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Intellinetics, Inc. Reports Second Quarter and Six-Month Results

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Revenue Growth Over First Quarter
 Consistent Software as a Service Growth

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

2018 Second Quarter Financial Highlights

  • Total Revenue increased 5% from Q1 2018.
  • Total Revenue decreased 25% from Q2 2017.
  • Software as a Service Revenue increased 19% from Q2 2017.
  • Net Loss of $669,450. 
  • Adjusted EBITDA Loss of $385,492.

Summary – 2018 Second Quarter Results
Revenues for the three months ended June 30, 2018 were $549,678 as compared with $737,269 for the same period in 2017. Intellinetics reported a net loss of $(669,451) and $(302,519) for the three months ended June 30, 2018 and 2017, respectively, representing an increase in net loss of $336,932. 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 June 30, 2018 and 2017 was ($0.04) and ($0.02), respectively.

Summary – 2018 Six-Month Results
Revenues for the six months ended June 30, 2018 were $1,075,052 as compared with $1,444,886 for the same period in 2017. Intellinetics reported a net loss of $(1,307,960) and $(752,712) for the six months ended June 30, 2018 and 2017, respectively, representing an increase in net loss of $555,248. 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 six months ended June 30, 2018 and 2017 was ($0.07) and ($0.04), 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 taking hold. While our steady growth in Software as a Service is encouraging, our real optimism comes from seeing the improved sales pipeline build in our targeted markets.  This includes making inroads in the K-12 education space with our new solutions partner in that market. We've already secured our first two orders from this initiative.  Our campaigns targeted at our strategic markets, including K-12 as well as Human Service Providers, are expected to bear fruit in the second half of this year." 

DeSocio continued, "This strategy, enabling us to provide greater revenue consistency and higher growth, will be a difference-maker for us. I am excited to see these roots take hold."

IntelliCloudTM – Powered by the Intel® NUC
IntelliCloud™ is a cloud-based document management platform that is optimized for work teams within organizations of any size with business-critical processes. Thousands and thousands of people at any given moment depend upon IntelliCloud to perform their work. IntelliCloud, which is strategically packaged with Intel® technology, provides Law Enforcement Grade security and compliance tools and is supported by a growing network of market-leading reseller partners. Resellers often attach IntelliCloud to the software, hardware, and/or services they already sell, without the sales or technical complexity of other less effective options in the market.

About Intellinetics, Inc.
Intellinetics, Inc. is a Columbus, Ohio-based content services software company. Its flagship IntelliCloudTM platform provides easy to use, affordable, secure document management to organization s 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 and form, file, record or document, and our superhuman 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 June 30,
        2018         2017  
Net loss - GAAP     $ (669,450 )     $ (302,519 )
Interest expense, net       219,352         138,183  
Depreciation and amortization       2,384         2,779  
Share-based compensation       62,222         37,303  
Adjusted EBITDA     $ (385,492 )     $ (124,254 )
             


INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
               
  For the Three Months Ended June 30,   For the Six Months Ended June 30,
    2018       2017       2018       2017  
               
Revenues:              
Sale of software $  34,158     $  77,291     $  75,152     $  240,275  
Software as a service   177,583       148,825       354,183       278,356  
Software maintenance services   245,299       240,881       488,867       490,802  
Professional services   52,605       247,622       111,556       355,227  
Third Party services   40,033       22,650       45,294       80,226  
               
Total revenues   549,678       737,269       1,075,052       1,444,886  
               
Cost of revenues:              
Sale of software   12,672       15,097       30,533       38,801  
Software as a service   68,594       54,883       145,687       149,239  
Software maintenance services   25,064       30,952       50,601       57,030  
Professional services   19,317       96,792       36,143       146,445  
Third Party services   33,954       15,410       44,199       28,498  
               
Total cost of revenues   159,601       213,134       307,163       420,013  
               
Gross profit   390,077       524,135       767,889       1,024,873  
               
Operating expenses:              
General and administrative   593,400       499,695       1,136,835       1,080,240  
Sales and marketing   244,391       185,996       506,100       421,282  
Depreciation   2,384       2,780       4,578       5,785  
               
Total operating expenses   840,175       688,471       1,647,513       1,507,307  
               
Loss from operations    (450,098 )      (164,336 )      (879,624 )      (482,434 )
               
