LeoNovus Inc - Annual Report 2019

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ANNUAL INFORMATION FORM

For the fiscal year ended December 31, 2019

Janaury 28, 2021

GENERAL MATTERS ........................................................................................................................................ 4 FORWARD-LOOKING STATEMENTS ............................................................................................................ 4 TRADEMARKS, TRADE NAMES AND SERVICE MARKS ........................................................................... 5 GLOSSARY OF TERMS ..................................................................................................................................... 5 CORPORATE STRUCTURE .............................................................................................................................. 6 INCORPORATION AND OFFICE .............................................................................................................................. 6 INTERCORPORATE RELATIONSHIPS ...................................................................................................................... 6 GENERAL DEVELOPMENT OF THE BUSINESS ........................................................................................... 6 OUR BUSINESS ................................................................................................................................................. 11 SMART DATA MANAGEMENT TOOLS SUITE .......................................................................................................... 13 MULTI-CLOUD DATA ARCHIVING ....................................................................................................................... 13 SECURE DATA STORAGE .................................................................................................................................... 13 OUR OPERATIONS .......................................................................................................................................... 15 OVERVIEW ....................................................................................................................................................... 15 INTELLECTUAL PROPERTY ................................................................................................................................. 15 PATENTS .......................................................................................................................................................... 16 TRADEMARK .................................................................................................................................................... 16 CONTRACTUAL RESTRICTIONS .......................................................................................................................... 16 FINANCE ........................................................................................................................................................... 16 RISK FACTORS ................................................................................................................................................ 16 RISKS RELATED TO OUR BUSINESS .................................................................................................................... 17 RISKS RELATED TO ALL FOREIGN OPERATIONS .................................................................................................. 24 RISKS RELATED TO OUR COMMON SHARES ........................................................................................................ 25 DESCRIPTION OF SHARE CAPITAL ............................................................................................................ 26 AUTHORIZED AND ISSUED CAPITAL ................................................................................................................... 26 COMMON SHARES ............................................................................................................................................. 26 PREFERRED SHARES .......................................................................................................................................... 26 DIVIDEND POLICY ......................................................................................................................................... 26 MARKET FOR SECURITIES .......................................................................................................................... 26 TRADING PRICES AND VOLUMES ....................................................................................................................... 26 DIRECTORS AND EXECUTIVE OFFICERS ................................................................................................. 28 BIOGRAPHIES .................................................................................................................................................... 29 PENALTIES OR SANCTIONS ................................................................................................................................ 31 CONFLICTS OF INTEREST ................................................................................................................................... 31 MATERIAL CONTRACTS ............................................................................................................................... 32 INTEREST OF EXPERTS ................................................................................................................................ 32 LEGAL MATTERS ........................................................................................................................................... 32 REGULATORY ACTIONS ............................................................................................................................... 32 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS .................................. 32

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AUDITORS, TRANSFER AGENT AND REGISTRAR ................................................................................... 32 ADDITIONAL INFORMATION ....................................................................................................................... 32

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GENERAL MATTERS

Unless otherwise noted or the context otherwise indicates, “Leonovus”, the “Company”, “we”, “us” and “our” refer to Leonovus Inc., together, if the context requires, with its subsidiaries.

Certain capitalized terms and phrases used in this annual information form are defined in the “Glossary of Terms”.

Unless otherwise noted in this annual information form, all information is presented as of December 31, 2019. Amounts are stated in U.S. dollars unless otherwise indicated.

Our financial statements, available on SEDAR at www.sedar.com, have been prepared in accordance with International Financial Reporting Standards.

FORWARD-LOOKING STATEMENTS

Certain statements in this annual information form about our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking information and/or forward-looking statements within the meaning of applicable securities laws (collectively, “ forward-looking statements ”). The words “may”, “will”, “would”, “should”, “could”, “expects”, “plans”, “intends”, “trends”, “indicates”, “anticipates”, “believes”, “estimates”, “predicts”, “likely” or “potential” or the negative or other variations of these words or other comparable words or phrases, are intended to identify forwardlooking statements, although not all forward-looking statements contain these words.

Forward-looking statements are based on certain assumptions and estimates made by us in light of our experience and perception of historical trends, current conditions, expected future developments related industries, and other factors we believe are appropriate and reasonable in the circumstances, but there can be no assurance that such assumptions and estimates will prove to be correct.

Forward-looking information involves statements about the future and is inherently uncertain. Forward-looking information is subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, those described under “Risk Factors” which include: A history of losses; risks relating to debt structure; no guarantee of product development; inability to protect intellectual property; competitive industry; key personnel; expiration of patents; intellectual property infringement; reliance on third-party service providers; transfer pricing; uncertain financial and geopolitical climate and downturn in global economy, including the impacts of the COVID19 pandemic; reliance on cloud servers; network disruptions, system failures and breaches of security; reliance on third-party manufacturing and shipping; legal and regulatory approvals and requirements; Solution defects; open source software; loss of rights to use software or components supplied by third parties; gross margins; managing acquisitions; security of customer information; limited operating history of the Company; additional capital requirements; taxes; accounting estimates; litigation; fluctuation of revenue and operating results; changes to pricing model; ability to manage product obsolescence; inability to meet demand; regulatory compliance; regulatory, economic, risks associated with foreign operations; fluctuations in foreign currencies; difficulty in enforcement of judgements.

The foregoing list is not exhaustive of all the factors that could affect us. Given the risks, uncertainties and assumptions inherent in the forward-looking statements, the reader should not place undue reliance on the forward-looking statements in this annual information form. Unless otherwise stated, the forward-looking statements contained in this annual information form are made as of the date of this annual information form and we do not assume any obligation to update any forward-looking statements, whether as a result of new information or future events or otherwise, except to the extent required by applicable law.

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TRADEMARKS, TRADE NAMES AND SERVICE MARKS

This annual information form contains company names, product names, trade names, trademarks and service marks of Leonovus and other organizations, all of which are the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or tradenames to imply an endorsement or sponsorship of us by such other companies. Solely for convenience, our trademarks and tradenames referred to in this annual information form may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks and tradenames.

GLOSSARY OF TERMS

“ BCSC ” means the British Columbia Securities Commission;

“ Board ” means the board of directors of the Company, as constituted from time to time;

“ Common Shares ” means common shares of the Company issued and outstanding as of the date of this annual information form;

“ Consolidation ” means the consolidation of Leonovus's Common Shares on a basis of thirty (30) pre-consolidation Common Shares to one (1) post-consolidation shares, which was made effective on October 26, 2020;

“ Exchange ” means the TSX Venture Exchange Inc.;

“ GDPR ” means the General Data Protection Regulation of the European Union;

“ HIPAA ” means The Health Insurance Portability and Accountability Act of 1966 (USA);

“ IoT ” means Internet of Things, and generally refers to a system of interrelated, internet-connected objects that are able to collect and transfer data over a wireless network without human intervention;

“ Leonovus ” or the “ Company ” means Leonovus Inc., a company existing under the laws of Ontario, and references in this annual information form to “Leonovus” or the “Company” should be interpreted as described under the heading “General Matters”;

“ Leonovus USA ” means Leonovus USA, Inc., a corporation existing under the laws of California, and a whollyowned subsidiary of Leonovus;

“ NEO ” means named executive officer and “NEOs” includes the President and Chief Executive Officer, the Chief Financial Officer and the Chief Technology Officer;

“ NI 51-102 ” means National Instrument 51-102 – Continuous Disclosure Obligations;
“ NI 52-110 ” means National Instrument 52-110 – Audit Committees;

“ NIST ” means National Institute of Standards and Technology, US Department of Commerce;

“ NOBO” means non-objecting beneficial owner;

“ OBCA ” means the Business Corporations Act (Ontario), as amended;

“ Option Plan ” means the Company’s amended and restated employee stock option plan ratified on June 25, 2020;

“ Options ” means options to purchase Common Shares pursuant to the Stock Option Plan;
“ OSC ” means the Ontario Securities Commission;

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“PCI” mean Payment Card Industry compliance;

“ RSU Plan ” means the Company’s established restricted share unit plan ratified on June 21, 2017;

“ Shareholders ” mean shareholders of the Company;

“SOX” means Sarbanes-Oxley compliance; and

" TSXV " means the TSX Venture Exchange Inc.

CORPORATE STRUCTURE

Incorporation and Office

Leonovus Inc. was incorporated under the OBCA on December 30, 2008. The Company’s head and registered office is located at 125 – 2611 Queensview Drive, Ottawa, ON, K2B 8K2.

The only subsidiary of the Company is Leonovus USA which was incorporated in 2008 under the laws of the state of California. Leonovus USA was formerly known as Personal Web Systems Inc. (PWS).

Intercorporate Relationships

The table below lists the only subsidiary of Leonovus as at December 31, 2019, as well as its jurisdiction of organization. The subsidiary is owned 100% by Leonovus.

Name	Jurisdiction Where Incorporated
Leonovus USA, Inc.	Delaware, USA

GENERAL DEVELOPMENT OF THE BUSINESS

Fiscal 2017

In January 2017, the Company launched its next generation software-defined object storage solution (“SDOSS”) for enterprise cloud users. The Company’s unified, highly secure SDOSS integrates into all network types including onpremises, cloud private or public, hybrid or multi-cloud – and directly addresses governance, risk management and compliance concerns without sacrificing ROI.

In March 2017, the Company completed a private placement offering of 26,000,000 units (each unit comprising one common share and one warrant) at a price of CAD$0.05 per unit for gross proceeds of CAD$1,300,000 (net proceeds of $983,000). Each warrant was exercisable for one common share at CAD$0.10 per share for a period of 24 months from the date of issue. In conjunction with the March private placement, 1,560,000 broker warrants were issued, exercisable at CAD$0.10 per common share for a period of 24 months. The Company also paid $78,000 in cash commissions to eligible finders.

In April 2017, the Company signed a strategic partnership with Montreal-based reseller, ZoneTI. Under the terms of the partnership agreemen,t ZoneTI acts as a reseller ofLeonovus's software to its global network of enterprise storage and cloud customers. As of this date the partnership agreement is still in place, however, Zone TI has not sold any Leonovus software to its customers.

In June 2017, the Company signed a strategic partnership agreement with Calgary-based, global cyber security and managed service provider, Snowy River International Inc. (“Snowy River”). This agreement expired in May 2019.

In August 2017, Storage Made Easy (“SME”) and Leonovus announced a new strategic partnership in which SME’s File Fabric product will be sold with Leonovus 3.0 enterprise software-defined storage. This agreement expired in December 2018.

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In September 2017, the Company completed a private placement offering of 30,000,000 units (each unit comprising one common share and one warrant) at a price of CAD$0.05 per unit, for gross proceeds of CAD$1,500,000 (net proceeds of $1,119,000). Each warrant was exercisable for one common share at CAD $0.075 per share for a period of eighteen months from the date of issuance. In conjunction with the September private placement, 2,100,000 broker warrants were issued. Each warrant was exercisable for one common share at CAD $0.075 per share for a period of eighteen months from the date of issuance.

In October 2017, the Company signed a product development agreement with DLT Labs to accelerate the engineering of the blockchain components of the Leonovus SDOSS DLT labs built the first version of our blockchain software and the agreement was terminated in February 2018.

In October 2017, Leonovus announced a proof of concept agreement with one of Canada’s ‘big six’ banks to install it’s Leonovus 3.0 software to assist the Bank in developing a multi-site data storage management fabric with complete data security, performance and compliance metrices that meet or exceed the Bank’s data governance policies by improving data security while reducing storage costs.

