UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q




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




For
the Quarterly Period Ended September 30, 2008




OR




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




For
the Transition Period From 
to




Commission File Number:000-30872




TRYCERA
FINANCIAL, INC.


(Exact
name of registrant as specified in its charter)







Nevada
            33-0910363(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      Employer
              Identification
      No.)2
      San Joaquin Plaza, Suite 240, Newport Beach, CA
            92660(Address
      of principal executive offices)
            (Zip
      Code)




(949) 734-4606


(Registrant’s
telephone number, including area code)




2560
E. Chapman Avenue, Suite 404, Orange, CA  92689


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




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




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




Large
accelerated
filer                                                                                                      
   Accelerated
filer  




Non-accelerated
filer    (Do not check if a smaller reporting
company)                        Smaller
reporting company  x 




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





As of
November 6, 2008, the registrant had outstanding 9,514,302 shares of Common
Stock, par value $0.001 per share.








TRYCERA
FINANCIAL, INC.








IndexPART IFINANCIAL
      INFORMATION
            PAGEItem 1.
            Financial
      Statements (Unaudited)
            4Consolidated Balance Sheets
            5Consolidated Statements of Operations
            6Consolidated Statements of Cash Flows
            7Notes to Consolidated Financial
    Statements
            8Item 2.
            Management’s
      Discussion and Analysis of Financial Condition and Results
      ofOperations
            11Item 3.
            Quantitative
      and Qualitative Discussion About Market Risk
            16Item 4.
            Controls and
      Procedures
            16PART IIOTHER
      INFORMATIONItem 1.
            Legal
      Proceedings
            16Item 6.
            Exhibits
            17SIGNATURE PAGE
            18












2


FORWARD-LOOKING
STATEMENTS




This
report contains certain forward-looking statements and information that are
based on assumptions made by management and on information currently
available.  When used in this report, the words “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “plan,” and similar expressions, as
they relate to our company or its management, are intended to identify
forward-looking statements.  These statements reflect management’s
current view of the company concerning future events and are subject to certain
risks, uncertainties and assumptions, including among many others the
following:  changes in federal, state or municipal laws governing the
distribution and performance of financial services; a general economic downturn;
our startup phase of operations; reliance on third party processors and product
suppliers; the inability to locate suitable acquisition targets; and other risks
and uncertainties.  Should any of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described in this report as anticipated,
estimated or expected.




Unless
otherwise provided in this report, references to “we”, “us”, “our” and “Company”
refer to Trycera Financial, Inc.


3


PART I
 FINANCIAL INFORMATION


Item
1.                             Financial
Statements (Unaudited)
 Trycera
      Financial, Inc.Balance SheetsSeptember
              
              
              December30,
      2008
              
              
              
              31,
      2007(Unaudited)AssetsCurrent AssetsCash
              
              $
              3,014
              
              
              $
              72,625Accounts
      Receivable, net
              
              
              3,816
              
              
              
              30,931Prepaid Expenses and other current assets
              
              
              6,800
              
              
              
              29,853Client
      ACH Reserves
              
              
              5,000
              
              
              
              5,000Total
      Current Assets
              
              
              18,630
              
              
              
              138,409Property
      & Equipment, net
              
              
              -
              
              
              
              9,751Other AssetsDefinite
      Life Intangible Assets, net
              
              
              -
              
              
              
              2,159Total
      Other Assets
              
              
              -
              
              
              
              2,159Total
      Assets
              
              $
              18,630
              
              
              $
              150,319Liabilities
      & Stockholders’ Equity (Deficit)Current LiabilitiesAccounts
      Payable
              
              $
              307,430
              
              
              $
              126,629Portfolio
      reserves
              
              
              34,773
              
              
              
              34,202Accrued
      Expenses
              
              
              123,475
              
              
              
              114,87810%
      Senior Secured Notes
              
              
              77,500
              
              
              
              -Total
      Current Liabilities
              
              
              543,178
              
              
              
              275,709Total
      Liabilities
              
              
              543,178
              
              
              
              275,709Commitments
              
              
              -
              
              
              
              -Stockholders’ Equity
    (Deficit)Preferred
      Stock, 20,000,000 Shares Authorized,$.001
      Par Value; None Issued and Outstanding
              
              
              -
              
              
              
              -Common
      Stock, 100,000,000 Shares Authorized at$.001
      Par Value; 9,514,302 and 9,250,302 SharesIssued
      and Outstanding, Respectively
              
              
              9,514
              
              
              
              9,250Additional
      Paid In Capital
              
              
              5,336,237
              
              
              
              5,184,500Prepaid
      Stock Compensation
              
              
              -
              
              
              
              (88,376
              )Accumulated
      Deficit
              
              
              (5,870,299
              )
              
              
              (5,230,764
              )Total
      Stockholders’ Equity (Deficit)
              
              
              (524,548
              )
              
              
              (125,390
              )Total Liabilities & Stockholders’ Equity
      (Deficit)
              
              $
              18,630
              
              
              $
              150,319
   The
accompanying notes are an integral part of these consolidated financial
statements.
 4
  Trycera
      Financial, Inc.Consolidated Statements of OperationsFor
      the Three Months Ended
              
