Board
     of Directors  effective  December 14, 2005.  The Board granted Mr.  Mezaros
     options to purchase  100,000  shares of common  stock upon  appointment  as
     director.  50,000  options vested  immediately;  the remaining were to vest
     ratably over the following 12 months. Mr. Mezaros resigned as a director of
     the Company on December 14, 2005.  81,918 options had vested at the date of
     resignation; the remaining 18,082 were cancelled.

                                       30
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth  certain  information  regarding the  beneficial
ownership of the  Company's  common stock as of December 31, 2005 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.


Name                                            Number of Shares      Percentage
-------------------------------------         ------------------      ----------

Richard F. Corlin, MD                                    515,000              3%

Robert J. Woodrow                                      1,000,000              5%

Allen Stamy                                              100,000              0%

William O'Loughlin                                             0              0%

Dennis Nasto                                             150,000              1%

Neil Burley                                              215,000              1%

Eugene Fry                                               200,000              1%

Gryphon Opportunities Fund I, LLC (1)                 13,482,638             67%

All Directors and Officers as a Group                  2,180,000

(1)  Excludes 85,150 shares of common stock owned by Dall, Inc., an affiliate of
     Gryphon  Opportunities  Fund I, LLC Excludes 100,000 shares of common stock
     owned by Grypon Financial Securities  Corporation,  an affiliate of Gryphon
     Opportunities  Fund I, LLC Excludes 235,150 shares of common stock owned by
     York Avenue Holding Corporation, an affiliate of Gryphon Opportunities Fund
     I, LLC

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As of December 31, 2005 and 2004, the Company had principal  amounts of $544,490
in notes payable to a related party,  Gryphon  Opportunities Fund I, LLC. During
the  twelve-month  periods  ended  December  31,  2005 and 2004,  there  were no
principal repayments on these notes payable.

At December 31,  2005,  the required  monthly  interest  payments on these notes
payable,  due to commence on September 1, 2004,  were not made by the Company to
Gryphon  Opportunities  Fund I, LLC. At December 31, 2005, the required  monthly
principal payments on these notes payable, due to commence on September 1, 2005,
were not made by the  Company  to  Gryphon  Opportunities  Fund I,  LLC.  Gryhon
Opportunities Fund I, LLC waived the Company's  non-compliance with the terms of
the note payable agreements as of December 31, 2005 and through January 1, 2007.

                                       31
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

The  following  Exhibits  are  incorporated  by  reference  to the filing or are
included following the Index to Exhibits.


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      Joint Plan of  Reorganization  Dated August 5, 2003,  as amended by the
         Bankruptcy Court's Confirmation Order dated December 2, 2003 (2)

3.5      The Bankruptcy Court's Confirmation Order dated December 2, 2003 (2)

3.6      Press Release Dated December 15, 2003 (2)

4.1      Form of 12% Convertible Bridge Note

4.2      Financial  Advisory and Other Services  Agreement,  dated September 28,
         2005  by  and  between  Argilus   Investment   Banking  and  SecureCARE
         Technologies, Inc.

31.1     Certification  of  the  Chief  Executive   Officer  pursuant  to  Rules
         13a-14(a) and 15d-14(a) of the  Securities and Exchange Act of 1934, as
         adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2     Certification  of  the  Chief  Financial   Officer  pursuant  to  Rules
         13a-14(a) and 15d-14(a) of the  Securities and Exchange Act of 1934, as
         adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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

(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  Form  8-K,  filed  with the
     Securities and Exchange Commission on December 15, 2003, File No. 0-29804.

B. Reports on Form 8-K

     On December 13, 1005 the Company filed a Form 8-K,  dated  December 9, 2005
     reporting  under Item 8.01 that it had  implemented  a staff  reduction  of
     approximately  16  employees  in what is expected  to be a  temporary  cost
     reduction in response to the failure of Argilus LLC, an investment  banking
     frim located in Pittsford,  NY, to provide operating and growth capital, as
     contracted for in late September of 2005.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Board of Directors  has reviewed  the  following  audit fees the Company has
paid to the  independent  registered  public  accounting  firm 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  registered public accounting firm 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 $57,280 for 2005 and $56,070 for 2004.  Fees billed for tax related
services in 2005 totaled $1,294. Additionally, fees billed for other services in
2005 totaled $1,000.

                                       32
<PAGE>


SIGNATURES

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

                                      SecureCare Technologies, Inc.


Date:  May 19, 2006                   By: /s/ ROBERT WOODROW
                                          --------------------------------------
                                          Robert Woodrow
                                          President, Chief Executive Officer
                                          And Director


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


NAME                             TITLE
/s/ ROBERT WOODROW             President, Chief Executive     Date: May 19, 2006
---------------------------    Officer and Director
Robert Woodrow


/s/ NEIL BURLEY                Chief Financial Officer        Date: May 19, 2006
---------------------------    (Principal Financial and
Neil Burley                    Accounting Officer)

                                       33
<PAGE>
                          SecureCARE Technologies, Inc.

                          INDEX TO FINANCIAL STATEMENTS




                                                                            Page
                                                                            ----

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM..................... F-1

FINANCIAL STATEMENTS

Balance Sheets at December 31, 2005 and 2004................................ F-2

Statements of Operations for the years ended December 31, 2005 and 2004..... F-4

Statement of Changes in Shareholders' Deficit for the years
   ended December 31, 2005 and 2004......................................... F-5

Statements of Cash Flows for the years ended December 31, 2005 and 2004..... F-7

Notes to Financial Statements............................................... F-9

<PAGE>

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.
as of  December  31,  2005 and 2004 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, 2005 and 2004, 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 B, 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,
2005. 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  B.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.


KBA Group LLP
Dallas, Texas
May 16, 2006

                                     F - 1
<PAGE>

                          SecureCARE Technologies, Inc.
                                 BALANCE SHEETS
                           December 31, 2005 and 2004


                                              ASSETS

<TABLE>
<CAPTION>
                                                                              2005         2004
                                                                           ----------   ----------
<S>                                                                        <C>          <C>
Current assets
   Cash and cash equivalents                                               $    3,400   $   50,847
   Accounts receivable - trade, net of allowance for doubtful accounts
     of $5,000 and $11,000 at December 31, 2005 and 2004, respectively         42,936       25,537
   Prepaid expenses                                                            14,905       26,513
                                                                           ----------   ----------
       Total current assets                                                    61,241      102,897

Property and equipment, net of accumulated depreciation and amortization
   of $361,490 and $283,076 at December 31, 2005 and 2004, respectively        93,822      172,236
Deferred financing fees, net of accumulated amortization of
   $79,032 and $40,949 at December 31, 2005 and 2004, respectively              5,514       43,597
Deposits                                                                       97,830      130,568
                                                                           ----------   ----------

