UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549




FORM
10-KSB





(Mark
One)


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





For the
fiscal year ended December 31, 2007





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





For the
transition period from ________ to __________





Commission
File Number: 000-30872






TRYCERA
FINANCIAL, INC.


(Exact
name of Registrant as specified in charter)










NEVADA
            
            33-0910363State or other
      jurisdiction of incorporation or organization
            
            I.R.S.
      Employer I.D. No.







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


(Address
      of principal executive offices)
            (Zip
      Code)





Issuer’s
telephone number, including area code:  (949) 273-4300





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





Securities
registered pursuant to Section 12(g) of the Act:  Common Stock, Par Value
$.001





Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act.  o





Check
whether the Issuer (1) has filed all reports required to be filed by section 13
or 15(d) of the Exchange Act during the past 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.  (1)  Yes x  No o       (2)  Yes  x    No  o





Check if
disclosure of delinquent filers in response to Item 405 of Regulation S-B is not
contained in this form, and no disclosure will be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. o

















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





The
registrant’s revenues for the twelve months ended December 31, 2007, were
$2,215,369.





The
aggregate market value of the voting stock held by non-affiliates of the
registrant (3,878,634 shares) is $426,650, computed by reference to the average
bid and asked price of the common stock ($.11) as of March 21,
2008.





At March
21, 2008, there were 9,250,302 shares of the registrant’s common stock
outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE





Part III
of the Form 10-KSB incorporates by reference certain portions of the
Registrant’s proxy statement for its 2008 Annual Meeting of Shareholders to be
filed with the Commission not later than 120 days after the end of the fiscal
year covered by this report.





Explanation





This annual report is being filed on
Form 10-KSB rather than on Form 10-K in compliance with the instructions for use
of Form 10-KSB by companies qualifying as “small business issuers” under
Regulation S-B for a fiscal year ended after December 15, 2007, as provided in
SEC Release 33-8876.





2








Table of
      ContentsPagePARTI
            
            4ITEM1.
            DESCRIPTION OF
      BUSINESS
            4ITEM2.
            DESCRIPTION OF
      PROPERTY
            14ITEM3.
            LEGAL
      PROCEEDINGS
            14ITEM4.
            SUBMISSION OF
      MATTERS TO A VOTE OF SECURITY HOLDERS
            15PARTII
            
            15ITEM5.
            MARKET FOR
      COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            15ITEM6.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            18ITEM7.
            FINANCIAL
      STATEMENTS
            27ITEM8.
            CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            28ITEM8A.
            CONTROLS AND
      PROCEDURES
            28ITEM8B.
            OTHER
      INFORMATION
            29PARTIII
            
            29ITEM9.
            DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
      SECTION 16 (a) OF THE EXCHANGE ACT
            29ITEM10.
            EXECUTIVE
      COMPENSATION
            29ITEM11.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
            30ITEM12.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
            30ITEM13.
            EXHIBITS
            30ITEM14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
            31






3





PARTI





ITEM1.  DESCRIPTION OF BUSINESS





Background
and Overview





Trycera Financial, Inc. was
incorporated under the laws of the State of Nevada on May 10, 2000, under the
name Whitelight Technologies, Inc.  On June 14, 2004, we amended the
articles of incorporation to change the name to Trycera Financial,
Inc.  We presently have no subsidiaries.





Prior to May 2004, we had no operating
history.  In May 2004 we retained the services of new management and
commenced our financial services and prepaid products business.  Our
operations are in the startup phase of development.





Based in Orange, California, we have
been in the business of developing, deploying and marketing semi-custom and
customized branded prepaid and prepaid card solutions.  To complement
the core prepaid card solutions, we worked to provide complementary financial
products and services, notably an alternative payment reporting platform, an
identification verification solution, and a host of cardholder driven choices
highlighted by items such as bill payment and online account access and account
balance management.  Prepaid 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
card or instrument.  Our core operating business is centered upon
developing, deploying and marketing a broad array of prepaid products and
services in conjunction with card marketers.  Card marketers are
defined as organizations, companies or individuals who elect to provide prepaid
products direct to cardholders or consumers while entering into a specific
agreement and relationship with our Company.  We then work with card
marketers to design and develop a prepaid card program or card-based solution
that the card marketer can then deliver to its target customer
base.  In many instances the target audience is persons without
banking relationships and persons who are underserved by existing banking
facilities.  The card marketers, with the card product(s) or service
supplied by our Company, can then deliver a varied option of prepaid products
and services to their target audience or customer base that
includes:





·
            Association-branded
      (MasterCard®, Visa®) prepaid debit
cards;


·
            Co-branded
      prepaid debit products;


·
            Private
      label credit products;


·
            Online
      payment solutions;


·
            Financial
      management tools and support; and


·
            Alternative
      payment improvement programs and
strategies.





Our card marketers and business
partners are provided program specific card solutions through infrastructure and
technology that allows our marketers and partners access and communication
through a secure web-based reporting system, though access to the suite of
services is only granted upon the execution of a term-defined services agreement
with us.  The flexibility of our technology platform allows our
prepaid products and services to be customized to meet the changing requirements
for specific card marketer, partner and changing cardholder
demands.





4


During 2007 we struggled to maintain or
expand our core operating business.  Set forth below are material
highlights of our business operations during 2007:





·
            We
      developed and launched two new programs, the Transfers4Less Money Share
      program and the Payroll Capital Premiere Payroll program.  Both
      programs have met with some processing development challenges and their
      program launches were delayed as a result.  Both programs
      combined generated only minimal program and cardholder related revenues in
      2007.  Each program has been plagued with challenges that are
      likely to continue early in 2008.  The Transfer4Less product is
      a money sharing program that offers a branded debit card with an ATM card
      to share money, while the Payroll Capital Payroll card is a turnkey
      prepaid solution which expanded our customized offerings and was developed
      to support prepaid payroll offerings with their card distributors
      throughout the United States.  Similar to our other internal
      card-based programs and solutions, both prepaid debit card programs offer
      a set of card features and functionalities that include: bill payment,
      wireless spending alerts, live customer service support and web-based card
      management tools.





·
            We
      refocused our efforts on selling our complementary financial services,
      including My Full Credit, an alternative payment reporting product and
      service.  This program aimed to allow participants to report
      non-traditional payments to over 140 national credit reporting
      agencies.  By providing such non-traditional payment
      information, credit reporting agencies can better understand an
      individual’s consumer credit behavior and in turn offer an ability to
      report alternative scores that may or may not help facilitate credit
      granting decisions by prospective credit lenders.  With limited
      capital to promote marketing of the product, we were not successful in
      marketing this payment reporting solution during the year, which further
      compounded the difficult underlying business environment for smaller
      financial services companies such as
ours.





·
            In
      the middle of the year, our co-founder and CEO, Matthew S. Kerper,
      resigned for personal reasons.  Because Mr. Kerper was a primary
      driving force behind sales and Company operations, the Company was forced
      to rethink strategy and begin seeking less desirable and supplemental
      sales alternatives.   Prior to his departure, Mr. Kerper
      was focused on continued card marketer growth and to the diversification
      of our prepaid card product offers.  In parallel, we focused on
      the sale of our proprietary card management platform designed to mitigate
      large program start-up costs while streamlining the way prepaid card
      programs are built and managed.  Known as the OEM platform, this card
      platform provided the Company the least costly growth opportunities while
      maintaining our visible presence in the industry.  As a result
      of Mr. Kerper’s departure, we suffered sales setbacks, operational
      difficulties directly related to resource constraints and the Company
      became less recognizable and less marketable across a growing
      industry.







5


·
            Aside
      from the two program build outs already planned from 2006 and engaged in
      the development and launch in 2007 (Payroll Capital and Transfers4Less),
      we did not add any additional programs in 2007.  The adverse
      business climate, coupled with an inability to raise sufficient capital to
      fund long term marketing efforts and a lack of a sustainable portfolio,
      resulted in a business strategy shift away from expansion and instead
      focused on maintenance of existing and pending programs and a shift
      towards reviewing strategic alternatives.  In addition to being
      undercapitalized, the departure of our CEO and key sales liaison in
      mid-year, resulted in our inability to actively manage the sales funnel
      and pursue any meaningful efforts to grow the card base and card
      portfolio.





·
            We
      directly acquired the Go DaddyTM program relationship in November 2007,
      after negotiating with our card marketer, All Card Financial
      Services.





·
            We
      disposed of our catalog shopping card business, Tru Platinum, in October
      of 2007, as we continued to streamline our focus on to our core prepaid
      card business.





·
            We
      continued with our two existing banking relationships.  These
      included MetaBank, a federally chartered bank in Sioux Falls, South
      Dakota, and New Millennium Bank, an issuing bank based in New Brunswick,
      New Jersey.  Despite having a pre-existing 5 year banking
      agreement that is not set to expire until 2009, management is certain that
      there will need to be a new agreement executed with MetaBank prior to the
      expiration of this agreement in order to maintain a healthy and
      collaborative banking relationship rolling
  forward.





·
            We
      disposed of our wholly owned subsidiary, isleCORE Systems, Inc., in March
      2007.  This subsidiary had originally been acquired in June
      2005.





·
            We
      terminated our original six month agreement entered during the second
      quarter in September 2007, with an investor relations and public relations
      group named TMS Capital, LLC.  TMS Capital was hired to help the
      Company distribute relevant news and information about the Company’s
      business and business operations.





In addition to our core operations, we
continued to search for small card marketers and card portfolio companies,
stand-alone card portfolios and financial services-related companies for
acquisition.  During 2007, we entered in to an LOI with E-Count, a
Citibank Company, to acquire a stand-alone portfolio of their
cards.  Despite executing a formal LOI and having completed definitive
agreements for final signature by both parties, we were unable to close the
transaction and ultimately terminated the agreement when our issuing bank would
not accept the portfolio’s transition from E-Count to our Company.  We
expended material resources on this transaction, but were ultimately unable to
close it despite collaborative and productive joint efforts by both E-Count and
our Company to do so because of the issuing bank.  This failed closing
had a material adverse affect on our business, as the card portfolio under
consideration was material in terms of its expected impact to metrics including
active cards, monthly fees, transactional volume, gross dollar volume and cost
reduction associated with the economies of scale that would have been achieved
in monthly banking and processing costs and minimums.





6


We also
evaluated other opportunities throughout the year, but did not pursue any of
them specifically beyond the initial discussion and due diligence stage other
than that conducted with E-Count and described herein.





Prepaid
and Financial Products and Services





Overview





We are engaged in two key areas of
focus, the first of which is to develop and implement prepaid programs either
internally or for outside customers to market, service and support branded
MasterCard® and Visa® prepaid debit and ATM cards. The second is developing and
marketing complementary financial service products such as alternative payment
reporting and management tools, personal finance tools and products that
facilitate alternative payment bureau report scoring.





Consumer Based Prepaid
Products





The prepaid card or prepaid debit card,
is typically a credit card-sized piece of plastic encoded with certain consumer
information and pre-loaded with a particular monetary value. Unlike credit
cards, which draw their value from a line of credit with a bank, or debit cards,
which draw their value from a cardholder’s checking account, the value on a
prepaid card typically comes from money given to the company that markets and/or
issues the card prior to its use.  Prepaid cards take many forms,
including gift cards that can be used at a specific merchant or location, travel
cards that can be used in the same way as travelers’ checks, payroll cards that
can be used to access one’s wages and “teen cards” that are marketed to those
under 18 years old to access funds their parents load onto the
card.  Our services include developing ready-to-market,
semi-customized or customized programs and brands for clients who want to
distribute prepaid cards through direct, non-retail channels or developing and
deploying our own prepaid card programs which can likewise be marketed through
direct, non-retail channels such as direct mail advertising or online
advertising.  We have developed and are currently marketing three
prepaid card programs with our own customized branding, while simultaneously
providing the program support for several other custom and semi-custom card
programs that have been delivered throughout and prior to 2007.  The
program support of the semi-customized and customized card programs includes the
transaction management, fraud and risk management and portfolio maintenance that
also includes the stock of custom card plastics, marketing collateral and
program terms and conditions.





We develop prepaid products which
include creating a customer brand or brand awareness for the card, structuring
consumer fees, securing bank approvals, producing marketing materials and
creating customer websites.  Some of these services are performed by
us in-house while others are outsourced to third party providers.  We
currently do not provide card processing services, which generally consist of
set-up and maintenance of the card and cardholder funds, transaction
authorization, processing, clearing and settlement of transactions, cardholder
dispute resolution, regulatory compliance, security and fraud control and
activity reporting.  These services are performed for us under an
agreement with Galileo Processing, our third party transaction processing
partner.  The Company pays for the Galileo Processing services under
an agreement that include monthly fees for transaction volume, special projects
fees and flat monthly support fees.  In addition, our current
portfolio of prepaid cards are issued by MetaBank and New Millennium Bank, our
banking partners, that represent financial institutions authorized to issue
MasterCard® or Visa® products in partnership with us.





7


With our Company being undercapitalized
throughout the second half of 2007, we did not actively market our card
solutions and services to prospective customers on a dedicated basis for
approximately six months.  This has continued in to the current year,
when we began transitioning our core focus to actively exploring and seeking
strategic alternatives for the Company.  If or when we get back to
marketing our products, we will generate leads from companies and customers that
are likely to come from business activities tied to trade shows and conferences,
personal contacts of management, business partners and/or contacts made by
management to selected companies.





