UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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~~June 3130, 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 No o

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 No o

~~The~~Indicate ~~number~~by ofcheck ~~shares~~mark ofwhether ~~common~~the ~~stock~~registrant ~~outstanding~~is a shell company (as ofdefined ~~June~~in Rule ~~30,~~12b-2 ~~2005~~of ~~was~~the ~~99,695,877~~Exchange Act). Yes o No o

~~Table~~ The number of ~~Contents~~shares of common stock outstanding as of August 12, 2005 was 94,795,877.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION		3		3
Item 1. Financial Statements		3
	Item 1.		Financial Statements	3
Item 2. Management’s Discussion And Analysis of Financial Condition and Results of Operations		4
	Item 2.		Management's Discussion And Analysis of Financial Condition and
Item 3. Quantitative and Qualitative Disclosures About Market Risk		8
			Results of Operations	4
Item 4. Controls and Procedures		8
	Item 3.		Quantitative and Qualitative Disclosures About Market Risk	9
PART II — OTHER INFORMATION		9
	Item 4.		Controls and Procedures	9
Item 1. Legal Proceedings		9
PART II — OTHER INFORMATION				10
Item 6. Exhibits and Reports on Form 8-K		9
	Item 1.		Legal Proceedings	10
INDEX TO EXHIBITS		10
	Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	10
Certification under Section 302
	Item 4.		Submission of Matters to a Vote of Security Holders	10
Certification Pursuant to 18 U.S.C. Section 1350
	Item 6.		Exhibits and Reports on Form 8-K	10
Certification of CEO and PFO Pursuant to Section 302
Certification of CEO and PFO 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

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these financial statements


	June 30,
	2005			December 31,
	(Unaudited)			2004

ASSETS

CURRENT ASSETS
Cash	$	1,400,893		$	6
VAT receivable, net		190,870			43,691
Notes and loans receivable		473,300			57,798
Receivable from shareholder		90,928			59,534
Accounts receivable, net		27,178,649			503,939
Prepaid expenses and other current assets		238,843			256,809


Total Current Assets		29,573,483			921,777

MACHINERY AND EQUIPMENT, NET		159,842			53,542

INTELLECTUAL PROPERTY, NET		63,170			77,064

GOODWILL		46,287			—


TOTAL ASSETS	$	29,842,782		$	1,052,383


LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES
Income taxes payable	$	2,735,040		$	2,888,672
Accounts payable		28,846,452			1,163,701
Accrued expenses and other current liabilities		2,045,676			1,253,902
Mortgage payable, short-term		226,705			—


Total Current Liabilities		33,853,873			5,306,275

STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock		94,753			93,753
Additional paid-in capital		343,757			314,757
Retained deficit		(4,881,019	)		(4,833,911	)
Accumulated other comprehensive income		549,548			368,391
Deferred compensation		(118,130	)		(196,882	)


Total Stockholders’ Equity (Deficit)		(4,011,091	)		(4,253,892	)


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	29,842,782		$	1,052,383

See accompanying notes to condensed consolidated 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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~The~~THREE ~~accompanying~~MONTHS ~~notes~~ENDED ~~are~~JUNE an30, ~~integral~~2005 ~~part~~AND ~~of these financial statements~~2004

(Unaudited)


	2005			2004

SALES	$	220,508,455		$	4,467,745

COST OF SALES		219,100,603			4,267,267


GROSS PROFIT		1,407,852			200,478

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		651,866			1,388,540


INCOME (LOSS) FROM OPERATIONS		755,986			(1,188,062	)

OTHER INCOME (EXPENSES):
Interest income		33			—
Interest expense and other financing costs		(847,338	)		(69,329	)


TOTAL OTHER INCOME (EXPENSES)		(847,305	)		(69,329	)


LOSS BEFORE INCOME TAXES		(91,319	)		(1,257,391	)

INCOME TAX BENEFIT		16,389			193,774


NET LOSS	$	(74,930	)	$	(1,063,617	)


LOSS PER SHARE — BASIC AND DILUTED	$	—		$	(0.01	)


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — BASIC AND DILUTED		93,753,020			93,753,020

See accompanying notes to condensed consolidated 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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~The~~SIX ~~accompanying~~MONTHS ~~notes~~ENDED ~~are~~JUNE an30, ~~integral~~2005 ~~part~~AND ~~of these financial statements~~2004