       Total assets                                                        $  258,407   $  449,298
                                                                           ==========   ==========
</TABLE>

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

                                     F - 2
<PAGE>

                          SecureCARE Technologies, Inc.
                           BALANCE SHEETS - CONTINUED
                           December 31, 2005 and 2004


<TABLE>
<CAPTION>
                                           LIABILITIES AND SHAREHOLDERS' DEFICIT

                                                                                                   2005            2004
                                                                                               ------------    ------------
<S>                                                                                            <C>             <C>
Current liabilities
  Current portion of notes payable, including $136,123 and $27,224 to a
    related party at December 31, 2005 and 2004, respectively and net of
    debt discount of $14,164 and $5,000, respectively                                          $  1,355,459    $    122,224
  Accounts payable - trade                                                                          222,888          96,732
  Accrued payroll                                                                                   222,436          38,235
  Accrued payroll tax liabilities                                                                   170,918          47,444
  Deferred revenue                                                                                   16,183              --
  Accrued interest                                                                                  161,337          47,050
  Other accrued liabilities                                                                         111,629           2,240
                                                                                               ------------    ------------
    Total current liabilities                                                                     2,260,850         349,445

Notes payable, less current portion including $408,367 and $517,265 to related parties
 at December 31, 2005 and 2004, respectively, net of debt discount of $0 and $30,333
 at December 31, 2005 and 2004, respectively                                                        408,367       1,006,933

Commitments and contingencies

Shareholders' deficit
  Preferred stock - $0.001 par value; 15,000,000 shares authorized,
    Series A preferred stock - 1,955,000 shares issued and outstanding
     (liquidation preference of $1.00 per share)                                                      1,955           1,955
    Series B preferred stock - 1,427,273 and 181,818 shares issued and outstanding
     at December 31, 2005 and 2004, respectively (liquidation preference of $1.10 per share)          1,427             182
  Common stock - $0.001 par value; 50,000,000 shares authorized,
    20,004,000 shares issued and outstanding                                                         20,004          20,004
  Additional paid-in capital                                                                     12,630,770      10,945,695
  Receivable for the purchase of equity                                                              (2,000)         (2,000)
  Accumulated deficit                                                                           (15,062,966)    (11,872,916)
                                                                                               ------------    ------------
    Total shareholders' deficit                                                                  (2,410,810)       (907,080)
                                                                                               ------------    ------------

    Total liabilities and shareholders' deficit                                                $    258,407    $    449,298
                                                                                               ============    ============
</TABLE>

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

                                     F - 3
<PAGE>

                          SecureCARE Technologies, Inc.
                            STATEMENTS OF OPERATIONS
                 For the Years Ended December 31, 2005 and 2004

<TABLE>
<CAPTION>
                                                                    2005            2004
                                                                ------------    ------------
<S>                                                             <C>             <C>
Revenues                                                        $    387,159    $    210,871

Operating expenses
   Cost of revenues                                                  860,961         491,328
   Selling, general and administrative                             2,271,575       1,892,369
   Bad debt expense                                                   29,490          25,540
                                                                ------------    ------------

   Operating loss                                                 (2,774,867)     (2,198,366)

Other income (expense)
   Gain on debt settlement                                             6,380          26,521
   Other                                                                  --           3,795
   Interest expense (including $26,578 and $11,074 to a
     related party, respectively)                                   (216,798)       (102,825)
                                                                ------------    ------------

 Net loss                                                       $ (2,985,285)   $ (2,270,875)
                                                                ============    ============
 Deemed dividend upon issuance of convertible preferred stock       (204,765)             --
                                                                ------------    ------------
Net loss available to common shareholders                       $ (3,190,050)   $ (2,270,875)
                                                                ============    ============

Net loss per common share - basic and diluted                   $      (0.16)   $      (0.12)
                                                                ============    ============
Weighted-average number of common shares outstanding -
   basic and diluted                                              20,004,000      19,642,948
                                                                ============    ============
</TABLE>

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

                                     F - 4
<PAGE>

                          SecureCARE Technologies, Inc.
                 STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
                 For the Years Ended December 31, 2005 and 2004

<TABLE>
<CAPTION>
                                                                     Series A               Series B
                                                                 Preferred Stock         Preferred Stock           Common Stock
                                                              ----------------------  ----------------------  ----------------------

                                                              ----------  ----------  ----------  ----------  ----------  ----------
                                                                Shares      Amount      Shares      Amount      Shares      Amount
                                                              ----------  ----------  ----------  ----------  ----------  ----------
<S>                                                            <C>        <C>          <C>        <C>         <C>         <C>
Balance at December 31, 2003                                          --  $       --          --  $       --  15,000,000  $   15,000

  Issuance of common stock to investors in connection
      with bridge financing                                           --          --          --          --     520,000         520
  Issuance of common stock and warrants for services                  --          --          --          --   2,434,000       2,434
  Issuance of common stock in connection with note payable            --          --          --          --      50,000          50
  Issuance of common stock and note receivable to placement
      agent in connection with the bridge financing                   --          --          --          --   2,000,000       2,000
  Issuance of Series A preferred stock                         1,955,000       1,955          --          --          --          --
  Issuance of Series B preferred stock                                --          --     181,818         182          --          --


  Net loss for the year                                               --          --          --          --          --          --

                                                              ----------  ----------  ----------  ----------  ----------  ----------
  Balance at December 31, 2004                                 1,955,000       1,955     181,818         182  20,004,000      20,004

  Issuance of Series B preferred stock                                --          --   1,245,455       1,245          --          --
  Issuance of stock options for services                              --          --          --          --          --          --
  Issuance of warrants in connection with notes payable               --          --          --          --          --          --
  Contribution of common stock by majority shareholder in
     conjunction with conversion of note payable and
     accrued interest                                                 --          --          --          --          --          --
  Capital contribution from majority shareholder                      --          --          --          --          --          --

  Net loss for the year                                               --          --          --          --          --          --

                                                              ----------  ----------  ----------  ----------  ----------  ----------
  Balance at December 31, 2005                                 1,955,000  $    1,955   1,427,273  $    1,427  20,004,000  $   20,004
                                                              ==========  ==========  ==========  ==========  ==========  ==========
</TABLE>

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

                                     F - 5
<PAGE>

                          SecureCARE Technologies, Inc.
           STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT - CONTINUED
                 For the Years Ended December 31, 2005 and 2004

<TABLE>
<CAPTION>
                                                              Additional
                                                                Paid-in      Accumulated        Notes
                                                                Capital        Deficit        Receivable        Total
                                                              ------------   ------------    ------------    ------------
<S>                                                           <C>            <C>             <C>             <C>
Balance at December 31, 2003                                  $  8,661,505   $ (9,602,041)   $         --    $   (925,536)

