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Intellinetics, Inc. Reports First Quarter Results

Modest Revenue Growth Over 4th Quarter
Consistent Software as a Service Growth

COLUMBUS, OH, May 15, 2018 (GLOBE NEWSWIRE) -- Intellinetics, Inc. (OTCQB: INLX), a cloud-based document solutions provider, announced financial results for the three months ended March 31, 2018.

First Quarter Financial Highlights

  Total Revenue increased 5% from Q4 2017
  Total Revenue decreased 26% from Q1 2017.
  Software as a Service Revenue increased 36% from Q1 2017.
  Net Loss increase of $188,316 from Q1 2017.
  Adjusted EBITDA Loss of $307,744.

Summary – First Quarter Results

Revenues for the three months ended March 31, 2018 were $525,374 as compared with $707,617 for the same period in 2017. Intellinetics reported a net loss of $(638,510) and $(450,194) for the three months ended March 31, 2018 and 2017, respectively, representing an increase in net loss of $188,316. 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 March 31, 2018 and 2017 was ($0.04) and ($0.03), respectively.

James F. DeSocio, President & CEO of Intellinetics, stated, “We have pulled together the components to enable us to better control how we scale revenues. This includes our new content, case studies, fact sheet, web site update, and other essential elements that provide the infrastructure for us to successfully grow our sales via campaigns targeted at our strategic markets. These markets include Human Service Providers, as well as state and local government and local education.”

DeSocio continued, “Our strategy is 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. This strategy will enable us to scale, provide greater revenue consistency and higher growth. I am bullish on our target market opportunities.”

First Quarter Highlights

  Strengthened support of existing partner channel with new messaging.
  Identified key strategic solutions partners who support our strategic vision.
  Implemented customer relationship management and lead management tools.
  Prepared and piloted a series of email campaigns for each target market which will launch in Q2 and continue on an ongoing basis.

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

    Three Months Ended March 31,  
    2018     2017  
Net loss - GAAP   $ (638,510 )   $ (450,194 )
Interest expense, net     208,984       132,095  
Depreciation and amortization     2,194       3,006  
Share-based compensation     119,588       86,383  
Note issue warrant expense     -       52,951  
Adjusted EBITDA   $ (307,774 )   $ (175,759 )


INTELLINETICS, INC. and SUBSIDIARY

Condensed Consolidated Statements of Operations
(Unaudited)

    For the Three Months Ended
March 31,
 
    2018     2017  
Revenues:                
Sale of software   $ 40,994     $ 162,984  
Software as a service     176,600       129,531  
Software maintenance services     243,568       249,922  
Professional services     58,951       107,604  
Third Party services     5,261       57,576  
                 
Total revenues     525,374       707,617  
                 
Cost of revenues:                
Sale of software     17,861       23,704  
Software as a service     77,093       94,357  
Software maintenance services     25,536       26,078  
Professional services     16,825       49,653  
Third Party services     10,245       13,088  
                 
Total cost of revenues     147,560       206,880  
                 
Gross profit     377,814       500,737  
                 
Operating expenses:                
General and administrative     543,437       580,544  
Sales and marketing     261,709       235,286  
Depreciation     2,194       3,006  
                 
Total operating expenses     807,340       818,836  
                 
Loss from operations     (429,526 )     (318,099 )
                 
Other income (expense)                
Interest expense, net     (208,984 )     (132,095 )
                 
Total other income (expense)     (208,984 )     (132,095 )
                 
Net loss   $ (638,510 )   $ (450,194 )
                 
Basic and diluted net loss per share:   $ (0.04 )   $ (0.03 )
                 
Weighted average number of common shares  outstanding - basic and diluted     17,719,220       17,354,619  


INTELLINETICS, INC. and SUBSIDIARY

Condensed Consolidated Balance Sheets

    (Unaudited)        
    March 31, 2018     December 31, 2017  
             
ASSETS                
Current assets:                
Cash   $ 710,088     $ 1,125,921  
Accounts receivable, net     211,131       295,815  
Prepaid expenses and other current assets     181,752       162,450  
                 
Total current assets     1,102,971       1,584,186  
                 
Property and equipment, net     12,566       14,760  
Other assets     10,284       10,284  
                 
Total assets   $ 1,125,821     $ 1,609,230  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
Current liabilities:                
Accounts payable and accrued expenses   $ 496,738     $ 475,459  
Deferred revenues     604,753       708,130  
Deferred compensation     202,089       213,166  
Notes payable - current     875,000       875,000  
Notes payable - related party - current     418,024       416,969  
Total current liabilities     2,596,604       2,688,724  
                 
Long-term liabilities:                
Notes payable - net of current portion     1,321,326       1,221,384  
Notes payable - related party - net of current portion     328,060       312,680  
Other long-term liabilities - related parties     42,308       29,997  
                 
Total long-term liabilities     1,691,694       1,564,061  
                 
Total liabilities     4,288,298       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 March 31, 2018 and December 31, 2017, respectively     30,733       30,431  
Additional paid-in capital     13,767,805       13,648,519  
Accumulated deficit     (16,961,015 )     (16,322,505 )
Total stockholders’ deficit     (3,162,477 )     (2,643,555 )
Total liabilities and stockholders’ deficit   $ 1,125,821     $ 1,609,230  


INTELLINETICS, INC. and SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

    For the Three Months Ended
March 31,
 
    2018     2017  
             
Cash flows from operating activities:                
Net loss   $ (638,510 )   $ (450,194 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     2,194       3,006  
Bad debt expense     (5,878 )     2,976  
Amortization of deferred financing costs     62,216       18,992  
Amortization of beneficial conversion option     64,238       59,908  
Stock issued for services     57,500       57,500  
Stock options compensation     62,088       28,883  
Note offer warrant expense     -       52,951  
Changes in operating assets and liabilities:                
Accounts receivable     90,562       (110,009 )
Prepaid expenses and other current assets     (19,302 )     (61,333 )
Accounts payable and accrued expenses     21,279       (30,509 )
Deferred compensation     (11,077 )     -  
Other long-term liabilities - related parties     12,311       5,484  
Deferred interest expense     -       (1,161 )
Deferred revenues     (103,377 )     (125,263 )
Total adjustments     232,754       (98,575 )
Net cash used in operating activities     (405,756 )     (548,769 )
                 
Cash flows from investing activities:                
Purchases of property and equipment     -       (6,429 )
Net cash used in investing activities     -       (6,429 )
                 
Cash flows from financing activities:                
Payment of deferred financing costs     -       (102,619 )
Proceeds from notes payable     -       560,000  
Repayment of notes payable     -       (87,971 )
Repayment of notes payable - related parties     (10,077 )     (9,223 )
Net cash used/provided by financing activities     (10,077 )     360,187  
                 
Net increase (decrease) in cash     (415,833 )     (195,011 )
Cash - beginning of period     1,125,921       689,946  
Cash - end of period   $ 710,088     $ 494,935  
                 
Supplemental disclosure of cash flow information:                
Cash paid during the period for interest and taxes   $ 24,688     $ 36,956  
                 
Supplemental disclosure of non-cash financing activities:                
Discount on notes payable for beneficial conversion feature   $ -     $ 248,522  

/EIN News/ --

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

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