Leonovus (TSX-V:LTV) is making some changes to its product lineup in an attempt to get cash flowing into the business, claiming its latest major offering was too “futuristic” to garner public interest.
The Ottawa-based firm, which develops software-based storage solutions for enterprise businesses, gave a frank account of its business Wednesday as it released results for its second quarter.
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Leonovus’ financials show the firm continues to struggle: While its cash reserves stand at around $1.5 million, the company says it will need to bring in more cash before the end of the fiscal year.
Leonovus reported a net loss of $818,000 for the three months ended June 30, an improvement from $1.2 million from last year. The company says it has been working to reduce its operating costs, cutting expenses such as travel by 90 per cent year-over-year.
Leonovus did report revenues of roughly $19,000 for the quarter, which compares to nil from the same quarter last year – the company had gone through a dry streak of many quarters in a row without recording revenues.
The firm looked to turn around in the fall of 2017, raising financing to develop a new storage solution using blockchain technology. That hype helped to bring Leonovus’ stock to new highs of 63 cents as the company built out a team of more than 30 employees in Ottawa.
Today, however, the firm’s share price sits back down around two cents.
The problem, Leonovus CEO Michael Gaffney said in a release on Wednesday, was that its product was too far ahead of the curve in terms of market demand. Leonovus’ Vault offering provides companies with storage across multiple cloud servers rather than just one, offering an extra layer of redundancy in the event of widespread outages or cyber attacks.
Gaffney said in his statement that while companies are indeed flocking to the cloud for storage, the market isn’t yet ready to pay a premium for multi-cloud solutions.
“It became clear in late 2018 that while companies were moving their data to a single cloud, moving their data to Vault’s multi-cloud architecture was ‘futuristic,’” Gaffney said.
“The Vault technology was successful in all our proof of concept installations, but the purchase horizon was too far in the future. We were not solving an immediate IT problem.”
In response to the lack of demand, Leonovus is shifting its strategy once again.
The firm is launching a new product called Smart Filer in the coming weeks, which analyzes a company’s data management system and automatically shifts any rarely accessed files to lower-quality cloud storage, freeing up premium storage space for high-demand files. This will pair with another new product, Galaxa Smart Cloud, which will offer customers access to a marketplace of cloud vendors for their storage needs.
The hope is that these two new products will bring in the cash Leonovus needs to remain afloat. While the company says it is focused on turning on the revenue pumps, it may also have to consider additional debt or other strategic initiatives to bring in cash.
