UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended March 31, 2004.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (No fee required) for the transition period from ____________________ to
___________________.
Commission file number: 0-32455
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TRICELL, INC.
---------------
(Exact Name of Registrant as Specified in Its Charter)
Nevada 88-0504530
------ ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
39 Uttoxeter Road, Longton, Stoke-on-Trent, ST3 1NT United Kingdom
------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
011 44 1782 339 130
-------------------
(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 [X] No [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
The number of shares outstanding of Registrant's common stock, par value $0.001
("Common Stock") as of May 18, 2004 was 93,500,000.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management's Discussion And Analysis of Financial Condition
and Results of Operations 4
Item 3. Quantitative and Qualitative Disclosures About Market Risk 7
Item 4. Controls and Procedures 8
PART II - OTHER INFORMATION 8
Item 1. Legal Proceedings 8
Item 6. Exhibits and Reports on Form 8-K 8
INDEX TO EXHIBITS 9
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
TRICELL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 December 31,
2004 2003
-------------- --------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 492,965 $ 183,241
VAT receivable, net 20,663 1,371,634
Notes and loans receivable 5,544,908 4,963,519
Accounts receivable, net 216,882 125,262
Receivable from shareholder 303,100 271,123
Prepaid expenses and other current assets 70,641 116,344
--------------- -------------
Total current assets 6,649,159 7,031,123
MACHINERY AND EQUIPMENT, NET 319,326 473,757
INTELLECTUAL PROPERTY, NET 86,745 0
--------------- -------------
TOTAL ASSETS $ 7,055,230 $ 7,504,880
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Income taxes payable $ 3,037,584 $ 2,890,939
Accounts payable and accrued expenses 1,027,698 962,011
VAT payable 0 190,143
Current portion of long-term debt 18,090 24,191
--------------- -------------
Total current liabilities 4,083,372 4,067,284
LONG-TERM DEBT 164,311 221,441
COMMITMENT AND CONTINGENCIES 0 0
STOCKHOLDERS' EQUITY
Common stock 93,753 93,500
Additional paid-in capital 314,757 0
Retained earnings 2,212,008 2,690,254
Accumulated other comprehensive income 502,039 432,401
Deferred compensation (315,010) 0
--------------- -------------
Total stockholders' equity 2,807,547 3,216,155
--------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,055,230 $ 7,504,880
=============== =============
See accompanying notes to condensed consolidated financial statements.
F-1
TRICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Unaudited)
2004 2003
---------------- ---------------
SALES $ 4,308,161 $ 56,659,801
COST OF SALES 4,229,964 54,812,457
----------------- --------------
GROSS PROFIT 78,197 1,847,344
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 600,544 1,261,014
----------------- -------------
INCOME (LOSS) FROM OPERATIONS (522,347) 586,330
OTHER EXPENSES:
Interest expense
and other financing costs (42,875) (142,841)
----------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES (565,222) 443,489
INCOME TAX (EXPENSE) BENEFIT 86,976 (133,048)
----------------- -------------
NET INCOME (LOSS) $ (478,246) $ 310,441
================= =============
LOSS PER SHARE - BASIC AND DILUTED $ (0.01) $ 0.00
================= =============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 93,539,359 0
================= =============
EARNING PER SHARE - BASIC AND DILUTED
(PROFORMA) $ 0.00 $ 0.01
================= =============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED (PROFORMA) 0 32,465,760
================= =============
See accompanying notes to condensed consolidated financial statements.
F-2
TRICELL , INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Unaudited)
2004 2003
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(478,246) $ 310,441
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 40,520 26,755
Changes in operating assets and liabilities:
(Increase) decrease in:
VAT receivable 1,395,449 6,730,973
Accounts receivable (70,386) (3,085,992)
Prepaid and other current assets 49,094 261
Increase (decrease) in:
Accounts payable and accrued expense (17,756) 5,424,118
Income taxes payable (86,975) 133,048
------------- -------------
Net Cash Provided By Operating Activities 831,700 9,539,604
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of machinery and equipment 0 (2,845)
Proceeds from sale of machinery and equipment 159,674 0
Cash paid in acquisition of ACL Distribution (137,724) 0
Loans to shareholder (24,842) 0
Loans to third-parties (450,743) 0
------------- -------------
Net Cash Used In Investing Activities (453,635) (2,845)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of borrowing from factor company 0 (4,839,087)
Repayment of loans from shareholder 0 (1,551,949)
Repayment of long-term debt (70,206) (10,159)
------------- --------------
Net Cash Used In Financing Activities (70,206) (6,401,195)
------------- --------------
NET INCREASE IN CASH 307,859 3,135,564
EFFECT OF EXCHANGE RATE ON CASH 1,865 (138,202)
CASH, BEGINNING OF PERIOD 183,241 4,441,294
------------- --------------
CASH, END OF PERIOD $ 492,965 $7,438,656
============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Interest paid during the period $ 42,874 $ 142,841
============= ==============
Income taxes paid during the period $ 0 $ 0
============= ==============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
253,020 shares issued for deferred compensation $ 315,010 $ 0
============= ==============
See accompanying notes to condensed consolidated financial statements.
