UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-QSB

x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
For the quarterly period ended: March 31, 2007

o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 
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
 
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o     No x
 


-1-


APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by court.
Yes o     No x
 
APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares of common stock outstanding as of March 31, 2007 was 731,522.

Transitional Small Business Disclosure Format:
Yes o     No x
 
-2-

 
SYNTHENOL INC.

FORM 10-QSB

PART I - FINANCIAL INFORMATION
 
Item 1.
FINANCIAL STATEMENTS
 
     
 
5
     
 
6
     
 
7
     
 
9
     
 
10
     
Item 2.
13
     
Item 3.
14
     
PART II - OTHER INFORMATION
 
     
Item 1.
14
     
Item 2.
14
     
Item 3.
14
     
Item 4.
14
     
Item 5.
14
     
Item 6.
14
 
 
-3-

 
Item 1.
FINANCIAL STATEMENTS
 
 
SYNTHENOL INC.
 
(A Development Stage Company)
 
CONSOLIDATED FINANCIAL STATEMENTS
 
March 31, 2007

Unaudited
 
 
 
-4-

 
SYNTHENOL INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
March 31,
2007
 
December 31,
2006
 
   
Unaudited
     
Current
         
Cash
 
$
2,907
 
$
13,462
 
               
   
$
2,907
 
$
13,462
 
               
LIABILITIES AND STOCKHOLDERS’ DEFICIT
             
               
Current
             
Accounts payable and accrued liabilities (Note 4)
 
$
113,446
 
$
118,577
 
Notes payable (Note 3)
   
143,122
   
107,431
 
               
     
256,568
   
226,008
 
               
Capital stock
             
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding
             
Common stock and paid-in capital (Note 5)
             
100,000,000 shares authorized with a par value of $0.01
             
731,521 (December 31, 2006: 731,521) shares issued and outstanding
   
7,315
   
7,315
 
Treasury stock, at cost, 540 shares (December 31, 2006: 540)
   
(270
)
 
(270
)
Additional paid-in capital
   
1,953,614
   
1,953,614
 
Other comprehensive income
   
18,591
   
18,604
 
Deficit
   
(1,305,454
)
 
(1,305,454
)
Deficit accumulated during the development stage
   
(927,457
)
 
(886,355
)
               
     
(253,661
)
 
(212,546
)
               
   
$
2,907
 
$
13,462
 

See accompanying notes.
 
 
-5-


SYNTHENOL INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited

   
Three months ended
March 31,
 
January 1,
2004 (Date of
inception of
development stage) to
March 31,
 
   
2007
 
2006
 
2007
 
               
General and Administrative Expenses
             
Amortization
 
$
-
 
$
-
 
$
27,077
 
Bad debt
   
-
   
-
   
525
 
Corporation promotion
   
-
   
-
   
13,920
 
Insurance
   
-
   
-
   
15,901
 
Management and consulting fees
   
22,757
   
3,361
   
137,615
 
Office supplies and services
   
4,215
   
1,363
   
51,625
 
Professional fees
   
14,130
   
2,000
   
221,849
 
Rent
   
-
   
367
   
16,311
 
Wages
   
-
   
-
   
84,258
 
                     
Loss before other items
   
(41,102
)
 
(4,814
)
 
(569,081
)
                     
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
   
(41,102
)
 
(4,814
)
 
(574,842
)
                     
Operating income (loss) from discontinued operations
   
-
   
22
   
(382,299
)
                     
Gain on sale of discontinued operations
   
-
   
29,684
   
29,684
 
                     
Net loss
 
$
(41,102
)
$
(24,892
)
$
(927,457
)
                     
Basic and diluted loss per share
 
$
(0.06
)
$
(0.03
)
     
                     
Weighted average number of shares outstanding
   
731,521
   
728,096
       

See accompanying notes.
 
 
-6-


SYNTHENOL INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited

   
Three month ended
March 31,
 
January 1, 2004 (Date
of Inception of
Development
Stage) to
March 31,
 
   
2007
 
2006
 
2007
 
Cash Flows from Operating Activities
             
Loss from continuing operations
 
$
(41,102
)
$
(4,814
)
$
(574,842
)
Add (deduct) items not affecting cash:
                   
Amortization
   
-
   
-
   
27,077
 
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:
                   
Amounts receivable
   
-
   
(1
)
 
-
 
Accounts payable and accrued liabilities
   
(5,131
)
 
(559
)
 
113,446
 
Accrued interest on notes payable
   
691
   
-
   
6,284
 
                     
Cash provided by (used in) continuing operations
   
(45,542
)
 
