The Leonovus (OTC:OTC:LVNSF) unique enterprise data storage solution decouples and pulls all customer data into a secure overlay plane that spans the entire corporate infrastructure. All data is encrypted in flight and at rest. Bulk and archived data are ‘shredded’ into discrete, encrypted objects that are distributed across a mix of on-premises, cloud and multi-cloud storage — tagged, classified and blockchain-secured for an immutable chain of evidence.
In a nutshell, data is encrypted, shredded and spread. ESS for short. The software is protected by almost 50 patents registered or in the process of being so.
Even if a customer’s network is breached, hackers can’t use the data they access. Leonovus’ patented algorithms break archived data into individual software objects for storage — usually 25 objects, though this can be calibrated to the customer’s security requirements. Those objects are distributed across multiple storage nodes: even if one node is compromised, it does not contain the complete object set, rendering it unusable by attackers. Only authorized users can reconstitute files, needing just a proportion of the total object set — e.g., 16 of 25 if that’s the selected configuration. This 25/16 algorithm delivers six-9s (99.9999%) of data recovery probability and business continuity.
Leonovus runs on any storage platform – even bare metal. The standards-based technology ensures integration with the full range of cloud storage solutions including Amazon AWS S3, Amazon Glacier, and Oracle as well as data management solutions like Commvault and Cloudberry, and software-defined object storage protocols such as Open Stack Swift.
Leonovus 3.0 requires no additional hardware investment from the customer and deploys in just 30 minutes. Its scalability is limitless — into the petabyte range and beyond. Storage efficiency increases over time, so as data volumes grow so does the storage ROI.
Business continuity is assured with Leonovus 3.0, even during planned and unplanned downtime and while moving or consolidating entire data centers. This is because the full set of data objects to reconstitute a whole “shredded” file is not needed. If a storage node is offline or a piece of equipment fails, the system can still “fill in the blanks” to regenerate the data needed, with no delay.
Canadian Bank Contracts Leonovus for Hyper-Secure Multi-Cloud Software
On September 20, 2018 the company announced that it has signed a contract with a big 6 Canadian bank (thought to be National Bank) to install its software in a production deployment.
Over a period of ten months, Leonovus successfully demonstrated the benefits, and the performance, of its secure object-based storage solution in the bank's lab with non-production data. This contract marks the transition from a ten-month long laboratory test and verification process to an in-production deployment of the Leonovus software defined storage solution into a major financial institution. Leonovus will aggregate the institution's on-premises storage resources with multiple subscribed public clouds to provide the data resiliency, security, and architecture necessary for the bank to benefit from the lower costs and the increased flexibility from this hybrid, multi-cloud, data storage strategy.
"Migrating the data storage of large enterprises from on-premises to the public-cloud, or hybrid-cloud, while providing a hyper-secure single storage gateway to these storage endpoints, is a key strategic objective of the Company's technology. Enterprise customers, like the bank, can now easily use any public cloud solution without sacrificing corporate data governance, or controls, and benefit from significant cost savings while preventing cloud service provider or storage vendor lock-in. I would like to give kudos to the entire Leonovus team for the speed at which this project closed. To close an enterprise customer of this size from POC to production in ten months is extraordinary work," said Michael Gaffney, Chairman and CEO.
This is a huge, pivotal moment for the fledgling company in that a major corporate enterprise has formally recognized the ground-breaking technological solution the software represents. As such, it will accelerate the sales and prospect cycle probably by an order of magnitude.
In July 2018, the company also announced a solution sale to a South Florida investment company to create a secure cloud infrastructure to meet their archival data storage requirements. The Leonovus software defined storage solution ("SDS") allows the firm to safely access data from any location and meet their on-premise and cloud compliance data governance standards with security, flexibility, a path to manage their future data storage growth - at a much better price than traditional data storage.
