VIKING ENERGY GROUP, INC. - Quarter Report: 2008 March (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
|
S
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the quarterly period
ended: March 31,
2008
|
£
|
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 ______________________________________
|
SYNTHENOL
INC.
|
||
|
(Exact
name of registrant as specified in its charter)
|
|
Florida
|
000-29219
|
98-0199508
|
||
|
(State
or other jurisdiction of incorporation or organization)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
|
Suite
206 – 388 Drake Street
|
||
|
Vancouver,
British Columbia, Canada
|
V6B
6A8
|
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
Issuer’s
telephone number
|
(604)
648-2090
|
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
(Zip
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 S No £
-1-
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer £ | Accelerated Filer £ |
| Non Accelerated Filer £ | Smaller Reporting Company S |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes £ No S
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS:
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes £ No £ Not
Applicable
APPLICABLE
ONLY TO CORPORATE ISSUERS
The
number of shares of common stock outstanding as of March 31, 2008 was
731,522.
-2-
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PART I – FINANCIALS INFORMATION
ITEM
1. FINANCIAL STATEMENTS
SYNTHENOL
INC.
(A
Development Stage Company)
CONSOLIDATED
FINANCIAL STATEMENTS
March 31,
2008
Unaudited
SYNTHENOL
INC.
(A
Development Stage Company)
CONSOLIDATED
BALANCE SHEETS
|
March
31,
|
December 31,
|
|||||||
|
ASSETS
|
2008
|
2007
|
||||||
|
Unaudited
|
||||||||
|
Current
|
||||||||
|
Cash
|
$ | 38,585 | $ | 66,273 | ||||
| $ | 38,585 | $ | 66,273 | |||||
|
LIABILITIES AND
STOCKHOLDERS’ DEFICIENCY
|
||||||||
|
|
||||||||
|
Current
|
||||||||
|
Accounts
payable and accrued liabilities (Note 4)
|
$ | 139,562 | $ | 133,508 | ||||
|
Notes
payable (Note 3)
|
315,981 | 309,079 | ||||||
| 455,543 | 442,587 | |||||||
|
Capital
stock
|
||||||||
|
Preferred
stock, $0.01 par value, 5,000,000 shares authorized, no shares issued or
outstanding
|
||||||||
|
Common stock, $0.01
par value, 100,000,000 shares authorized731,522 (December 31, 2007:
731,522) shares issued and outstanding
|
7,315 | 7,315 | ||||||
|
Treasury
stock, at cost, 540 shares (December 31, 2007: 540)
|
(270 | ) | (270 | ) | ||||
|
Additional
paid-in capital
|
1,974,187 | 1,974,187 | ||||||
|
Accumulated
other comprehensive income
|
4,591 | 5,213 | ||||||
|
Deficit
|
(1,305,454 | ) | (1,305,454 | ) | ||||
|
Deficit
accumulated during the development stage
|
(1,097,327 | ) | (1,057,305 | ) | ||||
| (416,958 | ) | (376,314 | ) | |||||
| $ | 38,585 | $ | 66,273 | |||||
Contingencies
(Note 2)
Commitments
(Note 3)
Subsequent
event (Note 6)
SEE
ACCOMPANYING NOTES
SYNTHENOL
INC.