In October 2017, the Company announced a new reseller partner with Toronto, Ontario based FlexITy Solutions Inc., an award-winning integrator of telephony, data centre, and IT network infrastructure providing professional and managed services with certified, highly experienced IT experts. Together, Leonovus and FlexITy gave enterprises access to an on-premises, hybrid or multi-cloud ultra-secure, blockchain-enhanced software-defined storage solution that allows for enhanced data security and compliance monitoring for regulatory requirements while reducing storage and operating costs. Regulatory compliance examples include HIPAA, PCI, SOX, GDPR. As of the date of this annual information form, the reseller partnership is still in place, however the Company is not actively engaging with FlexITy at this time.

In November 2017, the Company announced a proof of concept with a global health data services company to deliver improved user experience to it’s 20,000 Citrix users to provide flexibility of data movement, decoupling of data from the infrastructure and the potential to federate encrypted shreds of an object file into separate zones. This is a unique opportunity to seamlessly improve end-user experience, data security, data compliance and data sovereignty across all geographic regions. The Company successfully completed this trial, but the customer did not purchase a license to put the software into production.

In November 2017, Leonovus announced the hiring of Eric Lee, formerly a Oracle Global Account Director for hardware, software, cloud and applications sold internationally through the Tech Data network, as Vice President of Business Development for the USA . Mr. Lee Left the company in October 2018.

In December 2017, the Company completed a bought deal of 27,500,000 units (each unit comprising one common share and one-half warrant) at a price of $0.50 per unit, for gross proceeds of CAD$13,750,000. Each full warrant was exercisable for one common share at CAD$0.65 per share for a period of twenty-four months from the date of issuance.

In December 2017, Leonovus entered into a strategic partnership agreement with ApexIT of St. Louis, Missouri, under the terms of which ApexIT agreed to sell and support Leonovus’ solutions across the USA. APEX merged with another company in the fall of 2018 and the agreement was not assigned to the acquiring company.

In December 2017, Leonovus announced plans for an Initial Coin Offering (“ICO”) in the fall of 2018 to support the launch of an advanced blockchain storage and compute solution for enterprises, institutions and consumers, with a marketplace for cloud applications. The existing Leonovus product suite provides he foundation for an enterpriseclass blockchain/distributed ledger technology (“DLT”). As noted later in this annual information form, the ICO evolved into the Galaxa project, which planned for a Security Token Offering (“STO”) and not an ICO. The Galaxa project was discontinued in June of 2019.

Fiscal 2018

In January 2018, the Company hired Peter Hundal, formerly of Hewlett Packard Enterprises (“HPE”), as Vice President, Strategy and Solutions. Mr. Hundal left the company in June 2018.

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In January 2018, Leonovus announced that after four months of technical and market evaluation by the Government of Canada (“GOC”), the Company was pre-qualified to receive up to a CAD$500,000 purchase order from the Build in Canada Program (“BCIP”) to install its industry-leading blockchain hardened storage technology in one or more government departments. Because of the BCIP rules, that help accelerate the purchasing process for new Canadian innovations by the GOC, there is the potential for three additional CAD$500,000 purchase orders, paid from departmental budgets, for an aggregate revenue potential of CAD$2,000,000 in 2018, subject to finding suitable sponsoring GOC departments.

In February 2018, Christopher Benk, CPA, CA, CBV was appointed as VP Finance and Chief Financial Officer of Leonovus. Dan Hilton, CPA, CA, MBA, who was interim Chief Financial Officer since August 27, 2015 continues to be an active member of the board of directors, as he has been since December 30, 2008.

In March 2018, Leonovus entered into partnership with iCONECT CA Inc. of London, ON, makers of the iCONECTXERA document and video review platform already used to manage highly confidential information in some of the world’s highest profile legal cases to create a combined product offering. This offering assists corporations to meet regulatory requirements and increase security of sensitive documents and those used for legal cases as a component of their document management and eDiscovery workflow. This agreement was discontinued in January 2021.

In March 2018, a proof of concept customer purchased Leonovus 3.0 deploying it in its production environment. Leonovus also obtained four new proof of concept pilots with customers in Canada and the USA. Each of these trials were active, full customer engagement, with four different law enforcement and public safety customers. The proof of concept trials were successful but the customers did not purchase a license to put Leonovus software into production.

In March 2018, the Company contracted Electronic Warfare Associates, of Ottawa, ON and Herndon, Virginia, to advise and coordinate the Leonovus submission to the National Institute of Standards and Technology (“NIST”) in Washington, DC for the Company to obtain FIPS 140-2 certification. Leonovus would become one of the first companies in the world with embedded blockchain technology to receive FIPS 140-2 certification. The FIPS 140-2 certification, which Leonovus obtained in 2020, will enable Leonovus to sell its blockchain hardened software-defined storage solution into U.S. and Canadian governments and other regulated industries (such as financial and health-care institutions) that collect, store, transfer, share and disseminate sensitive but unclassified (“SBU”) information.

In April 2018, partnered with IT security experts, SynerSolutions Technologies Inc. (“SynerSolutions”) of Ottawa, ON, as a new value-added reseller partner. SynerSolutions specializes in information security, storage technology, and emerging technologies consulting services. SynerSolutions' prime focus is to assist public and private organizations to create security ecosystems to manage the known and unknown threats in their IT environment and business assets. Syner Solutions provided professional services to assist the company to get its FIPS 140-2 certification from NIST.

In June 2018, a large department in the GOC entered into a major trial of Leonovus software. This federal department is faced with managing a massive amount of data with the continuous pressure to reduce costs, and the ever-increasing requirements for compliance and ultra-secure data storage and retrieval. This is part of the GOC BCIP announced in February 2018, which entitles the Company to a CAD$500,000 purchase order and a CAD$1.5M simplified supply arrangement for any federal government department that purchases Leonovus software. The Company is in discussions with different government departments to install our industry-leading software defined storage solution. Additionally, the Company completed resiliency testing with the Centre of Excellence for Next Generation Networks (“CENGEN”).

In July 2018, the Company announced a solution sale to a South Florida investment company to create a secure cloud infrastructure to meet their archival data storage requirements. The Leonovus software-defined storage solution (“SDS”) allows the firm to safely access data from any location and meet their on-premise and cloud compliance data governance standards with security, flexibility, a path to manage their future data storage growth.

In August 2018, a second department in the GOC entered into a major trial of Leonovus software. This department is faced with both the preservation of and access to documents over an extended period. The critical requirements provided by the Leonovus solution include WORM (Write Once, Read Many), a blockchain-enabled digital chain of evidence, ultra-secure data storage, multi-cloud vendor management, control over where the data resides and avoiding

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storage vendor lock-in, which enables the department to take advantage of data storage pricing opportunities. This trial successfully completed by May 2019.

In September 2018, the Company announced that it had signed a proof of concept (“POC”) contract with a major Canadian bank. This contract marked the transition from a ten-month long laboratory test and verification process to an in-production deployment of the Leonovus software-defined storage solution into a major financial institution. Under the POC contract, Leononus would aggregate the institution’s on-premises storage resources with multiple subscribed public clouds to provide the data resiliency, security, and architecture necessary for the bank to benefit from the lower costs and the increased flexibility from this hybrid, multi-cloud, data storage strategy. As noted below, in the fall of 2019 the Company announced that it did not expect purchase orders from the bank.

In December 2018, Leonovus announced that Sherritt International, a world leader in the mining and refining of nickel and cobalt from lateritic ores, has selected Leonovus to strengthen its data security capabilities and support its evolving storage infrastructure. The pilot started in January 2019.

Fiscal 2019

In January 2019, the Company and Izertis, based in Spain, a digital transformation consulting company, signed a reseller agreement for the European market. While the contract is current, there have been no sales to date from Izertis.

Also in January 2019, the Company and Systematika Distribution, a division of Comparex Italia Srl. (“Systematika”), signed a distribution agreement to support the Company’s global expansion strategy. Customer engagements begin with a joint roadshow in Rome and Milan the first week of March 2019. While the contract is current, there have been no sales to date from Systematika.

In February 2019, the Company was the victim of a sophisticated bank fraud, suffering a loss of $564,000. The losses suffered as a result of this fraud had nothing to do with Leonovus products or its core technology, and at the time did not affect the ongoing operations or business of Leonovus. The fraud was related to funding of the Galaxa security token data storage project and was orchestrated by various external parties in Singapore, Switzerland and Italy. The Company initially commenced the Galaxa project in December 2017 and which evolved into an STO, as further described below. Because the loss involved cryptocurrency, it was not covered by insurance.

In March 2019, the Company received notice of issue of another patent with the United States Patent and Trademark Office (USPTO), bringing the running total to eight issued patents across North America and Europe with several more still in-process. The patent, granted as of February 19, 2019, re-defines cloud computing and storage across a widely distributed, loosely coupled set of infrastructure resources; essentially a virtual data center outside the data center; no longer tied to the necessity and restrictions of a closed and isolated network. This approach fundamentally changes the IT infrastructure landscape, enabling multi-year, multi-cloud strategies without cloud vendor lock-in.

Also in March 2019, the Company launched the latest release of its secure storage solution. With such innovative advancements as Smart Restore, Direct Download, Persisted Client Meta-data and a unified, Comprehensive Dashboard for a multi-cloud data controller.These newest features accelerate the enterprise’s journey to the cloud; improving efficiencies, reducing costs and eliminating complexities encountered in navigating the increasingly complex cloud landscape. Re-asserting the enterprise’s control over its data while maintaining the flexibility and longevity absolutely required by governance and regulation, Leonovus eliminates cloud-vendor lock-in and enhances cross-cloud migration.

In May 2019, Leonovus announced that it had entered into an agreement with Entoro Capital LLC to lead the financing of the Galaxa project and to sell the Company's digital security, GAAX, for total gross proceeds of a minimum of $10,000,000 and a maximum of $25,000,000. In June 2019, the Company made the decision to stop investing in the Galaxa project, given the overall marketplace challenges, and that it was not able to raise funds to launch the project.

Also in June 2019, the Company announced the appointment of George Pretli as Chief Financial Officer and Corporate Secretary. Mr. Pretli takes over from Chris Benk. Mr. Benk left the Company in May 2019.

In August 2019, Leonovus announced the release of its Data Discovery Tool which is storage hardware and cloud vendor agnostic. The tool performs high speed, low-touch, non-intrusive analytics on SMB2 or later mountable file

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servers; building a historical, up-to-the-moment model of the data on each monitored share. The purpose of the data model is to establish policies for the automatic offloading of the file servers, effectively increasing their capacity and extending their longevity.

Also in August 2019, the Company announced a new partnership with Wasabi Technologies, Inc. ("Wasabi") to offer Wasabi as a storage target for its new Smart Filer information lifecycle management ("ILM") technology and as part of a new cloud services offering.

In November 2019, the Company updated its Q4 2018, announcement regarding the expectation of revenues from a major Canadian bank for work on three projects. The expectation was based on successful technology trials and feedback from Bank management. However, by mid-2019, because of technical sponsor turnover at the bank, and internal technology strategy changes, the Company stated that it had no expectation that it would receive purchase orders from the bank.

Also in November 2019, the Company announced the official launch of its Smart Filer cold data management solution and a special offer in combination with Wasabi Hot Cloud Storage.

