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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 

 
FORM 10-Q
 

 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended September 30, 2012
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period From                     to                   
 
Commission File Number: 000-30872
 
TRYCERA FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
33-0910363
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
   
18100 Von Karman Ave, Suite 850, Irvine, California
92612
(Address of principal executive offices)
(Zip Code)
 
(949) 705-4480
(Registrant’s telephone number, including area code)

None
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  o    No  x
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ¨    No  ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  o                                                                                                                                Accelerated filer  o                
 
Non-accelerated filer    o  (Do not check if a smaller reporting company)                                             Smaller reporting company  x

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

At January 31, 2014 there were 611,808,446 shares of the registrant’s Common Stock outstanding, par value $0.001 per share.
 
 
TRYCERA FINANCIAL, INC.

Table of Contents
 
PART I FINANCIAL INFORMATION
PAGE
     
Item 1.
4
 
4
 
5
 
6
 
7
     
Item 2.
9
     
Item 3.
13
     
Item 4T.
13
     
     
PART II OTHER INFORMATION
 
     
Item 1.
14
     
Item 1A.
Risk Factors 14
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
14
     
Item 3.
15
     
Item 4.
15
     
Item 5.
15
     
Item 6.
15
     
16
 
 
FORWARD-LOOKING STATEMENTS
 
This report contains certain forward-looking statements and information that are based on assumptions made by management and on information currently available.  When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” and similar expressions, as they relate to our company or its management, are intended to identify forward-looking statements.  These statements reflect management’s current view of the company concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others the following:  changes in federal, state or municipal laws governing the distribution and performance of financial services; a general economic downturn; our startup phase of operations; reliance on third party processors and product suppliers; the inability to locate suitable acquisition targets; and other risks and uncertainties.  Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, estimated or expected.
 
Unless otherwise provided in this report, references to “we”, “us”, “our” and “Company” refer to Trycera Financial, Inc.
 
 
PART I
FINANCIAL INFORMATION

Item 1.                  Financial Statements
 
Trycera Financial, Inc.
Balance Sheets
 
   
September 30
   
December 31
 
   
2012
   
2011
 
   
(Unaudited)
       
Assets
           
Current Assets
           
Cash
  $ 2,031     $ 179  
Prepaid expenses and other current assets
    37,500       75,000  
Total Current Assets
    39,531       75,179  
                 
Property & Equipment, net
    9,548       11,143  
Total Fixed Assets
    9,548       11,143  
                 
Other Assets
               
Deposits
    -       6,711  
Total Other Assets
    -       6,711  
                 
Total Assets
  $ 49,079     $ 93,033  
                 
Liabilities & Stockholders’ Deficit
               
Current Liabilities
               
Bank overdraft
  $ -     $ 136  
Accounts payable
    657,392       557,165  
Accounts payable - related parties
    179,565       165,565  
Portfolio reserves
    34,774       34,774  
Accrued expenses
    1,330,199       962,069  
Unsecured notes, current maturities
    59,448       59,448  
Senior secured notes, current maturities
    77,500       77,500  
Convertible notes payable, net of discounts, current maturities
    661,147       575,929  
                 
Total Current Liabilities
    3,000,025       2,432,586  
                 
Long-term Liabilities
               
Unsecured notes, less current maturities
    25,000       -  
Convertible notes payable, net of discounts, less current maturities
    49,257       -  
Total Long-term Liabilities
    74,257       -  
                 
Total Liabilities
    3,074,282       2,432,586  
                 
Commitments
    -       -  
                 
Stockholders’ Deficit
               
Preferred stock, 20,000,000 shares authorized,
$.001 par value; none issued and outstanding
    -       -  
Common stock, 2,000,000,000 shares authorized at
$.001 par value; 551,273,447 and 502,901,447 shares
issued and outstanding, respectively
    551,273       502,901  
Additional paid in capital
    9,547,019       8,447,791  
Prepaid stock compensation
    (802,002 )     (42,585 )
Accumulated deficit
    (12,321,493 )     (11,247,660 )
Total Stockholders’ Deficit
    (3,025,203 )     (2,339,553 )
Total Liabilities & Stockholders’ Deficit
  $ 49,079     $ 93,033  
 
The accompanying notes are an integral part of these financial statements.
 
