Notes to the Financial Statements
September 30, 2016
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION
OF BUSINESS
Vican Resources, Inc. (the “Company”)
was incorporated under the laws of the State of Nevada on September 5, 2002 under the name of “Tremont Fair, Inc.”
From July 2009 until May 2011, the Company operated as a real estate services firm, seeking to capitalize on the real estate opportunities
resulting from the dislocation in the credit markets, and by extension, the multifamily housing market, by acquiring, rehabilitating,
stabilizing and selling distressed multifamily properties in the southern United States, predominantly in Texas. On May 26, 2011,
the Company changed its name to Vican Resources, Inc. and changed its business model when it sold the real estate services division
and acquired all of the outstanding shares of Vican Trading, Inc., a Montreal-based purchaser and seller of metals, ores, and other
commodities (hereafter, “Vican Trading”). Upon the acquisition of Vican Trading, there was an implied option for either
party to rescind the original acquisition. During the year that option was exercised and on December 20, 2011, the Company again
changed its business when it unwound the acquisition of Vican Trading and acquired all of the assets of Med Ex Direct, Inc., a
Florida-based provider of management services in respect of the distribution of diabetic supplies, principally to Hispanic patients
(hereafter, “Med Ex Florida”). On March 22, 2012, the Company again changed its business to become an oil and gas exploration,
development and distribution company when we unwound the purchase of the assets of Med Ex Florida and acquired three separate working
interests in two oil and gas wells located in Jefferson County, Mississippi. In consideration of the assignments the Company is
to pay all costs and expenses associated with the development of the working interests. To date there have been no costs incurred
or required.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited interim
financial statements of Vican Resources, Inc. ("the Company") have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read
in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report filed with
the SEC on Form 10-K for the year ended December 31, 2015. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods
presented have been reflected herein. Operating results for the nine months ended September 30, 2016 are not necessarily indicative
of the results to be expected for the year ending December 31, 2016. Notes to the financial statements which would substantially
duplicate the disclosures contained in the audited financial statements for the most recent year 2015 as reported in Form 10-K
have been omitted.
NOTE 3 - BASIC AND DILUTED NET
LOSS PER SHARE
The Company follows ASC Topic
260 to account for the earnings per share. Basic earnings (loss) per common share (“EPS”) calculations are determined
by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings
(loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares
and dilutive common share equivalents (if dilutive) outstanding.
VICAN RESOURCES, INC.
Notes to the Financial Statements
September 30, 2016
(Unaudited)
NOTE 4 - ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
|
|
|
|
|
|
|
September 30,
2016
|
|
December 31,
2015
|
Kenneth I. Denos, P.C. – legal services
|
|
$
|
270,000
|
|
|
$
|
202,500
|
|
Chene C. Gardner & Associates, Inc. - accounting services
|
|
|
180,000
|
|
|
|
135,000
|
|
Rent
|
|
|
18,000
|
|
|
|
13,500
|
|
Other vendors
|
|
|
49,330
|
|
|
|
29,457
|
|
Accrued interest on notes payable to related parties
|
|
|
262,183
|
|
|
|
196,578
|
|
Total
|
|
$
|
779,513
|
|
|
$
|
577,035
|
|
Kenneth I. Denos, P.C. is the
majority common stockholder of the Company and is controlled by Kenneth I. Denos, director of the Company from December 20, 2011
to May 27, 2014. Under a verbal agreement commencing January 2012, Kenneth I. Denos, P.C. has provided legal services to the Company
for accrued compensation of $7,500 per month.
Chene C. Gardner & Associates
Inc. is controlled by Chene C. Gardner, Chief Financial Officer of the Company from May 31, 2011 to May 27, 2014 and sole officer
and director of the Company from August 18, 2014 to present. Under a verbal agreement commencing June 2011, Chene C. Gardner &
Associates, Inc. has provided accounting services to the Company for accrued compensation of $5,000 per month.
NOTE 5 - ADVANCES FROM RELATED PARTIES
Advances from related parties, which are all non-interest bearing and due on demand, consist of the following:
|
|
|
|
|
|
|
September 30,
2016
|
|
December 31,
2015
|
Cumbria Capital, L.P.
|
|
$
|
37,278
|
|
|
$
|
37,278
|
|
Kenneth I. Denos, P.C.
|
|
|
26,861
|
|
|
|
22,861
|
|
John D. Thomas, P.C.
|
|
|
14,640
|
|
|
|
14,640
|
|
Total
|
|
$
|
78,779
|
|
|
$
|
74,779
|
|
Cumbria Capital, L.P. is a Texas
limited partnership controlled by Cyrus Boga, director of the Company from December 15, 2011 to May 27, 2014. Through its ownership
of 100 shares of the Series A Preferred Stock (10,000,000 votes per share), Cumbria Capital, L.P. has voting control of the Company.
John D. Thomas, P.C. is controlled
by John D. Thomas, former director of the Company.
VICAN RESOURCES, INC.
Notes to the Financial Statements
September 30, 2016
(Unaudited)
NOTE 6 - NOTES PAYABLE TO RELATED
PARTIES
Notes payable to related parties consist of the following:
|
|
|
|
|
|
|
September 30,
2016
|
|
December 31,
2015
|
Kenneth I. Denos, P.C., interest at 10%, due March 29, 2014 (in default)
|
|
$
|
402,500
|
|
|
$
|
402,500
|
|
Kenneth I. Denos, P.C., interest at 10%, due March 29, 2014 (in default)
|
|
|
311,973
|
|
|
|
311,973
|
|
Chene C. Gardner & Associates, Inc., interest at 10%, due March 29, 2014 (in default)
|
|
|
140,000
|
|
|
|
140,000
|
|
Due other entities affiliated with Kenneth I. Denos, P.C., interest at 10%, due March 29, 2014 (in default)
|
|
|
19,471
|
|
|
|
19,471
|
|
Total
|
|
$
|
873,944
|
|
|
$
|
873,944
|
|
NOTE 7 - COMMON AND PREFERRED STOCK
TRANSACTIONS
All common share issuances were recorded
at market value on the date of issuance.