We have been in an exclusive, renewable
service agreement with Galileo Processing, Inc. in which they have agreed to
process all of our authorization and settlement transactions for our prepaid
cards and to handle payments and adjustments to the cards. They also maintain
cardholder information, provide customer service, implement fraud control
processes and procedures and provide related services in connection with the
prepaid cards.  We are obligated to pay a minimum monthly fee for
these services, which is credited against the fees payable to them by us for
each processing transaction.  During the term of the agreement,
Galileo is required to maintain in effect errors and omissions insurance in the
aggregate amount of $2,000,000.  The agreement may be terminated by
either party if the other party becomes insolvent, if any of the representations
or warranties made by the other party in the agreement are inaccurate, if new
legal requirements are imposed on cards, if the issuing bank ceases to issue the
pre-paid cards, or if Galileo loses its sponsorship with MasterCard® as a
certified third-party processor.  In addition, Galileo may terminate
the agreement if we fail to make our monthly minimum on our customer
accounts.  At this point, the agreement itself is in the one year
“roll-over” timeframe and will be subject to renewal in October
2008.





In connection with our processing
agreement with Galileo Processing, we have also entered into a non- exclusive
agreement with First Federal Savings Bank of Midwest, doing business as Meta
Payment Systems, to issue to our customers the prepaid Visa® or MasterCard®
products marketed by us.  This agreement permits us to offer the
prepaid cards that are issued by the bank.  The design of the prepaid
cards is developed by us, but are subject to the bank’s prior written
approval.  In addition to issuing the prepaid cards, the bank is
responsible for holding and retaining cardholder funds until the funds are used
by the cardholders.  The account holding the cardholder funds is an
FDIC–insured account and is not accessible by the Company.  The bank
is also responsible for maintaining at its own expense a principal license with
MasterCard®, Visa®, or any other card network system for which it issues prepaid
cards.  We have agreed to pay the bank a monthly minimum fee or a fee
based on the monthly gross dollar value of card transactions, as well as
transaction fees for PIN-based or ATM transactions.  In return, the
bank distributes to us a percentage of the transaction fees collected from the
card holders.  The agreement requires us to maintain appropriate
comprehensive general liability insurance, errors and omissions and employee
theft and dishonesty insurance policies with a limit of not less than $1,000,000
per occurrence.  Either party may terminate the agreement for
cause.





8


We manage our customer accounts and
card portfolios through a combination of electronic reporting and transaction
monitoring, reviewing the card spending patterns, load volumes and spending
frequency reports.  Moreover, these reports outline fraud scenarios
and report suspicious activity such as high dollar load
transactions.  In addition, we subcontract personnel as needed from
our processor or qualified third parties to review fraud transactions and cross
check our internal controls and management systems to be certain that the
maintenance of the cardholder accounts continues to be administered to the
documented guidelines.  As the number of outstanding cards increases,
we anticipate that these functions would continue to be outsourced to our
processor.





Complementary Financial Products and
Services





We are actively engaged in the
development of products and services that can be bundled with our core prepaid
card products.  These complementary offerings include credit
management tools, credit bureau reporting services and prepaid
telecommunications products. We have sourced third party providers for these
services and we are in the process of negotiating service agreements with three
providers for such services.  The basis for developing complementary
services and products is to bundle a suite of products on to a single prepaid
card that then functions as a turnkey personal financial management
tool.  By maximizing the functionality of the prepaid card product, we
aim to sustain cardholders for longer periods of time and promote growth of our
product via word of mouth by those existing cardholders.  Expanding
the prepaid card functionality for current cardholders will also allow us to
differentiate our products from others in the market and provide a distinct
marketing advantage while providing the cardholders with improved features and
functionality.





Competition





The competitive landscape continues to
evolve with mergers and acquisitions, company consolidations and new entrants
developing and deploying niche market prepaid card solutions with a focus on
demographic and ethnic subsets, credit seeking individuals and under and
un-banked consumers.  The competitive environment has seen a rise in
products and companies across all sales channels, including online, retail,
non-retail, mass merchant and independent sales operators.  Although
the prepaid industry is still in a growth phase, considerable specialization has
begun to occur with the end result delivering a competitive landscape that can
be broken into three primary segments:  open, PIN-based semi-open and
closed loop product offerings. Most segments are filled with unique competitors
and an equally divergent collection of product offerings.





The open segment of the market consists
of a fragmented collection of association branded prepaid debit card
products.  The common trait within this product segment is that all
products carry the MasterCard®, Visa®, American Express®, or Discover® brand on
the front of the card giving the product category unparalleled payment
acceptance.  Examples of companies that compete within the space are
Green Dot Corporation, Net Spend, One Global Finance, Account Now, E-count and
E-Comm Link.  Many of these companies share common traits including:
well-developed proprietary infrastructure, substantial investment in internal IT
resources, significant and/or continual venture capital backing, large scale
distribution points, profitability and direct relationships with the
associations, such as MasterCard® and Visa®.





9


Within the context of the prepaid
space, “PIN-based or semi-open loop” traditionally refers to a category of
products that do not carry a major association branded (MasterCard®, Visa®,
American Express®, Discover®) on the front of the card.  These cards
are affiliated with the Cirrus, Maestro or Plus networks and are accepted as
payment at debit-enabled merchant locations.  Unlike an open loop
product, a PIN-based product cannot be used for online
commerce.  Several dozen small companies have emerged in this
semi-open segment, evolving from the precursor industry of prepaid phone
cards.  Included on the list would be companies such as Air Time
Technologies, I2C and nFinanSe, amongst others.





Closed-loop product offerings make up
the largest collective segment of the prepaid industry in terms of cards issued
and transactional volume.  Cards within this segment tend to be
focused on specific use applications within a single organization or
structure.  The common trait among these products is that they carry
no direct payment affiliation to the debit or credit network, and typically are
designed as a replacement for paper gift certificates or in limited cases to
access merchant specific online content.  Common examples
include:  the StarbucksTM gift card and Dave & BustersTM game
card.  There are several entrants within this space, most of which are
competing only for their own gift card business. Notable providers within the
space are Prepaid Systems, Value Link, AT&T and others.





There is a growing degree of
competition among companies seeking to acquire interests in prepaid and
financial services companies such as those we may target for acquisition or as
part of strategic alternatives.  A large number of established and
well-financed entities, including large banking and financial institutions,
prepaid distributors and aggregators and venture capital firms, are active in
acquiring interests in companies that we may find to be desirable acquisition
candidates.  Many of these entities have significantly greater
financial resources, industry expertise and managerial capabilities than do
we.  Consequently, we may be at a competitive disadvantage in
negotiating and executing possible acquisitions of these entities as competitors
may have easier access to capital than do we.  Although
entrepreneur-founders of privately held prepaid and financial services companies
may place greater emphasis on the ease of access to capital than on obtaining
the management skills and industry expertise that we can provide, management
believes that it offers unique and attractive set of benefits, including the
ability of the remaining founder and operators to preserve their business
culture and identity while leveraging the strengths of an acquired
company.





In addition, each of the prospective
acquired companies will undoubtedly face significant competition in their
individual markets.  We believe competition will continue to grow both
from new entrants to the market, as well as from existing participants such as
banks and processors expanding the breadth of their services into the markets
currently underserved.





10


We believe that competition in the
prepaid products and services market is based upon the following
factors:


·
            Addressing
      the needs of underserved and un-banked
  customers;


·
            Program
      flexibility for user-specific
needs;


·
            Responsiveness
      to customer demands;


·
            Easy
      product distribution access and usage (i.e. online, telephone, retail,
      etc);


·
            Prepaid
      expertise;


·
            Brand
      recognition and geographic presence;
and


·
            Price.





It can be assumed that we and any
acquired company will compete with numerous large companies that have
substantially greater market presence and financial, technical, marketing and
other resources than we have, such as Green Dot Corporation, Net Spend, One
Global Finance, Account Now, E-count and E-Comm Link.  These
competitors include (i) large prepaid product and service providers; (ii)
national, regional and local networked retail prepaid service providers that
have prepaid services divisions; (iii) fully integrated on-line services
companies; and (iv) major venture-backed prepaid firms.  Many of our
competitors have expanded their core product and/or service offerings over the
past year and increased their focus on new product development and delivery,
thus increasing the number of organizations that are providing products and
services similar to ours.





As a result of continued competition,
we have seen and expect to encounter product or pricing pressure, which in turn
could result in reductions in the average selling price of our products and
services.  There can be no assurance that we will be able to offset
the effects of any such price reductions through an increase in the volume of
product sales, higher revenue from new products or services, cost reductions or
otherwise.  In addition, we believe that continuing awareness and
expansion in the prepaid products and services industry could result in
increased price pressure and other competition in the industry.





11


Regulatory Environment





As the prepaid industry continues to
grow, we can expect regulatory oversight to expand accordingly.  In
related regulatory developments, and in a decision in the case of SPGGC, LLC v. Ayotte, issued
August 1, 2006, the US District Court for the District of New Hampshire found
that New Hampshire state consumer protection laws do not apply to prepaid gift
cards issued by national banks and federal savings associations, even if such
cards are marketed and distributed by non-bank third parties. This case is
significant in that it could expand the scope of federal preemption of state law
beyond the banks and their subsidiaries to agents of federal banking
institutions.  At this stage we rely on federal preemption of state
laws and as a non-bank third party, maintain a vested interest in the continued
scope of federal preemption.  Moreover, the Federal Deposit Insurance
Corporation (FDIC) has evaluated comments on whether prepaid card funds should
qualify as deposits that must be insured.  Separately, the Federal
Reserve Board is considering whether prepaid payroll cards should be covered by
Regulation E.  The Office of the Comptroller of the Currency (OCC)
issued an advisory letter offering guidance to national banks engaged in payroll
card systems regarding appropriate disclosures, error resolution procedures,
liability limits for unauthorized use and other issues.





States,
too, may initiate consumer protection requirements for prepaid cards, such as
caps on certain kinds of fees.  At this time, various states are
investigating the feasibility of clarifying existing regulations for prepaid
products.  Although there may be additional regulations at both the
state and federal level, outlined below are the key risks associated with the
prepaid industry:




·
            Federal
      laws:  There are cases in courts that are working to
      determine the applicability of the preemption doctrine as it relates
      specifically to the conflicts of federal and state laws governing prepaid
      and prepaid cards.  As the court cases are settled, there will
      be increased clarity to the application of the doctrine of federal
      preemption governing the prepaid industry and may result in or alter the
      compliance and regulatory climate across the
  industry.




·
            State
      laws:  States such as Pennsylvania, Connecticut and
      Maryland are proactive in defining and regulating the prepaid industry and
      serve as benchmarks for other states currently in the process of defining
      the regulatory aspects of the emerging industry.  These laws are
      designed to protect consumers and regulate the legitimate businesses in
      conducting business in the prepaid space.  On a state-by-state
      basis, each state may elect to further refine the regulatory scope and
      enact new laws to manage stricter compliance in the growing prepaid
      arena.





·
            Money transmitter
      laws:  Many states engage in the regulation of the
      transfer or transmittal of money.  Oftentimes this type of
      transaction is regulated by the state banking authorities to ensure
      consumer protection.  As prepaid makes an increased presence in
      the transactional marketplace, it could be expected that further
      regulatory guidelines will be established to monitor industry
      compliance.





·
            PATRIOT
      Act:  This law was enacted by the United States’
      government to provide further investigative tools to Justice Department
      authorities attempting to prevent acts of terrorism.  This
      legislative action is a potential risk for the prepaid industry as new
      laws governing information collection could be further
      changed.  Under the auspices of current law, the PATRIOT Act
      regulates the submission of appropriate personal identification for
      applications on all non-anonymous prepaid products.  As an
      extension of the PATRIOT Act, there is a subsequent Bank Secrecy Act,
      which may pose a future risk as the regulatory climate changes in response
      to further refining the existing
laws.





12


Intellectual Property





As of March 21, 2008, we had no
additional trademark registrations or pending trademark applications in the
United States.  Our existing trademarks include Trycera Financial® and
TF (stylized and/or with design)® and Finium®.  In December 2007, we
abandoned the pending application for our Tru Platinum brand as we disposed of
the asset in the fourth quarter 2007.





We regard
our trademarks as key assets and believe they have substantial value in the
marketing of our products and services.  We protect these trademarks
by registering them with the U.S. Patent and Trademark
Office.  We intend to work vigorously to enforce and protect our
trademark rights by engaging in monitoring services, issuing cease-and-desist
letters against third parties infringing or denigrating our trademarks and
initiating litigation as necessary.





Strategic
Acquisitions





Management continues seeking potential
acquisition candidates and working with companies to evaluate strategic
alternatives.  We have commenced preliminary discussions to enter into
a letter of intent for a possible merger or business combination with another
business entity which, if consummated, could lead to a change of control of our
company.  These discussions continue and no plans have been
finalized.  Nevertheless, our board of directors has authorized
certain merger or combination terms as guidelines in these discussions,
including completion of fund raising by the other entity and the allocation of a
portion of these funds to the business of our company.  However, a
letter of intent has not been finalized or executed by either party and there
are currently no binding agreements, arrangements, or understandings with
respect to this or any other acquisition, merger, or business combination, nor
can an assurance be given that we will ever consummate any such
transaction.





Selection Criteria for Acquisition
Targets





Prospective acquisitions will be
selected for their profitability, product mix, market position, customer base,
card portfolios and management team experience.  We attempt to
negotiate acquisition terms which will limit financial risk to our shareholders
by setting specific performance milestones in order for the target company’s
owners to receive full purchase consideration.





13


Management intends to consider a number
of factors prior to making any final decision as to whether to purchase a
company or to participate in any specific business endeavor, none of which may
be determinative or provide any assurance of success.





Selection Process for
Acquisitions





The
selection of a business opportunity in which to participate is complex and
risky.  Additionally, as we have only limited resources available to
us, it may be difficult to find good opportunities.  There can be no
assurance that we will be able to identify and acquire any additional business
opportunity based on management’s business judgment.





