Notes
to Condensed Financial Statements
For
the Three Months Ended March 31, 2021 and March 31, 2020
Note
1 – Organization and Business
VETANOVA
INC (“the Company) is in the business of building and operating sustainable photovoltaic (“PV”) solar powered, state
of the art, greenhouse facilities which grow high value greenhouse produce.
As
its initial development project, the Company expects to purchase, develop and operate four adjoining parcels of approximately 39 acres
each, totaling approximately 157 acres in rural Pueblo County, Colorado (“Pueblo Complex”). The Pueblo Complex is currently
majority owned by VitaNova Partners, LLC (“VitaNova”). The Pueblo Complex has an existing greenhouse facility consisting
of 90,000 sq ft of growing space and 15,000 sq ft of warehouse space, another partially built greenhouse and two parcels of vacant land.
In
2020, VitaNova began acquiring and now owns or controls a supermajority of the preferred or controlling equity interests of the four
parcels in the Pueblo Complex. The Pueblo Complex was significantly underpowered with only 300KVA of electrical power and no natural
gas available. The lack of power made the initial greenhouse facility unsuitable for its intended purpose. Since acquiring control VitaNova
has installed 1500KVA electrical service and is retrofitting the existing greenhouse with electrical environmental equipment that can
be solar powered.
The
Company received preliminary approval from C-PACE, a Colorado specialized solar financing program developed by federal, state and county
governments. The Company is in the process of developing engineering necessary to complete the C-Pace financing application.
The
Company recently completed a private placement and raised $556,129 by issuing 55,612,900 common shares along with 55,612,900 2-year warrants
exercisable at $0.20 per share. VitaNova and John McKowen (“McKowen”) are considered affiliates and control entities of the
Company. The Company currently has no independent directors. Both VitaNova and the Company have a common board member, Mr. McKowen. The
Company expects to appoint independent directors after the purchase of Directors and Officers insurance.
On
July 5, 2018, Mr. McKowen purchased a control block of 440,000 common shares of the Company,which at the time was a publicly
traded shell, and appointed himself as its sole board member and Chief Executive Officer. On July 17, 2020, Mr. McKowen transferred
his control block of the Company to VitaNova and began restructuring the Company. The Company currently is a fully
reporting publicly traded shell on OTC Market Pink Sheets, symbol VTNA. As part of the restructuring, the Company issued 55,612,837
common shares to VitaNova and 29,369,230 common shares to Mr. McKowen, which is proportional to Mr. McKowen’s ownership
of VitaNova.
Mr.
McKowen was also issued 58,738,460 shares that are subject to repurchase by the Company for a price of $0.0001 per share, of which 29,369,230
shares will be released from repurchase if warrants issued in Company’s recent private placement are exercised to acquire at least
42,140,266 shares of Common Stock; and 29,369,230 shares will be released from repurchase if, prior to December 31, 2022, the Company
completes a “sale lease back” of a solar powered property and receives gross proceeds of a least $6,000,000 from the sale.
For purposes of federal securities laws, Mr. McKowen is deemed to beneficially own 56,052,837 shares purchased by VitaNova because of
his ability to control VitaNova, as an officer and member of VitaNova.
On
February 1, 2021, the Company filed a registration statement Form 10 to voluntarily register common stock, par value $0.0001per share
of the Company, pursuant to Section 12(g) of the Securities Exchange Act of 1934, or the Exchange Act. The Company believes that when
the Form 10 becomes effective, 60 days after the Form 10 filing, it will no longer be a shell company
Note
2 – Summary of Significant Accounting Policies
Basis
of Presentation
The
financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (“SEC”). The financial statements have been prepared using the accrual basis of accounting in accordance with
Generally Accepted Accounting Principles (“GAAP”) of the United States.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management
to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reported period. Actual results could differ materially from those estimates.
Cash
and cash equivalents
For
purposes of reporting cash flows, the Company considers cash and cash equivalents to include highly liquid investments with original
maturities of 90 days or less. Those are readily convertible into cash and not subject to significant risk from fluctuations in interest
rates. The recorded amounts for cash equivalents approximate fair value due to the short-term nature of these financial instruments.
During
the years ended December 31, 2020 and December 31, 2019 the Company did not maintain its own bank account. In January, 2021, the Company
opened a separate bank account; therefore, the cash balance on March 31, 2021 is shown as cash and cash equivalents.
On
July 17, 2020, VitaNova acquired a super majority of the Company, which at the time was a shell. At the time, the Company had no assets
at, and its operating capital was provided by VitaNova pursuant to a Promissory Note dated August 17, 2020. On September 20, 2020, VitaNova
commenced a private placement on behalf of the Company and raised $351,093 during the year ended December 31, 2020. The proceeds from
the Company’s capital raise were deposited into VitaNova’s bank account and recorded on the Company’s books as “Due
from Related Party.” In 2021, the Company completed its private placement by raising an additional $205,036. Those proceeds were
deposited into a Company bank account opened on February 23, 2021.
Due
from related party and Due to related party – VitaNova Partners, LLC
VitaNova
owns approximately 22.05% of the Company. The Company currently has one director who is also the Company’s Chief Executive Officer
as well as the Chief Executive Officer and Secretary of VitaNova.