Fiscal 2020

In February 2020, Leonovus announced that it was awarded a $435,000 contract with the Canadian Federal Government through the Innovative Solutions Canada Program, formerly called the Build in Canada Innovation Program (BCIP). The Company announced that it expected to perform the work and recognize the revenue in the first three quarters of this fiscal year. The contract involved the Department of Justice Canada and the Department of National Defense Canada performing rigorous testing of Leonovus Vault software (the Innovation), enhanced with Leonovus's Smart Filer technology. As of this date, the Company has started detailed discussions with the Department of Justice for a mulit-year contract for Vault and Smartfiler.

In March 2020, the Company announced the signing of a Letter of Intent ("LOI") on February 27, 2020 to purchase PureColo Inc ("PureColo"), a Canadian colocation company. Under the terms of the LOI, Leonovus agreed to acquire all the issued and outstanding shares of PureColo (the “Proposed Transaction”). The purchase price was to be $3,000,000 paid in cash (the “Purchase Price”) plus the assumption of debts of approximately $500,000, and the acquisition of PureColo was conditional upon the Company raising a minimum of CAD$5,000,000. The Company and PureColo had targeted a closing date of May 1, 2020, however in June 2020, Leonovus announced that given the economic environment, it was unable to secure financing to purchase the shares of PureColo and, effective June 18, 2020, it had terminated the LOI. The Company's Common Shares were halted from trading on the TSXV following the announcement of the LOI, and resumed trading following its termination.

In April 2020, Leonovus announced the certification of Smart Filer on Nutanix AHV and with Nutanix Objects, which provided customers the ability to not only run Smart Filer natively on the Acropolis platform but to also use Nutanix Objects as secondary targets when offloading infrequently accessed files (cold data) from their primary storage. This platform certification provided organizations with even greater control and flexibility for managing their cold data as it relates to their corporate governance and compliance mandates. While the Company has successfully tested its technology with Sherritt International, a Nutanix user, no additional sales to Nutanix customers have been made.

Also in April 2020, the Company received FIPS 140-2 certification of its cryptographic subsystem from the NIST and the Communications Security Establishment (‘CSE’). The Leonovus Cryptographic Module (LCM), is an integral component of both the Smart Filer and Vault products, which were designed with a data-centric security model. As attested in its validation, the LCM protects important data on-premises, in transit and in the cloud.

In June 2020, the Company proposed "Consolidata" to the Canadian Federal Government, to capture and consolidate COVID-19 data from any data source into one data lake with an analytics engine. Public health, researchers, security and defence managers/experts need a national solution for consolidated and actionable information regarding COVID19 hospitalizations, hotspots, testing, critical care, contact tracing/containment, research and treatment. The software takes minutes to install alongside any system that currently creates relevant COVID-19 data. The policy engine moves data to the Consolidata repository hosted in a public cloud storage service (e.g. Amazon S3 or Microsoft Azure Blob Storage) or designated private data centre. The files are encrypted with additional data protection and archiving provided by Leonovus' Vault technology. The repository includes security and governance for controlled access to the

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data for any thirdparty analytics. Consolidata automatically feeds other data lakes based on approved policy. As of this date the Company is in active discussion with several federal departments regarding installing Consolidata.

In September 2020, the Company announced that it entered into a loan agreement with ten shareholders, including two directors, for a secured loan in the principal amount of CAD$395,000 (the “Loan”). The Loan has a term of twelve months and bears interest at the rate of 8% per annum and can be paid down at any time without penalty. The Loan is secured by a general security agreement. The Lenders received a bonus of 3,160,000 Common Shares of the Company at a deemed issue price of CAD$0.025 per Common Share, representing 20% of the net amount of the total Loan. In January 2021, the Company repaid 80% of the Loan principal from the proceeds of the financing completed on December 31, 2020.

In October 2020, Leonovus obtained approval from its shareholders at a special meeting held on October 8, 2020, to amend the Company’s articles to consolidate the issued and outstanding Common Shares of the Company on the basis of one (1) post-consolidation Common Share for every thirty (30) preconsolidation Common Shares outstanding (the “Consolidation”). The Consolidation became effective on October 26, 2020.

On December 30, 2020, Leonovus completed a private placement for CAD$1,579,690 by way of issuance of 5,137,203 units at a price of CAD$0.3075 per unit, with each unit comprising one Common Share and one Common Share purchase warrant, with each warrant exercisable for a price of CAD$0.60 per Common Share for a period of one year, subject to the Company's ability to accelerate the expiry date in the event the 15-day volume weighted average price of the Common Shares on the TSXV equals or exceeds $1.00 at any point after four months and one day following the date of closing.

Fiscal 2021 Recent Developments

In January 2021, the Company reported that a third major department in the Canadian Federal Government installed the Company's hyper-secure smart data management solution in late December for testing and evaluation in Q1 2021. As a result of the cyberattack on SolarWinds, a major US information technology firm, the COVID-19 crisis, and our funding from Innovation Canada (previously referred to herein as the BCIP program), there is an accelerated requirement to complete the testing by the middle of March 2021. Testing in the first two of the departments began in 2019/2020, and our smart data management solution has met or exceeded all requirements to date. Following successful testing of Leonovus technology, the Company is currently in negotiations with one of the departments for a multi-year purchase of a software license.

The Company plans to launch a Software as a Service (“SaaS”) version of its Smart Secure Data Lake in Q2 2021.

Significant Acquisitions

Leonovus did not complete any acquisitions during the financial year ended December 31, 2019 that are significant acquisitions for the purposes of Part 8 of NI 51-102.

OUR BUSINESS

In 2016, the Company refined its strategy and focused on implementing a software defined Object based Storage solution. We offer the leading software-defined storage (“SDS") solution combined with auditing and management capabilities that contribute to governance, risk management and compliance for the modern enterprise. Designed with the IT manager in mind, Leonovus’ patented algorithms virtualize, transform, slice and disperse data across a network of on-premises, hybrid and/or multi-cloud storage nodes, allowing for flexible yet secure object data storage while ensuring full visibility and compliance across the entire solution. The advanced geo-distributed architecture minimizes latency, optimizes geo-availability, reduces remote backup costs and allows organizations to meet data sovereignty requirements. With its software- and hardware-agnostic design, Leonovus is architected for petabyte scalability and allows the enterprise to utilize its existing idle storage resources, extend the useable lifespan of depreciated resources and improve the enterprise’s overall ROI.

Since 2016 the Company's technology and market strategy have evolved into a secure and smart data management software company. The Leonovus suite of data management tools offers a complete end-to-end data-centric solution. This solution stands on its own or integrates with the organization's zero-trust strategy and architecture. It takes

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seamless advantage of the organization's existing storage infrastructure and network architecture, working onpremises, in the cloud, or hybrid.

Leonovus believes that cybersecurity capabilities for the full lifespan of the data are essential and that its core technology in this area are a significant differentiator. Another market requirement is for a flexible and straightforward solution where users all interact with the data the same way they always have. The Leonovus system ensures the right users get secure access to the correct data at the right time. In addition to working with existing systems, the Leonovus solution aids in the organization's digital transformation by enabling ultramodern data concepts necessary for the datadriven world. These capabilities will support the tremendous growth in IoT data and feed the burgeoning need for Artificial Intelligence, Machine Learning, Business Intelligence and other yet to be developed business analytics tools.

Leonovus 3.0-3.6, Blockchain and Vault

Leonovus 3.0 was launched as a product in Q1 2017. Subsequently, Leonovus 3.4 introduced mechanisms that impose, maintain and monitor different levels of data security through transformation, encryption, deconstruction, and geo-distribution of the data, based on the data stored and the corporate governance and regulatory compliance required to protect it. The Company provides tools that ensure IT controls extend from on-premises out to hybrid, multi-cloud storage architectures with full compliance monitoring/reporting in support of data governance policies that are paramount to any IT system. Finally, Leonovus 3.4 provides significant potential ROI and simplicity because the software is hardware- and software- agnostic and can run on commodity technologies.

Leonovus 3.4 was architected with the assumption that all primary physical and virtual security systems are vulnerable and that breaches are inevitable. The Leonovus second line of defense ensures that the data is not usable by the hackers.

Given the new data security realities, and the introduction of legislative measures such as the GDPR in the EU and similar measures in other jurisdictions, which can lead to significant fines for personal data loss, the corporate IT department's mandate to improve services and reduce costs is at the forefront of corporate responsibilities. Leonovus 3.4 directly addresses these issues by offering increased protection from data breaches by an order of magnitude and protect companies as they strive to meet new regulatory environments for data security and privacy such as GDPR.

The introduction of blockchain technology to our solutions enhances our mission to protect and preserve corporate information. Moreover, the combination of our web integrated services environment ("WISE") network and the blockchain provides a platform to expand our product offerings to an even larger market.

The Leonovus products and services offer additional protection in the instance of a cybersecurity breach. This second line of defense is enabled through de-coupling the data from the underlying IT infrastructure and using the Company’s WISE network and blockchain technology to protect the underlying meta-data.

In 2019 the company abandoned its blockchain development programs as a simpler, but as effective, software solution was designed and implemented.

In the Summer of 2018, Leonovus 3.6 was renamed Leonovus Vault, a the multi-cloud data controller. As its name implies, Vault is the component of a data-centric security solution which locks data for a user's protection. Leonovus securely archives your data without reducing its reachability and availability, but only for the authenticated and authorized users who have permission to access it. Even administrators do not have access to Vaulted data unless the owner grants it to them.

The vaulting of a user file follows four main phases: file presentation, encoding, distribution and local cache removal. Through this encrypt, shred, and spread process, Vault ensures the data stored on the organization’s file servers and cloud environments is protected. Protections include data preservation, tamper and alteration detection and correction, and unauthorized access/reading prevention. Vault includes 256-bit encryption (FIPS 140-2 certified) both in-flight and at-rest, ensuring bad actors see nothing meaningful.

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As of 2021, the Company has evolved and expanded is core software defined object storage technology.Vault and Smart Filer are the two cornstone software technologies. Leonovus is a secure and smart data management software company. The Leonovus suite of data management tools offer an organization what it needs for a complete end-toend data-centric solution. This solution can stand on its own, or it can integrate with the organization's zero-trust strategy and architecture. It takes seamless advantage of the organization's existing storage infrastructure and network architecture, working on-premises, in the cloud, or both. It extends the data-centric controls across the entire architecture, including cloud resources. And it supplies these cybersecurity capabilities for the full lifespan of the data and beyond. The flexible and straightforward solution does not require changes in the method of data use. Applications, services, and users all interact with the data the same way they always have. The system ensures the right users get access to the correct data, at the right time, but securely. In addition to working with existing systems, the Leonovus solution aids in the organization's digital transformation by enabling ultramodern data concepts necessary for the data-driven world. These capabilities are included in an automated solution requiring little operations effort and no new skills or expertise.

Smart data management tools suite

The main elements of the Leonovus Smart Data Management suite are:

Vault - multi-cloud data management for data lifespan; Data Discovery Tool - classification and understanding of a user's existing data sets; Smart Filer - transparent file-based data controls for cost, flexibility, and scalability; Data View Gateways - controlled repository internal/external data sharing; Smart Secure Data Lake - multi-sourced context-rich repository for advanced analytics; and Consolidata - multi-sourced data collation and aggregation for near real-time insights.

Each is available independently or together as a comprehensive solution set.

Multi-cloud data archiving

Leonovus enables cost-effective data archiving within hybrid or multi-cloud storage environments. Automated policy enforcement enables compliance with regulations including HIPAA, PCI and GDPR.

