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LeoNovus Inc — Audit Report / Information 2024
Apr 30, 2025
46421_rns_2025-04-29_d8faf7d6-da43-4b4c-a36e-d783f9df15cd.pdf
Audit Report / Information
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Leonovus
Consolidated Financial Statements
Leonovus Inc.
Years ended December 31, 2024 and 2023
(Expressed in Canadian Dollars)
Leonovus Inc.
Consolidated Financial Statements
December 31, 2024 and 2023
| TABLE OF CONTENTS | PAGE |
|---|---|
| Independent Auditor's Report | |
| Consolidated statements of net loss and comprehensive loss | 4 |
| Consolidated statements of financial position | 5 |
| Consolidated statements of changes in shareholders' equity | 6 |
| Consolidated statements of cash flows | 7 |
| Notes to the consolidated financial statements | 8 - 19 |
KMSS
Kenway Mack Slusarchuk Stewart LLP Chartered Professional Accountants
Colebroating 35 years
Independent Auditors' Report
To: The Shareholders of Leonovus Inc.
Opinion
We have audited the consolidated financial statements of Leonovus Inc. and its subsidiaries (collectively, the "Company"), which comprise the consolidated statement of financial position as at December 31, 2024 and 2023 and the consolidated statements of net loss and comprehensive loss, changes in shareholders' equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of material accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2024 and 2023, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 to the consolidated financial statements which indicates that at December 31, 2024 the Company had a deficit of $56,823,000. This condition, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. Our opinion is not qualified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and not otherwise addressed in our report. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Except for the matter described in the Material Uncertainty Related to Going Concern section of our report, we have determined that there are no key audit matters to be communicated in our auditors' report.
Information Other than the Consolidated Financial Statements and Auditors' Report Thereon
Management is responsible for the other information. The other information comprises the information included in Management's Discussion and Analysis.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management's Discussion and Analysis prior to the date of this auditors' report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditors' report. We have nothing to report in this regard.
150 13 Avenue SW, Suite 300 Calgary AB T2R 0V2 Tel: 403.233.7750 Fax: 403.266.5267
714 10 Street, Suite 3 Canmore AB T1W 2A6 Tel: 403.675.1010 Fax: 403.675.6789
www.kmss.ca
An independent member of DFK INTERNATIONAL
Independent Auditors' Report (continued)
Responsibilities of Management and Those Charged With Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditors' Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Independent Auditors' Report (continued)
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this Independent Auditors' report is Roland A. Bishop, CPA, CA.
Kennedy Mack Sussarchuk Stewart
April 29, 2025
Calgary, Alberta
Chartered Professional Accountants
Leonovus Inc.
Consolidated statements of net loss and comprehensive loss
Years ended December 31, 2024 and 2023
(in thousands of Canadian dollars)
| Note | 2024 | 2023 | |
|---|---|---|---|
| Expenses | |||
| General and administrative | 3 | $ 648 | $ 740 |
| Research and development | 4 | - | 61 |
| Loss from operating activities | 648 | 801 | |
| Non-operating income (expense) | |||
| Finance costs | (36) | (42) | |
| Foreign exchange | (1) | - | |
| Debt settlement | - | 790 | |
| Net loss | (685) | (53) | |
| Other comprehensive income | |||
| Foreign currency translation loss | 29 | (8) | |
| Total comprehensive loss | $ (656) | $ (61) | |
| Net loss per share | 5 | ||
| Basic and diluted | $ (0.03) | $ (0.00) | |
| Weighted average number of outstanding shares | 20,900,996 | 20,900,996 |
The accompanying notes are an integral part of these consolidated financial statements
3
Leonovus Inc.
Consolidated statements of financial position
As at December 31, 2024 and 2023
(in thousands of Canadian Dollars)
| Note | 2024 | 2023 | |
|---|---|---|---|
| Assets | |||
| Current Assets | |||
| Cash | $ | 8 | $1 |
| Trade and other receivables | 6 | 49 | 105 |
| Total assets | $ | 57 | $106 |
| Liabilities and Shareholders' Equity | |||
| Current Liabilities | |||
| Trade and other liabilities | 7 | $2,001 | $1,397 |
| Loan payable | 8 | 134 | 98 |
| Deferred compensation | 9 | 179 | 164 |
| Total liabilities | 2,314 | 1,659 | |
| Shareholders' Equity | |||
| Share capital | 11 | 36,675 | 36,675 |
| Warrants | 11 | 3,001 | 3,001 |
| Contributed surplus | 11 | 7,751 | 7,741 |
| Accumulated other comprehensive income | 7,139 | 7,168 | |
| Deficit | (56,823) | (56,138) | |
| Total shareholders' equity | (2,257) | (1,553) | |
| Total liabilities and shareholders' equity | $ | 57 | $106 |
Going concern
1
ON BEHALF OF THE BOARD
"Denis Archabault"
Denis Archabault, Director
"Michael Gaffney"
Michael Gaffney, Director
The accompanying notes are an integral part of these consolidated financial statements
Leonovus Inc.
Consolidated statements of changes in shareholders' equity
Years ended December 31, 2024 and 2023
(in thousands of Canadian dollars)
| Number of common shares outstanding | Share capital | Warrants | Contributed surplus | Accumulated comprehensive income | Deficit | Total equity | |
|---|---|---|---|---|---|---|---|
| Balance as at December 31, 2022 | 20,900,996 | 36,675 | 2,959 | 7,701 | 7,160 | (56,085) | (1,590) |
| Issuance of warrants (note 11) | - | 42 | - | - | - | 42 | |
| Share-based compensation | - | - | 40 | - | - | 40 | |
| Transactions with shareholders | - | - | 42 | 40 | - | - | 82 |
| Net loss | - | - | - | - | (53) | (53) | |
| Foreign currency translation gain | - | - | - | 8 | - | 8 | |
| Balance as at December 31, 2023 | 20,900,996 | $ 36,675 | $ 3,001 | $ 7,741 | $ 7,168 | $ (56,138) | $ (1,553) |
| Share-based compensation | - | - | 10 | - | - | 10 | |
| Transactions with shareholders | 20,900,996 | 36,675 | 3,001 | 7,751 | 7,168 | (56,138) | (1,543) |
| Net loss | - | - | - | - | (685) | (685) | |
| Foreign currency translation loss | - | - | - | (29) | - | (29) | |
| Balance as at December 31, 2024 | 20,900,996 | $ 36,675 | $ 3,001 | $ 7,751 | $ 7,139 | $ (56,823) | $ (2,257) |
The accompanying notes are an integral part of these consolidated financial statements
Leonovus Inc.
