Intellinetics, Inc. Reports Third Quarter

and Nine-Month Results

Revenue Growth Over Second Quarter

 

COLUMBUS, OH – (November 14, 2018) – (GLOBENEWSWIRE) 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 14th, 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

 

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