JuneTable 30, December 31, 2004 2003 (Unaudited) ------------ --------------- ASSETS CURRENT ASSETS Cash $219,598 $183,241 VAT receivable, net 318,444 1,371,634 Notes and loans receivable 4,663,692 4,963,519 Accounts receivable, net 65,179 125,262 Receivable from shareholder 271,123 Prepaid expenses and other current assets 376,936 116,344 --------------- --------------- Total current assets 5,643,849 7,031,123 MACHINERY AND EQUIPMENT, NET 292,596 473,757 INTELLECTUAL PROPERTY, NET 81,335 - --------------- --------------- TOTAL ASSETS $6,017,780 $7,504,880 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Income taxes payable $2,643,088 $2,890,939 Accounts payable and accrued expenses 1,376,078 962,011 VAT payable 190,143 Payable to shareholder 61,111 Current portion of long-term debt 14,794 24,191 --------------- ---------------- Total current liabilities 4,095,071 4,067,284 LONG-TERM DEBT 162,619 221,441 C0MMITMENT AND CONTINGENCIES - - STOCKHOLDERS' EQUITY Common stock 93,753 93,500 Additional paid-in capital 314,757 - Retained earnings 1,148,391 2,690,254 Accumulated other comprehensive income 478,823 432,401 Deferred compensation (275,634) - --------------- ---------------- Total stockholders' equity 1,760,090 3,216,155 --------------- ---------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,017,780 $7,504,880 =============== ================Contents

~~2004~~UNITED ~~2003~~STATES ~~------------------~~SECURITIES ~~------------------~~AND CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(1,541,863) $549,809 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 81,916 52,608 Amortization of deferred compensation 39,376 - Changes in operating assets and liabilities: (Increase) decrease in: VAT receivable 1,076,104 8,576,397 Accounts receivable 80,239 (929,371) Prepaid and other current assets 119,857 (128,097) Increase (decrease) in: Accounts payable and accrued expenses 387,229 552,976 VAT payable (193,345) - Income taxes payable (295,000) 235,781 ------------------ ------------------ Net Cash Provided By (Used in) Operating Activities (245,487) 8,910,103 ------------------ ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of machinery and equipment - (2,853) Proceeds from sale of machinery and equipment 143,215 - Cash paid in acquisition of ACL Distribution (135,634) - Loans to shareholder - (214,550) Loans to third-parties - (2,062,362) ------------------ ------------------- Net Cash Provided by (Used in) Investing Activities 7,581 (2,279,765) ------------------ ------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of borrowing from factor company - (4,861,415) Repayment of loans to shareholder 275,689 - Repayment of loans from shareholder - (1,650,381) Loans from shareholder 61,147 - Repayment of long-term debt (72,253) (1,631,631) ------------------ ------------------- Net Cash Provided by (Used in) Financing Activities 264,583 (8,143,427) ------------------ ------------------- NET INCREASE (DECREASE) IN CASH 26,677 (1,513,089) EFFECT OF EXCHANGE RATE ON CASH 9,680 90,714 CASH, BEGINNING OF PERIOD 183,241 4,441,294 ------------------ ------------------- CASH, END OF PERIOD $219,598 $3,018,919 ================== =================== SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Interest paid during the period $111,552 $125,627 ================== =================== Income taxes paid during the period $ - $ - ================== =================== SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: 253,020 shares issued for deferred compensation $ 315,010 $ - ================== ===================COMMISSION

~~Three Months Ended Six Months Ended ------------------ ---------------- June 30~~Washington, ~~2004~~D.C. June 30, 2003 June 30, 2004 June 30, 2003 ------------- ------------- ------------- ------------- Net Income (Loss) $(1,063,617) $239,366 $(1,541,863) $ 67,062 Foreign currency translation adjustments, net of tax (23,216) 107,119 46,422 549,809 ------------- -------------- -------------- -------------- Comprehensive income (loss) $(1,086,833) $346,485 $(1,495,441) $616,871 ============== ============== =============== ==============20549

FORM 10-Q

(Mark One)


þ		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		for the quarterly period ended March 31, 2005.