              
              For
      the Nine Months EndedSeptember
              
              
              September
              
              
              September
              
              
              September30,
      2008
              
              
              
              30,
      2007
              
              
              
              30,
      2008
              
              
              
              30,
      2007(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)RevenuesStored
      Value
              
              $
              38,758
              
              
              $
              146,570
              
              
              $
              150,878
              
              
              $
              2,104,02238,758
              
              
              
              146,570
              
              
              
              150,878
              
              
              
              2,104,022Cost of Sales
              
              
              (20,828
              )
              
              
              116,589
              
              
              
              118,029
              
              
              
              1,762,802Gross
      Profit (Loss)
              
              
              59,586
              
              
              
              29,981
              
              
              
              32,849
              
              
              
              341,220ExpensesDepreciation and Amortization
              
              
              152
              
              
              
              1,808
              
              
              
              2,159
              
              
              
              8,485Salaries
      and Wages
              
              
              -
              
              
              
              79,557
              
              
              
              32,354
              
              
              
              293,437Stock Based Compensation
              
              
              25,569
              
              
              
              54,255
              
              
              
              134,121
              
              
              
              99,736Professional
      Fees
              
              
              32,525
              
              
              
              68,183
              
              
              
              120,474
              
              
              
              298,281Bad
      debt expense
              
              
              1,762
              
              
              
              27,329
              
              
              
              8,083
              
              
              
              236,489Contract termination costs
              
              
              -
              
              
              
              -
              
              
              
              70,000
              
              
              
              -General & Administrative
              
              
              146,457
              
              
              
              97,268
              
              
              
              299,157
              
              
              
              203,497Total
      Expenses
              
              
              206,465
              
              
              
              328,400
              
              
              
              666,348
              
              
              
              1,139,925Loss
      from Operations
              
              
              (146,879
              )
              
              
              (298,419
              )
              
              
              (633,499
              )
              
              
              (798,705
              )Other Income (Expenses)Interest,
      income
              
              
              -
              
              
              
              152
              
              
              
              174
              
              
              
              452Interest,
      expense
              
              
              (1,953
              )
              
              
              (40
              )
              
              
              (3,934
              )
              
              
              (878
              )Other income (expense)
              
              
              -
              
              
              
              -
              
              
              
              (2,276
              )
              
              
              -Total
      other Income (expense)
              
              
              (1,953
              )
              
              
              112
              
              
              
              (6,036
              )
              
              
              (426
              )Loss
      from Continuing Operations before tax
              
              
              (148,832
              )
              
              
              (298,307
              )
              
              
              (639,535
              )
              
              
              (799,131
              )Income
      tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Loss
      from Continuing Operations
              
              
              (148,832
              )
              
              
              (298,307
              )
              
              
              (639,535
              )
              
              
              (799,131
              )Discontinued OperationsLoss
      on disposal of Discontinued Operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (27,852
              )Gain
      (Loss) from Discontinued Operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              7,043Total
      gain (loss) from Discountinued Operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (20,809
              )Net
      Loss
              
              $
              (148,832
              )
              
              $
              (298,307
              )
              
              $
              (639,535
              )
              
              $
              (819,940
              )Basic
      earnings per share:Loss
      per share Continuing operations
              
              $
              (0.02
              )
              
              $
              (0.04
              )
              
              $
              (0.07
              )
              
              $
              (0.10
              )Loss
      per share Discontinued operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Net
      Loss per share
              
              $
              (0.02
              )
              
              $
              (0.04
              )
              
              $
              (0.07
              )
              
              $
              (0.10
              )Weighted
      average shares
              
              
              9,449,085
              
              
              
              8,178,671
              
              
              
              9,368,556
              
              
              
              7,952,021
  The
accompanying notes are an integral part of these consolidated financial
statements.
 5
  Trycera
      Financial, Inc.Consolidated Statements of Cash FlowsFor
      the Nine Months EndedSeptember
              
              
              September30,
      2008
              
              
              
              30,
      2007(Unaudited)
              
              
              (Unaudited)Cash Flows from Operating
      ActivitiesNet
      Loss
              
              $
              (639,535
              )
              
              $
              (819,940
              )Adjustments
      to Reconcile Net Loss to Net CashUsed
      by Operations;Depreciation
      and amortization
              
              
              2,159
              
              
              
              14,798Depreciation and amortization on discontinued operation
              
              
              -
              
              
              
              581Amortization
      of prepaid stock compensation
              
              
              88,376Bad
      debt expense
              
              
              (8,083
              )
              
              
              -Loss
      on sale of assets
              
              
              9,751
              
              
              
              27,852Stock
      issued for services
              
              
              17,880
              
              
              
              104,730Stock
      options and warrants
              
              
              134,121
              
              
              
              99,736(Increase)
      decrease in accounts receivable
              
              
              35,198
              
              
              
              33,478(Increase) decrease in prepaid and other current assets
              
              
              23,053
              
              
              
              (4,374
              )(Increase)
      decrease in deposits
              
              
              -
              
              
              
              8,814Increase
      (decrease) in accounts payable
              
              
              180,801
              
              
              
