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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2005, or
 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.
  Nevada
    
    88-0504530(State or other jurisdiction of incorporation or
organization)
    
    (I.R.S. Employer Identification No.)
 6 Howard Place, Stoke-on-Trent, Staffordshire ST1 4NQ United Kingdom
 011 44 8707 53 2360
  Title of Each Class
  o þ
  o þ
  o þ
 Form 10-K o
  o o þ
  o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PART I
    
    
    3Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    8Item 1B. Unresolved Staff Comments
    
    
    12Item 2. Property
    
    
    13Item 3. Legal Proceedings
    
    
    13Item 4. Submission of Matters to a Vote of Security Holders
    
    
    14PART II
    
    
    14Item 5. Market for Common Equity and Related Stockholder Matters
    
    
    14Item 6. Selected Financial Data
    
    
    15Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operation
    
    
    16Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    19Item 8. Financial Statements and Supplementary Data
    
    
    20Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    21Item 9A. Controls and Procedures
    
    
    21Item 9B. Other Information
    
    
    22PART III
    
    
    22Item 10. Directors and Executive Officers
    
    
    22Item 11. Executive Compensation
    
    
    23Item 12. Security Ownership of Certain Beneficial Owner and
Management and Related Stockholder Matters
    
    
    23Item 13. Certain Relationships and Related Transactions
    
    
    23Item 14. Principal Accounting Fees and Services
    
    
    23PART IV
    
    
    23Item 15.
Exhibits and Financial Statement Schedules
    
    
    23Employment Agreement - Neil PursellEmployment Agreement - James ReedEmployment Agreement - Adrian John SumnallEmployment Agreement - Neil ProctorLetter of IntentList of SubsidiariesCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




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PART I
 
 ITEM 1. Business
 3




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4




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ACL Distributors Limited




Ace Telecom Limited




Discount Intranet Supply Channel Limited






5




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Replacement handsets in mature markets
 Converged mobile devices.
 6




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7




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Tricell International Limited
    
    
    
    
    
    $
    758,548Tricell (UK) Limited
    
    
    
    
    
    $
    988,970Total
    
    
    
    
    
    $
    1,747,518
    
     8




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9




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10




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*
    
    secure adequate supplies of competitive products on a timely basis and on
commercially reasonable terms;*
    
    turn our inventories and collect our accounts receivable in a timely manner;*
    
    develop additional, and maintain our existing, key relationships with leading
network operators and manufacturers and dealers of wireless handsets and accessories;*
    
    hire and retain additional qualified management, marketing and other personnel
to successfully manage our growth, including personnel to monitor our operations,
control costs and maintain effective management, inventory and credit controls; and*
    
    invest significant amounts to enhance our information systems in order to
maintain our competitiveness and to develop new logistics services.
     11




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*
    
    purchasing patterns of customers in different markets;*
    
    the timing of introduction of new products by our suppliers and competitors;*
    
    variations in sales by distribution channels; and*
    
    product availability and pricing.















12



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Tricell
International
Limited
    
    
    
    
    
    £434,997 (equaling $771,380 as of January 28, 2006)Tricell (UK) Limited
    
    
    
    
    
    £567,135 (equaling $1,005,700 as of January 28, 2006)Total
    
    
    
    
    
    £1,002,132 (equaling $1,777,081 as of January 28, 2006)
 13




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Year
    
    Quarter
    
    
    High
    
    
    Low2004
    
    First
    
    $
    1.99
    
    
    $
    1.20Second
    
    $
    1.60
    
    
    $
    0.39Third
    
    $
    0.60
    
    
    $
    0.30Fourth
    
    $
    0.60
    
    
    $
    0.152005
    
    First
    
    $
    0.34
    
    
    $
    0.05Second
    
    $
    0.09
    
    
    $
    0.025Third
    
    $
    0.18
    
    
    $
    0.02Fourth
    
    $
    0.125
    
    
    $
    0.04
    14




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
    
    On November 29, 2005, we issued James Reed, Neil Pursell, Adrian John Sumnall, and Neil
Proctor each 500,000 shares upon the satisfaction of Ace Telecom Limited (Ace) reaching
targeted profitability goals. 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.
    
    We issued James Reed, Neil Pursell, Adrian John Sumnall, and Neil Proctor each one
million shares pursuant to employment agreements executed on November 29, 2006. The
securities, which were taken for investment and were subject to appropriate transfer
restrictions, were issued as one year of compensation for these persons agreeing to serve
as executive officers. These shares were issued without registration under the Securities
Act in reliance upon the exemption provided in Section 4(2) of the Securities Act.
 
  Fiscal Year End
    
    2005
    
    2004
    
    2003
    
    2002Operating Revenues
    
    $
    662,903,832
    
    
    $
    13,898,503
    
    
    $
    99,850,232
    
    
    $
    412,586,977Income (Loss) From
Operations
    
    $
    1,644,859
    
    
    $
    (7,556,643
    )
    
    $
    (94,334
    )
    
    $
    7,905,794Net Income
    
    $
    67,544
    
    
    $
    (7,524,165
    )
    
    $
    159,462
    
    
    $
    4,820,908Earnings Per Share
    
    $
    0.00
    
    
    ($
    0.08
    )
    
    $
    0.00
    
    
    $
    0.06Total Assets
    
    $
    53,597,733
    
    
    $
    1,052,383
    
    
    $
    7,504,880
    
    
    $
    14,427,459
  15




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Critical Accounting Policies
 ACCOUNTS RECEIVABLE
  GOODWILL AND INTANGIBLE ASSETS
 Goodwill and Other Intangible Assets
 STOCK OPTIONS
 Accounting for Stock Issued to Employees Accounting for Stock-Based
Compensation
 INCOME TAXES
 Accounting for Income Taxes
 Overview
    16




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17




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Results of Operations
 Increase
    
    Percent2005
    
    2004
    
    (Decrease)
    
    ChangeSelling, General
and Administrative
Expenses
    
    $
    5,913,036
    
    
    $
    8,029,391
    
    
    $
    (2,516,927
    )
    
    
    (31.3
    %)Other income
(expense)
    
    $
    (1,456,776
    )
    
    $
    (182,871
    )
    
    $
    (1,273,524
    )
    
    
    (670
    %)
   Liquidity and Capital Resources
      18




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Contractual Obligations
  Payments Due by PeriodMoreLess than
    
    
    
    
    
    
    3-5
    
    
    ThanTotal
    
    
    One Year
    
    
    1-3 Years
    
    
    Years
    
    
    5 YearsLong-Term Debt Obligations
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Capital Lease Obligations
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    Operating Lease Obligations
    