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: 0-50036

TRICELL, INC.

(Exact name of registrant as specified in its charter)


Nevada		88-0504530

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

6 Howard Place, Stoke-on-Trent, Staffordshire, ST1 4NQ United Kingdom
(Address of principal executive offices) (Zip Code)

011 44 8707 53 2360
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o No þ

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The number of shares of common stock outstanding as of June 30, 2005 was 99,695,877.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION			3

Item 1. Financial Statements			3
Item 2. Management’s Discussion And Analysis of Financial Condition and Results of Operations			4
Item 3. Quantitative and Qualitative Disclosures About Market Risk			8
Item 4. Controls and Procedures			8

PART II — OTHER INFORMATION			9

Item 1. Legal Proceedings			9
Item 6. Exhibits and Reports on Form 8-K			9

INDEX TO EXHIBITS			10
Certification under Section 302
Certification Pursuant to 18 U.S.C. Section 1350

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

TRICELL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31,
	2005			December 31,
	(Unaudited)			2004
ASSETS

CURRENT ASSETS
Cash	$	481,866		$	6
Inventory		1,477,834			—
VAT receivable, net		196,626			43,691
Notes and loans receivable		1,128,454			57,798
Receivable from shareholder		58,063			59,534
Accounts receivable, net		20,820,941			503,939
Prepaid expenses and other current assets		78,726			256,809


Total Current Assets		24,242,510			921,777

MACHINERY AND EQUIPMENT, NET		49,777			53,542

INTELLECTUAL PROPERTY, NET		70,463			77,064


TOTAL ASSETS	$	24,362,750		$	1,052,383


LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES
Income taxes payable	$	2,919,879		$	2,888,672
Accounts payable		23,074,577			1,163,701
Accrued expenses and other current liabilities		1,202,079			1,253,902
Line of credit		979,611			—


Total Current Liabilities		28,176,146			5,306,275

STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock		93,753			93,753
Additional paid-in capital		314,757			314,757
Retained deficit		(4,504,010	)		(4,833,911	)
Accumulated other comprehensive income		439,610			368,391
Deferred compensation		(157,506	)		(196,882	)


Total Stockholders’ Equity (Deficit)		(3,813,396	)		(4,253,892	)


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	24,362,750		$	1,052,383

The accompanying notes are an integral part of these financial statements

F-1

TRICELL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Unaudited)


	2005			2004
SALES	$	56,265,752		$	4,308,161

COST OF SALES		55,487,564			4,229,964


GROSS PROFIT		778,188			78,197

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		560,156			600,544


INCOME (LOSS) FROM OPERATIONS		218,032			(522,347	)

OTHER INCOME (EXPENSES)
Interest expense and other financing costs		(4,456	)		(42,875	)
Interest income		286			—


Total Other Income (Expenses)		(4,170	)		(42,875	)


INCOME (LOSS) BEFORE INCOME TAXES		213,862			(565,222	)

INCOME TAX (EXPENSE) BENEFIT		(103,284	)		86,976


NET INCOME (LOSS)	$	110,578		$	(478,246	)


EARNING PER SHARE - BASIC AND DILUTED	$	—		$	(0.01	)


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED	$	93,726,031		$	93,539,359

The accompanying notes are an integral part of these financial statements

F-2

TRICELL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Unaudited)


	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	110,578		$	(478,246	)
Adjustments to reconcile net income (loss) to net cash provided by (used) in operating activities:
Depreciation and amortization		7,189			40,520
Amortization of deferred compensation		157,504			—
Changes in operating assets and liabilities:
(Increase) decrease in:
Inventory		(1,488,027	)		—
VAT receivable		(155,076	)		1,395,449
Accounts receivable		(20,469,671	)		(70,386	)
Other receivables		(796,761	)		—
Prepaid and other current assets		—			49,094
Increase (decrease) in:
Accounts payable and accrued expenses		22,057,121			(17,756	)
Other current liabilities		(22,352	)		—
Income taxes payable		103,284			(86,975	)

