OSCEOLA GOLD, INC. (Formerly, PhyHealth Corp.) Amended 2018 Annual Financial Statements December 31, 2018 and 2017

Transcription

1 SCELA GLD, INC. (Formerly, PhyHealth Corp.) Amended 2018 Annual Financial Statements December 31, 2018 and

2 C N T E N T S Balance Sheets.3 Statement of perations 4 Statements of Stockholders Equity 5 Statement of Cash Flows. 6 Notes to the Financial Statements 7 2

3 sceola Gold Inc. BALANCE SHEET (unaudited) ASSETS CURRENT ASSETS December 31, 2018 December 31, 2017 Cash and cash equivalents 10,633 - Contract Receivable - - Note Receivable-Related Party - - ther Current Assets - - Costs and estimated earnings in excess of billings - - Adjustment to Current Assets - - Total Current Assets 10,633 - Fixed Assets Processing Equipment 59, ,708 Vehicles 22,634 71,538 Furniture and Equipment 1,359 6,538 Accumulated Depreciation (24,381) (16,676) Total Fixed Assets 59, ,108 Current Liabilities TTAL ASSETS 70, ,108 TTAL LIABILITIES AND STCKHHLDER EQUITY Bank verdraft - 5,486 Accounts Payable and Accrued Expenses 491, ,944 Notes Payable and Capital Leases - - Accruals on uncompleted contracts - - ther Current Liabilities 1,925,252 1,591,118 TTAL CURRENT LIABILITIES 2,416,619 1,928,548 Long Term Liabilities Notes Payable and Capital Leases 4,842,220 4,008,249 Adjustment to notes payable and capital leases - - TTAL LIABILITIES 7,258,839 5,936,797 Stockholders Equity (deficit) Preferred A Stock (Par ), 1,000,000 authorized, 247,053 and 247,053 issued and outstanding Preferred B Stock, (Par ), 1,000,000 shares authorized 1,000,000 issued and 0 outstanding Common Stock, (Par ), 298,000,000 shares authorized 295,613,836 issued and 2,386,164 outstanding 29,561 29,483 Paid in Capital in Excess of par value 1,567,756 2,375,301 Retained Deficit (8,786,190) (8,060,498) Total Stockholders Equity (7,188,748) - (5,655,689) TTAL LIABILITIES AND STCKHLDER EQUITY 70, ,108 3

4 sceola Gold Inc. Consolidated Statement of perations (unaudited) December 31, 2018 December 31, 2017 INCME - - PERATING EXPENSES 200, ,692 NET INCME (LSS) (200,705) (725,692) The accompanying financials were not subject to an audit, review, or compilation. The accompanying notes are an integral part of these financial statements. 4

5 sceola Gold, Inc. Statement of Shareholders Equity (Deficit) (unaudited) Series A Preferred Stock Series B Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Paid in Capital in Excess of Par Value Retained Deficit Total Stockholders Equity Ending Balance- December 31, , Shares Extinguish debts - Net Income for year ending December 31, Adjustments - Ending Balance- December 31, , ,549,765 24,074 2,380,429 (7,334,806) (4,929,997) - 51,280,193 5,128 (5,128) (725,692) (725,692) - 2,416 (783,579) (524,987) 1,591, ,829,958 31,618 (8,585,485) (5,655,689) ,000,000 - Shares Issued - Common Stock issued for debt conversion ,783,878 35,784 (35,784) Shares sold for 0.05 per share Common stock issued in lieu of payment for services Shares returned to Treasury (35,000,000) (3,500) 3, Conversion of preferred shares to common shares Current period deficit ((200,705) (1,533,059) Ending Balance- December 31, , ,000, ,613,836 34,341 1,559,438 (8,786,190) (7,188,748) The accompanying financials were not subject to an audit, review, or compilation. The accompanying notes are an integral part of these financial statements