(Unaudited)


	2005			2004

SALES	$	276,775,381		$	8,775,906

COST OF SALES		274,589,325			8,497,231


GROSS PROFIT		2,186,056			278,675

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		1,216,483			1,989,084


INCOME (LOSS) FROM OPERATIONS		969,573			(1,710,409	)

OTHER INCOME (EXPENSES):
Interest income		319			—
Interest expense and other financing costs		(1,091,406	)		(112,204	)


TOTAL OTHER INCOME (EXPENSES)		(1,091,087	)		(112,204	)


LOSS BEFORE INCOME TAXES		(121,514	)		(1,822,613	)

INCOME TAX (EXPENSE) BENEFIT		(40,524	)		280,750


NET LOSS	$	(162,038	)	$	(1,541,863	)


LOSS PER SHARE — BASIC AND DILUTED	$	—		$	(0.02	)


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — BASIC AND DILUTED		93,753,020			93,684,142

See accompanying notes to condensed consolidated financial statements.

F-3

TRICELL , INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2005 AND 2004

(Unaudited)


	2005			2004

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(162,038	)	$	(1,541,863	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		19,128			81,916
Amortization of deferred compensation		196,880			39,376
Bad debt		72,457			—
Changes in operating assets and liabilities:
(Increase) decrease in:
VAT receivable		(154,318	)		1,076,104
Accounts receivable		309,859			80,239
Other receivables		110,433			—
Prepaid and other current assets		(4,802	)		119,857
Increase (decrease) in:
Accounts payable and accrued expenses		9,968			387,229
Other current liabilities		129,699			(193,345	)
Income taxes payable		39,486			(295,000	)

Net Cash Provided By (Used in) Operating Activities		566,752			(245,487	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of machinery and equipment		(62,305	)		—
Proceeds from sale of machinery and equipment		—			143,215
Cash paid in acquisition of ACL Distribution		—			(135,634	)
Cash paid in acquisition of ACE Telecom		1,090,900			—
Loans to shareholder		(31,394	)		—
Loans to third-parties		(175,764	)		—

Net Cash Provided by Investing Activities		821,437			7,581


CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loans to shareholder		—			275,689
Repayment of loans to third parties		55,724			—
Loans from shareholder		—			61,147
Repayment of long-term debt		—			(72,253	)

Net Cash Provided by Financing Activities		55,724			264,583


NET INCREASE IN CASH		1,443,913			26,677

EFFECT OF EXCHANGE RATE ON CASH		(43,026	)		9,680

CASH, BEGINNING OF PERIOD		6			183,241


CASH, END OF PERIOD	$	1,400,893		$	219,598

SUPPLEMENTAL DISCLOSURE OF CASH
FLOWS INFORMATION:
Interest paid during the period	$	1,086,953		$	111,552

Income taxes paid during the period	$	—		$	—

SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
253,020 shares issued for deferred compensation				$	315,010

1,000,000 shares of common stock issued for the acquisition of ACE Telecom	$	30,000

See accompanying notes to condensed consolidated financial statements.

F-4

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2005

(Unaudited)


NOTE 1 —		BASIS OF PRESENTATION

The condensed consolidated balance sheet as of ~~March~~June 3130, 2005, the condensed consolidated statements of operations for the three months and six months ended ~~March~~June 3130, 2005 and 2004, and the condensed consolidated statements of cash flows for the ~~three~~six months ended ~~March~~June 3130, ~~2005~~ 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~~June 3130, 2005 and for all periods presented, have been made. The results of operations for the three-month ~~period~~and six-month period ended ~~March~~June 3130, 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~~ Properties Limited, ACE Telecom, and ACE Telecom Trading. All significant ~~inter-company~~ intercompany balances and transactions have been eliminated.

REPORTING PERIOD

The accompanying condensed consolidated financial statements for the three months and six months ended ~~March~~June 3130, 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 and six months ended ~~March~~June 3130, 2004 depict the results of operations and cash flows of Tricell, Inc., Tricell UK LTD and Tricell International LTD for the three months and six months ended ~~March~~June 3130, 2004 and the results of operations and cash flows of Tricell Distribution Limited from February 9, 2004 (date of acquisition) to ~~March~~June 3130, 2004.