F-3
TRICELL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated balance sheet as of March 31, 2004, the
condensed consolidated statements of operations for the three months ended
March 31, 2004 and 2003,and the condensed consolidated statements of cash
flows for the three months ended March 31, 2004 and 2003 are unaudited.
However, in the opinion of management, all adjustments (which include
reclassifications and normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows at
March 31, 2004 and for all periods presented, have been made. The results
of operations for the three-month period ended March 31, 2004 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, 2003 Form 10-K.
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of
Tricell, Inc. (the "Company") and its wholly- owned subsidiaries, Tricell
UK LTD, Tricell International LTD (formerly Tricell Limited), and Tricell
Distribution Limited. All significant intercompany balances and
transactions have been eliminated.
REPORTING PERIOD
As further explained in Note 2, the acquisition of Tricell UK LTD and
Tricell International LTD on July 21, 2003 was accounted for as a reverse
acquisition. Tricell UK LTD and Tricell International LTD were deemed to
be the accounting acquirers and the Company was deemed the legal acquirer.
The accompanying condensed consolidated financial statements for the three
months ended March 31, 2004 depict the results of operations and cash
F-4
TRICELL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION (CONTINUED)
REPORTING PERIOD (CONTINUED)
flows of Tricell, Inc. and all subsidiaries. The accompanying condensed
consolidated financial statements for the three months ended March 31,
2003 depict the results of operations and cash flows of Tricell UK LTD and
Tricell International LTD only.
NOTE 2 - ACQUISITIONS
ACQUISTIONS OF TRICELL UK LTD AND TRICELL INTERNATIONAL LTD
On July 21, 2003, Tricell, Inc., formally 4ForGolf, Inc., executed a Stock
Exchange Agreement with Tricell UK LTD and Tricell Limited (which
subsequently changed its name to Tricell International LTD on March 29,
2004). Pursuant to the Agreement, the Company acquired all of the issued
and outstanding capital stock of Tricell UK LTD and Tricell International
LTD, in aggregate, in exchange for 47,500,000 post-forward stock split
shares of the Company's common stock. As a result of the Agreement,
Tricell UK LTD and Tricell International LTD 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 International LTD 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 International LTD were deemed the
accounting acquirers.
PRO-FORMA RESULTS OF OPERATIONS
No pro-forma results of operations is provided as the results of
operations for Tricell, Inc., the accounting acquiree, for the three
months ended March 31, 2003 were not material. Tricell, Inc.'s net loss
for the 3 months ended March 31, 2003 was approximately $4,400.
F-5
TRICELL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
NOTE 2 - ACQUISITIONS (CONTINUED)
ACQUISTION OF ACL DISTRIBUTION LIMITED AND FORMATION OF
TRICELL DISTRIBUTION LIMITED
On 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 preliminary allocation of the purchase
price of ACL's tangible and intangible assets acquired:
Intellectual property $ 92,425
Computer equipment 18,485
Furniture and fixtures 9,237
Accounts receivable 18,485
Other
6
-----------
Total $ 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, to be amortized over 2 years.
F-6
TRICELL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
NOTE 3 - NOTES AND LOANS RECEIVABLE
On May 21, 2003, the Company entered into a loan facility agreement with a
third party, whereas the Company was to lend up to $3,470,000 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 to $4,383,000 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, was included in the December 31, 2003 statement of
operations as interest income.
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 repaid and the balance was expected to be
repaid prior to April 30, 2004. The loan is now delinquent but management
expects full payment.
The remaining balance of $832,706 included in notes and loans receivable
in the accompanying condensed consolidated balance sheet consist of
short-term loans to some of the Company's suppliers.
NOTE 4- COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company filed monthly claims for
refund of VAT (Value-Added-Tax) of approximately $14,230,000 for November
2002 through February 2003. The VAT authorities determined that $1,650,000
of this VAT was associated with particular transactions involved in
"Carousel" and/or "Missing Trader" fraud and therefore, the refund of the
VAT was denied. The Company referred the matter to the Tribunal which upon
review concluded that there was no wrongdoing by the Company, however,
they concluded that these transactions had no economic substance, since
the VAT had not been previously paid by a trader up the supply chain, and
therefore as the VAT was not held by the VAT authorities, no refund was
available.