6 Increase(decrease) in cash and cash equivalents sceola Gold Inc. Consolidated Statement of Cash Flows (unaudited) For the Years Ending December Net Income/(Loss) (200,705) (725,692) Adjustments to reconcile net loss to net cash used In operating activities - - Depreciation (24,381) (16,676) Common Stock issued in lieu of services - - ther Purchase Expense (7,500) - Changes in perating Assets and Liabilities Increase/(Decrease) in accounts payable and accrued expenses 3,149, ,653 Loss on disposal of Fixed Assets 206,159 81,803 Increase/(Decrease) in accrued wages 20,000 - Increase in bank overdraft (3,164) 4,561 Increase/(Decrease) in ther Current Liabilities 334,134 3,114 Net Cash Used in perating Activities 327, ,763 Cash Flow from Investing Activities (327,116) (263,763) Net Cash Used in Investing Activities (327,116) (263,763) Cash Flow from Financing Activities Proceeds from Short-Term Debt - - Payments on Short-Term Debt - - Proceeds from Long-Term Debt - - Proceeds from Sale of Common Stock - 127,500 - Accrued Interest - Net Cash Generated by Financing Activities 127,500 - Net Increase in Cash and Cash Equivalents 16,119 - Cash and Cash Equivalents at Beginning of Year (5486) - - Cash and Cash Equivalents at end of Year 10,633 - (5486) - Supplementary Disclosures of Cash Flow Information Cash Paid During the Year - - Interest - - Taxes - - The accompanying financials were not subject to an audit, review, or compilation. The accompanying notes are an integral part of these financial statements. 6

7 NTE 1 - RGANIZATIN AND DESCRIPTIN F BUSINESS The financial statements of sceola Gold, Inc. f/k/a Phyhealth Corp. (the "Company") have been prepared by management and are unaudited. In the opinion of management, these financial statements reflect all adjustments of a normal recurring nature necessary for a fair presentation of the results for the interim periods presented. Phyhealth Corp. was incorporated under the laws of the State of Delaware on April 27, 2012, which is considered date of inception. By amendment to the Articles of Incorporation, its name was changed to sceola Gold, Inc. on August sceola Gold Inc is an emerging, low cost producer whose primary assets are the gold mining claims known as Mav G in the famous sceola Mining District in Mary Ann Canyon in White Pine County, Nevada. NTE 2 - SUMMARY F SIGNIFICANT ACCUNTING PLICIES This summary of significant accounting policies of the Company is presented to assist in understanding the Company's financial statements which conform to U.S. generally accepted accounting principles. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. The following policies are considered to be significant: Accounting Method The financial statements are prepared using the accrual method of accounting in accordance with generally accepted accounting principles (GAAP). The Company has elected a calendar year-end. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all cash accounts and highly liquid investments with original maturities of less than three months to be cash equivalents. Fixed Assets Fixed assets are stated at cost less accumulated depreciation. Expenditures for minor replacements, maintenance and repairs which do not increase the useful lives of the property and equipment are charged to operations as incurred. Major additions and improvements are capitalized. Depreciation and amortization are computed using the straight-line method over an estimated useful life of 5 to 7 years. 7

8 NTE 2 - SUMMARY F SIGNIFICANT ACCUNTING PLICIES (Continued) Impairment of Long-Lived Assets The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future non-discounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairments were recognized for the year ended December 31, 2017 and Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on historical experience and various other factors. The Company continually evaluates the information used to make these estimates as the business and economic environment changes. Historically, actual results have not varied materially from the Company's estimates and the Company does not currently anticipate a significant change in its assumptions related to these estimates. However, actual results may differ from these estimates under different assumptions or conditions. Key estimates made in the accompanying financial statements include, among others, the economic useful lives and recovery of long-lived assets and contingencies. Fair Value of Financial Instruments The carrying amounts reported in the accompanying financial statements for cash and cash equivalents, accounts payable, other current liabilities approximate fair values because of the immediate or short-term maturities of these financial instruments. Concentrations of Risk The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. The Company has not experienced any losses in such accounts or lack of access to its cash, and believes it is not exposed to significant risk of loss with respect to cash. However, no assurance can be provided that access to the Company s cash will not be impacted by adverse economic conditions in the financial markets. 8

9 NTE 2 - SUMMARY F SIGNIFICANT ACCUNTING PLICIES (Continued) Contingencies Certain conditions may exist as of the date that these financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company s management and its legal counsel assess such contingent liabilities and such assessments inherently involves exercise of judgement. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company's financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee is disclosed. Stock-based Compensation The Company recognizes stock-based compensation in accordance with ASC Topic 718 "Stock Compensation" which requires the measurement and recognition of compensation expense for all sharebased payment awards made to employees and directors including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values. Recent Accounting Pronouncements In May 2014, the FASB issued ASU , Revenue from Contracts with Customers (Topic 606), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity is expected to be entitled for those goods or services. ASU defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation. In August 2015, the FASB issued ASU , Revenue from Contracts with Customers (Topic 606), to defer the effective date of ASU by 1 year. Accordingly, ASU will now be effective for the Company s year ending December 31, The adoption of ASU must be made using either of two methods: (a) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined with ASU ; or (b) retrospective with the cumulative effect of initially applying ASU recognized at the date of initial application and providing certain additional disclosures as defined in ASU The Company has not yet selected a transition method and is currently evaluating the impact of the pending adoption of ASU and ASU on its financial statements. 9