F-45

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2005

(Unaudited)

NOTE 2 ~~— LINE~~– ~~OF CREDIT~~ ACQUISITIONS

ACQUISITION OF ACE TELECOM LIMITED AND SUBSIDIARY

On June 30, 2005, the Company executed a Sale Agreement with ACE Telecom Limited (“ACE”), and its wholly owned subsidiary, ACE Telecom Trading Limited. Pursuant to the Agreement, the Company acquired all of the issued and outstanding capital stock of ACE, in aggregate, in exchange for 1,000,000 shares of the Company’s common stock. The 1,000,000 were valued at $30,000 based on the price of $.03 on the date of acquisition. Pursuant to the Agreement, all of the issued and outstanding capital stock of ACE immediately prior to closing was transferred to the Company by the Shareholders, who in exchange received the Shares in a pro rata manner. As a result, ACE became a wholly-owned subsidiary of the Company.

The following table sets forth the preliminary allocation of the purchase price to ACE’s tangible and intangible assets acquired and liabilities assumed as of January 1, 2005:


Cash	$	1,059,961
Accounts receivable, net		27,069,017
Other receivables		406,080
Prepaid expenses and other current assets		6,371
Fixed assets		58,708
Goodwill		46,287
Accounts payable		(27,806,866	)
Accrued expenses and other current liabilities		(592,229	)
Income tax payable		9,376
Mortgage payable		(226,705	)


Total	$	30,000

F-6

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2005

(Unaudited)


NOTE 2 –		ACQUISITIONS, CONTINUED

PRO-FORMA RESULTS OF OPERATIONS

The following sets forth the Company’s results of operations for the six months and three months ended June 30, 2005 as if the acquisitions had taken place on January 1, 2004:


	SIX MONTHS ENDED JUNE 30,
	2005			2004
Revenues	$	352,098,638		$	56,730,480

Net Income	$	(318,544	)	$	(1,637,352	)

Earnings per share
Basic	$	—		$	(0.02	)
Diluted	$	—		$	(0.02	)


	THREE MONTHS ENDED JUNE 30,
	2005			2004
Revenues	$	295,143,017		$	52,055,761

Net Income	$	(230,005	)	$	(1,158,376	)

Earnings per share
Basic	$	—		$	(0.01	)
Diluted	$	—		$	(0.01	)


NOTE 3 –		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.

F-7

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2005

(Unaudited)


NOTE 3 –		LINE OF CREDIT (CONTINUED)

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~~June 3130, 2005, ~~the~~there was no balance due the Lender ~~was $979,611~~.

NOTE 34 — – COMMITMENTS AND CONTINGENCIES

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~~June 3130, 2005 and December 31, 2004.

~~F-5~~GUARANTEES

At June 30, 2005, the Company was a guarantor on a lease entered into by ACE Telecom for rental of its premises to an unrelated third party. The lease requires monthly payments of approximately $4,500. This guarantee would require the Company to make timely rental payments to the unrelated third party in the event ACE is unable to do so.


NOTE 5 –		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 June 30, 2005 and December 31, 2004, were $90,928 and $59,534, respectively.

F-8

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2005

(Unaudited)

NOTE 46 ~~— RELATED~~– ~~PARTY~~COMPREHENSIVE ~~TRANSACTIONS~~ INCOME (LOSS)

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						Six Months Ended
	March 31,
	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
	2005			2004
Net Income (Loss)	$	(74,930	)	$	(1,063,617	)	$	(162,038	)	$	(1,541,863	)
Net Income (Loss)	$	139,149		$	(478,246	)
Foreign currency translation adjustments, net of tax		108,994			(23,216	)		181,157			46,422
Foreign currency translation adjustments, net of tax		71,082			69,638
Comprehensive income (loss)	$	34,064		$	(1,086,833	)	$	19,119		$	(1,495,441	)
Comprehensive income (loss)	$	210,231		$	(408,608	)

~~F-6~~ NOTE 7 — 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 and six months ended June 30, 2005 and 2004:


Three Months Ended June 30,		Six Months Ended June 30,
2005	2004	2005	2004
49%	43%	39%	21%
33%	33%	26%	16%
16%	15%	16%	12%
-	-	13%	11%
-	-	-	10%

F-9

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2005

(Unaudited)

