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 June 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.)2560
      E. Chapman Avenue, Suite 404, Orange, CA
            92689(Address
      of principal executive offices)
            (Zip
      Code)




(949) 273-4300


(Registrant’s
telephone number, including area code)









Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past
90 days.    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
August 9, 2008, the registrant had outstanding 9,394,302 shares of Common Stock,
par value $0.001 per share.








TRYCERA
FINANCIAL, INC.





Index








PARTI
      FINANCIAL 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
            16PARTII OTHER
      INFORMATIONItem1.
            Legal
      Proceedings
            16Item2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            17Item5.
            Other
      Information
            17Item6.
            Exhibits
            17SIGNATUREPAGE
            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


PARTI


FINANCIAL
INFORMATION





Item
1.                    Financial
Statements




Trycera
      Financial, Inc.Balance SheetsJune
            
            
            December30,
      2008
            
            
            
            31,
      2007(Unaudited)AssetsCurrent AssetsCash
            
            $
            4,406
            
            
            $
            72,625Accounts
      Receivable, net
            
            
            9,780
            
            
            
            30,931Prepaid
      Expenses and other current assets
            
            
            13,275
            
            
            
            29,853Client
      ACH Reserves
            
            
            5,000
            
            
            
            5,000Total
      Current Assets
            
            
            32,461
            
            
            
            138,409Property
      & Equipment, net
            
            
            -
            
            
            
            9,751Other AssetsDefinite
      Life Intangible Assets, net
            
            
            152
            
            
            
            2,159Total
      Other Assets
            
            
            152
            
            
            
            2,159Total
      Assets
            
            $
            32,613
            
            
            $
            150,319Liabilities
      & Stockholders’ Equity (Deficit)Current LiabilitiesAccounts
      Payable
            
            $
            285,284
            
            
            $
            126,629Portfolio
      reserves
            
            
            32,545
            
            
            
            34,202Accrued
      Expenses
            
            
            121,521
            
            
            
            114,87810%
      Senior Secured Notes
            
            
            77,500
            
            
            
            -Total
      Current Liabilities
            
            
            516,850
            
            
            
            275,709Total
      Liabilities
            
            
            516,850
            
            
            
            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; 9,394,302 and 9,250,302 SharesIssued
      and Outstanding, Respectively
            
            
            9,394
            
            
            
            9,250Additional
      Paid In Capital
            
            
            5,303,588
            
            
            
            5,184,500Prepaid
      Stock Compensation
            
            
            (75,752
            )
            
            
            (88,376
            )Accumulated
      Deficit
            
            
            (5,721,467
            )
            
            
            (5,230,764
            )Total
      Stockholders’ Equity (Deficit)
            
            
            (484,237
            )
            
            
            (125,390
            )Total
      Liabilities & Stockholders’ Equity (Deficit)
            
            $
            32,613
            
            
            $
            150,319






4





Trycera
      Financial, Inc.Consolidated Statements of OperationsFor
      the Three Months Ended
            
            
            For
      the Six Months EndedJune
            
            
            June
            
            
            June
            
            
            June30,
      2008
            
            
            
            30,
      2007
            
            
            
            30,
      2008
            
            
            
            30,
      2007(Unaudited)
            
            
            (Unaudited)
            
            
            (Unaudited)
            
            
            (Unaudited)RevenuesStored
      Value
            
            $
            39,921
            
            
            $
            710,809
            
            
            $
            112,120
            
            
            $
            1,957,45239,921
            
            
            
            710,809
            
            
            
            112,120
            
            
            
            1,957,452Cost of Sales
            
            
            66,610
            
            
            
            541,620
            
            
            
            138,857
            
            
            
            1,646,213Gross
      Profit (Loss)
            
            
            (26,689
            )
            
            
            169,189
            
            
            
            (26,737
            )
            
            
            311,239ExpensesDepreciation
      and Amortization
            
            
            662
            
            
            
            3,339
            
            
            
            2,007
            
            
            
            6,677Salaries
      and Wages
            
            
            2,919
            
            
            
            104,216
            
            
            
            32,354
            
            
            
            213,880Stock
      Based Compensation
            
            
            66,297
            
            
            
            25,555
            
            
            
            108,552
            
            
            
            45,481Professional
      Fees
            
            
            37,092
            
            
            
            154,798
            
            
            
            87,949
            
            
            