10 NTE 2 - SUMMARY F SIGNIFICANT ACCUNTING PLICIES (Continued) In February 2016, the FASB issued ASU No , Leases, which requires an entity to recognize the rights and obligations resulting from leases as lease assets and lease liabilities on the balance sheet, including leases previously recorded and classified as operating leases. Pursuant to this new guidance, a lessee should recognize in the balance sheet a liability to make lease payments (lease liability) and a rightof-use assets (lease asset) representing its right to use the underlying asset for the lease term, initially measured at the present value of the lease payments. This new standard is effective for the Company for the year ended December 31, 2020, with early application permitted, using a modified retrospective approach. The Company is currently evaluating the impact of the pending adoption of ASU on its financial statements. ther recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) did not or are not believed to have a material impact on the Company s present or future financial statements. NTE 3 - FIXED ASSETS As of December 31, 2018, and 2017 fixed assets had a basis of 83,839 and 297,784, respectively and accumulated depreciation balance of 19,523 and 16,676. Depreciation expense was recorded for the years ended December 31, 2017 and 2016 was 19,523 and 16,676, respectively. NTE 4 - CMMITMENTS As of August 24, 2014, the Company leases the mining rights from the majority shareholder, Pizz, Inc. The Company is obligated to pay annually the greater of Twenty percent (20%) of the gross revenue generated from the gold recovered or Fifty Thousand Dollars (50,000.00). In addition to the lease payments, the Company is obligated to pay annually the property tax owed by Pizz, Inc. As of September 2018, the Company has moved their office to Weirton, WV. The Company has contracted for this office on an annual basis. NTE 5 - RELATED PARTY Prior to December 2014, the Company entered into convertible debt agreements with various former officers. The obligation due to related party is outstanding with a balance of 261,194 as of December 31, 2018 and The debt is non-interest bearing and considered due on demand. The debt is convertible into common shares. The debt is included in other current liabilities on the balance sheet. The Company is not currently accruing interest on obligations due to prior officers as the creditors, amounts and terms are undefined. The statute of limitations of debts under Delaware law is six (6) years. NTE 6 - LNG-TERM LIABILITIES 10

11 Note Holder rigination Principal Accrued Interest Total Date of Debt Balance RK Grain/ January 1, , , ,810 David Rumbold RK Grain/ July 1, ,000 71, ,225 David Rumbold More Success July 1, , , ,777 Group RK Grain/ April 1, , , ,223 David Rumbold Myron Cupp April 1, ,500 1,538 5,038 Brian Starszak August 1, ,000 3,430 13,430 NTE 7 - PREFERRED STCK AND CMMN STCK The Company is authorized to issue Two Million (2,000,000) shares of Preferred Stock. n April 27, 2012, the management of the Company filed with the Delaware Secretary of State a certificate of amendment to the certificate of incorporation authorizing these amounts and designating ne Million (1,000,000) shares as Series A Preferred Stock and ne Million (1,000,000) shares as Series B Preferred Stock. The certificate of amendment to the certificate of incorporation designates any rights or privileges to either the Series A Preferred Stock or designates Pizz Inc. to the privilege to 1,000,000 of the Series B Preferred Stock. Series A Preferred Stock The Series A Preferred Stock is senior equity to the common stock of the Company. The Series A Preferred Stock participates in dividends on an as-converted basis pari passu with the Common Stock of the Company. The Series A Preferred Stock does not have a liquidation preference. The Series A Preferred Stock votes pari passu with the Common Stock of the Company. The Series A Preferred Stock may be converted at the holder s option on a one-to-one basis into the Common Stock of the Company. No transactions in Series A Preferred Stock occurred in this period. Series B Preferred Stock The Series B Preferred Stock is senior equity to the common stock of the Company. The Series B Preferred Stock participates in dividends on an as-converted basis pari passu with the Common Stock of the Company. The Series B Preferred Stock does not have a liquidation preference. The Series B Preferred Stock votes pari passu with the Common Stock of the Company. The Series B Preferred Stock may be converted at the holder s option on a one-to-one basis into the Common Stock of the Company. The Transactions for the Series B Preferred Stock occurred in this period in granting Pizz, Inc. the 1,000,000 Series Preferred B Stock that was available. 11