Secure data storage

Patented “data shredding” algorithms provide highly secure distributed storage and ensure archived data cannot be read or used by unauthorized parties.

Data Discovery Tool

In the Spring of 2019, Leonovus introduced the Data Discovery Tool to IT data managers. The Leonovus Data Discovery Tool provides organizations with the visibility required to understand, analyze, and manage their unstructured data environments securely and efficiently, while reducing their total cost of ownership.

Data Discovery provides administrators the ability to mount Server Message Block (SMB) network attached file storage and discover the nature of the data stored on it. The Data Discovery operation is storage vendor agnostic and can work across heterogenous storage environments provided that an SMB interface is available for mounting the network file storage system.

Data Discovery operations help administrators inventory their network file storage environments and visualize the mix of active versus infrequently accessed files. With this level of visibility, administrators can create data management strategies specific to their use cases and business requirements. The customizable classification capabilities of Data Discovery empower the administrators in performing inventory, policy, and what-if analytics.

Data Discovery operations are read-only and are safe to run in production environments. The result of running Data Discovery is an inventory report providing an overall summary of the target mount, a summary based upon file last access date, and a summary based upon the file type/extension.

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Smart Filer

In the Fall of 2019, the Leonovus Smart Filer product was released. Smart Filer provides organizations the visibility and control necessary to implement and operate data management strategies for growing volumes of unstructured data, while significantly optimizing existing storage and reducing costs. Smart Filer enables organizations to create hybrid storage environments that leverage existing on-premises storage environments for data that is actively used or worked on frequently and leverage the economics and virtually unlimited capacity of the cloud for data that is infrequently accessed.

Similarly, Smart Filer can assume the role of a storage gateway, automatically transiting data from traditional to secured data configurations. As a component of a data-centric security solution, Smart Filer provides the seamless, transparent data transitions which allow users and applications to utilize their data the same way they always have, even when it is in actuality located elsewhere.

Data View Gateways

In the Summer of 2020, the Data View Gateways product was developed. Based on the principle that it is not sufficient just to secure and control data inside the organization’s managed environment. With the breadth of SaaS offerings and with the degree to which Internet connected organizations interface with third-party partners, there is a very real need for a means of securely share data beyond their internal infrastructure.

This is true whether it is a direct sharing between two groups just to transfer the data or a pooling of data for a number of external analytics applications. The Leonovus Data View Gateways provide this capability.

With View Gateway’s, the owner of the data gains a secure mechanism where they can specify controlled access to file systems or repository/data lake-based data. The organization can manage subsets of data, sharing only what needs to be known, continuing to keep the remainder closed-off. As with the other Leonovus data management tools, only authenticated and authorized users gain access and then all interactions are fully tracked and logged.

Consolidata

Based on the Smart Filer, Vault, Vault and the Data View Gateway products, in the Spring of 2020, Leonovus began proposing the software solution Consolidata. In April 2020, the Consolidata solution was proposed to the Government of Canada as a mechanism for the management, distribution and protection of data with respect to COVID-19.

Consolidata is a data management solution which securely aggregates data from a multiplicity of data origins, potentially from a multiplicity of source organizations, collecting it all in one place. By unifying this data, users now have one stop sourcing for real-time tracking/reporting, diagnostic, analytic, and process information. It shifts the focus away from the search for data and focuses it on using the information to gain meaningful insights and launch direct action in response to those insights.

Consolidata achieves these goals while respecting the rights, privileges and privacy tied to the data. It includes the necessary data-centric security and controls to ensure the data protection and governance such a solution requires. Leonovus Consolidata is a data sovereign solution, keeping the organization’s information safe from the actions and influences of those outside their borders. It consolidates the data putting it to use now and protecting it for the future.

Smart Secure Data Lake

Based on its Consolidata Solution offering and the Leonovus products Smart Filer and Vault, the Leonovus Smart Secure Data Lake (“SSDL”) was developed and offered as a solution to the data management, protection, and controls in the area of data analytics. The first SSDL solutions were offered to the market in the Fall of 2020.

The Leonovus SSDL incorporates the capabilities of Data Discovery, Smart Filer, Vault and View Gateways to provide a data-centric secured solution for the management of organizational data sets and results in their analytics

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architectures. SSDL provides analysts and data scientists with a means of managing and protecting their structured, semi-structured, and unstructured data sets.

SSDL is the entry point of the organization’s data pipeline, securing and enhancing the quality of the data from its origin. From its, context inclusive on-boarding capabilities for both stream and file-based data sources, to its normalized, managed data repository, the SSDL offers a fully operational data lake. Its extraction, transformation, and loading (“ETL”) capabilities combined with the data governance required of a data-centric security solution, ensure high quality data and the controls to ensure preservation of data integrity direct from the source of truth. SSDL can be used directly as the source of data sets for analytics either with third-party analytics or with its own bundled insights engine. Or it can be the critical first segment in a more complex data analytics pipeline, directly feeding industry standard data warehouses, data lakes, and third-party analytics engines.

By obtaining context instilled by the data’s originator and retaining that context through the user selected transformations, by ensuring controls and governance from the data origin, and by sourcing data with a near-real time on-boarding automation engine, SSDL provides for higher performance analytics, with high data quality. This means a shorter time to insights and more responsive actions. With context bundled and maintained in the data lake, analytics are enriched and can be more insightful with more meaningful semantics. SSDL includes cost saving data management and tiering of content within the data lake repository. Data sets can be retained, protected, and directly accessible as needed, while managing costs by retaining idle data sets in lower cost storage infrastructure. The cost savings, scalability, and elasticity capabilities of SSDL are available throughout SSDL, and all of the data protections outlined above are maintained across the entire infrastructure. This ensures the data-centric security solution spans the data lake, including in-house analytics or if need be, all the way to the secure data sharing with third-party analytics.

OUR OPERATIONS

Overview

Our operations span two countries, namely Canada and the United States. These operations are segmented into three business functions, including Research & Development, Sales & Marketing and Finance. As of the date of this annual information form, we employ five employees and four consultants. None of our employees are represented by a labour union or are covered by a collective bargaining agreement.

Our main Canadian office is currently located at 2611 Queensview Drive, Ottawa, ON K2B 6B7 and all 5 employees and 4 consultants are employed at this office. The term of the lease at 2611 Queensview Drive is for 142 months commencing June 1, 2018, with one 5-year renewal option. We also have a virtual business office located at 6203 San Ignacio Avenue, Suite 110, San Jose, CA 95119, USA.

Competitive Landscape

There is a massive market for secure and smart data management in the cloud, as evidenced by the high growth rates of Amazon AWS, Microsoft Azure and Google Cloud. Leonovus believes that itis uniquely positioned in the hypersecure cloud data storage, data lake, and data management market with significant product differentiation and entry protection barriers because of its patented IP, as noted below. The Company’s current strategy is to gain traction and validation with a small set of key reference customers. Currently, the encrypt, shred, and spread Vault technology, combined with its Smart Filer technology, which form the base for all our products, is a unique market offering, which in management's view would take a competitor several years and millions of dollars to replicate or develop a substitute technology.

Intellectual Property

The protection for our products, technologies, processes, and know-how are essential to our business. To establish and protect our intellectual property in North America and internationally, we rely on a combination of patents, trademarks, contractual restrictions and trade secrets. We conduct intellectual property surveillance of direct and indirect competition as well as potential threats that could become our competition. This surveillance addresses direct and indirect competitors as well as threats that could be market followers or intellectual property barriers for future development. See “Risk Factors – Risks Related to Our Business - Intellectual Property Infringement”, “Risk Factors

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– Risks Related to Our Business – Inability to Protect Intellectual Property” and “Risk Factors – Risks Related to Our Business Expiration of Patents”.

Patents

Leonovus has implemented a strategic patent approach. The strategy includes the creation of broad and impactful monolithic patents which can then be sub-divided and focused tactically to address specific aspects of the product or competitive landscapes. The currently issued patent portfolio will begin to expire in 2033 – See “Risk Factors – Expiration of Patents”.

The Company holds eight patents in the United States, Canada, and the European Union. There are over three hundred individual claims in these patents.

The Leonovus IP portfolio is based on three classes of patents: Distributed Data Center, Data-centric Multi-Cloud Security, and Web Script Accelerations.

Distributed Data Center (D2C)

Cloud Computing System and Method Utilizing Unused Resources of Non-dedicated Devices USA Patent: 10,333,860

EU Patent: 3020206 Canadian PCT application in process: 2917763 Cloud Computing System and Method Based on Distributed Consumer Electronic Devices USA Patents: 10,212,482 and 9,451,322 EU Patent: 2989554 Canadian PCT application in process: 2909765

Data-centric Multi-Cloud Control

Modified Reed-Solomon Algorithm for Data Centric Multi-cloud Security Trade Secret: as recognized in USA, EU, and Canada

Multi-media and Browser Based Web Script Accelerations

Media Action Script: method, system and method, apparatus system and method USA Patents: 8,487,942; 8,487,941; 8,441,488; 8,432,404; 8,432,403

Trademark

We currently own the trademarks “Leonovus and “LeonovusTV”.

Contractual Restrictions

We avoid disclosure of our intellectual property and proprietary information by requiring key employees and partners to execute non-disclosure and assignment of intellectual property agreements. Such agreements require our key employees and partners to assign to us all intellectual property developed in the course of their employment or engagement. Other than employee/contractor contracts, there are no other contractual agreements that might materially affect the Company’s operations in 2021 or onward.

Finance

Our financial operations are located at our corporate office in Ottawa, Ontario, Canada and since June 4, 2019 are headed by George Pretli, our Chief Financial Officer and Corporate Secretary.

RISK FACTORS

Investors in the Company’s securities should carefully consider the risks described below, which are qualified in their entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this annual information form, and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2019. The risks and uncertainties described below are those we currently

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believe to be material, but they are not the only ones we face. If any of the following risks, or any other risks and uncertainties that we have not yet identified or that we currently consider not to be material, occur or become material risks, our business, prospects, financial condition, results of operations and cash flows and consequently the price of the Common Shares could be materially and adversely affected. In all these cases, the trading price of the Common Shares could decline, and you could lose all or part of your investment.

Risks Related to Our Business

History of Losses

We have incurred significant operating losses in each of the last three years. We incurred net losses after finance charges of $5.193 million in the fiscal year ended December 31, 2019, $4.924 million in the 2018 fiscal year, US$2.725 million in the 2017 fiscal year, $1.236 million in the 2016 fiscal year, $1.878 million in the 2015 fiscal year. At December 31, 2019, we had an accumulated deficit of $35.8 million. With the $1.57 million in equity raised during fiscal 2019, total shareholders’ equity was $0.8 million as at December 31, 2019. The losses and accumulated deficit were due to the substantial investments we made to grow our business, develop our applications and acquire customers. These losses combined with non-cash income and expenses, as well as working capital impacts, resulted in net cash outflows from operating activities, respectively of US$4.707 million in the fiscal year ended December 31, 2019, $6.887 million in 2018, $2.452 million in 2017, $0.453 million in 2016, $0.601 million in 2015.

Significant expenditures to support our growth strategy may include investments in our software, costs associated with the development of new software, costs associated to the expansion of our market reach through expensive multimodal marketing initiatives. We expect that our operating expenses might increase as we spend resources on growing our business, and if our revenue does not correspondingly increase, our operating results and financial condition will suffer. The amount of these expenditures is difficult to forecast accurately, and cost overruns may occur. We cannot be certain of the timing and extent of revenue receipts and expense disbursements. To become profitable, we will have to generate sufficient revenue while controlling our costs and expenses. Accordingly, we cannot assure you that we will achieve profitability in the future, nor that, if we do become profitable, we will sustain profitability. Consequently, we cannot assure that we will generate positive cash flows from operating activities in the future or, if we do generate positive cash flows from operating activities, that they will be sustained.