Consolidated statements of cash flows
Years ended December 31, 2024 and 2023
(in thousands of Canadian dollars)
| Note | 2024 | 2023 | |
|---|---|---|---|
| Cash provided by (used in) the following activities: | |||
| Operating activities | |||
| Net loss | $ | (685) | $ (53) |
| Adjustments to net loss: | |||
| Share-based compensation | 11 | 10 | 40 |
| Settlement of lease liability | - | (741) | |
| Settlement of payables | - | (49) | |
| Accretion of loan payable | 8 | 36 | 41 |
| Net change in non-cash operating working capital | 12 | 675 | 683 |
| Net cash used in operating activities | 36 | (79) | |
| Financing activities | |||
| Issuance of loan payable | $ | - | $ 100 |
| Repayment of loan | - | (60) | |
| Cash flows from (used in) financing activities | - | 40 | |
| Net decrease in cash | 36 | (39) | |
| Effects of currency translation on cash | (29) | (3) | |
| Cash, beginning of the year | 1 | 43 | |
| Cash, end of the year | $ | 8 | $ 1 |
| Additional Information | |||
| Interest received included in operating activities | $ | - | $ - |
| Income tax paid included in operating activities | $ | - | $ - |
The accompanying notes are an integral part of the these consolidated financial statements
6
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
- Corporate information, Going Concern
Corporate information
Leonovus Inc. ("Leonovus" or the "Company") is a publicly listed Company and is incorporated under the Province of Ontario Business Corporations Act. The Company's shares are listed on the TSX Venture Exchange ("TSX-V") under the symbol LTV. The address of the Company's registered office and its principal place of business is 2611 Queensview Drive, Suite 125, Ottawa, ON K2B 8K2.
Leonovus is a secure data management software company. The Leonovus suite of data management tools offers customers a complete end-to-end data-centric solution. This solution can stand on its own, or it can be integrated 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 and extends the data-centric controls across the entire architecture, including cloud resources.
Going concern
The preparation of consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS") contemplates the continuation of the Company as a going concern. During the year ended December 31, 2024 the Company has not generated sufficient revenues to achieve and sustain profitability, has a net loss of $685 (December 31, 2023 – ($53)) and as of December 31, 2024 had a deficit of $56,823 (December 31, 2023 - $56,138). In the absence of raising additional debt or equity financing or generating sufficient revenues to achieve and sustain profitability, there is a material uncertainty that may cast significant doubt regarding the Company's ability to continue as a going concern.
The Company will require revenue from its products and may need new financing to continue as a going concern in its present form. However, there can be no assurance that the Company will achieve such results. These consolidated financial statements do not include any adjustments related to recoverability and classification of recorded asset amounts, or the amounts and classification of liabilities that might be necessary should the Company be unable to continue its operations. The Company's ability to realize its assets and discharge its liabilities is dependent on its ability to obtain additional financing.
In assessing whether this assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to, twelve months from the end of the reporting period. If the going concern assumption was not appropriate for these financial statements, then adjustments would likely be necessary in the carrying amounts of assets and liabilities, expenses, the accumulated deficit and the classification used in the consolidated statement of financial position. These adjustments could be material.
- Summary of material accounting policies
The following accounting policies have been used throughout all periods presented in the consolidated financial statements.
(a) Statement of compliance
These consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and the Interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") and in effect at the closing date of December 31, 2024.
On April 29, 2025, the Company's Board of Directors approved these consolidated financial statements and authorized them for issue.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair value, as explained in the accounting policies set out in Note 2(p).
(c) Basis of consolidation
The consolidated financial statements include the accounts of Leonovus Inc., the ultimate parent, and its wholly owned subsidiaries Leonovus USA Inc. (a company incorporated on November 19, 2007 in the State of Delaware, USA), 1000998579 Ontario Inc. (a company incorporated on September 5, 2024 under the Business Corporations Act (Ontario)) and 1000997809 Ontario Inc. (a company incorporated on September 5, 2024 under the Business Corporations Act (Ontario)) for year ended December 31, 2024 or for the period from incorporation to December 31, 2024.. Control is achieved when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities, is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company until the date on which control ceases. All intercompany transactions and balances have been eliminated. All subsidiaries have a reporting date of December 31st.
7
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
2. Summary of material accounting policies...continued
(d) Functional currency and foreign currency translation
The functional currency of Leonovus Inc. is the Canadian dollar (CAD). The functional currency of the wholly owned subsidiary is the United States dollar (USD).
Items included in the consolidated financial statements of the Company and its subsidiary are measured using the currency of the primary economic environment in which the entity operates (the functional currency). Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary assets and liabilities not denominated in the functional currency of an entity are at period end recognized in net loss for the period.
Non-monetary items are not retranslated at the period-end. They are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.
(e) Foreign operations
Assets and liabilities of entities with functional currencies other than the CAD are translated at the period end rates of exchange, and the results of their operations are translated at the average exchange rates over the reporting period. The resulting translation adjustments are included in accumulated other comprehensive loss in equity.
(f) Cash
Cash represents cash deposits held at financial institutions. Cash is held at a major financial institution and is subject to credit risk to the extent they exceed federal deposit insurance limits.
(g) Research and development
Research costs are expensed as incurred. Development costs are deferred and amortized when the criteria for intangible assets are met, or otherwise, are expensed as incurred. To date, no development costs have been deferred.