We are unable to predict the time as to
when and if we may actually participate in any specific business
endeavor.  We anticipate that proposed business ventures will be made
available to us through personal contacts of directors, executive officers and
stockholders, professional advisors, broker dealers in securities, venture
capital personnel, members of the financial community, attorneys and others that
may present unsolicited proposals.  In certain cases, the Company may
agree to pay a finder’s fee or to otherwise compensate the persons who submit a
potential business endeavor in which the Company eventually
participates.  Such persons may include our directors, executive
officers, beneficial owners or our affiliates.  In this event, such
fees may become a factor in negotiations regarding a potential acquisition and,
accordingly, may present a conflict of interest for such
individuals.  Our directors and executive officer have not used any
particular consultants, advisors or finders on a regular basis to locate
potential business opportunities.





The possibility exists that we may
acquire or merge with a business or company in which our executive officers,
directors, beneficial owners or our affiliates may have an ownership
interest.  Our current policy does not prohibit such
transactions.  Because no such transaction is currently contemplated,
it is impossible to estimate the potential pecuniary benefits to these
persons.





Employees





At March 21, 2008, we had two
full-time employees, namely our COO, CFO and Principal Executive Officer, Bryan
Kenyon, and one other team member, Alex McClure whose role is Director of
Product Development.





ITEM2.  DESCRIPTION OF PROPERTY





Our administrative offices and
headquarters, consisting of a direct mail suite, are located at 2560 E. Chapman
Avenue, Suite 404, Orange, CA  92869.  We prepaid for a six
month payment and will maintain a monthly renewal as required
thereafter.  The prepayment was $106.00 and any meetings or in-person
sales and related visits will be hosted at the Office of the
Chairman.





ITEM3.  LEGAL PROCEEDINGS





In February 2007 we received a letter
from a law firm representing Meridian Enterprises Corporation (“Meridian”), the
owner of U.S. Patent No. 5,025,372 (the “372” Patent”).  The letter
claimed that we may have infringed on the 372 Patent applicable to card-based
incentive programs.  On April 7, 2008, we received notification from
Meridian that because our cards are only used by consumers and not as a means
for delivering an award in conjunction with an incentive award program, there
would be no further inquiry into our possible infringement of the
patent.  Management has deemed this matter concluded.





14


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).  We have not received a copy of the
complaint.  Upon receipt of the complaint, management intends to
assess the company’s alternatives in filing an answer and defending against the
complaint.











ITEM4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





No matters were submitted to a vote of
shareholders of the Company during the fourth quarter of the fiscal year ended
December 31, 2007.





PARTII





ITEM5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS





Market
Information





Our
shares have been approved for quotation on the OTC Electronic Bulletin Board
since July 19, 2006, although no trades occurred until September
2006.  Only a limited number of shares have traded since the
commencement of trading in September 2006.  Our common stock is
currently traded with the trading symbol of “TRYF”.  The table below
sets forth for the periods indicated the high and low sales prices as reported
by various private services on the Internet.  These quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.









Quarter
            
            High
            
            
            LowFISCAL YEAR
      ENDED
              DECEMBER 31, 2006FirstSecondThird
            
            $
            1.50
            
            
            $
            1.25Fourth
            
            $
            3.25
            
            
            $
            1.70






15




FISCAL YEAR
      ENDED
              DECEMBER
      31, 2007First
            
            $
            1.70
            
            
            $
            1.25Second
            
            $
            1.07
            
            
            $
            0.55Third
            
            $
            1.01
            
            
            $
            0.36Fourth
            
            $
            0.36
            
            
            $
            0.13




We believe that a number of factors,
both within and outside our control, could cause the price of our common stock
to fluctuate, perhaps substantially. As a small nano-cap public Company, the
public market for our securities is not yet efficient and there remain a limited
number of active market makers in our stock.  Of those market markers
that are active in our stock, there is typically a wider than normal variance in
the bid/ask prices quoted publicly for our securities.





Factors
such as the following could also have a significant adverse impact on the market
price of our common stock:


- Our
  ability to obtain additional financing and, if available, the terms and
  conditions of the financing;
- Our
  financial position and results of operations;
- Concern
  as to, or other evidence of, the reliability of our products and services or
  our competitors’ products and services;
- Announcements
  of innovations or new products or services by us or our
  competitors;
- U.S.
  federal and state governmental regulatory actions and the impact of such
  requirements on our business;
- Banking
  regulatory actions and the impact of such requirements on our
  business;
- The
  development of litigation against us;
- Period-to-period
  fluctuations in our operating results;
- The
  issuance of new equity securities pursuant to a future offering or
  acquisition;
- The
  issuance of new equity securities pursuant to a future offering or
  acquisition;
- Competitive
  developments, including announcements by competitors of new products or
  services or significant contracts, acquisitions, strategic partnerships, joint
  ventures or capital commitments;
- Investor
  perceptions of us; and
- Investor
  perceptions of us; and
- General
  economic, market and other local, regional, national and international
  conditions.





16


Holders





At March
21, 2008, we had 121 shareholders of record as reported to us by our transfer
agent.  The number of record holders was determined from the records
of our transfer agent and does not include beneficial owners of common stock
whose shares are held in the names of various security brokers, dealers and
registered clearing agencies. We have appointed Interwest Transfer Company,
Inc., 1981 East 4800 South, Suite 100, Salt Lake City, UT 84117, to act as our
transfer agent.





Dividend Policy





Since our
inception we have not paid any cash dividends on our common stock and we do not
anticipate that we will pay dividends in the foreseeable future.  In
addition, any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon our financial
condition, results of operations, capital requirements and such other factors as
the Board of Directors deem relevant.





Sales
of Unregistered Securities





During the year ended December 31,
2007, except as noted below, and except as previously reported by us in our
quarterly reports on Form 10-QSB or current reports on Form 8-K during the year,
the following securities were sold by us without registering the securities
under the Securities Act:





·
            On
      June 15, 2007, we initiated an offering of up to 1,000,000 shares of
      common stock for gross proceeds of $1,000,000.  As a result of
      limited interest into the June offering, on September 26, 2007 we
      initiated an offering 4,000,000 shares of common stock for gross proceeds
      of $1,000,000.  The offering terminated on December 31, 2007,
      after having sold 540,000 shares for a total of $135,000.  Each
      investor in the offering also received stock purchase warrants at a rate
      of 50% of the shares purchased.  The warrants are exercisable
      through September 10, 2014, at $1.25 with certain incentive discounts to
      the exercise price available through September 10, 2011.  These
      shares were sold without registration under the Securities Act by reason
      of the exemption from registration afforded by the provisions of Section
      4(2) thereof, and Rule 506 promulgated thereunder, as a transaction by an
      issuer not involving any public offering.  Since the last
      reported sales in this offering, and through the closing date of the
      offering, the following securities were
  sold :







17








Name
            
            Number of
      Shares
            
            
            Number of
      Warrants
            
            
            AmountAlan
      Knitowski
            
            
            300,000
            
            
            
            150,000
            
            
            $
            75,000








Mr.
Knitowski was an accredited investors as defined in Rule 501 of Regulation D at
the time of the purchase.  He delivered appropriate investment
representations with respect to the purchase of the securities and consented to
the imposition of a restrictive legend upon the certificates evidencing such
shares and warrants.  The investor represented that he had not
purchased the shares 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.  The investor further represented that he had been 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 securities.








Purchases
of Equity Securities





There were no purchases made during the
fourth quarter ended December 31, 2007, by or on behalf of our Company or any
affiliated purchaser of shares or other units of any class of our common
stock.





ITEM6.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION





We have commenced preliminary
discussions on the sale of the Company and entered into a letter of intent for a
possible merger or business combination with another business entity which, if
consummated, could lead to a change of control of our company.  These
discussions continue with the letter of intent in place, yet no definitive
agreements have been finalized.  Nevertheless, our board of directors
has authorized certain merger or combination terms as guidelines in these
discussions, including completion of fund raising by the other entity and the
allocation of a portion of these funds to the business of our
company.  However, and while the letter of intent has been executed by
both parties there are currently no binding agreements, arrangements, or
understandings with respect to this or any other acquisition, merger, or
business combination, nor can an assurance be given that we will ever consummate
any such transaction.





Results
of Operations





In 2007, we grew revenue 168% over the
prior year.  The growth of revenue was attributed to core prepaid
growth in one particular channel, debt management, and largely occurred in the
first quarter 2007.  In efforts to boost per card revenues and further
add new revenue sources to offset costs, which were down across all segments on
a comparable basis from 2006 to 2007, we continued throughout 2007, to identify,
promote and offer a suite of  complementary financial products and
service offerings, notably an alternative payment reporting platform and an
identification verification solution.





18


Near the end of the first quarter 2007,
we uncovered that our primary revenue generating partner, IMG, had no reasonable
ability to pay for the related services and
performance.  Concurrently, IMG had brought other card marketers into
the business of marketing cards and those companies were subsequently not
willing to pay for the services provided by the Company.





While working closely with IMG, a
program card marketer, we continued to materially reduce our overall revenues
throughout the year and specifically after the first quarter 2007, by suspending
services for the flagship IMG program: the Plan First Financial Solutions (PFFS)
product.  After numerous attempts were made to reach an accord with
all IMG and related parties, and as a direct result of ongoing non-payment for
services by IMG and related parties, we moved in the third quarter to close
programs or directly sign agreements with the sub card marketers
of  two of the four IMG cards under their original card marketer
stewardship, of which the PFFS product was the largest.  At the end of
the third quarter we were actively engaged in negotiating agreements between
Valor Card International and InControl.





The collective programs under the IMG
umbrella represented a focus on the debt management space and their card
offerings were related to actively helping individuals manage personal debt and
create a financial tool that allowed the prepaid card to streamline bill
payments and proactively manage alternative financial
solutions.  While the development of the IMG programs allowed us to
introduce a multi-purse card where there is a general purpose spending purse, a
managed bill payment (debt management) purse and a savings purse, the
non-payment for services by IMG and the related card programs have materially
and adversely impacted the operations of our Company.  The suspension
of this single program eliminated more than 30,000 active accounts and more than
$100M in annualized gross dollar volume, where gross dollar volume is the amount
of money loaded onto the accounts in this portfolio.  A significant
resource allocation was committed in the second and third quarters to resolve
the ongoing issues of non-payment with IMG and we continue to consider actions
to recover the outstanding receivables due.  As the year closed,
however, there was limited progress on arriving at a solution and further legal
actions may be required in order to receive payment for our
services.  In parallel, and to offset this unfavorable impact, we
reserved the entire outstanding receivable balances as bad debt in order to
realize and reflect the current non-payment of the services
provided.





Concurrently, we previously recognized
that a collateral benefit of working with IMG was the  development and
deployment of the multi-purse card that would allow future program card
marketers the opportunity to create offerings that could segregate funds loaded
onto prepaid cards and further enhance program specific functions to facilitate
spending and savings on one card.  After further discussions with the
issuing bank, MetaBank, we have determined that this benefit has been
marginalized by problems directly related to Plan First Financial Systems and
the Plan First prepaid program.  As of the date of this filing there
remain ongoing disputes by both related to the non-payment for services provided
by Trycera.  As a result, Trycera as worked with the principals of IMG
to amicably resolve the outstanding balances.  Furthermore, and as a
result, we will only support our existing multi-purse programs and will not
pursue future multi-purse programs until we receive an endorsement or guarantee
of approval from MetaBank to issue cards with such features and
functionality.  To that end and pursuant to ongoing discussions and
communications with MetaBank, we notified all Plan First Financial Solutions and
National Foundation for Debt Management cardholders that effective December 1,
2007, their cards were no longer valid, that each account has been closed and
the remaining funds refunded were to them.  At December 31, 2007, the
card portfolios had been closed and the entire Plan First Financial Solutions
and related program was permanently shut down.





19


During the first quarter and up through
stages of the third quarter, we attempted to continue our focus on card and
portfolio aggregation while managing through this material program suspension
that unfavorably impacted results in the second quarter and expanded the
unfavorable results during the third quarter.  The loss of our CEO,
combined with undercapitalized operations and the resulting human resource
constraints, only served to further strain the ability of the remaining staff to
effectively manage business operations.





During the first three quarters, we
finalized development and deployment of the only two OEM programs with our other
issuing bank partner, New Millennium Bank.  By working closely with
New Millennium Bank, we were able to offer a predictable fixed cost pricing
solution that provided our program partners the flexibility of working with wide
reaching prepaid programs and align cardholders with a progressive state
bank.  The two programs developed and that have been issued through
Mew Millennium Bank include a money share program offered by Transfers4Less and
a payroll program offered by Payroll Capital.  While the card
marketers are working to aggregate sustainable card portfolios, each has
resulted in challenges to the Company, as both programs are highly dependent
upon approvals and card feature development outside of our
control.  Approvals are required from MasterCard on the association
level, New Millennium Bank on the issuing bank level and Galileo on the
processor level.  Additionally, feature development is required from
Galileo on the processor level.  We continue to work with each of
these companies on behalf of our customers as Program Manager, but are
ultimately not able to proceed to market without their approvals and completion
of the required feature development.  In some cases, such as feature
development tied to overdraft technology, we have delayed and waited for over 6
months past the original scheduled delivery date provided by our
processor.  This delay has not only had a material impact to our
customer, but it has also prevented them from selling or issuing cards to their
customers and targeted channels.  Similarly, and as a result, our
Company has been materially adversely affected by these delays and has been
unable to generate any prepaid card income during this period for this
program.  Likewise with Transfers4Less, there have been programming
delays on the side of the processor that have been compounded by “feature-creep”
with the card marketer.  Originally designed as an OEM platform, the
Transfers4Less product has now morphed into a hybrid custom solution and has
resulted in cost overruns and strained resources.  Furthermore, as the
“feature-creep” continues to be a focal point of the discussions, the principal
of Transfers4Less is adamant that they are owed restitution for certain program
efforts.  We have rebuffed the claims and continue to work with both
Transfers4Less and the processor to reach an agreeable solution.





