TCLL,10-Q is out tonight...Awesome Awesome numbers...Monday should be a great day and to think this one is only .30 cents a share..lol I own a ton of this one and have been waiting for this woooooohooooo
http://biz.yahoo.com/e/060818/tcll.ob10-q.html
Form 10-Q for TRICELL INC
18-Aug-2006
Quarterly Report
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-looking Information
This quarterly report contains forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. These statements relate to future events or to our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. There are a number of factors that could cause our actual results to differ materially from those indicated by such forward-looking statements.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance, or achievements. Moreover, it does not assume responsibility for the accuracy and completeness of such forward-looking statements. The Company is under no duty to update any of the forward-looking statements after the date of this information statement to conform such statements to actual results. The foregoing management's discussion and analysis should be read in conjunction with the Company's financial statements and the notes herein.
Overview
During the quarter ended June 30, 2006, we maintained our level of profitability from operations for the first quarter of 2006, which represents a significant improvement from our profitability for the quarter ended June 30, 2005. This improvement is due to our continued focus on trading operations. We have achieved this by retaining and reinvesting the working capital generated from our profitable trading operations during 2005 and continuing in the first half of 2006 and additionally achieving short-term debt financing. We anticipate that our current operations will maintain this level of revenue and profitability throughout the remainder of 2006.
The primary area of our operations is the wireless sector, where we will continue our wholesale international distribution of mobile handsets and electronic equipment. We are continuing to see market growth and an increased demand for our services, in addition to the expansion of our products into new markets, which we plan to include the United States by the end of the second quarter for 2007. These factors are expected to be complimented by developing improved relationships with the wireless manufacturers and the expansion of our integrated logistics services.
Proposed Acquisition of N2J Limited
We are continuing our negotiations to acquire N2J Limited, a United Kingdom limited company. The Letter of Intent (LOI), dated April 14, 2006, we entered into with N2J expired on May 15, 2006 but we expect to execute a new LOI before August 31, 2006. In the event we acquire N2J, we will have a broader platform of markets to sell our products. We believe N2J's ability to liberally conduct trading from the United Kingdom will provide synergies of our current subsidiaries, as their network of purchasers and suppliers will now only be enhanced. We believe that this acquisition will significantly accelerate future profitability.
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Future Sales Strategy
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 customers to whom we supply;
Expand the geographic coverage of our operations in Eastern Europe, Asia and North America; and
Develop and expand our service offering to deliver integrated logistic 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.
The size and relative lack of saturation of this market are the primary reasons why we anticipate trying to gain further entry in the United States market.
Results of Operations
SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2005
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, 2005. Comparisons made between reporting periods herein are for the six month period ended June 30, 2006 as compared to the same period in 2005.
Six Months Six Months
June 30, Ended June 30, Ended Percent
2006 2005 Increase Increase
Revenue $ 740,924,849 $ 276,755,381 $ 464,149,468 168 %
Gross Profit $ 10,855,220 $ 2,186,056 $ 8,669,164 397 %
The improvements in revenue and gross profit resulted when our 2006 trading operations were expanded relative to our trading operations conducted in the six months ended June 30, 2005. Further enhancing our results for six months ended June 30, 2006 as compared to the same period in 2005 was our focus on improved gross profit as compared to our 2005 operations due to our ongoing efforts to reduce our cost of sales and economies of scale.
Six Months Six Months
June 30, Ended June 30, Ended Percent
2006 2005 Increase Increase
Gross Profit $ 10,855,220 $ 2,186,056 $ 8,669,164 397 %
Selling, General and Administrative Expenses $ 5,809,795 $ 1,216,483 $ 4,593,309 378 %
Income from Operations $ 5,045,428 $ 969,573 $ 4,075,855 420 %
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Our selling, general and administrative expenses increased for first six months of 2006 when compared with the same period of 2005. This 378% increase is related to our increase in trading operations and increased revenue which require that our administrative expenses increase. The improvement, 420% in income from operations is the result of our increased revenues, relatively decreased cost of sales, and our relatively lower selling, general and administrative expenses. Additionally, in the first six months ended June 30, 2006, Tricell resumed internally financing nearly all of its trading activities with cash flow from operations, whereas an external line of credit was used to finance a substantial portion of operations for most of 2005.
Six Months Six Months
Ended June 30, Ended Percent
2006 June 30, 2005 Increase Increase
Income from Operations $ 5,045,428 $ 969,573 $ 4,075,855 420 %
Other Income (Expense) $ 3,294,406 $ (1,091,087 ) $ 4,385,493 402 %
Income Tax Benefit (Expense) $ (1,563,442 ) $ (40,524 ) $ 1,522,918 3758 %
Net Income (loss) $ 6,776,389 $ (162,038 ) $ 6,938,427 4282 %
The increase in other income is almost entirely due to our write off of approximately $3,621,000 of net liabilities when two of our subsidiaries were liquidated in January 2006. Also contributing to our improved profitability is our reduction of interest expense and financing costs to $321,128 for the six months ended June 30, 2006 from $1,091,406 for the six months ended June 30, 2005. This other income added significantly to our already increased income from operations, resulting in net income of $6,776,389 for the six months ended June 30, 2006, as compared to net loss of $162,038 for the same period in 2005.
THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2005
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, 2005. Comparisons made between reporting periods herein are for the three-month period ended June 30, 2006 as compared to the same period in 2005.
Three Months Three Months
Ended Ended Percent
June 30, 2006 June 30, 2005 Increase Increase
Revenue $ 357,387,776 $ 220,508,455 $ 136,879,321 62 %
Gross Profit $ 5,027,463 $ 1,407,852 $ 3,619,611 257 %
Our sales revenue increased to $357,387,776 for the three months ended June 30, 2006 from $220,508,445 for the same period in 2005. The increase in sales revenue is due to continued expansion of our trading operations.
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Three Months Three Months
Ended Ended Percent
June 30, 2006 June 30, 2005 Increase Increase
Gross Profit $ 5,027,463 $ 1,407,852 $ 3,619,611 257 %
Selling, General and Administrative Expenses $ 2,053,429 $ 651,866 $ 1,401,563 215 %
Income from Operations $ 2,974,034 $ 755,986 $ 2,218,048 293 %
Our selling, general and administrative (SGA) expenses increased for the second quarter of 2006 when compared with the same period of 2005. This 215% increase is related to our increase in trading operations and increased revenue which requires that our administrative expenses increase. The improvement, 293% in income from operations is the result of our increased revenues, relatively decreased cost of sales, and our relatively lower selling, general and administrative expenses.
Three Three
Months Months
Ended Ended Percent
June 30, 2006 June 30, 2005 Increase/(Decrease) Increase/(Decrease)
Income from Operations $ 2,974,034 $ 755,986 $ 2,218,048 293 %
Other Income (Expense) $ (319,799 ) $ (847,305 ) $ (527,506 ) (62 %)
Income Tax Benefit (Expense) $ (884,853 ) $ 16,389 $ (901,242 ) (5499 %)
Net Income (Loss) $ 1,769,382 $ (74,930 ) $ 1,844,312 2461 %
We had net income of $1,769,382 for the three months ended June 30, 2006 as compared to a net loss of $74,930 for the three months in 2005. The increase in income was due to our expanded trading operations as well as a reduction of interest expense and financing costs in the three months ended June 30, 2006 to $320,460, from $847,338 for the three months ended June 30, 2005. Liquidity and Capital Resources
As of June 30, 2006, our cash and cash equivalents were $98,141, as compared to $266,780 as of December 31, 2005. The decrease is primarily due to working capital needs of our expanded operations.
Six months Six months
ended June 30, ended June 30,
2006 2005
Cash Provided By (Used In) $ (282,388 ) $ 566,752
Operating Activities
Cash used in operating activities for the six months ended June 30, 2006 was $282,388 as compared to cash provided by operating activities for the same period of 2005 of $566,752. The
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change is mainly attributable to the fact that our expanding operations required more working capital in 2006.
Six months Six months
ended June 30, ended June 30,
2006 2005
Cash Provided by (Used In) Investing Activities $ (10,152 ) $ 821,437
Cash used in investing activities decreased to $10,152 for the six months ended June 30, 2006 as compared to cash provided by investing activities of $821,437 for the same period in 2005. This decrease is primarily the result of a decrease in loans to third parties, from $175,764 for the six months ended June 30, 2005 to $0 for the same period in 2006; a decrease on loans to shareholders, from $31,394 for the six months ended June 30, 2005 to $0 for the same period in 2006; and a decrease in cash paid in the acquisition of Ace Telecom, from $1,090,900 for the six months ended June 30, 2005, to $0 for the same period in 2006.
Six months Six months
ended June 30, ended June 30,
2006 2005
Cash Provided by (Used In) Financing Activities $ - $ 55,724
Cash provided by financing activities for the six months ended June 30, 2006 was $0, as compared to cash provided by financing activities of $55,724 for the same period in 2005. The decrease in cash provided by financing activities reflects our lack of borrowing for the six months ended June 30, 2006, as opposed to borrowing of $55,724 for the same period in 2005 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 related to working capital for our operations. 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. Off-Balance Sheet Arrangements
We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structure finance or special purpose entities ("SPEs"), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes as part of our ongoing business. As of June 30, 2006, we were not involved in any unconsolidated SPE transactions.
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk We have never owned or traded market risk sensitive instruments, or equivalent instruments from which future cash flows can be realized. Our major market risk is changes in foreign currency exchange rates relative to the British Pound, which could impact our results of operations and financial condition. Foreign exchange risk arises from our exposure to
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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. Specifically, we attempt to affect every one of our sales and purchase transactions in British Pounds to eliminate currency fluctuations entirely. We further attempt to minimize currency fluctuation risk by effecting purchases of equipment and subsequent resale of such equipment as expeditiously as possible and immediately thereafter convert foreign funds to British Pounds as to minimize the amount of time we are exposed to currency fluctuation. As of June 30, 2006, we had not engaged in any currency arbitrage or hedging activities, although we may in the future. Our debt is not subject to one measure of interest, therefore, the debt is somewhat diversified against interest rate increases.
ITEM 4. Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this quarterly report. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.
There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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