Risks Relating to Debt Structure

The Company has relied on debt financing in the past and currently there is very little to no debt financing in place. The terms on which we borrow funds are such that the lender can withdraw funding without prior notice which may cause us to have find alternative financing methods including dilutive equity issuances to satisfy the amounts owing. Further, failure to renegotiate or refinance indebtedness as it comes due may have an adverse impact on the Corporation. See Risk Factors “Additional Capital Requirements”

Competitive Industry

We are engaged in an industry that is highly competitive and rapidly evolving. No technology has been exclusively or commercially adopted as the industry standard. Accordingly, both the nature of the competition and the scope of the business opportunities afforded by the market in which we compete are currently uncertain. Our competitors, including many new market entrants, may implement new technologies before we do. In addition, our competitors may deliver new products and solutions earlier, or provide more attractively priced, enhanced or better quality products and solutions than we do.

Many of our competitors have greater name recognition, larger customer bases and significantly greater financial, technical, marketing, public relations, sales, distribution and other resources than Leonovus. We therefore cannot assure an investor that we will be able to compete effectively with these companies. We also expect that additional competition will develop, both from existing businesses in the data management industry and from new entrants

No Guarantee of Product Development

The data management industry is an industry that is characterised by rapid technological change, evolving industry standards and new regulations introductions. The new technology and the emergence of new industry standards can

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render our solutions obsolete and unmarketable and can exert price pressures on existing software. It is critical to our success that we can anticipate and react quickly to changes in technology or in industry standards and to successfully develop and introduce new, enhanced and competitive updates on a timely basis.

The development and application of new technologies involve time, substantial costs and risks. Our inability, for technological or other reasons, to enhance, develop and introduce software in a timely manner, or at all, in response to changing market conditions or customer requirements could have a material adverse effect on our operating results or could result in our products becoming obsolete. Our ability to compete successfully will depend in large measure on our ability to maintain an appropriately skilled research and development staff and to adapt to technological changes and advances in the industry, including providing for the continued compatibility of our software with evolving industry standards and protocols.

Inability to Protect Intellectual Property

Our commercial success and value depends upon our ability to develop new or improved technologies, and to successfully obtain patent or other proprietary or statutory protection, in the United States and Canada and other countries in which we carry on (or intend to carry on) business. However, we may not be able to develop technology that is patentable, patents may not be issued in connection with the pending applications (as applied for, or at all) and claims allowed may not be sufficient to provide us with exclusive protection for our technology. Furthermore, any patents issued to us could be challenged, invalidated or circumvented by others, and may not provide proprietary protection or a competitive advantage to us.

A number of our competitors and other third parties have been issued patents and may have filed patent applications or may obtain additional patents and proprietary rights for technologies similar to those that we have made or may make in the future. There can be no assurance that others will not independently develop or have not so developed similar or equivalent software. We cannot be certain that we were the first to develop the software covered by our pending patent applications or that we were the first to file patent applications for the technology. In addition, the disclosure in our patent applications, particularly in respect of the utility of our claimed inventions, may not be sufficient to meet the statutory requirements for patentability in all cases. As a result, we cannot assure investors that our patent applications will result in valid or enforceable patents or any of our patents or patent applications will ultimately provide any protection or competitive advantages to us.

In addition to patents, we rely on copyrights, trademarks owned by Leonovus, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary rights. We may enter into confidentiality and non-disclosure agreements with our employees, consultants, contract manufacturers, customers, potential customers and others to attempt to limit access to and distribution of our proprietary and confidential information, however it is possible that: (a) some or all of our confidentiality agreements will not be honoured; (b) third parties will independently develop equivalent technology; (c) disputes will arise with our strategic partners, customers or others concerning the ownership of intellectual property; (d) unauthorised disclosure of our know-how or trade secrets will occur; or (e) misappropriation of our property and confidential information, including technology, will nevertheless occur.

We cannot assure an investor that we will be successful in protecting or enforcing our rights protecting our confidential information and know-how, and unregister able intellectual property rights, or that all such information and knowhow is protectable.

We have not registered or applied to register trademarks other than in Canada and United States. No assurance can be given that any future applications for our trademarks will be granted or, if granted, will be valid or enforceable. Our ability or failure to secure registered trademark protection in countries in which we carry or intend to carry on business may have a material and adverse effect on our ability to protect our brands, and to complete effectively.

Key Personnel

Our success depends largely upon the continued services of our executive officers and other key employees, including, but not limited to, Michael Gaffney, our Chief Executive Officer and Chairman; Dan Willis, Chief Technology Officer; George Pretli, our Chief Financial Officer; Sean O’Hagan our Vice President, Product Development; for their industry expertise, operations experience with us and their working relationships, existing shareholders and personnel. From time to time, there may be changes in our executive management team resulting from the hiring or departure of

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executives, which could disrupt our business. If we are unable to attract and retain top talents, our ability to compete may be harmed. Our success is also highly dependent on our continuing ability to identify, hire, train, retain and motivate highly qualified personnel. Competition for highly skilled technical, research and development, management, sales and other employees is high in our industry, and we may not be successful in attracting and retaining such personnel. Failure to attract and retain qualified executive officers and other key employees could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

Expiration of Patents

Certain of our patents, including certain of our key patents, will begin to expire in 2029. By US patent law this means they will be enforceable until 2035. However, these patents are not critical to our core business strategy and operations. Those which comprise elements of our business strategy begin to expire in 2033, with enforceability to 2039. As a result, our ability to exploit and fully commercialize our software, and to prevent others from using our software, may be limited. In addition, the expiration of certain core patents could result in significant and new competition for our products and technology, all of which may result in significant reductions in sales which would consequently affect our financial condition. The effect of these patent expirations depends, among other things, upon the nature of the market and the position of our products in the market from time to time, the growth of the market and the complexities and economics of manufacture of a competitive product.

Intellectual Property Infringement

Our commercial success and value depends, in part, upon our not infringing the intellectual property rights of others. A number of our competitors, and other third parties, may have issued patents and pending patent applications, and may obtain additional patents and proprietary rights for technologies similar to those used by us in our products and services. Some of these patents may grant very broad protection to the owners of the patents. We cannot determine with certainty whether any issued patents, or the issuance of any patents, would require us to alter our software, obtain licenses, or cease certain activities. We may become subject to claims by other parties that our technology infringes their intellectual property rights due to the growth of products in our target markets, the overlap in functionality of these products and the prevalence of these products.

Litigation may be necessary to determine the scope, enforceability and validity of third-party proprietary claims or rights or to establish our proprietary claims or rights. Some of our competitors have, or are affiliated with companies having, substantially greater resources than us, and these competitors may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. Any claim brought or defended by us could, regardless of the merits of the claim: (a) be time-consuming to evaluate and litigate; (b) result in costly litigation; (c) cause product shipment delays or stoppages; (d) divert management’s attention and resources; (e) subject us to significant liabilities and damages; (f) require that we enter into royalty or licensing agreements; (g) require that we cease certain activities, including the sale of products; (h) adversely affect our relationships with current or future network carriers and licensees of our technology; (i) adversely affect our relationships with current or future distributors and dealers of our products; or (j) adversely affect our reputation with customers.

Any such claim may therefore result in costs or other consequences that have a material adverse effect on our business, results of operations and financial condition.

We may be prohibited from developing or commercializing certain software and provide services unless we obtain a license from a third party. There can be no assurance that we will be able to obtain any such license on commercially favourable terms, or at all. If we do not obtain such a license, our business, results of operations and financial condition could be materially adversely affected, and we could be required to cease related business operations in some markets and to restructure our business to focus on operations in other markets.

Uncertain Financial and Geopolitical Climate and Downturn in Global Economy

Many of our users are directly affected by economic and geopolitical uncertainties. Some of our users have also reduced capital spending on technology products. Current and future conditions in the domestic and global economies remain uncertain. A slowdown in capital spending by users of our products, coupled with existing economic and geopolitical uncertainties globally and may affect our revenues.

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It is difficult to estimate the level of growth for either the economy as a whole or in various parts of the economy, including the markets in which we participate. The future direction of the overall domestic and global economies will have an impact on our overall performance. If these economic conditions decline, we may experience reduced demand and pricing pressure on our products which could harm our operating results. In addition, the COVID-19 pandemic has created uncertainties that may affect the global economy and could have a material adverse effect on our business, operating results and financial condition.

Global financial market and economic conditions can pose a significant threat to economic growth in almost all sectors and economies, causing a decline in consumer and business confidence, a reduction in credit availability and a dampening in business and household spending.

As a result of the current global economic situation, we and our industry peers may have restricted access to capital and may suffer from increased borrowing costs. The lending capacity of all financial institutions has diminished, and risk premiums have increased. As our ability to meet future capital requirements may depend upon our ability to borrow money from third parties or make additional offerings of securities in the future, our ability to do so may be limited by, among other factors, the overall state of capital markets and investor demand for investments in the technology industry, more precisely in the software development industry and our securities in particular.

Economic conditions (including demonetization of currencies) and other factors may also reduce the demand for software products or services from that forecasted and factors expected to support or increase demand may not have the effect expected. Any reduction in demand may have a material adverse effect on our financial results or condition.

Impacts of COVID-19

The transmission of COVID-19 and efforts to contain its spread have recently resulted in international, national and local border closings, travel restrictions, significant disruptions to business operations, supply chains and customer activity and demand, service cancellations, reductions and other changes, and quarantines, as well as considerable general concern and uncertainty. To date, the impacts of COVID-19 have not had a significant direct impact on our operations. However, the extent of the impacts of COVID-19 on Leonovus and our customers, as well as the financial and equity markets generally, are uncertain and are unknown at this time, but could result in material adverse consequences to our business, our customers, and our ability to fund our operations.

Network Disruptions, System Failures and Breaches of Security

Our operations rely, to a significant degree, on the efficient and uninterrupted operation of complex technology systems and networks, which are in some cases integrated with those of third parties. These systems and operations are vulnerable to damage, breakdown or interruption from events which are beyond our control, such as (a) fire, flood and other natural disasters; (b) power loss or telecommunications or data network failures; (c) improper or negligent operation of the systems by employees, or unauthorized physical or electronic access; and (d) interruptions to Internet system integrity generally as a result of attacks by computer hackers or viruses or other types of security breaches. Any such damage or interruption could cause significant disruption to our operations. This could be harmful to our business, financial condition and reputation and could deter current or potential customers from using our services.

There can be no guarantee that our security measures in relation to our computer, communication and information systems will protect us from all potential breaches of security, and any such breach of security could have an adverse effect on our business, results of operations or financial condition.

Legal and Regulatory Approvals and Requirements

Our software may require regulatory and operator approvals in each of the countries where they are sold. Delays in obtaining such approvals can impact the timing of new software introduction.

In addition, we may be subject to laws and regulations affecting our domestic and international operations in a number of areas. Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business. Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation could individually or in the aggregate make our products and services less attractive to our customers,

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delay the introduction of new products in one or more regions, or cause us to change or limit our business practices. We intend to implement policies and procedures designed to ensure compliance with applicable laws and regulations, but there can be no assurance that our employees, contractors, or agents will not violate such laws and regulations or our policies and procedures.