(A Development Stage
Company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
Unaudited
|
January 1, 2004
|
||||||||||||
|
Three
months ended
|
(Date of Inception of the Development Stage) to
|
|||||||||||
|
March 31,
|
March 31,
|
|||||||||||
|
2008
|
2007
|
2008
|
||||||||||
|
General
and administrative expenses
|
||||||||||||
|
Amortization
|
$ | - | $ | - | $ | 27,077 | ||||||
|
Bad
debt
|
- | - | 525 | |||||||||
|
Corporate
promotion
|
- | - | 13,920 | |||||||||
|
Finance
charges
|
4,051 | - | 15,336 | |||||||||
|
Insurance
|
- | - | 15,901 | |||||||||
|
Interest
on notes payable
|
4,907 | - | 28,335 | |||||||||
|
Management
and consultant fees (Note 4)
|
24,356 | 22,757 | 248,955 | |||||||||
|
Office
supplies and services
|
709 | 4,215 | 47,126 | |||||||||
|
Professional
fees
|
6,000 | 14,130 | 241,207 | |||||||||
|
Rent
|
- | - | 16,311 | |||||||||
|
Wages
|
- | - | 84,258 | |||||||||
|
Loss
before other items
|
(40,022 | ) | (41,102 | ) | (738,951 | ) | ||||||
|
Other
items
|
||||||||||||
|
Loss
on disposition of equipment
|
- | - | (15,028 | ) | ||||||||
|
Write-down
of intangible assets
|
- | - | (50,001 | ) | ||||||||
|
Write-off
of notes payable
|
- | - | 14,823 | |||||||||
|
Gain
on settlement of lawsuit
|
- | - | 44,445 | |||||||||
|
Loss
from continuing operations
|
(40,022 | ) | (41,102 | ) | (744,712 | ) | ||||||
|
Operating
loss from discontinued operations
|
- | - | (382,299 | ) | ||||||||
|
Gain
on sale of discontinued operations
|
- | - | 29,684 | |||||||||
|
Net
loss
|
$ | (40,022 | ) | $ | (41,102 | ) | $ | (1,097,327 | ) | |||
|
Basic
and diluted loss per common share
|
$ | (0.05 | ) | $ | (0.06 | ) | ||||||
|
Weighted
average number of common share outstanding – basic and
diluted
|
731,522 | 731,522 | ||||||||||
|
Comprehensive
loss
|
||||||||||||
|
Net
loss
|
$ | (40,022 | ) | $ | (41,102 | ) | $ | (1,097,327 | ) | |||
|
Foreign
currency translation adjustment
|
(622 | ) | (13 | ) | 4,591 | |||||||
|
Total
comprehensive loss
|
$ | (40,644 | ) | $ | (41,115 | ) | $ | (1,092,736 | ) | |||
SEE ACCOMPANYING NOTES
SYNTHENOL
INC.
(A Development Stage
Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Unaudited
|
January 1,
2004
|
||||||||||||
|
Three
months ended
|
(Date
of Inception of the Development Stage) to
|
|||||||||||
|
March 31,
|
March 31,
|
|||||||||||
|
2008
|
2007
|
2008
|
||||||||||
|
Cash
flows from operating activities
|
||||||||||||
|
Net
loss from continuing operations
|
$ | (40,022 | ) | $ | (41,102 | ) | $ | (744,712 | ) | |||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
|
Finance
charges
|
4,051 | - | 15,336 | |||||||||
|
Accrued
interest on notes payable
|
4,907 | 691 | 28,335 | |||||||||
|
Amortization
|
- | - | 27,077 | |||||||||
|
Foreign
exchange effect on notes payable
|
(2,056 | ) | - | 6,045 | ||||||||
|
Issuance
of common stock for services
|
- | - | 1,000 | |||||||||
|
Stock-based
compensation
|
- | - | 4,460 | |||||||||
|
Loss
on disposition of equipment
|
- | - | 225,184 | |||||||||
|
Write-down
of intangible assets
|
- | - | 360,001 | |||||||||
|
Write-off
of notes payable
|
- | - | (18,729 | ) | ||||||||
|
Gain
on settlement of lawsuit
|
- | - | (44,445 | ) | ||||||||
|
Changes
in non-cash working capital items:
|
||||||||||||
|
Accounts
payable and accrued liabilities
|
6,054 | (5,131 | ) | 139,562 | ||||||||
|
Cash
used in continuing operations
|
(27,066 | ) | (45,542 | ) | (886 | ) | ||||||
|
Discontinued
operations
|
- | - | (553,150 | ) | ||||||||
|
Net
cash used in operating activities
|
(27,066 | ) | (45,542 | ) | (554,036 | ) | ||||||
|
Cash
flows from investing activities
|
||||||||||||
|
Proceeds
from sale of subsidiary
|
- | - | 1 | |||||||||
|
Proceeds
from assets disposition
|
- | - | 5,458 | |||||||||
|
Purchase
of equipment
|
- | - | (5,808 | ) | ||||||||
|
Net
cash used in investing activities
|
- | - | (349 | ) | ||||||||
|
Cash
flows from financing activities
|
||||||||||||
|
Proceeds
from notes payable
|
- | 35,000 | 398,614 | |||||||||
|
Proceeds
from issuance of common stock
|
- | - | 1,000 | |||||||||
|
Net
cash provided by financing activities
|
- | 35,000 | 399,614 | |||||||||
|
Effect
of exchange rate changes on cash
|
(622 | ) | (13 | ) | (16,161 | ) | ||||||
|
Change
in cash from continuing operations
|
(27,688 | ) | (10,555 | ) | (170,932 | ) | ||||||
|
Cash,
beginning
|
66,273 | 13,462 | 209,517 | |||||||||
|
Cash,
ending
|
$ | 38,585 | $ | 2,907 | $ | 38,585 | ||||||
Supplemental
cash flow information (Note 5)
SEE
ACCOMPANYING NOTES
SYNTHENOL
INC.