Net Cash Provided By (Used in) Operating Activities		(496,211	)		831,700


CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of machinery and equipment		—			159,674
Cash paid in acquisition of ACL		—			(137,724	)
Loans to third-parties		(166,555	)		(450,743	)
Loans to shareholder		—			(24,842	)

Net Cash Provided by (Used In) Investing Activities		(166,555	)		(453,635	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in line of credit		986,368			—
Repayment of long-term debt		—			(70,206	)
Repayment of loan to third-parties		56,759			—

Net Cash Provided by (Used In) Financing Activities		1,043,127			(70,206	)


NET INCREASE IN CASH		380,361			307,859

EFFECT OF EXCHANGE RATE ON CASH		101,499			1,865

CASH, BEGINNING OF PERIOD:		6			183,241


CASH, END OF PERIOD:	$	481,866		$	492,965


SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Interest paid during the year	$	—		$	42,874

Income taxes paid during the year	$	—		$	—


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares issued as deferred compensation	$	—		$	315,010

The accompanying notes are an integral part of these financial statements

F-3

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

(Unaudited)

NOTE 1 — BASIS OF PRESENTATION

The condensed consolidated balance sheet as of March 31, 2005, the condensed consolidated statements of operations for the three months ended March 31, 2005 and 2004, and the condensed consolidated statements of cash flows for the three months ended March 31, 2005 and 2004 are unaudited. However, in the opinion of management, all adjustments (which include reclassifications and normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2005 and for all periods presented, have been made. The results of operations for the three-month period ended March 31, 2005 are not necessarily indicative of the operating results for the full year.

These condensed consolidated financial statements and notes are presented in accordance with rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s December 31, 2004 Form 10-K.

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of Tricell, Inc. and Subsidiaries (the “Company”) and its wholly-owned subsidiaries, Tricell UK LTD, Tricell International LTD (formerly Tricell Limited), Tricell Distribution Limited, and Tricell Properties Limited. All significant inter-company balances and transactions have been eliminated.

REPORTING PERIOD

The accompanying condensed consolidated financial statements for the three months ended March 31, 2005 depict the results of operations and cash flows of Tricell, Inc. and all subsidiaries. The accompanying condensed consolidated financial statements for the three months ended March 31, 2004 depict the results of operations and cash flows of Tricell, Inc., Tricell UK LTD and Tricell International LTD for the three months ended March 31, 2004 and the results of operations and cash flows of Tricell Distribution Limited from February 9, 2004 (date of acquisition) to March 31, 2004.

F-4

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

(Unaudited)

NOTE 2 — LINE OF CREDIT

On February 28, 2005, Tricell Distribution (“the Borrower”) entered into a line of credit agreement with an unrelated third party (“the Lender”) for a maximum of $3,837,800 for the purpose of funding the purchase of mobile communication equipment. Upon receiving a written request stating the quantity of units to be purchased, purchase price, sale price, expected gross profit, and the expected date of resale, the Lender will advance the Borrower the required sum up to the maximum amount. Repayment of the loan principal is due upon completion of the sale of the equipment, and on that date, the Borrower must pay the Lender 50% of the gross profit from the resale of the equipment. For purposes of this agreement, gross profit is described as total sale price less total purchase price excluding applicable taxes.

Should the Borrower file for bankruptcy, the balance of the loan will become immediately due and payable with interest calculated at the Barclays Bank base rate.

As of March 31, 2005, the balance due the Lender was $979,611.

NOTE 3 — COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company filed monthly claims for refund of VAT (Value-Added-Tax) of approximately $14,230,000 for November 2002 through February 2003. The VAT authorities determined that $1,650,000 of this VAT was associated with particular transactions involved in “Carousel” and/or “Missing Trader” fraud and therefore, the refund of the VAT was denied. The Company referred the matter to the Tribunal which upon review concluded that there was no wrongdoing by the Company, however, they concluded that these transactions had no economic substance, since the VAT had not been previously paid by a trader up the supply chain, and therefore as the VAT was not held by the VAT authorities, no refund was available.