F-7
TRICELL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
NOTE 4- COMMITMENTS AND CONTINGENCIES (CONTINUED)
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 and therefore the Company has provided for an allowance of
$942,000 against VAT receivable as of December 31, 2002 and an allowance
of $708,000 against VAT receivable as of December 31, 2003.
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 $303,100 from the shareholder as of March 31,
2004. The shareholder intends to repay the loan during the second quarter of
2004.
NOTE 6 - COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) includes net income (loss) and foreign currency
translation adjustments, which are reported separately on the consolidated
statements of stockholders' equity in the Company Form 10-K.
Three Months Ended
------------------
March 31, March 31,
2004 2003
----------- -------------
Net Income (Loss) $ (478,246) $ 310,441
Foreign currency translation
adjustments, net of tax 69,638 (40,057)
----------- -------------
Comprehensive income (loss) $ 408,608) $ 270,384
=========== =============
F-8
TRICELL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
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 ended March 31, 2004 and 2003:
Three Months Ended March 31,
----------------------------
2004 2003
----- ------
24% 18%
22% 12%
19% -
11% -
Net purchases from vendors in excess of 10% of total purchases approximated
the following during the three months ended March 31, 2004 and 2003:
Three Months Ended March 31,
----------------------------
2004 2003
---- ------
30% 10%
25% -
18% -
Revenues from the United Kingdom and other countries were as follows:
Three Months Ended March 31,
2004 2003
---------- --------------
UK $ 2,956,479 $ 8,212,966
------------ --------------
Germany 758,033 -
Republic of Ireland 297,484 1,160,011
Luxemburg 296,165 -
Netherlands - 19,690,028
Belgium - 18,917,795
France - 3,892,391
Hong Kong - 3,862,329
Spain - 924,281
------------ -------------
Total Other countries 1,351,682 48,446,835
------------ -------------
Total $ 4,308,161 $56,659,801
============ =============
The company has no long-lived assets outside of the United
Kingdom.
F-9
TRICELL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
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.
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.
F-10
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 we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, we do not assume
responsibility for the accuracy and completeness of such forward-looking
statements. We are 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 our financial statements and the notes herein.
General
As used herein, the terms "Company", "we", "our" or "us" refer to Tricell,
Inc., a Nevada corporation, and its subsidiaries and predecessors, unless the
context indicates otherwise. 4ForGolf, Inc. was incorporated in the State of
Nevada on July 9, 2001 to engage in an online golf tee-time reservation service
and golfing resource website, which we operated since our inception. As a result
of our lack of profitability and the Company's receipt of numerous inquires from
entities seeking to merge with us, we decided to change our operational focus in
July, 2003 by executing a Stock Exchange Agreement ("Agreement") with Tricell UK
Limited and Tricell Limited, two United Kingdom corporations (collectively
referred to as "Tricell"). As a result of the Agreement, Tricell UK Limited and
Tricell Limited became our wholly-owned subsidiaries and the Tricell
shareholders became the collective owners of approximately 51% of our
outstanding common stock We experienced a sharp decline in our revenue and in
our trading of mobile telephones and related accessories in 2004 as compared to
2003 and in 2003 as compared to 2002 due primarily to a change in the regulatory
regime involving VAT refunds. Specifically, the regime changed to avail any
participant in the purchase and sale of products to liability for any wrongdoing
by any upstream and downstream purchaser.
Our operations now consist of supplying and distributing mobile
telephones, telephone accessories and electronic commodities in Europe and Asia.
We attempt to obtain our products at the best prices available and distribute
these products to markets at varying levels of maturity in Europe and Asia.
4
On October 30, 2003, our board of directors issued a press release
announcing our intended acquisition of ACL Distributors Limited, a UK based
company ("ACL"), pursuant to terms which had been reached to acquire one hundred
percent (100%) of ACL for a proposed maximum consideration of US$2 million in
our common stock and an element of cash to be issued at the closing price on the
day preceding completion. Instead of buying ACL outright, we were able buy
certain of ACL's assets, on February 19, 2004, and employed certain of its
personnel, including its majority stockholder, Thomas Adams. We tendered a
maximum consideration of $138,000 for these assets. Subsequent to the purchase,
we have issued shares of our common stock valued at $533,400, as of February 19,
2004 to secure the services of the senior management of this business. The ACL
assets have been contributed to and form the basis of operations for our new
subsidiary, Tricell Distribution, a United Kingdom limited company.