12 NTE 7 - PREFERRED STCK AND CMMN STCK (Continued) Common Stock Issuances n January 2, 2017, the Company converted Twelve Thousand Dollars (12,000.00) of the issuing Four Hundred (400,000) shares. As the market price at the time of the issuance of the shares was Sixty-Two Cents (0.62) per share, the Company recorded a loss on note conversion equal to Two Hundred Thirty-Six Thousand Dollars (236,000.00). n January 2, 2017, the Company converted Four Thousand Five Hundred Dollars (4,500.00) of the issuing ne Hundred Fifty Thousand (150,000) shares. As the market price at the time of the issuance of the shares was Sixty-Two Cents (0.62) per share, the Company recorded a loss on note conversion equal to Eight- Eight Thousand Five Hundred Dollars (88,500.00). n January 2, 2017, the Company converted Five Thousand Dollars (5,000.00) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing ne Hundred Sixty-Six Thousand Six Hundred Sixty-Seven (166,667) shares. As the market price at the time of the issuance of the shares was Sixty-Two Cents (0.62) per share, the Company recorded a loss on note conversion equal to Ninety-Eight Thousand Three Hundred Thirty-Four Dollars (98,334.00). n January 3, 2017, the Company converted Twenty-Five Thousand Dollars (25,000.00) of the issuing Five Hundred Thousand (500,000) shares. As the market price at the time of the issuance of the shares was Sixty-Two Cents (0.62) per share, the Company recorded a loss on note conversion equal to Two Hundred Eighty-Five Thousand Dollars (285,000.00). n January 3, 2017, the Company converted Twenty-Five Thousand Dollars (25,000.00) of the issuing Five Hundred Thousand (500,000) shares. As the market price at the time of the issuance of the shares was Sixty-Two Cents (0.62) per share, the Company recorded a loss on note conversion equal to Two Hundred Eighty-Five Thousand Dollars (285,000.00). n January 3, 2017, the Company converted Six Thousand Dollars (6,000.00) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing Two Hundred Thousand (200,000) shares. As the market price at the time of the issuance of the shares was Sixty-Two Cents (0.62) per share, the Company recorded a loss on note conversion equal to ne Hundred Eighteen Thousand Dollars (118,000.00). 12

13 NTE 7 - PREFERRED STCK AND CMMN STCK (Continued) Common Stock Issuances (Continued) n January 4, 2017, the Company converted Fifty Thousand Dollars (50,000.00) of the issuing ne Million (1,000,000) shares. As the market price at the time of the issuance of the shares was Fifty Cents (0.50) per share, the Company recorded a loss on note conversion equal to Four Hundred Fifty Thousand Dollars (450,000.00). n January 6, 2017, the Company converted Fifty Thousand Dollars (50,000.00) of the issuing ne Million (1,000,000) shares. As the market price at the time of the issuance of the shares was Fifty-Nine and Nine Tenths Cents (0.599) per share, the Company recorded a loss on note conversion equal to Five Hundred Forty- Nine Thousand Dollars (549,000.00). n January 6, 2017, the Company converted Five Thousand Dollars (5,000.00) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing Two Hundred Fifty Thousand (250,000) shares. As the market price at the time of the issuance of the shares was Fifty-Nine and Nine Tenths Cents (0.599) per share, the Company recorded a loss on note conversion equal to ne Hundred Forty-Four Thousand Seven Hundred Fifty Dollars (144,750.00). n January 9, 2017, the Company converted Twenty-Five Thousand Dollars (25,000.00) of the issuing Five Hundred Thousand (500,000) shares. As the market price at the time of the issuance of the shares was Sixty Cents (0.60) per share, the Company recorded a loss on note conversion equal to Two Hundred Seventy- Five Thousand Dollars (275,000.00). n January 10, 2017, the Company converted Twenty-Five Thousand Dollars (25,000.00) of the issuing Five Hundred Thousand (500,000) shares. As the market price at the time of the issuance of the shares was Sixty-Four Cents (0.64) per share, the Company recorded a loss on note conversion equal to Two Hundred Ninety-Five Thousand Dollars (295,000.00). n January 29, 2017, the Company converted Thirty-Two Thousand Dollars (32,000.00) of the issuing Six Hundred Forty Thousand (640,000) shares. As the market price at the time of the issuance of the shares was Sixty-Five Cents (0.65) per share, the Company recorded a loss on note conversion equal to Three Hundred Eighty-Four Thousand Dollars (384,000.00). 13