Product Defects

Our Software and services are highly complex and sophisticated and, from time to time, may contain design defects that are difficult to detect and correct. We cannot assure an investor that errors or defects will not be found in new software or services after commencement of provision of such services or, if discovered, that we will be able to successfully correct such errors or defects in a timely manner or at all. The occurrence of errors and failures in our software or services could result in loss of or delay in market acceptance of our products or services and correcting such errors and failures in our products or services could require significant expenditure of capital. The failure of our services to perform to customer expectations could give rise to warranty claims. The consequences of such errors, failures and claims could have a material adverse effect on our business, operating results and financial condition.

Open Source Software

We use open source software in our solutions. Although we intend to monitor our use of open source software closely, the terms of many open source licenses have not been interpreted by courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our solution. In such event, we could be required to seek licenses from third parties in order to continue offering our solution, to reengineer our technology or to discontinue offering our solution in the event re-engineering cannot be accomplished on a timely basis, any of which could adversely affect our business, operating results and financial condition. We will also incorporate certain third-party technologies into our solution and may desire to incorporate additional third-party technologies in the future. Licenses to new third-party technology may not be available to us on commercially reasonable terms, or at all.

Loss of Rights to Use Software or Components Supplied by Third Parties

We license certain operations from third parties, generally on a non-exclusive basis. The termination of any of these licences, or the failure of these licensors to adequately maintain, protect or update their software or intellectual property rights, could delay our ability to provide our services while we seek to implement alternative operations offered by other sources and could require significant unplanned investments on our part if we are forced to develop alternative solution internally. In addition, alternative solutions may not be available on commercially reasonable terms from other sources. In the future, it may be necessary or desirable to obtain other third-party licences relating to one or more of our services or relating to current or future software to enhance our offerings. There is a risk that we will not be able to obtain licensing rights to the needed components on commercially reasonable terms, if at all. While it may be necessary or desirable in the future to obtain licenses relating to one or more of our products, or relating to current or future technologies, we may not be able to do so on commercially reasonable terms, or at all

Gross Margins

Gross margins on software are typically both high and highly variable. These margins can change over time because of pricing and configuration changes, competition, macroeconomic externalities, microeconomic externalities, product development costs, warranty, and other cost fluctuations. Eventually we expect more than 50% of our sales to be outside Canada and overall profitability, may be materially adversely impacted as a result of a shift in product or geographic mix, changes in foreign exchange rates, price competition, protectionist government policies, or the introduction of new software.

Additionally, we could be subject to unexpected developments late in a quarter, such as lower-than-anticipated demand for our products, issues with new product introductions, an internal systems failure, or failure of one of our logistics, components supply, or manufacturing partners. As a result, our revenues are difficult to forecast, and our quarterly operating results can fluctuate substantially until a large enough base of business is established.

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Managing Acquisitions

In the future, we may pursue acquisitions of assets, products or businesses that we believe are complementary to our existing business and/or to enhance our market position or expand our product portfolio. There is a risk that we will not be able to identify suitable acquisition candidates available for sale at reasonable prices, complete any acquisition, or successfully integrate any acquired product or business into our operations. We are likely to face competition for acquisition candidates from other parties including those that have substantially greater available resources. Acquisitions may involve a number of other risks, including: (a) diversion of management’s attention; (b) disruption to our ongoing business; (c) failure to retain key acquired personnel; (d) difficulties in integrating acquired operations, technologies, products or personnel; (e) unanticipated expenses, events or circumstances; (f) assumption of disclosed and undisclosed liabilities; and (g) inappropriate valuation of the acquired in-process research and development, or the entire acquired business.

If we do not successfully address these risks or any other problems encountered in connection with an acquisition, the acquisition could have a material adverse effect on our business, results of operations and financial condition. Problems with an acquired business could have a material adverse effect on our performance or our business as a whole. In addition, if we proceed with an acquisition, our available cash may be used to complete the transaction, diminishing our liquidity and capital resources, or shares may be issued which could cause significant dilution to existing shareholders.

Security of Customer Information

Our operations involve the storage and transmission of the confidential information, and security breaches could expose us to a risk of loss of this information, litigation, indemnity obligations and other liability. If our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and, as a result, someone obtains unauthorized access to the Company’s customers’ data, including personally identifiable information regarding users, damage to our reputation is likely, our business may suffer, and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to prevent these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose potential sales and existing customers. Further, an actual or perceived security breach affecting one of our competitors or any other company that provides hosting services or delivers applications under a SaaS model occurs, even if no confidential information of our customers is compromised, may adversely affect the market perception of our security measures and we could lose potential sales and existing customers.

Limited Operating History of the Company

We have a limited operating history. The success of the consolidated Company will be dependent on the managers of those operations to be successful in their attempts to gain new business. There can be no assurance that we will be successful in addressing these risks. Due to the significant and complex accounting and legal requirements applicable to public companies, the time and efforts of our management team may be diverted from operational matters and may require the recruitment of additional personnel solely or primarily to address these requirements.

Additional Capital Requirements

We intend to continue to make investments to grow our business and may require additional funds to respond to business challenges, including the need to expand sales and marketing activities; develop new features and modules to enhance existing solutions; enhance operating infrastructure; and acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If additional funds are raised through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of Common Shares. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which might make it more difficult for us to obtain additional capital and to pursue business opportunities. No assurances can be provided that sufficient debt or equity financing will be available for necessary or desirable infrastructure expenditures or

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acquisitions or to cover losses, and accordingly, our ability to continue to support the growth of the business and to respond to business challenges could be significantly limited.

Taxes

We are subject to taxes in Canada and other foreign jurisdictions. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change. Our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation. We are also subject to the examination of our tax returns and other tax matters by applicable tax authorities and governmental bodies. We intend to regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of its provision for taxes. There can be no assurance as to the outcome of these examinations. If our effective tax rates were to increase, or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, our operating results, cash flows, and financial condition could be adversely affected.

Accounting Estimates

We are required to make accounting estimates and judgments in the ordinary course of business. Such accounting estimates and judgments will affect the reported amounts of our assets and liabilities at the date of our financial statements and reports and the reported amounts of our operating results during the periods presented. Additionally, we will be required to interpret the accounting rules in existence as of the date of the financial statements and reports when the accounting rules are not specific to a particular event or transaction. If the underlying estimates are ultimately proven to be incorrect, or if auditors or regulators subsequently interpret our application of accounting rules differently, subsequent adjustments could have a material adverse effect on our operating results for the period or periods in which the change is identified. Additionally, subsequent adjustments could require us to restate our financial statements or reports. A restatement of our financial statements or reports could result in a material change in the price of our Common Shares.

Litigation

Our business is subject to the risk of litigation by employees, customers, consumers, suppliers, competitors, shareholders, government agencies, or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action lawsuits, regulatory actions and intellectual property claims, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to these lawsuits may remain unknown for substantial periods of time. In addition, certain of these lawsuits, if decided adversely to us or settled by us, may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required. The cost to defend future litigation may be significant. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may adversely affect our business and financial condition.

Fluctuation of Revenue and Operating Results

Our revenue is difficult to forecast and is likely to fluctuate significantly from quarter to quarter. In addition, our operating results may not follow any past trends. The factors affecting our revenue and results, many of which are outside of our control, include: (a) competitive conditions in the industry, including strategic initiatives by us or our competitors, new products or services, product or service announcements and changes in pricing policy by us or our competitors; (b) market acceptance of our products and services; (c) our ability to maintain existing relationships and to create new relationships with partners; (d) the length and variability of the sales cycles for our services; (e) strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; (f) general weakening of the economy resulting in a decrease in the overall demand; and/or (g) timing of software development and new software initiatives.

Because our quarterly revenue may be dependent upon a relatively small number of transactions, even minor variations in the rate and timing of conversion of our sales prospects into revenue could cause us to plan or budget inaccurately, and those variations could adversely affect our financial results.

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Changes to Pricing Model

The competitive market in which we conduct our business may require us to reduce our prices. If our competitors offer deep discounts on certain products or services in an effort to gain market share or to sell other services, we may be required to lower prices or offer other favourable terms to compete successfully. Any such changes would reduce our margins and could adversely affect our operating results.

Ability to Manage Solution Obsolescence

As we develop new solutions, many of our older software will reach the end of their operating life. As we discontinue the sale of these older software, we must manage the customer expectations. If we are unable to properly manage the discontinuation of these older services, this could have a material adverse effect on our business, financial condition and results of operations.

Inability to Meet Demand

Our inability to consistently meet demand may have negative repercussions for our business including, but not limited to, customer’s loss in confidence in our business, future decrease in demand for our products, a loss or decrease in our market share and can be harmful to our reputation in the market. If we are unable to consistently meet demand, this could result in material adverse effects to our business, financial condition and results of operation.

Legal and Regulatory Compliance

Our current and planned activities may at times be subject to a number of foreign, federal, state, and local laws and regulations. Compliance with these laws and regulations could be costly and could delay or even preclude commercialization of our products for certain applications. Our failure to comply with government regulations could subject us to civil and criminal penalties, require us to forfeit property rights and may affect the value of our assets or our ability to conduct business. Any such penalty may adversely affect our business activities, financial condition or results of operations. We cannot predict the extent to which future legislation and regulation could cause us to incur additional operating expenses, capital expenditures, or restrictions and delays in the development of our products and properties.

Risks Related to all Foreign Operations

Risks Associated with Foreign Operations

We expect to derive a significant portion of our revenues from foreign operations. Going forward, we may not always be aware of all factors that may affect our business in foreign jurisdictions, which includes recent examples of countries that have restricted the prevalence of foreign technology companies. We cannot predict the effect of various factors in the countries in which our contractors and our customers are located, including, among others: (a) our cash flow is impacted by our use of different currencies and our exposure to various tax regimes, including being subject to taxation by more than one jurisdiction; (b) economic trends in international markets; (c) legal and regulatory changes, and our cost of compliance with such laws, including trade restrictions and tariffs and labour and employment laws; (d) increase in transportation costs or delays; (e) increase and volatility in labour costs; (f) political unrest, terrorism and economic instability; and (g) limitations on repatriation of earnings. Any of the foregoing or other factors associated with doing business abroad could have a material adverse effect on our business and financial condition.

Fluctuations in Foreign Currencies

We consolidate our financial results in US dollars. Accordingly, we are exposed to foreign currency risks related to the consolidation of our financial results in US dollars. We are also vulnerable to foreign currency fluctuations in the value of the US dollar relative to the Canadian dollar which may impact our financial position and results of operations. In addition, we are exposed to general market fluctuations of interest rates.

Our primary exposure to movements in foreign currency exchange rates relates to non-US dollar denominated sales and operating expenses worldwide. Weakening of foreign currencies relative to the US dollar adversely affects the U.S. dollar value of our foreign currency denominated sales and earnings, and generally leads us to raise international

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pricing, potentially reducing demand for our products. In some circumstances, for competitive or other reasons, we may decide not to raise local prices to fully offset the dollar’s strengthening, or at all, which would adversely affect the US dollar value of our foreign currency denominated sales and earnings. Conversely, a strengthening of foreign currencies relative to the US dollar, while generally beneficial to our foreign currency-denominated sales and earnings could cause us to reduce international pricing and incur losses on our foreign currency derivative instruments, thereby limiting the benefit. Additionally, the strengthening of foreign currencies may also increase our cost of product components denominated in those currencies, thus adversely affecting gross margins.

