Telemetrix, Inc.

Notes to Consolidated Financial Statements December 31, 2007

A summary of stock option and warrant activity is as follows:

		Number     of     shares			Weighted  average  exercise  price
Balance at December 31, 2005		450,000			$2.04
Granted		22,000,000			$0.02
Exercised/Forfeited		-
Balance at December 31, 2006		22,450,000
Granted		-
Exercised/Forfeited		(6,666,667	)
Balance at December 31, 2007		15,783,333			$0.02
Exercisable at December 31, 2007		12,450,000

Weighted average remaining contractual life – 4 years
Weighted average fair value - $.02

NOTE 8. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office space from an officer of the Company. The rent is $2,500 per month pursuant to a lease that expired October 31, 2007. The Company is currently renting office space from this officer on a month-to-month basis.

In addition, the Company leases office space pursuant to a lease expiring in April 2009 at a monthly rental of $980. Future minimum payments are as follows: 2008 $11,760 – 2009 $3,920.

Litigation

On January 16, 2007 Tracy Broadcasting Corporation filed a complaint in the District Court for Scottsbluff County, Nebraska, against the Company, in Case No. CI-07 37. Tracy Broadcasting Corporation is owned by Michael Tracy, a former CEO and Director of the Company. Mr. Tracy is also a major shareholder of the Company. The Complaint alleges that the Company owes Tracy Broadcasting Corporation $467,000 plus accrued interest at 10% per annum for outstanding loans under a promissory note issued in December 2004. The Company’s records indicate that the promissory notes were repaid in full and dispute the claim. The Company filed a motion to compel arbitration in Denver, Colorado. On November 27, 2007 the motion was denied and the Company has appealed the decision with the Nebraska Supreme Court.

On February 2, 2007 Michael J. Tracy filed a complaint in the County Court for Scottsbluff County, Nebraska, against the Company, in Case No. CI-07 169. Michael Tracy is a former CEO and Director of the Company. Mr. Tracy is also a major shareholder of the Company. The Complaint alleges that the Company owes Mr. Tracy $3,496 in expenses associated with a lease agreement that expired October 31, 2006. The case was dismissed with prejudice on May 8, 2007.

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Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007

On April 12, 2006, Michael J. Tracy filed a complaint in the District Court for Scottsbluff County, Nebraska, against the Company, in Case No. CI-06-291. Mr. Tracy is the former CEO and Director of the Company. The Complaint alleges that the Company owes Mr. Tracy $3,378,129 as of April 1, 2006, including principal and interest for loans Mr. Tracy made to the Company at various times in 2001 and 2002. The loans are represented by convertible demand notes. On May 26, 2003, Mr. Tracy and the Company entered into an agreement for the exchange and conversion of these notes for preferred stock of Telemetrix. The Complaint alleges that Telemetrix has failed to perform this agreement. In November 2006, the Company tendered 23,894,351 shares of common stock to Mr. Tracy in satisfaction of the May 26, 2003, Exchange and Conversion Agreement and 3,472,789 shares of common for deferred compensation. Additionally, the Company has offered Mr. Tracy the right to exchange the 23,894,351 share of common stock for 101,551 shares of Series D preferred stock and 3,584,151 shares of common stock pursuant to the May 26, 2003 Agreement. Mr. Tracy returned the shares tendered claiming that he did not agree to accept common shares in lieu of preferred shares. The Company filed counterclaims against Mr. Tracy in connection with the Complaint and filed a motion to compel arbitration in Denver, Colorado. On November 27, 2007, the motion to compel arbitration was ordered and the claim was dismissed from District Court in Nebraska. This case docketed in the District Court for Scotts Bluff County, Nebraska, is now closed. As of the date of the financial statements Mr. Tracy has not filed an arbitration action in Denver, Colorado.

On September 10, 2004, the Company filed a Complaint in the United States District Court in the Southern District of New York against Michael Tracy (“Tracy”), Michael L. Glaser (“Glaser”), and William W. Becker (“Becker”), in case number 04CV7255. The Complaint sought an award for compensatory damages, an injunction against Tracy, Glaser and Becker for breach of fiduciary duty, costs and expenses for litigation (except fees and other disbursements) including reasonable attorney’s fees, and against Tracy for conversion, and such other and further relief as may be deemed just and proper.

On September 16, 2004, the Company filed a complaint in the United States District Court for the District of Nebraska, in case number 7:04CV5020, against TowerGate Finance, Ltd., (“TowerGate”) and Nyssen, LP (“Nyssen”). The Complaint alleges fraudulent misrepresentations against TowerGate, fraudulent concealment against Nyssen, breach of fiduciary duty against TowerGate, civil conspiracy against TowerGate and Nyssen, breach of contract against TowerGate, and breach of the covenant of good faith and fair dealings against TowerGate. The Complaint seeks preliminary and permanent injunction, declaratory judgment and an accounting. The Complaint also requests a jury trial.