            230,098Bad
      debt expense
            
            
            -
            
            
            
            209,160
            
            
            
            6,321
            
            
            
            209,160Contract
      termination costs
            
            
            70,000
            
            
            
            -
            
            
            
            70,000
            
            
            
            -General
      & Administrative
            
            
            92,828
            
            
            
            17,195
            
            
            
            152,700
            
            
            
            106,229Total
      Expenses
            
            
            269,798
            
            
            
            514,263
            
            
            
            459,883
            
            
            
            811,525Loss
      from Operations
            
            
            (296,487
            )
            
            
            (345,074
            )
            
            
            (486,620
            )
            
            
            (500,286
            )Other Income (Expenses)Interest,
      income
            
            
            18
            
            
            
            150
            
            
            
            174
            
            
            
            300Interest,
      expense
            
            
            (1,894
            )
            
            
            (304
            )
            
            
            (1,981
            )
            
            
            (838
            )Other
      income (expense)
            
            
            918
            
            
            
            
            
            
            
            (2,276
            )
            
            
            -Total
      other Income (expense)
            
            
            (958
            )
            
            
            (154
            )
            
            
            (4,083
            )
            
            
            (538
            )Loss
      from Continuing Operations before tax
            
            
            (297,445
            )
            
            
            (345,228
            )
            
            
            (490,703
            )
            
            
            (500,824
            )Income
      tax
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Loss
      from Continuing Operations
            
            
            (297,445
            )
            
            
            (345,228
            )
            
            
            (490,703
            )
            
            
            (500,824
            )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
            
            $
            (297,445
            )
            
            $
            (345,228
            )
            
            $
            (490,703
            )
            
            $
            (521,633
            )Basic
      earnings per share:Loss
      per share Continuing operations
            
            $
            (0.03
            )
            
            $
            (0.04
            )
            
            $
            (0.05
            )
            
            $
            (0.07
            )Loss
      per share Discontinued operations
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      Loss per share
            
            $
            (0.03
            )
            
            $
            (0.04
            )
            
            $
            (0.05
            )
            
            $
            (0.07
            )Weighted
      average shares
            
            
            9,274,302
            
            
            
            7,970,124
            
            
            
            9,268,335
            
            
            
            7,846,322





5







Trycera
      Financial, Inc.Consolidated Statements of Cash FlowsFor
      the Six Months EndedJune
            
            
            June30,
      2008
            
            
            
            30,
      2007(Unaudited)
            
            
            (Unaudited)Cash Flows from Operating
      ActivitiesNet
      Loss
            
            $
            (490,703
            )
            
            $
            (521,633
            )Adjustments
      to Reconcile Net Loss to Net CashUsed
      by Operations;Depreciation
      and amortization
            
            
            2,007
            
            
            
            6,676Depreciation
      and amortization on discontinued operation
            
            
            -
            
            
            
            581Amortization
      of prepaid stock compensation
            
            
            12,624Bad
      debt expense
            
            
            6,321
            
            
            
            -Loss
      on sale of assets
            
            
            9,751
            
            
            
            27,852Stock
      issued for services
            
            
            10,680
            
            
            
            76,570Stock
      options and warrants
            
            
            108,552
            
            
            
            45,481(Increase)
      decrease in accounts receivable
            
            
            14,830
            
            
            
            (1,729
            )(Increase)
      decrease in prepaid and other current assets
            
            
            16,578
            
            
            
            320(Increase)
      decrease in deposits
            
            
            -
            
            
            
            4,199Increase
      (decrease) in accounts payable
            
            
            158,655
            
            
            
            30,240Increase
      (decrease) in portfolio reserves
            
            
            (1,657
            )
            
            
            8,749Increase
      (decrease) in accrued expenses
            
            
            6,643
            
            
            
            (40,484
            )Net
      Cash Used by Operating Activities
            
            
            (145,719
            )
            
            
            (363,178
            )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
            
            
            -
            
            
            
            315,000Proceeds
      from line of credit
            
            
            -
            
            
            
            20,000Net
      Cash Provided by Financing Activities
            
            
            77,500
            
            
            
            335,000Net
      Increase (Decrease) in Cash and Cash Equivalents
            
            
            (68,219
            )
            
            
            (23,178
            )Cash
      and Cash Equivalents at Beginning of Period
            
            
            72,625
            
            
            
