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LeoNovus Inc — Audit Report / Information 2025
Apr 22, 2026
46421_rns_2026-04-22_36f82e8c-a279-4f6f-a4a3-bae783e8beff.pdf
Audit Report / Information
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Leonovus
Consolidated Financial Statements
Leonovus Inc.
Years ended December 31, 2025 and 2024
(Expressed in Canadian Dollars)
Leonovus Inc.
Consolidated Financial Statements
December 31, 2025 and 2024
| TABLE OF CONTENTS | PAGE |
|---|---|
| Independent Auditor's Report | 3 |
| Consolidated statements of net loss and comprehensive loss | 6 |
| Consolidated statements of financial position | 7 |
| Consolidated statements of changes in shareholders' equity | 8 |
| Consolidated statements of cash flows | 9 |
| Notes to the consolidated financial statements | 10 - 19 |
KMSS
Kenway Mack Slusarchuk Stewart LLP Chartered Professional Accountants
Celebrating 35 years
Independent Auditor's 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, 2025 and 2024 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, 2025 and 2024, and its financial performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.
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 Auditor's 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, 2025 the Company had a deficit of $57,651,000. 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 auditor's report.
Information Other than the Consolidated Financial Statements and Auditor's 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.
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 Auditor's Report (continued)
We obtained Management's Discussion and Analysis prior to the date of this auditor's 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 auditor's report. We have nothing to report in this regard.
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 IFRS Accounting Standards as issued by the International Accounting Standards Board, 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.
Auditor's 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 auditor's 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 auditor's 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 auditor's 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 Auditor’s 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 Auditor’s report is Scott Reinarz, CPA, CA.
Kemley Mack Shwarchuk Stewart
April 13, 2026
Calgary, Alberta
Chartered Professional Accountants
6
Leonovus Inc.
Consolidated statements of net loss and comprehensive loss
Years ended December 31, 2025 and 2024
(in thousands of Canadian dollars)
| Note | 2025 | 2024 | |
|---|---|---|---|
| Expenses | |||
| General and administrative | 3 | $ 810 | $ 648 |
| Loss from operating activities | 810 | 648 | |
| Non-operating income (expense) | |||
| Finance costs | (18) | (36) | |
| Foreign exchange | - | (1) | |
| Net loss | (828) | (685) | |
| Other comprehensive income (loss) | |||
| Foreign currency translation gain (loss) | 16 | (29) | |
| Total comprehensive loss | $ (812) | $ (714) | |
| Net loss per share | |||
| Basic and diluted | $ (0.04) | $ (0.03) | |
| Weighted average number of outstanding shares | 20,900,996 | 20,900,996 |
The accompanying notes are an integral part of these consolidated financial statements
Leonovus Inc.
Consolidated statements of financial position
As at December 31, 2025 and 2024
(in thousands of Canadian Dollars)
| Note | 2025 | 2024 | |
|---|---|---|---|
| Assets | |||
| Current Assets | |||
| Cash | $ | 20 | $ 8 |
| Trade and other receivables | 4 | 54 | 49 |
| Total assets | $ | 74 | $ 57 |
| Liabilities and Shareholders' Equity | |||
| Current Liabilities | |||
| Trade and other liabilities | 5 | $ 2,821 | $ 2,001 |
| Loan payable | 6 | 152 | 134 |
| Deferred compensation | 7 | 170 | 179 |
| Total liabilities | 3,143 | 2,314 | |
| Shareholders' Equity | |||
| Share capital | 9 | 36,675 | 36,675 |
| Warrants | 9 | 3,001 | 3,001 |
| Contributed surplus | 9 | 7,751 | 7,751 |
| Accumulated other comprehensive income | 7,155 | 7,139 | |
| Deficit | (57,651) | (56,823) | |
| Total shareholders' equity | (3,069) | (2,257) | |
| Total liabilities and shareholders' equity | $ | 74 | $ 57 |
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
7
Leonovus Inc.
Consolidated statements of changes in shareholders' equity
Years ended December 31, 2025 and 2024
(in thousands of Canadian dollars)
| Number of common shares outstanding | Share capital | Warrants | Contributed surplus | Accumulated comprehensive income (loss) | Deficit | Total equity | |
|---|---|---|---|---|---|---|---|
| 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) |
| Net loss | - | - | - | - | (828) | (828) | |
| Foreign currency translation gain | - | - | - | 16 | - | 16 | |
| Balance as at December 31, 2025 | 20,900,996 | $ 36,675 | $ 3,001 | $ 7,751 | $ 7,155 | $ (57,651) | $ (3,069) |
The accompanying notes are an integral part of these consolidated financial statements
Leonovus Inc.