In the wireless sector, we will continue our wholesale international
distribution of mobile handsets and electronic equipment and feel confident that
we will return to 2002 revenue levels. Our confidence stems from the continued
growth in the market and the demand for our services. This will be complimented
by developing improved relationships with the wireless manufacturers and the
expansion of our integrated logistic services.
Tricell's strategy is two fold. First, we seek to grow our current
business through acquisition to deliver diversification in products and
geography. Additionally, we will attempt to identify business development
opportunities in the wireless communications and associated sectors that offer
high revenues and sustain or improve current margins.
Our strategy for growth and increasing shareholder value includes the
development and expansion of our product and service offerings and geographic
expansion to address the new markets. This is driven by the continuing growth in
handset sales (new and replacement), the growing convergence between voice and
data, the introduction of UMTS and the increasing focus of network operators on
the expansion of their service offering upon proprietary handsets.
To deliver our strategy we will:
Continue to build our relationships with wireless manufacturers,
broadening our portfolio with these manufacturers and expanding the number
of customer to whom we supply;
Expand the geographic coverage of our operations to cover Eastern Europe,
Asia and North America
Develop and expand our service offering to deliver integrated logistics
services to the handset manufacturers and network operators, enabling them
to more effectively address their markets, including the distribution,
marketing and selling of airtime services.
We plan to deliver the growth in our business through a combination of
internal expansion, acquisitions and joint ventures.
5
Results of Operations
The following discussion should be read in conjunction with the audited
financial statements and notes thereto included in our annual report on Form
10-K for the fiscal year ended December 31, 2003. Comparisons made between
reporting periods herein are for the three month periods ended March 31, 2004 as
compared to the same period in 2003.
We had a net loss of $478,246 for the quarter ended March 31, 2004 as
compared to $310,441 in net income for the same quarter in 2003. Our sales
revenue decreased from $56,659,801 for the three months ended March 31, 2003 to
$4,308,161 for the same period in 2004. The decrease in sales revenue is mainly
due to our suspension of business activities in the first quarter of 2004 while
we awaited the outcome of a Customs & Excise ruling on the treatment of
liability for Value-Added-Tax ("VAT") upon intra-European transactions.
- ----------------------------------------------
2004 2003
- ----------------------------------------------
Net Income (Loss) $ (478,246) 310,441
- ----------------------------------------------
Sales Revenue $4,308,161 $56,659,801
- ----------------------------------------------
Additionally, our selling, general and administrative expenses decreased
to $600,544 for the three months ended March 31, 2004 from $1,261,014 for the
same period in 2003. These decreases are due to our suspension of business
activities in the first quarter of 2004.
- ----------------------------------------------------------
Expenses* 2004 2003
- ----------------------------------------------------------
Selling, General & Administrative 600,544 1,261,014
- ----------------------------------------------------------
Interest Expense 42,875 142,841
- ----------------------------------------------------------
Total 643,419 1,403,855
- ----------------------------------------------------------
* Note that these expenses may not represent all actual expenditures in the
above categories as a result of our ability to capitalize certain expenditures.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities for the three months ended March 31,
2004 was $ 831,700 as compared to cash provided by operating activities for the
same period of 2003 of $9,539,604. This change is mainly attributable to a
decrease in sales taxes receivable of $1,395,449 compared to $6,730,973 in 2003.
This is due to decreased revenues and decrease VAT taxes. For example, Tricell's
VAT receivable typically averages approximately 17.5% of its sales revenues, so
as revenue decreases, the VAT receivable decreases proportionately.
- -------------------------------------------------------------
2004 2003
- -------------------------------------------------------------
Cash Provided By Operating Activities $831,700 $9,539,604
- -------------------------------------------------------------
Cash used in investing activities decreased to $ (453,635) for the three
months ended March 31, 2004 as compared to $(2,845) for the same period in 2003.
This is primarily attributable to loans to third parties of $450,743.
6
- ------------------------------------------------------
2004 2003
- ------------------------------------------------------
Cash Used In Investing Activities $(453,635) $(2,845)
- ------------------------------------------------------
Cash used by financing activities was $ (70,206) for the three months
ended March 31, 2004 compared to cash used by financing activities of
$(6,401,195) for the three months ended March 31, 2003. The increased financing
activity reflects repayment of borrowing from a factor company, repayment of
loans from a shareholder, and repayment of long-term debt.
- ----------------------------------------------------------
2004 2003
- ----------------------------------------------------------
Cash Used In Financing Activities $ (70,206) $(6,401,195)
- ----------------------------------------------------------
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 we 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 Operating Officer.