    
    
    
    
    
    51,564
    
    
    
    103,128
    
    
    
    103,128
    
    
    
    257,820Purchase Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Long-Term
Liabilities Reflected on
the Registrants Balance
Sheet Under GAAP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totals
    
    
    515,640
    
    
    
    51,564
    
    
    
    103,128
    
    
    
    103,128
    
    

    $
    257,820
 Off-Balance Sheet Arrangements
  
   19




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20




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    /s/ Berenfeld, Spritzer, Shechter and Sheer
 F-2




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Tricell Inc and Subsidiaries
Consolidated Balance Sheets
December 31, 2005 and 2004
 2005
    
    2004ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    266,780
    
    
    $
    6VAT receivable, net
    
    
    1,783,320
    
    
    
    43,691Notes and loans receivable
    
    
    
    
    
    
    57,798Receivable from shareholder
    
    
    135,784
    
    
    
    59,534Accounts receivable
    
    
    50,815,920
    
    
    
    503,939Prepaid expenses and other current assets
    
    
    329,276
    
    
    
    256,809Total current assets
    
    
    53,331,080
    
    
    
    921,777Machinery and equipment, net
    
    
    137,159
    
    
    
    53,542Intangible assets, net of $33,846 and
$18,485, respectively
    
    
    58,579
    
    
    
    77,064Goodwill
    
    
    70,915
    
    
    
    TOTAL ASSETS
    
    $
    53,597,733
    
    
    $
    1,052,383LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIESIncome taxes payable
    
    $
    2,675,072
    
    
    $
    2,888,672Accounts payable
    
    
    51,447,603
    
    
    
    1,163,701Payable to shareholder
    
    
    69,173
    
    
    
    Accrued expenses and other current
liabilities
    
    
    2,717,018
    
    
    
    1,253,902Deferred tax liability
    
    
    327,131
    
    
    
    Total current liabilities
    
    
    57,235,997
    
    
    
    5,306,275STOCKHOLDERS DEFICITPreferred stock, $0.001 par value,
100,000,000 shares authorized, none
issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value,
500,000,000 shares authorized,
99,030,020 and 93,753,020
shares issued and outstanding during
2005 and 2004, respectively
    
    
    99,003
    
    
    
    93,753Additional paid-in capital
    
    
    741,007
    
    
    
    314,757Accumulated deficit
    
    
    (4,766,367
    )
    
    
    (4,833,911
    )Accumulated other comprehensive income
    
    
    640,264
    
    
    
    368,391Deferred compensation
    
    
    (352,172
    )
    
    
    (196,882
    )Total stockholders deficit
    
    
    (3,638,264
    )
    
    
    (4,253,892
    )TOTAL LIABILITIES AND STOCKHOLDERS
DEFICIT
    
    $
    53,597,733
    
    
    $
    1,052,383
  F-3




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Tricell Inc and Subsidiaries
Consolidated Statements of Operations
Years Ended December 31, 2005, 2004 and 2003
 2005
    
    2004
    
    2003SALES
    
    $
    662,903,832
    
    
    $
    13,898,503
    
    
    $
    99,850,232COST OF SALES
    
    
    655,776,390
    
    
    
    13,425,755
    
    
    
    96,795,080GROSS PROFIT
    
    
    7,127,442
    
    
    
    472,748
    
    
    
    3,055,152SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES
    
    
    5,512,464
    
    
    
    8,029,391
    
    
    
    3,149,486INCOME (LOSS) FROM
OPERATIONS
    
    
    1,614,978
    
    
    
    (7,556,643
    )
    
    
    (94,334
    )OTHER INCOME
(EXPENSES)Interest expense
and other financing
costs
    
    
    (1,458,726
    )
    
    
    (202,183
    )
    
    
    (64,934
    )Gain (loss) on sale
of fixed assets
    
    
    
    
    
    
    18,839
    
    
    
    60,478Interest income
    
    
    2,331
    
    
    
    473
    
    
    
    486,194Total Other Income
(Expenses)
    
    
    (1,456,395
    )
    
    
    (182,871
    )
    
    
    481,738INCOME (LOSS)
BEFORE INCOME TAXES
    
    
    158,583
    
    
    
    (7,739,514
    )
    
    
    387,404INCOME TAX BENEFIT
(EXPENSE)
    
    
    (91,039
    )
    
    
    215,349
    
    
    
    (227,942
    )NET INCOME (LOSS)
    
    $
    67,544
    
    
    $
    (7,524,165
    )
    
    $
    159,462EARNING (LOSS) PER
SHARE  BASIC AND
DILUTED
    
    $
    
    
    
    $
    (0.08
    )
    
    $
    WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING  BASIC AND DILUTED
    
    
    94,624,253
    
    
    
    93,719,284
    
    
    
    74,148,148
  F-4




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Tricell Inc and Subsidiaries
Consolidated Statements of Stockholders Equity (Deficit)
Years Ended December 31, 2005, 2004 and 2003
 AccumulatedRetained
    
    Other
    
    TotalCommon
    
    
    
    
    
    Additional
    
    Earnings
    
    Compre-
    
    Stockholders'Stock
    
    Common
    
    Paid-in
    
    (Accumu-
    
    hensive
    
    EquityShares
    
    Stock
    
    Capital
    
    lated Deficit)
    
    Income
    
    (Deficit)BALANCE, DECEMBER 31, 2003
    
    
    93,500,000
    
    
    $
    93,500
    
    
    $
    
    
    
    $
    2,690,254
    
    
    $
    432,401
    
    
    $
    3,216,155Shares issued to management of ACL
    
    
    253,020
    
    
    
    253
    
    
    
    314,757
    
    
    
    (315,010
    )
    
    
    
    
    
    
    Deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118,128
    
    
    
    
    
    
    
    118,128Comprehensive Loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,524,165
    )
    
    
    
    
    
    
    (7,524,165
    )Other comprehensive loss, net
of income tax expense:Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,010
    )
    
    
    (64,010
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,588,175
    )BALANCE, DECEMBER 31, 2004
    
    
    93,753,020
    
    
    
    93,753
    
    
    
    314,757
    
    
    
    (5,030,793
    )
    
    
    368,391
    
    
    
    (4,253,892
    )Shares issued in acquisition of Ace
Telecom
    
    
    1,000,000
    
    
    
    1,000
    
    
    
    29,000
    
    
    
    
    
    
    
    
    
    
    