While the Company continues to seek recovery of this VAT, based upon the Tribunal findings, recovery of the VAT associated with these transactions is uncertain. The Company did not provide for an allowance against VAT receivable as of March 31, 2005 and December 31, 2004.

F-5

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

(Unaudited)

NOTE 4 — RELATED PARTY TRANSACTIONS

As of December 31, 2002, the Company owed $1,643,395 to one of its shareholders. During 2003, the Company made several payments to the shareholder in repayment of the loan and inadvertently overpaid him, resulting in a receivable of $271,123 from the shareholder as of December 31, 2003. The balances as of March 31, 2005 and March 31, 2004, were $86,438 and $59,534, respectively.

NOTE 5 — COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes net income (loss) and foreign currency translation adjustments, which are reported separately on the consolidated statements of stockholders’ equity in the Company Form 10-K.


	Three Months Ended
	March 31,
	2005		2004
Net Income (Loss)	$	139,149	$	(478,246	)

Foreign currency translation adjustments, net of tax		71,082		69,638


Comprehensive income (loss)	$	210,231	$	(408,608	)

F-6

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

(Unaudited)

NOTE 6 — SEGMENT REPORTING

The Company has only one reportable segment.

Net sales to customers in excess of 10% of net sales approximated the following during the three months ended March 31, 2005 and 2004:


3 Months Ended March 31,
2005	2004
77%		24	%
—		22	%
—		19	%
—		11	%

Net purchases from vendors in excess of 10% of total purchases approximated the following during the three months ended March 31, 2005 and 2004:


3 Months Ended March 31,
2005	2004
55%		30	%
17%		25	%
11%		18	%

Revenues from the United Kingdom and other countries were as follows during the three months ended March 31, 2005 and 2004:


	3 Months Ended March 31,
	2005		2004
UK	$	53,437,548	$	2,956,479


Republic of Ireland		—		297,484
Germany		—		758,033
Luxemburg		—		296,165
Portugal		2,098,259		—
United States		729,945		—

Total Other countries		2,828,204		1,351,682

Total	$	56,265,752	$	4,308,161

The company has no long-lived assets outside of the United Kingdom.

F-7

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

(Unaudited)

NOTE 7 — RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued Interpretations No. 46, “Consolidation of Variable Interest Entities”. FIN No. 46 addresses consolidation by business enterprises of variable interest entities (formerly special purpose entities or “SPEs”). The Company does not have any variable interest entities as defined by FIN No. 46.

In April 2003, the FASB issued Statement No. 149, “Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities”. This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under Statement No. 133, “Accounting for Derivatives Instruments and Hedging Activities.” The provisions of this statement are effective for all derivatives and hedging activities entered into after June 30, 2003. The Company does not expect SFAS No. 149 to have a material effect on its financial statements.

In May 2003, the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. SFAS No. 150 establishes standards on the classification and measurement of certain instruments with characteristics of both liabilities and equity. The provisions of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2002 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. The Company does not expect SFAS No. 150 to have a material effect on its financial statements.

NOTE 8 — SUBSEQUENT EVENTS

RESCISSION OF DISCOUNT-INTRANET SUPPLY CHANNEL (D-ISC)

On October 19, 2004, The Company announced the acquisition of Discount-Intranet Supply Channel (D-ISC), an online discounted shopping service for employee and affinity member benefits for a combination of cash and restricted stock. The agreement provided for $250,000 to be paid to D-ISC and $14,750,000 to be satisfied by the issue of the Company’s common stock. As of June 7, 2005 management had determined that D-ISC was in breach of the agreement and informed D-ISC of their desire to rescind the acquisition agreement.

The Company offered 5,900,000 shares of common stock in exchange for the full rescission and release of all claims under the Agreement and the Company would also rescind any and all rights to the D-ISC shares under the Agreement. D-ISC has not responded to the Company’s offer for rescission.