              49,272Increase
      (decrease) in portfolio reserves
              
              
              571
              
              
              
              2,925Increase
      (decrease) in accrued expenses
              
              
              8,597
              
              
              
              (21,724
              )Net
      Cash Used by Operating Activities
              
              
              (147,111
              )
              
              
              (503,852
              )Cash Flows from Investing
      ActivitiesProceeds
      from disposal of discontinued operations
              
              
              -
              
              
              
              5,000Net
      Cash Provided (Used) by Investing Activities
              
              
              -
              
              
              
              5,000Cash Flows from Financing
      ActivitiesProceeds
      for issuance of 10% Secured Notes
              
              
              77,500
              
              
              
              -Proceeds
      from issuance of common stock
              
              
              -
              
              
              
              455,000Net
      Cash Provided by Financing Activities
              
              
              77,500
              
              
              
              455,000Net
      Increase (Decrease) in Cash and Cash Equivalents
              
              
              (69,611
              )
              
              
              (43,852
              )Cash
      and Cash Equivalents at Beginning of Period
              
              
              72,625
              
              
              
              87,193Cash
      and Cash Equivalents at End of Period
              
              $
              3,014
              
              
              $
              43,341Cash Paid for:Interest
              
              $
              -
              
              
              $
              878Income
      Taxes
              
              $
              -
              
              
              $
              -Non-cash financing
    activities:Common
      stock issued for services and deferred compensation
              
              $
              240,377
              
              
              $
              205,730
  The
accompanying notes are an integral part of these consolidated financial
statements.
 6
 Trycera
Financial, Inc.
 Notes to Consolidated Financial Statements
 September
30, 2008
  NOTE 1 – SIGNIFICANT
ACCOUNTING POLICIES
 
 A.
              General
 
 The
      accompanying condensed financial statements of the Company have been
      prepared by the Company, without audit, pursuant to the rules and
      regulations of the Securities and Exchange Commission.  Certain
      information and disclosures normally included in financial statements
      prepared in accordance with accounting principles generally accepted in
      the United States have been condensed or omitted pursuant to such rules
      and regulations.  These condensed financial statements reflect
      all adjustments (consisting only of normal recurring adjustments) that, in
      the opinion of management, are necessary to present fairly the results of
      operations of the Company for the periods presented.  These
      condensed financial statements should be read in conjunction with the
      financial statements and the notes thereto included in the Company’s Form
      10-KSB for the year ended December 31, 2007.  The results of
      operations for the three and nine months ended September 30, 2008, are not
      necessarily indicative of the results that may be expected for the fiscal
      year ending December 31, 2008.
 
 B.
              Earnings (Loss) Per
      Share of Common Stock
 
 The
      computation of earnings (loss) per share of common stock is based on the
      weighted average number of shares outstanding at the date of the financial
      statements.  Fully diluted earnings per share, which account for
      outstanding employee stock options and warrants have not been shown
      because the effect would have been anti-dilutive for the periods
      presented.
  For
      the Three Months Ended
              
              
              For
      the Nine Months EndedSeptember
              
              
              September
              
              
              September
              
              
              September30,
      2008
              
              
              
              30,
      2007
              
              
              
              30,
      2008
              
              
              
              30,
      2007(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)Basic
      earnings per shareIncome
      (loss) (numerator)
              
              $
              (148,832
              )
              
              $
              (298,307
              )
              
              $
              (639,535
              )
              
              $
              (819,940
              )Shares
      (demoninator)
              
              
              9,449,085
              
              
              
              8,178,671
              
              
              
              9,368,556
              
              
              
              7,952,021Per
      share amount
              
              $
              (0.02
              )
              
              $
              (0.04
              )
              
              $
              (0.07
              )
              
              $
              (0.10
              )







NOTE 2 –STOCK OPTION
PLAN





On May 4, 2004, the Company approved
and adopted the 2004 Stock Option/Stock Issuance Plan, which allows for the
Company to issue stock or grant options to purchase or receive shares of the
Company’s common stock.  The maximum number of shares that may be
optioned and sold under the plan is 10,000,000.  The plan became
effective with its adoption and remains in effect for ten years, with options
expiring ten years from grant, unless terminated earlier.  Options
granted under the plan vest according to terms imposed by the Plan
Administrator.  The Administrator may not impose a vesting schedule
upon any option grant which is more restrictive than twenty percent (20%) per
year vesting with the initial vesting to occur not later than one (1) year after
the option grant date.  The following schedule summarizes the activity
during the period ending September 30, 2008:





7
 Trycera
Financial, Inc.
 Notes
to Consolidated Financial Statements
 September
30, 2008





2004
      Stock PlanWeightedAmount
            
            
            averageof
            
            
            exerciseshares
            
            
            priceOutstanding
      at January 1, 2008
            
            
            2,379,500
            
            
            $
            0.73Options
      Granted
            
            
            -
            
            
            
            -Options
      Exercised
            
            
            -
            
            
            
            -Options
      Canceled
            
            
            (400,000
            )
            