(h) Investment tax credit
The Company is entitled to certain Canadian investment tax credits for qualifying research and development activities performed in Canada. These credits can be applied against future income taxes payable and are subject to a 20 year carry forward period. An estimate of the refundable investment tax credit on scientific research and development expenditures is recorded in the year the expenditures are incurred provided there is reasonable assurance that the credits will be received. The expenditures are reduced by the amount of the estimated investment tax credit.
(i) Government grants
The Company recognizes government grants when there is reasonable assurance that the Company will comply with the conditions of the grant and the grant will be received. Government grants receivable are recorded in accounts receivable on the consolidated statements of financial position. The Company recognizes government grants in the consolidated statements of loss and comprehensive loss as a reduction in expenses in the same period as the expenses for which the grant is intended to compensate. In cases where a government grant becomes receivable as compensation for expenses already incurred in prior periods, the grant is recognized in the consolidated statements of loss and comprehensive loss in the period in which it becomes receivable.
(j) Equity
Share capital represents the amount received for shares that have been issued less transaction costs directly attributable to the issuance of common shares net of any related income tax benefits.
Valuation of equity instruments in private placements
The Company has adopted a residual method with respect to the measurement of common shares and warrants issued as private placement units. Warrants attached to units are valued based on the fair value of the warrants using the Black-Scholes option pricing model and the share price at the time of financing, and the difference between the proceeds raised and the value assigned to the warrants is the residual fair value of the shares. The proceeds from the issue of units are allocated between share capital and warrants. In situations when the warrants are categorized as FVTPL the value associated with the warrants is presented as a liability. If and when the warrants are exercised, the applicable amounts of warrants or liability are transferred to share capital. Any consideration paid on the exercise of the warrants is credited to share capital.
Broker Units/Warrants
The Company uses the fair value method based on the Black-Scholes pricing model to determine the fair value of the equity units and warrants issued to brokers and agents.
8
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
2. Summary of material accounting policies...continued
(k) Share-based compensation
The Company accounts for share-based compensation arrangements using the fair value method of accounting. When employees are rewarded using share-based payments, the fair value of employees' services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is measured at the grant date.
The share-based compensation cost is recorded as an expense in net earnings and credited to contributed surplus.
If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of awards expected to vest. Estimates are subsequently revised if there is any indication that the number expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior periods if awards ultimately exercised are different to that estimated on vesting.
An award with different vesting dates is considered a separate grant for the calculation of fair value and the resulting fair value is amortized over the vesting period of the respective grants.
When share options are exercised, any consideration paid by employees is credited to share capital in addition to the amount previously recorded in contributed surplus.
The Company's plan does not feature any options for cash settlement.
(l) Earnings per share
The Company presents basic and diluted earnings per share ("EPS") data. Basic EPS is calculated by dividing the net earnings attributable to the shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the net earnings attributable to shareholders and the weighted average number of shares outstanding, for the effects of all potential dilutive shares. The diluted loss per share is equal to the basic loss per share where the effect of stock options and warrants are antidilutive as it would decrease the loss per share.
(m) Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in net earnings except for items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized using the liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the expected tax rates applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realized simultaneously.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable income against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. This is assessed based on the Company's forecast of future operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any tax loss or credit. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable income will be available.
Changes in deferred tax assets or liabilities are recognized as a component of tax recovery or expense in net earnings, except where they relate to items that are recognized in other comprehensive income or directly in equity, in which case the related deferred tax is also recognized in other comprehensive income or equity, respectively.
9
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
- Summary of material accounting policies...continued
(n) Critical accounting estimates and judgments
The Company's consolidated financial statements are prepared in accordance with IFRS recognition and measurement principles that often require management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts presented and disclosed in the consolidated financial statements. Management reviews these estimates and assumptions on an ongoing basis based on historical experience, changes in business conditions and other relevant factors as it believes to be reasonable under the circumstances. Changes in facts and circumstances may result in revised estimates, and actual results could differ from those estimates. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Estimation uncertainty
Share-based compensation
The estimation of share-based compensation requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. The Company has made estimates as to the volatility of its own share, the forfeiture rate of share options granted and the time of exercise of those share options. The model used by the Company is the Black-Scholes valuation model.
Warrants
In calculating the value of the warrants, key estimates such as the value of the common share, the expected life of the warrant, the volatility of the Company's stock price and the risk-free interest rate are used.
(m) Critical accounting estimates and judgments
Significant management judgments
Recognition of deferred tax assets
Deferred tax assets are recognized for unused tax losses and credits to the extent that it is probable that taxable income will be available against which the losses can be utilized. These estimates are reviewed at every reporting date. Information about assumptions and estimation based upon the likely timing and the level of the reversal of existing timing differences, future taxable income and future tax planning strategies, is included in Note 10. The tax rules in the numerous jurisdictions in which the Company operates are also taken into consideration.
Research and development
Research costs are expensed as incurred. Development costs are deferred and amortized when the criteria for intangible assets are met, or otherwise, are expensed as incurred. To date, no development costs have been deferred.
Investment tax credits
The Company is entitled to certain Canadian investment tax credits for qualifying research and development activities performed in Canada. These credits can be applied against future income taxes payable and are subject to a twenty-year carry forward period. If the Company is not in a taxable position a portion of these credits, are cash refundable.
Investment tax credits are accounted for as a reduction of operating expenses and are accrued as qualifying expenditures are made provided it is probable that the credits will be realized. To date the Company has only accrued the amount of tax credits that are refundable as an offset to research and development expense.
Functional currency
In assessing the functional currency, each entity within the Company determines its own functional currency, and the items included in the financial statements of each entity are measured using that functional currency. The functional currency determination involves certain judgments in evaluating the primary economic environment, and the Company reconsiders the functional currencies of each entity if there is a change in the underlying transactions, events and conditions which determine the primary economic environment.
Going concern risk assessment
Management considers whether there exists any event(s) or condition(s) that may cast significant doubt on the Company's ability to continue as a going concern. Considerations take into account all available information about the future including the availability of debt and equity financing as well as the Company's working capital balance and future commitments.