NOTE 67 — SEGMENT REPORTING (CONTINUED)

~~The~~Net ~~Company~~purchases ~~has~~from ~~only~~vendors ~~one~~in ~~reportable~~excess ~~segment.~~of 10% of total purchases approximated the following during the three months and six months ended June 30, 2005 and 2004:

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


Three Months Ended June 30,		Six Months Ended June 30,
2005	2004	2005	2004
47% 32% 17% -	44% 23% 12% -	39% 26% 13% 11%	21% 20% 15% 12%

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

Revenues from the United Kingdom and other countries were as follows during the three months and six months ended June 30, 2005 and 2004:

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


	Three Months Ended June 30,
	2005		2004
UK	$	111,037,238	$	53,438,722

Republic of Ireland		—		—
Germany		—		—
Spain		74,540,275		—
Portugal		34,928,646		2,098,259
United States		2,296		729,945

Total Other countries		109,471,217		2,828,204

Total	$	220,508,455	$	56,266,926

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

F-10

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~~JUNE 3130, 2005

(Unaudited)

NOTE 7 — ~~RECENT~~ ~~ACCOUNTING~~SEGMENT ~~PRONOUNCEMENTS~~ REPORTING (CONTINUED)


	Six Months Ended June 30,
	2005		2004
UK	$	165,009,628	$	3,915,625
Republic of Ireland		—		297,484
Denmark		—		1,787,653
Netherlands		—		1,348,406
Germany		—		758,033
Luxemburg		—		296,165
United Arab Emirates		—		372,541
United States		725,572		—
Portugal		75,228,099		—
Spain		37,329,981		—

Total Other countries		113,283,652		4,860,281

Total	$	278,293,280	$	8,775,906

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


NOTE 8 –		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.

F-11

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2005

(Unaudited)


NOTE 8 –		RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

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 89 ~~— SUBSEQUENT~~– ~~EVENTS~~ GOING CONCERN CONSIDERATIONS

~~RESCISSION~~The accompanying condensed consolidated financial statements have been presented assuming OFthe ~~DISCOUNT-INTRANET~~continuity ~~SUPPLY~~of ~~CHANNEL~~the ~~(D-ISC)~~Company as a going concern. However, the Company has incurred substantial losses resulting in an accumulated deficit of $4,881,019 as of June 30, 2005.

On ~~October~~January 1928, ~~2004,~~2005 ~~The~~two of the Company’s ~~announced~~operating ~~the~~subsidiaries, ~~acquisition~~Tricell ofUK ~~Discount-Intranet~~LTD ~~Supply~~and Tricell ~~Channel~~International ~~(D-ISC),~~LTD. anfiled ~~online~~for ~~discounted~~bankruptcy ~~shopping~~in ~~service~~the ~~for~~United ~~employee~~Kingdom. ~~and~~The ~~affinity~~subsidiaries ~~member~~represent a ~~benefits~~substantial ~~for~~portion of the Company’s operations. As a ~~combination~~result of ~~cash~~the ~~and~~bankruptcies, ~~restricted~~there ~~stock.~~are uncertainties ~~The~~regarding ~~agreement~~the ~~provided~~realizable ~~for~~value ~~$250~~of assets on a liquidation basis,~~000~~ the amount towhich will ultimately be paid to ~~D-ISC~~settle liabilities and ~~$14,750,000~~operations toas bea ~~satisfied~~result byof the ~~issue~~plan or ofreorganization. The uncertainties related to the ~~Company’s~~bankruptcies, ~~common stock.~~combined Aswith a negative ratio of ~~June 7,~~current ~~2005~~assets ~~management~~to ~~had~~current ~~determined~~liabilities ~~that~~and ~~D-ISC~~retained ~~was~~deficit in ~~breach~~equity ~~of the~~raise ~~agreement~~substantial ~~and~~doubts ~~informed~~about ~~D-ISC~~the ofCompany’s ~~their~~ability ~~desire~~ to ~~rescind~~continue ~~the~~as ~~acquisition~~a ~~agreement~~going concern.