(5,374
)
 
99,436
 
Discontinued operations
   
-
   
-
   
(553,150
)
                     
Net cash used in operating activities
   
(45,542
)
 
(5,374
)
 
(453,714
)
                     
Cash Flows from Investing Activities
                   
Proceeds from sale of subsidiary
   
-
   
-
   
1
 
Proceeds from assets disposition
   
-
   
-
   
5,458
 
Purchase of equipment
   
-
   
-
   
(5,808
)
Net cash provided by (used in) investing activities
   
-
   
-
   
(349
)
                     
Cash Flows from Financing Activities
                   
Proceeds from notes payable
   
35,000
   
-
   
248,614
 
Proceeds from issuance of common stock
   
-
   
-
   
1,000
 
                     
Net cash provided by financing activities
   
35,000
   
-
   
249,614
 
                     
Effect of exchange rate changes on cash
   
(13
)
 
-
   
(2,161
)
                     
Net decrease in cash from continuing operations
   
(10,555
)
 
(5,374
)
 
(206,610
)
                     
Cash, beginning
   
13,462
   
6,765
   
209,517
 
                     
Cash, ending
 
$
2,907
 
$
1,391
 
$
2,907
 

See accompanying notes
 
 
-7-


SYNTHENOL INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Unaudited

   
Three month ended
March 31,
 
January 1, 2004
(Date
of Inception of
Development
Stage) to
March 31,
 
   
2007
 
2006
 
2007
 
               
Supplemental Disclosure of Cash Flow Information and Non-cash Investing and Financing Activities:
             
Cash paid for:
             
Interest
 
$
-
 
$
-
 
$
-
 
Income taxes (recovery)
 
$
-
 
$
-
 
$
(3,934
)
                     
Common shares issued to settle notes payable
 
$
-
 
$
-
 
$
25,000
 

See accompanying notes
 
 
-8-

 
SYNTHENOL INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

   
Common Shares
 
Treasury
 
Additional
Paid-in
 
Accumulated Other Comprehensive
     
Deficit Accumulated During the Development
     
   
Number
 
Amount
 
Stock
 
Capital
 
Income
 
Deficit
 
Stage
 
Total
 
Balance at December 31, 2005
   
681,521
 
$
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
   
731,521
   
7,315
   
(270
)
 
1,953,614
   
18,604
   
(1,305,454
)
 
(886,355
)
 
(212,546
)
Net loss
   
-
   
-
   
-
   
-
   
-
   
-
   
(41,102
)
 
(41,102
)
Foreign currency translation adjustment
   
-
   
-
   
-
   
-
   
(13
)
 
-
   
-
   
(13
)
Balance at March 31, 2007 (Unaudited)
   
731,521
 
$
7,315
 
$
(270
)
$
1,953,614
 
$
18,591
 
$
(1,305,454
)
$
(927,457
)
$
(253,661
)

See accompanying notes.
 
 
-9-

 
SYNTHENOL INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2007
Unaudited

Note 1
Interim Financial Statements

 
These interim unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown.

 
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. Accordingly, the Company has been in the development stage since January 2004.

 
At the Annual General Meeting on November 8, 2006, the shareholders passed a motion approving the change of 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, 2007, the Company had not yet achieved profitable operations, has accumulated losses of $927,457 since its inception 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. Since inception, the Company has funded operations through common stock issuances and related party loans in order to meet their strategic objectives.
 
 
-10-


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 $25,453 from Ubiquity Management Inc., controlled by a former director of the Company, as of March 31, 2007 is unsecured, bears interest at 5% per annum and is due on demand.

 
b)
A promissory note of $30,991 as of March 31, 2007 (2006: $29,164) is unsecured, bears interest at the Canadian prime rate (6% as of March 31, 2007) and due on demand.

 
c)
On April 6, 2006, the Company received $10,000 from Hokley Limited (“Hokley”). The promissory note is unsecured and bears interest at 5% per annum. Interest accrued as of March 31, 2007 is $123. The principal and accrued interest is payable by the Company on April 6, 2008.

 
d)
On July 31, 2006, the Company received $25,000 from Hokley. The promissory note is unsecured and bears interest at 5% per annum. Interest accrued as of March 31, 2007 is $308. The principal and accrued interest is payable by the Company on July 31, 2007.

 
e)
On December 15, 2006, the Company received $15,000 from Hokley. The promissory note is unsecured and bears interest at 5% per annum. Interest accrued as of March 31, 2007 is $185. The principal and accrued interest is payable by the Company on December 15, 2007.

 
f)
On February 26, 2007, the Company received $35,000 from Hokley. The promissory note is unsecured and bears interest at 5% per annum. Interest accrued as of March 31, 2007 is $432. The principal and accrued interest is payable by the Company on February 26, 2008.