            87,193Cash
      and Cash Equivalents at End of Period
            
            $
            4,406
            
            
            $
            64,015Cash Paid for:Interest
            
            $
            1,894
            
            
            $
            1,981Income
      Taxes
            
            $
            -
            
            
            $
            -Non-cash financing
    activities:Common
      stock issued for services and deferred compensation
            
            $
            131,856
            
            
            $
            76,570




6
 Trycera
Financial, Inc.
 Notes
to Consolidated Financial Statements
 June
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 six months ended June 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 Six Months EndedJune
              
              
              June
              
              
              June
              
              
              June30,
      2008
              
              
              
              30,
      2007
              
              
              
              31,
      2008
              
              
              
              31,
      2007(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)Basic
      earnings per shareIncome
      (loss) (numerator)
              
              $
              (297,445
              )
              
              $
              (345,228
              )
              
              $
              (490,703
              )
              
              $
              (521,633
              )Shares
      (demoninator)
              
              
              9,274,302
              
              
              
              7,970,124
              
              
              
              9,268,335
              
              
              
              7,846,322Per
      share amount
              
              $
              (0.03
              )
              
              $
              (0.04
              )
              
              $
              (0.05
              )
              
              $
              (0.07
              )
  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 June 30, 2008:







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




2004
      Stock PlanWeightedAmount
              
              
              averageof
              
              
              exerciseshares
              
              
              priceOutstanding
      at January 1, 2008
              
              
              2,379,500
              
              
              $
              0.73Options
      Granted
              
              
              -
              
              
              
              -Options
      Exercised
              
              
              -
              
              
              
              -Options
      Canceled
              
              
              -
              
              
              
              -Options
      Outstanding at June 30, 2008
              
              
              2,379,500
              
              
              $
              0.73Options
      Exercisable at June 30, 2008
              
              
              1,956,583
              
              
              $
              0.67




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




2004
      Stock PlanWeightedAmount
              
              
              averageof
              
              
              exerciseshares
              
              
              priceOutstanding
      at January 1, 2007
              
              
              2,874,750
              
              
              $
              0.63Options
      Granted
              
              
              470,000
              
              
              
              1.01Options
      Exercised
              
              
              -
              
              
              
              -Options
      Canceled
              
              
              (23,500
              )
              
              
              1.00Options
      Outstanding at June 30, 2007
              
              
              3,321,250
              
              
              $
              0.68Options
      Exercisable at June 30, 2007
              
              
              2,661,873
              
              
              $
              0.60





The
Company, in accordance with Statement of Financial Accounting Standards No.
123R, “Accounting for
Stock-Based Compensation,” recognized $66,297 and $25,555, for the three
months ended June 30, 2008 and 2007, respectively. The Company recognized
$108,552 and $45,481, respectively for the six months ended June 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:




June
      30, 2008Five
      Year Risk Free Interest Rate
            
            
            4.56%
      -5.1%Divident
      Yield
            
            
            -Volatility
            
            
            61%
      - 244%Average
      Expected Term (Years to exercise)
            
            
            5






8
 Trycera
Financial, Inc.
 Notes
to Consolidated Financial Statements
 June
30, 2008




Employee
stock options outstanding and exercisable under this plan as of June 30, 2008
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
              
              
              
              1.0
              
              
              
              1,453,122
              
              
              $
              0.55$
              1.00
      - $2.00
              
              
              
              898,250
              
              
              $
              1.03
              
              
              
              2.5
              
              
              
              503,461
              
              
              $
              1.05Employee
      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
              
              
              
              2,431,250
              
              
              $
              0.55
              
              
              
              2.8
              
              
              
              2,485,517
              
              
              $
              0.55$
              1.00
      - $2.00
              
              
              
              593,500
              
              
              $
              1.04
              
              
              
              4.2
              
              
              
              230,166
              
              
              $
              1.05


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 Six Months EndedJune
              
              
              June
              
              
              June
              
              
              June30,
      2008
              
              
              
              30,
      2007
              
              
              
              31,
      2008
              
              
              
              31,
      2007(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)Basic
      earnings per shareRevenue
              
              $
              -
              
              
              $
              65,293
              
              
              $
              -
              
              
              $
              65,293Income
      (loss) from discontinued operations
              
              $
              -
              
              
              $
              7,043
              
              
              $
              -
              
              
              $
              7,043


NOTE 4 – RESTATEMENT AND
RECLASSIFICATION





We have
reclassified our Statement of Operations for the three months ended June 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
 June
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 create substantial doubt
as to the Company’s ability to operate as a going concern 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.