            
            -Options
      Outstanding at September 30, 2008
            
            
            1,979,500
            
            
            $
            0.71Options
      Exercisable at September 30, 2008
            
            
            1,773,667
            
            
            $
            0.66




Options
granted under the plan vest according to terms imposed by the Plan
Administrator.  The following schedule summarizes the activity during
the period ending September 30, 2007:




2004
      Stock PlanWeightedAmount
            
            
            averageof
            
            
            exerciseshares
            
            
            priceOutstanding
      at January 1, 2007
            
            
            2,874,750
            
            
            $
            0.63Options
      Granted
            
            
            528,250
            
            
            
            0.96Options
      Exercised
            
            
            -
            
            
            
            -Options
      Canceled
            
            
            (23,500
            )
            
            
            1.00Options
      Outstanding at September 30, 2007
            
            
            3,379,500
            
            
            $
            0.68Options
      Exercisable at September 30, 2007
            
            
            2,734,706
            
            
            $
            0.61




The
Company, in accordance with Statement of Financial Accounting Standards No.
123R, “Accounting for
Stock-Based Compensation,” recognized $25,569 and $54,255, for the three
months ended September 30, 2008 and 2007, respectively. The Company recognized
$134,121 and $99,736, respectively for the nine months ended September 30, 2008
and 2007, respectively.  The fair value of the option grant was
established at the date of grant using the Black-Scholes option pricing model
with the following assumptions:
  September
      30, 2008Five
      Year Risk Free Interest Rate
              
              
              4.56%
      -5.1%Divident
      Yield
              
              
              -Volatility
              
              
              61%
      - 244%Average
      Expected Term (Years to exercise)
              
              
              5




Management
would like to confirm an intention to use an appropriate volatility in the
future, which is likely to be higher than the historical basis.


Employee
stock options outstanding and exercisable under this plan as of September 30,
2008 are:
 
 8
 Trycera
Financial, Inc.
 Notes
to Consolidated Financial Statements
 September
30, 2008
  Weighted
              
              
              Average
              
              
              WeightedNumber
      of
              
              
              Average
              
              
              Remaining
              
              
              Number
              
              
              AverageRange
      of
              
              
              Options
              
              
              Exercise
              
              
              Contractual
              
              
              of
      Options
              
              
              ExerciseExercise
      Price
              
              
              Granted
              
              
              Price
              
              
              Life
      (Years)
              
              
              Vested
              
              
              Price$
              .001
      - $0.99
              
              
              
              1,321,250
              
              
              $
              0.54
              
              
              
              0.8
              
              
              
              1,321,247
              
              
              $
              0.54$
              1.00
      - $2.00
              
              
              
              658,250
              
              
              $
              1.04
              
              
              
              2.2
              
              
              
              412,420
              
              
              $
              1.06




Employee
      stock options outstanding and exercisable under this plan as of December
      31, 2007 are:




Weighted
              
              
              Average
              
              
              WeightedNumber
      of
              
              
              Average
              
              
              Remaining
              
              
              Number
              
              
              AverageRange
      of
              
              
              Options
              
              
              Exercise
              
              
              Contractual
              
              
              of
      Options
              
              
              ExerciseExercise
      Price
              
              
              Granted
              
              
              Price
              
              
              Life
      (Years)
              
              
              Vested
              
              
              Price$
              .001
      - $0.99
              
              
              
              1,481,250
              
              
              $
              0.55
              
              
              
              2.5
              
              
              
              1,421,247
              
              
              $
              0.55$
              1.00
      - $2.00
              
              
              
              898,250
              
              
              $
              1.03
              
              
              
              3.5
              
              
              
              393,793
              
              
              $
              1.06




NOTE 3 – DISCONTINUED
OPERATIONS
 
 In March,
2007, the Company completed the sale of its IsleCore subsidiary. In accordance
with Statement of Financial Accounting Standards (“SFAS”) 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, the financial results of the Company’s
IsleCore operations are reported as discontinued operations for all periods
presented. The financial results included in discontinued operations
are:




For
      the Three Months Ended
              
              
              For
      the Nine Months EndedSeptember
              
              
              September
              
              
              September
              
              
              September30,
      2008
              
              
              
              30,
      2007
              
              
              
              30,
      2008
              
              
              
              30,
      2007(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)Basic
      earnings per shareRevenue
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              65,293Income
      (loss) from discontinued operations
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              7,043
 
 NOTE 4 – RESTATEMENT AND
RECLASSIFICATION
 
 We have
reclassified our Statement of Operations for the nine months ended September 30,
2007, to reflect the sale of our IsleCore subsidiary. Our management and our
board of directors have concluded this reclassification is necessary to reflect
the changes described above in Note 3.
 
 9
 Trycera
Financial, Inc.
 Notes
to Consolidated Financial Statements
 September
30, 2008
  NOTE 5 – GOING
CONCERN
 
 The
Company has had recurring operating losses since inception and is dependent upon
financing to continue operations.  These factors indicate that the Company
may be unable to continue in existence should immediate and short term financing
options not be available.  These financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue its existence.  These financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.  Currently the Company has nearly zero cash on hand and
few material assets.  In addition, the Company has not established nor
maintained a recurring source of revenues to sufficiently cover or offset any
current, anticipated or planned operating costs to allow it to continue as a
going concern.  It is the intent of the Company to find additional capital
funding and/or a profitable business venture to acquire or
merge






10
  Item
2.                             Management’s
Discussion and Analysis of Financial Condition and Results
ofOperations
 
 
 The
following discussion should be read in conjunction with our financial statements
and related notes thereto as filed with the Securities and Exchange
Commission.
 