~~The~~Management ~~Company~~plans ~~offered~~with ~~5,900,000~~regards ~~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~~this ~~D-ISC~~issue ~~shares~~are ~~under~~as ~~the Agreement. D-ISC has not responded to the Company’s~~follows: ~~offer for rescission.~~

~~F-8~~The Company filed for bankruptcy to protect its assets from creditors and because of the United Kingdom’s Customs and Excise Department’s policy of seizing and freezing claimed Value Added Tax refunds on mobile telephone export (see note 4). During the administration process the Company will remain in possession of their assets and properties, with the administrator operating their business and managing their assets. At the end of the administration management intends to regain all operational responsibilities.

The Company has established a short-term financing arrangement for the purpose of funding purchases of product for resale (see note 3). This debt agreement will allow

F-12

TRICELL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2005

(Unaudited)

NOTE 89 ~~— SUBSEQUENT~~– ~~EVENTS~~GOING CONCERN CONSIDERATIONS (CONTINUED)

~~BANKRUPTCY~~the Company to significantly increase sales through new sales sources and thereby increasing ~~PROCEEDINGS~~necessary cash flow.

~~On April 7~~Presently, ~~2005,~~the ~~Tricell~~Company UKcannot ~~LTD~~ascertain ~~and~~the ~~Tricell~~eventual ~~International~~success ~~LTD~~of ~~filed~~management’s ~~for~~plans ~~bankruptcy~~or in the ~~United~~eventual ~~Kingdom~~outcome ~~(High Courts~~ of ~~Justice~~a ~~Birmingham,~~policy ~~Case~~change ~~numbers~~by ~~2037 and 2088, respectively). In~~ the ~~bankruptcy~~United ~~filing,~~Kingdom’s ~~Tricell~~Customs UKand ~~reported~~Excise ~~approximately $3,455,000 due to~~Department’s ~~creditors~~policy ~~and~~on ~~Tricell~~Value ~~International~~Added ~~LTD~~Tax ~~reported~~with ~~$1,100,000~~any ~~due~~degree toof ~~creditors~~certainty. The ~~Court~~accompanying condensed ~~has~~consolidated ~~assigned~~financial astatements ~~receiver~~do tonot ~~oversee~~include ~~the~~any ~~operations~~adjustments ofthat ~~the~~might ~~companies,~~result from the eventual ~~liquidation~~outcome of ~~assets~~ ~~and~~ the ~~distributions~~risks toand ~~creditors~~uncertainty described above.

F-913

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~~increased significantly during the quarter and six months ended ~~March~~June 3130, 2005 as compared to the quarter ended ~~March~~June 3130, 2004 as we restarted material trading operations in January 2005. 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, as more fully discussed below, 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~~$3,837,800. 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, aswithout ~~discussed~~this ~~more~~loan ~~fully below,~~agreement in place we would not have been able to restart material trading operations as we did

~~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~~gross profit realized from the trading effected with this capital. Andre Salt, our Chief Executive Officer, ~~and~~has ~~largest~~divested ~~shareholder,~~his ~~owns~~entire ~~50%~~Telco stock ofownership ~~Telco~~position, ~~although~~ hein ~~does~~addition ~~not~~to ~~share~~tendering inhis ~~allocation~~resignation offrom Telco’s ~~profits~~board ~~from~~of ~~this relationship~~directors. 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 inno ~~the~~later ~~first~~than ~~week of July~~September 2005.

~~Value-Added~~ On ~~Tax~~June 30, 2005, we acquired all of the outstanding common stock of Ace Telecom Limited (“Ace”) in exchange for one million (1,000,000) shares (“Shares”) of our common stock. The Company believes Ace, with its extensive customer base in the telecommunications industry, will reinforce the Company’s wholesale trading and distribution business.

~~Starting~~Value-Added inTax 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.

Starting in the late stages of 2002 and continuing through 2003 and 2004, we experienced a sharp decline in our trading of mobile telephones and related accessories and consequently our revenue. This decline 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. On each sale and purchase of goods, VAT is calculated on the price of the goods and 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 inappropriate 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 again equal to 17.5% of revenue, we could not engage in operations at maximum efficiency.

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~~ 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~~SIX ~~following~~MONTHS ~~discussion~~ENDED ~~should~~JUNE ~~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~~30, ~~2004.~~ ~~Comparisons~~2005 ~~made~~COMPARED ~~between~~TO ~~reporting~~THE ~~periods~~SIX ~~herein~~MONTHS ~~are~~ENDED ~~for~~JUNE ~~the three month periods ended March 31~~30, ~~2005 as compared to the same period in~~ 2004.