(A Development Stage
Company)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ DEFICIENCY
Unaudited
|
Common
Shares
|
Treasury
|
Additional
Paid-in
|
Subscriptions
|
Accumulated
Other Comprehensive
|
Deficit
Accumulated During the Development
|
|||||||||||||||||||||||||||||||
|
Number
|
Amount
|
Stock
|
Capital
|
Received
|
Income
|
Deficit
|
Stage
|
Total
|
||||||||||||||||||||||||||||
|
May 3,
1989 ( Inception) through December 31, 1997
|
60,022 | $ | 600 | $ | - | $ | 9,400 | $ | - | $ | - | $ | (10,000 | ) | $ | - | $ | - | ||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | (148,931 | ) | - | (148,931 | ) | |||||||||||||||||||||||||
|
Shares
issued for cash
|
180,000 | 1,800 | - | 148,200 | 2,000 | - | - | - | 152,000 | |||||||||||||||||||||||||||
|
Balance
at December 31, 1998
|
240,022 | 2,400 | - | 157,600 | 2,000 | - | (158,931 | ) | - | 3,069 | ||||||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | (511,587 | ) | - | (511,587 | ) | |||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (14,130 | ) | - | - | (14,130 | ) | |||||||||||||||||||||||||
|
Share
issued for services
|
15,000 | 150 | - | 124,850 | - | - | - | - | 125,000 | |||||||||||||||||||||||||||
|
Subscription
receivable
|
12,000 | 120 | - | 99,880 | 8,000 | - | - | - | 108,000 | |||||||||||||||||||||||||||
|
Share
issued for intangible assets
|
15,000 | 150 | - | 124,850 | - | - | - | - | 125,000 | |||||||||||||||||||||||||||
|
Balance
at December 31, 1999
|
282,022 | 2,820 | - | 507,180 | 10,000 | (14,130 | ) | (670,518 | ) | - | (164,648 | ) | ||||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | (339,063 | ) | - | (339,063 | ) | |||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | 18,885 | - | - | 18,885 | |||||||||||||||||||||||||||
|
Shares
issued for cash
|
21,600 | 216 | - | 259,784 | - | - | - | - | 260,000 | |||||||||||||||||||||||||||
|
Shares
issued for settlement of debt
|
4,500 | 45 | - | 174,955 | - | - | - | - | 175,000 | |||||||||||||||||||||||||||
|
Subscription
receivable
|
600 | 6 | - | 9,994 | (200 | ) | - | - | - | 9,800 | ||||||||||||||||||||||||||
|
Subscription
received
|
30,000 | 300 | - | 499,700 | (9,350 | ) | - | - | - | 490,650 | ||||||||||||||||||||||||||
|
Stock
option benefit
|
- | - | - | 14,235 | - | - | - | - | 14,235 | |||||||||||||||||||||||||||
|
Balance
at December 31, 2000
|
338,722 | 3,387 | - | 1,465,848 | 450 | 4,755 | (1,009,581 | ) | - | 464,859 | ||||||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | 375,621 | - | 375,621 | |||||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | 13,629 | - | - | 13,629 | |||||||||||||||||||||||||||
|
Shares
issued for cash
|
300 | 3 | - | 2,247 | - | - | - | - | 2,250 | |||||||||||||||||||||||||||
|
Subscription
received
|
- | - | - | - | 200 | - | - | - | 200 | |||||||||||||||||||||||||||
|
Stock
option benefit
|
- | - | - | 118,920 | - | - | - | - | 118,920 | |||||||||||||||||||||||||||
|
Repurchase
of common stock for treasury
|
- | - | (270 | ) | (6,611 | ) | - | - | - | - | (6,881 | ) | ||||||||||||||||||||||||
|
Balance
at December 31, 2001
|
339,022 | 3,390 | (270 | ) | 1,580,404 | 650 | 18,384 | (633,960 | ) | - | 968,598 | |||||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | (63,864 | ) | - | (63,864 | ) | ||||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | (1,155 | ) | - | (1,155 | ) | |||||||||||||||||||||||||||
|
Shares
issued for cash
|
4,500 | 45 | - | 33,705 | - | - | - | - | 33,750 | |||||||||||||||||||||||||||
|
Balance
at December 31, 2002
|
343,522 | $ | 3,435 | $ | (270 | ) | $ | 1,614,109 | $ | 650 | $ | 17,229 | $ | (697,824 | ) | $ | - | $ | 937,329 | |||||||||||||||||
SEE ACCOMPANYING NOTES
SYNTHENOL
INC.