F-8

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

(Unaudited)

NOTE 8 — SUBSEQUENT EVENTS (CONTINUED)

BANKRUPTCY PROCEEDINGS

On April 7, 2005, Tricell UK LTD and Tricell International LTD filed for bankruptcy in the United Kingdom (High Courts of Justice Birmingham, Case numbers 2037 and 2088, respectively). In the bankruptcy filing, Tricell UK reported approximately $3,455,000 due to creditors and Tricell International LTD reported $1,100,000 due to creditors. The Court has assigned a receiver to oversee the operations of the companies, the liquidation of assets and the distributions to creditors.

F-9

Item 2. Management’s Discussion And Analysis of Financial Condition and Results of Operation

Forward-looking Information

This information statement contains forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. These statements relate to future events or to our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. There are a number of factors that could cause our actual results to differ materially from those indicated by such forward-looking statements.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance, or achievements. Moreover, it does not assume responsibility for the accuracy and completeness of such forward-looking statements. The Company is under no duty to update any of the forward-looking statements after the date of this information statement to conform such statements to actual results. The foregoing management’s discussion and analysis should be read in conjunction with the Company’s financial statements and the notes herein.

Development

Our revenues increase significantly during the quarter ended March 31, 2005 as compared to the quarter ended March 31, 2004 as we restarted material trading operations in January. We are optimistic that we will be able to continue this momentum throughout the remainder of 2005 and hope to soon achieve and exceed our 2002 revenue levels.

Our historic method of trading operations involved funding capital requirements from revenues generated. However, given the value added tax (“VAT”) issues we have encountered, we recently altered our mode of operations by conducting operations via our subsidiary, Tricell Distribution, and by executing a loan agreement, dated February 14, 2005, with Telco Invest Limited (“Telco”) establishing a line of credit of two million pounds. Since we use our capital to effect a constant turnover of goods, without this loan agreement in place and considering the amount of capital we have had frozen with the British Commissioners of Customs and Excise, as discussed more fully below, we would not have been able to restart material trading operations as

we did in January 2005. This line of credit was essential to operations as it allows us to trade our products in the various markets we conduct business in. Any loans made to the Company under the line of credit will be repaid pursuant to the request for funding made by the Company to Telco. Additionally, as consideration for the Telco line of credit, we have agreed to a funding charge to be paid to Telco equal to 50% of net profit realized from the trading effected with this capital. Andre Salt, our Chief Executive Officer and largest shareholder, owns 50% of Telco, although he does not share in allocation of Telco profits from this relationship. We hope to be able to finance all capital trading operations from revenue created by the fourth quarter of 2005 and thereafter cease utilizing the Telco line of credit, as the cost of accessing the Telco line of credit is prohibitive.

We have tentatively agreed to a mutual recission of our July 15, 2004 acquisition of Discount Intranet Supply Channel Limited (“D-ISC”). Our decision to rescind stemmed from D-ISC’s poor revenues and high expenses. We agreed to provide D-ISC with 20% of the shares they received in this acquisition, or 5.9 million shares, in exchange for their total release, which we expect to be consummated in the first week of July 2005.

Value-Added Tax

Starting in the late stages of 2002 and continuing through 2003 and 2004, we experienced a sharp decline in our revenue and in our trading of mobile telephones and related accessories. This was due almost entirely to a United Kingdom Tribunal’s change of the regulatory regime involving VAT recoverability following a petition of the British Customs and Excise regulators. The principle of the VAT in the United Kingdom involves the application to goods and services of a general tax, currently 17.5%, on consumption exactly proportional to the price of goods and services, whatever the number of transactions which take place in the production and distribution process before the stage at which the tax is charged. On each transaction, VAT, calculated on the price of the goods or services, is chargeable after the deduction of the amount of VAT borne directly by the various cost components. In 2002, a United Kingdom Tribunal decided that product traders, such as Tricell, do not have a right to a refund of input VAT on goods which it then sold to companies outside the United Kingdom, when there was a defaulting trader or a trader using a hijacked VAT number in the chain of supply, even though the trader claiming the refund was in no way involved in, and had no knowledge of, the failure of the defaulting trader to fulfill its obligations. As a result of this policy, VAT refunds, to which we previously received on a monthly basis, were being frozen on order by HM Revenue & Customs. Since we use our capital to effect a constant turnover of goods, without VAT refunds we cannot engage in operations at maximum efficiency as we are not able to invest the VAT refund in capital acquisitions.