On December 10, 2004, the Company, Tracy, Glaser and Becker and our other majority shareholders and TowerGate and Nyssen entered into a binding agreement (“Agreement”) dated as of November 30, 2004, in which the parties agreed to dismiss the above described lawsuits, and settle the dispute between them and between the Company and TowerGate and Nyssen. The agreement calls for the appointment of an interim board of directors and stipulated that so long as Becker and affiliated entities and TowerGate/Nyssen hold in excess of 25% of the outstanding voting common shares that they will be entitled to appoint two directors.

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Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007

All parties to the Settlement Agreement are either beneficial owners of the Company’s common stock, current or proposed members of the Company’s management, and/or are parties or affiliates of parties involved in the Litigation that gave rise to the Settlement Agreement. The specific terms of the Settlement Agreement, including the relationships among the parties to the Settlement Agreement is discussed in the Schedule 14A Proxy Statement filed with the SEC on September 15, 2006 and sent to the shareholders in October 2006.

In the Settlement Agreement, the parties agree that the parties will undertake the following actions:

Increase the Company’s authorized share capital;

Effect material share issuances to Becker Capital Management;

Effect material share issuances to Nyssen LP and TowerGate Finance Limited; and Adopt a stock option plan for the Company’s existing and new management.

The Company is also involved in various legal actions arising in the normal course of business management believes that such matters will not have a material effect upon the financial position of the Company.

Other

On October 19, 2006, the Company filed a Request for Arbitration with the World Intellectual Property Organization against UT Starcom, Inc., the successor in interest to Telos Technologies, Inc., the manufacturer of the Sonata SE switching system (GSM switch). The Request for Arbitration was accepted on October 24, 2006. The dispute relates to a Master Purchase and License Agreement dated October 22, 2003 for a Sonata SE Global System for Mobile Communications switching system. The Company requests arbitration of the following claims: (1) breach of contract; (2) breach of good faith and fair dealing; (3) fraudulent misrepresentations; (4) fraudulent inducement; (5) negligent misrepresentation; (6) intentional interference with existing contractual relations; (7) intentional interference with prospective economic relations; (8) negligent interference with existing economic relations; and (9) negligent interference with prospective economic relations. The Company claims that UT Starcom failed to perform from the time of installation and UT Starcom failed to deliver five significant features and functionality that UT Starcom represented would be available at the time the Company purchased the GSM switch. These features and functionality include among others, (a) E911-Phase II functionality in the GSM Switch so that Telemetrix could comply with the FCC’s mandated 911 services requirement by June 30, 2006; a GSM feature including intelligent network functions into a GSM network system; CALEA, which imposes upon Telemetrix a statutory obligation to ensure that its equipment, facilities or services that provide a customer or subscriber with the ability to originate, terminate or direct communications. Telemetrix requests entry of an award during the arbitration in its favor and against UT Starcom as follows:

	A.	for general damages in an amount to be established at trial;
	B.	alternatively, a rescission of the Agreement;
	C.	for cost of the arbitration, including attorneys’ fees; and
	D.	for such other and further relief as the Arbitrator may deem just and fair.

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Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007

NOTE 9. CONCENTRATIONS

During the year ended December 31, 2007, three customers accounted for approximately 47%, 30% and 13%, a total of 90%, of total revenue.

NOTE 10. NON-RECURRING CHARGES

In 2007, the Company recorded a gain on the extinguishment of debt of $146,018 as a result of debts going beyond the statute of limitation for collection. Although there are no assurances that our creditors will not file a suit against us for payment, the Company believes that they have substantial evidence to ask a judge to dismiss the suit on the grounds that the statute of limitations has expired. In 2006, the Company recorded a gain on the extinguishment of debt of $809,265. Of the recorded 2006 gain, $151,608 is from the settlement of debt with vendors and $657,657 is the result of debts going beyond the statute of limitations for collection.

The Company recorded a loss on disposal of assets of $661,210 in 2006. The Company discontinued operating its network switching services and wireless paging services in Gering, Nebraska in 2006. The Company wrote off $1,641,592 of network switching and paging equipment and other fixed assets associated with its operations in Gering.

NOTE 11. SUBSEQUENT EVENTS

As of the date of this report, the Company has received $100,000 in advances in the form of the convertible note to Nyssen described in Note 4.

The Company entered into a five year lease with an officer of the Company on January 1, 2008. The lease is for office space of 3,199 square feet for $5,065 per month. The five year lease includes an annual increase of 3% per annum.

Minimum annual rentals are as follows:

2008		$ 60,780
2009		62,603
2010		64,482
2011		66,416
2012		68,408
		$322,689

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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE.