(A Development Stage
Company)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ DEFICIENCY
Unaudited
|
Additional
|
Accumulated
Other
|
Deficit
Accumulated During the
|
||||||||||||||||||||||||||||||||||
|
Common
Shares
|
Treasury
|
Paid-in
|
Subscriptions
|
Comprehensive
|
Development
|
|||||||||||||||||||||||||||||||
|
Number
|
Amount
|
Stock
|
Capital
|
Received
|
Income
|
Deficit
|
Stage
|
Total
|
||||||||||||||||||||||||||||
|
Balance
at December 31, 2002
|
343,521 | 3,435 | (270 | ) | 1,614,109 | 650 | 17,229 | (697,824 | ) | - | 937,329 | |||||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | (607,630 | ) | - | (607,630 | ) | |||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | 1,752 | - | - | 1,752 | |||||||||||||||||||||||||||
|
Stock
option benefit
|
- | - | - | 11,800 | - | - | - | 11,800 | ||||||||||||||||||||||||||||
|
Cancellation
of agreement
|
- | - | - | (650 | ) | - | - | - | (650 | ) | ||||||||||||||||||||||||||
|
Share
issues for cash on exercise of options
|
12,000 | 120 | - | 11,880 | - | - | - | - | 12,000 | |||||||||||||||||||||||||||
|
Share
issues for consulting services
|
45,000 | 450 | - | 49,675 | - | - | - | - | 50,125 | |||||||||||||||||||||||||||
|
Share
issues for intangible assets
|
60,000 | 600 | - | 104,400 | - | - | - | - | 105,000 | |||||||||||||||||||||||||||
|
Share
issued for software
|
60,000 | 600 | - | 53,400 | - | - | - | - | 54,000 | |||||||||||||||||||||||||||
|
Balance
at December 31, 2003
|
520,521 | 5,205 | (270 | ) | 1,845,264 | - | 18,981 | (1,305,454 | ) | - | 563,726 | |||||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | - | (795,364 | ) | (795,364 | ) | |||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (238 | ) | - | - | (238 | ) | |||||||||||||||||||||||||
|
Stock-based
compensation
|
- | - | - | 4,460 | - | - | - | - | 4,460 | |||||||||||||||||||||||||||
|
Shares
issued for cash on exercise of options
|
1,000 | 10 | - | 990 | - | - | - | - | 1,000 | |||||||||||||||||||||||||||
|
Share
issued for debt
|
140,000 | 1,400 | - | 68,600 | - | - | - | - | 70,000 | |||||||||||||||||||||||||||
|
Share
issued for consulting
services
|
2,000 | 20 | - | 980 | - | - | - | - | 1,000 | |||||||||||||||||||||||||||
|
Balance
at December 31, 2004
|
663,522 | 6,635 | (270 | ) | 1,920,294 | - | 18,743 | (1,305,454 | ) | (795,364 | ) | (155,416 | ) | |||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | - | (54,416 | ) | (54,416 | ) | |||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (702 | ) | - | - | (702 | ) | |||||||||||||||||||||||||
|
Share
issues for consulting services
|
18,000 | 180 | - | 8,820 | - | - | - | - | 9,000 | |||||||||||||||||||||||||||
|
Balance
at December 31, 2005
|
681,522 | 6,815 | (270 | ) | 1,929,114 | - | 18,041 | (1,305,454 | ) | (849,780 | ) | (201,534 | ) | |||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | - | (36,575 | ) | (36,575 | ) | |||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | 563 | - | - | 563 | |||||||||||||||||||||||||||
|
Share
issues for debt
|
50,000 | 500 | - | 24,500 | - | - | - | - | 25,000 | |||||||||||||||||||||||||||
|
Balance
at December 31, 2006
|
731,522 | $ | 7,315 | $ | (270 | ) | $ | 1,953,614 | $ | - | $ | 18,604 | $ | (1,305,454 | ) | $ | (886,355 | ) | $ | (212,546 | ) | |||||||||||||||
SEE
ACCOMPANYING NOTES
SYNTHENOL
INC.