In February 2005, the Advocate General of the United Kingdom (“AG”) overruled the United Kingdom Tribunal’s VAT interpretation, holding that VAT transactions are to be viewed as separate transactions, not one transaction encompassing numerous smaller transactions. VAT fraud concerns a series of consecutive activities, performed by a number of traders in a supply chain. It is an essential feature of the common system of VAT that VAT becomes chargeable on each transaction in a supply chain. The AG ruled that each transaction should be regarded on its

own merits, the character of a particular transaction in the chain cannot be altered by earlier or subsequent events and misconduct by certain traders should not be allowed to penalize traders who were not involved: in misconduct, but happened to be in the supply chain. This interpretation has allowed us to once more confidently seek a VAT refund, which are now been received. However, the change in interpretation will not be permanent until the decision is backed by the European Court of Justice (“ECJ”). We anticipate the ECJ will issue its ruling in late 2005.

Additionally, on January 28, 2005, we voluntarily requested that two of our wholly owned subsidiaries, Tricell UK Limited (“Tricell UK”) and Tricell International Limited (“Tricell Int”), both United Kingdom corporations, be placed into administration, which is the rough equivalent to Chapter 11 reorganization in the United States. We believe the likelihood of a new VAT regime allowing Tricell to once more claim its VAT refund will expedite the removal of our subsidiaries from administration. Further, Tricell intends to attempt to recoup the 800,000 English Pounds spent on the legal defense as related to VAT seizures as well as lost profits for the last 20 months in which our VAT refunds were denied.

Results of Operations

The following discussion should be read in conjunction with the audited financial statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended December 31, 2004. Comparisons made between reporting periods herein are for the three month periods ended March 31, 2005 as compared to the same period in 2004.

We had net income of $110,578 for the quarter ended March 31, 2005 as compared to a net loss of $478,246 for the same quarter in 2004. Our sales revenue increased from $4,308,161 for the three months ended March 31, 2004 to $56,265,752 for the same period in 2005. The increase in sales revenue is mainly due to our renewal of business activities in the first quarter of 2005 following the release of the UK Advocate General’s opinion over a Customs & Excise ruling on the treatment of liability for Value-Added-Tax (“VAT”) upon intra-European transactions, as discussed above.


	2005		2004
Net Income (Loss)	$	110,578	$	(478,246	)
Sales Revenue	$	56,265,752	$	4,308,161

Additionally, our selling, general and administrative expenses decreased to $560,156 for the three months ended March 31, 2005 from $600,544 for the same period in 2004. This decrease is due to our increased focus on cost controls during the first quarter of 2005.


Expenses*	2005		2004
Selling, General & Administrative Expenses	$	560,156	$	600,544
Interest Expense	$	4,456	$	42,875

Total	$	564,162	$	643,419

*	Note that these expenses may not represent all actual expenditures in the above categories as a result of our ability to capitalize certain expenditures.

Liquidity and Capital Resources

Cash provided by (used in) operating activities for the three months ended March 31, 2005 was $496,211 as compared to cash provided by operating activities for the same period of 2004 of $831,700. This change is mainly attributable to an increase in inventory of $(1,488,027) as compared to $0 in 2004, an increase in VAT receivable from $1,395,449 in 2004 to $(155,076) in 2005, an increase in accounts receivable from $(70,386) in 2004 to $(20,469,671) in 2005, an increase in other receivables from $0 in 2004 to $(769,761) in 2005 and a decrease in prepaid and other assets from $49,094 in 2004 to $0 in 2005.


	2005			2004
Cash Provided By (Used In) Operating Activities	$	(496,211	)	$	831,700

Cash used in investing activity decreased to $165,555 for the three months ended March 31, 2004 as compared to $453,635 for the same period in 2004. This is primarily attributable to a decrease in loans to third parties from $450,743 in quarter ended March 31, 2004 to 166,555 in quarter ended March 31, 2005.