    30,000Shares issued to Port Vale for services
    
    
    250,000
    
    
    
    250
    
    
    
    27,250
    
    
    
    
    
    
    
    
    
    
    
    27,500Shares issued to directors
    
    
    4,000,000
    
    
    
    4,000
    
    
    
    370,000
    
    
    
    (374,000
    )
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218,711
    
    
    
    
    
    
    
    218,711Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,544
    
    
    
    
    
    
    
    67,544Other comprehensive income, net of
income tax expenses:Foreign currency translation
adjustment, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271,873
    
    
    
    271,873Total comprehensive income:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,417BALANCE, DECEMBER 31, 2005
    
    
    99,003,020
    
    
    $
    99,003
    
    
    $
    741,007
    
    
    $
    (5,118,538
    )
    
    $
    640,264
    
    
    $
    (3,638,264
    )
  F-5




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TRICELL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
 2005
    
    2004
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    67,544
    
    
    $
    (7,524,165
    )
    
    $
    159,462Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    69,382
    
    
    
    122,942
    
    
    
    139,204Amortization of deferred compensation
    
    
    218,711
    
    
    
    118,128
    
    
    
    Shares issued for services
    
    
    27,500
    
    
    
    
    
    
    
    Gain on sale of fixed assets
    
    
    
    
    
    
    (18,839
    )
    
    
    (60,478
    )Bad debt expense
    
    
    
    
    
    
    5,488,559
    
    
    
    Income tax benefit
    
    
    
    
    
    
    (231,322
    )
    
    
    Changes in operating assets and liabilities:VAT receivable
    
    
    (1,739,629
    )
    
    
    1,372,846
    
    
    
    7,782,347Accounts receivable
    
    
    (22,715,023
    )
    
    
    (463,935
    )
    
    
    (82,482
    )Prepaid and other current assets
    
    
    304,515
    
    
    
    113,934
    
    
    
    (53,750
    )Other receivables (payables), net
    
    
    50,721
    
    
    
    
    
    
    
    Accounts payable and accrued
expenses
    
    
    22,295,289
    
    
    
    1,272,277
    
    
    
    (187,321
    )VAT payable
    
    
    
    
    
    
    
    
    
    
    174,859Other current liabilities
    
    
    
    
    
    
    (189,659
    )
    
    
    Income taxes payable
    
    
    (223,869
    )
    
    
    
    
    
    
    209,552Net Cash Provided By (Used In) Operating Activities
    
    
    (1,644,859
    )
    
    
    60,766
    
    
    
    8,081,393CASH FLOWS FROM INVESTING ACTIVITIESPurchase of machinery and equipment
    
    
    (318,767
    )
    
    
    (17,238
    )
    
    
    (401,079
    )Proceeds from sale of property
    
    
    554,395
    
    
    
    159,466
    
    
    
    287,674Cash paid in acquisition of ACL
    
    
    
    
    
    
    (137,550
    )
    
    
    Cash acquired in acquisition of ACE Telecom
    
    
    1,077,002
    
    
    
    
    
    
    
    Loans to third parties
    
    
    
    
    
    
    (531,860
    )
    
    
    (3,910,324
    )Loans to shareholders
    
    
    
    
    
    
    
    
    
    
    (249,330
    )Net Cash Provided by (Used In) Investing Activities
    
    
    1,312,630
    
    
    
    (527,182
    )
    
    
    (4,273,059
    )CASH FLOWS FROM FINANCING ACTIVITIESBorrowing from (repayment to) factor company
    
    
    
    
    
    
    
    
    
    
    (4,934,794
    )Increase (decrease) in bank loans
    
    
    
    
    
    
    (71,231
    )
    
    
    26,614Repayment of loan by (borrowing from) shareholder
    
    
    
    
    
    
    279,584
    
    
    
    (1,675,292
    )
 F-6




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##### Table of Contents



Borrowing from (repayment to) third parties
    
    
    
    
    
    
    
    
    
    
    (1,635,540
    )Net Cash Provided by (Used In) Financing Activities
    
    
    
    
    
    
    208,353
    
    
    
    (8,219,012
    )NET DECREASE IN CASH
    
    
    (332,229
    )
    
    
    (258,063
    )
    
    
    (4,410,678
    )EFFECT OF EXCHANGE RATE ON CASH
    
    
    599,003
    
    
    
    74,828
    
    
    
    92,711CASH, BEGINNING OF YEAR
    
    
    6
    
    
    
    183,241
    
    
    
    4,501,208CASH, END OF YEAR
    
    $
    266,780
    
    
    $
    6
    
    
    $
    183,241supplemental DISCLOSURE OF CASH FLOWS
INFORMATION:Interest paid
during the year
    
    $
    1,458,726
    
    
    $
    185,324
    
    
    $
    64,934Income taxes paid
during the year
    
    $
    
    
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:Shareholder loans
    
    $
    
    
    
    $
    59,534
    
    
    $
    Repossession of
automobile by
finance company
    
    $
    
    
    