NOTE 6 – 10% SENIOR SECURED
PROMISSORY NOTES





On April
2, 2008 the Company commenced an offering of up to $150,000 of Senior Secured
Notes bearing interest at 10%. Principal and interest on the Notes is due and
payable upon a change of control of the company.  The notes are secured by
all tangible and intangible assets of the Company, whether existing at the time
of the sale of the Note or thereafter acquired or created.  Until the Notes
are paid in full, the Company is not permitted to create, assume, guaranty or
permit to exist any indebtedness that ranks senior in priority to, or pari passu with, the
obligations under the Notes. As of June 30, 2008 $77,500 had been raised
pursuant to the offering. While repayment of the notes, if any, is
dependent on the occurrence of certain future events, the timing which is
unknown to the Company, management has elected to show these notes as short
term.





The
Company has the following note payable obligations:








June
30,
              200810% Senior
      Secured Promissory Notes
            
            $
            77,500Total
            
            
            77,500Less Current
      Maturities
            
            
            (77,500
            )Total Long
      Term Notes Payable
            
            $
            -






10


Item2. 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, 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 second quarter ended June 30,
2008, 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.  Throughout the second quarter we worked to close down card
programs 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
second quarter but timing, due diligence and other factors caused certain
opportunities to be unattainable.





As part of the winding up process, on
May 6, 2008 we mutually terminated the Marketer and Services Agreement between
Trycera Financial, Inc. and Payroll Capital, LLC.  This allowed the
card marketer, Payroll Capital, LLC to move directly into a relationship with an
issuing bank and migrate off the Company platform.





In addition, on June 9, 2008, the
Company received a Notice of Late Payment from our key processing partner,
Galileo Processing.  Based upon our continued inability to pay for
services, Galileo Processing has notified the Company that they shall be
entitled to terminate the services agreement at any time.  While the
card programs are being transferred or terminated, immediate stoppage of
processing services may result in unknown damages and adversely affect the
Company, the underlying entity or its status moving forward.  In
addition, we have stopped receiving invoices for services from both our primary
processing and bank partners.





Furthermore, on June 13, 2008, the
Company was notified that Go Daddy plans to terminate their prepaid card program
effective September 1, 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.  In the early stages of the second
quarter we took in funds tied to senior secured notes in order to continue
evaluating strategic opportunities and keeping essential operations and
regulatory filings up to date.





The Board of Directors has endorsed
that the company to wind down all operational activities tied to prepaid debit
card programs and products and financial services, continue to sell off any
specific assets tied to these activities and pursue a reverse merger with
another enterprise as the next step from our original list of strategic
alternatives.  During the second quarter there was non-performance of
the letter of intent entered into by and between the Company and U.S. Social
Scene, LLC.  As a result of U.S. Social Scene’s failure to perform
under terms of the executed LOI, the Board had no suitable option but to stay
the course on shutting down the operations and seeking other strategic
alternatives as a means to preserve the entity and perform on payments to key
vendors, partners and investors.






11





Full
Time Equivalents





At August 9, 2008, there was one
full-time equivalent directly engaged with the company, Bryan Kenyon the Chief
Operating Officer and Chief Financial Officer.  The remaining company
operator, Alex McClure, was terminated in June due to ongoing cash flow
problems, but remains in a consultative capacity and performs services regularly
to ensure continuity while transitioning into a proposed or strategic
alternative.





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 June 30, 2008





Results
of Operations





For the three months ended
June 30, 2008





In the second quarter of 2008 we saw
revenue drop 94% over the prior second quarter 2007 comparable
period.  The decline in revenue was attributed to the elimination of
the debt management and other card programs  deployed
in  2007 during the second quarter of 2007.  As a result of
the elimination no debt management revenue was achieved for the comparable first
quarter in 2008.





Revenue





Revenue
from continuing operations was $39,921 and $710,809 for the quarters ended June
30, 2008 and 2007, respectively, representing a decrease of $670,888 or 94%. 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 $66,610 and $541,620 for the quarters ended June 30, 2008 and 2007,
respectively, representing a decrease of $475,010 or 88%.  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 ($26,689) and $169,189 for the quarters ended
June 30, 2008 and 2007, respectively.  Management expects gross profit
margin to continue to be impacted by the reduction in card programs. The Company
is still incurring fixed processing costs associated with our banking
relationships and now has a lower volume of cards to absorb such
overhead.