We rarely use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. When we do use such hedging activities, it may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place.

Risks Related to our Common Shares

Unpredictability and Volatility of the Common Share Price

The market price of our Common Shares could fluctuate significantly as a result of many factors, including but not limited to the following: (a) economic and stock market conditions generally, and specifically as they may impact participants in the software development industry; (b) our earnings and results of operations and other developments affecting our businesses; (c) sales of our Common Shares into the market by the Shareholders and/or the insiders of Leonovus; (d) changes in financial estimates and recommendations by securities analysts following our Common Shares; (e) earnings and other announcements by, and changes in market evaluations of, the software development industry; (f) changes in business or regulatory conditions affecting participants in the software development industry; (g) trading volume in our Common Shares; (h) additions or departures of key personnel; and (i) competitive pricing pressures in the software development industry.

In addition, the financial markets have experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance of such companies. Accordingly, the market price of our Common Shares may decline even if our operating results or prospects have not changed.

Dividends

If we generate earnings in the foreseeable future, we expect that such earnings will be retained to finance growth, both organically and by acquisitions, if any, and, when appropriate, repay debt. Our directors will determine if and when dividends should be declared and paid in the future based on our financial position at the relevant time. Each of our Common Shares will entitle its holder to an equal share in any dividend declared and paid by us. We do not expect to pay any dividends in the foreseeable future. Investors seeking cash dividends should not purchase our Common Shares.

Future Sales of Common Shares by our Directors or Officers

Subject to compliance with applicable securities laws, our officers, directors and their affiliates may sell some or all of their Common Shares in the future. No prediction can be made as to the effect, if any, such future sales of Common Shares will have on the market price of the Common Shares prevailing from time to time. However, the future sale of a substantial number of Common Shares by our officers, directors and their affiliates, or the perception that such sales could occur, could adversely affect prevailing market prices for the Common Shares.

Additional Financings

If we are not able to achieve and sustain profitability, we may require additional equity or debt financing. There can be no assurances that we will be able to obtain additional financial resources on favorable commercial terms or at all. Failure to obtain such financial resources could affect our plan for growth or result in the inability to satisfy our obligations as they become due, either of which could have a material adverse effect on our business, results of operations and the financial condition.

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DESCRIPTION OF SHARE CAPITAL

Authorized and Issued Capital

Our authorized capital consists of an unlimited number of Common Shares and an unlimited number of preferred shares issuable in series. As of the date of this annual information form, there are 14,757,424 outstanding Common Shares and no preferred shares are issued and outstanding.

There is a total of 961,817 options outstanding as of the date of this annual information form. And there were further, 5,137,203 Common Shares reserved for issuance at a weighted average exercise price of CAD$0.3075 and will be issued upon the due exercise, as applicable, of Warrants.

Common Shares

Holders of Common Shares are entitled to receive notice of, attend and vote at, meetings of shareholders (other than meetings at which only holders of another class or series of shares are entitled to vote separately as a class or series). Each Common Share carries the right to one vote. Holders of Common Shares are entitled to receive any dividends declared by us in respect of the Common Shares, subject to the rights of the holders of Preferred Shares or other classes ranking in priority to the Common Shares with respect of the payment of dividends. In the event of the liquidation, dissolution or winding-up of our Company, holders of Common Shares are also entitled to receive, on a pro rata basis, the remaining property and assets of the Company available for distribution after payment of all of its liabilities and subject to the rights of the holders of Preferred Shares or other classes ranking in priority to the Common Shares. See also “Dividend Policy”.

Preferred Shares

Preferred shares are issuable at any time and from time to time in one or more series. Each series of preferred shares consist of such number of shares and shall have such rights, privileges, restrictions and conditions as may be determined by the Board of Directors prior to the issuance thereof. Holders of preferred shares, except as otherwise provided in the terms specific to a series of preferred shares or as required by law, will not be entitled to vote at meetings of holders of Common Shares. The preferred shares of each series will rank on parity with the preferred shares of every other series and will be entitled to preference over the Common Shares and any other shares ranking junior to the preferred shares with respect to payment of dividends and distribution of any property or assets in the event of the liquidation, dissolution or winding-up of the Company.

DIVIDEND POLICY

We have not paid dividends to our shareholders to date and do not anticipate paying dividends in the foreseeable future. Our current policy is to retain cash flows to finance growth in working capital, the development and enhancement of our products and services and to otherwise invest in our business.

MARKET FOR SECURITIES

Trading Prices and Volumes

Leonovus’ Common Shares are listed for trading on the Exchange under the symbol “LTV”. The monthly share prices and share trading data for the year ending December 31, 2019 and the time period ending January 14, 2021 is as follows, and note that the Company’s shares were halted from March 4, 2020 to June 26, 2020 because of the potential acquisition of PureColo (see Fiscal 2020 above). The numbers below are displayed on a post-Consolidation basis.

	Share Price "CAD"	Share Price "CAD"
Month	High	Low	Volume
2019 January	5.70	4.20	178,700
February	6.00	4.20	321.200

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March	4.80	3.90	183,200
April	4.50	3.00	177,800
May	3.60	1.80	184,900
June	2.10	1.80	111,500
July	1.80	1.20	175,400
August	2.10	0.60	323,300
September	1.80	0.90	175,400
October	1.20	0.90	113,300
November	0.90	0.60	208,800
December	0.60	0.30	192,600
2020 January	0.90	0.30	183,800
February	1.20	0.30	874,400
March	0.60	0.60	40,400
April	0.60	0.60	0
May	0.60	0.60	0
June	1.50	0.60	18,133,200
July	1.50	0.60	4,999,200
August	1.20	0.60	1,410,400
September	1.20	0.60	772,400
October	0.60	0.30	360,200
October 26, 2020 Consolidation 30:1
November	0.40	0.33	261,800
December	0.56	0.35	983,200
2021 January (1–14)	1.95	0.40	3,076,100

Prior Sales

In the year ended December 31, 2019, Leonovus issued the following securities:

26,486,000 Common Shares, issued pursuant to the exercise of warrants (24,314,000) and broker warrants (2,172,000), for gross proceeds to the Company of $1,560,000.
130,215 Common Shares, issued pursuant to the exercise of options on August 8, 2019, for gross proceeds to the Company of $6,000.

In the year ended December 31, 2020, Leonovus issued the following securities:

In September 2020, in connection with the Loan, the Company issued to the lenders as a bonus 3,160,000 Common Shares of the Company at a deemed issue price of CAD$0.025 per Common Share (on a preConsolidation basis. Post-consolidation bonus shares equaled 105,333 at a deemed issue price of $0.75). After the issuance of the bonus shares there was a total of 288,606,639 issued and outstanding shares.
On October 26, 2020 the Company completed the Consolidation, on the basis of one (1) post-Consolidation Common Share being issued for every thirty (30) pre-Consolidation Common Shares. This resulted in the Company having 9,620,221 Common Shares issued and outstanding directly following the Consolidation.

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On December 30, 2020, Leonovus completed a private placement for CAD$1,579,690 by way of issuance of 5,137,203 units at a price of CAD$0.3075 per unit, with each unit including one Common Share and one Common Share purchase warrant, with each warrant exercisable for a price of CAD$0.60 per Common Share for a period of one (1) year, subject to the Company's ability to accelerate the expiry date in the event the 15-day volume weighted average price of the Common Shares on the TSXV equals or exceeds $1.00 at any point after four months and one day following the date of closing. These units were issued on a postConsolidation basis.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth, for each of our directors and executive officers, as at the date of this annual information form, his or her name, province or state and country of residence, position(s) with the Company, principal occupation for the past five years, ownership of Common Shares and if applicable, the date of initial appointment as a director of the Company.

The audit committee of the Corporation currently consists of Denis Archambault, Daniel Hilton and Daniel Willis, each of whom is financially literate as required under NI 52-110. Messrs. Archambault and Hilton are "independent" within the meaning ascribed to the term in NI 52-110. Mr. Willis is not considered independent as he is deemed to be in a "material relationship" with Leonovus as a result of him holding the office of Chief Technology Officer.

Name and Municipality of Residence	Age	Relevant Educational Background	Position(s) Held with the Company and Period Service as a Director	Principal Occupation and Positions During Last Five Years (Principal Business of Organization)	Common Shares Beneficially Owned or Controlled
Michael Gaffney Calabogie, Ontario	66	B.Sc. (Health Sciences), University of Ottawa; MBA Concordia University	Chair & CEO since November 5, 2016	Chair and CEO of since November 5, 2016. Chair of Intouch Insight Systems (TSXV:INX) since July 2013.	5.72%, 844,197
Denis Archambault Ottawa, Ontario	56	BBA, University of Ottawa	Director since October 4, 2016	President of DMAC Group Inc. a private investment and real estate company that acquires, self-manages, finances various real estate endeavours and performs consultations for lenders, pension fund managers and real estate portfolio owners.	2.41%, 355,238

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Name and Municipality of Residence	Age	Relevant Educational Background	Position(s) Held with the Company and Period Service as a Director	Principal Occupation and Positions During Last Five Years (Principal Business of Organization)	Common Shares Beneficially Owned or Controlled
Daniel Hilton Ottawa, Ontario	52	B. Comm., University of Ottawa, MBA Queen’s University; MBA Cornell University; Chartered Accountant	Director since December 30, 2008.	Chief Financial Officer of Fully Managed Inc. (formerly CareWorx) since April 2017; Director of Fully Managed Inc. (formerly CareWorx) since July 2013; Director of Clarity IOT Services & Technology Inc. since January 2017; Director of UPSnap Inc. since September 2017; Chief Financial Officer and Corporate Secretary of Datawind Inc. from January 2014 to November 2016; Director, Green Swan Capital Corp. since October 2008;	0.38%, 55,435
Daniel Willis Smith Falls, Ontario	60	B.Sc. Honours (Computer Science) Queens University	Director since July 30, 2020. Vice President and Chief Technology Officer	Director since July 30,2020. Vice President and CTO since November 5, 2016. CEO from November 13, 2015 to November 5, 2016. President and CTO from February 2014 to November 5, 2016.	1.16%, 171,706
George Pretli Ottawa, Ontario	63	Business Diploma (Accounting/ Management) Algonquin College	Chief Financial Officer and Corporate Secretary since June 4, 2019	CFO and Corporate Secretary since June 4, 2019. Vice President Finance, CEO and Corporate Secretary of Intouch Insight Ltd. April 25, 1995 to April 25, 2019	0.08%, 12,399

Biographies

The following are brief profiles of our executive officers and directors.

Michael Gaffney

Michael Gaffney B.Sc. (Health Sciences, University of Ottawa), M.B.A.(John Molson School of Business, Concordia University), is a serial entrepreneur, CEO and board member with over 32 years of experience in technology (software, semiconductors, telecommunications, eLearning, mobile) and services companies. He brings a wealth of expertise with particular strengths in marketing, product design, product innovation, mergers and acquisitions, public financings (IPO’s), private placements, venture capital and business strategy. Michael is also conversant with IFRS, financial strategy, financial reporting and currently even does some of the purchase price equation calculations for acquisitions by companies where he sits on the board of directors. High performance psychology/coaching is an area of expertise and a lifelong pursuit for Michael.