    $
    185,275
    
    
    $
    
  F-7




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##### Table of Contents



NOTE
1 
    
    NATURE OF BUSINESS AND CAPITALIZATIONORGANIZATION AND CAPITALIZATIONTricell, Inc. and subsidiaries (Tricell UK Limited, Tricell
Limited, Tricell Distribution Limited, Tricell Global Limited
(formally Tricell Properties Limited), Ace Telecom Limited and
Ace Telecom Trading Limited), collectively referred to as the
Company, was incorporated as 4ForGolf, Inc. in the State of
Nevada on July 9, 2001. The Company was in development stage
until July 2003, when it acquired two United Kingdom
corporations, (Tricell UK LTD, incorporated in October 8, 1999
and Tricell Limited, incorporated on November 11, 1999) in a
reverse acquisition. (See Note 3). On July 11, 2003, the Company
changed its name to Tricell, Inc.In July 2003, the Companys articles of incorporation were amended to increase the
authorized number of common stock, $0.001 par value, from 100,000,000 to 500,000,000 and to
authorize a class of 100,000,000 shares of preferred stock, $0.001 par value. There were no
preferred stock outstanding at December 31, 2005.Also in July 2003, the Company conducted a forward stock split of its issued and outstanding
common stock on a 20 new for 1 old basis. All stock figures have been restated to reflect
the stock split.The Company is a worldwide distributor of mobile telephones and other mobile handset
accessories. The Companys corporate offices are located in Stoke-On-Trent, United Kingdom.NOTE
2 
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESA summary of the Companys significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows:BASIS OF ACCOUNTINGThe accounts are maintained and the consolidated financial statements have been prepared
using the accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America.PRINCIPLES OF CONSOLIDATIONThe consolidated financial statements include the accounts of Tricell, Inc. and its
wholly-owned subsidiaries. All significant intercompany transactions and balances have been
eliminated in consolidation.USE OF ESTIMATESThe preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain reported amounts in the consolidated financial
statements and accompanying notes. Actual results could differ from these estimates and assumptions.
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CASH AND CASH EQUIVALENTSThe Company considers all highly liquid investments with a maturity of three months or less
when purchased to be cash equivalents. At December 31, 2005 and 2004, the Company had no
such investments.ACCOUNTS RECEIVABLEAccounts receivable are stated at amounts management expects to collect from outstanding
balances. Management provides for probable uncollectible amounts through a charge to
earnings and a credit to a valuation allowance based on its assessment of the current status
of individual accounts. Balances still outstanding after management has used reasonable
collection efforts are written off through a charge to the valuation allowance and a credit
to accounts receivable. No allowance for doubtful accounts was provided at December 31,
2005 and 2004, as the Company considers all accounts receivable to be fully collectible.GOODWILL AND INTANGIBLE ASSETSIn June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, which
addresses the accounting for goodwill and other intangible assets. Under SFAS No. 142,
goodwill and intangible assets with indefinite lives are no longer amortized, but reviewed
on an annual basis for impairment. The Companys annual evaluation was performed as of
December 31, 2005. No impairment losses were identified as a result of this evaluation.
Intangible assets consist of intellectual property and customer lists acquired through
acquisitions. All of the Companys intangible assets are amortized on a straight-line basis
over their estimated lives of five years. Fully amortized assets are written off against
accumulated amortization.MACHINERY AND EQUIPMENTMachinery and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets for financial reporting
purposes. Expenditures for major renewals and betterments that extend the useful lives are
capitalized. Expenditures for normal maintenance and repairs are expensed as incurred. The
cost of assets sold or abandoned and the related accumulated depreciation are eliminated
from the accounts and any gains or losses are reflected in the accompanying consolidated
statement of operations in the respective period. The estimated useful lives range from
three to five years.STOCK OPTIONSDuring 2005 the Company issued stock options, which are described more fully in Note 12.
The Company accounts for its stock options under the recognition and measurement principles
of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. The following table illustrates the effect on net
income (loss) and earnings (loss) per share if the Company had applied the fair value
recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to
stock-based employee compensation.
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The following presents pro forma net income and per share data as if a fair value accounting
method had been used to account for stock-based compensation.
 December 31,2005Net income, as reported
    
    $
    67,544Less total stock-based employee compensation expense
determined under the fair value based method for all
awards
    
    
    17,203Pro forma net income
    
    $
    50,341Earnings per share:Basic and diluted  as reported
    
    $
    Basic and diluted  pro forma
    
    $
    
 REVENUE RECOGNITIONThe Company recognized revenue in accordance with SEC Staff Accounting Bulletin (SAB) 104,
Revenue Recognition. Revenue is recognized when title and/or risk of loss have passed to
the customer, there is persuasive evidence of an arrangement, delivery has occurred or
services have been rendered, the sales price is fixed or determinable, and collectibility is
reasonably assured. Revenue is recognized under the gross method in accordance with
Emerging Issues Task Force (EITF) 99-19, Reporting Revenue Gross as a Principle vs. Net as
an Agent. As such, revenue includes the value of the product sold.The criteria for recognition of revenue are generally met upon shipment to customers,
including title transfer, and, therefore, revenue is recognized at the time of shipment. In
certain countries, title is retained by the Company for collection purposes only, which does
not impact the timing of revenue recognition in accordance to the provisions of SAB 104.COST OF SALES AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSESThe significant components of the line item Cost of sales include the cost to acquire
merchandise from vendors and freight in.The significant components of the line item Selling, general and administrative expenses
primarily include payroll and related payroll benefits; rent and other office expenses;
travel and entertainment and other corporate-related expenses.
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INCOME TAXESDeferred income taxes are determined using the liability method in accordance with Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred income taxes are measured using
enacted tax rates expected to apply to taxable operations in years in which such temporary
differences are expected to be recovered or settled. The effect on deferred income taxes of
a change in tax rates is recognized in the consolidated statement of operations of the
period that includes the enactment date. In addition, a valuation allowance is established
to reduce any deferred tax asset for which it is determined that it is more likely than not
that some portion of the deferred tax asset will not be realized.ADVERTISING COSTSAdvertising costs are expensed as incurred. The Company incurred $37,973, $165,555 and
$70,253 in advertising costs for the years ended December 31, 2005, 2004 and 2003,
respectively, which are included in selling, general and administrative expenses in the
consolidated statements of operations.FOREIGN CURRENCY TRANSLATIONSThe Companys functional currency is other than the U.S. dollar. All assets and liabilities
in the balance sheet are translated at year-end exchange rates. All revenues and expenses
in the statement of operations are translated at average exchange rates for the year.
Translation gains and losses are not included in determining net income (loss), but are
shown in accumulated other comprehensive income (loss) in the stockholders equity section
of the consolidated balance sheets. Foreign currency transaction gains and losses are
included in determining net income and were not significant.COMPREHENSIVE INCOMEThe Company reports comprehensive income (loss) in accordance with the provisions of SFAS
No. 130, Reporting Comprehensive Income. Comprehensive income (loss) consists of net income
(loss) and foreign currency translation adjustments and is presented in the consolidated
statements of stockholders equity.EARNINGS PER SHAREBasic earnings per share is calculated by dividing net income (loss) available to common
stockholders by the weighted average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur if accounts or
other contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings for the Company.
For the years presented herein, basic and diluted earnings (loss) per share are the same.
4,000,000 common
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stock options have been excluded from the diluted earnings per share calculation for 2005,
as they were not dilutive.FAIR VALUE OF FINANCIAL INSTRUMENTSIn accordance with the reporting requirements of SFAS No. 107, Disclosures About Fair Value
of Financial Instruments, the Company calculates the fair value of its assets and
liabilities which qualify as financial instruments under this statement and includes this
additional information in the notes to consolidated financial statements when the fair is
different than the carrying value of those financial instruments. The estimated fair value
of accounts receivable and accounts payable approximate the carrying amounts due to the
relatively short maturity of these instruments. None of these instruments are held for
trading purposes.IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDSIn December 2003, the Financial Accounting Standards Board (FASB) issued Interpretation
No. 46 (revised December 2003), Consolidation of Variable Interest Entities(FIN 46R),
which addresses how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and, accordingly,
should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, which was issued in January 2003. The Company is required to
apply FIN 46R to variable interests in variable interest entities (VIEs) created after
December 31, 2003. For variable interests in VIEs created before January 1, 2004, FIN 46R
will be applied beginning on January 1, 2005. For any VIEs that must be consolidated under
FIN 46R that were created before January 1, 2004, the assets, liabilities, and
noncontrolling interests of the VIE initially would be measured at their carrying amounts
with any difference between the net amount added to the consolidated balance sheet and any
previously recognized interest being recognized as the cumulative effect of a change in
accounting principle. If determining the carrying amounts is not practicable, fair value at
the date FIN 46R first applies may be used to measure the assets, liabilities, and
noncontrolling interest of the VIE. The Company owns no interests in variable interest
entities; therefore, FIN 46R did not affect the Companys consolidated financial statements.In December 2004, the FASB issued SFAS 123R, Share-Based Payment, which is a revision of SFAS
123, Accounting for Stock Based Compensation, and superseded Accounting Principles Bulletin
(APB) Opinion 25, Accounting for Stock Issued to Employees. SFAS 123R focuses primarily on
share-based payments for employee services, requiring these payments to be recorded using a
fair-value-based method. The use of APB 25s intrinsic value method of accounting for
employee stock options has been eliminated. As a result the fair value of stock options
granted to employees in the future will be required to be expensed. The impact on the
results of operations of the Company will be dependent on the number of options granted and
the fair value of those options. For the Company, FASB 123R will be effective in 2006.
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NOTE
3 
    