 
Trycera Financial, Inc.
 Statements of Operations
(unaudited)
 
   
For the Three Months Ended
   
For the Nine Months Ended
 
   
Sep 30,
   
Sep 30,
   
Sep 30,
   
Sep 30,
 
   
2012
   
2011
   
2012
   
2011
 
Revenues
                       
Stored value
  $ 813     $ -     $ 1,652     $ 149  
      813       -       1,652       149  
                                 
Cost of Sales
    295       318       722       2,521  
 Gross Profit (loss)
    518       (318 )     930       (2,372 )
                                 
Expenses
                               
Salaries and wages
    150,000       203,077       322,500       568,757  
Stock based compensation
    112,000       115,998       192,000       361,204  
Professional fees
    9,000       20,468       29,000       92,097  
General & administrative
    125,382       170,194       382,809       837,093  
                                 
Total Expenses
    396,382       509,737       926,309       1,859,151  
                                 
Loss from Operations
    (395,864 )     (510,055 )     (925,379 )     (1,861,523 )
                                 
Other Income (Expense)
                               
Interest expense
    (23,604 )     (35,778 )     (148,454 )     (116,104 )
Total Other Income (Expense)
    (23,604 )     (35,778 )     (148,454 )     (116,104 )
                                 
Loss before tax
    (419,468 )     (545,833 )     (1,073,833 )     (1,977,627 )
Income tax
    -       -       -       -  
Net Loss
  $ (419,468 )   $ (545,833 )   $ (1,073,833 )   $ (1,977,627 )
                                 
Basic loss Per Share:
                               
                                 
Loss per share
  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
 Net Loss Per Share
  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
                                 
Weighted Average Shares
    543,077,795       481,293,837       523,554,268       465,732,214  
 
The accompanying notes are an integral part of these financial statements.
 
 
Trycera Financial, Inc.
Statements of Cash Flows
(unaudited)
 
   
For the Years Ended
 
   
September 30
   
September 30
 
   
2012
   
2011
 
Cash Flows from Operating Activities
           
Net Loss
  $ (1,073,833 )   $ (1,977,627 )
Adjustments to reconcile net loss to net cash used by operations;
               
Depreciation and amortization
    1,595       1,595  
Amortization of prepaid stock compensation
    368,583       88,688  
Amortization of discount on note payable
    85,474       43,362  
Stock issued for services
    -       420,000  
Stock options and warrants
    -       361,204  
Changes in operating assets and liabilities;
               
(Increase) decrease in prepaid and other current assets
    37,500       84,262  
(Increase) decrease in deposits/reserves
    6,711       -  
Increase (decrease) in accounts payable
    114,227       141,274  
Increase (decrease) in accrued expenses
    368,130       438,454  
Net Cash Used by Operating Activities
    (91,613 )     (398,788 )
                 
Cash Flows from Investing Activities
               
Payments for definite life intangible assets
    -       (143,104 )
Net Cash Provided by Investing Activities
    -       (143,104 )
                 
Cash Flows from Financing Activities
               
Proceeds from the sale of common stock
    18,600       380,000  
Proceeds from issuance 10% Convertible notes
    75,000       150,000  
(Increase) decrease in bank overdraft
    (136 )     -  
Payment of unsecured note
    -       (3,000 )
Net Cash Provided by Financing Activities
    93,464       527,000  
                 
Net Increase (Decrease) in Cash and Cash Equivalents
    1,851       (14,892 )
Cash and Cash Equivalents at Beginning of Period
    179       15,800  
Cash and Cash Equivalents at End of Period
  $ 2,030     $ 908  
                 
Cash Paid For:
               
Interest
  $ -     $ -  
Income Taxes
  $ -     $ -  
Non-Cash Financing Activities:
               
Common stock/options issued for services and deferred compensation
  $ 2,352,000     $ 415,000  
Common stock issued for accounts payable and accrued expenses
  $ 656,000     $ 7,500  
Common stock issued for debt
  $ -     $ 70,000  
Common stock issued for prepaid assets
  $ -     $ -  
 
The accompanying notes are an integral part of these financial statements.
 