Note 4
Related Party Transactions

 
The Company incurred $3,000 of management fees (2006 - $3,000) with directors of the Company and a former officer of the Company.

Note 5
Capital Stock

 
On October 31, 2006, the Company declared a one-for-fifty reverse stock split of all of the outstanding common stock, without any change in par value of the shares of common stock. At March 31, 2007, the authorized capital was 100,000,000 common shares.
 
 
-11-


SYNTHENOL INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2007
Unaudited
 
Note 5
Capital Stock (continued)

 
As of November 3, 2005, the Company was indebted to Iris International Holdings (“Iris”) for an amount of $25,000. The promissory note was unsecured, bore interest at 5% per annum and was due in one year. On January 26, 2006, Iris agreed to accept common shares in settlement of the debt owing to them. The Company’s Board of Directors resolved to settle the debt owed to Iris by issuing 2,500,000 pre-split shares of the Company’s common stock at a fair value of $0.01 per share. The number of shares after one-for-fifty reverse stock split is 50,000.

 
Unless otherwise noted, all references to common stock, common shares outstanding, average numbers of common shares outstanding and per share amounts in these financial statements and notes to financial statements have been adjusted to reflect the a one-for-fifty reverse stock split.
 
 
-12-


Item 2.
MANAGEMENTS’ DISCUSSION AND ANALYSIS OR PLANS OF OPERATIONS

OVERVIEW

Our current business strategy is to acquire new Poker software and market the software to on-line gaming sites worldwide excluding North America. In North America we propose to pursue the licensing of
Tournament based subscription games that are legally approved in most States. We are proposing to acquire a License in the Philippines.

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.

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".

RESULTS OF CONTINUING OPERATIONS

Three months ended March 31, 2007 compared to three months ended March 31, 2006

REVENUES. Net sales for the three months ended March 31, 2007 and 2006 were $nil.

EXPENSES. Operating expenses for the three months ended March 31, 2007 were $41,102 compared to $4,814 for the three months ended March 31, 2006. The major expense item for the three months ended March 31, 2007 was the management and consulting fees of $22,757, as compared to $3,361 for the three months ended March 31, 2006. This is mainly due to monthly administration fees paid for general office and accounting services. The professional fees were $14,130 in 2007 as compared to $2,000 in 2006 for increasing auditing fee.

PROVISION FOR INCOME TAXES. No tax provision was made for the three months ended March 31, 2007 or 2006.

FINANCIAL CONDITION AND LIQUIDITY

On March 31, 2007, our working capital deficit was $253,661 compared to $212,546 at December 31, 2006. At March 31, 2007, the Company had cash balances totaling $2,907 compared to $13,462 at December 31, 2006. 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.

Net cash used in operating activities for the three months ended March 31, 2007 was $408,172 compared to $453,714 for the same period in 2006. The increase in cash used was mainly due to increase in business operation expenses like consulting fees and interest expenses.
 
 
-13-


Net cash provided by financing activities for the three months ended March 31, 2007 was $35,000 compared to $nil cash provided at March 31, 2006. The increase was attributed to the proceeds received from notes payable.

The Company's ability to continue as a going concern and fund operations through the remainder of 2007 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.
 
Item 3.
CONTROLS AND PROCEDURES

The Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of March 31, 2007. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in ensuring that information required to be disclosed in the reports the Company files under the Exchange Act are recorded, processed and reported as required.


PART II--OTHER INFORMATION

Item 1.
Legal Proceedings

None.

Item 2.
Changes in Securities

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 and Reports on Form 8-K

Exhibit Number
 
Description
2.1
*  
On February 20, 2007, the Company filed 8K regarding Management and Administrative agreements.
2.2
*  
On March 1, 2007, the Company filed 8K regarding Promissory Note
2.3
*  
On May 7, 2007, the Company filed 8K regarding sale of shares of Skillpoker.com
   
302 Certification for the Chief Executive Officer
   
302 Certification for the Chief Financial Officer
   
906 Certification for the Chief Executive Officer
   
906 Certification for the Chief Financial Officer
* previously filed with SEC
 
 
-14-


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.


SYNTHENOL INC.
(Registrant)
 
 
/s/ Cecil Morris
 
Date: May 14, 2007
Cecil Morris
Director, President
   
/s/ John Page
 
Date: May 14, 2007
John Page
Director / Treasurer
   
 
 
-15-