14 NTE 7 - PREFERRED STCK AND CMMN STCK (Continued) Common Stock Issuances (Continued) n February 3, 2017, the Company converted Ten Thousand Dollars (10,000.00) of the issuing Twenty-Eight Thousand Five Hundred Seventy-ne (28,571) shares. As the market price at the time of the issuance of the shares was Sixty-Eight and Four Tenths Cents (0.684) per share, the Company recorded a loss on note conversion equal to Nine Thousand Five Hundred Forty-Two Dollars (9,543.00). n February 9, 2017, the Company converted Ten Thousand Dollars (10,000.00) of the issuing Thirty-Three Thousand Three Hundred Thirty-Three (33,333) shares. As the market price at the time of the issuance of the shares was Seventy-ne Cents (0.71) per share, the Company recorded a loss on note conversion equal to Thirteen Thousand Six Hundred Sixty-Six Dollars (13,666.00). n March 8, 2017, the Company converted Twenty-Five Thousand Nine Hundred Fifteen Dollars (25,915.00) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing ne Million Two Hundred Ninety-Five Thousand Seven Hundred Ninety- ne (1,295,791) shares. As the market price at the time of the issuance of the shares was Sixty- Five Cents (0.65) per share, the Company recorded a loss on note conversion equal to Eight Hundred Sixteen Thousand Three Hundred Forty-Nine Dollars (816,349.00). n April 21, 2017, the Company converted Twelve Thousand Five Hundred Dollars (12,500.00) of the issuing ne Million Two Hundred Fifty Thousand (1,250,000) shares. As the market price at the time of the issuance of the shares was Eleven Cents (0.11) per share, the Company recorded a loss on note conversion equal to ne Hundred Twenty-Five Thousand Dollars (125,000.00). n April 25, 2017, the Company converted Ten Thousand Dollars (10,000.00) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing ne Million (1,000,000) shares. As the market price at the time of the issuance of the shares was Ten Cents (0.10) per share, the Company recorded a loss on note conversion equal to Ninety Thousand Dollars (90,000.00). n April 25, 2017, the Company converted Ten Thousand Dollars (10,000.00) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing ne Million (1,000,000) shares. As the market price at the time of the issuance of the shares was Ten Cents (0.10) per share, the Company recorded a loss on note conversion equal to Ninety Thousand Dollars (90,000.00). 14

15 NTE 7 - PREFERRED STCK AND CMMN STCK (Continued) Common Stock Issuances (Continued) n April 26, 2017, the Company converted Twenty Thousand Dollars (20,000.00) of the issuing Two Million (2,000,000) shares. As the market price at the time of the issuance of the shares was Nine and Eight Tenths Cents (0.098) per share, the Company recorded a loss on note conversion equal to ne Hundred Seventy-Six Thousand Dollars (176,000.00). n April 28, 2017, the Company converted Ten Thousand Dollars (10,000.00) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing ne Million (1,000,000) shares. As the market price at the time of the issuance of the shares was Ten Cents (0.10) per share, the Company recorded a loss on note conversion equal to Ninety Thousand Dollars (90,000.00). n May 11, 2017, the Company converted Twenty Thousand Dollars (20,000.00) of the issuing Two Million (2,000,000) shares. As the market price at the time of the issuance of the shares was Eight Cents (0.08) per share, the Company recorded a loss on note conversion equal to ne Hundred Forty Thousand Dollars (140,000.00). n May 12, 2017, the Company converted Ten Thousand Dollars (10,000.00) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing ne Million (1,000,000) shares. As the market price at the time of the issuance of the shares was Nine and Five Tenths Cents (0.095) per share, the Company recorded a loss on note conversion equal to Eighty-Five Thousand Dollars (85,000.00). n June 1, 2017, the Company converted Twenty-Five Thousand Dollars (25,000.00) of the issuing Two Million Five Hundred Thousand (2,500,000) shares. As the market price at the time of the issuance of the shares was Seven and Five Tenths Cents (0.075) per share, the Company recorded a loss on note conversion equal to ne Hundred Sixty-Two Thousand Five Hundred Dollars (162,500.00). n June 2, 2017, the Company converted Ten Thousand Dollars (10,000.00) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing ne Million (1,000,000) shares. As the market price at the time of the issuance of the shares was Seven and Five Tenths Cents (0.075) per share, the Company recorded a loss on note conversion equal to Sixty-Five Thousand Dollars (65,000.00). 15