10
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
- Summary of material accounting policies...continued
(m) Critical accounting estimates and judgments...continued
Contingencies
Management uses judgment to assess the existence of contingencies. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. Management also uses judgment to assess the likelihood of the occurrence of one or more future events. When contingencies exist, Management estimates the related financial impact to the Company based on the possible outcomes of one or more future events.
(o) Financial instruments
Classification
On initial recognition, the Company determines the classification of financial instruments based on the following categories:
- Measured at amortized cost
- Measured at fair value through profit or loss (FVTPL)
- Measured at fair value through other comprehensive income (FVOCI)
The classification under IFRS 9 is based on the business model under which a financial asset is managed and on its contractual cash flow characteristics. Assets held for the collection of contractual cash flows and for which those cash flows correspond solely to principal repayments and interest payments are measured at amortized cost. Contracts with embedded derivatives where the host is a financial instrument in the scope of the standard will be assessed as a whole for classification.
A financial asset is measured at amortized cost if both of the following criteria are met:
- Held within a business model whose objective is to hold assets to collect contractual cash flows; and,
- Contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Equity investments held for trading are classified as FVTPL. For all other equity investments that are not held for trading, the Company may irrevocably elect, on initial recognition, to present subsequent changes in the investment's fair value in other comprehensive income. This election is made on an investment-by-investment basis.
Financial liabilities are measured at amortized cost unless they must be measured at FVTPL (such as derivatives), or if the Company has chosen to evaluate them at FVTPL.
Management has classified and measurement of our financial instruments as follows:
| Financial Instrument | Classification |
|---|---|
| Cash | Amortized cost |
| Trade and other receivables | Amortized cost |
| Trade and other liabilities | Amortized cost |
| Deferred compensation | Amortized cost |
| Loan payable | Amortized cost |
11
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
- Summary of material accounting policies...continued
(o) Financial instruments...continued
Measurement
Initial recognition – A financial asset or financial liability is initially recorded at its fair value, which is typically the transaction price, plus or minus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. In the event that fair value is determined to be different from the transaction price, and that fair value is evidenced by a quoted price in an active market for an identical asset or liability or is based on a valuation technique that uses only data from observable markets, then the difference between fair value and transaction price is recognized as a gain or loss at the time of initial recognition.
Amortized cost – The amount at which a financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any expected credit losses. The effective interest method is a method of calculating the amortized cost of a financial asset or liability and of allocating interest and any transaction costs over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability to the net carrying amount on initial recognition.
Fair value through profit or loss – Changes in fair value after initial recognition, whether realized or not, are recognized through the consolidated statements of net loss and comprehensive loss. Income arising in the form of interest, dividends, or similar, is recognized through the consolidated statements of net loss and comprehensive loss when the right to receive payment is established, the economic benefits will flow to the Company, and the amount can be measured reliably.
Fair value through other comprehensive income – Changes in fair value after initial recognition, whether realized or not, are recognized through other comprehensive income. Income arising in the form of interest, dividends, or similar, is recognized through the consolidated statements of net loss and comprehensive loss when the right to receive payment is established, the economic benefits will flow to the Company, and the amount can be measured reliably.
Impairment
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition.
The Company has applied the simplified approach to recognize lifetime expected credit losses for its trade receivable. In general, the Company anticipates that the application of the expected credit loss model of IFRS 9 results in earlier recognition of credit losses for the respective items.
Derecognition
Financial assets – The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset have expired or when contractual rights to the cash flows have been transferred. Gains and losses from the derecognition are recognized in the consolidated statements of net loss and comprehensive loss.
Financial liabilities – The Company derecognizes a financial liability when the obligation specified in the contract is discharged, canceled or expired. The difference between the carrying amount of the derecognized financial liability and the consideration paid or payable, including non-cash assets transferred or liabilities assumed, is recognized in the consolidated statements of net loss and comprehensive loss.
12
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
- General and administrative expenses
Expenses incurred by the Company are broken down as follows for the years ended December 31:
| 2024 | 2023 | |
|---|---|---|
| Corporate administration | $ 70 | $ 131 |
| Consultant fees | 463 | 456 |
| Professional fees | 115 | 153 |
| $ 648 | $ 740 |
Included in Corporate administration are $10 related to non-cash stock-based compensation expense for 2024 compared to $40 in 2023.
- Research and development expenses
The following chart shows the breakdown of research and development expenses for the years ended December 31:
| 2024 | 2023 | |
|---|---|---|
| Consultant fees | - | 61 |
| $ - | $ 61 |
- Loss per share
The calculation of basic and diluted loss per share for the relevant periods is based on the following information:
| 2024 | 2023 | |
|---|---|---|
| Weighted average number of common shares – basic and diluted | $ 20,900,996 | $ 20,900,996 |
Options and warrants that are anti-dilutive were not included in the compilation of diluted common shares for the year ended December 31, 2024. Excluded from the calculations are Nil stock options (see Note 11) (December 31, 2023 – 1,371,648) and 2,000,000 warrants (December 31, 2023 – 13,280,572).
- Trade and other receivables
Trade and other receivables consist primarily of trade receivable from billings of software applications and services, as well as taxes and government funding recoverable. There are no expected credit losses associated with these receivables (December 31, 2023 - $Nil).
| 2024 | 2023 | |
|---|---|---|
| HST receivable | $ 49 | $ 55 |
| Science research and experimental development receivable | - | 50 |
| $ 49 | $ 105 |
- Trade and other liabilities
Trade payables and accrued liabilities for the Company as at December 31 are broken down as follows:
| 2024 | 2023 | |
|---|---|---|
| Trade payables | $ 1,830 | $ 1,240 |
| Accrued liabilities | 171 | 157 |
| $ 2,001 | $ 1,397 |
13
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
8. Loan payable
On September 8, 2022, the Company entered into a loan agreement with the Chief Executive Officer in the amount of $30. Terms of the loan include interest to be paid at a rate of 13% per annum, compounded semi-annually. The loan and any accumulated interest are due on or before March 31, 2023. The loan was repaid on March 1, 2023.