During the second half of 2007 we had
moved to foster momentum with our alternative payment reporting product and
service branded under the name My Full Credit.  We actively worked
with sub-prime mortgage lenders to deliver the product as a complement to their
financial wellness packages being offered in conjunction with loan
delivery.  While no specific agreements were finalized in the third or
fourth quarters, we did partner with two companies to pilot the program and
streamline the product delivery process.  The product and service is
sold primarily as a bundled offer, where a company prepaid card is provided to
support the payments that are reported by the My Full Credit alternative payment
reporting product.  This complementary product and service program
allows participants to report non-traditional payments to over 140 national
credit reporting agencies.  A majority of the payments and
transactions provided to the national credit reporting agencies under this
program would include rent, gas and electric, cable TV, phone/wireless and
utilities (water, sewer and trash).  By providing such non-traditional
payment information, My Full Credit allows credit reporting agencies to
potentially better understand and evaluate an individual’s consumer credit
behavior and in turn offer an ability to report alternative scores that may or
may not help facilitate credit granting decisions by prospective credit
lenders.  In the third quarter, the My Full Credit continuing
development incurred expenses in excess of $5,000, much of which was planned to
be recouped when additional revenue streams were realized in the fourth quarter
2007.  However, pressures tied to the underlying macroeconomic and
business environment impacting the Company, coupled with our inability to secure
additional funds to market and grow the core portfolio, resulted in no amount of
material sales of My Full Credit for calendar year 2007.  Efforts were
particularly refocused during the fourth quarter, but it was evident that
conversion rates and the stickiness of the product were not resonating with any
particular companies, least of all those in the sub-prime mortgage sector and
especially those falling victim to the ongoing global credit
crunch.





20


In the third quarter we also refined
our basic business paradigm by electing to discontinue offering our
semi-customized OEM platform and instead focusing on more direct-to-consumer
channels.  By refocusing away from OEM offerings, we were able to free
up resources, mitigate program development timeframe delays and minimize
interaction with third party card marketers who are not revenue generating.
Developed originally in the middle of 2006, this turnkey prepaid solution was
designed to showcase our ability to deliver a feature-rich turnkey prepaid card
program in a timeframe (90 days or less) that was believed to create a
competitive advantage for us.  However, the changing prepaid
landscape, coupled with the general failure of the OEM offering as a sustainable
and profitable platform, required us to get more proactive and refine a strategy
to engage consumers directly.  Current programs running under this
platform will continue to be serviced under the terms of original agreements,
but as OEM marketing and services agreements expire, the Company intends to
offer card marketers the opportunity to convert to more standardized programs or
reselling arrangements, deconvert or to discontinue their program(s)
entirely.





Another key issue to recap for the year
ending December 31, 2007, has been the accumulation of accounts receivables by
our custom and semi-custom or OEM program card marketers.  A sizable
portion of our accounts receivable balances remain outstanding from the first,
second and third quarters for 2007.  While much of the balances have
been offset by bad debt reserves, the growing days sales outstanding (DSO) also
contribute to cash flow constraints.  As a result, we have worked for
the balance of the third and fourth quarters to collect such outstanding
invoices and receivables.  Despite our efforts, few payments have been
delivered and we are now evaluating any and all options, including and up to
suspension of services or cancellation of card programs in their
entirety.  With respect to accounts payable, we no longer have any way
to actively service our key vendors and primary business drivers such as
banking, processing and card fulfillment.  The accounts payable has
grown significantly as a result of our primary vendor costs, third party
consulting and outsourcing costs.  As early as the end of the third
quarter we began delaying payments to certain vendors and continued evaluating
the operations for ways to reduce costs.  Despite those efforts, we
continue to currently have no ability to service our key costs and unless a
strategic alternative is executed, could be in jeopardy of defaulting on a
number of payment obligations which may or may not directly affect our ability
to continue operations of the Company.





21


The existing financial state of our
Company has directly resulted in missed business opportunities throughout 2007,
including renegotiating a new processor agreement with our existing processor
(Galileo), creating a redundant processor agreement with a new processor,
establishing new banking relationships with both federally chartered and state
chartered issuing banks, executing pay-per-application online sales initiatives
and executing opportunistic mergers and acquisitions.  As an example,
we attempted to close the acquisition of a small portfolio of cards under a
signed LOI from E-Count, a wholly owned subsidiary of Citibank, but were unable
to execute the definitive agreements because the issuing bank would not consent
to the transaction.  This theme continues to prevent us from being
able to execute our business model, as the underlying approvals for all
programs, products and services are not directly within our Company’s
control.  As a result, and even when we win new business, new
customers or new contracts, we remain challenged in being able to go to market
and monetize the opportunities because the timing of our launches are controlled
by numerous third parties.





At a macro level, the landscape for
prepaid cards and services has changed rapidly, and as a small Company we are
struggling to adjust our business model to address the new requirements demanded
by both issuing banks and processors.  Namely, most issuing banks and
processors are consolidating and transitioning their prepaid units to having
tens of customers doing millions of debit cards or transactions from a historic
convention of having hundreds to thousands of customers doing tens of thousands
of debit cards or transactions.  As a result, our programs are
experiencing unusually long and seemingly punitive delays in getting the
requisite approvals in order for us to take the programs to market and
ultimately monetize our investments in these initiatives.  Thus, these
delays are causing a material adverse impact to our revenues and our operations
as we can no longer predict with any certainty the timing associated with
getting any individual program to market.  Furthermore, because we no
longer fit into the customer profile desired by the issuing banks and
processors, we are typically lower in the priority queue for gaining the
approvals needed in order to execute our business model.  To this end,
our primary issuing bank, MetaBank, has communicated its desire to renegotiate
its 5 year agreement with us to implement terms and pricing that are less
favorable to our Company.  The Company is in agreement with the bank
that the agreement needs to be renegotiated, but there has been only limited
progress on executing a new bank agreement thus
far.   Unfavorable changes to the agreement, or an unwillingness
on the part of MetaBank to continue issuing new cards on behalf of the Company,
or contribute to program delays through lagging approval processes, would both
have a further material adverse affect on our business.  Compounding
these adverse impacts during the third quarter remains a level of uncertainty
with our primary issuing bank relationship with MetaBank.  As the
issuer of the Plan First prepaid program, MetaBank is not comfortable with the
ongoing disputes between us and Plan First Financial Solutions
(PFFS).  PFFS has more than once contacted MetaBank to make certain
claims and assertions against us.  These ongoing claims made by PFFS
have resulted in detailed discussions between us and the bank to justify our
position and communicate that our actions fall within the guidelines of the
bank.  Furthermore, since our active card portfolio is comparatively
small on the bank scale and requires a high amount of attention for approval and
management purposes, there has been an unintended result of contributing to the
underlying uncertainty.  While management met face to face with key
bank personnel late in the fourth quarter, we are cognizant that the
accumulation of events has contributed in potentially material changes to our
primary issuing bank relationship.





22


In parallel, we continued to develop a
significant relationship with a new card marketer in the third and fourth
quarters.  This relationship is important as the card marketer has a
large amount of card related deal flow for us.  However, due to the
challenges facing our business, it is possible that we will not be able to
deliver on all of the programs as specified between us and the card
marketer.  In the case where we cannot service all of the
requirements, we may be forced to transfer, assign or otherwise refund certain
portions of program development and implementation fees.





In addition, our key processing
partner, Galileo Processing, continues to adversely impact our primary prepaid
card business.  As originally reported in quarterly filings in 2007,
program launches are delayed and behind schedule as a direct function of
delivery delays related to processing platform features and functionalities,
specifically including dual card functionality and overdraft
protection.  As a constraint of the functionality, a key loading
partner, IPP, has only recently resurfaced as a loading option on the Galileo
platform. Whereas previously load capabilities were real-time in nature, there
is now a 48 hour hold on the funds being loaded to a cardholder
account.  This delay has caused a program specific issue and has yet
to be remedied.   Moreover, integration timing and scalability
constraints have also contributed to the IMG program suspension and continue to
affect program launches and projected implementation lead
times.  While we work closely with our processing partner, we have
been unsuccessful in raising further capital to build an infrastructure and
middle ware that enables more control for the Company and provides a more
turnkey solution that will allow the Company flexibility to rely on less
processing resources.  These constraints and delays have had a
material and unfavorable impact on the operations of the Company and have
directly contributed to the lack of sustainable success of the
Company.





Separately, our wholly owned
subsidiary, isleCORE Systems, located in Honolulu, Hawaii, was disposed during
the first quarter and provided no new incremental revenues for the remainder of
2007.  We continued to carry accounts receivable throughout the third
and fourth quarters and subsequently received payment in the first quarter of
2008.  IsleCORE has been treated as a discontinued operation and the
Consolidated Statements of Operations reflect such treatment.





Revenue





Revenue
was $2,215,369 and $827,302 for the years ended December 31, 2007 and 2006,
respectively, representing an increase of $1,388,067 or 168%. Our 2007 product
launches coupled with marketing efforts resulted in improved revenues through
the addition of new customers for our customized and semi customized program
solutions and increased sales of our branded card products and services. We have
also contracted with additional third party distributors and online marketers
which have the potential to generate additional revenue in the future
quarters.





23





Cost of Sales and Gross
Profit





Cost of
sales was $1,895,910 and $815,217 for the years ended December 31, 2007 and
2006, respectively, representing an increase of $1,080,693 or
133%.  The increase was attributed to the growth of the card
production, distribution costs and transaction processing costs.





The
resulting gross profit was 14.4% and 1.5% for the years ended December 31, 2007
and 2006, respectively. Management expects gross profit margin to improve as it
achieves economies of scale in the cost of processing accompanied by the
increased margin in the customized and semi customized program solutions and
increased sales of our branded card products and services.





Operating
expenses





Operating
expenses were $1,401,063 and $1,080,821 for the years ended December 31, 2007
and 2006, respectively, representing an increase of $320,242 or 30%. The major
components of operating expense are salaries and wages (26%) general and
administrative (17%) professional fees (27%) and stock based compensation of
$152,741.





Salaries and wages expense was $362,208
and $446,986 for the years ended December 31, 2007 and 2006, respectively,
representing a decrease of $84,778 or 19.0%. The decrease resulted from the
reduction of support staff in 2007, the departure of the co-founder and CEO,
Matthew S. Kerper, in addition to resignation of the Controller in early 2006,
which role is now being handled by a third party service provider.





General
and administrative expense was $238,152 and $211,340 for the years ended
December 31, 2007 and 2006, respectively, representing a decrease $26,812 or
12.7%. The decrease resulted from a significant decrease in postage and mailing
as we curtailed the operations of our direct mail operation in addition to a
concerted effort by management to review all spending in an effort to reach cash
neutral position.





Professional
fees and expenses were $375,846 and $246,764 for the years ended December 31,
2007 and 2006, respectively, representing an increase of $129,082 or
52.3%.   The increase resulted from the inclusion of additional
expenses associated with a third party accounting service provider. Included in
this number is $107,650 in the form of non cash compensation resulting from the
issue of stock grants for services.





Stock
based compensation was $152,741 and $146,416 for the years ended December 31,
2007 and 2006, respectively, representing an increase of $6,325 or 4.3%. The net
increase is a combination of the number of options vesting in 2007 as compared
to 2006 combined with valuation of these options.





24





Other income
(expense)





Other
income (expense) was ($318,392) and ($245,230) for the years ended December 31,
2007 and 2006, respectively.  The main component of other expense is
the financing costs which resulted from the issuance of warrants attached to the
shares offered in the Company’s last private placements. The financing costs are
calculated using the number of warrants and the Black-Scholes model. Financing
costs were $342,925 and $247,845 for the years ended December 31, 2007 and 2006
respectively.








Discontinued
Operations





As previously stated the Company sold
its isleCore operations effective March 31, 2007. The total loss resulting from
these operations were $20,809 and $47,050 for the periods ended December 31 2007
and 2006 respectively.





Net loss





We
incurred net losses of $1,421,605 and $1,361,816 for the years ended December
31, 2007 and 2006, respectively.  Despite the addition of cardholders
and programs the constant churn of our existing cardholder base coupled with
decreasing sales of our branded products and  a lack of sustainability
with our complementary reporting and ID verification services, we do not expect
to improve on gross profit margins and do not anticipate any foreseeable profits
in 2008 or beyond.





Liquidity
and Capital Resources





As of
December 31, 2007, cash totaled $72,625 as compared with $87,193 cash or cash
equivalents at December 31, 2006. Cash used in operations was $634,568 and was
offset by $590,000 of cash from financing and $30,000 in cash provided from the
sale of IsleCore and other assets.  Cash used by operations was
$634,568 and decreased by $108,394 from the comparative prior year period. The
decrease resulted from a larger net loss for the year ended December 31, 2007,
offset by increased non cash expenses. Cash provided by financing was $590,000
and decreased by $43,515 from the comparative prior year period. The decrease
resulted from the additional funds raised in private placements throughout
2006.





Working
capital was $(137,300) at December 31, 2007, as compared with working capital of
$15,831 at December 31, 2006. This decrease in working capital was a result
primarily of using cash balances for operations to support product development,
cost of sales, and revenue growth.