	2005		2004
Cash Used In Investing Activity	$	165,555	$	453,635

Cash provided by financing activities was $1,043,127 for the three months ended March 31, 2005 compared to cash used in financing activities of $70,206 for the three months ended March 31, 2004. The increased financing activity reflects a net increase in line of credit from Telco, as discussed more fully above.


	2005		2004
Cash Provided By (Used In) Financing Activity	$	1,043,127	$	(70,206	)

We believe we have sufficient cash to satisfy our operating requirements for twelve months. We have the ability to restrict our expenditures to the extent cash is not available to purchase our goods, which will then attempt to resell. We anticipate that our re-entry into the intra-European market as a result of the Customs & Excise ruling will increase expenses and, if operations are successful, revenues. If the cash reserves are not enough to satisfy our operating needs and we are unable to generate revenues, we will seek bank loans on favorable terms and/or sell additional shares of our equity securities to secure the cash required to conduct our business operations for the next twelve (12) months. During the next twelve months, we plan to offer key positions, which are currently vacant, to management personnel from the acquisition of Tricell, including but not limited to the position of Chief Financial Officer and Chief Operating Officer.

Contractual Obligations

Obligations under non-cancelable agreements at March 31, 2005 were as follows:


	Payments Due by Period
									More
			Less than				3-5		Than
	Total		One Year		1-3 Years		Years		5 Years
Long-Term Debt Obligations	$	0	$	0	$	0	$	0	$	0
Capital Lease Obligations	$	53,150	$	53,150		0		—		—
Operating Lease Obligations		—		—		—		—		—
Purchase Obligations		—		—		—		—		—
Other Long-Term Liabilities Reflected on the Registrant’s Balance Sheet Under GAAP		—		—		—		—		—


Totals	$	53,150	$	53,150		0		0	$	—

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structure finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of March 31, 2005, we were not involved in any unconsolidated SPE transactions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our major market risk is to changes in foreign currency exchange rates in the British Pound, which could impact our results of operations and financial condition. Foreign exchange risk arises from our exposure to fluctuations in foreign currency exchange rates because our reporting currency is the United States dollar. Management seeks to minimize the exposure to foreign currency fluctuations through natural internal offsets to the fullest extent possible. As of March 31, 2005, we had not engaged in any currency arbitrage or hedging activities, although we may in the future. Our debt is not subject to one measure of interest, therefore, the debt is somewhat diversified against interest rate increases.

Item 4. Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this quarterly report. Based upon that evaluation, our chief

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 provide reasonable assurance that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not a party to any legal proceedings and is unaware of any pending or threatened legal proceedings. However, we are involved in a dispute, which is nearing resolution, over how much VAT tax refund we are entitled to, as more fully described herein. Additionally, the Company is in the process of negotiating with its former director, Tom Adams, a settlement regarding back pay claimed by Mr. Adams for services rendered.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits. Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits beginning on page 10 of this Form 10-Q, which is incorporated herein by reference.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 1st day of July, 2005.


	Tricell, Inc.
	/s/ Andre Salt
	By: Andre Salt, Chief Executive Officer

INDEX TO EXHIBITS


EXHIBIT
NO.		DESCRIPTION
3(i)		Articles of Incorporation of the Company. (Incorporated by reference from the Company’s Form 10-SB12G, file number 000-50036, filed on October 11, 2002.)

3(ii)		Bylaws of the Company. (Incorporated by reference from the Company’s Form 10-SB12G, file number 000-50036, filed on October 11, 2002.)

10		Loan Agreement (Incorporated by reference from the Company’s Form 10- K, file number 000-50036, filed on June 10, 2005.)

31(i)		Certification of Chief Executive Officer and Principal Financial Officer of Tricell, Inc. under Section 302 of the Sarbanes-Oxley Act of 2002.

32(i)		Certification of Chief Executive Officer and Principal Financial Officer of Tricell, Inc. pursuant to 18 U.S.C. §1350

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