Not applicable

ITEM 8A. CONTROLS AND PROCEDURES.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Acts reports is recorded, processed and summarized and is reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure control procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the date of this report, the Company's management, including the President (principal executive officer) and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the evaluation, the Company's President (principal executive officer) and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company's periodic SEC filings. There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company's management carried out its evaluation.

There have been no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation.

Part III.

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

Directors and Executive Officers: Our Directors may appoint new directors and elect officers at regular meetings with proper notification. Our shareholders elect our directors at each annual general meeting. Directors hold office until their successors have been elected and qualified or until death, resignation or removal. Our Officers are appointed by our Board of Directors. Our Directors and executive officers are as follows:

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Name		Age		Position		Term of Office
William Becker		78		Chairman of the Board		Until resignation
				CEO and President		Or removal
Larry Becker		50		Director		Until resignation
						Or removal
Gary Brown		55		Secretary and Treasurer		Until resignation
				And Director		Or removal
Brett Smithard		41		Director		Until resignation
						Or removal
Patrick Kealy		64		Director		Until resignation
						Or removal

William W. Becker, Chairman of the Board and Chief Executive Officer. Mr. William Becker has held the position of Chairman of the Board of Telemetrix from 1999 until April 2004. He was reelected Chairman in September 2004, replacing Mr. Patrick J. Kealy who was elected Chairman in April 2004. Mr. Becker is the principal of Hartford Holdings Ltd., a Cayman Islands corporation which invests in real estate, oil and gas, and telecommunication entities. It is solely owned by Mr. William W. Becker. Mr. Becker founded a number of companies in telecommunications, cable television, oil and gas, real estate development, and other industries. From 1993 to 1995, Mr. Becker was a principal of WWB Oil & Gas, Ltd. Mr. Becker was a significant investor of ICG Communications, Inc., a competitive local exchange carrier, for which he served as Chairman and Chief Executive Officer from 1987 to June 1995. Mr. Becker devotes the majority of his time to Telemetrix.

Gary Brown has been Secretary and Treasurer since September 16, 2004 and has been a Director since October 9, 2004. Mr. Brown is the Chief Executive Office and President of Gobility Inc., a systems integrator for WIFI networks. Previously, Mr. Brown was Executive Vice President of Global Sales of Global Sales Operations for Tekelec Inc., a manufacturer of next generation switching systems, STP, and communication applications worldwide. From December 2001 to October 2003, Mr. Brown served as Chief Operating Officer of Metro-Optics, also a manufacturer of telecommunications switching systems. Mr. Brown has more than 30 years experience in the telecommunications industry.

Larry Becker is a Director of the Company and was elected to preside over sharpening our strategic focus and concentrating on debt restructuring, financial viability, operating efficiencies, long-term growth opportunities and shareholder appreciation. Larry also manages and oversees the operation of Becker Capital Management and regularly serves in key capacities within its portfolio companies. Larry has numerous years of experience in operating, early stage start up, restructuring and positioning for future investment. Larry’s most notable roles include CEO of SkyConnect Inc. an ad insertion company sold to nCUBE a Larry Ellision portfolio company, CEO of VR-1 Inc. a multiplayer game company technology company able to forge strategic relationships with Microsoft, Sony & Deutsche Telecom, CEO of Aircell Inc. which provides air to ground communications for business jets and was able to attract funding from Blumenstein Thorne and Pritzker of the Chicago area. Larry also manages real estate portfolio in the United States and Canada. Larry serves on a local school board and is a Director of the YMCA of Boulder. Larry graduated from the University of Alberta with a major in Finance.

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Brett Smithard is a Director of the company and was appointed to the board in September 2007. Mr. Smithard is the Chief Executive Officer of Tower Gate Capital, a London based investment bank. Mr. Smithard is a chartered accountant (formerly with PWC), with international investment, advisory and commercial experience. He was the founder of Smithard & Co., an investment and advisory firm focusing on turnaround and restructuring opportunities, having previously worked as a corporate financier at Personal Trust International. His prior business experience includes serving as CEO of National Autoparks Group, and CFO of TNT International Express and Autopage Holdings, as well as serving as a non-executive director of various other public and private companies.

Patrick Kealy is a Director of the Company and was appointed to the Board in December 2007. Mr. Kealy served as our Chairman of the Board in 2004. Patrick J. Kealy is currently President and CEO of Star Energy Corp and has over 30 years of experience in financial services. He began his career at a major U.K. brokerage and consulting firm Wood MacKenzie & Co. Inc., where he rose to become president of the company’s U.S. subsidiary. He continued his career as First Vice President at Morgan Stanley Dean Witter in New York. Kealy then became Senior Managing Director of Credit Lyonnais Securities where he was responsible for management of equity capital markets staff including research, sales and trading of both U.S. and foreign shares.