Operating
expenses





Operating
expenses were $269,798 and $514,263 for the quarters ended June 30, 2008 and
2007, respectively, representing a decrease of $244,465 or 47%.  The
major components of our second quarter 2008 operating expense are general and
administrative (34%), professional fees (14%), stock based compensation (25%)
and contract termination costs of $70,000.





Salaries and wages expense were $2,919
and $104,216 for the quarters ended June 30, 2008 and 2007, respectively,
representing a decrease of $101,297 or 97%.  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.





12


General
and administrative expenses were $92,828 and $17,195 for the quarters ended June
30, 2008 and 2007, respectively, representing an increase of $75,633 or
439%.  The increase resulted largely from the inclusion of employees
now on a contract basis.





Professional
fees and expenses were $37,092 and $154,798 for the quarters ended June 30, 2008
and 2007, respectively, representing a decrease of $117,706 or
76%.  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 grants.





Stock
based compensation was $66,297 and $25,555 for the quarters ended June 30, 2008
and 2007, respectively, representing a increase of $40,742 or
159%.  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 $297,445 and $345,228 for the quarters ended June 30,
2008 and 2007, respectively, representing a decrease in net loss of $47,783 or
14%.  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 six months ended
June 30, 2008





In the six months ended June 30, 2008
we saw revenue drop 94% over the prior year 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 for the
comparable first quarter in 2008.





Revenue





Revenue
from continuing operations was $112,120 and $1,957,452 for the six months ended
June 30, 2008 and 2007, respectively, representing a decrease of $1,845,332 or
94%. 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 $138,857 and $1,646,213 for the six months ended June 30, 2008 and
2007, respectively, representing a decrease of $1,507,356 or 92%.  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 ($26,737) and $311,239 for the six months
ended June 30, 2008 and 2007, respectively.  Management expects gross
profit margin to continue to be impacted by the reduction in card programs. The
Company is still incurring fixed processing costs associated with our banking
relationships and now has a lower volume of cards to absorb such
overhead.





Operating
expenses





Operating
expenses were $459,883 and $811,525 for the six months ended June 30, 2008 and
2007, respectively, representing a decrease of $351,642 or 43%.  The
major components of our first quarter 2008 operating expense are, general and
administrative (33%), professional fees (19%), stock based compensation (24%)
and contract termination costs (15%).





13


Salaries and wages expense were $32,354
and $213,880 for the six months ended June 30, 2008 and 2007, respectively,
representing a decrease of $181,526 or 84%.  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.





General
and administrative expenses were $152,700 and $106,229 for the six months ended
June 30, 2008 and 2007, respectively, representing an increase of $46,471 or
44%.  The increase resulted largely from the inclusion of employees
now on a contract basis.





Professional
fees and expenses were $87,949 and $230,098 for the six months ended June 30,
2008 and 2007, respectively, representing a decrease of $142,149 or
62%.  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 grants.





Stock
based compensation was $108,552 and $45,481 for the six months ended June 30,
2008 and 2007, respectively, representing a increase of $63,071 or
139%.  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 three months ended June 30,
2007.





Net loss





We
incurred net losses of $490,703 and $521,633 for the six months ended June 30,
2008 and 2007, respectively, representing a decrease in net loss of $30,930 or
56%.  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 June 30, 2008, cash totaled
$4,406 as compared with $72,625 of cash at December 31, 2007, resulting in a
decrease of $68,219 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 six
months ended June 30, 2008 we used $145,719 of cash in
operations.  For the comparable period in the prior year we used
$363,178 of cash in operations.





Working capital was ($484,389) at June
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 first quarter of
the Company’s 2008 fiscal year (the “First 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 down 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.





On April
4, 2008, the Company received $67,500 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, the Board of Directors continues to
work closely with Company investors to deliver a pro rata bridge financing by
prior investors.  The capital proceeds will be used for sustaining the
ongoing operations and to allow the Company to continue efforts to finalize a
strategic alternative now that the USSS deal has been terminated.