(A Development Stage
Company)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ DEFICIENCY
Unaudited
|
Common
Shares
|
Treasury
|
Additional
Paid-in
|
Subscriptions
|
Accumulated
Other Comprehensive
|
Deficit
Accumulated During the Development
|
|||||||||||||||||||||||||||||||
|
Number
|
Amount
|
Stock
|
Capital
|
Received
|
Income
|
Deficit
|
Stage
|
Total
|
||||||||||||||||||||||||||||
|
Balance
at December 31, 2006
|
731,522 | $ | 7,315 | $ | (270 | ) | $ | 1,953,614 | $ | - | $ | 18,604 | $ | (1,305,454 | ) | $ | (886,355 | ) | $ | (212,546 | ) | |||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | - | (170,950 | ) | (170,950 | ) | |||||||||||||||||||||||||
|
Discount
on notes payable
|
- | - | - | 20,573 | - | - | - | - | 20,573 | |||||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (13,391 | ) | - | - | (13,391 | ) | |||||||||||||||||||||||||
|
Balance
at December 31, 2007
|
731,522 | 7,315 | (270 | ) | 1,974,187 | - | 5,213 | (1,305,454 | ) | (1,057,305 | ) | (376,314 | ) | |||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | - | (40,022 | ) | (40,022 | ) | |||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (622 | ) | - | - | (622 | ) | |||||||||||||||||||||||||
|
Balance
at March 31, 2008 (Unaudited)
|
731,522 | $ | 7,315 | $ | (270 | ) | $ | 1,974,187 | $ | - | $ | 4,591 | $ | (1,305,454 | ) | $ | (1,097,327 | ) | $ | (416,958 | ) | |||||||||||||||
SYNTHENOL
INC.
(A
Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31,
2008
Unaudited
|
Note
1
|
Interim Financial
Statements
|
The
foregoing unaudited interim consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q as promulgated by
the Securities and Exchange Commission ("SEC"). Accordingly, these financial
statements do not include all of the disclosures required by generally accepted
accounting principles for complete financial statements. The accompanying
unaudited financial statements and related notes should be read in conjunction
with the audited consolidated financial statements and the Form 10-KSB of the
Company for the year ended December 31, 2007. In the opinion of management, the
unaudited interim financial statements furnished herein include all adjustments,
all of which are of a normal recurring nature, necessary for a fair statement of
the results for the interim period presented.
The
results of operations for such periods are not necessarily indicative of the
results expected for a full year or for any future period.
|
Note
2
|
Nature and Continuance
of Operations
|
Synthenol
Inc. (the “Company”) was incorporated under the laws of the State of Florida on
May 3, 1989 as Sparta Ventures Corp. and remained inactive until June 27,
1998. The name was changed to Thermal Ablation Technologies
Corporation on October 8, 1998 and then to Poker.com, Inc. on August 10,
1999. On September 15, 2003, the Company changed its name to
LegalPlay Entertainment Inc. The Company’s business to December 31,
2003 was primarily related to the operations of online gaming. In
2004, the Company discontinued the online gaming operations and redirected its
business strategy to acquisition of new poker software and market the software
to on-line gaming sites worldwide. The Company is a development stage company as
defined by Statement of Financial Accounting Standards (“SFAS”) No. 7,
“Development Stage Enterprises.”
At the
Annual General Meeting on October 31, 2006, the shareholders of the Company
ratified the Purchase Agreement and the decision to change the Company’s name to
Synthenol Inc. effective December 18, 2006.