  Issuance of common stock to investors
     in connection with bridge financing                            51,480             --              --          52,000
  Issuance of common stock and warrants for services               276,211             --              --         278,645
  Issuance of common stock in connection with Note payable           7,450             --              --           7,500
  Issuance of common stock and note receivable to placement
      agent in connection with the bridge financing                 12,571             --          (2,000)         12,571
  Issuance of Series A preferred stock                           1,736,660             --              --       1,738,615
  Issuance of Series B preferred stock                             199,818             --              --         200,000

  Net loss for the year                                                 --     (2,270,875)             --      (2,270,875)

                                                              ------------   ------------    ------------    ------------
  Balance at December 31, 2004                                  10,945,695    (11,872,916)         (2,000)       (907,080)

  Issuance of Series B preferred stock                           1,441,714       (204,765)             --       1,238,194
  Issuance of stock options for services                             4,300             --              --           4,300
  Issuance of warrants in connection with notes payable             12,061             --              --          12,061
  Contribution of common stock by majority shareholder in
     conjunction with conversion of note payable and
     accrued interest                                               77,000             --              --          77,000
  Capital contribution from majority shareholder                   150,000             --              --         150,000

  Net loss for the year                                                 --     (2,985,285)             --      (2,985,285)

                                                              ------------   ------------    ------------    ------------
  Balance at December 31, 2005                                $ 12,630,770   $(15,062,966)   $     (2,000)   $ (2,410,810)
                                                              ============   ============    ============    ============
</TABLE>

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

                                     F - 6
<PAGE>

                          SecureCARE Technologies, Inc.

                            STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 2005 and 2004

<TABLE>
<CAPTION>
                                                             2005            2004
                                                          -----------    ------------
<S>                                                      <C>             <C>

Cash flows from operating activities
  Net loss                                               $ (2,985,285)   $ (2,270,875)
  Adjustments to reconcile net loss to net
   cash used in operating activities:
     Depreciation and amortization                             78,414           1,540
     Bad debt expense                                          29,490          25,540
     Gain on disposal of fixed assets                              --          (4,699)
     Stock and warrants issued for services                        --         217,350
     Stock-based compensation                                   4,300          61,295
     Amortization of deferred financing fees                   38,083          40,949
     Amortization of debt discount                             33,230          24,167
     Other non-cash interest expense                           23,187              --
  Increases and decreases in working capital accounts:
     Accounts receivable - trade                              (46,889)        (34,310)
     Prepaid expenses                                          11,608         (23,013)
     Other current assets                                      32,738              --
     Deposits                                                      --        (124,717)
     Deferred revenue                                          16,183              --
     Accounts payable - trade                                 126,156         (74,217)
     Accrued liabilities                                      539,644         (38,819)
                                                         ------------    ------------
    Cash flows used in operating activities                (2,099,141)     (2,199,809)

Cash flows from investing activities
     Purchases of property and equipment                           --          (2,484)
     Capitalized software development costs                        --        (170,000)
                                                         ------------    ------------
    Cash flows used in investing activities                        --        (172,484)

Cash flows from financing activities
     Proceeds from notes payable                              700,000         622,825
     Payments on notes payable                                (36,500)       (140,800)
     Capital contribution from majority shareholder           150,000              --
     Proceeds from the issuance of preferred stock          1,238,194       1,938,615
                                                         ------------    ------------
     Cash flows provided by financing activities            2,051,694       2,420,640
</TABLE>

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

                                     F - 7
<PAGE>

                          SecureCARE Technologies, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED
                 For the Years Ended December 31, 2005 and 2004

<TABLE>
<CAPTION>
                                                                             2005           2004
                                                                         ------------   ------------
<S>                                                                      <C>            <C>
Net increase (decrease) in cash and cash equivalents                          (47,447)        48,347

Cash and cash equivalents, beginning of year                                   50,847          2,500
                                                                         ------------   ------------
Cash and cash equivalents, end of year                                   $      3,400   $     50,847
                                                                         ============   ============

Supplemental disclosures for cash flow information:
  Cash paid during the year for:
    Interest                                                             $         --   $        697
                                                                         ============   ============
Supplemental Schedule Of Non-Cash Investing And Financing Activities:
  Stock issued for subscription receivable                               $         --   $      2,000
                                                                         ============   ============
  Common stock issued to investors in connection with bridge financing   $         --   $     52,000
                                                                         ============   ============
  Issuance of common stock and note receivable to the placement agent
   in connection with the bridge financing                               $         --   $     12,571
                                                                         ============   ============
  Deferred financing fees resulting from the issuance of notes payable   $         --   $     71,975
                                                                         ============   ============
  Fixed assets transferred in settlement of accounts payable             $         --   $      6,000
                                                                         ============   ============
  Contribution of common stock by majority shareholder in
   conjunction with conversion of note payable and accrued interest      $     77,000   $         --
                                                                         ============   ============
  Conversion of note payable and accrued interest in to
   common stock                                                          $     50,000   $         --
                                                                         ============   ============
  Deemed dividend upon issuance of convertible preferred stock           $    204,765   $         --
                                                                         ============   ============
  Warrants issued in connection with notes payable                       $     12,061   $         --
                                                                         ============   ============
</TABLE>

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

                                     F - 8
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

NOTE A - BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF THE BUSINESS
----------------------

SecureCARE  Technologies,   Inc.  (the  "Company"  or  "SecureCARE"),  a  Nevada
corporation  incorporated on May 12, 1999,  provides  electronic  Internet-based
document  exchange and e-signature  solutions for the healthcare  industry.  The
Company  markets its services to customers  throughout  the United  States.  The
Company currently operates from its Austin, Texas-based corporate headquarters.

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

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

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

                                     F - 9
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

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

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.

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, 2005 and 2004 was $78,414
and $1,540, respectively.

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  three  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. For the year ending  December 31, 2004,  the Company  recorded
capitalized software development costs totaling $170,000. In 2005,  amortization
expense of $77,917  was  recorded  related to  software  development  costs.  No
amortization expense related to the software development costs had been recorded
as of December  31, 2004 since the  software  development  was not  completed at
December 31, 2004. No software  development  costs were  capitalized  during the
year ended December 31, 2005.

                                     F - 10
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

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

DEFERRED FINANCING FEES
-----------------------

Deferred  financing  fees  related  to the  notes  payable  are  amortized  on a
straight-line  basis  over the term of the notes  payable  which  range from six
months to two years. Any deferred  financing fees related to notes that are paid
early or converted  to equity are  expensed.  Deferred  financing  fees,  net of
accumulated  amortization  were $5,514 and $43,597,  as of December 31, 2005 and
2004, 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.

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  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  rendered;  (3)
the fee is fixed and determinable; and (4) collectibility is reasonably assured.
Determination  of  criteria  (3) and (4) are  based  on  management's  judgments
regarding  the fixed  nature of the fee charged for  services  rendered  and the
collectibility  of those fees.  Should changes in conditions cause management to
determine these criteria are not met for certain sales,  revenue  recognized for
any reporting period could be adversely  affected.  In instances when any one of
the four criteria is not met, the Company will either defer  recognition  of the
monthly  service fees until the criteria are met or will recognize the recurring
monthly service fees on a ratable basis.

