Ottawa blockchain firm Leonovus records $5M loss as R&D spending ramps up

Leonovus posted a net loss of nearly $5 million in 2018 as it ramped up its spending on R&D and sales and marketing, the company announced this week.

The Ottawa firm (TSX-V:LTV), which makes software that uses blockchain technology to secure cloud-based data storage systems, had revenues of about $14,000 for the 12-month period ending Dec. 31.

At the same time, Leonovus’s overall expenditures rose dramatically in 2018. The company invested more than $1.1 million in research and development and nearly $1.6 million in sales and marketing, boosting its overall operating expenses to $5 million for the year ​– up substantially from its 2017 expenditures of about $1.6 million.

Leonovus’s net loss of $4.9 million in 2018 compared with a loss of $2.7 million a year earlier. The company has now racked up a total deficit of more than $30.6 million.

Leonovus said much of the additional spending was earmarked for employee salaries after the firm went on a hiring spree last year, boosting its headcount from about 10 to nearly 40 in anticipation of new contracts.

The company said it recently completed a successful trial with a major federal government department and said it expects to renew a contract with a major Canadian bank later in 2019. In financial documents filed this week, the firm also said it has landed a deal with mining services company Sherritt International.

In addition, Leonovus said it’s pursuing deals with “several new potential customers including another bank, new government departments and several multinationals.” The firm also said it’s negotiating with investment banks in the United States and Canada for new funding to further develop its digital security offering.

Leonovus had about $3.6 million in cash on hand at the end of 2018, compared with $7.6 million a year earlier. The company said it has implemented several “cost management initiatives” in an effort to trim expenses, adding it expects revenues to “ramp up” throughout the year thanks to new customer wins and the planned launch later this summer of a new “next-generation” data storage product featuring machine learning technology.

“We expect that this evolution of our multi-cloud storage solution to more of a data management platform gives us a stronger market appeal and a shorter sales cycle,” CEO Michael Gaffney said in a statement.

Shares in Leonovus were unchanged at 12 cents on the TSX Venture Exchange.