The Company does not have sufficient
cash to meet its working capital needs while it pursues its strategic
alternatives beyond early August 2008, unless additional bridge financing is
provided, internally or externally.  Currently there are discussions
ongoing relative to this bridge financing, but as of this date there are no
specific agreements in place and the monies raised include the $67,500 plus and
additional $10,000 from two additional shareholders.  While the Board
is reaching out to investors for pro-rata commitments no additional funding has
resulted thus far.  Should any efforts by the Board and management not
prove successful, the Board and management will explore any and all remaining
alternatives for the Company, whatever they may be.





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.





15


Subsequent
Events





The following material events occurred
subsequent to the quarter ended June 30, 2008:





On July 31, 2008 The Board of Directors
of Trycera Financial, Inc. entered into and executed a Letter of Intent (LOI) by
and between Trycera Financial, Inc. and Global Business Development, LLC
(GBD).  The LOI specifically intends for GBD to purchase 90% of the
Company and the remaining 10% shall remain with the current
shareholders.








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 principal executive officer
(“COO”) and principal financial officer (“CFO”), 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 COO and CFO 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





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 July 13, 2008 we responded to additional discovery
documents required by the counsel of Airport Industrial Complex.  The
motions continue and we expect further answers and information in the coming
weeks and months.





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.





16


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
2.                              Unregistered
Sales of Equity Securities and Use of Proceeds





During the quarter ended June 30, 2008,
we commenced an offering of 10% Senior Secured Promissory Notes.  Principal
and interest on the Notes is due and payable upon a change of control of our
company.  The notes are secured by all tangible and intangible assets of
our company, whether existing at the time of the sale of the Note or thereafter
acquired or created.  Until the Notes are paid in full, we are not
permitted to create, assume, guaranty or permit to exist any indebtedness that
ranks senior in priority to, or pari passu with, the
obligations under the Notes.  During the quarter ended June 30, 2008, we
sold Notes in the aggregate principal amount of $77,500 received from the
investors, including $67,500 from Ecewa Capital Group, LLC, an entity controlled
by Alan Knitowski, our Chairman, and $5,000 from Sagoso Capital, LLC, an entity
controlled by Luan Dang, one of our directors.  These Notes were sold
without registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(6) and/or Section 4(2)
thereof, and Rule 506 promulgated thereunder, as a transaction by an issuer not
involving any public offering.  Each of the three investors was an
accredited investor as defined in Regulation D.  Each investor acquired the
Notes for investment purposes and without the intent to further distribute the
Notes.  A restrictive legend was placed on the front page of each
Note.  No investor entered into the transaction with us as a result of or
subsequent to any advertisement, article, notice, or other communication
published in any newspaper, magazine, or similar media or broadcast on
television or radio, or presented at any seminar or meeting.  Each investor
was also afforded the opportunity to ask questions of our management and to
receive answers concerning the terms and conditions of the transaction.  No
underwriting discounts or commissions were paid in connection with the sale of
these Notes.





Item
5.                               Other
Information





As described above in Item 2, on or
about April 3, 2008, we issued two 10% Senior Secured Promissory Notes in the
aggregate amount of $67,500 to Ecewa Capital, LLC, an entity controlled by Alan
Knitowski, our Chairman.   Pursuant to the provisions of Item
1.01 of Form 8-K, we should have filed a report on 8-K on or before April 9,
2008.  The description of this transaction set forth above in Item 2
is incorporated into this Item 5.





As described above in Item 2, on or
about May 14, 2008, we issued a 10% Senior Secured Promissory Note in the amount
of $5,000 to Sagoso Capital, LLC, an entity controlled by Luan Dang, one of our
directors.   Pursuant to the provisions of Item 1.01 of Form 8-K,
we should have filed a report on 8-K on or before May 20, 2008.  The
description of this transaction set forth above in Item 2 is incorporated into
this Item 5.





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
      Officer.31.2
            
            Certification
      pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the
      Securities Exchange Act of 1934 of the Chief 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.99.1
            
            Form
      of 10% Senior Secured Promissory Note, with schedule of note
      holders








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: 
      August 13, 2008
              By:
              /s/ Bryan
      KenyonBryan
      Kenyon, COO(Principal
      Executive Officer)Date:
      August 13, 2008
              By:
              /s/
      Bryan KenyonBryan
      Kenyon, Chief Financial Officer(Principal
      Financial Officer)


































18