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,  2005 and 2004 have been
excluded from the computation  since such inclusion would have an  anti-dilutive
effect.

                                     F - 11
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

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.

ADVERTISING COSTS
-----------------

All costs  associated  with  advertising  are  expensed in the period  incurred.
Advertising  expense totaled $2,485 and $17,398 for the years ended December 31,
2005 and 2004, respectively.

STOCK-BASED COMPENSATION
------------------------

The Company  accounts for  stock-based  employee  compensation  arrangements  in
accordance with provisions of Accounting  Principles Board (APB) Opinion No. 25,
"Accounting  for Stock Issued to  Employees",  and complies with the  disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" as amended
by SFAS No. 148,  "Accounting  for  Stock-Based  Compensation  - Transition  and
Disclosure -- an Amendment of FASB Statement No. 123". Under APB Opinion No. 25,
compensation  expense for employees is based on the excess,  if any, on the date
of grant, between the fair value of the Company's stock over the exercise price.

Had the  Company  determined  compensation  based on the fair value at the grant
date for its stock  options  under SFAS No. 123, as amended by SFAS No. 148, net
loss, and loss per share would have been changed, as indicated below:

<TABLE>
<CAPTION>
                                                        Year ended      Year ended
                                                       December 31,    December 31,
                                                           2005            2004
                                                       ------------    ------------
<S>                                                    <C>             <C>
Net loss attributable to common stockholders,
    as reported                                        $ (3,190,050)   $ (2,270,875)
Add: Stock-based employee compensation
   expense included in reported net loss                      4,300              --
Deduct: Stock-based employee compensation expense
   determined under fair value based method                (641,807)        (42,481)
                                                       ------------    ------------
Pro forma net loss                                     $ (3,827,557)   $ (2,313,356)
                                                       ============    ============
Net loss per share -- Basic and diluted:
   As reported                                         $       (.16)   $       (.12)
                                                       ============    ============
   Pro forma                                           $       (.19)   $       (.12)
                                                       ============    ============
</TABLE>

                                     F - 12
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

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

Compensation cost is reflected over the options' vesting period of 0 to 2 years.

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.

USE OF ESTIMATES AND ASSUMPTIONS
--------------------------------

Management uses estimates and assumptions in preparing  financial  statements in
accordance with U.S. generally accepted accounting  principles.  Those estimates
and  assumptions  affect the  reported  amounts of assets and  liabilities,  the
disclosure of contingent  assets and  liabilities,  and the reported  amounts of
revenues and expenses.  Actual  results could vary from the estimates  that were
used.

NEW ACCOUNTING PRONOUNCEMENT
----------------------------

In December 2004, the FASB issued SFAS 123(R), "Share-Based Payment," which is a
revision of SFAS 123 "Accounting for  Stock-Based  Compensation"  and supersedes
APB Opinion 25, "Accounting for Stock Issued to Employees".  SFAS 123(R) focuses
primarily  on  share-based  payments  for  employee  services,  requiring  these
payments to be recorded  using a  fair-value-based  method.  The use of APB 25's
intrinsic  value method of accounting  for employee stock options will no longer
be allowed. As a result, the fair value of stock options granted to employees in
the  future  will be  required  to be  expensed.  The  impact on the  results of
operations of the Company will be dependent on the number of options granted and
the fair value of those  options.  The  Company  will adopt FASB 123R  effective
January 1, 2006, using the modified prospective method.

The Company is  evaluating  the impact of adopting SFAS 123R and expects that it
will record substantial  non-cash stock compensation  expenses.  The adoption of
SFAS  123R  is not  expected  to  have a  significant  effect  on the  Company's
financial  condition or cash flows but is expected to have a significant  effect
on the  Company's  results of  operations.  The future impact of the adoption of
SFAS 123R cannot be  predicted at this time because it will depend on the levels
of share-based  payments granted by the Company in the future.  However, had the
Company  adopted SFAS 123R in prior  periods,  the impact of the standard  would
have  approximated the impact of SFAS 123 as described in the pro forma net loss
attributable to common  shareholders  included in the  Stock-Based  Compensation
policy footnote.

NOTE B - 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 $2,985,285
and $2,270,875 for the years ended December 31, 2005 and 2004, respectively, and
has accumulated  losses through  December 31, 2005 of $15,062,966.  Cash used in
operating activities for the same periods aggregated  $2,099,141 and $2,199,809,
respectively.  Total liabilities at December 31, 2005 of $2,669,217 exceed total
assets of $258,407. As of the date of this report, the Company is unable to meet
all of its  short-term  obligations  as they become due because of  shortages of
cash. The Company's continued existence depends upon the success of management's
efforts to raise additional capital necessary to meet the Company's  obligations
as they come due, and to obtain sufficient capital to execute its business plan.
The Company  intends to obtain capital  primarily  through  issuances of debt or
equity.  There can be no degree of assurance that the Company will be successful
in completing additional financing  transactions.  For additional information on
additional  financing  transactions  see  Note  A,  Background  and  Summary  of
Significant  Accounting  Policies,  "Nature of the Business" in the accompanying
financial statements.

The 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.

                                     F - 13
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

NOTE C - PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2005 and 2004 consists of the following:


                                                     2005          2004
                                                  ----------    ----------
Computer equipment and software                   $  442,774    $  442,774
Furniture and office equipment                        12,538        12,538
                                                  ----------    ----------
                                                     455,312       455,312

Less: accumulated depreciation and amortization     (361,490)     (283,076)
                                                  ----------    ----------
Net property and equipment                        $   93,822    $  172,236
                                                  ==========    ==========

Computer  equipment and software at December 31, 2005 and 2004 includes $170,000
in costs capitalized in the development of software held for internal use.