These
interim financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern, which assumes that
the Company will be able to meet its obligations and continue its operations for
its next fiscal year. Realization values may be substantially
different from carrying values as shown and these financial statements do not
give effect to adjustments that would be necessary to the carrying values and
classification of assets and liabilities should the Company be unable to
continue as a going concern. At March 31, 2008, the Company had not
yet achieved profitable operations, has accumulated losses of $1,097,327 during
its development stage and expects to incur further losses in the development of
its business, all of which casts substantial doubt about the Company’s ability
to continue as a going concern. The Company’s ability to continue as a going
concern is dependent upon its ability to generate future profitable operations
and/or to obtain the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come
due. Management has no formal plan in place to address this concern
but considers that the Company will be able to obtain additional funds by equity
financing and/or related party advances; however there is no assurance of
additional funding being available.
SYNTHENOL
INC.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
March 31,
2007
Unaudited
|
Note
3
|
Notes
Payable
|
Notes
payable are comprised of the following:
|
|
a)
|
A
loan of $25,735 (December 31, 2007 - $26,649) (CAD$26,417) from Ubiquity
Management Inc., a company controlled by a former director of the Company,
is unsecured, bears interest at 5% per annum and is due on demand.
Interest accrued as of March 31, 2008 is $4,319 (December 31, 2007 -
$3,998).
|
|
|
b)
|
A
promissory note of $32,149 (December 31, 2007 - $33,290) (CAD$33,000)
payable to Pannell Kerr Forster, Chartered Accountants, is unsecured,
bears interest at the Bank of Canada prime rate (6.50% as of March 31,
2008) and due on demand. Interest accrued as of March 31, 2008 is $7,299
(December 31, 2007 - $6,777).
|
As of
March 31, 2008, the Company received loans totaling $235,000 (December 31, 2007
- $235,000) from Hokley Limited (“Hokley”), an unrelated third party, as
follows:
|
|
a)
|
On
April 6, 2006, the Company received $10,000 from Hokley. The promissory
note is unsecured and bears interest at 5% per annum. The principal and
accrued interest is payable by the Company on June 30,
2008.
|
|
|
b)
|
On
July 31, 2006, the Company received $25,000 from Hokley. The promissory
note is unsecured and bears interest at 5% per annum. The principal and
accrued interest is payable by the Company on June 30,
2008.
|
|
|
c)
|
On
December 15, 2006, the Company received $15,000 from Hokley. The
promissory note is unsecured and bears interest at 5% per annum. The
principal and accrued interest is payable by the Company on June 30,
2008.
|
|
|
d)
|
On
February 26, 2007, the Company received $35,000 from Hokley. The
promissory note is unsecured and bears interest at 5% per annum. The
principal and accrued interest is payable by the Company on August 31,
2008.
|
|
|
e)
|
On
May 15, 2007, the Company received $30,000 from Hokley. The promissory
note is unsecured and bears interest at 5% per annum. The principal and
accrued interest is payable by the Company on May 15,
2008.
|
SYNTHENOL
INC.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
March 31,
2007
Unaudited
|
Note 3
|
Notes
Payable – cont’d
|
|
|
f)
|
On
July 18, 2007, the Company received $30,000 from Hokley. The promissory
note is unsecured and bears interest at 5% per annum. The principal and
accrued interest is payable by the Company on July 18,
2008.
|
|
|
g)
|
On
October 3, 2007, the Company received $30,000 from Hokley. The promissory
note is unsecured and bears interest at 10% per annum. The principal and
accrued interest is payable by the Company on October 3,
2008.
|
|
|
h)
|
On
December 7, 2007, the Company received $60,000 from Hokley. The promissory
note is unsecured and bears interest at 10% per annum. The principal and
accrued interest is payable by the Company on December 7,
2008.
|
Pursuant
to SFAS No. 157, Fair Value Measurements, management has recognized that the
interest rate on the notes payable (“Notes”) from Hokley is below fair market
value, and has recorded a discount of $20,573 (December 31, 2007 - $20,573) on
the funds received from Hokley during fiscal 2007. This value was recorded as
additional paid-in capital and is being deferred and amortized over the term of
the Notes. The carrying value of the Notes at March 31, 2008 of $229,763
(December 31, 2007 - $225,712) will be accreted to the face value over the term
of the Notes.