WeThe ~~had~~following ~~net~~discussion ~~income~~should ofbe ~~$110,578~~read ~~for~~in ~~the~~conjunction ~~quarter~~with ~~ended~~the ~~March 31,~~audited ~~2005~~financial ~~as compared to a net loss~~statements ofand ~~$478,246~~notes ~~for~~thereto ~~the~~included ~~same quarter~~ in ~~2004.~~our ~~Our~~annual ~~sales~~report ~~revenue~~on ~~increased~~Form ~~from~~10-K ~~$4,308,161~~ for the ~~three months~~fiscal year ended ~~March~~December 31, 2004 ~~to $56,265,752 for the same period in 2005~~. ~~The~~Comparisons ~~increase~~made inbetween ~~sales revenue~~reporting isperiods ~~mainly~~herein ~~due~~are tofor ~~our renewal of business activities in~~ the ~~first~~six ~~quarter~~month ofperiod ~~2005~~ended ~~following~~June 30, ~~the~~2005 ~~release~~as ofcompared ~~the~~to ~~UK Advocate General’s opinion over a Customs & Excise ruling on~~ the ~~treatment~~same ~~of liability~~period ~~for~~in ~~Value-Added-Tax (“VAT”) upon intra-European transactions, as discussed above~~2004.

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

We had a net loss of $74,930 for the six months ended June 30, 2005 as compared to a net loss of $1,541,863 for the same period in 2004. Our sales revenue increased materially to $276,775,381 for the six months ended June 30, 2005 from $8,775,906 for the same period in 2004. The increase in sales revenue is due to our resumption of material business activities in the first quarter of 2005 while we awaited the outcome of a Customs & Excise ruling on the treatment of liability for Value-Added-Tax (“VAT”) upon intra-European transactions.

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.


	2005			2004
Net Income (Loss)	$	(74,930	)	$	(1,541,863	)
Sales Revenue	$	276,775,381		$	8,775,906

Expenses*	2005		2004
Selling, General & Administrative Expenses	$	560,156	$	600,544
Interest Expense	$	4,456	$	42,875
Total	$	564,162	$	643,419

Additionally, our selling, general and administrative expenses decreased to $1,216,483 for the six months ended June 30, 2005 from $1,989,084 for the same period in 2004. This decrease is due to cost savings methods we have implemented. Our interest expense increased to $1,091,406 for the six months ended June 30, 2005 from $112,204 for the same period in 2004. This increase was primarily due to utilization of the Telco line of credit.

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


	Six months ended			Six months ended
Expenses	June 30, 2005			June 30, 2005
Selling, General & Administrative Expenses	$	1,216,483		$	1,989,084
Interest Expense	$	(1,091,406	)	$	(112,204	)

Total	$	2,307,889		$	1,101,288

THREE MONTHS ENDED JUNE 30, 2005 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2004

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 period ended June 30, 2005 as compared to the same period in 2004.

We had a net loss of $74,930 for the quarter ended June 30, 2005 as compared to a net loss of $1,063,617 for the same quarter in 2004. Our sales revenue increased to $220,508,445 for the three months ended June 30, 2005 from $4,467,745 for the same period in 2004. The increase in sales revenue is due to our resumption of business activities in the first quarter of 2005 while we awaited the outcome of a Customs & Excise ruling on the treatment of liability for Value-Added-Tax (“VAT”) upon intra-European transactions.


	Three months ended			Three months ended
	June 30, 2005			June 30, 2004
Net Income (Loss)	$	(74,930	)	$	(1,063,617	)
Sales Revenue	$	220,508,455		$	4,467,745

Additionally, our selling, general and administrative expenses decreased to $651,866 for the three months ended June 30, 2005 from $1,388,540 for the same period in 2004. This increase is primarily due to the implementation of cost savings methods. Our interest expense increased to $847,305 for the three months ended June 30, 2005 from $69,329 for the same period in 2004. This increase was primarily due to utilization of the Telco line of credit.