                                     F - 14
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

NOTE D - NOTES PAYABLE

Notes  payable  at  December  31,  2005 and  December  31,  2004  consist of the
following:

<TABLE>
<CAPTION>
                                                                             2005                           2004
                                                                ----------------------------   ----------------------------
                                                                  Short                          Short
                                                                   Term          Long Term        Term           Long Term
                                                                ------------    ------------   ------------    ------------
<S>                                                             <C>             <C>            <C>             <C>
Note payable to related party bearing interest at
5%, principal and interest due September 30,                    $    136,123    $    408,367   $     27,224    $    517,266
2009, secured by a security interest in the assets
and intellectual property of the Company; interest
payments in default as of September 2, 2004;
principal payments in default as of October, 1, 2005
Note payable to investors bearing flat interest at                    50,000              --             --              --
60%. Note originally due September 27, 2005;
extended through April 27, 2006, unsecured
Note payable to investors bearing interest at 18%                     75,000              --             --              --
Note is in default as of October 28, 2005,
unsecured
Note payable to investors bearing interest at 18%                    150,000              --             --              --
Note is in default as of October 29, 2005,
unsecured
Note payable to investors bearing interest at 18%                    125,000              --             --              --
Note is in default as of December 2, 2005,
unsecured
Note payable to investors bearing interest at 18%                     50,000              --             --              --
Note is in default as of December 4, 2005,
unsecured
Note payable to investors bearing interest at 18%                     50,000              --             --              --
Note is in default as of December 15, 2005,
unsecured
Note payable to investors bearing interest at                        220,000              --             --         220,000
7.5%. Principal and interest due February 13,
2006, unsecured
Note payable to investors bearing interest at                        150,000              --             --         150,000
7.5%. Principal and interest due March 2, 2006,
unsecured
Note payable to investors bearing interest at                        150,000              --             --         150,000
7.5%. Principal and interest due March 9, 2006,
unsecured
Note payable to Phoebe Holdings, Inc. at 7.5%                         63,500              --        100,000              --
Note is in default as of May 1, 2005, unsecured
Convertible bridge note payable bearing interest                      50,000              --             --              --
at 12%. Principal and interest due October 31, 2006,
unsecured
Convertible bridge note payable bearing interest                      25,000              --             --              --
at 12%. Principal and interest due November 6,
2006, unsecured
Convertible bridge note payable bearing interest                      25,000              --             --              --
at 12%. Principal and interest due November 7,
2006, unsecured
</TABLE>

                                     F - 15
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

Notes  payable  at  December  31,  2005 and  December  31,  2004  consist of the
following (continued):

<TABLE>
<CAPTION>

<S>                                                             <C>             <C>            <C>             <C>
Convertible bridge note payable bearing interest                      40,000              --             --              --
at 12%. Principal and interest due November 24,
2006, unsecured
Convertible bridge note payable bearing interest                      10,000              --             --              --
at 12%. Principal and interest due November 28,
2006, unsecured
                                                                -----------------------------------------------------------
                                                                   1,369,623         408,367        127,224       1,037,266
Less:  Unamortized debt discount                                     (14,164)             --         (5,000)        (30,333)
                                                                -----------------------------------------------------------
Total Notes Payable                                             $  1,355,459    $    408,367   $    122,224    $  1,006,933
                                                                -----------------------------------------------------------
</TABLE>

As of March 2,  2006,  the  Company is in  default  on the  principle  amount of
$520,000  in a series of 7.5% Senior  Subordinated  Notes  Payable,  issued to a
group of seven  investors  in February and March of 2004.  In addition,  accrued
interest on these notes as of March 2, 2006 was approximately $80,000. The notes
may be extended at the option of the Company for an  additional  six months.  If
the notes are  extended,  the Company  must issue one share of common  stock for
each $4.00 principal and accrued  interest on the Notes that are extended,  or a
total of  approximately  150,000 shares of common stock.  As of the date of this
filing,  the Company has not  elected the option of  extending  the notes for an
additional six months. See Subsequent Events Note M.

During February and March 2004, in conjunction with the 7.5% senior subordinated
notes payable to investors,  the Company  issued 520,000 shares of common stock.
These  shares were valued at $0.10 per share  resulting in a total fair value of
$52,000.  This amount was recorded as debt discount and is being  amortized as a
component of interest expense over the life of the notes (2 years).

In November 2004, in conjunction with the 7.5% senior  subordinated note payable
to Phoebe  Holdings,  Inc.,  the Company  issued  50,000 shares of common stock.
These  shares were valued at $0.15 per share  resulting in a total fair value of
$7,500.  This amount was recorded as debt  discount and is being  amortized as a
component of interest expense over the life of the note (6 months).

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

In October 2005, in conjunction  with $100,000 in 12%  convertible  bridge notes
payable issued pursuant to agreement with Argilus Capital Partners,  the Company
issued 20,000 warrants to purchase one share of common stock at a price equal to
the lesser of 75% of the per share  purchase  price on the closing date or $0.75
per share. These warrants were valued at a range of $0.313 to $0.424 per warrant
resulting  in a total fair value of $7,195.  This amount was  recorded as a debt
discount and is being amortized as a component of interest expense over the life
of the notes (thirteen months).

Future maturities of notes payable at December 31, 2005 are as follows:

        2006                      $1,369,623
        2007                         108,898
        2008                         108,898
        2009                         108,898
        2010                          81,673
                                  ----------

        Total                     $1,777,990
                                  ==========

                                     F - 16
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

NOTE F - LEASE COMMITMENTS

The Company leases its office facilities under a non-cancelable  operating lease
agreement, which expires on November 30, 2007. Rent expense totaled $124,430 and
$67,713 for the years ended December 31, 2005 and 2004, respectively.

Future  minimum  lease  payments  under  the  non-cancelable  office  facilities
operating lease at December 31, 2005 are as follows:

          2006                     $ 127,560
          2007                       106,300
                                   ---------
          Total                    $ 233,860
                                   =========

The Company was notified on February 21, 2006,  that it was in default under the
lease for its principal  executive  office located in Austin,  Texas, due to its
failure to timely pay the base  monthly  rental.  The  Company  was  directed to
vacate the premises no later than  February 28,  2006.  The Company  vacated the
premises on February 28, 2006 and temporarily  relocated its principal executive
office to an alternative location in Austin,  Texas. As of December 31, 2005 the
Company has accrued $21,260 in rent expense.  As of the date of this filing, the
lessor has agreed to  extinguish  the lease and will  require the Company to pay
its  outstanding  base monthly  rental  amounts owed through  February 28, 2006,
totaling $47,433, including applicable late fees.

The Company also leases computer hardware under a non-cancelable operating lease
agreement, which expires on January 31, 2007. Lease expense totaled $180,064 for
the years ended December 31, 2005.

          2006                     $ 196,433
          2007                        16,369
                                   ---------
          Total                    $ 212,802
                                   =========

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. As of the date of this
filing,  the Company has  restructured  the lease for an additional  twenty four
months for the balance of the amount owed on its original lease offset by credit
given for the lease deposit of $59,000. The restructured balance totals $197,101
and the Company expects to commence  payments on the restructured  lease on June
1, 2006.

NOTE G - INCOME TAXES

At December 31, 2005 and 2004 deferred tax assets and  liabilities are comprised
of the following:

                                               2005            2004
                                           ------------    ------------
          Current deferred tax asset       $      1,700    $      3,740
          Non-current deferred tax asset      2,226,836       1,244,573
          Less: valuation allowance          (2,228,536)     (1,248,313)
                                           ------------    ------------
          Net deferred tax asset           $         --    $         --
                                           ============    ============

Non-current  deferred tax assets  principally  result from net operating losses.
The December 31, 2005 current  deferred tax asset results from the allowance for
doubtful  receivables  which is not  currently  deducted for federal  income tax
reporting  purposes.  The December 31, 2005 and 2004  deferred tax assets have a
100% valuation  allowance due to the  uncertainty  of generating  future taxable
income.