 
Trycera Financial, Inc.
Notes to Consolidated Financial Statements
September 30, 2012
(unaudited)

 
NOTE 1 – GENERAL
 
The accompanying condensed financial statements of the Company have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations.  These condensed financial statements reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the results of operations of the Company for the periods presented.  These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2011.  The results of operations for the nine months ended September 30, 2012, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2012.

NOTE 2 – 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 minimal cash on hand and few material assets outside key intellectual property.  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, grow revenues organically through new program launches and marketing campaigns and/or a profitable business venture to acquire or merge.

NOTE 3 – SIGNIFICANT TRANSACTIONS

On September 4, 2012, the Company entered into a two year loan with a private individual for twenty five thousand dollars ($25,000).  This loan shall accrue simple interest at a rate of ten percent (10%) per annum.

On August 22, 2012, the Company was awarded a judgment against GrupoMex Holdings, LLC and Leticia R Castro in the amount of $1,144,957 from the Superior Court of California, County of Los Angeles, case number BC463637.

On August 17, 2012, the Company entered into an Addendum to the existing Consulting Agreement with W3 Design Team, LLC in which the Consultant agreed to continue to work for the Company on an accrual basis of $5,000 per month.  Such compensation will continue to accrue until the Company secures a minimum investment of $250,000.

On July 1, 2012, the Company entered into a non-renewable consulting agreement with Norman Hardy, an individual, for a term of one year.  The agreement can be terminated at any time by either party with thirty day written notice.  Under this agreement, the consultant will utilize business contacts in the auto industry to help promote the Company’s products and services.  The consultant is to be paid $1,200 per month and compensation will accrue until the Company secures a minimum of $250,000 in investment dollars.  The consultant is granted options to purchase 7,500,000 shares of Company’s restricted stock at an exercise price of $0.001.  If Company does not secure minimum financing by October 1, 2012, the Consulting Agreement shall immediately terminate and all accrued and unpaid consideration due to Consultant shall be waived and forgiven by Consultant.
 
 
Trycera Financial, Inc.
Notes to Consolidated Financial Statements
September 30, 2012
(unaudited)

 
On July 1, 2012, the Board of Directors, approved employment contract for Shampa Mitra-Reddy. This fulltime employment agreement became effective July 1, 2012, and is for a term of three years.  It is renewable in yearly increments unless terminated prior to expiration of a term.  Under the agreement, Ms. Mitra-Reddy is employed as Vice President of Business Development. The base salary is $180,000 per year, payable in the month increments of $15,000.  As a signing bonus for entering into the agreement, the party received 18,000,000 shares and will be issued 4,000,000 shares per quarter for eight (8) quarters. The employee is also eligible for performance bonuses and to participate in the Company’s stock option plan. Employee is also entitled to participate in employee benefit plans, including health and retirement plans created hereafter.

 NOTE 4 – SUBSEQUENT EVENTS

Pursuant to FASB ASC 855-10-50-1, the Company has evaluated subsequent events through the date these financial statements to be issued.

Complete Stock Issuance subsequent to September 30, 2012. The Company issued a total of 60,535,000 shares between October 1, 2012 and January 31, 2014.  The total shares issued per employment agreements was 45,435,000.  The total shares issued for consulting services was 12,500,000 and the total shares issued for investment purposes was 2,600,000.

On October 24, 2012, the Company entered into a three month loan with a private individual for ten thousand dollars ($10,000).  The interest to be paid on this loan is Five Hundred Thousand (500,000) shares of restricted common stock of Company.

 
 
Item 2.                  Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following discussion should be read in conjunction with our financial statements and related notes thereto as filed with the Securities and Exchange Commission.

Overview

From 2004 until 2008 the Company was in the business of developing, deploying and marketing semi-custom and customized branded prepaid and prepaid card solutions.  Due to continued losses from operations during 2009, the Company began winding down its principal business operations and commenced a search for a new business venture.  The Company has no material assets and significant liabilities. Former board members and management were unsuccessful in securing a new business venture for the Company and on January 22, 2009, transferred control of the Company to Ronald N. Vance, former company counsel, to seek for and, if possible, locate a suitable operating business venture willing to take control of the Company.