Included
in the notes payable balance at March 31, 2008 is accrued interest and loan fees
of $16,715 (December 31, 2007 - $12,653) relating to the loans owing to
Hokley.
|
Note
4
|
Related Party
Transactions
|
The
Company incurred the following amounts with directors of the Company and a
former officer of the Company.
|
January 1,
2004
|
||||||||||||
|
Three
month ended
|
(Date
of Inception of the Development Stage) to
|
|||||||||||
|
March 31,
|
March 31,
|
|||||||||||
|
2008
|
2007
|
2008
|
||||||||||
|
Management
and consulting fees
|
$ | 1,500 | $ | 1,500 | $ | 96,178 | ||||||
|
Wages
|
- | - | 1,000 | |||||||||
| $ | 1,500 | $ | 1,500 | $ | 97,178 | |||||||
At March
31, 2008, included in accounts payable and accrued liabilities is $34,000
(December 31, 2007 -$31,000) owing to directors of the Company. The amounts are
unsecured, non-interest bearing and have no set terms of
repayment.
SYNTHENOL
INC.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
March 31,
2007
Unaudited
|
Note
5
|
Supplemental Cash Flow
Information
|
|
January 1,
2004
|
||||||||||||
|
Three
months ended
|
(Dateof
Inception of the Development
Stage) to |
|||||||||||
|
March
31,
|
March
31,
|
|||||||||||
|
2008
|
2007
|
2008
|
||||||||||
|
Cash
paid for:
|
||||||||||||
|
Interest
|
$ | - | $ | - | $ | - | ||||||
|
Income
taxes (recovery)
|
$ | - | $ | - | $ | (3,934 | ) | |||||
|
Common
shares issued to settle notes payable
|
$ | - | $ | 25,000 | $ | 25,000 | ||||||
|
Note
6
|
Subsequent
event
|
On April
1, 2008, the Company entered into an agreement with an unrelated third party,
Ryerson Corporation A.V.V. (“Ryerson”), to sell the issued and outstanding
shares of the Company’s 100% owned subsidiaries, 564448 BC Ltd. (“564448”) and
Casino Marketing S.A. (“CMSA”) for consideration of $1. All inter-company debts
between CMSA, 564448 and the Company will be cancelled. Ryerson will release the
Company from any liability in respect of CMSA and 564448.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form
10-Q includes "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
Synthenol Inc., a company organized under the laws of Florida, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions; competition; success of
operating initiatives; our ability to raise capital and the terms thereof;
changes in business strategy or development plans; future rental revenues; the
continuity, experience and quality of our management; changes in or failure to
comply with government regulations or the lack of government authorization to
continue our projects; and other factors referenced in the Form
10-Q.
The use
in this Form 10-Q of such words as "believes", "plans", "anticipates",
"expects", "intends", and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying such
statements. The success of the Company is dependent on our efforts, the
employees and many other factors including, primarily, our ability to raise
additional capital.
We
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. Such
forward-looking statements are based on the beliefs and estimates of our
management as well as on assumptions made by and information currently available
to us at the time such statements were made. Forward looking
statements are subject to a variety of risks and uncertainties which could cause
actual events or results to differ from those reflected in the forward looking
statements, including, without limitation, the failure to obtain adequate
financing on a timely basis and other risks and uncertainties. Actual results
could differ materially from those projected in the forward-looking statements,
either as a result of the matters set forth or incorporated in this Report
generally and certain economic and business factors, some of which may be beyond
our control.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PLAN
OF OPERATIONS
The
Company is analyzing the economics of setting up a website and viewing the
probability of raising capital to launch such a business model. The Company
proposes to charge a monthly subscription fee and will initially offer daily
prizes of $1,000 and weekly prizes of $5,000. The projected prize budget is
$150,000 per month and the infrastructure costs and licensing fees will be in
the range of $50,000 per month.
If the
Company decides to pursue this business model they will have to raise
approximately $2,500,000 to cover costs for one year. We estimate that the
Company will in time have 50,000 paying subscribers and generate approximately
$12 million per year.
In the
event the company proceeds with this project they will apply to change their
corporate name back to LegalPlay which is appropriate for the business they wish
to enact.
On May 5,
2008, the Company passed a resolution to terminate the 1998 Combined Incentive
and Non-qualified Stock Option Plan including (i) all options previously granted
thereunder and which remain outstanding and unexercised and (ii) all unexpired
or unterminated stock option agreements previously entered by the Company
pursuant to the terms of the Stock Option Plan.
We are in
immediate need of further working capital and are considering options with
respect to financing in the form of debt, equity or a combination
thereof.
