AP NEWS

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

November 14, 2018

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 MeasureIntellinetics 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 For the Nine Months Ended September 30, 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 17,729,421 17,376,012 17,726,083 17,369,012 outstanding - basic and diluted ---------- - ---------- - ------------ - ------------ -

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 30,733 30,431 31, 2017, respectively 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, CFOIntellinetics, Inc. 614.921.8170 investors@intellinetics.com

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