    ACQUISITIONSACQUISITION OF ACE TELECOM LIMITED AND SUBSIDIARYOn June 30, 2005, the Company purchased ACE Telecom Limited and its wholly owned subsidiary,
ACE Telecom Trading Limited, collectively referred to as ACE. ACE has bolstered the
Companys revenues and added additional customer base. Further, ACE has reinforced the
Companys wholesale trading and distribution business significantly. ACE is in the same
line of business of the Company and act complementary because they effect trades through
separate networks of suppliers and purchasers. Pursuant to the purchase 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 shares were
valued at $30,000 based on the price of $.03 on the date of acquisition. Pursuant to the
purchase 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 of the Company in a pro rata manner. As a result, ACE became a wholly-owned
subsidiary of the Company.The following table sets forth the allocation of the purchase price to ACEs tangible and
intangible assets acquired and liabilities as of June 30, 2005:
 Cash
    
    $
    1,077,002Accounts receivable, net
    
    
    27,596,958Other receivables
    
    
    370,825Prepaid expenses and other current assets
    
    
    6,157Fixed assets
    
    
    602,495Goodwill
    
    
    70,915Accounts payable
    
    
    (28,434,451
    )Accrued expenses and other current liabilities
    
    
    (1,017,279
    )Income tax payable
    
    
    (10,269
    )Mortgage payable
    
    
    (232,353
    )Total
    
    $
    30,000
 As part of consideration in the purchase of ACE, the purchase agreement called for the
issuance of 2,000,000 additional shares to be issued to the former directors of ACE if
certain goals are met. In accordance with SFAS 141, Business Combinations, the Company has
not recorded the contingent purchase price since the outcome of the contingency is not
determinable beyond a reasonable doubt. If the shares are issued at the resolution of the
contingency, it will result in an additional element of cost of the acquired assets and an
adjustment to recorded goodwill at such time.
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The following unaudited pro forma information presents the results of operations as if the
acquisition had occurred as of the beginning of the immediate preceding period. The pro
forma information is not necessarily indicative of what would have occurred had the
acquisition been made as of such periods, nor is it indicative of future results of
operations.
 2005
    
    
    2004Sales
    
    $
    716,462,326
    
    
    $
    121,181,220Net income (loss)
    
    $
    116,836
    
    
    $
    (7,489,203
    )Net income (loss) per share  basic and
diluted
    
    $
    
    
    
    $
    (0.08
    )
 ACQUISITION OF ACL DISTRIBUTION LIMITED AND FORMATION OF TRICELL DISTRIBUTION LIMITED AND
TRICELL PROPERTIESOn February 9, 2004, the Company purchased certain assets of ACL Distribution Limited, a
United Kingdom limited partnership, for a total consideration of approximately $139,000.The following table sets forth the allocation of the purchase price of ACLs tangible and
intangible assets acquired:
 Intangible assets
    
    $
    92,425Computer equipment
    
    
    18,485Furniture and fixtures
    
    
    9,237Accounts receivable
    
    
    18,485Other
    
    
    6Total
    
    $
    138,638
 The ACL assets have been contributed to and form the basis of a new wholly-owned subsidiary,
Tricell Distribution Limited, incorporated in the United Kingdom on November 14, 2003 as
Yulestar Limited. Its name was changed to Tricell Distribution Limited on January 20, 2004.On February 19, 2004, the Company issued 253,020 shares of restricted common stock to former
management of Tricell Distribution Limited to secure their services. Those employees became
employees of the Company, with 2-year employment contracts. The shares were valued at the
closing price of the Companys common stock on that date, less a 25% discount for
restriction, for a total of $315,010. This amount has been recorded as deferred
compensation, and is being amortized over 2 years.On September 15, 2004, the Company issued 1 share of common stock to an unrelated third
party to acquire an inactive company Tricell Properties Limited and to create a new
wholly-owned subsidiary. Tricell Properties Limited was incorporated in the United Kingdom
on August 14, 2003 as Sunrise Marketing Limited. Its name was changed to Tricell Properties
Limited on November 19, 2003 and subsequent to December 31, 2004 the name was again changed
to Tricell Global Limited on February 23, 2005. Since inception until September 15, 2004
the company was inactive with no assets.ACQUISITIONS OF TRICELL UK AND TRICELL INTERNATIONAL, LTD.On July 21, 2003, the Company executed a Stock Exchange Agreement with Tricell UK LTD and
Tricell Limited. Pursuant to the Agreement, the Company acquired all of the issued and
outstanding capital stock of Tricell UK LTD and Tricell Limited, in aggregate, in exchange
for 47,500,000 post-forward stock split shares of the Companys common stock. As a result of
the
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Agreement, Tricell UK LTD and Tricell Limited became wholly owned subsidiaries of the
Company, and their former shareholders became the collective owners of 51% of the Company.Prior to the acquisitions, the Company was a non-operating entity, with minimal net assets
(approximately $54,000 at June 30, 2003). As a result of Tricell UK LTD and Tricell Limited
shareholders owning the majority of the stock of the combined company, and as a result of
the Company having minimal net assets, the acquisition was accounted for as a reverse
recapitalization with no goodwill or intangible assets recognition. Tricell UK LTD and
Tricell Limited were deemed the accounting acquirers.REPORTING PERIODThe accompanying consolidated financial statements for the year ended December 31, 2005
depict the results of operations and cash flows of Tricell, Inc., Tricell UK Limited,
Tricell International Limited, Tricell Distribution Limited and Tricell Global Limited for
the twelve months ended December 31, 2005 and the results of operations and cash flows of
Ace Telecom Limited and Ace Telecom Trading Limited from June 30, 2005 (date of acquisition)
to December 31, 2005.The accompanying consolidated financial statements for the year ended December 31, 2004
depict the results of operations and cash flows of Tricell, Inc., Tricell UK Limited,
Tricell International Limited for the twelve months ended December 31, 2004 and the results
of operations and cash flows of Tricell Distribution Limited from February 9, 2004 (date of
acquisition) to December 31, 2004, and the results of Tricell Properties from September 15,
2004.The accompanying consolidated financial statements for the year ended December 31, 2003
depict the results of operations and cash flows of the Tricell UK LTD and Tricell
International LTD for the twelve months ended December 31, 2003 and the results of
operations and cash flows of the Tricell, Inc. from July 21, 2003 (date of acquisition) to
December 31, 2003.NOTE
4 
    