"Leonovus is excited to support this US-based investment company and their business requirement for secure customer data with the flexibility to choose the most cost-efficient infrastructure for today and the future. The market continues to validate our strategy that enterprises want military-grade security, fully compliant data protection, lower data storage costs, flexibility, and simplicity – all in one package”.
Government of Canada Trials
In January 2018, Leonovus announced its approval for the GOC's Build in Canada Program which entitles the Company to a $500,000 purchase grant and a $1.5M simplified supply arrangement for any federal government department that purchases Leonovus software.
On Aug 18, 2018 another major trial was announced for a Government of Canada department.
Both federal departments are faced with managing a massive amount of data with the continuous pressure to reduce costs, and the ever-increasing requirements for compliance and ultra-secure data storage and retrieval.
Leonovus is currently in discussions with several other Government of Canada departments and expect more of these departments to install the software by the end of 2018.
Currently, there are fifty companies in the company's sales pipeline with a gross annual revenue potential of more than $8M CAD. The sales cycle is twelve to eighteen months, which means this revenue, except for current proof of concept invoices, would begin to appear in 2019. The current sales forecast includes only Canada and the USA.
"Going into the fall of 2018 we expect to increase the number of trial customers further and announce the conversion of our initial proof of concept ("POC") customers into production customers. To date, we have been 100% successful in retaining POCs and expect most if not all to convert into production customers. Over the past six months our primary investment was in product hardening and building out our marketing. We are very pleased with the sales funnel given that we only had two sales professionals on staff. We are currently increasing our sales staff and expanding our partner program. We believe we can increase our sales pipeline by a factor of five in the next twelve to eighteen months”.
On Sept 13, 2018, the company announced a new product offering - the Blockchain Evidence Locker. The Company is taking customer orders for trials in Q4 2018 and expects full deployment of this powerful solution in Q1 2019.
All law enforcement agencies, and related organizations, are faced with massive growth for storing digital evidence. This critical evidentiary information needs to remain true, tamperproof, and with a verifiable chain of custody. Car cams, body cams, CCTV, computers, and all forms of communication records, are driving this growth. Leonovus has developed the Blockchain Evidence Locker to address these needs.
The Blockchain Evidence Locker enables law enforcement organizations to address their storage requirements with confidence that their digital evidence remains available and cryptographically-verifiable. Leonovus' patented algorithms encrypt, shred and spreads data across a network of on-premises, hybrid or multi-cloud storage nodes – allowing for the most secure yet internally accessible form of object-based data storage that provides governance, risk management and compliance across the entire Blockchain Evidence Locker solution. The advanced distributed architecture minimizes latency, optimizes geo-availability, reduces remote backup costs and meets data sovereignty requirements.
Police forces, prosecutors and the courts are required to maintain a detailed chain of custody for all digital evidence. The Leonovus Blockchain Evidence Locker records all evidence submissions, supports access monitoring, reports on new evidence submissions along with update and deletion events. The Blockchain Evidence Locker is directly managed by the agency or police force giving them complete control over the process.
This solution allows authorized third-party organizations to access the evidence. Auditors can view and verify all digital activity regarding the evidentiary assets. This includes having a detailed audit of any changes to the information as well as having absolute knowledge about who has submitted, accessed, or updated the digital evidence.
"The Company has eight law enforcement and public safety agencies in its sales pipeline and we expect most of these agencies to start a paid trial product verification process. The Blockchain Evidence Locker has utility beyond the law enforcement and legal markets. Indeed, the GDPR regulations in Europe and the standard compliance requirements of many corporations demand that corporate data be managed much like an evidence locker," said Michael Gaffney, Chairman & CEO.
On March 28,2018 the company announced that Electronic Warfare Associates Inc. of Ottawa, Ontario and Herndon, Virginia, had been contracted to advise and coordinate the Leonovus submission to the National Institute of Standards and Technology (NIST) in Washington, DC for the company to obtain FIPS 140-2 certification. Leonovus would become one of the first companies in the world with embedded blockchain technology to receive FIPS 140-2 certification.