                                     F - 17
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

NOTE G - INCOME TAXES (continued)

Differences between the statutory federal income tax rate and the effective rate
for the years ended December 31, 2005 and 2004 are as follows:

                                                     2005         2004
                                                   --------     --------
          Income tax provision at statutory rate       34.0%        34.0%
          Permanent differences                        (1.2)        (0.6)
          Change in valuation allowance               (32.8)       (33.4)
                                                   --------     --------
                                                        0.0%         0.0%
                                                   ========     ========

The Company has a net operating  loss carryover of  approximately  $6,500,000 at
December 31, 2005. 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, 2005  consists  of losses that were  generated
subsequent to the bankruptcy filing. The net operating loss carryover will begin
to expire in 2024.


NOTE H - SHAREHOLDERS' DEFICIT

In January  2004,  the Company  authorized  the issuance of 2,350,000  shares of
common stock,  valued at $0.023, to directors,  officers and employees.  In June
2004, the Company  authorized the issuance of an additional 65,000 shares valued
at $0.023 to  directors,  officers and  employees.  Of these  2,415,000  shares,
1,600,000 shares were issued to directors,  of which 50% vested  immediately and
the remaining 50% vested in June 2005. The remaining  815,000 shares were issued
to employees  which  vested on October 1, 2004.  The Company  recorded  deferred
stock  compensation  of $61,295 related to this stock issuance and amortized the
stock compensation expense over the applicable vesting periods.

Effective January 20, 2004 the Company entered into a Consulting  Agreement (the
"Agreement")  with a related party (the  "Consultant") to retain the Consultant,
on a non-exclusive  basis, to perform  consulting  services related to corporate
finance,  strategic investments,  capital raising,  mergers and acquisitions and
other  financial  service  matters.  The term of the  Agreement was one year. In
consideration of the Consultant performing these services, the Company agreed to
issue  2,000,000  shares of its common stock to the  Consultant for an aggregate
purchase price of $2,000. These shares were valued at $0.023 per share resulting
in a net  stock  compensation  of  $44,000.  The  portion  of this  compensation
allocated to fund raising totaled $12,571 and was recorded as deferred financing
costs to be amortized on a  straight-line  basis over the life of the notes (two
years).  The portion of this  compensation  allocated to the fund raising in the
Private  Placement  totaled  $31,429 and has been  recorded  as a  reduction  of
proceeds from the sale of Series A preferred stock.

During  February and March 2004,  and pursuant to the  Agreement  with a related
party (the "Placement Agent"),  the Company raised an aggregate of $520,000 from
seven  accredited  investors (as defined in Rule 503 under the 1933 Act) to fund
the  Company's  operations  (the "Bridge  Financing").  Investors in this Bridge
Financing  received $1.00 principal amount of 7.5% Senior  Subordinated Note and
one share of common stock for each $1.00 that they purchased.  The Notes are due
on their  second  anniversary  date,  but may be  extended  at the option of the
Company for an additional six months. The Company must issue one share of common
stock for each  $4.00  principal  and  accrued  interest  on the notes  that are
extended.  During  February  and March  2004,  in  conjunction  with the  Bridge
Financing,  the Company issued 520,000 shares of common stock. These shares were
valued at $0.10 per share resulting in a total fair value of $52,000.

                                     F - 18
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

NOTE H - SHAREHOLDERS' DEFICIT (continued)

This  amount  was  recorded  as a debt  discount  and is  being  amortized  as a
component  of interest  expense  over the life of these notes (two  years).  The
Placement  Agent received  warrants to purchase an aggregate of 52,000 shares of
common  stock at an exercise  price of $1.00 per share.  The fair value of these
warrants was not  significant.  These  warrants  expire in February and March of
2011.

From May through October 2004 and pursuant to the Agreement with a related party
(the "Placement Agent"),  the Company received funds through a Private Placement
(the "Placement"). In the financing the Company issued an aggregate of 1,955,000
shares of  Series A  preferred  stock,  with a $1.00  per  share  stated  value,
initially  convertible  into one share of the Company's  common stock, par value
$0.001 per share for net proceeds of  $1,738,615.  The  Placement  Agent and the
investors  in the  financing  received  warrants  to purchase  an  aggregate  of
2,337,000  shares of common  stock at an exercise  price of $1.00 per share with
382,000  warrants  issued  to the  Agent and  1,955,000  warrants  issued to the
investors. These warrants expire in May through October of 2009.

The  holders  of the  Series A  preferred  stock are  entitled  to vote upon all
matters upon which holders of the common stock have the right to vote, and shall
be entitled to the number of votes equal to the largest number of full shares of
common  stock into  which the shares of  preferred  stock,  pursuant  to certain
conversion  and  anti-dilution  rights,  could be converted  on the  appropriate
record  date.  The  holders  of the Series A  preferred  stock are  entitled  to
receive, out of the assets of the Company 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  holder's of common  stock.  Dividends  on the Series A preferred  stock are
payable when  declared by the board of  directors.  As of December 31, 2005,  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, 2005. 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 June 2004,  the Company  authorized  the issuance of 19,000  shares of common
stock to the  Chairman  of the Board,  Chief  Medical  Officer  and two  Medical
Advisory Board members of SecureCARE Technologies, Inc. These shares were valued
at  $0.15  per  share  totaling  $2,850.  This  amount  was  recorded  as  stock
compensation expense.

In November  2004, the Company sold $100,000 of 7.5% Senior  Subordinated  Notes
Payable  and issued one share of the  Company's  common  stock for each $2.00 of
notes purchased for a total issuance of 50,000 shares.  These shares were valued
at $0.15 per share  resulting  in a total fair value of $7,500.  This amount was
recorded as a debt  discount  and is being  amortized as a component of interest
expense over the life of these notes (6 months).

                                     F - 19
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

NOTE H - SHAREHOLDERS' DEFICIT (continued)

In  December  2004,  the  Company  issued  200,000  warrants to a third party in
connection with services received.  These warrants allow for the purchase of one
share of the Company's common stock per warrant. All warrants vested on the date
of issuance. The warrants are valued as follows:

         Warrants Issued                     100,000      50,000       50,000
         Exercise Price                      $2.19        $2.63        $3.50
         Fair Market Value per Warrant       $1.09        $1.03        $1.08
         Expiration Date                     3/31/2008    3/31/2008    3/31/2009

These  warrants  have a fair  market  value of  $214,500  which is  included  in
selling,  general, and administrative  expense in the accompanying  statement of
operations  for the  year-ended  December 31, 2004.  The warrants were issued as
part of the consulting contract with the third party executed on August 1, 2004.

