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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 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
               
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