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Denis Archambault

Denis Archambault is not an executive officer, employee or control person of the Corporation. He holds a Bachelor of Business Administration from the University of Ottawa and held for over 25 years, professional designations in the Real Estate Industry. Mr. Archambault has served on the National Board of the Real Estate Institute of Canada along with appointments on its Finance Committee and currently serves on the board of a hotel and multi use property in South Florida. He also currently serves on a finance committee of a pension fund located in Montreal. Mr. Archambault was a Senior Commercial Loan Account Manager for a Montreal Trust Company in Ottawa. He also served as Director of Finance and development co-ordinator for a major real estate developer/owner in the Ottawa area where his duties included strategic mortgage analysis, acquisitions and development of a varied portfolio of real estate assets. He was also dean of faculty for the finance program for the Real Estate Institute of Canada for over 20 years. He is presently president of DMAC Group Inc. an investment company that acquires, self-manages, finances, develops various real estate endeavours and performs consultations & training for lenders, pension fund managers and real estate portfolio owners. Mr. Archambault, also performs various seminars relating to mortgage financing and real estate investment analysis, is fluently bilingual, and is based in Ottawa.

Daniel Hilton

Mr. Hilton, CPA, CA, MBA has served on the Board since its inception in 2008. He was the interim Chief Financial Officer of the Corporation between August 27, 2015 and February 12, 2018. He is a Chartered Accountant with a broad range of experience in strategic planning and leadership of finance and operations. Mr. Hilton is currently Chief Financial Officer of Careworx Corporation, is a Director of UPSnap Inc., and was formerly the Chief Financial Officer & Corporate Secretary at Datawind Ltd. He served as Executive Director of the Conservative Party of Canada from 2009 to 2013 and, prior to that, Director of Finance and Administration, Research and Development for World Heart Corporation and a co-founder and Chief Financial Officer of Kids Futures Ltd., a national loyalty program, which in December of 2005 became a publicly traded entity on the Exchange. Mr. Hilton was formerly the Vice-President Finance and Technology and Senior Vice-President, Corporate Development & Administration of Enablence Technologies Inc., a publicly traded entity on the Exchange. Mr. Hilton earned his undergraduate business degree from the University of Ottawa and earned his professional designation with the firm Deloitte & Touche LLP. Mr. Hilton holds graduate business degrees from both Queen’s University and Cornell University.

Dan Willis

Mr. Dan Willis is a Co-founder and Chief Technology Officer of Leonovus Inc where he has been since January 2009. A versatile individual, Mr. Willis has also previously served as the Chief Architect, Vice President of Engineering, President and Chief Executive Officer of Leonovus Inc.

He served in a number of technical and business leadership roles at Google, Inc. Willis came to Google as a result of Google’s purchase in 2007 of Adscape Media, the pioneer of dynamic in-game advertising founded by Willis, where he served as CEO and Chief Technical Officer. Willis’s technical and business leadership fueled the growth of Adscape into a multinational corporation, breaking down traditional advertising paradigms by integrating new advertising models into rich, interactive media such as video games and video services.

Prior to Adscape, Willis spent over 15 years at Bell Northern Research and Northern Telecom, where he was a significant contributor to the early development of residential broadband networks, interactive television, telephony automation, VoIP and distributed access network services and management. Willis began his professional career as a UNIX systems solutions consultant in the defense, security and communications industries, where he was instrumental in building several real time systems that remain state of the art today.

With a computing career of over 35 years and over 70 patent applications to his name across Nortel, Adscape, Google and Leonovus, Willis has continually demonstrated his expertise as a prolific innovator with a solid grounding in business realities. He received a BSc Honours in Computer Science from Queen’s University at Kingston in 1984.

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George Pretli

George is a senior executive with over 25 years of financial experience, having led and played key roles in all accounting functions. George has been directly involved in over 6 successful acquisitions including post acquisition integrations.

Prior to joining Leonovus Inc., George was the Vice President, Finance, Chief Financial Officer and Corporate Secretary for Intouch Insight Ltd., a TSX-V listed company. He was with Intouch Insight for 25 years before retiring. Before Intouch Insight, George held various positions as Controller in the Health and Automotive industries.

George graduated from Algonquin College with a Business Diploma majoring in Accounting and Management, participated in Queen’s Just-In-Time series and completed various TSX-V sponsored workshops.

Cease Trade Orders or Bankruptcies

Except as set out below, none of our directors or executive officers is, as at the date of this annual information form, or has been within 10 years before the date of this annual information form, a director, chief executive officer or chief financial officer of any company that, while that person was acting in that capacity, or after that person ceased to act in such capacity but resulting from an event that occurred while that person was acting in such capacity, was the subject of a cease trade order, an order similar to a cease trade order, or an order that denied the company access to any exemption under securities legislation in each case for a period of more than 30 consecutive days.

Messrs. Hilton was a director and Willis was President and CEO of the Corporation when the Corporation was unable to file its annual financial statements for the fiscal year ended December 31, 2015 and its quarterly filing statements for the first quarter of the fiscal year ending on December 31, 2016 within the statutory filing deadlines for such documents. As a result, the Corporation was subject to cease trade orders issued by the Ontario Securities Commission, the British Columbia Securities Commission and the Alberta Securities Commissions (the “Commissions”). The Corporation cured all of its outstanding filing defaults and was reinstated for trading as of August 29, 2016.

None of our directors, or executive officers, or to our knowledge, our shareholders holding a sufficient number of securities to affect materially the control of our Company (i) is as at the date of this annual information form, or has been within ten years before the date of this annual information form, a director or executive officer of any company (including us) that, while that person was acting in that capacity, or within a year of that person ceasing to act in such capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (ii) has, within ten years before the date of this annual information form, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of such director, executive officer or shareholder.

Penalties or Sanctions

None of our directors or executive officers, or to our knowledge, our shareholders holding a sufficient number of securities to affect materially the control of our Company, has been subject to:

any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or
any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

Conflicts of Interest

There are no known existing or potential conflicts of interest between us and our directors, executive officers or other members of management as a result of their outside business interests as at the date of this annual information form. However, as certain of our directors and officers also serve as directors and officers of other companies, it is possible that a conflict of interest may arise between their duties to us and their duties to such other companies. Conflicts of

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interest, if any, will be subject to the procedures and remedies available under the OBCA. See “ Interests of Management and Others in Material Transactions ”.

MATERIAL CONTRACTS

There are no material contracts, other than those contracts entered into in the ordinary course of business, which we have entered into since the beginning of the last financial year, or entered into prior to such date, but which are still in effect and which are required to be filed with Canadian securities regulatory authorization in accordance with Section 12.2 of NI 51-102:

INTEREST OF EXPERTS

The Company’s independent external auditor for the fiscal year ended December 31, 2019 was MNP LLP who have informed us that they are independent with respect to the Company within the meaning of the Rules of Professional Conduct of the Institute of Chartered Professional Accountants Ontario.

LEGAL MATTERS

During the year ended December 31, 2019, Leonovus settled claims relating to unpaid salaries of four former officers of Leonovus USA Inc. Each of these settlements have been paid and the associated liabilities have been extinguished. Leonovus had accrued for these potential liabilities in the past up to December 31, 2019. Please refer to the December 31, 2019 annual financial statements.

As of the date of this annual information form, Leonovus is not a party to any material legal proceedings, and our property and assets are not the subject of material of legal proceeding.

Notwithstanding the foregoing, given the nature of our business, we are, and may from time to time in the future be, party to various, and at times numerous, legal proceedings and claims that arise in the ordinary course of business. The outcome of litigation is inherently uncertain. See “Risk Factors” .

REGULATORY ACTIONS

As of the date of this annual information form, we are not subject to any regulatory action.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than with respect to the Loan, in which two directors of the Company loaned $70,000 in the aggregate to the Company in September 2020, of which $56,000 has been repaid as of the date hereof, and as described elsewhere in this annual information form, none of (i) our directors or executive officers, (ii) the shareholders who beneficially own, control or direct, directly or indirectly, more than 10% of our voting securities, or (iii) any associate or affiliate of the persons referred to in (i) and (ii), has or has had any material interest, direct or indirect, in any transaction within the three years before the date of this annual information form or in any proposed transaction that has materially affected or is reasonably expected to materially affect us or any of our subsidiaries.

AUDITORS, TRANSFER AGENT AND REGISTRAR

Our current auditor is MNP LLP at 800-1600 Carling Avenue, Ottawa, ON K1Z 1G3.

The transfer agent and registrar for the Common Shares is TSX Trust Company at its principal offices in Toronto, Ontario.

ADDITIONAL INFORMATION

Additional information relating to our Company may be found on SEDAR at www.sedar.com and on our website at www.Leonovus.com. Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of our securities and securities authorized for issuance under our equity compensation plans is

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contained in our management information circular for the most recent annual meeting of shareholders and will be contained in our management information circular in connection with our next annual meeting of shareholders. Additional financial information is provided in the audited consolidated financial statements and the management’s discussion & analysis of financial condition and results of operation of the Company for the fiscal year ended December 31, 2019, available on SEDAR at www.sedar.com and on Leonovus’ website at www.Leonovus.com.

In addition to press releases, securities filings and public conference calls and webcasts, we intend to use our investor relations page on our website as a means of disclosing material information to our investors and others and for complying with our disclosure obligations under applicable securities laws. Accordingly, investors and others should monitor the website in addition to following our press releases, securities filings and public conference calls and webcasts. This list may be updated from time to time.

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AI assistant

LeoNovus Inc — Annual Report 2019

46421_rns_2021-01-28_8b986008-68e3-436f-89e7-1fada11971af.pdf

ANNUAL INFORMATION FORM

Table of Contents

GENERAL MATTERS

FORWARD-LOOKING STATEMENTS

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

GLOSSARY OF TERMS

CORPORATE STRUCTURE

Incorporation and Office

Intercorporate Relationships

GENERAL DEVELOPMENT OF THE BUSINESS

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2021 Recent Developments

Significant Acquisitions

OUR BUSINESS

Leonovus 3.0-3.6, Blockchain and Vault

Smart data management tools suite

Multi-cloud data archiving

Secure data storage

Data Discovery Tool

Smart Filer

Data View Gateways

Consolidata

Smart Secure Data Lake

OUR OPERATIONS

Overview

Competitive Landscape

Intellectual Property

Patents

Distributed Data Center (D2C)

Data-centric Multi-Cloud Control

Multi-media and Browser Based Web Script Accelerations

Trademark

Contractual Restrictions

Finance

RISK FACTORS

Risks Related to Our Business

History of Losses

Risks Relating to Debt Structure

Competitive Industry

No Guarantee of Product Development

Inability to Protect Intellectual Property

Key Personnel

Expiration of Patents

Intellectual Property Infringement

Uncertain Financial and Geopolitical Climate and Downturn in Global Economy

Impacts of COVID-19

Network Disruptions, System Failures and Breaches of Security

Legal and Regulatory Approvals and Requirements

Product Defects

Open Source Software

Loss of Rights to Use Software or Components Supplied by Third Parties

Gross Margins

Managing Acquisitions

Security of Customer Information

Limited Operating History of the Company

Additional Capital Requirements

Taxes

Accounting Estimates

Litigation

Fluctuation of Revenue and Operating Results

Changes to Pricing Model

Ability to Manage Solution Obsolescence

Inability to Meet Demand

Legal and Regulatory Compliance

Risks Related to all Foreign Operations

Risks Associated with Foreign Operations

Fluctuations in Foreign Currencies

Risks Related to our Common Shares

Unpredictability and Volatility of the Common Share Price

Dividends

Future Sales of Common Shares by our Directors or Officers

Additional Financings

DESCRIPTION OF SHARE CAPITAL

Authorized and Issued Capital

LeoNovus Inc Annual Report 2019