    NOTES AND LOANS RECEIVABLEOn May 21, 2003, the Company entered into a loan facility agreement with a third party,
whereas the Company was to lend up to $3,167,000 to the third party. The loan bears interest
at 2% above the Base Rate of Barclays Bank plc and was due on October 31, 2003. The facility
was subsequently increased to up $4,000,000 and the maturity was extended to December 31,
2003. On December 5, 2003, the maturity of the loan was further extended to April 30, 2004.The loan provides for an additional fee of approximately $409,000 to be collected at maturity.
This amount, along with accrued interest on the loan of $77,194, is included in the
accompanying income statements as interest income for the year ending December 31, 2003.As of March 31, 2004, the balance of the loan (including accrued interest and fees, as
discussed above) was $4,712,202. On April 14, 2004, approximately $3,735,000 was to have been
repaid. The debtor made representation and gave written notice that they would pay the above
balance via a wire transfer. The transfer was never consummated and upon discovery of this
fact, the Company took action to recover and secured its position with a security agreement on
equipment. A portion of the receivable (approximately $903,700) was received in September of
2004. However, in
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December 2004, management determined that the remaining portion of the note was uncollectible.
As a result, the Company wrote off the balance due and in the statement of operations for the
year ended December 31, 2004 recognized a loss from the write off of $2,580,332, included in
selling, general and administrative expenses.NOTE
5 
    
    MACHINERY AND EQUIPMENTAs of December 31, 2005 and 2004 machinery and equipment consisted of the following:
 2005
    
    
    2004Machinery
    
    $
    243,244
    
    
    $
    108,722Less: Accumulated Depreciation
    
    
    (106,085
    )
    
    
    (55,180
    )Machinery and Equipment, Net
    
    $
    137,159
    
    
    $
    53,542
 Depreciation expense was $50,896, $104,600 and $139,204 for the years ended December 31,
2005, 2004 and 2003, respectively.NOTE 6 
    
    CREDIT ARRANGEMENTSDuring 2005, the Company secured a revolving line-of-credit with Telco Invest Limited
(Telco) in the principal amount of $3,818,400. This line-of-credit was used during the
year and provided the Company with the needed capital to engage in trading operations.
Funds received pursuant to the line-of-credit were repaid, and as additional
consideration for the line-of-credit, the Company paid Telco a funding charge equal to
50% of the gross profit earned on transactions in which the line-of-credit was used. Due
to the acquisition of ACE and the significant cost associated with the use of the
line-of-credit, the line was paid in full in the third quarter of 2005 and is no longer
used. The line-of-credit has a zero balance as of December 31, 2005.NOTE 7 
    
    INCOME TAXESThe provisions for income taxes consisted of the following:
 2005
    
    
    2004
    
    
    2003Current
    
    $
    101,186
    
    
    $
    (231,323
    )
    
    $
    209,825Deferred
    
    
    (10,147
    )
    
    
    15,794
    
    
    
    18,117Total tax expense (benefit)
    
    $
    91,039
    
    
    $
    (215,349
    )
    
    $
    227,942
 At December 31, 2005 and 2004, the only significant deferred tax asset (liability) of the
Company related to foreign currency translation, see Note 10.A reconciliation of the statutory tax with the effective tax follows:
 2005
    
    
    2004
    
    
    2003UK statutory corporation rate
    
    $
    95,590
    
    
    $
    (1,658,681
    )
    
    $
    183,797Effects of:Depreciation
    
    
    (11,765
    )
    
    
    (6,003
    )
    
    
    2,337Expenses not allowable
for tax purposes
    
    
    17,361
    
    
    
    1,433,361
    
    
    
    23,691Effective tax
    
    $
    101,186
    
    
    $
    (231,323
    )
    
    $
    209,825
 All taxes of the Company related to the U.K.
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NOTE
8 
    
    EMPLOYEE BENEFIT PLANThe Company has a defined contribution plan that covers substantially all directors and
employees. The Plan provides for the Company to make discretionary contributions, determined
annually. No contributions were made during the year ended December 31, 2005. During the
years ended December 31, 2004 and 2003, the Company made contributions of approximately $3,700
and $64,000, respectively.NOTE
9 
    
    COMMITMENTS AND CONTINGENCIESLeasesThe Company leases office space under two operating lease agreements. One office lease has
expired and the Company is currently looking for a new facility and is leasing on a
month-to-month basis. The second lease, which is with a related party, expires in August 2015
and requires annual rental payments of approximately $52,000. Total rent expense was $79,923,
$112,395 and $16,735 for the years ended December 31, 2005, 2004 and 2003, respectively.ContingenciesIn the ordinary course of business, the Company filed monthly claims for refund of VAT
(Value-Added-Tax) of approximately the $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.During 2004, the Company rescinded their July 15, 2004 acquisition of Discount Intranet Supply
Channel Limited (D-ISC). Despite the Companys attempts to negotiate a mutually agreeable
rescission, the Company has informed D-ISC that the 29.5 million shares of the Companys common
stock issued to D-ISC are invalid, not fully paid and not non-assessable. The Company has also
informed D-ISC that they will vigorously defend any attempt by D-ISC to establish rights in
these shares.
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NOTE
10 
    