Management believes that the current
lack of possessing a sustainable card portfolio, combined with the continued
undercapitalization of the Company, has resulted in a shift in the operational
business focus to that of existing card program maintenance only.  All
primary operational efforts are currently prioritized on seeking a strategic
alternative for the Company in order to continue operations beyond April
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 or working
capital requirements on a sustained basis much beyond the filing deadline of
this annual report.  As previously disclosed in the Company’s
quarterly report on Form 10-QSB for the third quarter of the Company’s 2007
fiscal year (the “Third Quarter 10-QSB 2007”), ongoing program and approval
delays, non-payment for services, operational challenges and an inability to
raise capital have all contributed to the current uncertainty and viability of
the business going forward. All 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.





25


At this time, the Company is attempting
to maintain its current operations while it pursues strategic
alternatives.  The Company’s Board and management are actively
exploring strategic alternatives that would preserve its core business, 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.  At this time,
there is one known opportunity that would preserve the existing business
operations of Trycera.  This opportunity has resulted in the execution
of a letter of intent as filed under Form 8-K on April 4, 2008.  There
can be no assurance that management will be successful in executing any binding
or definitive agreements beyond the currently executed LOI, nor can there be any
assurance that it will close the transaction formally.  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.  In addition, the Board of Directors is
working 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
material definitive agreement with USSS.  Furthermore, the USSS group
has informed the Company of their intent to fund their $37,500 pursuant to the
Letter of Intent the week of April 14, 2008.





As stated
previously, the Company currently does not have any agreement with a potential
acquiror or merger partner in place and there can be no assurance that such an
agreement can be reached on terms acceptable to the Board of Directors, or at
all.  Furthermore, the Company does not have sufficient cash to meet
its working capital needs while it pursues its strategic alternatives beyond
early April 2008, unless 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 no monies raised.  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.





26


Off-Balance Sheet
Arrangements





During
the year ended December 31, 2007, we did not engage in any off-balance sheet
arrangements.





Stock-Based
Compensation





In December 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. This standard requires the expensing of all
share-based compensation including options, using the fair value based method.
We adopted 123R under the modified prospective basis on January 1,
2006.





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 our 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; changes in money transmitter
laws and regulations; changes in money service business laws and regulations;
pending litigation that may result in material change(s) to the prepaid business
and industry; unforeseen portfolio fraud and risk management; a general economic
downturn; our growth phase of operations; reliance on third party processors and
product suppliers; reliance on nationally chartered or state chartered banks;
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.





ITEM7.  FINANCIAL STATEMENTS





Our financial statements required by
this item are set forth immediately following the signature page of this annual
report.





27


ITEM8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE





No information is reportable pursuant
to this item.





ITEM8A.  CONTROLS AND PROCEDURES





Disclosure
Controls and Procedures





Based on an evaluation as of the date
of the end of the period covered by this report, our Principal Executive Officer
and Chief Financial Officer, conducted an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures, as required by
Exchange Act Rule 13a-15. Based on that evaluation, our Principal Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this report to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified by the SEC’s rules and
forms.




Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Principal Executive Officer and our Chief Financial
Officer, to allow timely decisions regarding required disclosure.





Management’s Annual Report
on Internal Control Over Financial Reporting




Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Exchange Act Rule 13a-15(f).  Management
conducted an evaluation of the effectiveness of the internal control over
financial reporting as of December 31, 2007, using the general criteria outlined
in the Sarbanes –Oxley Small Business Guide as posted on the Securities and
Exchange Commission website.  Based on the general criteria,
Management asserts and confirms that their close involvement in the controls of
the daily operations and transaction flows are an adequate means of control and
demonstrate reasonable effectiveness.  Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements.  Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.








Changes in Internal Control
Over Financial Reporting




There has
been no change in our internal control over financial reporting that occurred
during our last fiscal quarter (our fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.




28


The term “internal control over financial reporting” is defined as
a process designed by, or under the supervision of, the registrant’s principal
executive and principal financial officers, or persons performing similar
functions, and effected by the registrant’s board of directors, management and
other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:




(a)           Pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the
registrant;




(b)           Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the registrant are
being made only in accordance with authorizations of management and directors of
the registrant; and




(c)           Provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the registrant’s assets that could have a
material effect on the financial statements.





ITEM8B.  OTHER INFORMATION





No
information is reportable pursuant to this item.





PARTIII





ITEM9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT





Information
responsive to this item is incorporated herein by reference to our Proxy
Statement to be filed with the Securities and Exchange Commission within
120 days after the end of the fiscal year covered by this Form 10-KSB with
respect to our Annual Meeting of Shareholders to be held on May 20,
2008.





ITEM10.  EXECUTIVE COMPENSATION





Information
responsive to this item is incorporated herein by reference to our Proxy
Statement to be filed with the Securities and Exchange Commission within
120 days after the end of the fiscal year covered by this Form 10-KSB with
respect to our Annual Meeting of Shareholders to be held on May 20,
2008.





29


ITEM11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS





Information
responsive to this item is incorporated herein by reference to our Proxy
Statement to be filed with the Securities and Exchange Commission within
120 days after the end of the fiscal year covered by this Form 10-KSB with
respect to our Annual Meeting of Shareholders to be held on May 20,
2008.





ITEM12.  CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS





Information
responsive to this item is incorporated herein by reference to our Proxy
Statement to be filed with the Securities and Exchange Commission within
120 days after the end of the fiscal year covered by this Form 10-KSB with
respect to our Annual Meeting of Shareholders to be held on May 20,
2008.





ITEM13.  EXHIBITS





The
following exhibits are included as part of this annual report:











Incorporated by ReferenceExhibitNumber
              Exhibit Description
              Form
              File No.
              Exhibit
              Filing Date
              Filed Herewith3.1
              Articles
      of Incorporation, as amended June 14, 2004
              8-K
              000-30872
              3.1
              June
      15, 20043.2
              Current
      Bylaws
              10-QSB
              000-30872
              3.2
              August
      16, 20044.1
              Form
      of Common Stock Certificate
              10-SB
              000-30872
              4.1
              July
      21, 20004.2
              2004
      Stock Option/Stock Issuance Plan *
              8-K
              000-30872
              4.2
              May
      13, 20044.3
      &
                10.7
              Grant
      of Stock Option Form used pursuant to the 2004 Stock Option/Stock Issuance
      Plan
              10-KSB
              000-30872
              4.3
              April
      7, 20064.4
              Form
      of Series A Common Stock Purchase Warrant, as amended
              10-KSB
              000-30872
              4.6
              April
      7, 20064.5
              Form
      of Series B Common Stock Purchase Warrant
              10-KSB
              000-30872
              4.7
              April
      7, 20064.6
              Description
      of Registration Rights for investors in offerings dated September 20,
      2005, and January 3, 2006
              10-KSB
              000-30872
              4.8
              April
      7, 200610.1
              Employment
      Agreement with Matthew S. Kerper *
              8-K
              000-30872
              10.7
              June
      9, 200410.2
              Employment
      Agreement with Bryan Kenyon*
              8-K
              000-30872
              10.8
              June
      9, 200410.3
              Service
      Agreement dated September 9, 2004, with Galileo Processing, Inc.
      (Confidential treatment has been requested for a portion of this
      exhibit)
              10-KSB
              000-30872
              10.12
              April
      15, 200510.4
              Marketer
      Agreement dated October 5, 2004, with First Federal Savings Bank of
      Midwest (Confidential treatment has been requested for a portion of this
      exhibit)
              10-KSB
              000-30872
              10.13
              April
      15, 200510.5
              Marketer
      Agreement dated August 8, 2006, with New Millennium Bank (Confidential
      treatment has been requested for a portion of this
exhibit)
              10-KSB
              000-30872
              10.5
              April
      2, 2007
   30
  10.6
              Office
      Rent Agreement dated January 2, 2007, with Curo Capital,
    LLC
              10-KSB
              000-30872
              10.6
              April
      2, 200714.1
              Code
      of Ethics
              8-K
              000-30872
              14.1
              August
      26, 200431.1
              Rule
      13a-14(a) Certification by Principal Executive Officer
              
              
              
              
              X31.2
              Rule
      13a-14(a) Certification by Principal Financial Officer
              
              
              
              
              X32.1
              Section
      1350 Certification of Principal Executive Officer
              
              
              
              
              X32.2
              Section
      1350 Certification of Chief Financial Officer
              
              
              
              
              X


ITEM14.  PRINCIPAL ACCOUNTANT FEES AND
SERVICES





Audit
Fees





The aggregate fees billed for
professional services rendered by our principal accountant for the audit of our
annual financial statements, review of financial statements included in the
quarterly reports and other fees that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for the fiscal
years ended December 31, 2007 and 2006 were $28,265 and $24,925,
respectively.





Audit-Related
Fees





The aggregate fees billed for assurance
and related services by our principal accountant that are reasonably related to
the performance of the audit or review of the financial statements, other than
those previously reported in this Item 14, for the fiscal years ended December
31, 2007 and 2006 were $0 and $0, respectively.





Tax
Fees





The aggregate fees billed for
professional services rendered by our principal accountant for tax compliance,
tax advice and tax planning for the fiscal years ended December 31, 2007 and
2006 were $0 and $0, respectively.  These fees related to the
preparation of federal income and state franchise tax returns.





All
Other Fees





There were no other fees billed for
products or services provided by the principal accountant, other than those
previously reported in this Item 14, for the fiscal years ended December 31,
2007 and 2006.





31


Audit
Committee





Two
of the four members on our Board of Directors functions as our audit committee.
All of the services described above in this Item 14 for the year ended December
31, 2007, were approved by the Audit Committee.








[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE
PAGE FOR PARTIES FOLLOWS]


32


SIGNATURES





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






Trycera Financial,
      Inc.Date
      April 14, 2008
              By:
              /s/ Bryan
      W. KenyonBryan
      W. KenyonPrincipal
      Executive Officer


In
accordance with the Exchange Act, this report has been signed below by the
following person on behalf of the registrant and in the capacities and on the
dates indicated.









Date: April
      14, 2008
            
            /S/ Bryan W.
      KenyonBryan W.
      Kenyon, CFO and Director
              (Principal
      Executive Officer)Date: April
      11, 2008
            
            /S/
      Luan DangLuan Dang,
      DirectorDate: April
      14, 2008
            
            /S/ Alan S.
      KnitowskiAlan
      S. Knitowski, DirectorDate: April
      11, 2008
            
            /S/ Randy
      CherkasRandy
      Cherkas, Director










33


Consolidated
Financial Statements



































TRYCERA
FINANCIAL, INC
































For
the years ended December 31, 2007 and 2006








TRYCERA
FINANCIAL, INC.











Table
      of ContentsFor
      the years ended December 31, 2007 and 2006PageReportof Independent Registered Public Accounting
      Firm
            3ConsolidatedBalance Sheets
            4ConsolidatedStatements of Operations
            5ConsolidatedStatements of  Cash
    Flows
            6ConsolidatedStatements of Stockholders' Equity
            7Notesto Consolidated Financial Statements
            8

















REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
  To the
Board of Directors and Shareholders of
  Trycera
Financial, Inc.
   We have
audited the accompanying balance sheet of Trycera Financial, Inc. as of December
31, 2007and 2006 , and the related statements of operations, stockholders’
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
  We
conducted our audits in accordance with standards of the PCAOB (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
  In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Trycera Financial, Inc. at December
31, 2007and 2006 , and the results of its operations and cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
  The
accompanying financial statements have been prepared assuming that Trycera
Financial, Inc. will continue as a going concern. As discussed in Note 12 to the
financial statements, Trycera Financial, Inc. has suffered recurring losses from
operations and has a net capital deficiency that raises substantial doubt about
the company’s ability to continue as a going concern. Management’s plans in
regard to these matters are also described in Note 13. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
  
  
 /s/Chisholm, Bierwolf &
Nilson
 Chisholm,
Bierwolf & Nilson, LLC
 Bountiful,
UT
 February
7, 2008




3




Trycera
      Financial, Inc.Consolidated
      BalanceSheetsDecember
              
              
              December31,
      2007
              
              
              
              31,
      2006AssetsCurrent AssetsCash
              
              $
              72,625
              
              
              $
              87,193Accounts
      Receivable, net
              
              
              30,931
              
              
              
              86,628Prepaid Expenses and other current assets
              
              
              29,853
              
              
              
              12,429Client
      ACH Reserves
              
              
              5,000
              
              
              
              5,000Total
      Current Assets
              
              
              138,409
              
              
              
              191,250Property
      & Equipment, net
              
              
              9,751
              
              
              
              18,395Other AssetsDeposits
              
              
              0
              
              
              
              12,507Definite Life Intangible Assets, net
              
              
              2,159
              
              
              
              38,542Total
      Other Assets
              
              
              2,159
              
              
              
              51,049Total
      Assets
              
              $
              150,319
              
              
              $
              260,694Liabilities
      & Stockholders’ Equity (Deficit)Current LiabilitiesAccounts
      Payable
              
              $
              126,629
              
              
              $
              71,452Portfolio
      reserves
              
              
              34,202
              
              
              
              25,425Accrued
      Expenses
              
              
              114,878
              
              
              
              78,542Line
      of Credit
              
              
              -
              
              
              
              -Total
      Current Liabilities
              
              
              275,709
              
              
              
              175,419Total
      Liabilities
              
              
              275,709
              
              
              
              175,419Commitments
              
              
              -
              
              
              
              -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; 9,250,302 and 7,582,302 SharesIssued
      and Outstanding, Respectively
              
              
              9,250
              
              
              
              7,582Additional
      Paid In Capital
              
              
              5,184,500
              
              
              
              3,886,852Prepaid
      Stock Compensation
              
              
              (88,376
              )
              
              
              -Accumulated
      Deficit
              
              
              (5,230,764
              )
              
              
              (3,809,159
              )Total
      Stockholders’ Equity (Deficit)
              
              
              (125,390
              )
              