On August 12, 2009, the Company changed its status from shell Company to operating Company.  Pursuant to business operations re-established in 2009, the Company restarted operations.  The core focus of the restarted operations is marketing prepaid card products, payment reporting products and a suite of personal financial products and services.  As a result, and at this time, the Company does not plan to reinstate its previous program management status, and will instead rely on third party processors, program managers and banks to coordinate, issue and manage prepaid card portfolios on behalf of the Company.  The Company will focus on the marketing of network branded third party card programs that can adopt our payment reporting platform within their technical infrastructure.  By leveraging existing card platforms and portfolios, we should be able to aggregate more payment reporting customers. The Company has also begun negotiations to engage businesses in the sales process.  The targeted focus of the Company is to partner with businesses which deliver non-bank personal and financial services such as insurance agencies, micro-loan centers, rent to own, local/regional credit unions and check cashing businesses.   As of the date of this report, the Company has been engaged in a host of negotiations for various credit products, budgeting tools, payment reporting products, strategic arrangements and operating agreements.  While various new agreements are in place, it is indeterminable how such agreements may positively or adversely affect the business.  As a result, the Company, while attempting to generate newfound revenue streams, will continue seeking opportunities for outside business ventures and raising funds to aid in launching new opportunities, work to begin generating organic revenues and developing strategic alliances and payment reporting partnerships.

Recent Developments

For the three quarters ending September 30, 2012, all primary operational efforts have been focused on finalizing the technical infrastructure for the planned rollout of the Company’s payment reporting engines and financial budgeting program.  This effort continues as a spill over from the delays associated with the restarted operations dating back to 2009.  Failures to secure sustained funding for operations have hampered operational efforts and delayed product rollouts.  The shortfalls in funding are the direct result of three groups over the course of a two year period failing to deliver on promised funds under signed placement agreements.  Despite working capital shortfalls and operational delays, the Company continues its ongoing technical build out, and the Company has continued working closely with existing and new partners and associations in efforts to position the suite of products and services for a late 2012 calendar year launch.  Throughout the first nine quarters and subsequently thereafter, the Company also engaged in signing new agreements, terminating existing agreements and restructuring deals to help ensure the viability of the entity long-term.  Key management personnel have continued entering into new distribution, strategic partnerships and operating agreements in support of the payment reporting and financial products business that is now the backbone of the payment reporting business.   The Company has refocused the operational strategy on products and services while allowing any prepaid card to become a conduit for payment reporting services and other financial products currently being marketed by the Company.  The Company has refocused away from needing to be a marketer of prepaid cards and instead prefers to align with any prepaid card issuer in efforts to develop a rapport for payment and recurring payment reporting.  During the first three quarters, the Company made limited progress in marketing the primary products and services in support of continued operations.  In continuing with the direction outlined throughout the past two years, the Company continued to focus on developing marketing partnerships to facilitate the distribution of prepaid debit cards, personal financial services and payment reporting services, all of which are designed to assist consumers in managing individual personal finances, including spending, budgeting and financial awareness.  As part of the roadmap to further solidify the Company’s payment reporting efforts, the Company has revamped its operational strategy and is no longer seeking a customized network branded card program.  The Company has elected to use third party providers for all card-based products and will continue to evaluate any need for a fully customized program and renewed program management status.  Based on the economics related to a full custom card solution, the third party provider gives the Company flexibility and access to networks and partnerships that the Company alone could not underwrite nor fund.
 
 
The Company believes that this strategy will be able to offer more predictable low cost model that will provide our customers and strategic distribution partners the flexibility of working with wide reaching portfolio program channels and will better align cardholders with a suite of financial tools that include personal budgeting tools, online card balance viewing, bill payment, convenient reloading options online or at retail and a financial management spending analysis tool.  We piloted a similar program in the past, but without specific target or installed cardholder base, the Company is uncertain when we may anticipate launching this program in conjunction with our payment reporting product and budgeting tools.

In conjunction with continuing efforts to expand operations and generate revenue, the Company spent additional time in the first three quarters on aligning the payment reporting business with key industry associations, industry experts and governmental agencies in order to foster long term alliances.