16 NTE 7 - PREFERRED STCK AND CMMN STCK (Continued) Common Stock Issuances (Continued) n June 14, 2017, the Company converted Fifty Thousand Dollars (50,000.00) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing Five Million (5,000,000) shares. As the market price at the time of the issuance of the shares was Nine and Ninety-Five Hundredth Cents (0.0995) per share, the Company recorded a loss on note conversion equal to Four Hundred Forty- Seven Thousand Five Hundred Dollars (447,500.00). n July 14, 2017, the Company converted Fifty Thousand Dollars (50,000.00) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing Five Million (5,000,000) shares. As the market price at the time of the issuance of the shares was Ten and Nine Tenths Cents (0.109) per share, the Company recorded a loss on note conversion equal to Four Hundred Ninety-Five Thousand Dollars (495,000.00). n July 10, 2017, the Company converted Five Thousand Dollars (5,000) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing Twenty- Three Million (23,000,000) shares. As the market price at the time of the issuance of the shares was Eight and Ninety-Nine Hundredths Cents (0.0899) per share, the Company recorded a loss on note conversion equal to Two Million Sixty-Two Thousand Seven Hundred Dollars (2,062,700). n July 10, 2017, the Company converted Ten Thousand Dollars (10,000) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing Four Million (4,000,000) shares. As the market price at the time of the issuance of the shares was Eight and Eight and Ninety-Nine Hundredths Cents (0.0899) per share, the Company recorded a loss on note conversion equal to Three Hundred Forty-Nine Thousand Six Hundred Dollars (349,600). n August 3, 2017, the Company converted Twenty Thousand Dollars (20,000.00) of the issuing Two Million Two Hundred Twenty-Two Thousand Two Hundred Twenty-Two (2,222,222) shares. As the market price at the time of the issuance of the shares was Seven and Four Tenths Cents (0.074) per share, the Company recorded a loss on note conversion equal to ne Hundred Forty-Four Thousand Four Hundred Forty-Four Dollars (144,444.00). n August 9, 2017, the Company converted ne Hundred Thousand Dollars (100,000.00) of the issuing Ten Million (10,000,000) shares. As the market price at the time of the issuance of the shares was Eight and Four Tenths Cents (0.084) per share, the Company recorded a loss on note conversion equal to Seven Hundred Forty Thousand Dollars (740,000.00). 16

17 NTE 7 - PREFERRED STCK AND CMMN STCK (Continued) Common Stock Issuances (Continued) n August 23, 2017, the Company converted Seventy Thousand Dollars (70,000) of the issuing Seven Million (7,000,000) shares. As the market price at the time of the issuance of the shares was Eight and Four Tenths Cents (0.084) per share, the Company recorded a loss on note conversion equal to Five Hundred Eighteen Thousand Dollars (518,000). n August 29, 2017, the Company converted Seven Thousand Dollars (7,000) of the outstanding balance (principal plus accrued interest) of a demand note into common stock by issuing Seven hundred seventy-seven thousand seven hundred seventy- eight (777,778) shares. As the market price at the time of the issuance of the shares was Eight and Four Tenths Cents (0.084) per share, the Company recorded a loss on note conversion equal to Fifty -Eight Thousand Three Hundred Thirty-Three Dollars (58,333). n September 26, 2017, the Company converted Fifteen Thousand Dollars (15,000) of the issuing ne million five hundred thousand (1,500,000) shares. As the market price at the time of the issuance of the shares was Eleven Cents (0.11) per share, the Company recorded a loss on note conversion equal to ne Hundred Fifty Thousand Dollars (150,000). n September 26, 2017, the Company converted Eight Thousand Dollars (8,000) of the issuing Five hundred thousand (500,000) shares. As the market price at the time of the issuance of the shares was Eleven Cents (0.11) per share, the Company recorded a loss on note conversion equal to Forty-Seven Thousand Dollars (47,000). n September 26, 2017, the Company converted Thirty Thousand Dollars (30,000) of the issuing Three million thirty-seven thousand seven hundred thirty (3,037,730) shares. As the market price at the time of the issuance of the shares was Eleven Cents (0.11) per share, the Company recorded a loss on note conversion equal to Three Hundred Four Thousand ne Hundred Fifty Dollars (304,150). n ctober 3, 2017, the Company converted ne Hundred Thousand Dollars (84,484) of the issuing Five million two hundred eighty thousand two hundred twenty-seven (5,280,227) shares. As the market price at the time of the issuance of the shares was Ten Cents (0.10) per share, the Company recorded a loss on note conversion equal to Four Hundred Forty-Three Thousand Five Hundred Thirty-Eight Dollars (443,539). 17