On December 15, 2022, the Company borrowed $30 from a company controlled by the Chief Executive Officer in the amount of $30 which was repaid without interest on January 4, 2023.
On February 3, 2023, the Company entered into a loan agreement with the Chief Executive Officer and a member of the Board of Directors in the amount of $100. Terms of the loan include interest to be paid at a rate of 18% per annum, payable at maturity. The loan and any accumulated interest are due eighteen months after the advance date. As a bonus for the loan, the lenders were issued 2,000,000 common share purchase warrants, exercisable at $0.05 for eighteen months. The fair value of warrants issued was determined using the Black-Scholes option pricing model. See note 11 During the year, the maturity date on the loan and the warrants were extended to August 3, 2025.
As at December 31, 2024, interest outstanding on the loan was $34 (December 31, 2023 - $16).
9. Deferred compensation
Total deferred compensation at December 31, 2024 is $179 (December 31, 2023 - $164). Of the balance, $110 (December 31, 2023 - $102), is payable to one former employee with whom a settlement and payment plan has been reached.
10. Investment tax credits and income taxes
| The Company's expected tax rate is different from the combined federal and provincial income tax rate in Canada. The difference comes from the following elements | 2024 | 2023 |
|---|---|---|
| $ (685) | $ (53) | |
| Earnings before income taxes | ||
| Expected tax recovery calculated using the combined federal and provincial tax rate in Canada of 26.5% (26.5% at December 31, 2023) | (182) | (14) |
| Adjustments for the following items | ||
| Permanent differences and others | 29 | 9 |
| Change in temporary differences for which no tax assets are recorded | 153 | 5 |
| $ - | $ - |
As at December 31, 2024, the Company has the following gross temporary differences and losses for which no deferred tax asset was recognized:
| 2024 | 2023 | |
|---|---|---|
| Fixed assets | $ 1 | $ 1,194 |
| Non-capital losses | 53,132 | 52,349 |
| Share issuance costs | 96 | 222 |
| R&D credits | 883 | 883 |
| SRED expenditures | 7,220 | 7,220 |
| Other | - | (18) |
| $ 61,332 | $ 61,850 |
14
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
- Investment tax credits and income taxes...continued
As at December 31, 2024, the Company has the following non-capital losses which are available to reduce taxable income in future periods, for which no deferred tax asset has been recognized in the consolidated statement of financial position, that can be carried forward to the following years:
| United States | Canada | |
|---|---|---|
| December 31, 2028 | $ 5,655 | $ 8 |
| December 31, 2029 | 3,896 | 69 |
| December 31, 2030 | 1,985 | 259 |
| December 31, 2031 | 3,125 | 432 |
| December 31, 2032 | 1,769 | 400 |
| December 31, 2033 | 2,739 | 508 |
| December 31, 2034 | 3,481 | 866 |
| December 31, 2035 | 2,009 | 423 |
| December 31, 2036 | 50 | 839 |
| December 31, 2037 | 564 | 2,840 |
| December 31, 2038 | 1,436 | 5,942 |
| December 31, 2039 | 566 | 5,114 |
| December 31, 2040 | 1 | 1,424 |
| December 31, 2041 | 115 | 2,260 |
| December 31, 2042 | - | 1,416 |
| December 31, 2043 | - | 2,157 |
| December 31, 2044 | - | 784 |
| $ 27,391 | $ 25,741 |
The Company also has Research and Development expenditures of approximately $7,220 (2023 - $7,220) available to reduce taxable income in Canada. These expenditures are available without expiry.
The Company also has Investment Tax Credits of $1,997 (2023 - $1,997) available to offset future Canadian federal tax obligations. These tax credits commence to expire in 2030.
The Company also has Research Credits of $466 (2023 - $466) available to offset future US federal tax obligations. These tax credits commence to expire in 2029.
Included in other receivables is an amount of $nil (2023 - $50) related to scientific research and development investment tax credits. This amount has been included in research and development expenses on the statement of net loss and comprehensive loss.
The Company's subsidiary which operates in California has a combined federal and state tax rate of 27.98%. The US federal tax rate is 21.0%.
- Share capital
The Company has an unlimited number of no-par common shares authorized for issuance with 20,900,996 (December 31, 2023 – 20,900,996) shares outstanding.
Warrants
On June 8, 2022, the Company announced it had received approval from the TSX Venture Exchange on the extension of 5,137,203 common share purchase warrants (the "Warrants") which were issued as part of the private placement of the Company on December 31, 2020. The Warrants, previously set to expire on June 15, 2022, expired on June 15, 2024. Holders of Warrants will not receive an amended Warrant certificate. The fair value of the Warrants was not affected as a result of the modification. The fair value of the Warrants was measured immediately before and after the modification. The fair value of Warrants after the modification was lower than the previous amount calculated at $334 using a Black-Scholes computation with the assumptions of a volatility of 164%, risk free interest rate of 0.27%, expected life of six-months with no expected dividend yield. Since the calculated value was lower, no change was recorded.
On February 3, 2023, the Company entered into a loan agreement with the Chief Executive Officer and a member of the Board of Directors in the amount of $100. As a bonus for the loan, the lenders were issued 2,000,000 common share purchase warrants exercisable at $0.05 for eighteen months. The fair value of warrants issued was determined using the Black-Scholes option pricing model. The underlying expected volatility was determined by reference to historical data of the Company's shares over the expected life of the options. The assumptions were 127% volatility, risk free interest rate of 3.05%, expected life of eighteen (18) months resulting in an average value of $0.021 per warrant or $42 in aggregate. On August 3, 2024, the maturity date on the warrants were extended to August 3, 2025.