 Prior to
May 2004, we had no operating history.  Based in Orange County,
California, the Company has discontinued the ongoing development and marketing
of a suite of prepaid and stored value and financial products and
services.  Prepaid and stored value products are broadly defined as
financial instruments where the value on the card has been prepaid, and where
subsequent transactions decrease the value against the balance originally loaded
onto the instrument.  The core operating business has been curtailed
to refocus efforts on developing strategic alternatives while transitioning
current stored value products and services to other willing program managers,
card marketers or third party providers such as banks, processors or marketers
in the prepaid industry.
 
 Recent
Developments
 
 For the third quarter ended September
30, 2008, all operational efforts were permanently shut down and focused on
winding up of the existing prepaid card operations and related financial
services operations and seeking a strategic alternative for the Company’s public
entity.  Throughout the third quarter we worked to close down card
programs, shut off any ongoing card operations and mitigate the negative effects
of winding up the business on the underlying public entity.  In
parallel, the Board of Directors looked at strategic alternatives which included
acquiring or being acquired by an operating entity.  The Company
evaluated various opportunities in the third quarter but timing, due diligence
and other factors caused certain opportunities to be unattainable.
 
 As part of the winding up process the
Go Daddy prepaid card program was officially terminated pursuant to their
notification effective September 1, 2008.  Furthermore, the Company,
via the issuing bank, notified all cardholders that their prepaid cards would no
longer be available after the end of September.  This notification
process was conducted to every cardholder.  As a result, the Company’s
transaction processor shut off the portfolio in concert with the issuing bank
cancellation of all cardholder cards. Separately, and as a direct result of the
winding up process, there are disputed amounts by and between the Company and
Pan Am Payment Systems for services rendered.  The core item is a
$15,000 payment made by Pan Am for an initial payment for a card
program.  While the Company began securing bins, provided services and
traveled on behalf of Pan Am, they elected to seek a direct program management
relationship and have demanded their funds be returned.  The Company
is seeking a suitable remedy, but disagrees that any of the $15,000 is owed due
to the services provided.
 
 The Company has been for multiple
quarters and is currently insolvent unless there is a short-term capital
infusion, a material change to the recent trends in revenue, or an executed LOI
tied to a strategic alternative. We do not currently have sufficient cash on
hand to satisfy existing operating cash needs, reduce or pay key outstanding
vendor invoices, or service working capital requirements on a sustained
basis.  Unlike the second quarter where a small amount of funds were
raised tied to senior debt, no such funds were taken in during the third
quarter.  As a direct result, no effective operations were maintained
throughout the third quarter.
 
 On
September 11, 2008 the Board of Directors of Trycera Financial, Inc. received a
termination notice of  the executed a Letter of Intent (LOI) on July
31, 2008 by and between Trycera Financial, Inc. and Global Business Development,
LLC (GBD).  The termination confirmed GBD’s inability to perform under
the existing terms of the LOI.
 
 The Board of Directors has continued to
support the wind up of all operational activities tied to prepaid debit card
programs and products and financial services, the continued sell off of any
specific assets tied to these activities and to pursue a reverse merger with
another enterprise as the next step from our original list of strategic
alternatives.
  
 11
 Full
Time Equivalents
 
 At November 6, 2008, there were no
full-time equivalents directly engaged with the company.  The
remaining oversight resides with two Board members, the Chairman, Alan Knitowski
and Board and Committee member, Luan Dang.
 
 Key
Accounting Policies
 
 Key accounting policies are defined as
those that are reflective of significant judgments and uncertainties, and
potentially result in materially different results under different assumptions
and conditions.  There were no changes to our key accounting policies
for the quarter ended September 30, 2008
 
 Results
of Operations
 
 For
the three months ended September 30, 2008
 
 In the third quarter of 2008 we saw
revenue drop 74% over the third quarter 2007 comparable period.  The
decline in revenue was attributed to the elimination of the debt management and
other card programs deployed in 2007.  As a result of the elimination
no debt management revenue was achieved for the 2008.
 
 Revenue
 
 Revenue
from continuing operations was $38,758 and $146,570 for the quarters ended
September 30, 2008 and 2007, respectively, representing a decrease of $107,812
or 74%. As previously discussed, all operational efforts have been prioritized
and focused on winding up of the existing prepaid card operations and related
financial services operations and seeking a strategic alternative for the
Company’s public entity.
 
 Cost of Sales and Gross
Profit
 
 Cost of
sales was ($20,828) and $116,589 for the quarters ended September 30, 2008 and
2007, respectively, representing a decrease of $137,417 or 118%.  The
decrease was attributed to the absence of costs due to the suspension and
termination of some of our major programs. The negative cost of sales resulted
from the overestimation of unbilled service costs from our
processor.
 