RESULTS
OF CONTINUING OPERATIONS
Three
months ended March 31, 2008 compared to three months ended March 31,
2007
REVENUES. Net sales for the
three months ended March 31, 2008 and 2007 were $nil.
EXPENSES. Operating
expenses for the three months ended March 31, 2008 were $40,022 compared to
$41,102 for the three months ended March 31, 2007. The major expense
item for the three months ended March 31, 2008 was the
$8,958 interest and finance charges on notes payable, as compared to
$nil for the three months ended March 31, 2007 due to money borrowed for general
office and accounting services. The decrease of professional fees from $14,130
in 2007 to $6,000 in 2008 was due to reduction of legal fee.
FINANCIAL
CONDITION AND LIQUIDITY
Our cash
position was $38,585 at March 31, 2008 and was $66,273 at December 31,
2007.
Our
working capital deficit at March 31, 2007 was $406,958 as compared to 376,314 at
December 31, 2007.
The
Company's ability to continue as a going concern and fund operations through the
remainder of 2008 is contingent upon its ability to raise funds through equity
or debt financing.
The
Company has arranged loans from third party lenders in order to fund the on
going operations of the business. These loans have been secured by way of
Promissory Notes.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
We have
adopted various accounting policies that govern the application of accounting
principles generally accepted in the United States of America in the preparation
of our financial statements which requires us to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes.
Although
these estimates are based on our knowledge of current events and actions we may
undertake in the future, they may ultimately differ from actual results. Certain
accounting policies involve significant judgments and assumptions by us, which
have a material impact on our financial condition and
results. Management believes its critical accounting policies reflect
its most significant estimates and assumptions used in the presentation of our
financial statements. Our critical accounting policies include debt
management and accounting for stock-based compensation. We do not
have off-balance sheet arrangements, financings, or other relationships with
unconsolidated entities or other persons, also known as "special purpose
entities".
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
ITEM
4. CONTROLS AND PROCEDURES
Disclosure Controls and
Procedures
There are
controls and procedures that are designed to ensure that information required to
be disclosed by Synthenol Inc. in the reports it files or submits under the
Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed,
summarized, and reported within the time periods specified by the Commission’s
rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to provide reasonable assurance that
information required to be disclosed by Synthenol Inc. in the reports it files
or submits under the Exchange Act is accumulated and communicated to management,
including the Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure.
Under the
supervision and with the participation of management, including the Chief
Executive Officer and Chief Financial Officer, Synthenol Inc. has evaluated the
effectiveness of its disclosure controls and procedures (as such term is defined
in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2007,
and, based upon this evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that these controls and procedures are effective in
providing reasonable assurance of compliance.
Changes in Internal Control
over Financial Reporting
During
the three months ended March 31, 2008, management took steps to improve the
internal controls over financial reporting by (1) searching for outside
directors to establish an effective audit committee, (2) utilizing existing
office staff in order to remedy the segregation of duties deficiencies, (3)
writing accounting and financial reporting procedures to comply with the
requirements of US GAAP and SEC disclosures, and (4) following the newly written
accounting and financial reporting procedures in (3) which tightens the control
over the period ends.
Management
and directors will continue to monitor
and evaluate the effectiveness of
our internal controls and procedures and our internal controls over
financial reporting on an ongoing basis and
are committed to
taking further action and implementing
additional enhancements or improvements, as necessary and as funds
allow.
PART II--OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
None.
ITEM
1A. RISK FACTORS
We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
ITEM
5. OTHER INFORMATION
None.
ITEM
6. EXHIBITS
|
Exhibit
Number
|
Description
|
|
|
2.1*
|
Resolution
of the Board of Directors regarding transfer of subsidiaries (8-K on April
7, 2008)
|
|
|
2.2*
|
Agreement
for the sale of shares (8-K on April 7,
2008)
|
|
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive
Officer.
|
||
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
|
||
|
Certificate
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350
|
* previously
filed with SEC
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
SYNTHENOL
INC.
(Registrant)
|
/s/
Cecil Morris
|
Date:
May 14, 2008
|
|
|
Cecil
Morris
|
||
|
Director,
President
|
||
|
/s/
John Page
|
Date:
May 14, 2008
|
|
|
John
Page
|
||
|
Director
/ Treasurer
|
-18-