Commencing December 2004 and pursuant to the Agreement with a related party (the
"Placement Agent"),  the Company received funds through a Private Placement (the
"Placement").  Through  December  31, 2004,  the Company  issued an aggregate of
181,818  shares of Series B preferred  stock for  proceeds of  $200,000,  with a
$1.10  per  share  stated  value,  initially  convertible  into one share of the
Company's  common stock, par value $0.001 per share. The Placement Agent and the
investors in the financing  received warrants to purchase an aggregate of 36,363
shares of common stock at an exercise price of $1.25 per share for each $5.00 of
Series B preferred stock purchased. These warrants expire in December 2009.

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

From  January 1, 2005 through  December  31, 2005,  and pursuant to a Consulting
Agreement with a related party, Gryphon Financial Securities  Corporation,  Inc.
(the "Placement Agent"),  the Company received funds through a private placement
(the "Placement"). The Company issued an aggregate of 1,245,455 shares of Series
B preferred stock,  with a $1.10 per share stated value,  initially  convertible
into one share of the Company's common stock, par value $.001 per share, for net
proceeds of approximately  $1,238,000.  The Placement Agent and the investors in
the financing  received  warrants to purchase an aggregate of 281,818  shares of
common stock at an exercise  price of $1.25 per share for each $5.00 of Series B
preferred  stock  purchased,  with 32,727 warrants issued to the Placement Agent
and 249,091  warrants issued to the investors.  These warrants expire in January
through July of 2010. After allocating a portion of the net proceeds to the fair
value of the warrants received,  it was determined that a beneficial  conversion
existed  to the  purchasers  of the  Series  B  Preferred  Stock  at the time of
issuance.  Accordingly,  a beneficial  conversion  amount totaling  $204,765 was
recorded as a deemed dividend since the Series B Preferred Stock was immediately
convertible into shares of the Company's Common Stock.

The Company issued a series of short-term notes payable totaling $550,000 during
2005.  Of this debt  offering,  $450,000 was sold through a series of promissory
notes with a 90-day term and  interest of 1% per month.  On the  maturity  date,
each of the note holders have the option to convert the total  principle  amount
and accrued  interest due on the promissory note to equity at a conversion price
equal to the price  established  and  approved by the Board of  Directors on the
next round of debt or equity  financing.  If the principle  and interest  remain
unpaid  after 90 days,  the interest  rate will  increase to 1.5% as long as any
portion of the note remains outstanding.

                                     F - 20
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

NOTE H - SHAREHOLDERS' DEFICIT (continued)

The  additional  $100,000 of this debt offering was  structured  under  separate
terms. $50,000 was sold as a 60-day note, with an interest rate of 5% per month,
or 60%  annualized.  If the principle and interest  remain unpaid for 10 days or
more following the end of the term, an additional late penalty  equivalent to 5%
of such  payment will be  assessed.  As of December 31, 2005,  the holder of the
note agreed to extend the term of the note with the same interest rate of 5% per
month, or 60% annualized.  The remaining $50,000 was sold as a 30-day note, with
a flat  interest rate of 2.5% to be paid at the end of the term. As of September
26,  2005,  the  principle  and  interest  remained  unpaid on this note 10 days
following the end of the 30-day term. Accordingly,  a late penalty of $2,563, 5%
of the $51,250  outstanding  balance,  was assessed.  On September 26, 2005, the
holder of a 30-day,  $50,000  promissory  note agreed to convert the  principle,
accrued  interest and late fees,  totaling  $53,183  into 110,000  shares of the
Company's  common  stock.  Gryphon  Opportunities  Fund  I,  LLC,  the  majority
shareholder  of the Company,  contributed  110,000 shares of common stock to the
Company,  having a fair value of $0.70 per share,  effecting  a $77,000  capital
contribution.  The exchange of the note, totaling $53,193 in principle,  accrued
interest  and  penalties,  into  110,000  shares of common stock of the Company,
resulted in the Company's recognition of a deemed interest expense of $23,188.

On September 16, 2005, in order to provide immediate working capital of $150,000
to the Company,  the Company  structured a special terms  agreement with Gryphon
Opportunities Fund, I LLC ("Gryphon"),  the majority shareholder of the Company,
and four outside investors in which these investors would immediately contribute
$150,000  to the  Company.  In  return  Gryphon  agreed  to  contribute  454,546
outstanding common shares to the Company to be purchased by these five investors
at a purchase  price equal to 50% of the closing price of the  Company's  common
stock on that day, which was quoted on the NASD Over the Counter Bulletin Board,
at $0.66. In addition to the share issuances, each investor received warrants to
purchase  common  stock,  also issued by Gryphon,  equal to the number of shares
purchased.  These  warrants  have an  exercise  price of $1.50  per  share and a
five-year  life. This offering was initially  limited to $150,000,  with a total
issuance  by Gryphon of 454,546  common  stock  shares and  454,546  warrants to
purchase common stock. The Company recognized a total capital  contribution from
Gryphon of $150,000.

On September 27, 2005 the officers and directors of the Company structured a 12%
convertible  bridge note placement  agreement with Argilus Capital Partners (the
"Placement  Agent").  Under the terms of the agreement  (the  "Placement"),  the
Company may draw up to $500,000 in four installments of $125,000 each, dependent
on its ability to raise matching funds, dollar-for-dollar, and show satisfactory
performance  versus budget in the fourth  quarter of 2005.  All notes sold under
this  agreement,  either to Argilus  Capital  Partners or through the raising of
matching funds,  are 13-month,  12% convertible  promissory  notes attached to 3
year warrants to purchase common shares equal to 20% of the  investment,  with a
an exercise  price of the lesser of 75% of the per share  purchase  price on the
closing date or $0.75 per share.  Pursuant to the agreement  with  Argilus,  the
Company sold $150,000,  12% convertible  bridge notes  representing a portion of
the matching  funds  necessary to draw on the first  $125,000  installment  from
Argilus in September  and October of 2005.  30,000  warrants to purchase  common
stock at  exercise  prices  ranging  from$0.34  to $0.53  were  attached  to the
convertible bridge note.

NOTE I - STOCK OPTIONS AND WARRANTS

The Board of Directors of the Company approved the SecureCARE Technologies, Inc.
2004 Stock Option Plan on December 3, 2004.  The Company has reserved  2,000,000
shares of common stock for issuance  under this Plan. The exercise price of each
option granted may not be less than the fair market value of common stock at the
date of grant,  without prior  approval of the Board of  Directors.  Options are
exercisable  according  to the terms  set out in the  option  agreement,  not to
exceed ten years.  As of December 31, 2005,  the Company had  1,342,073  options
outstanding.  All options  granted by the Company are  restricted  stock  awards
under rules promulgated by the Securities and Exchange Commission.