During
2020, the Company’s funds were held as due the Company in a bank account owned by VitaNova. For the year ended December 31, 2020,
VitaNova held $65,179 for the benefit of the Company. The Company
In
January, 2021, the Company opened its own bank account.
Income
Taxes
The
Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company
has determined the deferred tax assets and liabilities on the basis of the differences between the financial statement and tax basis
of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect
of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The
Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making
such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable
temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines
that it would be able to realize our deferred tax assets in the future in excess of their net recorded amount, it would make an adjustment
to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The
Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether
it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for
those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is
more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
The
Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated
statement of operations. As of December 31, 2020, and December 31, 2019, no accrued interest or penalties are included on the related
tax liability line in the balance sheet and no deferred tax asset is recognized.
Net
Income (Loss) per Share
Basic
net (loss) per share is computed by dividing net income (loss) attributed to VETANOVA available to common shareholders for the period
by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing
the net income for the period by the weighted average number of common and potential common shares outstanding during the period.
As
of December 31, 2020, and March 31, 2021, there were no dilutive effect from the warrants issued since it would be anti-dilutive.
Accounting
for Equity Raise
The
Company recently completed a private placement and raised $556,127 by issuing 55,612,900 common shares along with 55,612,900 warrants
expiring on September 30, 2022 exercisable at $0.20 per share. During the twelve months ended December 31, 2020, the Company closed on
$351,092 in equity and issued 35,109,231 common shares and 35,109,231 warrants. During the three months ended March 31, 2021, the Company
closed on $205,035 Accounting Standards Codification (“ASC”) requires the Company to first analyze the warrant to determine
if the warrant is a liability or equity instrument.
The
warrants in the offering qualifies as equity. The issued warrant does not obligate the Company to repurchase its shares by transferring
an asset. The warrant does not obligate the Company to settle the warrant by issuing a variable number of shares if the monetary value
of the obligation is based on a predetermined fixed amount, variation in something other than the issuers stock price, or variations
inversely related to the issuers stock price. Therefore, since there is no obligation on behalf of the Company, the warrants should be
classified as equity.
The
next step is to determine the fair value of the equity unit. The Company’s offering does not meet any of the four areas of ASC
820-10-30-3A requiring a fair value calculation; therefore, fair value equals the actual transaction value. The next step is to compute
the fair in order to determine the allocation of value between the common shares and the warrants issued (ASC 815). The Company performed
this calculation which gave a value of 50% to the warrant and 50% to the common shares.
The
following variables were used to calculate the warrant value:
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Annualized
volatility of 865%
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Expected
life in years of 1.02
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Discount
rate – bond equivalent (US Treasury 5-year coupon rate) of 0.37%
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The
common share value was computed by evaluating each equity raise closing date to VTNA’s market stock price to the price issue, which
was $0.01/share.
Note
3 – Equity Transactions
The
Company has authorized 500,000,000 shares of common stock with a par value of $0.0001. The total issued common stock as of March 31,
2021 and December 31, 2020 was 215,475,502 and 194,971,866 shares, respectfully.
During
the three months ended March 31, 2021 there were the following equity transactions:
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20,503,600
shares to outside investors, and
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36
shares as a rounding/true-up issuance to an outside investor.
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During
the year ended December 31, 2020 there were the following equity transactions:
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91,127,145
shares issued to the Company’s founders, officers and board members;
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12,495,700
shares issued to the Company’s consultants;
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55,612,837
shares issued to VitaNova Partners, LLC, and
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35,109,231
shares issued to outside investors.
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Note
4 – Commitments and Contingencies
The
Company has no commitments or contingencies.
Note
5 – Related Party Transactions
VitaNova
Partners, which owns approximately 22.5% of VETANOVA, is providing management, including financial oversight, of VETANOVA. As of March
31, 2021, the Company owed VitaNova Partners $ 83,995. As of December 31, 2020 VitaNova Partners owed the Company $65,179.
On
July 15, 2020, the Company and VitaNova entered into a consulting agreement whereby VitaNova would provide management services until
the current private placement offering is completed and the shareholders of the Company can properly elect an independent board of directors
and appoint Company officers. VitaNova is paid $456,000 annually for its management services. Payments are made in 12 monthly installments
of $38,000. On December 15, 2020 the consulting agreement was amended to reduce payments to $19,000 a month effective January 1, 2021.
During
the year ended December 31, 2020 there were the following equity transactions involving related parties:
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100,622,845
shares issued to the Company’s founders, officers and board members, and
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55,612,837
shares issued to VitaNova Partners, LLC.
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Note
6 – Subsequent Events
RM
Materials, LLC was issued 61,511,800 the Company’s common units, of which 41,007,200 VTNA common units were issued on April 5,
2021 and are subject to repurchase by VitaNova Solar Partners, LLC for a price of $0.0001 per VTNA common units. Of the 41,007,400 VTNA
common units Common Units subject to repurchase, 20,503,600 VTNA Common Units will be released from repurchase if a contemplated $3,000,000
VTNA private placement is completed by December 31, 2021; and 20,503,600 VTNA Common Units will be released from repurchase if,
prior to December 31, 2022, VTNA completes a “sale lease back” of a solar powered property from which VTNA receives gross
proceeds of a least $6,000,000.