Intellinetics, Inc. Reports Third Quarter and Nine-Month Results

Revenue Growth Over Second Quarter

COLUMBUS, OH, Nov. 14, 2018 (GLOBE NEWSWIRE) -- Intellinetics, Inc. (OTCQB: INLX), a cloud-based document solutions provider, announced financial results for the three and nine months ended September 30, 2018.

2018 Third Quarter Financial Highlights

Total Revenue increased 22% from Q2 2018.
Total Revenue flat from Q3 2017.
Software as a Service Revenue decreased 2% from Q3 2017.
Net Loss of $479,791.
Adjusted EBITDA Loss of $208,362.

Summary – 2018 Third Quarter Results
Revenues for the three months ended September 30, 2018 were $673,111 as compared with $671,453 for the same period in 2017, and as compared with $549,678 for Q2 2018. Intellinetics reported a net loss of $(479,791) and $(295,120) for the three months ended September 30, 2018 and 2017, respectively, representing an increase in net loss of $184,671. The increased net loss was a result of lower revenue, driven by lower one-time software and professional services sales compared to 2017. Net loss per share for the three months ended September 30, 2018 and 2017 was ($0.03) and ($0.02), respectively.

Summary – 2018 Nine-Month Results
Revenues for the nine months ended September 30, 2018 were $1,748,161 as compared with $2,116,338 for the same period in 2017. Intellinetics reported a net loss of $(1,787,877) and $(1,047,833) for the nine months ended September 30, 2018 and 2017, respectively, representing an increase in net loss of $740,044. The increased net loss was a result of lower revenue, driven by lower one-time software and professional services sales compared to 2017. Net loss per share for the nine months ended September 30, 2018 and 2017 was ($0.10) and ($0.06), respectively.

James F. DeSocio, President & CEO of Intellinetics, stated, “Our strategy to accelerate our sales through strategic solutions partners, and continue to grow our subscription sales so that we are less reliant on one-time sales, is gaining traction. While our growth in Software as a Service was offset by the reduction in scope from our single largest monthly customer in Q3, our diversity in revenue sources and ability to absorb this impact is a testament to our minimal exposure to any single customer. We’re also encouraged by our investors’ continued support and commitment to see our strategy bear fruit.”

DeSocio continued, “On August 14^th, we were pleased to announce our partnership with software publisher Software Unlimited, Inc. I’m happy to share that we’ve closed our first orders through this relationship. We anticipate more relationships with other segment leaders moving forward. These partnerships will be transformational for us; I am excited by the sheer potential. We’re convinced our partnership strategies and focus on select niche markets will enable us to provide greater revenue consistency and higher growth.”

About Intellinetics, Inc.
Intellinetics, Inc., located in Columbus, Ohio, is a cloud-based document content services provider. Its flagship IntelliCloud™ platform provides easy to use, affordable, secure document management to organizations that have critical document requirements and must always be audit-ready, including health and human services, education and law enforcement. Our customers save valuable time by immediately locating any form, file, record or document, and our commitment to superior customer service ensures users can remain focused on their mission. For additional information, please visit www.intellinetics.com.

Cautionary Statement
Statements in this press release which are not purely historical, including statements regarding future business and new revenues associated with any industry, channel partner, service, or business relationship; Intellinetics’ future revenues and growth in 2018 and beyond; growth of software as a service revenue; market penetration; execution of Intellinetics’ business plan, strategy, and focus; and other intentions, beliefs, expectations, representations, projections, plans or strategies regarding future growth, financial results, and other future events are forward-looking statements. The forward-looking statements involve risks and uncertainties including, but not limited to, the risks associated with the effect of changing economic conditions, trends in the products markets, variations in Intellinetics’ cash flow or adequacy of capital resources, market acceptance risks, the success of Intellinetics’ channel partners and distribution partners, technical development risks, and other risks and uncertainties discussed in Intellinetics’ most recent annual report on Form 10-K and subsequently filed Form 10-Qs and Form 8-Ks. Intellinetics cautions investors not to place undue reliance on the forward-looking statements contained in this press release. Intellinetics disclaims any obligation and does not undertake to update or revise any forward-looking statements in this press release. Expanded and historical information is made available to the public by Intellinetics on its website at www.intellinetics.com or at www.sec.gov.

Non-GAAP Financial Measure
Intellinetics uses non-GAAP Adjusted EBITDA as a supplemental measure of our performance that is not required by, or presented in accordance with, accounting principles generally accepted in the United States (GAAP).

A non-GAAP financial measure is a numerical measure of a company's financial performance that excludes or includes amounts so as to be different from the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of a company. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to net income, operating income, or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or a measure of our liquidity. Intellinetics urges investors to review the reconciliation of non-GAAP Adjusted EBITDA to the comparable GAAP Net Loss, which is included in this press release, and not to rely on any single financial measure to evaluate Intellinetics’ financial performance.

We believe that Adjusted EBITDA is a useful performance measure and is used by us to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than measures under GAAP can provide alone. We define “Adjusted EBITDA” as earnings before interest expense, any income taxes, depreciation and amortization expense, and other non-cash expenses such as share-based compensation, note conversion warrant expense and other financing related transaction costs.