In addition, a number of initiatives undertaken during the first three quarters by the Company have failed or taken longer than expected or anticipated.  Capital constraints coupled with key management time constraints, increasing regulatory requirements, lengthening approval timeframes and vendor payment shortfalls and increasing legal procedures all contributed to slower than planned marketing as well as delays in generating organic revenues in the first quarter.  The Company expects that organic revenues will be generated in the first half of 2013 to allow the Company to hire third parties to staff and support the program development and primary growth objectives.

Throughout the third quarter of 2012, the Company was contacted by several vendors demanding payment for prior services.  The Company, as of the date of this report, is underfunded and is nearly insolvent.  The new financial commitments entered into in 2011 was intended to provide improved funding over the coming quarters and was expected to allow the Company to remain focused on the core business and delivery of the payment reporting personal financial products and services.  However, slow delivery of working capital and delays and misrepresentations in funding overall have resulted in the near collapse of the Company.  The Company continues to negotiate with new vendors, key vendors and prior service providers.  Key management personnel have accrued wages and continue to accrue wages and accept limited or partial payments for services.  In addition, key management personnel are underwriting many operational expenses of the Company and are accruing those expenses as well. It is anticipated that key management personnel and key vendors and prior service providers shall be reimbursed accordingly once additional working capital is invested.  A continued and substantial backlog of liabilities remains on the records of the Company, but management remain confident that those liabilities will be paid, negotiated, reduced or addressed in the coming quarters.  Of the major items outstanding, an area of concern are the lapsed settlement agreements with former directors Knitowski, Dang and their related parties, Dang, Ecewa, Curo and Sagoso.  The Company has not been in contact with certain principals as listed above for some time.  Since the agreements have lapsed the Company has had intermittent contact with certain principals in the nine months ending September 30, 2012.  It is expected that the Company will re-engage those parties listed above in the coming quarter to arrange cash payments or alternative arrangements in order to mitigate any languishing liabilities to those particular parties.

Key Accounting Policies

Key accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions.  There were no changes to our key accounting policies for the quarter ended September 30, 2012.
 
Results of Operations

For the nine months ended September 30, 2012

In the third quarter of 2012 we were focused on the technical infrastructure and executing distribution, marketing and strategic agreements. Delays in delivering marketing and services coupled with delayed vendor payments caused us to miss the opportunity to generate any material revenues during the quarter.  As a result the Company had minimal revenues for the quarters ended September 30, 2012 and September 30, 2011.
 
Revenue

Revenue from continuing operations was $813 and $0 for the quarters ended September 30, 2012 and 2011, respectively, representing an increase of $813 or effectively 100%.  As previously discussed, we revised the business strategy to focus on restarting operations and take the company into financial services marketing and move away from direct program management.

Cost of Sales and Gross Profit

Cost of sales was $295 and $318 for the quarters ended September 30, 2012 and 2011.  The decrease was nominal and incudes some nominal operating cost associated with the commencement of programs and operations.
 
 
The resulting gross profit (loss) was $518 and $(318) for the quarters ended September 30, 2012 and 2011, respectively.  Management expects gross profit margin to remain unpredictable and volatile as the new operations begin.  Fluctuations can be anticipated due to uncertainties in accessing markets coupled with higher product costs mixed with the volatility of entering markets where products have been commoditized.  Management believes that by eliminating previously high fixed processing and banking costs associated with program management, the Company can focus on improving margins by delivering organic revenues through new marketing partnerships and alliances.

Operating Expenses

Operating expenses were $396,382 and $509,737 for the quarters ended September 30, 2012 and 2011, respectively, representing a decrease of $113,355.  The key components of our third quarter 2012 operating expense are salaries and wages $150,000, professional fees $9,000, general and administrative $125,382 and stock based compensation $112,000.

Salaries and wages expense were $150,000 and $203,077 for the quarters ended September 30, 2012 and 2011, respectively, representing a decrease of $53,077. The decrease is largely due to the reduction in headcount and the fact that the Company has now only three employees who are working largely under accrued wages and non-cash compensation until such a time certain milestones are achieved or the Company has the funds to pay cash compensation or until the Company and employees mutually agree to new compensation terms.