15
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
11. Share capital...continued
Warrants...continued
As at December 31, 2024 and December 31, 2023, the Company has the following warrants with average exercise prices and expiry dates outstanding:
| Number of whole share warrants | Average exercise price | Expiry date | |
|---|---|---|---|
| Balance, December 31, 2022 | 11,280,775 | 0.65 | |
| Issued (see note 8) | 2,000,000 | 0.05 | Aug 3, 2025 |
| Balance, December 31, 2023 | 13,280,572 | 0.56 | |
| Expired | (11,280,775) | 0.65 | |
| Balance, December 31, 2024 | 2,000,000 | 0.05 |
Stock option plan
The Board of Directors of the Company has approved and implemented a stock option plan (the "Plan"). Pursuant to the Plan, the board may from time to time at its discretion, and in accordance with regulatory requirements, grant non-transferable options to purchase shares to directors, officers, employees and consultants of the Company, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares at the time of the grant. Pursuant to the Plan, the maximum number of common shares reserved for issuance in any twelve-month period to any one employee other than a consultant may not exceed 5% of the issued and outstanding common shares at the date of the grant.
As at December 31, 2024 and 2023, the Company has the following options with weighted average exercise prices outstanding:
| Stock options | Weighted average exercise price | |
|---|---|---|
| Outstanding as at December 31, 2022 | 1,374,980 | $ 0.36 |
| Expired | (3,332) | 4.50 |
| Outstanding as at December 31, 2023 | 1,371,648 | $ 0.34 |
| Expired or forfeited | (1,371,648) | 0.34 |
| Outstanding as at December 31, 2024 | - |
Share-based compensation is recorded as an increase to contributed surplus and is transferred to share capital when the underlying options are exercised. Total share-based compensation expense during the year ended December 31, 2024 was $10 (2023 – $40). The fair value of the options issued in 2022 was determined using the Black-Scholes option pricing model. The underlying expected volatility was determined by reference to historical data of the Company's shares over the expected life of the options. The assumptions were volatility of 127%, risk free interest rate of 1.53%, expected life of 1 year.
12. Cash flow information
Net change in non-cash working capital items is comprised of:
| 2024 | 2023 | |
|---|---|---|
| Trade and other receivables | $ 56 | $ (36) |
| Trade and other liabilities | 604 | 723 |
| Deferred compensation | 15 | (4) |
| $ 675 | $ 683 |
16
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
13. Key management personnel compensation
The key management personnel have been identified as the directors and officers of the Company based on their authority and responsibility for planning and directing the activities of the Company. By title, these are the independent directors, Chief Executive Officer, Chief Technology Officer, Chief Financial Officer, VP Product Management, VP Engineering, and Senior VP Sales. The remuneration of key management personnel who held these positions during the year was as follows:
| 2024 | 2023 | ||
|---|---|---|---|
| Salaries and fees | $ | 422 | $ 456 |
| Share-based compensation | 5 | 22 | |
| $ | 427 | $ 478 |
Salaries include cash payments for base salaries. Director's fees include meeting fees and any Leonovus specific travel expenses incurred. Share-based compensation includes the compensation expense recognized during the year for key management personnel. There were no stock options and no warrants exercised by key management personnel in 2024 (2023 – Nil).
14. Related party transactions
During the fiscal year ended December 31, 2024, the Company incurred $240 (2023 - $240) of consultant expenses to a Company controlled by the Chief Executive Officer.
During the fiscal year ended December 31, 2024, the Company incurred $75 (2023 - $69) of consultant expenses by the Chief Financial Officer.
During the fiscal year ended December 31, 2024, the Company incurred $7 (2023 - $50) of consultant expenses by the Chief Technology Officer.
Included in trade and other liabilities are amounts owed to directors of $113 (2023 - $56) and key management of $1,024 (2023 - $604).
On February 3, 2023, the Company entered into a loan agreement with the Chief Executive Officer and a member of the Board of Directors in the amount of $100 (see Note 8).
15. Financial instruments
The Company's financial instruments and the nature of the risks which they may be subject to are set out in the following table.
| Risks | ||||
|---|---|---|---|---|
| Credit | Liquidity | Market | ||
| Foreign Exchange | Interest Rate | |||
| Cash | Yes | Yes | ||
| Trade receivables | Yes | |||
| Trade and other liabilities | Yes | Yes | ||
| Loan payable | Yes | Yes | ||
| Deferred compensation | Yes | Yes |
The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate and foreign exchange rate risk). The Company's management team carries out risk management with guidance from the Audit Committee under the direction of the Board of Directors. The Board of Directors also provides regular guidance for overall risk management. Management's assessment of the Company's exposure, objectives and processes for managing financial risks, as noted below, has not changed from the prior year, unless otherwise disclosed.
Credit risk
Credit risk is the risk of loss associated with counterparty's inability to fulfill its payment obligations. The Company's credit risk is primarily attributable to cash. The Company's maximum credit risk at December 31, 2024 is $8 (December 31, 2023 - $1). Management does not believe the Company is exposed to significant credit risk.
17
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
- Financial instruments...continued
Cash
Cash consists of bank balances. Credit risk associated with cash is minimized substantially by ensuring that these financial assets are invested in Schedule 1 chartered Canadian Banks.
Liquidity risk
The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. Management has significantly reduced expenses over the last 18 - 30 months and continues to monitor the Company's expenses carefully. As at December 31, 2024, the Company had cash and trade receivables of $57 (December 31, 2023 - $106) and trade and other liabilities and loan payable of $2,314 (December 31, 2023 - $1,659).
The following are the contractual maturities of the undiscounted cash flows of financial liabilities as at December 31, 2024.
The amounts presented in the below maturity analysis represent the undiscounted future cash flows and as a result, they may differ from the net book value.
| Future value | 2025 | 2026 | 2027 and after | |
|---|---|---|---|---|
| Trade and other liabilities | $ 2,001 | $ 2,001 | $ - | $ - |
| Deferred compensation | 179 | 179 | - | - |
| Loan | 134 | 134 | - | - |
| Total financial liabilities | $ 2,314 | $ 2,314 | $ - | $ - |
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the fair value of a financial instrument or its future cash flows. The Company is currently not subject to market risk.