NIST created the FIPS 140-2 standard to coordinate the requirements and standards for cryptography modules. Protection of a cryptographic module within a security system is necessary to maintain the confidentiality and integrity of the information protected by the module. This standard specifies the security requirements that will be satisfied by such a module. The standard provides increasing, qualitative levels of security intended to cover a wide range of potential applications and environments. The security requirements cover areas related to the secure design and implementation of the cryptography. These areas include cryptographic module specification; cryptographic module ports and interfaces; roles, services, and authentication; key management; operational environment; finite state model; self-tests; design assurance; and mitigation of other attacks.
The FIPS 140-2 certification will enable Leonovus to sell its blockchain hardened software-defined storage solution into Canadian, U.S. governments and other regulated industries (such as financial and health-care institutions) that collect, store, transfer, share and disseminate sensitive but unclassified (SBU) information.
"Over the past nine months, Leonovus has maintained an internal audit cadence to meet the FIPS 140-2 certification standards. We are pleased to report that the company believes that it has achieved the requirements, based on internal testing. Electronic Warfare Associates will help manage the whole certification process for the company and is confident that our software will be certified later in the year. Many government agencies in the USA, Canada and around the world, require the FIPS 140-2 certification. Moreover, because of the robust requirements to meet the standard, enterprise customers also benefit. Our early sales traction with police and security agencies is accelerated because of our design and development to this standard”.
On Sept. 4, 2018 the company announced an update to its initial December 21, 2017 news release regarding plans for the launch of an Initial Coin Offering ("ICO") for securities in the form of a contract called a Simple Agreement for a Future Token ("SAFT"). The Company plans to release the first draft of the GALAXA Whitepaper before the end of October and launch the ICO before the end of 2018.
The SAFT will convert into tokens called GAAX, which is the underlying cryptocurrency for the Anything as a Service ("XaaS") marketplace called "GALAXA". The Company is in discussions with the Launchpad team of the Ontario Securities Commission ("OSC") for its support and the support of other Canadian securities administrators in developing GALAXA to ensure that the offering and issuance of GALAXA SAFTs are carried out in compliance with Canadian securities laws. The Company is also in discussions with the TSX Venture Exchange ("TSXV") with a view to listing the GAAX SAFTs for trading.
"Leonovus is applying to the regulators and the stock exchange to make the GAAX SAFT a publicly tradable security on the TSX Venture Exchange. If approved, unlike most cryptocurrencies, the GAAX SAFT will become a regulated security with the requirement for continuous public disclosure. This transparency exceeds the disclosure to investors compared to most other cryptocurrencies," said Michael Gaffney, Chairman and CEO.
The current cloud storage and compute marketplace is an oligopoly dominated currently by Amazon and Microsoft and GALAXA intends to challenge this market concentration. Gartner predicts 40%+ compounded growth rates for enterprise data storage and compute. GALAXA's blockchain technology is designed to manage this growth either in the cloud or on-premises and provide an open platform for developers to add new enterprise products/services.
The GALAXA protocol introduces a new blockchain architecture designed to accelerate the global development and implementation of XaaS offerings by independent developers that share a worldwide network of enterprise-grade distributed data storage and distributed compute assets.
Unlike the proposed technology of many ICO's, much of the core technology for GALAXA is already designed, developed and deployed by Leonovus. Since it began operations in 2011, the Company has invested $26 million in the development of its geo-distributed software-defined storage and distributed compute software. Large portions of this technology are already in trials with Leonovus customers. This software is the essential foundation technology for GALAXA. Leonovus will provide free, perpetual licenses to GALAXA for this software, which should accelerate the development of XaaS applications by independent entrepreneurial developers.
The GALAXA hybrid blockchain protocol provides the governance, risk management and compliance required by large enterprises as they need to extend standard IT controls into distributed cloud applications.