General and administrative expenses were $125,382 and $170,194 for the quarters ended September 30, 2012 and 2011, respectively, representing a decrease of $44,812.  The decrease is largely due to the reduction in all costs which have been curtailed until certain milestones are achieved or until the Company has the funds to incur additional expenses.
Net loss

We incurred net losses of $419,468 and $545,833 for the quarters ended September 30, 2012 and 2011, respectively, representing a decrease in net loss of $126,365.  As we continue our general business operations, organic growth in conjunction with strategic alliances and a potential reverse acquisition or merger opportunity, we expect to improve on net losses when 2013 is compared to 2012.

For the nine months ended September 30, 2012

In the first nine months of 2012 we were focused on the technical infrastructure and executing distribution, marketing and strategic agreements.  Delays in delivering marketing and services coupled with delayed vendor payments caused us to miss the opportunity to generate any material revenues during the quarter.  As a result there was a drop of 100% over the third quarter 2011 comparable period.  The decline in revenue was attributed to the winding up of business operations in subsequent quarters in 2011 and the elimination of the card portfolio, financial services operations and related programs throughout the remainder of 2012.
 
Revenue

Revenue from continuing operations was $1,652 and $149 for the nine months ended September 30, 2012 and 2011, respectively, representing an increase of $1,503 or effectively 1008%.  As previously discussed, we revised the business strategy to focus on restarting operations and take the company into financial services marketing and move away from direct program management.

Cost of Sales and Gross Profit

Cost of sales was $722 and $2,521 for the nine months ended September 30, 2012 and 2011.  The decrease was nominal and incudes some nominal operating cost associated with the commencement of programs and operations.

The resulting gross profit (loss) was $930 and $(2,372) for the nine months ended September 30, 2012 and 2011, respectively.  Management expects gross profit margin to remain unpredictable and volatile as the new operations begin.  Fluctuations can be anticipated due to uncertainties in accessing markets coupled with higher product costs mixed with the volatility of entering markets where products have been commoditized.  Management believes that by eliminating previously high fixed processing and banking costs associated with program management, the Company can focus on improving margins by delivering organic revenues through new marketing partnerships and alliances.

Operating Expenses

Operating expenses were $926,309 and $1,859,151 for the nine months ended September 30, 2012 and 2011, respectively, representing an increase of $932,842.  The key components of our operating expense are salaries and wages $322,500 professional fees $29,000, general and administrative $382,809 and stock based compensation $192,000.
 
 
Salaries and wages expense were $192,000 and $361,204 for the nine months ended September 30, 2012 and 2011, respectively, representing a decrease of $169,204. The decrease is largely due to the reduction in headcount and the fact that the Company has now only three employees who are working largely under accrued wages and non-cash compensation until such a time certain milestones are achieved or the Company has the funds to pay cash compensation or until the Company and employees mutually agree to new compensation terms.

General and administrative expenses were $382,809 and $837,093 for the nine months ended September 30, 2012 and 2011, respectively, representing a decrease of $454,284.  The decrease is largely due to the reduction in all costs which have been curtailed until certain milestones are achieved or until the Company has the funds to incur additional expenses.
Net loss

We incurred net losses of $1,073,833 and $1,977,627 for the nine months ended September 30, 2012 and 2011, respectively, representing a decrease in net loss of $903,794.  As we continue our general business operations, organic growth in conjunction with strategic alliances and a potential reverse acquisition or merger opportunity, we expect to improve on net losses when 2013 is compared to 2012.

Liquidity and Capital Resources

As of September 30, 2012, cash totaled $2,031 as compared with $179 at December 31, 2011, resulting in an increase of $1,852 in cash and cash equivalents.  Working capital deficit was ($2,960,494) at September 30, 2012, as compared with working capital deficit of ($2,357,407) at December 31, 2011.  This decrease in working capital was a result of using new funds and stock to fund operations and related expenses.
 