Reconciliation of Net Loss to Adjusted EBITDA
	For the Three Months Ended September 30,
		2018		2017
Net loss - GAAP		($479,916	)	($295,120	)
Interest expense, net		206,642		141,483
Depreciation and amortization		2,429		3,231
Share-based compensation		62,358		24,877
Note offer warrant expense		-		1,064
Adjusted EBITDA		($208,487	)	($124,465	)

INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
		2018		2017			2018		2017

Revenues:
Sale of software		$ 64,986		$ 134,731			$ 140,138		$ 375,006
Software as a service		173,515		177,729			527,697		456,085
Software maintenance services		251,660		241,358			740,527		732,160
Professional services		57,294		81,751			168,849		436,977
Third party services		125,656		35,884			170,950		116,110

Total revenues		673,111		671,453			1,748,161		2,116,338

Cost of revenues:
Sale of software		33,757		32,714			64,290		71,515
Software as a service		75,266		78,915			220,953		228,154
Software maintenance services		23,794		30,433			74,395		87,463
Professional services		22,303		36,688			58,445		183,133
Third party services		106,638		5,209			150,837		33,707

Total cost of revenues		261,758		183,959			568,920		603,972

Gross profit		411,353		487,494			1,179,241		1,512,366

Operating expenses:
General and administrative		446,224		490,943			1,583,059		1,571,184
Sales and marketing		235,974		146,957			742,074		568,238
Depreciation		2,429		3,231			7,007		9,016

Total operating expenses		684,627		641,131			2,332,140		2,148,438

Loss from operations		(273,274	)	(153,637	)		(1,152,899	)	(636,072	)

Other income (expense):
Interest expense, net		(206,642	)	(141,483	)		(634,978	)	(411,761	)

Total other income (expense)		(206,642	)	(141,483	)		(634,978	)	(411,761	)

Net loss		$ (479,916	)	$ (295,120	)		$ (1,787,877	)	$ (1,047,833	)

Basic and diluted net loss per share:		$ (0.03	)	$ (0.02	)		$ (0.10	)	$ (0.06	)

Weighted average number of common shares outstanding - basic and diluted		17,729,421		17,376,012			17,726,083		17,369,012

INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Balance Sheets

ASSETS
		(Unaudited)
		September 30,			December 31,
			2018			2017

Current assets:
	Cash	$	1,333,278		$	1,125,921
	Accounts receivable, net		192,569			295,815
	Prepaid expenses and other current assets		200,349			162,450

	Total current assets		1,726,196			1,584,186

Property and equipment, net			11,163			14,760
Other assets			10,284			10,284

	Total assets	$	1,747,643		$	1,609,230

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
	Accounts payable and accrued expenses	$	649,461		$	475,459
	Deferred revenues		693,198			708,130
	Deferred compensation		178,089			213,166
	Notes payable - current		-			875,000
	Notes payable - related party - current		45,598			416,969
	Total current liabilities		1,566,346			2,688,724

Long-term liabilities:
	Notes payable - net of current portion		3,153,827			1,221,384
	Notes payable - related party - net of current portion		1,067,952			312,680
	Deferred interest expense		-			-
	Other long-term liabilities - related parties		82,435			29,997

	Total long-term liabilities		4,304,214			1,564,061

	Total liabilities		5,870,560			4,252,785


Stockholders' deficit:
	Common stock, $0.001 par value, 75,000,000 shares authorized; 17,729,421 and 17,426,792 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively		30,733			30,431
	Additional paid-in capital		13,956,732			13,648,519
	Accumulated deficit		(18,110,382	)		(16,322,505	)
	Total stockholders' deficit		(4,122,917	)		(2,643,555	)
	Total liabilities and stockholders' deficit	$	1,747,643		$	1,609,230

INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
		For the Nine Months Ended September 30,
			2018		2017
Cash flows from operating activities:
Net loss			$ (1,787,877	)	$ (1,047,833	)
Adjustments to reconcile net loss to net cash used in operating activities:
	Depreciation and amortization		7,007		9,016
	Bad debt expense		2,398		6,646
	Amortization of deferred financing costs		186,646		59,761
	Amortization of beneficial conversion option		184,541		188,385
	Stock issued for services		57,500		57,500
	Stock options compensation		186,668		91,063
	Note offer warrant expense		-		54,015
Changes in operating assets and liabilities:
	Accounts receivable		100,848		(204,219	)
	Prepaid expenses and other current assets		(37,899	)	(14,338	)
	Accounts payable and accrued expenses		174,002		76,427
	Deferred compensation		(35,077	)	-
	Other long-term liabilities - related parties		52,438		24,806
	Deferred interest expense		-		(3,230	)
	Deferred revenues		(14,932	)	(103,403	)
	Total adjustments		864,140		242,429
	Net cash used in operating activities		(923,737	)	(805,404	)

Cash flows from investing activities:
	Purchases of property and equipment		(3,410	)	(14,202	)
	Net cash used in investing activities		(3,410	)	(14,202	)

Cash flows from financing activities:
	Payment of deferred financing costs		(130,841	)	(103,328	)
	Proceeds from notes payable		900,000		560,000
	Proceeds from notes payable - related parties		400,000		150,000
	Repayment of notes payable		-		(268,195	)
	Repayment of notes payable - related parties		(34,655	)	(25,114	)
	Net cash used/provided by financing activities		1,134,504		313,363

Net increase (decrease) in cash			207,357		(506,243	)
Cash - beginning of period			1,125,921		689,946
Cash - end of period			$ 1,333,278		$ 183,703

Supplemental disclosure of cash flow information:
	Cash paid during the period for interest and taxes		$ 32,207		$ 75,658

Supplemental disclosure of non-cash financing activities:
	Discount on notes payable for beneficial conversion feature		$ -		$ 248,522
	Discount on notes payable for warrants		44,548		-
	Discount on notes payable - related parties for warrants		19,799		38,836

CONTACT:
Joe Spain, CFO
Intellinetics, Inc.
614.921.8170 investors@intellinetics.com

Source: Intellinetics, Inc.

Released November 14, 2018

Intellinetics, Inc. Reports Third Quarter and Nine-Month Results

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