 The
resulting gross profit (loss) was $59,586 and $29,981 for the quarters ended
September 30, 2008 and 2007, respectively.  Management expects gross
profit margin to continue to be impacted by the reduction in card
programs.
 
 Operating
expenses
 
 Operating
expenses were $206,465 and $328,400 for the quarters ended September 30, 2008
and 2007, respectively, representing a decrease of $121,935 or
37%.  The major components of our first quarter 2008 operating expense
are general and administrative (71%), professional fees (16%) and stock based
compensation (12%).
 
 Salaries and wages expense were $0 and
$79,557 for the quarters ended September 30, 2008 and 2007, respectively,
representing a decrease of $79,557 or 100%.  The decrease resulted
from the departure of the CEO during the middle of 2007, coupled with the fact
that the Company’s ceased payroll.
 
 General and administrative expenses were $146,457 and $97,268 for the quarters
ended September 30, 2008 and 2007, respectively, representing an increase of
$49,188 or 51%.  The increase results mainly from the amortization of
costs associated with an employment agreement which terminated and the inclusion
former employees now on a contract basis.
 
 12
 Professional
fees and expenses were $32,525 and $68,183 for the quarters ended September 30,
2008 and 2007, respectively, representing a decrease of $35,658 or
52%.  The increase results mainly from the amortization of costs
associated with an employment agreement which terminated and the fair value of
compensation expense for accounting resources associated with a third party
service provider who is paid partly in the form of stock grants.
 
 Stock
based compensation was $25,569 and $54,255 for the quarters ended September 30,
2008 and 2007, respectively, representing a decrease of $28,686 or
53%.  The net increase is a result of a valuation of options vesting
in 2008 as compared to 2007.
 
 
 Net loss
 
 We
incurred net losses of $148,832 and $298,307 for the quarters ended September
30, 2008 and 2007, respectively, representing a decrease in net loss of $149,475
or 50%.  As we continue to seek strategic alternatives and a reverse
or merger opportunity, we do not expect any material amount of gross profit
margins and the losses are expected to continue in 2008.
 
 
 For the nine months ended
September 30,
2008
 
 For the nine months ended September 30,
2008 we saw revenue drop 93% over the comparable period.  The decline
in revenue was attributed to the elimination of the debt management card
programs deployed in 2007 during the second quarter of 2007.  As a
result of the elimination no debt management revenue was achieved in
2008.
 
 Revenue
 
 Revenue
from continuing operations was $150,878 and $2,104,022 for the nine months ended
September 30, 2008 and 2007, respectively, representing a decrease of $1,953,144
or 93%. As previously discussed, all operational efforts have been prioritized
and focused on winding up of the existing prepaid card operations and related
financial services operations and seeking a strategic alternative for the
Company’s public entity.
 
 Cost of Sales and Gross
Profit
 
 Cost of
sales was $118,029 and $1,762,802 for the nine months ended September 30, 2008
and 2007, respectively, representing a decrease of $1,644,773 or
93%.  The decrease was attributed to the absence of costs due to the
suspension and termination of some of our major programs.
 
 The
resulting gross profit (loss) was $32,849 and $341,220 for the nine months ended
September 30, 2008 and 2007, respectively.  Management expects gross
profit margin to continue to be impacted by the cessation of card
programs.
 
 Operating
expenses
 
 Operating
expenses were $666,348 and $1,139,925 for the nine months ended September 30,
2008 and 2007, respectively, representing a decrease of $473,577 or
41%.  The major components of our first quarter 2008 operating expense
are, general and administrative (45%), professional fees (18%), stock based
compensation (20%) and contract termination costs (11%).
 
 Salaries and wages expense were $32,354
and $293,437 for the nine months ended September 30, 2008 and 2007,
respectively, representing a decrease of $261,083 or 89%.  The
decrease resulted from the departure of the CEO during the middle of 2007,
coupled with the fact that the Company’s ceased payroll and put all employees on
a contract basis in February 2008.
 
 13
 General
and administrative expenses were $299,156 and $203,497 for the nine months ended
September 30, 2008 and 2007, respectively, representing an increase of $95,659
or 47%. The increase results mainly from the amortization of costs associated
with an employment agreement which terminated and the inclusion former employees
now on a contract basis.
 
 Professional
fees and expenses were $120,474 and $298,281 for the nine months ended September
30, 2008 and 2007, respectively, representing a decrease of $177,807 or
60%.  The decrease results mainly from the fair value of compensation
expense for accounting resources associated with a third party service provider
who is paid partly in the form of stock grant.
 
 Stock
based compensation was $134,121 and $99,736 for the nine months ended September
30, 2008 and 2007, respectively, representing an increase of $34,385 or
34%.  The net increase is a result of a higher volume of options
vesting in 2008 as compared to 2007.
 
 Discontinued
Operations
 
 Results
of discontinued operations
 
 Having
disposed of IsleCORE in the first quarter of 2007, the results of the subsidiary
have been shown as a discontinued operation for the purposes of our financial
statements.  Net income was $7,043 for the nine months ended September
30, 2007.
 