	Three months ended		Three months ended
Expenses	June 30, 2005		June 30, 2004
Selling, General & Administrative Expenses	$	651,866	$	1,388,540
Interest Expense	$	847,305	$	69,329

Liquidity and Capital Resources

~~Cash~~Our ~~provided~~principal bysource ~~(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~~short ~~of $831,700.~~term ~~This~~liquidity ~~change~~ is ~~mainly~~operating ~~attributable~~cash toflow anand ~~increase~~our inline ~~inventory~~ of ~~$(1,488,027) as~~credit ~~compared~~with toTelco $0Invest. inA ~~2004,~~substantial 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~~revenues ~~and other~~or ~~assets~~our ~~from~~line ~~$49,094~~of incredit ~~2004~~could toimpact $0the ~~in 2005.~~funds

		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~~from ~~Obligations~~operating cash flow and jeopardize our ability to meet current obligations. Cash provided by operating activities for the six months ended June 30, 2005 was $566,752 as compared to cash used in operating activities for the same period of 2004 of $245,487. This change is mainly attributable to an increase in accounts receivable to $309,859 for the six months ended June 30, 2005 as compared to $80,239 for the same period in 2004, as well as an increase other receivables of $110,433 for 2005 as compared to $0 for 2004.

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


	Three months ended		Three months ended
	June 30, 2005		June 30, 2004
Cash Provided By (Used In) Operating Activities	$	566,752	$	(245,487	)

	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	$	—

Cash provided by investing activity increased to $821,437 for the six months ended June 30, 2005 as compared to $7,581 for the same period in 2004. This is primarily attributable to a the cash paid in the acquisition of Ace Telecom of $1,090,900 for the six months ending June 30, 2005, as compared to $0 for 2004.


	Three months ended		Three months ended
	June 30, 2005		June 30, 2004
Cash Provided by (Used In) Investing Activity	$	821,437	$	7,581

Cash provided by financing activities was $55,724 for the six months ended June 30, 2005 compared to cash provided by financing activities of $264,583 for the three months ended June 30, 2004. The decrease is due to the repayment of loans of $0 for the six months ended June 30, 2005, as compared to $274,689 for 2004.


	Three months ended		Three months ended
	June 30, 2005		June 30, 2004
Cash Provided by (Used In) Financing Activity	$	55,724	$	264,583

We believe we have sufficient cash, together with our line of credit from Telco Invest, 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 continue to 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 utilize the Telco line of credit 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, including but not limited to the position of Chief Operating Officer.

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~~June 3130, 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~~June 3130, 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.

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.~~

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 2. Unregistered Sales of Equity Securities and Use of Proceeds

On June 30, 2005, we issued 1,000,000 shares of our common stock (the “Shares”) pursuant to a Sale Agreement (the “Agreement”) with James Reed, Neil Pursell, Adrian Sumnall and Neil Proctor (the “Shareholders”) of Ace Telecom Limited (“Ace”). Pursuant to the Agreement, we acquired from the Shareholders all of the issued and outstanding capital stock of Ace with the Shareholders receiving the Shares in a pro rata manner. The securities, which were taken for investment and were subject to appropriate transfer restrictions, were issued without registration under the Securities Act upon the exemption provided in Section 4(2) of the Securities Act.

Item 4. Submission of Matters to A Vote of Security Holders

The registrant held its annual meeting of stockholders in Stoke-on-Trent, Staffordshire United Kingdom on June 21, 2005. The only matter submitted to a vote of shareholders was the election of directors. Each of the three nominees were elected, although two nominees, Paul Langley and Nicholas Topham, have not yet accepted their nominations, subject to our procurement of certain insurance policy(ies), which we expect obtain by the end of August 2005. The following sets forth the items that were submitted to a vote of the stockholders and the results thereof:

a) election of three directors, pending their acceptance of their directorship, each for a term of one year. The vote tabulation for each nominee was as follows:

NOMINEE

FOR

WITHHELD

ABSTENTION

BROKER NON VOTES

Paul Langley

48,041,250

Nicholas Topham

48,041,250

Andre Salt

48,041,250

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 1011 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~~22nd day of ~~July~~August, 2005.

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

911

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.)
10.1		Loan Agreement by and between Tricell Distribution Ltd. and Telco Invest Limited (Incorporated by reference from the Company’s Form 10-K, file number 000-50036, filed on June 10, 2005.)
10.2		Sale Agreement by and between the Company and James Reed, Neil Pursell, Adrian Sumnall and Neil Proctor (Incorporated by reference from the Company’s Form 8-K, file number 000-50036, filed on July 7, 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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