Consolidated statements of cash flows
Years ended December 31, 2025 and 2024
(in thousands of Canadian dollars)
| Note | 2025 | 2024 | |
|---|---|---|---|
| Cash provided by (used in) the following activities: | |||
| Operating activities | |||
| Net loss | $ | (828) | $ (685) |
| Adjustments to net loss: | |||
| Share-based compensation | 9 | - | 10 |
| Accretion of loan payable | 6 | 18 | 36 |
| Net change in non-cash operating working capital | 10 | 806 | 675 |
| Net cash used in operating activities | (4) | 36 | |
| Net increase (decrease) in cash | (4) | 36 | |
| Effects of currency translation on cash | 16 | (29) | |
| Cash, beginning of the year | 8 | 1 | |
| Cash, end of the year | $ | 20 | $ 8 |
| Additional Information | |||
| Interest received included in operating activities | $ | - | $ - |
| Income tax paid included in operating activities | $ | - | $ - |
The accompanying notes are an integral part of these consolidated financial statements
9
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2025 and 2024
(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 IFRS Accounting Standards ("IFRS") contemplates the continuation of the Company as a going concern. During the year ended December 31, 2025 the Company has not generated sufficient revenues to achieve and sustain profitability, has a net loss of $828 (December 31, 2024 – $685) and as of December 31, 2025 had a deficit of $57,651 (December 31, 2024 - $56,823). 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 IFRS Accounting 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, 2025.
On April 13, 2026, 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(m).
(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, 2025 under the Business Corporations Act (Ontario)) and 1000997809 Ontario Inc. (a company incorporated on September 5, 2025 under the Business Corporations Act (Ontario)). 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.
10
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2025 and 2024
(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., 1000998579 Ontario Inc. and 1000997809 Ontario Inc. is the Canadian dollar (CAD). The functional currency of Leonovus USA Inc. 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 income 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) 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.
(h) 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.
(i) 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.
11
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2025 and 2024
(In thousands of Canadian dollars)
- Summary of material accounting policies...continued
(i) Share-based compensation...continued
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.
(j) 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.
(k) 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, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future and provided that the Company can control the reversal of those differences. 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.
12
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2025 and 2024
(In thousands of Canadian dollars)
- Summary of material accounting policies...continued
(I) 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.
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 8. The tax rules in the numerous jurisdictions in which the Company operates are also taken into consideration.
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.
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.
13
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2025 and 2024
(In thousands of Canadian dollars)
- Summary of material accounting policies...continued
(m) 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 |
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.
14
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2025 and 2024
(In thousands of Canadian dollars)
2. Summary of material accounting policies...continued
(m) Financial instruments...continued
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.
3. General and administrative expenses
Expenses incurred by the Company are broken down as follows for the years ended December 31:
| 2025 | 2024 | ||
|---|---|---|---|
| Corporate administration | $ | 44 | $ 70 |
| Consultant fees | 451 | 463 | |
| Professional fees | 315 | 115 | |
| $ | 810 | $ 648 |
Included in Corporate administration are $Nil related to non-cash stock-based compensation expense for 2025 compared to $10 in 2024.
4. Trade and other receivables
Trade and other receivables consist primarily of HST receivable of $54 (December 31, 2024 - $49). There are no expected credit losses associated with these receivables (December 31, 2024 - $Nil).
5. Trade and other liabilities
Trade payables and accrued liabilities for the Company as at December 31 are broken down as follows:
| 2025 | 2024 | |
|---|---|---|
| Trade payables | $ 2,658 | $ 1,830 |
| Accrued liabilities | 163 | 171 |
| $ 2,821 | $ 2,001 |
6. Loan payable
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 9. During 2024, the maturity date on the loan and the warrants were extended to August 3, 2025. On August 3, 2025, the maturity date on the loan and the warrants were extended to August 3, 2026.
As at December 31, 2025, interest outstanding on the loan was $52 (December 31, 2024 - $34).
7. Deferred compensation
Total deferred compensation at December 31, 2025 is $170 (December 31, 2024 - $179). Of the balance, $105 (December 31, 2024 - $110), is payable to one former employee with whom a settlement and payment plan has been reached.