                                     F - 21
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

NOTE I - STOCK OPTIONS AND WARRANTS (Continued)

A summary of changes in the Company's options and purchase warrants follows:

                                                         Total
                                       -----------------------------------------
                                                              Range of Weighted
                                                                   Average
                                       Options and Warrants    Exercise Prices
                                       --------------------   ------------------
Outstanding at 12/31/03                              --
    Granted                                   4,081,863         $1.00 - $1.13
    Exercised                                        --
    Cancelled                                        --
                                           ------------         -------------
Outstanding at 12/31/04                       4,081,863          1.00 -  1.13

    Granted                                     626,818          1.03 -  1.17
    Exercised                                        --
    Cancelled                                  (429,427)         0.99 -  0.99
                                           ------------         -------------
Outstanding at 12/31/05                       4,279,254         $1.01 - $1.13
                                           ============         =============

The following table  summarizes  information  about  compensatory  stock options
outstanding at December 31, 2005:

<TABLE>
<CAPTION>
Stock Options Outstanding                                                        Stock Options Exercisable
=========================================================================     ===============================
                                       Weighted Avg.
Range of           Number              Remaining           Weighted Avg       Number           Weighted Avg
Exercise Prices    Outstanding         Contractual Life    Exercise Price     Exercisable      Exercise Price
<S>                 <C>                    <C>                 <C>              <C>                <C>
$.40 - 1.20         1,342,073              .81 years           $1.01            960,294            $1.01

The following table summarizes  information about other  non-compensatory  stock
options outstanding at December 31, 2005:
<CAPTION>

              Warrants Outstanding                                                  Warrants Exercisable
=========================================================================     ===============================
                                       Weighted Avg.
Range of           Number              Remaining           Weighted Avg       Number           Weighted Avg
Exercise Prices    Outstanding         Contractual Life    Exercise Price     Exercisable      Exercise Price
<S>                 <C>                   <C>                   <C>            <C>                 <C>
$0.34 - $1.00       2,419,000             3.49 years            $0.99          2,419,000           $0.99
$1.01 - $2.00         318,181             4.17 years            $1.25            318,181           $1.25
$2.01 - $3.00         150,000             2.24 years            $2.34            150,000           $2.34
$3.01 - $3.50          50,000             3.24 years            $3.50             50,000           $3.50
</TABLE>

The Company applies APB Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25), in accounting for its  compensatory  options.  The options  granted in
2005 and 2004 have exercise  prices which  approximate or exceed fair value and,
accordingly, no compensation cost has been recognized for its compensatory stock
options in these financial statements.

                                     F - 22
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

NOTE I - STOCK OPTIONS AND WARRANTS (Continued)

The weighted  average grant date fair value of options  granted  during 2005 and
2004  was  $0.62  and  $0.78,   respectively.   The  following  weighted-average
assumptions  for stock  options  granted  during fiscal years 2005 and 2004 were
used:

                                                    2005          2004
                                                  --------      --------
                Expected dividend yield                  0%            0%
                Stock price volatility                 100%          100%
                Risk-free interest rate                5.0%          5.0%
                Expected option term               4 years      10 years

NOTE J - RELATED PARTY TRANSACTIONS

As of December 31, 2005 and 2004, the Company had principal  amounts of $544,490
and  $610,490,  respectively,  in notes  payable  to a  related  party,  Gryphon
Opportunities  Fund I, LLC. During the  twelve-month  periods ended December 31,
2005 and 2004, there were no principal repayments on these notes payable.

At December 31,  2005,  the required  monthly  interest  payments on these notes
payable,  due to commence on September 1, 2004,  were not made by the Company to
Gryphon  Opportunities  Fund I, LLC. At December 31, 2005, the required  monthly
principal  payments on these notes, due to commence  September 1, 2005, were not
made by the Company to Gryphon  Opportunities Fund I, LLC. Gryhon  Opportunities
Fund I, LLC  waived  the  Company's  non-compliance  with the  terms of the note
payable agreements as of December 31, 2005 and through January 1, 2007.

NOTE K - 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, 2005 two customers accounted for 27% of accounts receivable.  At
December 31, 2004, one customer accounted for 10% of accounts receivable.

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.

NOTE L - CONTINGENCIES

On April 7, 2005 a lawsuit was filed by Norman K. Best, a former  officer of the
Company,  against  SecureCARE  Technologies,  Inc. The lawsuit is  identified as
cause number  GN501073  and was filed in the 353rd  Judicial  District  Court of
Travis County,  Texas as "Norman K. Best versus SecureCARE  Technologies,  Inc."
The lawsuit  alleges that the Company  breached the terms of its agreements with
Mr.  Best by  failing  to tender  50,000  shares of common  stock of  SecureCARE
Technologies, Inc. which were granted to him. The Company responded to this

                                     F - 23
<PAGE>

                          SecureCARE Technologies, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2005 and 2004

lawsuit on May 13, 2005, by filing a general denial, denying all the allegations
raised  by the  Plaintiff.  On July 8,  2005,  the  Company  filed a  series  of
responses to the plaintiff's  request for admission.  The Company is required to
produce all documents  related to the plaintiff's  request for production by May
2, 2006. As of the date of this filing,  the Company has asked the plaintiff for
a further  extension  of this  request for  production.  Although no loss can be
estimated in regard to this lawsuit 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 this
legal proceeding will not have a material impact.

NOTE M - SUBSEQUENT EVENTS

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. As of the date
of this filing,  the Company is working  with the lease owner on  re-negotiating
the lease for the property  remaining in the  Company's  possession  and for the
amounts owed on the original  lease.  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.

The Company was notified on February 21, 2006,  that it was in default under the
lease for its principal  executive  office located in Austin,  Texas, due to its
failure to timely pay the base  monthly  rental.  The  Company  was  directed to
vacate the premises no later than  February 28,  2006.  The Company  vacated the
premises on February 28, 2006 and temporarily  relocated its principal executive
office to an alternative  location in Austin,  Texas in approximately 300 square
feet of leased  office  space.  The company  believes  that its  facilities  are
adequate for the Company's  current  operations and that additional leased space
can be obtained when its expansion plans commence.

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

As of March 2,  2006,  the  Company is in  default  on the  principle  amount of
$520,000  in a series of 7.5% Senior  Subordinated  Notes  Payable,  issued to a
group of seven  investors  in February and March of 2004.  In addition,  accrued
interest on these notes as of March 2, 2006 was approximately $80,000. The notes
may be extended at the option of the Company for an  additional  six months.  If
the notes are  extended,  the Company  must issue one share of Common  Stock for
each $4.00 principal and accrued  interest on the Notes that are extended,  or a
total of  approximately  150,000 shares of Common Stock.  As of the date of this
filing,  the Company has not  elected the option of  extending  the notes for an
additional six months.

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