 Net loss
 
 We
incurred net losses of $639,534 and $819,940 for the nine months ended September
30, 2008 and 2007, respectively, representing a decrease in net loss of $180,406
or 22%.  As we continue to seek strategic alternatives and a reverse
or merger opportunity, we do not expect any material amount of gross profit
margins and the losses are expected to continue when 2008 is compared to
2007.
 
 Liquidity
and Capital Resources
 
 As of September 30, 2008, cash totaled
$3,015 as compared with $72,625 of cash at December 31, 2007, resulting in a
decrease of $69,610 in cash and cash equivalents.  The decrease in
cash and cash equivalents was attributed to funding the operational expenses and
cost of goods sold with existing cash proceeds and accounts payable as offset by
$77,500 raised by the issuance of 10% Secured Notes.  In the nine
months ended September 30, 2008 we used $147,110 of cash in
operations.  For the comparable period in the prior year we used
$503,852 of cash in operations.
 
 Working capital was ($524,548) at
September 30, 2008, as compared with working capital of $(137,300) at December
31, 2007.  This decrease in working capital was a result of using
existing funds and accounts payable to fund operations and related
expenses.
 
 Management believes that the lack of
possessing a sustainable card portfolio, sustainable revenue generating
financial services combined with the prolonged undercapitalization of the
Company, has resulted in the inability to provide service and performance on any
card programs and thus the resulting winding down of all prepaid card and
financial services operations.
 
 All primary and ongoing operational
efforts are currently prioritized on winding down the prepaid card operations
and seeking a strategic alternative for the public Company moving forward beyond
the end of the second quarter 2008.  The Company is currently
insolvent unless there is a short-term capital infusion, a material change to
the recent trends in revenue, or an executed LOI tied to a strategic
alternative. We do not currently have sufficient cash on hand to satisfy
existing operating cash needs, reduce or pay key outstanding vendor invoices or
service working capital requirements on a sustained basis.  As
previously disclosed in the Company’s annual report on Form 10-KSB for the year
ending December 31, 2007 (the “2007 Annual Report”), quarterly report on Form
10-QSB for the third quarter of the Company’s 2007 fiscal year (the “Third
Quarter 10-QSB 2007”) and quarterly report on Form 10-Q for the second quarter
of the Company’s 2008 fiscal year (the “Second Quarter 10-Q 2008”), ongoing
program and approval delays, non-payment for services, operational challenges
and an inability to raise capital have all contributed to the failure of the
underlying business model and the resulting insolvency and lack of viability of
the business. Aside from monies received from senior secured notes in the second
quarter (April 2008), all other recent individual and institutional efforts to
raise additional new capital have been unsuccessful and there can be no
assurances that this will change in the short term due to the challenging market
conditions for both private and public financing and the current state of the
Company’s business and operations.
 
 14
 
  At this time, the Company is in the
process of winding up its existing operations while it pursues strategic
alternatives.  The Company’s Board is actively exploring strategic
alternatives that would preserve its public vehicle and are also considering
options associated with the pursuit of a reverse acquisition should no other
strategic alternatives present themselves that would preserve the Company’s
current business operations.  Should a reverse acquisition ultimately
be pursued or executed, it would likely result in a change to the Company’s
underlying business model, a change in control, a change in management, a sale
of assets, a merger with another entity or some other combination that may
result in the disposal of all or substantially all of the Company’s prior
business to one or more third parties.  Should the pursuit of
strategic alternatives fail to deliver a viable migration strategy to the
Company or its stakeholders, then the Board and management may seek to initiate
an orderly liquidation of the Company, some combination of these transactions or
other legal options that may be available.  In addition, should
alternatives fail to deliver a viable strategy, the Board and management will
attempt to contact vendors to reduce or eliminate any and all contracted service
costs or otherwise negotiate or settle outstanding debts or obligations using
non-cash instruments such as stock.
 
 The
Company and the Board of Directors are unaware, at this time, of unforeseen or
prospective liabilities, damages and contingencies resulting from the exit of
the prepaid card operations.  The Company does acknowledge that the winding
up of all prepaid and financial services operations was due in part to the
cessation of services of Company vendors (banks and processor) who were unpaid
for varying lengths of time.  As such, through the shut down of the
collective portfolios by the issuing banks and processor, there may be resulting
liabilities that are not considered, included or reflected in the underlying
Company financials.  Such uncertainty may result in more unfavorable or
material differences to the Company financials currently being reported. 
This inability of the Company or the Board of Directors to quantify the
potential scope of such liabilities/damages or both, is the direct result of not
being able to clearly identify or forecast such contingencies and liabilities
and evaluate whether they are known or qualified.
 
 On April
4, 2008, and thereafter, the Company received $77,500 of financing in the form
of senior bridge notes, including the $37,500 related to the performance on the
Letter of Intent executed by and between U.S. Social Scene (USSS) and Trycera as
disclosed under Form 8-K on April 4, 2008.  Despite the LOI being
terminated by the Board of Directors on or about May 2, 2008, for USSS' failure
to perform financially against its $37,500 bridge loan obligation specified in
the aforementioned LOI, the Company continued to pursue both alternative
transactions and other sources of potential financing for its core prepaid
business.
 