Immediately prior to joining Star, Kealy enjoyed a tenure as Chairman of SwissFone International, where he negotiated the acquisition of the U.S. division of Swisscom A.G.

Mr. Kealy received his bachelor’s degree in Finance from the University of Notre Dame and pursued graduate studies in International Finance at New York University. Mr. Kealy is a non executive director of Tower Gate Capital.

Significant Employees

None

Family Relationships

Larry Becker, a Director of the Company, is the son of William Becker, Chairman, CEO and President. Lorn Becker, a 5% beneficial owner of our common stock, is also the son of William Becker.

Gayle Becker, wife of Larry Becker, provides administrative services to the Company on an as needed basis.

There are no other family relationships.

Legal Proceedings

No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in legal proceedings that would be material to an evaluation of our management.

Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:

     1.    any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

     2.    any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

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     3.   being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

     4.   being found by a court of competent jurisdiction (in a civil action),the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Committee of the Board of Directors

We presently do not have an audit committee, compensation committee, nominating committee, an executive committee of our board of directors, stock plan committee or any other committees. However, our Board of Directors is considering establishing various such committees during the current fiscal year. Currently, our Board of Directors makes decisions regarding compensation, our stock option plan, our audit, the appointment of auditors, and the inclusion of financial statements in our periodic reports.

Audit Committee

We presently do not have an audit committee and have no financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Larry Becker, a Director of the Company, is experienced in financial matters and holds a Bachelor of Commerce with a major in Finance from the University of Alberta.

Code of Ethics

We have not yet adopted a corporate code of ethics. Our board of directors is considering establishing, over the next year, a code of ethics to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth summary information concerning the compensation received for services rendered to it during the current year and the years ended December 31, 2007, 2006, and 2005 respectively.

             SUMMARY COMPENSATION CHART

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	1.	William Becker, our Chairman, CEO and President received 2,000,000 options to purchase our common stock, with an exercise price of $.02 per share, the fair market value on the date of grant, December 31, 2006.
	2.	Gary Brown, our Secretary and Treasurer, received 2,000,000 options to purchase our common stock with an exercise price of $0.02 per share, the fair market value on the date of grant., December 31, 2006
	3.	Larry Becker, a Director, received deferred compensation of $200,000 for managing the daily operations and fund raising activities of Telemetrix. Mr. Becker also 2,000,000 options to purchase our common stock with an exercise price of $.02 per share, the fair market value on the date of grant, December 31, 2006.
	4.	Charles LaCroix, our Chief Operating Officer, receives a salary of $175,000 per year. Mr. LaCroix received no other compensation in 2006, however, he is eligible for a grant of stock options pursuant to the 2006 Employee Stock Option Plan.
	5.	In 2006, Michael Tracy, our former CEO and President, received payment of $40,000 from a consulting agreement from December 1, 2004 through July 31, 2005. From August 1, 2005 through May 31, 2006, Mr. Tracy’s wholly owned company, Greenfly LL, received consulting fees of $24,000 per month for a services agreement to operate our switch and radio access network in Gering, Nebraska. In November 2006, Mr. Tracy received 5,879,479 shares of our common stock for deferred compensation from 1999 through 2003. The shares were valued at prices ranging from $.06 to $.36 per share and the Company recorded $859,000 in salary expense in 1999 through 2003. Mr. Tracy has not been an employee of the Company since 11/30/04 and does not have any agreements with the Company as of December 31, 2007.

OPTION/SAR GRANTS 2007 and 2006

The Company did not grant any Options/SAR Grants in 2007. The grants in 2006:

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AGGREGATE OPTIONS/SAR EXERCISES IN 2007 AND FISCAL YEAR END OPTIONS/SAR VALUES

There were no in-the-money exercisable options or SARs at the end of the fiscal year.

Board Compensation

Larry Becker, a Director of the Company, received a deferred compensation of $200,000 for services of running the daily operations and fund raising activities of Telemetrix. In 2007, the Board Members did not receive any compensation for Board of Director services. In 2006, William Becker, Gary Brown and Larry Becker received a grant of 2,000,000 options each to purchase shares of our common stock with an exercise price of $.02 per share, the fair market value on the date of grant. The options were granted for prior services.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following tables set forth the ownership as of December 31, 2007: (a) by each person known by us to be the beneficial owner of more than five percent (5%) of our outstanding common stock; and (b) by each of our directors, by all executive officers and our directors as a group.

To the best of our knowledge, all persons named have sole voting and investment power with respect to such shares, except as otherwise noted. Other than the Convertible Promissory Notes discussed in Note 4 of the Audited Financial Statements, there are not any pending or anticipated arrangements that may cause a change in our control.

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