An Ottawa software firm that spent years trying to find a market for its data transfer and storage technology has sold its assets to a U.S. company for $2.5 million.
Leonovus announced this week that Delaware-based Cylentium Research Ltd. has acquired the Ottawa company’s software and intellectual property.
The all-cash transaction, which still needs the green light from Leonovus’s shareholders and regulators, including the TSX Venture Exchange, is expected to be finalized by the end of June.
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In a news release on Wednesday, CEO Michael Gaffney said the sale will leave Leonovus with a “significant amount of cash, a clean balance sheet and a public listing, positioning the company well to identify and complete an acquisition of assets or a reverse takeover.”
The TSX Venture Exchange halted trading of the company’s shares on Wednesday. In a statement the same day, Leonovus said it expects the TSX-V – which is owned by the same company that operates the Toronto Stock Exchange and caters to smaller, emerging enterprises – will migrate the firm to the lower-tier NEX Board, which provides a platform for companies that don’t meet the TSX-V’s listing requirements.
While Leonovus said it plans to use the proceeds from the sale to “acquire or develop” a business that can meet the TSX-V’s listing standards, it cautioned that “there can be no assurances that it will be able to do so before its listing is migrated” to the NEX Board.
The company also said it plans to settle $193,000 worth of debt by issuing 3.86 million common shares at a price of five cents per share.
The move marks Leonovus’s latest effort to stay afloat after failing to generate meaningful revenue from its software solution, which distributes and encrypts data across numerous cloud servers rather than a single on-premise location.
Leonovus, which sells its software on a monthly subscription basis, brought in only $5,000 in revenue in fiscal 2022, down from $78,000 the previous year and $327,000 in 2020. The company racked up a net loss of $3 million in fiscal 2022 as it struggled to find customers.
Nearly two years ago, Gaffney said he was hoping the company would turn the corner after receiving a standing offer to sell its products to the federal government.
At the time, Leonovus touted the secure file-sharing and data-transfer space as a multibillion-dollar market opportunity. The company said the industry was growing rapidly as the Internet of Things required more and more connected devices to wirelessly communicate with one another.
“Leonovus is well positioned with its technology to capitalize on the data storage growth trends in cloud computing,” management said in a report filed with regulators in April 2022.
The company’s shares, which were worth more than $5 in late February 2019, were trading at just four cents this week.