              
              85,275Total
      Liabilities & Stockholders’ Equity (Deficit)
              
              $
              150,319
              
              
              $
              260,694






The
accompanying notes are an integral part of these consolidated financial
statements.
 4






Trycera
      Financial, Inc.Consolidated
      Statementsof OperationsFor
      the Twelve Months EndedDecember
            
            
            December31,
      2007
            
            
            
            31,
      2006RevenuesStored
      Value
            
            $
            2,215,369
            
            
            $
            827,3022,215,369
            
            
            
            827,302Cost of Sales
            
            
            1,895,910
            
            
            
            815,217Gross
      Profit
            
            
            319,459
            
            
            
            12,085ExpensesDepreciation
      and Amortization
            
            
            10,911
            
            
            
            17,858Salaries
      and Wages
            
            
            362,208
            
            
            
            446,986Stock
      Based Compensation
            
            
            152,741
            
            
            
            146,416Professional
      Fees
            
            
            375,846
            
            
            
            246,764Bad
      debt expense
            
            
            261,205
            
            
            
            11,457General
      & Administrative
            
            
            238,152
            
            
            
            211,340Total
      Expenses
            
            
            1,401,063
            
            
            
            1,080,821Loss
      from Operations
            
            
            (1,081,604
            )
            
            
            (1,068,736
            )Other Income (Expenses)Interest,
      income
            
            
            1,094
            
            
            
            1,468Interest,
      expense
            
            
            (878
            )
            
            
            (2,853
            )Financing
      costs
            
            
            (342,925
            )
            
            
            (247,845
            )Other
      income (expense)
            
            
            24,317
            
            
            
            4,000Total
      other Income (expense)
            
            
            (318,392
            )
            
            
            (245,230
            )Loss
      from Continuing Operations before tax
            
            
            (1,399,996
            )
            
            
            (1,313,966
            )Income
      tax
            
            
            800
            
            
            
            800Loss
      from Continuing Operations
            
            
            (1,400,796
            )
            
            
            (1,314,766
            )Discontinued OperationsLoss
      on disposal of Discontinued Operations
            
            
            (27,852
            )
            
            
            (47,050
            )Gain
      (Loss) from Discontinued Operations
            
            
            7,043
            
            
            
            -Total
      gain (loss) from Discountinued Operations
            
            
            (20,809
            )
            
            
            (47,050
            )Net
      Loss
            
            $
            (1,421,605
            )
            
            $
            (1,361,816
            )Basic
      earnings per share:Loss
      per share Continuing operations
            
            
            (0.17
            )
            
            
            (0.18
            )Loss
      per share Discontinued operations
            
            
            (0.00
            )
            
            
            (0.01
            )Net
      Loss per share
            
            $
            (0.17
            )
            
            $
            (0.19
            )Weighted
      average shares
            
            
            8,266,850
            
            
            
            7,252,169








The
accompanying notes are an integral part of these consolidated financial
statements.
 5




Trycera
      Financial, Inc.Consolidated
      Statements of CashFlowsFor
      the Twelve Months EndedDecember
                
                
                December31,
      2007
                
                
                
                31,
      2006Cash Flows from Operating
      ActivitiesNet
      Loss
                
                $
                (1,421,605
                )
                
                $
                (1,361,816
                )Adjustments
      to Reconcile Net Loss to Net CashUsed
      by Operations;Depreciation
      and amortization
                
                
                23,535
                
                
                
                21,354Depreciation
      and amortization on discontinued operation
                
                
                581
                
                
                
                -Impairment
      of intangible assets
                
                
                -
                
                
                
                25,000Bad
      debt expense
                
                
                -
                
                
                
                11,457Gain
      on sale of assets
                
                
                (24,317
                )Loss
      on sale of discontinued operations
                
                
                27,852
                
                
                
                -Stock
      issued for services
                
                
                112,650
                
                
                
                84,067Stock
      options and warrants
                
                
                495,666
                
                
                
                394,261(Increase)
      decrease in accounts receivable
                
                
                55,697
                
                
                
                1,726(Increase)
      decrease in prepaid and other current assets
                
                
                (17,424
                )
                
                
                30,357(Increase)
      decrease in deposits
                
                
                12,507
                
                
                
                (3,300
                )Increase
      (decrease) in accounts payable
                
                
                55,177
                
                
                
                18,983Increase
      (decrease) in portfolio reserves
                
                
                8,777
                
                
                
                25,425Increase
      (decrease) in accrued expenses
                
                
                36,336
                
                
                
                31,715Increase
      (decrease) in unearned revenue
                
                
                -
                
                
                
                (22,191
                )Net
      Cash Used by Operating Activities
                
                
                (634,568
                )
                
                
                (742,962
                )Cash Flows from Investing
      ActivitiesAcquisition
      of property and equipment
                
                
                -
                
                
                
                (13,686
                )Proceeds
      from sale of assets
                
                
                25,000
                
                
                
                -Proceeds
      from disposal of discontinued operations
                
                
                5,000
                
                
                
                (1,197
                )Net
      Cash Provided (Used) by Investing Activities
                
                
                30,000
                
                
                
                (14,883
                )Cash Flows from Financing
      ActivitiesProceeds
      from issuance of common stock
                
                
                590,000
                
                
                
                648,000Payments
      made on line of credit
                
                
                -
                
                
                
                (14,485
                )Net
      Cash Provided by Financing Activities
                
                
                590,000
                
                
                
                633,515Net
      Increase (Decrease) in Cash and Cash Equivalents
                
                
                (14,568
                )
                
                
                (124,330
                )Cash
      and Cash Equivalents at Beginning of Period
                
                
                87,193
                
                
                
                211,523Cash
      and Cash Equivalents at End of Period
                
                $
                72,625
                
                
                $
                87,193Cash Paid for:Interest
                
                $
                878
                
                
                $
                992Income
      Taxes
                
                $
                800
                
                
                $
                -Non-cash financing
    activities:Common
      stock issued for services and deferred compensation
                
                $
                208,579
                
                
                $
                84,067
    The
accompanying notes are an integral part of these consolidated financial
statements.
 6






Trycera
      Financial, Inc.Statements
      of Stockholder’sEquityFrom
      January 1, 2006 to December 31, 2007Preferred
      Stock
              
              
              Common
      Stock
              
              
              Paid-In
              
              
              AccumulatedShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              DeficitBalance,
      at January 1, 2006
              
              
              -
              
              
              
              -
              
              
              
              6,876,802
              
              
              
              6,876
              
              
              
              2,761,230
              
              
              
              (2,447,343
              )Shares
      issued for cash pursuant toprivate
      placement memorandumat
      $1.00 per share
              
              
              -
              
              
              
              -
              
              
              
              635,500
              
              
              
              636
              
              
              
              647,364
              
              
              
              -Shares
      Issued for Services atat
      $1.00 - $3.25 per share
              
              
              -
              
              
              
              -
              
              
              
              70,000
              
              
              
              70
              
              
              
              83,997
              
              
              
              -Valuation
      of Stock Options
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              146,416
              
              
              
              -Valuation
      of Stock warrants
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              247,845
              
              
              
              -Loss
      for the period endedDecember
      31, 2006
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,361,816
              )Balance,  at
      December 31, 2006
              
              
              -
              
              
              
              -
              
              
              
              7,582,302
              
              
              
              7,582
              
              
              
              3,886,852
              
              
              
              (3,809,159
              )Shares
      issued for cash pursuant toprivate
      placement memorandumat
      $1.00 per share
              
              
              -
              
              
              
              -
              
              
              
              315,000
              
              
              
              315
              
              
              
              314,685
              
              
              
              -Shares
      issued for cash pursuant toprivate
      placement memorandumat
      $0.25 per share
              
              
              -
              
              
              
              -
              
              
              
              1,100,000
              
              
              
              1,100
              
              
              
              273,900
              
              
              
              -Shares
      Issued for Services atat
      $0.13 - $3.25 per share
              
              
              -
              
              
              
              -
              
              
              
              143,000
              
              
              
              143
              
              
              
              107,507
              
              
              
              -Shares
      granted in connectionwith
      employment agreementat
      $1.01 per share
              
              
              -
              
              
              
              -
              
              
              
              100,000
              
              
              
              100
              
              
              
              100,900
              
              
              
              -Shares
      Issued for Accounts payable atat
      $0.50 per share
              
              
              
              
              
              
              
              
              
              
              10,000
              
              
              
              10
              
              
              
              4,990Valuation
      of Stock Options
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              152,741
              
              
              
              -Valuation
      of Stock Warrants
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              342,925Loss
      for the period endedDecember
      31, 2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,421,605
              )Balance,  at
      December 31, 2007
              
              
              -
              
              
              
              -
              
              
              
              9,250,302
              
              
              
              9,250
              
              
              
              5,184,500
              
              
              
              (5,230,764
              )








The
accompanying notes are an integral part of these consolidated financial
statements.
 7
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007





NOTE1 -
CORPORATE HISTORY





Trycera
Financial, Inc., (the "Company") was incorporated in Nevada on May 10, 2000,
under the name Whitelight Technologies, Inc., for the purpose of seeking and
consummating a merger or acquisition with a business entity organized as a
private corporation, partnership, or sole proprietorship.





On July
16, 2004, the Company filed a certificate of amendment with the state of
Nevada changing the name to Trycera Financial Inc.





Trycera
Financial is in the business of developing, deploying and marketing semi-custom
and customized branded prepaid and stored value card solutions.  To
complement the core stored value card solutions we also provide complementary
financial products and services, notably an alternative credit reporting
platform, an identification verification solution and a host of cardholder
driven choices highlighted by items such as bill payment and online account
access and account balance management.  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 card or instrument.  Our core
operating business is centered upon developing, deploying and marketing a broad
array of stored value products and services in conjunction with card
marketers.  Card marketers are defined as organizations, companies or
individuals who elect to provide stored value products direct to cardholders or
consumers while entering into a specific agreement and relationship with our
company.  We then work with card marketers to design and develop a
stored value card program or card-based solution that the card marketer can then
deliver to their target customer base.  In many instances the target
audience is persons without banking relationships and persons who are
underserved by existing banking facilities.  The card marketers, with
the card product(s) or service supplied by our company can then deliver a varied
option of stored value products and services.  We generate revenue in
various forms from our prepaid cards portfolio. Trycera Financial markets its
products in the United States and its protectorates.





NOTE 2 - SIGNIFICANT
ACCOUNTING POLICIES





A.  
Basis of Accounting




The
Company uses the accrual method of accounting.





B.   Revenue Recognition




The
Company applies the provisions of SEC Staff Accounting Bulletin("SAB") No. 104,
Revenue Recognition in Financial Statements ("SAB 104"), which provides guidance
on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC.  SAB 104 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosure
related to revenue recognition policies.  In general, the Company
recognizes revenue related to monthly contracted amounts for services provided
when (i) persuasive evidence of an arrangement exists, (ii) delivery has
occurred or services have been rendered, (iii) the fee is fixed or determinable
and (iv) collectibility is reasonably assured.




8
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007




Within the Company's business, there
are three key separate events that allow it to recognize revenue.  The
first event is when a consumer
purchases a catalog shopping card membership, the second is when a consumer with
an active membership buys goods using their catalog shopping card and the third
event is when a consumer purchases a prepaid or stored value
product.  With regard to the Company's catalog shopping business, it
fulfills the first aspect of SAB 104 when a customer signs and returns one of
the Company's Tru Platinum membership offerings with the appropriate payment for
membership.  The second aspect of SAB 104 is met when the Company
delivers the catalog shopping card to the consumer.  This takes place
when the Company fulfills the membership agreement by sending the customer an
enrollment package containing the catalog shopping card and a select number of
product catalogs for future order placement.  The third and fourth
criteria are satisfied because the membership price is fixed and known to the
customer and payment for membership is collected in advance of issuing the
membership package. An alternative justification for criteria four exists by
virtue of the fact that the Company's fulfillment begins only after funds are
verified by its bank, thus collectibility is reasonably assured. From a
recognition standpoint, the catalog shopping card revenue is recognized only
after the product has been shipped to the customer. This recognition of such
revenue is based on a five day assumed delivery period for the product. In
addition, the Company has elected to account for customer refunds by reserving a
percentage of the membership income received against a liability for future
refunds. In terms of the Signature Credit product line, the membership income is
based off a yearly membership fee. After the company verifies the funds and
waits the five days after shipping the membership package to the customer and
establishing a reserve against future refunds. The Company books the gross
sales  less the fifteen percent set aside for refund reserves into a
deferred revenue account and on a monthly basis the Company recognizes one month
of revenue for each of twelve months until the entire membership is realized and
satisfied. The Company receives income for the Tru Platinum shopping card from a
one-time acceptance fee.  The Company verifies the funds and waits
five days after shipping the membership package to the customer and establishes
a reserve against future refunds.  The Company records gross sales
less fifteen percent, for refund reserves.  The reserves are recorded
as deferred revenue and recognized monthly over a twelve month period. This
period has been determined by management as the average customer
retention.





Separately,
once a consumer has purchased a catalog shopping card, the individual member may
elect to buy goods using the available spending limit on the card
itself.  The consumer will identify products to purchase from one or
more of the Company's catalogs.  The consumer will then fill out an
appropriate order form or shop online and submit a down payment. This down
payment is between 25% and 33% of the total purchase amount. This down payment
is then processed by the Company, and once the funds have been verified, the
product is shipped to the customer. Five days after the shipment has been sent
to the customer, the company recognizes the transaction as complete and books
the order as a sale and will book the portion still owed against the purchase to
accounts receivable. The company also books a monthly entry for bad debt
expenses to reserve for any future uncollectible amounts. The consumer is then
billed monthly for any outstanding balances with a minimum payment
due.