15
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2025 and 2024
(In thousands of Canadian dollars)
8. 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 | 2025 | 2024 |
|---|---|---|
| Earnings before income taxes | $ (828) | $ (685) |
| Expected tax recovery calculated using the combined federal and provincial tax rate in Canada of 26.5% (26.5% at December 31, 2024) | (220) | (182) |
| Adjustments for the following items | ||
| Permanent differences and others | 26 | 29 |
| Change in temporary differences for which no tax assets are recorded | 194 | 153 |
| $ - | $ - |
As at December 31, 2025, the Company has the following gross temporary differences and losses for which no deferred tax asset was recognized:
| 2025 | 2024 | |
|---|---|---|
| Fixed assets | $ 1 | $ 1 |
| Non-capital losses | 52,760 | 53,132 |
| Share issuance costs | - | 96 |
| R&D credits | 883 | 883 |
| SRED expenditures | 7,220 | 7,220 |
| $ 60,864 | $ 61,332 |
As at December 31, 2025, 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 | $ 5,386 | $ 8 |
| December 31, 2029 | 3,711 | 69 |
| December 31, 2030 | 1,891 | 259 |
| December 31, 2031 | 2,976 | 432 |
| December 31, 2032 | 1,682 | 400 |
| December 31, 2033 | 2,609 | 508 |
| December 31, 2034 | 3,316 | 866 |
| December 31, 2035 | 1,913 | 423 |
| December 31, 2036 | 48 | 839 |
| December 31, 2037 | 538 | 2,840 |
| December 31, 2038 | 1,368 | 5,942 |
| December 31, 2039 | 539 | 5,114 |
| December 31, 2040 | 1 | 1,424 |
| December 31, 2041 | 110 | 2,260 |
| December 31, 2042 | - | 1,416 |
| December 31, 2043 | - | 2,157 |
| December 31, 2044 | - | 784 |
| December 31, 2045 | - | 926 |
| $ 26,091 | $ 26,667 |
The Company also has Research and Development expenditures of approximately $7,220 (2024 - $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 (2024 - $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 (2024 - $466) available to offset future US federal tax obligations. These tax credits commence to expire in 2029.
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%.
16
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2025 and 2024
(In thousands of Canadian dollars)
- Share capital
The Company has an unlimited number of no-par common shares authorized for issuance with 20,900,996 (December 31, 2024 – 20,900,996) shares outstanding.
Warrants
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 will be issued 2,000,000 common share purchase warrants (subject to TSX-V approval), 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. On August 3, 2025, the maturity date on the warrants were extended to August 3, 2026.
As at December 31, 2025 and December 31, 2024, 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, 2024 | 2,000,000 | 0.05 | Aug 3, 2025 |
| Balance, December 31, 2025 | 2,000,000 | 0.05 | Aug 3, 2026 |
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, 2025 and 2024, the Company had Nil options outstanding.
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, 2025 was $nil (2024 – $11).
- Cash flow information
Net change in non-cash working capital items is comprised of:
| 2025 | 2024 | |
|---|---|---|
| Trade and other receivables | $ (5) | $ 56 |
| Trade and other liabilities | 820 | 604 |
| Deferred compensation | (9) | 15 |
| $ 806 | $ 675 |
- 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:
| 2025 | 2024 | |
|---|---|---|
| Salaries and fees | $ 420 | $ 422 |
| Share-based compensation | - | 5 |
| $ 420 | $ 427 |
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 2025 (2024 – Nil).
17
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2025 and 2024
(In thousands of Canadian dollars)
12. Related party transactions
During the fiscal year ended December 31, 2025, the Company incurred $240 (2024 - $240) of consultant expenses to a Company controlled by the Chief Executive Officer.
During the fiscal year ended December 31, 2025, the Company incurred $75 (2024 - $75) of consultant expenses by the Chief Financial Officer.
During the fiscal year ended December 31, 2025, the Company incurred $5 (2024 - $7) of consultant expenses by the Chief Technology Officer.
Included in trade and other liabilities are amounts owed to directors of $170 (2024 - $113) and key management of $1,439 (2024 - $1,024).
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 6).
13. 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 | ||||
|---|---|---|---|---|
| Market | ||||
| Credit | Liquidity | 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, 2025 is $20 (December 31, 2024 - $8). Management does not believe the Company is exposed to significant credit risk.
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, 2025, the Company had cash and trade receivables of $74 (December 31, 2024 - $57) and trade and other liabilities and loan payable of $3,143 (December 31, 2024 - $2,314).
The following are the contractual maturities of the undiscounted cash flows of financial liabilities as at December 31, 2025.
18
Leonovus Inc.
Notes to the consolidated financial statements
Years ended December 31, 2025 and 2024
(In thousands of Canadian dollars)
13. Financial instruments...continued
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 | 2026 | 2027 | 2028 and after | |
|---|---|---|---|---|
| Trade and other liabilities | $ 2,821 | $ 2,821 | $ - | $ - |
| Deferred compensation | 170 | 170 | - | - |
| Loan | 152 | 152 | - | - |
| Total financial liabilities | $ 3,143 | $ 3,143 | $ - | $ - |
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.
14. 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.
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