 On July
31, 2008, the Company executed a new LOI by and between Global Business
Development (GBD) and the Company, in which GBD was to provide $500,000 in cash
and business operations, subsidiaries, agreements and assets exceeding
$80,000,000 in return for 90% of the common stock of the
Company.  This fully executed LOI also required GBD to deliver a
non-refundable $30,000 cash payment within 30 days of executing the LOI or GBD
would have been in material breach of the underlying agreement.  This
30 day window opened and closed without GBD performing against this required
financial covenant.  As a result, the Company's Board of Directors
terminated this LOI on or about September 11, 2008, in conjunction with
receiving a signed written letter from GBD stating the LOI was "cancelled due to
GBD's non-performance".
 
 Due to
the failure of both LOIs resulting in a closed transaction, and the Company's
lack of success in closing additional financing for operations to this point in
time, the Company does not currently have sufficient cash in order to meet its
ongoing working capital needs.  As a result, the Company is
exclusively pursuing strategic alternatives that can be entered and closed
before year end 2008.  Should these efforts not prove successful, then
the Company will explore any and all remaining alternatives for the Company,
whatever they may be, and execute them before year end 2008.
 
 15
  Stock-Based
Compensation
 
 In March 2004, the FASB issued
Statement of Financial Accounting Standards (SFAS) No.123 (Revised),
Shared-Based Payment.  This standard revises SFAS No. 123, APB Opinion
No. 25 and related accounting interpretations and eliminates the use of the
intrinsic value method for employee stock-based compensation.  SFAS
No. 123R requires compensation costs related to share based payment transactions
to be recognized in the financial statements over the period that an employee
provides service in exchange for award.  Currently, the Company uses
the revised fair value method of SFAS No. 123R to value share-based options
granted to employees and board members.  This standard requires the
expensing of all share-based compensation including options, using the fair
value based method.
  Subsequent
Events
 
 The following material events occurred
subsequent to the quarter ended September 30, 2008:
 
 On October 2, 2008, Bryan Kenyon, the
remaining operational officer, resigned all positions with the Company,
effective immediately.  Details are available on Form 8-K filed with
the SEC on October 7, 2008.
 
 On or about October 1, 2008, Galileo
Processing turned off all processing capacity for the Company’s cancelled
portfolio of cards.  This was a final step in winding up all prepaid
card operations.
 
 
 Item
3.                             Quantitative
and Qualitative Disclosures About Market Risk
 
 As a
smaller reporting company, we have elected not to provide the disclosure
required by this item.
 
 Item
4.                                Controls
and Procedures
 
 Disclosure
Controls and Procedures
 
 As of the end
of the period covered by this report, we conducted an evaluation, under the
supervision and with the participation of the Chairman of the Board (“Chairman”)
and the remaining Board Member (“Member”), of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”).
Based on this evaluation, the Chairman and Board Member concluded that, as of
the end of the record period covered by this report, our disclosure controls and
procedures are (1) effective to provide reasonable assurance that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms,
and (2) designed to ensure that material information required to be disclosed by
us in such reports is accumulated, organized and communicated to our management,
including our principal executive officer and principal financial officer, as
appropriated, to allow timely decisions regarding required
disclosure.
 
 Change
In Internal Controls Over Financial Reporting
 
 There was no change in our internal
controls over financial reporting during our most recently completed fiscal
quarter that has materially, or is reasonably likely to materially affect, our
internal control over financial reporting.
 
 
 PART II
 OTHER
INFORMATION
 
 Item
1.                               Legal
Proceedings
 
 On September 30, 2008 we were notified
of an arbitration claim filed by Transfers4Less against the Company for
$75,000.  The claim alleges breach of contract which the Company
refutes and plans to vigorously defend.
 
 In April 2008 we received service of
process for a complaint filed by Airport Industrial Complex, our former
landlord. The complaint has been filed in the Orange Superior Court (Case No.
30-2008 00104277).  Management has received and reviewed a copy of the
complaint.  On August 24, 2008 we were notified that a trial date has
been scheduled for June 2009.
 
 16
 On April 24, 2008, we received
correspondence from Hill Ward Henderson, a law firm representing interests on
behalf of a card marketer program, the Plan First Financial Prepaid MasterCard
Card.  The Plan First Prepaid MasterCard Card was the flagship program
under the IMG card marketer umbrella.  The correspondence contains
assertions related to monies owed to both cardholders and Plan First Financial
Solutions, both of which the Company refutes.
 
 On May 1, 2008, we received a demand
for payment letter filed by American Alarm Systems, our former security system
provider.  Management contacted American Alarm Systems, but no formal
settlement has been determined.  Management intends to continue
efforts to negotiate with American Alarm Systems to relieve the payment burden
on the Company.
  Item 6. Exhibits
  Exhibit No.
                
                Description31.1
                
                Certification
      pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the
      Securities Exchange Act of 1934 of the Principal Executive and Principal
      Financial Officer.32.1
                
                Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal
      Executive Officer and Principal Financial
  Officer.
 
  17
  
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
    Trycera
      Financial, Inc.Date:
      November 19, 2008
                  By:
                  /s/
      Alan KnitowskiAlan
      Knitowski, Chairman(Principal
      Executive and Financial Officer)
   18