    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)Accumulated other comprehensive income (loss) consisted of the following at December 31, 2005,
2004 and 2003:
 2005
    
    
    2004
    
    
    2003Foreign currency translation
adjustments
    
    $
    967,395
    
    
    $
    490,833
    
    
    $
    617,716Deferred income tax
adjustment
    
    
    (327,131
    )
    
    
    (122,442
    )
    
    
    (183,315
    )$
    640,264
    
    
    $
    368,391
    
    
    $
    432,401
 NOTE
11 
    
    CONCENTRATIONSFinancial instruments that potentially subject the Company to concentrations of credit risk
consist principally of cash investments and trade receivables. The Company maintains cash
balances at several banks, including accounts in the UK and US. Accounts in the UK are not
insured. There were no U.S. uninsured cash balances as of December 31, 2005 or 2004.As of December 31, 2005, the Company had four customers that accounted for approximately 40%,
22%, 22%, and 12% of the Companys accounts receivable balance. As of December 31, 2004, the
Company had two customers that accounted for approximately 72% and 17% of the Companys
accounts receivable balance.Net sales to customers in excess of 10% of total sales approximated the following during the
years ended December 31, 2005, 2004 and 2003:
 Customer
    
    2005
    
    2004
    
    2003A
    
    
    28
    %
    
    
    21
    %
    
    
    19
    %B
    
    
    14
    %
    
    
    13
    %
    
    
    11
    %C
    
    
    
    
    
    
    10
    %
    
    
 Purchases from vendors in excess of 10% of total purchases approximated the following during
the years ended December 31, 2005, 2004 and 2003:
 Vendor
    
    2005
    
    
    2004
    
    
    2003A
    
    
    17
    %
    
    
    20
    %
    
    
    18
    %B
    
    
    10
    %
    
    
    13
    %
    
    
    14
    %C
    
    
    
    
    
    
    12
    %
    
    
    
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2005
    
    
    2004
    
    
    2003UK
    
    $
    352,537,253
    
    
    $
    3,425,030
    
    
    $
    17,023,049Cyprus
    
    
    7,583,101
    
    
    
    
    
    
    
    Spain
    
    
    207,081,052
    
    
    
    
    
    
    
    Portugal
    
    
    58,388,937
    
    
    
    
    
    
    
    Netherlands
    
    
    12,230,087
    
    
    
    745,614
    
    
    
    20,079,452Belgium
    
    
    22,215,412
    
    
    
    
    
    
    
    19,291,947Hong Kong
    
    
    
    
    
    
    
    
    
    
    18,475,573France
    
    
    
    
    
    
    760,320
    
    
    
    16,726,056Other
    
    
    2,867,990
    
    
    
    2,647,282
    
    
    
    8,254,155Total
    
    $
    662,963,832
    
    
    $
    7,578,246
    
    
    $
    99,850,232
 NOTE 12 
    
    STOCK OPTIONSIn 2005, the Company issued 4,000,000 stock options, divided equally among the four directors
of the Company. The stock options vest 2,000,000 in November 2006 and 2,000,000 in November
2007. The exercise price is equal to the average share price for a 30 day period prior to the
vesting date. Such options have a 4 year life.As of December 31, 2005, the exercise price for the outstanding options had not yet been fixed,
and hence such values of these options will be remeasured quarterly until the exercise price is
fixed.Information regarding the pro forma net income is required by SFAS 123, and has been determined
as if the Company had accounted for its employee stock options under the fair value method of
SFAS No. 123. The fair value of these options was estimated at the date of grant using a
Black-Scholes option-pricing model using the following weighted average assumptions:
 2005Volatility
    
    
    100
    %Expected lives
    
    4 yearsExpected dividend yield
    
    Risk free rate
    
    
    4.39
    %
 The Black-Scholes options valuation model was developed for use in estimating the fair value of
traded options, which have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions including the
expected stock price volatility. Because changes in the subjective input assumptions can
materially affect the fair value estimate, in managements opinion, the existing models do not
necessarily provide a reliable single measure for the fair value of its employee stock options.NOTE 13 
    
    RELATED PARTY TRANSACTIONSDuring 2003, the Company made several payments to the shareholder in repayment of a loan and
inadvertently overpaid him, resulting in a receivable of $271,123 from the shareholder as of
December 31, 2003. As of 2004, the balance of this receivable was $59,534. During 2005, this
was repaid and as of December 31, 2005 there was a balance payable to the shareholder of
$69,173.As part of the acquisition of ACE there were amounts owed to the Company by their four
shareholders of $275,704. These have been repaid in part during 2005 and as of December 31, 2005
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##### Table of Contents



the balance receivable from the shareholders was $135,784, divided equally between the four
shareholders.As part of the acquisition of ACE, the Company acquired a building previously owned by ACE.
During 2005, the building was sold to a related party for approximately $525,000, which was
encumbered by a mortgage of approximately $232,000. No gain or loss was recorded related to
the sale. The building is now leased back to the Company by the related party, as discussed in
Note 9.NOTE
14 
    
    SUBSEQUENT EVENTSBANKRUPTCY PROCEEDINGSOn January 28, 2006, the Company was notified that two of the Companys wholly owned
subsidiaries, Tricell International Limited (Tricell Int.) and Tricell (UK) Limited (Tricell
UK), were moved from administration, a United Kingdom equivalent of Chapter 11 reorganization,
to creditors voluntary liquidation, a United Kingdom equivalent of Chapter 7 liquidation.
Neither Tricell nor other subsidiaries have provided any guarantees or security interests to
the creditors of either Tricell Int. or Tricell UK.Bond Partners, LLP, the liquidator for Tricell Int. and Tricell UK, estimates that there will
be no surplus from after all creditors of Tricell UK and Tricell Int. have been paid. As the
liquidator estimates that there will be deficiencies in both Tricell Int. and Tricell UK, he
does not expect us to receive any income or assets. The estimated deficiencies of the companies
in liquidation are:
 Tricell International Limited
    
    
    
    $
    758,548Tricell (UK) Limited
    
    
    
    $
    988,970Total
    
    
    