- Capital management
The Company's objective is to maintain sufficient capital base so as to maintain investor, creditor and customer confidence and to sustain future development of the business and provide the ability to continue as a going concern. Management defines capital as the Company's shareholders' equity. The Board of Directors does not establish quantitative return on capital criteria for management; but rather promotes year over year sustainable liquidity. The Company currently has not paid any dividends to its shareholders.
The Company is not subject to any statutory capital requirements and has no commitments, other than its options, to sell or otherwise issue common shares.
There were no changes in the Company's approach to capital management during the period.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.
18
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
17. Subsequent events
(a) On September 5, 2024, the Company and Wellfield Technologies Inc., a Company listed on the TSXV under the stock symbol WFLD, entered into a definitive agreement (the "Definitive Agreement") outlining the terms upon which the Company will acquire all of the issued and outstanding common shares in the capital of Tradewind Markets Inc. ("Tradewind"), a wholly-owned subsidiary of Wellfield incorporated under the laws of Delaware. Subsequent to December 31, 2024, and under the terms of the Definitive Agreement, the Company plans to acquire all of the issued and outstanding common shares in the capital of Tradewind Markets, Inc., for an aggregate of 562,500,000 pre-consolidated common shares in the capital of the Company (corresponding to 36,000,000 common shares on a post-consolidation basis), which will result in a RTO of the Company under the policies of the TSXV. In connection with the completion of the RTO, The Company will change its name to "Tradewind Precious Metals Exchange Inc.", or such other name as may be determined by the parties and approved by the TSXV.
In connection with the RTO, the Company entered into an agreement with Research Capital Corporation as the sole agent and sole bookrunner (the "Agent") for a commercially reasonable efforts, private placement offering (the "Offering") of a combination of securities for minimum aggregate gross proceeds of C$4,000,000 with an Agent option of 15%, consisting of (i) debt equity subscription receipts ("Debt Equity Subscription Receipts") at a price of C$2,000 per Debt Equity Subscription Receipt; and (ii) equity subscription receipts ("Equity Subscription Receipts") at a price of C$0.50 per Equity Subscription Receipt.
Each Debt Equity Subscription Receipt will entitle the holder thereof, upon the satisfaction of the Escrow Release Conditions (as defined herein) to receive one debt equity unit (a "Debt Equity Unit"). Each Debt Equity Unit will consist of: (i) one secured 14% convertible debenture ("Convertible Debenture") with a principal face value of C$1,000 per Convertible Debenture; (ii) 2,000 common shares; and (iii) 4,000 common share purchase warrants (the "Warrants"). The Convertible Debentures will be secured upon closing of the RTO by a security agreement granting a first ranking security interest in the physical gold purchased (held at the Royal Canadian Mint) by the Resulting Issuer in the amount of C$1,000 per Debt Equity Unit issued (50%). The Resulting Issuer may not issue any further securities that rank senior or pari-passu to the Convertible Debentures.
Each Equity Subscription Receipt will entitle the holder thereof, upon the satisfaction of the Escrow Release Conditions (as defined herein) to receive one equity unit ("Equity Unit"). Each Equity Unit will consist of one common share and one Warrant.
Each Warrant will entitle the holder to purchase one Resulting Issuer Share (a "Warrant Share") at an exercise price of C$0.625 per Warrant Share until the date that is 60 months following the satisfaction or waiver of the Escrow Release Conditions.
Escrow Release Conditions - The gross proceeds of the Offering, less the Agent's expenses and 50% of the cash commission (the "Escrowed Funds"), will be deposited and held by a licensed Canadian trust company or other escrow agent (the "Escrow Agents"). The Escrowed Funds (less the remaining 50% of the cash commission and any remaining costs and expenses of the Agent) will be released from escrow to the Resulting Issuer, as applicable, upon satisfaction of the following conditions (collectively, the "Escrow Release Conditions") no later than the 120th day following the Closing Date (the "Escrow Release Deadline"), including (i) the completion, satisfaction or waiver of all conditions precedent to the RTO in accordance with the Definitive Agreement, to the satisfaction of the Agent; (ii) the completion of the Share Consolidation and Name Change; (iii) the receipt of all required shareholder and regulatory approvals, including, without limitation, the conditional approval of the TSXV for the listing of the Resulting Issuer Shares and the RTO; (iv) the Resulting Issuer securities issued in exchange for the underlying securities not being subject to any statutory or other hold period in Canada; (v) the representations and warranties of the Company contained in the agency agreement to be entered into in connection with the Offering being true and accurate in all material respects, as if made on and as of the escrow release date; and (iv) the Company and the Agent having delivered a joint notice and direction to the Escrow Agents, confirming that the conditions set forth in (i) to (V) above have been met or waived.
Tradewind is at the forefront of the digital gold market, leveraging blockchain technology and a unique collaboration with a sovereign mint to provide investors with digital ownership of securely custodied gold, along with powerful 24/7 trading solutions. Through its flagship products, VaultChain™ Gold and VaultChain™ Silver, Tradewind has digitized ownership of over CDN$170 million in physical metal on its platform. In the coming months, Tradewind will introduce a suite of smart contract-based decentralized finance (DeFi) services, including an Automated Market-Maker (AMM) for instant settlement in spot gold trading, and products offering investors a unique opportunity to generate yield on gold holdings, denominated in gold. Tradewind's collaboration with a sovereign mint to digitize ownership of physical metal combined with its blockchain-based trading ecosystem is one of a kind and represents a pivotal advancement in the physical precious metals market. This proprietary platform removes barriers for retail investors, enhances efficiencies for institutions, and significantly lowers trading costs. Thanks to its innovations in gold digitization and blockchain-based trading, Tradewind is well-positioned to capitalize on increasing demand from both institutional and retail investors seeking an accessible and affordable hedge against economic and geopolitical uncertainty.
19
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
17. Subsequent events...continued
(a)...continued
Tradewind will enter a support agreement with Wellfield Technologies to enhance its platform's capabilities. Under this agreement, Wellfield will supply a team of professionals with extensive experience in electronic trading, market structure, gold investment management, market operations, cryptography, and blockchain technology. This collaboration aims to ensure seamless technology transfer and operational support during the initial 18 months of Tradewind's service expansion, reinforcing its position as a leader in the digital gold trading landscape.
