Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This report contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons.
Plan of Operation
Vican Resources, Inc. (hereafter, "we", "our", "us", or the "Company") was incorporated in the State of Nevada on September 5, 2002. From July 2009 until May 2011, we 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, we changed our business when we sold our 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, we again changed our business when we 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 21-22, 2012, we again changed our business to become an oil & gas exploration, development, and distribution company when we unwound the purchase of the assets of Med Ex Florida and received assignments for three separate working interests in two oil and gas wells located in Jefferson County, Mississippi.
On April 11, 2017, the Company executed a Share Exchange Agreement with Unprescribed, LLC ("Unprescribed") and the members of Unprescribed, including Ian Jenkins, Chief Executive Officer and majority shareholder, Dr. Gregory Mongean and Christopher Dean (the "Members). Pursuant to the Share Exchange Agreement, the Company agreed to exchange the outstanding membership interests of Unprescribed held by the Members for an aggregate of 25,000,000 shares of common stock of the Company. Ian Jenkins, the holder of 1,830,000 shares of common stock and 100 shares of Series A Preferred Stock, agreed to cancel such shares as of and at the Closing. Other than Mr. Jenkins, shareholders of the Company's common stock hold approximately 109,907 shares, which will remain unchanged by the Share Exchange Agreement. In addition, at the Closing, the holders of an aggregate of approximately $1,357,000 of outstanding convertible notes issued by the Company have agreed to limit conversion of such debt to a maximum of 8,500,000 shares of common stock and the remaining debt will be cancelled.
The Share Exchange Agreement is subject to completion of certain conditions precedent to closing, including Uprescribed's delivery of audited financial statements for the years ended December 31, 2015 and 2016.
The Share Exchange Agreement automatically terminates if the closing of the transactions contemplated thereby shall not have occurred by June 30, 2017; and it may be terminated by Unprescribed or the Company under certain specified circumstances. The parties previously agreed to extend the termination date of the Share Exchange Agreement from June 30, 2017, until August 31, 2017. The parties are finalizing the terms of the transaction, and have agreed to further extend the termination date of the Share Exchange Agreement from August 31, 2017 until December 31, 2017.
In addition, the parties have agreed that in addition to the share exchange with Unprescribed, the Company shall also exchange shares for membership interests in Cornerstone Medical Center LLC, a Nebraska limited liability company, and affiliate of Unprescribed ("Cornerstone"), and the members of Cornerstone. At the Closing, the Company will exchange the outstanding membership interests of Unprescribed and Cornerstone held by the Members for an aggregate of 25,000,000 shares of common stock of the Company.
Liquidity and Capital Resources
As of September 30, 2017, the Company's primary source of liquidity consisted of $nil in cash and cash equivalents. Since inception, the Company has financed its operations through a combination of short and long-term loans, and through the private placement of its common stock.
The Company has sustained significant net losses which have resulted in a total stockholders' deficit at September 30, 2017 and is currently experiencing a substantial shortfall in operating capital which raises doubt about the Company's ability to continue as a going concern. The Company anticipates a net loss for the year ending December 31, 2017 and with the expected cash requirements for the coming months, without additional cash inflows from an increase in revenues combined with continued cost-cutting or a receipt of cash from capital investment, there is substantial doubt as to the Company's ability to continue operations.
We may seek to secure additional debt or equity capital to finance substantial business development initiatives. There is presently no agreement in place with any source of financing for the Company and there can be no assurance that the Company will be able to raise any additional funds, or that such funds will be available on acceptable terms. Funds raised through future equity financing will likely be substantially dilutive to current shareholders. Lack of additional funds will materially affect the Company and its business, and may cause the Company to cease operations. Consequently, shareholders could incur a loss of their entire investment in the Company.
Net Cash Used in Operating Activities
During the nine months ended September 30, 2017, cash used in operations was $30,225 and $4,000 for the nine months ended September 30, 2016, respectively. Cash used in operating activities was primarily the result of selling, general and administrative expenses offset by an increase in accounts payable and accrued liabilities. In 2016, the cash used in operating activities was largely due to the selling, general and administrative expenses, largely offset by an increase in accounts payable and accrued liabilities.
Net Cash Used in Investing Activities
Net cash used in investing activities was $500,000 for the nine months ended September 30, 2017, as a result of the loan to Cornerstone in exchange for a secured promissory note.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $530,225 as a result of the proceeds from the convertible promissory note for the nine months ended September 30, 2017 and $30,225 in advances from a third party. For the nine months ended September 30, 2016, the Company received $4,000 in financing from related parties.
Results of Operations
From July 2009 until May 2011, we 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, we changed our business when we sold our 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, we again changed our business when we 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 21-22, 2012, we again changed our 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 received assignments for three separate working interests in two oil and gas wells located in Jefferson County, Mississippi.
Revenues
. For the three and nine months ended September 30, 2017 and 2016, net revenues were $nil.
Selling General and Administrative Expense.
Selling, general and administrative expenses for the three months ended September 30, 2017 were $1,614 compared with $43,152 for the three months ended September 30, 2016. Selling, general and administrative expenses for the nine months ended September 30, 2017 were $58,875 compared with $140,872 for the nine months ended September 30, 2016. The selling, general and administrative expenses for the three and nine months ended Septemer 30, 2017 were lower compared with the same periods in 2016 as a result of reduced corporate activity.
Other Income (Expenses).
Other expenses for the three months ended September 30, 2017 was $49,734 compared with other expenses of $22,029 for the three months ended September 30, 2016. Included in this category is interest expense related to promissory notes issued by the Company. Additionally, the Company recognized interest income of $5,041 related to the receipt of a promissory note and interest expense related to the issuance of a convertible note. For the three months ended September 30, 2017, the Company recognized income of $45,219 as a result of a change in the fair value of an embedded derivative and an expense of $73,404 as a result of accretion expense of a debt discount on the convertible promissory note.
Other income for the nine months ended September 30, 2017, was $595,725 compared with other expenses of $65,606 for the nine months ended September 30, 2016. Included in this category is interest expense related to promissory notes issued by the Company. Additionally, the Company recognized interest income of $9,425 related to the receipt of a promissory note and interest expense related to the issuance of a convertible note. During the nine months ended September 30, 2017, the Company recorded a gain on the settlement of debt in the amount of $671,585. For the nine months ended September 30, 2017, the Company recognized income of $126,021 as a result of a change in the fair value of an embedded derivative and an expense of $137,234 as a result of accretion expense of a debt discount on the convertible promissory note.
Net Income (Loss).
Net loss for the three months ended September 30, 2017 was $51,348 compared to a net loss of $66,181 for the three months ended September 30, 2016.
Net income for the nine months ended September 30, 2017 was $536,850 compared to a net loss of $206,478 for the nine months ended September 30, 2016.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Personnel
Vican Resources has no full-time employees, but utilizes other project-based contract personnel to carry out our business. We utilize contract personnel on a continuous basis, primarily in connection with the filing of reports with the Securities and Exchange Commission which require a high level of specialization for one or more of the service components offered.