The Company is currently being funded through a mix of equity investments and convertible note instruments to supply working capital for operations.  The Company has a substantial backlog of liabilities and will need to negotiate and reduce liabilities in order to remain on a viable business path.  If vendors, agents, suppliers and third parties are unwilling to agree to terms more favorable to the Company, there is a likelihood that the liabilities could materially and adversely affect day to day operations.  The funds invested and committed are primarily focused on driving business growth and not specifically earmarked to extinguish large tranches of debt or the backlog of liabilities. In event that the Company is unable to mitigate the affects of the liabilities, the Company may seek any and all necessary protections afforded under various state and federal laws.  The Company plans to continue to collect equity investments and debt instruments for the remainder of 2012 in order to finance continued operations and to finance potential merger and/or acquisition investments.  In an event where the Company faces immediate insolvency, the Company may pursue the sale of its intellectual property, which may or may not have marketable value.

Off-Balance Sheet Arrangements

During the quarter ended September 30, 2012, we did not engage in any off-balance sheet arrangements.

Stock-Based Compensation
 
"On June 30, 2009, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162. On the effective date of this standard, FASB Accounting Standards Codification™ (ASC) became the source of authoritative U.S. accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the Securities and Exchange Commission (SEC). FASB ASC significantly changes the way financial statement preparers, auditors, and academics perform accounting research."
 
"This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.  If an accounting change results from the application of this guidance, an entity should disclose the nature and reason for the change in accounting principle in their financial statements.  This new standard flattens the GAAP hierarchy to two levels: one that is authoritative (in FASB ASC) and one that is non-authoritative (not in FASB ASC). Exceptions include all rules and interpretive releases of the SEC under the authority of federal securities laws, which are sources of authoritative GAAP for SEC registrants, and certain grandfathered guidance having an effective date before March 15, 1992. This standard creates Topic 105, Generally Accepted Accounting Principles, in FASB ASC."
 
"FASB Statement No. 168 is the final standard that will be issued by FASB in that form.  It was added to FASB ASC through Accounting Standards Update No. 2009-02 on June 30, 2009.  There will no longer be, for example, accounting standards in the form of statements, staff positions, Emerging Issues Task Force (EITF) abstracts, or AICPA Accounting Statements of Position.  Instead, FASB will issue Accounting Standards Updates.  FASB will not consider Accounting Standards Updates as authoritative in their own right.  Instead, they will serve only to update FASB ASC, provide background information about the guidance, and provide the basis for conclusions on changes made to FASB ASC."
 
 
"FASB ASC is a major restructuring of accounting and reporting standards designed to simplify user access to all authoritative U.S. generally accepted accounting principles (GAAP) by providing the authoritative literature in a topically organized structure.  FASB ASC disassembled and reassembled thousands of nongovernmental accounting pronouncements (including those of FASB, the EITF, and the AICPA) to organize them under approximately 90 topics and include all accounting standards issued by a standard setter within levels A-D of the current U.S. GAAP hierarchy.  FASB ASC also includes relevant portions of authoritative content issued by the SEC, as well as selected SEC staff interpretations and administrative guidance issued by the SEC; however, FASB ASC is not the official source of SEC guidance and does not contain the entire population of SEC rules, regulations, interpretive releases, and staff guidance. Moreover, FASB ASC does not include governmental accounting standards.  FASB ASC is not intended to change U.S. GAAP or any requirements of the SEC."
 
Subsequent Events

The following material events occurred subsequent to the quarter ended September 30, 2012:

Complete Stock Issuance subsequent to September 30, 2012. The Company issued a total of 60,535,000 shares between October 1, 2012 and January 31, 2014.  The total shares issued per employment agreements was 45,435,000.  The total shares issued for consulting services was 12,500,000 and the total shares issued for investment purposes was 2,600,000.

On October 24, 2012, the Company entered into a three month loan with a private individual for ten thousand dollars ($10,000).  The interest to be paid on this loan is Five Hundred Thousand (500,000) shares of restricted common stock of Company.
 
Item 3.                  Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

Item 4T.               Controls and Procedures
 
Controls and Procedures

Any control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that its objectives will be met.  Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the Company’s “disclosure controls and procedures”, as such term is defined in Rules 13a — 15(e) and 15d — 15(e) of the Securities Exchange Act of 1934 (“Exchange Act”) as of the end of the period covered by the report.

Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that, as of September 30, 2012, the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that (i) the information required to be disclosed by us in this Report was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

With the participation of the Company’s management, including its Chief Executive Officer and Principal Financial Officer, the Company also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the Company’s fiscal quarter ended September 30, 2012, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.  Based on such evaluation, management concluded that, as of the end of the period covered by this report, there have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
PART II
OTHER INFORMATION

Item 1.                  Legal Proceedings
 
The Company continues to receive demands for payments from creditors.  The Company has insufficient funds to defend these actions or to pay the creditors.  However, management has been proactive to reach out to most creditors in an attempt to negotiate or resolve outstanding debt.  In addition, the Company is proactively working with interested third parties to convert debt on behalf of the Company.  Converted debt notifications will be filed on Form 8-K with the Securities and Exchange Commission.

The Company has received erroneous demands from certain individuals related to compensation and shareholder interests.  As a result, the company has retained a law firm to protect our various interests and authorized various cease and desist orders to halt the dissemination of false and misleading information.

On August 22, 2012, the Company was awarded a judgment against GrupoMex Holdings, LLC and Leticia R Castro in the amount of $1,144,957 from the Superior Court of California, County of Los Angeles, case number BC463637.

On June 17, 2011, the Company filed a complaint against GrupoMex Holdings LLC, in Los Angeles Superior Court.  The complaint is related to a contract breach committed by GrupoMex Holdings LLC in which GrupoMex failed to deliver equity funds in the amount of $2,500,000 within 45 days of August 17, 2010, which would have been October 1, 2010.  The Company had detrimentally relied on such funding and as of the date of the complaint, GrupoMex Holdings LLC had invested a total of $157,500 or 6.3% of the committed funding amount.
 
             On January 10, 2012, the Company received a Notice of Claim and Conference from the Labor Commissioner, State of California Case Number 18-84756 BB.  The case was brought by Kevin Goldstein, our former Chief Technology Officer.  Mr. Goldstein stated he resigned from the Company effective November 21, 2011 as a result of the Company’s failure to maintain proper insurance and alleged the Company was in breach of his employment agreement dated October 25, 2010. Pursuant to the Claim, Mr. Goldstein is seeking $90,035.71 in back wages.  The Company intends to vigorously defend this Claim.

On January 31, 2012, the Company received a Notice of Claim and Conference from the Labor Commissioner, State of California Case Number 18-84792 BB.  The case was brought by Michael G. Nathans, our former President of Credit Services.  Mr. Nathans stated he resigned from the Company effective November 21, 2011 as a result of the Company’s failure to maintain proper insurance and alleged the Company was in breach of his employment agreement with the Company dated September 17, 2010. Pursuant to the Claim, Mr. Nathans is seeking $152,054 in back wages.  The Company intends to vigorously defend this Claim.

On April 4, 2012, the Company received a subpoena from the California Department of Corporations requesting certain documents and records.  The Company intends to comply fully with the subpoena.

Item 1A.               Risk Factors
 
        In addition to the other information set forth in this report, you should carefully consider the factors discussed under the caption “Risk Factors” in Part I, "Item 1. Description of Business" in our Annual Report on Form 10-K for the year ended December 31, 2011 which could materially affect our business prospects, financial condition or future results. There have been no other material changes during the three months ended March 30, 2012 to the risk factors discussed in the periodic report noted above.
 
Item 2.                  Unregistered Sales of Equity Securities and Use of Proceeds

None
 
 
Item 3.                  Defaults Upon Senior Debt
 
None

Item 4.                  (Removed and Reserved)

Item 5.                  Other Information

Item 6.                  Exhibits
 
 
101.INS
 
XBRL Instance Document
     
101.SCH
 
XBRL Taxonomy Extension Schema
     
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase
     
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase
     
101.LAB
 
XBRL Taxonomy Extension Label Linkbase
     
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase
 

SIGNATURE PAGE FOLLOWS
 
 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Trycera Financial, Inc.
 
       
Date: February 28, 2014
By:
/s/ Ray A. Smith
 
   
Ray A. Smith, President
 
   
(Principal Executive Officer)
 
       
 
 
By:
/s/ Ray A. Smith
 
   
Ray A. Smith, Principal Financial Officer
 
   
(Principal Financial Officer)
 
       
 
 
 
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