Pursuant to the Definitive Agreement, a newly incorporated subsidiary of the Company will amalgamate with a newly incorporated subsidiary of Tradewind under the Business Corporations Act (Ontario), and such resulting entity will become a wholly owned subsidiary of the Resulting Issuer. On completion of the RTO, the Resulting Issuer will issue replacement common shares in the capital of the Resulting Issuer (the "Resulting Issuer Shares") and replacement warrants to purchase Resulting Issuer Shares to the current holders of Leonovus Shares and the current holders of warrants to purchase Leonovus Shares. Any remaining stock options of the Company will be cancelled on closing of the RTO.
The full particulars of the RTO, and the Resulting Issuer will be described in the management information circular of the Company (the "RTO Circular") prepared in accordance with the policies of the TSXV. A copy of the RTO Circular will be available electronically on SEDAR+ (www.sedarplus.ca) under the Company's issuer profile in due course. It is anticipated that an annual and special meeting of the securityholders of the Company will be held in mid 2025 (the "RTO Meeting").
Shareholder approval at the RTO Meeting is required for several of the transactions described in this press release, including: (i) the change of name to "Tradewind Precious Metals Exchange Inc."; (ii) the Stock Consolidation; (iii) the approval of the RTO; (iv) the election of directors; (v) the appointment of auditors; (vi) the adoption of new securities compensation arrangements; and (vii) the adoption of new by-laws. Each of the resolutions will require approval by a 50% majority of votes cast at the RTO Meeting, other than the resolutions to approve the change of name and the Stock Consolidation, which will require approval by two-thirds (66 2/3%) of the votes cast at the RTO Meeting. The resolution for approval of the RTO will also require approval by disinterested shareholders of the Company.
In support of the RTO and related transactions, each of the directors and officers of the Company, representing an aggregate of 1,429,175 Leonovus Shares (approximately 7% of the issued and outstanding Leonovus Shares) have entered into a voting support agreement with Wellfield in support of the RTO. The respective boards of directors of each of Wellfield and the Company, following consultation with their financial and legal advisors, have unanimously approved the Definitive Agreement and the RTO.
The Resulting Issuer Shares issuable to Wellfield will be subject to TSXV escrow policies and releasable in tranches over a period of 36 months following the closing of the RTO. In addition, 45% of the Resulting Issuer Shares issuable to Wellfield shall be subject to contractual escrow and releasable in tranches over 24 months following the closing of the RTO.
In conjunction with the RTO, Wellfield will also provide to the Resulting Issuer: (i) an intellectual property support agreement for post-closing services and support related to the Tradewind business valued at approximately $1,000,000; and (ii) a customary non-competition agreement for a term of 5 years.
Wellfield and the Resulting Issuer will also enter into an investor rights agreement granting Wellfield a participation rights in future Resulting Issuer financings, subject to Wellfield holding at least 5% of the voting rights applicable to the outstanding Resulting Issuer Shares.
Completion of the RTO is subject to several conditions, including, but not limited to, receipt of the Company's shareholder approval, receipt of TSXV approval, closing of the Financing, completion of certain upgrades to the Tradewind platform, no material adverse change having occurred for either Wellfield nor the Company, and compliance with the terms of the Definitive Agreement by each of Wellfield and the Company. There can be no assurance that the RTO will be completed as proposed or at all.
Upon completion of the RTO, the current directors and officers of the Company will resign and the board of directors of the Resulting Issuer (the "Resulting Issuer Board") will be comprised of four persons nominated by Wellfield and one person nominated by the Company for appointment to the Resulting Issuer Board at the RTO Meeting, to hold office until the next annual general meeting of the Resulting Issuer or until their successors are elected or appointed. Wellfield will nominate the Chief Executive Officer, the Chief Financial Officer and the Chief Operating Officer of the Resulting Issuer for appointment by the Resulting Issuer Board.
Investors are cautioned that, except as disclosed in the RTO Circular to be prepared in connection with the RTO, any information released or received with respect to the RTO may not be accurate or complete and should not be relied upon. Trading in the securities of the Company should be considered highly speculative.
The Definitive Agreement was negotiated at arm's length between representatives of Wellfield and the Company. The Leonovus Shares will remain halted pending further filings with the TSXV. The Company may seek waivers or exemptions from certain listing requirements of the TSXV in connection with the RTO, including the requirement to obtain a sponsor for the RTO. However, there can be no assurance that any waivers will be obtained. If a waiver from the sponsorship requirement is not obtained, a sponsor will be identified later. No deposit, advance or loan has been made or is to be made in connection with the RTO.
20
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2024 and 2023
(In thousands of Canadian dollars)
- Subsequent events...continued
(b) In conjunction with the Tradewind Markets, Inc. acquisition, the Company plans to complete a shares for debt transaction with two Directors for a bridge loan of $129,000 by the issuance of 4,031,250 shares of the Company issued at a price of $0.032 and the Company plans to complete a shares for debt transaction with management, directors and consultants by the issuance of 27,569,313 shares of the Company issued at a price of $0.032 in exchange for payables totaling $882,218. Under the debt settlement agreement, management has forgiven $288,750 of additional payables to management.
(c) On January 31, 2024, the Company announced that it has signed a non-binding Letter of Intent to sell substantially all its software and patent assets to Cylentium Research Ltd. for $2,500,000 in an all-cash transaction. The Company and Cylentium expected closing of the transaction to be before the end of June 2024. Because the Company plans to sell substantially all its assets, the transaction will require all necessary approvals including, but not limited to, approval by not less than 66 2/3% of the votes cast by the Company's shareholders. Closing of the transaction will also be subject to customary conditions and third-party consents for the transfer of the assets subject to the Transaction, where applicable. In February 2025, the Company cancelled the proposed sale of the Company's current software and patents to Cylentium Research Ltd.
21