With
regard to events related to purchases of stored value or prepaid card products,
the Company has sold no such goods at this time.  When the Company
begins to sell such stored value products, a customer who purchases a prepaid
card product will pay an upfront acceptance fee in addition to paying some
incremental value to add to the stored value card. The Company recognizes only
the acceptance fee revenues, as the actual pre-funded load value is
electronically transferred from our partner processor to an FDIC-insured account
at our partner bank.  The Company never possesses the actual
pre-funded load value, which resides in a secure account at our processor before
being sent to a non-Company accessible customer funding account at our
bank.  As a result, there is no general accounting treatment for the
amounts pre-funded on the stored value cards.  With respect to the
acceptance fee, the Company will collect the acceptance fee from the customer,
satisfying criteria (i) under SAB 104 with a persuasive evidence of an
arrangement.  The company does not realize the revenue from the
acceptance income until the customer has activated their card. The activation of
their card requires that they have passed the legal requirements of identity
verification and an embossed card in their name has been mailed to their
physical address and lastly the client with the card in their physical
possession has called to activate their card. Moreover, the funds have been
prepaid by the customer and thus as outlined in criteria (iv) the collectibility
is reasonably assured. In both instances, the Company simply supplies a product
or financial tool to a customer.  There are no unearned income
ramifications since the funds are held in an FDIC-insured account by our partner
Bank and not under the control of the Company. The consumer may choose to spend
or not spend the money on the stored value card, but the Company after the
initial transaction has no obligation to provide future products.  The
Company does host a customer service center to receive and resolve any issues
that may arise out of the use of the prepaid card product.





9
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007


The
consulting revenue the Company receives is billed after satisfying the
customers' requirement and which follows the criteria of SAB 104 more
specifically relating to the delivery of services rendered as outlined in
criteria (ii).





C.   Cash Equivalents




The Company considers all short term,
highly liquid investments that


are
readily convertible, within three months, to known amounts as cash equivalents.
The Company currently has no cash equivalents.








D.   Property and Equipment




Property
and equipment as of December 31, 2007 and 2006 consists of the following and are
recorded at cost:








2007
            
            
            2006Furniture
      & fixtures
            
            $
            10,533
            
            
            $
            17,735Computer
      equipment
            
            
            12,437
            
            
            
            19,935Total fixed
      assets
            
            
            22,970
            
            
            
            37,670Accumulated
      depreciation
            
            
            (13,219
            )
            
            
            (19,275
            )Net fixed
      assets
            
            $
            9,751
            
            
            $
            18,395




Provision
for depreciation of equipment is computed on the straight-line method for
financial reporting purposes. Depreciation is based upon estimated useful lives
as follows:








10
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007





D.   Property and Equipment
(continued)




Computer
      equipment
            2-3
      YearsFurniture
      & fixtures
            7
      Years


Maintenance,
repairs, and renewals which neither materially add to the value of
the equipment nor appreciably prolong its life are charged to expense
as incurred.





Depreciation
charged to operations was $4,165 and $21,842 for the years ended
December 31 2007 and 2006, respectively.





E.   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. Outstanding employee stock options of 2,815,040 and
2,655,975, and outstanding warrants of 820,372 and 317,750 have not been
considered in the fully diluted earnings per share calculation in 2007 and 2006,
due to the anti-dilutive effect.




For the Years Ended
      December 31,2007
            
            
            2006Basic Earnings
      per share:Income (Loss)
      (numerator)
            
            $
            (1,421,605
            )
            
            $
            (1,361,816
            )Shares
      (denominator)
            
            
            8,266,850
            
            
            
            7,525,169Loss Per
      Share
            
            $
            (0.17
            )
            
            $
            (0.19
            )







F.   Stock Options




The
Company has elected to measure and record compensation cost relative
to stock option costs in accordance with SFAS 123R, "ACCOUNTING
FOR STOCK-BASED COMPENSATION," which requires the Company to use
the Black-Scholes pricing model to estimate the fair value of the
options at the option grant date.








G.   Use of Estimates




The
preparation of the financial statements in conformity with generally
accepted accounting principles, in the United States of America,
require management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes.  Actual results could differ from those estimates.





H.   Fair Value of Financial
Instruments




The fair value of
the Company's cash and cash equivalents, receivables, accounts payable and
accrued liabilities approximate carrying value based on their effective interest
rates compared to current market prices.







11
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007


I.   Selling, General and Administrative
Costs




Selling,
general and administrative expenses included the following for the
years ended December 31, 2007 and 2006.




2007
            
            
            2006Insurance
            
            $
            55,934
            
            
            $
            50,021Rent
            
            
            52,546
            
            
            
            54,851Travel &
      Entertainment
            
            
            14,379
            
            
            
            23,833Sales &
      Marketing
            
            
            1,378
            
            
            
            4,138Technology
      Costs
            
            
            33,827
            
            
            
            26,161General &
      Administrative
            
            
            80,088
            
            
            
            52,336Total
      SG&A
            
            $
            238,152
            
            
            $
            211,340










J.   Prepaid Expenses and other Current
Assets




Prepaid
expenses and other current assets included the following for the years
ended December 31, 2007 and 2006.






2007
            
            
            2006Prepaid
      expenses
            
            $
            17,353
            
            
            $
            12,429Prepaid
      marketing costs
            
            
            12,500
            
            
            
            0Total Prepaid
      & Other
            
            $
            29,853
            
            
            $
            12,429







K.   Accrued Expenses




Accrued
expenses included the following for the years ended December 31, 2007
and 2006.








2007
            
            
            2006Accrued
      payroll and Compensated absences
            
            $
            32,435
            
            
            $
            40,521Accrued
      liabilities
            
            
            0
            
            
            
            13,021Interchange
      and fees payable
            
            
            57,443
            
            
            
            25,000Program
      termination costs
            
            
            25,000
            
            
            
            0$
            114,878
            
            
            $
            78,542





L.   Lines of Credit




The
Company maintained and utilized one open line of credit for $25,000 with
Wells Fargo Bank.  This account had been closed prior to the end of
the fiscal year, in part because the line of credit has been personally
guaranteed by a former employee and director of the Company. Repayment terms on
any borrowings adjusted quarterly at the then current prime rate plus
1%.





12
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007


NOTE 2 - SIGNIFICANT
ACCOUNTING POLICIES (continued)





M.   Trade Receivables and
Collections




In the
collection of payments, loans or receivables, the Company applies a
range of collection techniques to manage delinquent accounts.
In instances where balances exceed baseline levels a third party collection
agency is selected to perform a collection service.  The service fees
may cost the Company 25% to 40% of the face value of the debt owed and result in
receiving only a small portion of monies owed.  With the stored value
portfolio, the Company has not implemented a specific policy. Since a majority
of the transaction activity is prepaid, the Company does not often provide
services and load product until funds have been provided in advance. In cases
where the funds are not provided in advance, the Company will carry an open
receivable balance and does reserve the right to reduce the client reserve
account in lieu of payment. At December 31, 2007 the allowance for bad and
doubtful accounts was $246,110.





N.   Income Taxes





The
Company utilizes the liability method of accounting of income taxes.  Under
the liability method, deferred income tax assets and liabilities
are provided based on the difference between the financial statements
and tax basis of assets and liabilities measured by the currently
enacted tax rates in effect for the years in which these d ifferences
are expected to reverse.  Deferred tax expense or
benefit is the
result of changes in deferred tax assets and liabilities.





O.   Concentrations




Financial
instruments that potentially subject Trycera Financial, Inc. (the
Company) to concentrations of credit risk consist of cash and cash
equivalents.  The Company places its cash and cash equivalents
at w ell-known,
quality financial institutions.  At times, such cash
and cash
equivalents may be in excess of the FDIC insurance limit.





P.   Capital Structure and Security
Rights




Common
Stock - The Company is authorized to issue 100,000,000 shares of common
stock, par value $.001 per share. All common shares are equal to
each other with respect to voting, and dividend rights, and are equal
to each other with respect to liquidations rights.




Preferred
Stock - The Company has authorization to issue 20,000,000 shares of
preferred stock, par value $.001 per share. The Board of Directors
will be authorized to establish the rights and preferences of any
series of the preferred shares without shareholder approval.
At this
time, the Board has not established a series of the preferred shares
and no preferred shares have been issued.








13
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007





NOTE 3 - NEW TECHNICAL
PRONOUNCEMENTS





In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
SFAS No. 157, Fair Value Measurements, or SFAS 157, which defines fair
value, establishes a framework for measuring fair value and requires additional
disclosures about fair value measurements. SFAS 157 is effective for fiscal
years beginning after November 15, 2007 with early adoption permitted; in
November 2007, the FASB agreed to defer the effective date of SFAS 157 for
one year for all nonfinancial assets and nonfinancial liabilities, except for
those items that are recognized or disclosed at fair value in the financial
statements on a recurring basis. Generally, the provisions of this statement
should be applied prospectively as of the beginning of the fiscal year in which
this statement is initially applied. We have determined that the adoption of
SFAS 157 will not have a material effect on our consolidated financial
statements.





In
February 2007, FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities- including an amendment of FASB
Statement 115”, (“SFAS 159”). This statement provides companies with an option
to report selected financial assets and liabilities at fair value. This
statement is effective for fiscal years beginning after November 15, 2007
with early adoption permitted. We have determined that the adoption of SFAS 159
will not have a material affect on our consolidated financial position, results
of operations, cash flows or financial statement disclosures.





In
December 2007, the FASB issued FAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51”. FAS
No. 160 establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. FAS No. 160 is effective for the
Company in its fiscal year beginning January 1, 2009. The Company is
currently evaluating the impact of FAS No. 160 on its consolidated
financial position and results of operations.





In
December 2007, the FASB issued FAS No. 141 R “Business Combinations”. FAS
No. 141R establishes principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed and any noncontrolling interest in the
acquiree. FAS No. 141R also provides guidance for recognizing and measuring
the goodwill acquired in a business combination and determines what information
to disclose to enable users of the financial statements to evaluate the nature
and financial effects of a business combination. FAS No. 141R is effective
for the Company in its fiscal year beginning January 1, 2009. While the
Company has not yet evaluated this statement for the impact, if any, that FAS
No. 141R will have on its consolidated financial position and results of
operations, the Company will be required to expense costs related to any
acquisitions after September 30, 2009.





14
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007




NOTE 4 – 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:






2007
            
            
            2006Revenue
            
            $
            65,293
            
            
            $
            267,281Income (loss)
      from discontinued operations
            
            $
            7,043
            
            
            $
            (47,080
            )






NOTE 5 –
RECLASSIFICATION





We have
reclassified our Statement of Operations for the year ended December 31, 2006,
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 4.








NOTE 6 - INTANGIBLE
ASSETS





On June
13, 2005 the Company issued 40,000 shares of common stock valued at $40,000
and paid cash in the amount of $30,000 for the net operating assets of Hawaii
Direct Telephone that were merged into the operations of Trycera as a
wholly-owned Hawaiian subsidiary corporation, isleCORE Systems, Inc., valued at
$70,000.  The Company paid $70,000 for the fixed assets including,
key operating contracts valued at $53,955, and office equipment and
supplies were valued at $15,892.  There was no intellectual property received
and the existing accounts receivable was zero at the time of the asset
purchase. At December 31, 2006 there was no impairment to the intangible
assets. However, an impairment of $25,000 was charged to the statement
of operations during the year ended December 31, 2006. As previously stated at
the end of the first quarter, our wholly owned subsidiary, isleCORE Systems,
located in  Honolulu, Hawaii, was disposed.  The sale was
completed in March 2007 and effective immediately at the close of the first
quarter.








On
November 2, 2004 the Company issued 150,000 shares of common stock valued at
$112,500 and paid cash in the amount of $100,000 for the net operating
assets of Signature Credit Corporation that were merged into the operations
of Trycera, valued at $212,500.  The Company paid $112,500 for the fixed
assets including, a Signature Credit customized software database system
valued at $75,000, office equipment and supplies valued at $24,775, five
existing domain names valued at $5,000 and existing accounts receivable
valued at $7,725.  The remainder of the consideration, $100,000 was
allocated to intangible assets in the form of the existing Signature customer
base. As a result of the asset acquisition, the value of the


Signature
Credit customized software database system was booked as a definite
life intangible asset. The Signature customer base was booked as a separate
definite life intangible asset. Management derived such value
of the
Signature Credit customer base by evaluating the assets to be acquired and
assigning a value to those assets.  The hard assets were valued at
fair market
value and the balance of the purchase price was assigned to the customer
base, which management felt was reasonable for our use. The remaining Signature
assets were sold in October 2007 for a sum of $25,000.








15
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007






We
account for goodwill and other intangible assets in accordance with SFAS No. 142,
which requires that goodwill and other intangible assets that have indefinite
lives not be amortized but instead be tested at least annually for
impairment, or more frequently when events or a change in circumstances indicate
that the asset might be impaired.  For indefinite lived intangible assets,
impairment is tested by comparing the carrying value of the asset to its
fair value and assessing the ongoing appropriateness of the indefinite
life classification.  For goodwill, a two-step test is used to identify
the potential impairment and to measure the amount of impairment, if
any.  The first step is to compare the fair value of a reporting unit with its
carrying amount, including goodwill.  If the fair value of a
reporting unit exceeds its carrying amount, goodwill is considered not impaired,
otherwise goodwill is impaired and the loss is measured by performing
step two.  Under step two, the impairment loss is measured by comparing
the implied fair value of the reporting unit with the carrying


amount of
goodwill. At December 31, 2007 there was no impairment to the intangible
assets. However, an impairment of $60,000 was charged to the statement
of operations during the year ended December 31, 2004.