Other income (expense)              
Interest expense, net    (219,353 )      (138,183 )      (428,336 )      (270,278 )
               
Total other income (expense)     (219,353 )       (138,183 )       (428,336 )       (270,278 )
               
Net loss $  (669,451 )   $   (302,519 )   $ (1,307,960 )   $   (752,712 )
               
Basic and diluted net loss per share: $   (0.04 )   $   (0.02 )   $   (0.07 )   $   (0.04 )
               
Weighted average number of common shares outstanding - basic and diluted     17,729,421         17,376,012         17,724,377         17,365,434  


INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Balance Sheets
 
ASSETS
          (Unaudited)    
          June 30,   December 31,
            2018       2017  
Current assets:            
  Cash     $  280,972     $  1,125,921  
  Accounts receivable, net   199,402       295,815  
  Prepaid expenses and other current assets   223,895       162,450  
      Total current assets   704,269       1,584,186  
               
Property and equipment, net   13,592       14,760  
Other assets       10,284       10,284  
      Total assets $  728,145     $  1,609,230  
               
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities:            
  Accounts payable and accrued expenses   $  582,528     $  475,459  
  Deferred revenues     607,991       708,130  
  Deferred compensation   189,166       213,166  
  Notes payable - current   875,000       875,000  
  Notes payable - related party - current   419,476       416,969  
      Total current liabilities   2,674,161       2,688,724  
               
Long-term liabilities:        
  Notes payable - net of current portion   1,421,268       1,221,384  
  Notes payable - related party - net of current portion   339,250       312,680  
  Other long-term liabilities - related parties   63,171       29,997  
               
      Total long-term liabilities   1,823,689       1,564,061  
               
      Total liabilities   4,497,850       4,252,785  
               
Stockholders' deficit:        
  Common stock, $0.001 par value, 50,000,000 shares authorized; 17,729,421 and 17,426,792 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively    

30,733
       

30,431
 
           
  Additional paid-in capital   13,830,027       13,648,519  
  Accumulated deficit    (17,630,465 )      (16,322,505 )
      Total stockholders' deficit    (3,769,705 )      (2,643,555 )
      Total liabilities and stockholders' deficit $  728,145     $  1,609,230  


INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
           
      For the Six Months Ended June 30,
        2018       2017  
           
Cash flows from operating activities:        
Net loss   $   (1,307,960 )   $   (752,712 )
Adjustments to reconcile net loss to net cash        
  used in operating activities:        
  Depreciation and amortization     4,578       5,786  
  Bad debt expense      (3,834 )     6,727  
  Amortization of deferred financing costs     124,431       40,030  
  Amortization of beneficial conversion option     128,477       124,147  
  Stock issued for services     57,500       57,500  
  Stock options compensation     124,310       66,186  
  Note offer warrant expense           52,951  
Changes in operating assets and liabilities:        
  Accounts receivable     100,247        (62,596 )
  Prepaid expenses and other current assets      (61,445 )      (42,093 )
  Accounts payable and accrued expenses     107,069        (59,052 )
  Deferred compensation      (24,000 )      
  Other long-term liabilities - related parties     33,174       10,969  
  Deferred interest expense            (2,238 )
  Deferred revenues      (100,139 )      (84,137 )
  Total adjustments     490,368       114,180  
  Net cash used in operating activities      (817,592 )      (638,532 )
           
Cash flows from investing activities:        
  Purchases of property and equipment      (3,410 )      (6,429 )
  Net cash used in investing activities      (3,410 )      (6,429 )
           
Cash flows from financing activities:        
  Payment of deferred financing costs            (103,328 )
  Proceeds from notes payable           560,000  
  Repayment of notes payable            (177,362 )
  Repayment of notes payable - related parties      (23,947 )      (18,678 )
  Net cash used/provided by financing activities      (23,947 )     260,632  
           
Net increase (decrease) in cash      (844,949 )      (384,329 )
Cash - beginning of period     1,125,921       689,946  
Cash - end of period   $  280,972     $  305,617  
           
Supplemental disclosure of cash flow information:        
  Cash paid during the period for interest and taxes   $  28,973     $  75,658  
           
Supplemental disclosure of non-cash financing activities:        
  Discount on notes payable for beneficial conversion feature           248,522  


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

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