On September 24, 2013, the Company
converted a certain promissory note, in the original principal amount of $400,000 held by Cumbria Capital, L.P. (“Cumbria”),
into 100 shares of Series A Preferred Stock. Cumbria is a Texas limited partnership owned and controlled by Cyrus Boga, a director
of the Company from December 15, 2011 to May 27, 2014. Although the Preferred Stock carries no dividend, distribution, or liquidation
rights, and is not convertible into common stock, each share of Series A Preferred Stock carries 10,000,000 votes per share and
is entitled to vote with the Company’s common stockholders on all matters upon which common stockholders may vote. As a result,
Cumbria holds a controlling voting interest in the Company and Mr. Boga may unilaterally determine the election of the Board and
other substantive matters requiring approval of the Company’s stockholders.
On September 24, 2013, the Company
converted 1,825,000 shares of our Series C Preferred Stock (“Series C Conversion”), which amount represented all of
the issued and outstanding shares of Series C Preferred Stock, into 1,825,000,000 shares of our Class A common stock. As a result
of this conversion, there are no shares of Series C Preferred Stock outstanding. Immediately following the Series C Conversion,
the Board of Directors of the Company approved the Plan of Share Exchange (the "Plan"). The Plan allowed for the conversion
of 1,914,840,019 shares of Class A common stock, which amount represented all of the outstanding shares of common stock of the
Company, into 1,943,634 shares of Class B common stock. As a result, the Company has no shares of Class A Common stock outstanding,
and 1,943,634 shares of Class B common stock outstanding.
During the process of converting
our Series C Preferred Stock into Class A common stock and subsequently exchanging all of our Class A common stock into Class B
common stock, we temporarily exceeded the number of authorized shares of our common stock, even though certificates for the 1,825,000,000
shares of Class A common stock were not actually distributed. Since the Share Exchange immediately followed the conversion of our
Series C Preferred Stock, we now have a sufficient number of our common shares authorized for issuance.
VICAN RESOURCES, INC.
Notes to the Financial Statements
September 30, 2016
(Unaudited)
NOTE 8 - INCOME TAXES
The Financial Accounting Standards
Board (FASB) has issued FASB ASC 740-10. FASB ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized
in an enterprise's financial statements. This standard requires a company to determine whether it is more likely than not
that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-
not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance
with recognition and measurement standards established by FASB ASC 740-10.
Deferred taxes are provided on
a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit
carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
At December 31, 2015 the Company
had net operating loss carryforwards of approximately $3,400,000 that may be offset against future taxable income through 2035.
No tax benefits have been reported in the financial statements, because the potential tax benefits of the net operating loss carry
forwards are offset by a valuation allowance of the same amount.
Due to the change in ownership
provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject
to annual limitations. Should a significant change in ownership occur, net operating loss carryforwards may be limited as to use
in the future.
Net deferred
tax assets consist of the following components as of September 30, 2016 and December 31, 2015:
|
|
September 30, 2016
|
|
December 31, 2015
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards NOL Carryover
|
|
$
|
1,379,771
|
|
|
$
|
1,309,568
|
|
Valuation allowance
|
|
|
(1,379,771
|
)
|
|
|
(1,309,568
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
VICAN RESOURCES, INC.
Notes to the Financial Statements
September 30, 2016
(Unaudited)
The income tax provision (benefit)
differs from the amount of income tax determined by applying the U.S. federal income tax rate of 34% to pretax income for the nine
months ended September 30, 2016 and 2015 due to the following:
|
|
Nine Months Ended September 30,
|
|
|
2016
|
|
2015
|
Expected tax at 34%
|
|
$
|
(70,203
|
)
|
|
$
|
(71,211
|
)
|
Change in valuation allowance
|
|
|
70,203
|
|
|
|
71,211
|
|
Provision for (benefit from) income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
NOTE 9 - GOING CONCERN
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company has sustained significant net losses which have resulted
in an accumulated deficit at September 30, 2016 of $3,656,959, has negative working capital, and negative cash flows from operations,
all of which raise substantial doubt regarding the Company’s ability to continue as a going concern.
The Company believes these conditions
have resulted from the inherent risks associated with small companies. Such risks include, but are not limited to, the ability
to (i) generate revenues and sales of its products and services at levels sufficient to cover its costs and provide a return for
investors, (ii) attract additional capital in order to finance growth, (iii) further develop and successfully market commercial
products and services, and (iv) successfully compete with other comparable companies having financial, production and marketing
resources significantly greater than those of the Company.
We are presently seeking additional
debt and equity financing to provide sufficient funds for payment of obligations incurred and to fund our ongoing business plan.
We expect to generate revenue pursuant
to our new business plan as an oil and gas exploration, development, and production company and expect to rely on equity and debt
financings to fund our capital resources requirements. We will be dependent on additional debt and equity financing to develop
our new business but we cannot assure you that any such financings will be available or will otherwise be made on terms acceptable
to us, or that our present shareholders might suffer substantial dilution as a result.
The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.