Total
amortization in 2007 and 2006, respectively was $6,745 and $25,649. The
amortization period for the intangible assets is 3 years and the accumulated
amortization and intangible asset values are set forth as follows:










Year
            
            Accumulated
      Amortization
            
            
            Asset
Value2007
            
            $
            110,789
            
            
            $
            2,1592006
            
            $
            112,102
            
            
            $
            38,542







In
accordance with Financial Accounting Standards Board Statement No. 144, the
Company records impairment of long-lived assets to be held and used or to be
disposed of when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the
carrying amount.





NOTE 7 - RELATED PARTY
TRANSACTIONS





On May
10, 2004, the Company entered into a contract with Cygni Capital, LLC
("Cygni") to provide management and consultation services.  The contract
became effective May 15, 2004, and was continued until the termination
of the agreement on December 31, 2005. Cygni provided ongoing consulting
services for $10,000 per month throughout the contract term,


with
$5,000 of $10,000 per month consulting services fee being paid directly
to Ecewa Capital, LLC, whose principals are directors of
Trycera.  This contract has been replaced by a contract with Ecewa
Capital, LLC to provide strategic management and consulting
services.  This verbal contract became effective December 15, 2005 and
provides services for $5,000 per month on a month to month contract basis. The
amount incurred in respect of this agreement amounted to $60,000 for the years
ended December 31, 2007 and December 31, 2006. Ecewa  Capital was paid
an additional $22,000 and $0, respectively, for additional consulting services
during the years ended December 31, 2007 and December 31, 2006.





The
Company incurs a charge from Curo Capital, llc, a Company whose principals are
directors of Trycera, of $1000 per month for rent of the Chairman’s office.
Expenses incurred under this agreement amounted to $12,000 and $0, respectively,
during the years ended December 31, 2007 and December 31, 2006.








16
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007





NOTE 8 - INCOME
TAXES





The
Company has adopted FASB 109 to account for income taxes. The Company currently
has no issues that create timing differences that would mandate deferred
tax expense. Net operating losses would create possible tax assets in future
years. Due to the uncertainty as to the utilization of net operating
loss carry forwards an evaluation allowance has been made to the extent of
any tax benefit that net operating losses may generate.   No provision
for income taxes has been recorded due to net operating losses of
$4,887,839 as of December 31, 2007 that will be offset against further taxable
income.  No tax benefit has been reported in the financial
statements.





Deferred
tax assets and the valuation account as of December 31, 2007 and 2006 are
as follows:









2007
            
            
            2006Deferred
      tax asset:Net operating
      loss carryforward
            
            $
            1,661,865
            
            
            $
            1,295,114Valuation
      allowance
            
            
            (1,661,865
            )
            
            
            (1,295,114
            )$
            -
            
            
            $
            -







The
components of income tax expense are as follows:








2007
            
            
            2006Current
      Federal Tax
            
            $
            -
            
            
            $
            -Current State
      Tax
            
            
            800
            
            
            
            800Change in NOL
      benefit
            
            
            (366,751
            )
            
            
            (463,017
            )Change in
      allowance
            
            
            366,751
            
            
            
            463,017$
            800
            
            
            $
            800










The
Company has incurred losses that can be carried forward to offset future
earnings if conditions of the Internal Revenue Codes are met. These losses
are as follows:






Year of
      Loss
            
            Amount
            
            Expiration
      Date2000
            
            $
            21,617
            
            20202001
            
            
            8,114
            
            20212002
            
            
            9,070
            
            20222003
            
            
            12,872
            
            20232004
            
            
            858,632
            
            20242005
            
            
            1,537,037
            
            20252006
            
            
            1,361,816
            
            20262007
            
            
            1,421,605
            
            2027







17
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007


NOTE 9 - OPERATING
LEASES





The
Company exited the leased space for its administrative and headquarters
effective February 29, 2008.  The former space, occupied the entire
2007 fiscal year consisted of approximately 2,150 square feet of office space,
and was located at 18023 East Sky Park Circle, Suite G, Irvine,
California.  Monthly lease payments were $3,500 with a lease
expiration on October 31, 2009.  The Company had not been able to
continue payments and subsequently vacated the space.





The
Company’s wholly owned subsidiary, isleCORE Systems, was sold. The office space
was located at 7 Waterfront Plaza, 500 Ala Moana Blvd, Honolulu, Hawaii, 96813.
The total cost of the location was approximately $3,500, for 600 square
feet.  The lease expired on March 31, 2007 and the Company no longer
has a committment.













Total Lease
      CommitmentsYear
            
            Total2008
            
            $
            42,0002009
            
            
            35,0002010
            
            
            -Thereafter
            
            
            -Total
            
            $
            77,000






Rent
Expense for the year ended December 31, 2007 and the year ended December
31, 2006 was $52,546 and $54,851, respectively.





NOTE 10 - STOCKHOLDERS'
EQUITY





During
the year ended December 31, 2007, the Company issued an aggregate of
315,000 shares of common stock pursuant to private offerings at $1.00 per share.
Accordingly, common stock and additional paid in capital have been charged $315
and $314,685 respectively. Each investor also received stock purchase warrants
at a rate of 50% of the shares purchased.  The warrants are
exercisable through February 28, 2014, at $1.25 with certain incentive discounts
to the exercise price available through February 28, 2011. As of December 31,
2007, 170,000 warrants were outstanding related to this offering.





During
the year ended December 31, 2007, the Company issued an aggregate of
1,100,000 shares of common stock pursuant to private offerings at $0.25 per
share. Accordingly, common stock and additional paid in capital have been
charged $1,100 and $273,900 respectively. Each investor also received stock
purchase warrants at a rate of 50% of the shares purchased. The warrants are
exercisable through October 31, 2014, at $.3125 with certain incentive discounts
to the exercise price available through February 28, 2011. As of December 31,
2007, 550,000 warrants were outstanding related to this offering.





During
the year ended December 31, 2007, the Company issued an aggregate 143,000
shares of common stock for accounting and administrative services. The price
of the stock at the time of issue was between $0.13 and $3.25. Accordingly,
common stock and additional paid in capital have been charged $143 and
$107,507 respectively.





18
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007




During
the year ended December 31, 2007, the Company issued an aggregate 100,000
shares of common stock in connection with an employment agreement. The price of
the stock at the time of issue was $1.01. Common stock and additional paid in
capital have been charged $100 and $100,900 respectively. The value of the
employment agreement has been set up as a contra equity account and the amount
is being amortized over the life of the employment agreement.




During
the year ended December 31, 2007 the Company also issued 10,000 shares of common
stock to settle accounts payable. Common stock and additional paid in capital
have been charged $10 and $4,990 respectively.





During
the year ended December 31, 2006, the Company issued an aggregate 635,500
shares of common stock pursuant to private offerings. Accordingly, common stock
and additional paid in capital have been charged $636 and $647,365 respectively.
Each investor also received stock purchase warrants at a rate of 50% of the
shares purchased.  The warrants are exercisable through February 28,
2014, at $1.25 with certain incentive discounts to the exercise price available
through February 28, 2011. As of December 31, 2006, 12,500 warrants were
outstanding related to this offering.





During
the year ended December 31, 2006, the Company issued an aggregate 70,000
shares of common stock for accounting and administrative services. Accordingly,
common stock and additional paid in capital have been charged $70 and
$83,997 respectively.








NOTE 11 - 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
5,000,000.  The plan became effective with its adoption and remains in effect
for ten years, however, options expire five 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 periods ending December 31, 2007 and
2006:







19
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007




2004 Stock
      PlanAmount
              of Shares
            
            
            Weighted
              Average
              Exercise
      PriceOutstanding at
      January 1, 2006
            
            
            3,070,250
            
            
            $
            .62Options
      Granted
            
            
            170,000
            
            
            $
            1.12Options
      Exercised
            
            
            -
            
            
            
            -Options
      Canceled
            
            
            365,500
            
            
            
            .78Options
      Outstanding at December 31, 2006
            
            
            2,874,750
            
            
            $
            .63Options
      Exercisable at December 31, 2006
            
            
            2,655,975
            
            
            $
            .59






2004 Stock
      PlanAmount
              of Shares
            
            
            Weighted
              Average
              Exercise
      PriceOutstanding at
      January 1, 2007
            
            
            2,874,750
            
            
            $
            .63Options
      Granted
            
            
            528,250
            
            
            $
            .96Options
      Exercised
            
            
            -
            
            
            
            -Options
      Canceled
            
            
            1,023,500
            
            
            
            .56Options
      Outstanding at December 31, 2007
            
            
            2,379,500
            
            
            $
            .73Options
      Exercisable at December 31, 2007
            
            
            1,815,040
            
            
            $
            .65





The
Company has elected to measure and record compensation cost relative to performance
stock option costs in accordance with Statement of Financial Accounting
Standards No. 123R, "Accounting for Stock-Based Compensation", which
requires the Company to use the Black-Scholes pricing model to estimate
the fair value of options at the option date grant, $152,741 was recognized
for the year ended December 31, 2007.  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:









2007
            
            
            2006Five Year Risk
      Free Interest
      Rate
            
            
            4.56-5.10
            %
            
            
            4.15-5.10
            %Dividend
      Yield
            
            
            0
            %
            
            
            0
            %Volatility
            
            
            61-244
            %
            
            
            30-60
            %Average
      Expected Term (Years to Exercise)
            
            
            5
            
            
            
            5







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








Range of
              Exercise
      Price
            
            
            Number
      of
              Options Granted
            
            
            Weighted
      Average
              Exercise
      Price
            
            
            Average Remaining
              Contractual
              Life
      (Years)
            
            
            Number of
      Options Vested
            
            
            Weighted Average
      Exercise Price$
            .01-$0.99
            
            
            
            1,481,250
            
            
            $
            .55
            
            
            
            2.5
            
            
            
            1,421,247
            
            
            $
            .55$
            1.00-2.00
            
            
            
            898,250
            
            
            $
            1.03
            
            
            
            3.5
            
            
            
            393,793
            
            
            $
            1.06






20
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007




The
following represents the key vesting time frames and general terms included
in the stock option plans for the Company Executives:





For the
initial key personnel, employment agreements outlined provisions for the
performance-based vesting terms. The exercise price of the options granted
to the employees is $0.25 of the first quarter of the options granted;
$0.45 for the next quarter; $0.65 for the next quarter; and $0.85 for the
final quarter granted.  The options granted to the employees shall vest as
follows: 1/12th per quarter for each quarter of company revenue exceeding
the previous quarter of revenue since his date of hire, independent
of whether the revenue is generated from acquisition or non-acquisition
business activities, 1/12th for each $250K in aggregate gross
revenue growth from the day he commences work at the company, and/or at the
three year six month anniversary of his employment with the company.





For the
subsequent option grants for all other Company associates, refer to the 2004
Stock Option /Stock Issuance Plan, whereby the exercise price of the
options granted was determined to be the $0.75 per share price and vests
according to 1/4 of the options vesting after the first 12 months and then 1/36
of the options vesting each month, where all options are vested after 48
continuous months of service.







The
Company has issued warrants as part of its private placements.  The
warrants are exercisable through February 28, 2014, at various prices with
certain incentive discounts to the exercise price available through February 28,
2011.  These shares were sold without registration under the
Securities Act by reason of the exemption from registration afforded by the
provisions of Section 4(2) thereof, and Rule 506 promulgated thereunder, as a
transaction by an issuer not involving any public offering. The amount
subscribed prior to December 31, 2007 was:




Date
            
            Number of
      Warrants
            
            
            Average
              ExerciseDecember 31,
      2007
            
            
            1,250,250
            
            
            $
            0.83





The
Company uses the Black-Scholes pricing model to estimate the fair value of
warrants issued. The resulting cost is expensed as a cost of
financing.  $342,925 was recognized for the year ended December 31,
2007 for the cost of such warrants.








NOTE
12  -  SUBSEQUENT EVENTS





Office
Lease





In April
2008 we received an electronic notice of Service of Process.  The
complaint was filed by Airport Industrial Complex, the landlord on the office
space we leased until February 2008.  Management has neither received
or reviewed the complaint and has contacted the attorney representing the
plaintiff to acquire the complaint and respond accordingly. Management has not
accrued any additional liabilities for the remainder of the lease, which runs
through October 2009.  In event that the landlord and the Company cannot
agree on the relocation to a more affordable space and continue our lease under
new financial arrangements, the Company is prepared to re-enter the prior
location and assume the lease payments, retroactive to March 1,
2008.








21
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007




Operations





At this
time, the Company is attempting to maintain its current operations while it
pursues strategic alternatives.  The Company’s Board and management
are actively exploring strategic alternatives that would preserve its core
business, 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.  At this
time, there is one known opportunity that would preserve the existing business
operations of Trycera.  This opportunity has resulted in the execution
of a letter of intent as filed under Form 8-K on April 4, 2008.  There
can be no assurance that management will be successful in executing any binding
or definitive agreements beyond the currently executed LOI, nor can there be any
assurance that it will close the transaction formally.  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.  In addition, the Board of Directors is
working 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
material definitive agreement with USSS.  Furthermore, the USSS group
has informed the Company of their intent to fund their $37,500 pursuant to the
Letter of Intent the week of April 14, 2008.





As stated
previously, the Company currently does not have any agreement with a potential
acquiror or merger partner in place and there can be no assurance that such an
agreement can be reached on terms acceptable to the Board of Directors, or at
all.  Furthermore, the Company does not have sufficient cash to meet
its working capital needs while it pursues its strategic alternatives beyond
early April 2008, unless 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 no monies raised.  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.











22
 TRYCERA
FINANCIAL, INC.
 Notes
to the Financial Statements
 December
31, 2007

















NOTE 13 – 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.

































23