CRITICAL ACCOUNTING POLICIES
Management's discussion and analysis of our financial condition and
results of operations are based on our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States (GAAP). GAAP represents a comprehensive set of accounting
and disclosure rules and requirements, the application of which requires
management judgments and estimates including, in certain circumstances, choices
between acceptable GAAP alternatives. The preparation of these consolidated
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities, if any, at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. We base our estimates on historical experience and various
other assumptions that are believed to be reasonable under the circumstances.
Actual results could differ from these estimates under different assumptions or
conditions. Note 1 to our consolidated financial statements included elsewhere
in this Form 10-Q, contains a comprehensive summary of our significant
accounting policies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our major market risk is to changes in foreign currency exchange rates in
the British Pound, which could impact our results of operations and financial
condition. Foreign exchange risk arises from our exposure to fluctuations in
foreign currency exchange rates because our reporting currency is the United
States dollar. Management seeks to minimize the exposure to foreign currency
fluctuations through natural internal offsets to the fullest extent possible. As
of March 31, 2004, we had not engaged in any currency arbitrage or hedging
7
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
The Company, under the supervision and with the participation of its
management, including the Chief Executive Officer and the Chief Financial
Officer, evaluated the effectiveness of the design and operation of the
Company's "disclosure controls and procedures" (as defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of
the period covered by this report. Based on that evaluation, the Chief Executive
Officer and the Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective in timely making known to them material
information relating to the Company and the Company's consolidated subsidiaries
required to be disclosed in the Company's reports filed or submitted under the
Exchange Act. There has been no change in the Company's internal control over
financial reporting during the quarter ended March 31, 2004 that has materially
affected, or is reasonably likely to materially affect, the Company's 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
over how much VAT tax refund we are entitled to, as more fully described herein.
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 9 of
this Form 10-Q, which is incorporated herein by reference.
(b) Reports on Form 8-K. No reports were filed on Form 8-K during the
first quarter of 2004.
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 18 day of May, 2004.
Tricell, Inc.
/s/ Andre Salt
----------------------------------------------
By: Andre Salt, CEO and Chairman of the Board
/s/ Albert Amritanand
----------------------------------------------
By: Albert Amritanand, Principal Financial
Officer
8
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. 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.)
31(i) 11 Certification of Chief Executive Officer under Section 302 of
the Sarbanes-Oxley Act of 2002.
31(ii) 12 Certification of Chief Financial Officer under Section 302 of
the Sarbanes-Oxley Act of 2002.
32(i) 13 Certification of Chief Executive Officer of Tricell, Inc.
Pursuant to 18 U.S.C. ss.1350
32(ii) 14 906 Certification of Chief Financial Officer of Tricell, Inc.
Pursuant to 18 U.S.C. ss.1350
* Previously filed as indicated and incorporated herein by reference from the
referenced filings previously made by the Company.
9
EXHIBIT 31(i)
CERTIFICATION
I, Andre Salt, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Tricell, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer(s) and I am responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to myself by others within
those entities, particularly during the period in which this annual report
is being prepared;
(b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designated under my
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the regtistrant's internal controls
over financial reporting that occurred during the registrant's most recent
fiscal year that has materially affected, or is reasonably likely to
materially effect, the registrant's internal controls over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 18, 2004
/s/ Andre Salt
- ------------------------------------
Andre Salt
Chief Executive Officer and Chairman
10
EXHIBIT 31(ii)
CERTIFICATION
I, Albert Amritanand, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Tricell, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer(s) and I am responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to myself by others within those
entities, particularly during the period in which this annual report is
being prepared;
(b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designated under my
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the retgistrant's internal controls
over financial reporting that occurred during the registrant most recent
fiscal year that has materially affected, or is reasonably likely to
materially effect, the registrant's internal controls over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 18, 2004
/s/ Albert Amritanand
- -----------------------
Albert Amritanand
Chief Financial Officer
11
EXHIBIT 32(i)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report on Form 10-Q of Tricell, Inc. (the
"Company") for the period ended March 31, 2004 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), the undersigned, Andre
Salt, the Chief Executive Officer of the Company, hereby certifies, pursuant to
18 U.S.C. section 1350, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: May 18, 2004
/s/ Andre Salt
- ------------------------
Andre Salt
Chief Executive Officer
12
EXHIBIT 32(ii)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report on Form 10-Q of Tricell, Inc. (the
"Company") for the period ended March 31, 2004 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), the undersigned, Albert
Amritanand, Chief Financial Officer of the Company, hereby certifies, pursuant
to 18 U.S.C. section 1350, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15
(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: May 18, 2004
/s/ Albert Amritanand
- ------------------------
Albert Amritanand
Chief Financial Officer
13