The Company believes that GAAX is the first cryptography designed for the exchange of value between a corporate information technology buyer, an application service provider, and a storage/compute infrastructure supplier. The GALAXA ICO is a solution for the enterprise market - unlike most consumer-focused ICO's.
Enterprise-class customers need a mechanism to discover, verify and use distributed services, be they cloud-based or on-premises, which meets their requirements for flexibility, efficiency, capability, security and compliance. Similarly, the providers of these enterprise-class XaaS in the GALAXA Marketplace, need a cost-effective mechanism to make their services available, including verified capabilities and quality of service, for a broad vendor-neutral set of customers across multiple verticals and target markets. GALAXA ensures that the exchange of services and payments is simple, efficient and verified with a Proof of Provided Service consensus algorithm and scales to millions of transactions per second.
"The development of many new global software products and services requires the use of a token or coin as the measure of value for services delivered or services bought. Distributed everything, at the edge, will become the norm. Without the use of a token, operating and monitoring distributed storage and computing by humans is not economically feasible. However, as larger public and private corporations look for blockchain-based applications and services, they will expect regulation as trust is critical for these organizations. Leonovus intends to be at the forefront of global, trusted, tokenized applications," said Gaffney.
It is expected that the planned ICO will include a public offering of SAFTs in Canada and a private placement offering of SAFTs to accredited investors in Canada and to equivalent investors in other jurisdictions in compliance with applicable securities laws of those jurisdictions.
“There can be no assurance that the Canadian securities administrators will provide a final receipt for the prospectus and there can be no assurance that the TSXV will accept the SAFTs for trading. Following the issue of SAFTs to investors, no GAAX Tokens will be issued pursuant to the SAFTs unless and until the Company successfully develops, builds, and launches the GALAXA Marketplace. The launch date is planned to occur within eighteen to twenty-four months after the close of financings. The ability to trade the GAAX Tokens will be subject to applicable securities and other laws and exchange rules at that time.”
It is speculated that up to $300 million may be raised by this ICO, representing $1 a share in value with the existing share float of 250 million shares out.
The company has spent 10 years and $25 million to develop this software. In the last quarterly report, it showed no realized revenue yet, and a cash burn rate of $1.2 million USD per quarter, with available cash of $8 million USD. This gives it a 2-year runway with no revenue. However, with the just announced bank order, the worm is about to turn, and revenue could rapidly ramp up in 2019 from existing customers and as more prospects sign on. The company is basically undiscovered in the USA with virtually no pink sheet trading volumes, although it is actively traded on the Canadian TSX Venture stock exchange
Lots of Takeaway
Signing of a production contract with a major Canadian bank after a Proof of Concept trial of only 10 months is a pivotal validation of the product. This order will literally make it an order of magnitude easier to close existing POC’s as well as make it far easier and faster to generate new prospects.
The indisputable security aspects the product offers in an age of ever escalating and ever severe data breaches, as well the prospect of significant storage cost savings, and with the inherent ease of using cloud storage across multiple clouds including on-prem storage, make it a truly compelling idea for corporates and government agencies. In many respects, the product is a potential market disruptor.
A version of the product specifically tailored to law enforcement agencies opens up a major new market for the product.
The imminent Leonovus ICO could raise up to $300 million to be deployed into a crytpocoin platform listed and regulated by Canadian stock exchanges offering in effect a crypotcoin which can be used to buy cloud storage. Unlike other ICO’s, the underlying product already exists.
The potential for the product is not just in Canada and the US but global and a European office will be inevitable at some point.
Should Leonovus continue to fulfil its promise, as we believe they are successfully now doing, buyout offers are highly likely.
To get right down to the bottom line, substantial share price gains are likely to be enjoyed by patient investors who should be looking at a 3 -5 year time horizon, as this penny stock company continues on its compelling story. Acorns have been known to grow into oak trees.
Disclosure: I am/we are long LVNSF.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.