18 NTE 7 - PREFERRED STCK AND CMMN STCK (Continued) Common Stock Issuances (Continued) n ctober 12, 2017, the Company converted Seventy Thousand Dollars (70,000) of the issuing Seven million (7,000,000) shares. As the market price at the time of the issuance of the shares was Eight Cent (0.08) per share, the Company recorded a loss on note conversion equal to Four Hundred Ninety Thousand Dollars (490,000). n January 19, 2018, the Company converted Five Thousand Dollars (5,000) of the issuing Five Hundred Thousand (500,000) shares. As the market price at the time of the issuance of the shares was Four and a half Cents (0.045) per share n April 18, 2018 the Company received a contribution back from Pizz Inc. to sceola Gold of Twenty-Five Million Shares (25,000,000) for private placement issuance of stock. As the Market price at the time of the issuance of the shares was Five Cents (0.05) per share n May 1, 2018, the Company converted shares on the outstanding balance of Thirteen Thousand Eight Hundred Eighty-Six dollars (13,886.00) demand note into common stock by issuing Thirteen Million Eight Hundred Eighty-Six Thousand Two Hundred Fifty-Two (13,886,252) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a conversion for the debt. n August 1, 2018, the Company sold shares of common stock by issuing Five Hundred Thousand (500,000) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a new issuance. n August 1, 2018, the Company converted shares on the outstanding balance of Thirteen Thousand Eight Hundred Eighty-Six dollars (13,886.00) demand note into common stock by issuing Thirteen Million Eight Hundred Eighty Sis Thousand Two Hundred Fifty-Two (13,886,252) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a conversion for the debt. n August 1, 2018, the Company sold shares of common stock by issuing ne Million ne Hundred Fifty Thousand (1,150,000) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share. n August 1, 2018, the Company sold shares of common stock by issuing Five Hundred Thousand (500,000) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.02) per share. 18

19 n August 1, 2018, the Company sold shares of common stock by issuing Five Hundred Thousand (500,000) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share n August 1, 2018, the Company sold shares of common stock by issuing Two Hundred Thirty- Eight Thousand Ninety-Five (238,095) shares. As the Market Share was four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.021) per share n August 1, 2018, the Company sold shares of common stock by issuing Two Hundred Fifty Thousand (250,000) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.02) per share n August 1, 2018, the Company sold shares of common stock by Two Hundred Thousand (200,000) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share n August 1, 2018, the Company sold shares of common stock by issuing Five Hundred Thousand (500,000) shares. As the Market Share was four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share n August 1, 2018, the Company sold shares of common stock by ne million (1,000,000) shares. As the Market Share was four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share n August 1, 2018, the Company sold shares of common stock by Two Hundred Thousand (200,000) shares. As the Market Share was four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share n August 1, 2018, the Company sold shares of common stock by ne Hundred Thousand (100,000) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share n August 1, 2018, the Company sold shares of common stock by ne Hundred Thousand (100,000) shares. As the Market Share was four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share n August 1, 2018 the Company received a contribution back from Pizz Inc. to sceola Gold of Ten Million Shares (10,000,000) for private placement issuance of stock. As the Market price at the time of the issuance of the shares was Four Cent (0.04) per share 19