    $
    1,747,518
 The liquidators estimated statement of affairs includes $1,843,800 VAT receivable from the UK
government that was previously for VAT tax withheld, but it does not include estimates for
potential claims that could be pursued against the UK Government for damages and/or interest
due to the withholding actions taken by the UK Government. The Companys Board of Directors,
after investigating potential claims, the Companys likely costs in pursuing potential claims,
and the Companys ultimate recoverability, has decided not to pursue a claim against the UK
government on the basis that the funds necessary to pursue such a claim may be better used in
the Companys operations. As a result of this liquidation, as of January 27, 2006, the assets
and liabilities of Tricell UK and Tricell Int. were removed from our consolidated financial
statements and on that date our net assets, or shareholders equity, increased by $1,747,518.
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##### Table of Contents



NOTE
15 
    
    QUARTERLY FINANCIAL DATA (UNAUDITED)Selected financial data (unaudited) for the years ended December 31, 2005 and 2004 is set
forth below:
 Net Income (Loss)Per Share
    
    Weighted Average2005
    
    Revenues
    
    Net Income (Loss)
    
    Basic/Diluted
    
    Shares OutstandingFirst quarter
    
    $
    56,266,926
    
    
    $
    (87,108
    )
    
    $
    
    
    
    
    93,726,031Second quarter
    
    $
    220,508,455
    
    
    $
    (74,930
    )
    
    $
    
    
    
    
    93,753,020Third quarter
    
    $
    240,167,787
    
    
    $
    349,900
    
    
    $
    
    
    
    
    94,753,020Fourth quarter
    
    $
    145,960,664
    
    
    $
    (120,318
    )
    
    $
    
    
    
    
    96,264,000For the year
    
    $
    662,903,832
    
    
    $
    67,544
    
    
    $
    
    
    
    
    94,624,253
 Net Income (Loss)Per Share
    
    Weighted Average2004
    
    Revenues
    
    Net Income (Loss)
    
    Basic/Diluted
    
    Shares OutstandingFirst quarter
    
    $
    4,308,161
    
    
    $
    (478,246
    )
    
    $
    (0.01
    )
    
    
    93,539,359Second quarter
    
    $
    4,467,745
    
    
    $
    (1,063,617
    )
    
    $
    (0.01
    )
    
    
    93,753,020Third quarter
    
    $
    3,996,543
    
    
    $
    (877,181
    )
    
    $
    (0.01
    )
    
    
    93,753,020Fourth quarter
    
    $
    1,156,054
    
    
    $
    (5,105,121
    )
    
    $
    (0.05
    )
    
    
    93,753,020For the year
    
    $
    13,898,503
    
    
    $
    (7,524,165
    )
    
    $
    (0.08
    )
    
    
    93,719,284
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##### Table of Contents



ITEM 9.
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
  
 ITEM 9A.
    
    Controls and Procedures
 Introduction
    21




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  Evaluation of Disclosure Controls and Procedures.
  
 ITEM 9B.
    
    Other Information
  
  
 ITEM 10.
    
    Directors and Executive Officers
    22




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##### Table of Contents



(a)
    
    The following documents are filed as part of this report:1.
    
    Financial Statements.Our consolidated financial statements are included in Part
II, Item 8 of this report:Independent Auditors Report;Consolidated Balance Sheets as of December 31, 2005 and 2004;Consolidated Statements of Operations for the Years Ended
December 31, 2005, 2004 and 2003;Consolidated Statements of Stockholders Equity for the
Years Ended December 31, 2005, 2004 and 2003;Consolidated Statements of Cash Flows for Years Ended
December 31, 2005, 2004 and 2003;Notes to Consolidated Financial Statements.
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##### Table of Contents



2.
    
    ExhibitsA list of the exhibits filed or furnished with this report
on Form 10-K (or incorporated by reference to exhibits
previously filed or furnished by us) is provided in the
Exhibit Index beginning on page 26 of this report. Those
exhibits incorporated by reference herein are indicated as
such by the information supplied in the parenthetical
thereafter. Otherwise, the exhibits are filed herewith.
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##### Table of Contents



SIGNATURES
  TRICELL, INC.Date: April 17, 2006
    
    /s/ Andre SaltBy: Andre SaltCEO and Chairman of the Board
  By:
    
    /s/ Andre Salt
    
    Date: April 17, 2006Andre SaltChief Executive Officer and Chairman of the Board(Principal Executive Officer)By:
    
    /s/ Neil Pursell
    
    Date: April 17, 2006Neil PursellChief Financial Officer and Director(Principal Financial and Accounting Officer)By:
    
    /s/ James Reed
    
    Date: April 17, 2006James ReedPresident and DirectorBy:
    
    /s/Adrian John Sumnall
    
    Date: April 17, 2006Adrian John SumnallDirectorBy:
    
    /s/ Neil Proctor
    
    Date: April 17, 2006Neil ProctorDirector
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##### Table of Contents



EXHIBITNO.
    
    DESCRIPTION3(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.)10.1
    
    Loan Agreement, dated February 14, 2005, by and between Tricell Distribution Ltd. and Telco
Invest Limited (filed as Exhibit 10 to the Companys Current Report on Form 10-K filed on June
10, 2005, and incorporated herein by reference).10.2
    
    Employment Agreement, dated January 26, 2006, by and between the Company and Neil Pursell10.3
    
    Employment Agreement, dated January 26, 2006, by and between the Company and James Reed10.4
    
    Employment Agreement, dated January 26, 2006, by and between the Company and Adrian John
Sumnall10.5
    
    Employment Agreement, dated January 26, 2006, by and between the Company and Neil Proctor10.6
    
    Sale Agreement, dated June 30, 2005, by and between the Company and James Reed, Neil Pursell,
John Sumnall, and Neil Proctor (filed as Exhibit 10 to the Companys Current Report on Form
8-K filed on July 7, 2005, and incorporated herein by reference).10.7
    
    Letter of Intent dated April 12, 2006 executed by and between the Company and the owners of
N2J Limited21
    
    List of Subsidiaries31(i)
    
    Certification of Chief Executive Officer of Tricell, Inc. under Section 302 of the
Sarbanes-Oxley Act of 2002.31(ii)
    
    Certification of Chief Financial Officer of Tricell, Inc. under Section 302 of the
Sarbanes-Oxley Act of 2002.32(i)
    
    Certification of Chief Executive Officer of Tricell, Inc. Pursuant to 18 U.S.C. §135032(ii)
    
    Certification of Chief Financial Officer of Tricell, Inc. Pursuant to 18 U.S.C. §1350
 
 *
    
    Previously filed as indicated and incorporated herein by reference from the referenced filings
previously made by the Company. 26