20 n August 1, 2018, the Company sold shares of common stock by Two Hundred Thousand (200,000) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share n August 1, 2018, the Company issued shares of common stock by Seven Million (7,000,000) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share in lieu of services. n August 1, 2018, the Company converted shares on the outstanding balance of Seventy-Five Thousand dollars (75,000.00) demand note into common stock by issuing Thirteen Million Eight Hundred Eighty Sis Thousand Two Hundred Fifty-Two (13,886,252) shares. As the Market Share was Four cents (0.04) per share, the company issued these shares as a conversion for the debt n August 1, 2018, the Company issued shares of common stock by Five Hundred Thousand (500,000) shares. As the Market Share was Five cents (0.05) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share n December 28, 2018, the Company issued shares of common stock by Three Million (3,000,000) shares. As the Market Share was Five cents (0.04) per share, the company issued these shares as a new issuance. As the Market price at the time was ne Cent (0.01) per share NTE 8 - RISKS RELATED T UR SECURITIES AND THE VER THE CUNTER MARKET Securities trading on the TC Markets (the Pink Sheets ) may be volatile and transactions may be sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares. We are a not a fully reporting issuer with the Securities and Exchange Commission we are alternative reporting to TC markets standards, and our common stock is quoted on the "Pink Sheets" as provided by TC Markets under the ticker symbol SCI. Trading in stock quoted on the Pink Sheets, or any other over the counter venues, is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the Pink Sheets is not a stock exchange, and trading of securities on the Pink Sheets is often more sporadic than the trading of securities listed on a quotation system such as NASDAQ or a physical stock exchange (e.g., New York Stock Exchange). Accordingly, shareholder s may have difficulty reselling any of their shares. ur stock is a penny stock. Trading of our stock may be restricted by the SEC's penny stock regulations and FINRA's sales practice requirements, which may limit a stockholder's ability to buy and sell our stock. 20

21 ur stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than Five Dollars (5.00) per share or an exercise price of less than Five Dollars (5.00) per share, subject to certain exceptions. ur securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" NTE 8 - RISKS RELATED T UR SECURITIES AND THE VER THE CUNTER MARKET (Continued) refers generally to institutions with assets in excess of Five Million Dollars (5,000,000) or individuals with a net worth in excess of ne Million Dollars (1,000,000) or annual income exceeding Two Hundred Thousand Dollars (200,000) or Three Hundred Thousand Dollars (300,000) jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker- dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock. In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority ( FINRA ) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low- priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA s requirements make it more difficult for broker- 21

22 dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock. Rule 144 sales are sales of publicly-traded securities pursuant to the safe harbor of Rule 144 of Section 4 of the Securities Act of Under Section 4 of the Securities Act of 1933, the shareholder can sell shares of the Company into the public markets absent a registration if the selling shareholder complies with certain conditions, the Company is not a shell pursuant to Rule 144(i), and the Company complies with certain reporting provisions of Rule 144. The Company does not comply with the Company complies with certain reporting provisions of Rule 144 at this time. In the future, Rule 144 sales may have a depressive effect on our stock price as an increase in supply of shares for sale, with no corresponding increase in demand will cause prices to fall. NTE 8 - RISKS RELATED T UR SECURITIES AND THE VER THE CUNTER MARKET (Continued) All of the outstanding shares of common stock held by the present officers, directors, and affiliate stockholders are "restricted securities" within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. Rule 144 provides in essence that a person who is an affiliate or officer or director who has held restricted securities for six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of Ten Percent (10%) of a company's outstanding common stock. There is no limit on the amount of restricted securities that may be sold by a non- affiliate after the owner has held the restricted securities for a period of six months if the company is a current reporting company under the 1934 Act. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to subsequent registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the common stock in any market that may develop. FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock. In addition to the "penny stock" rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA 22

23 requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares. Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-xley Act could have a material adverse effect on our business and operating results It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-xley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. NTE 8 - RISKS RELATED T UR SECURITIES AND THE VER THE CUNTER MARKET (Continued) If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes- xley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock. Pursuant to Section 404 of the Sarbanes-xley Act and current SEC regulations, we are required to prepare assessments regarding internal controls over financial reporting and, furnish a report by our management on our internal control over financial reporting. We have begun the process of documenting and testing our internal control procedures in order to satisfy these requirements, which is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities. While our management is expending significant resources in an effort to complete this important project, there can be no assurance that we will be able to achieve our objective on a timely basis. Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price. In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover "material weaknesses" in our internal controls as defined in standards established by the Public Company Accounting versight Board ( PCAB ). A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAB defines "significant deficiency" as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected. 23