GlobeNewswire Inc | Mar 30, 2021 08:30AM EDT

March 30, 2021

Record Software as a Service and Overall Revenue; Positive Operating Cash Flow

COLUMBUS, OH, March 30, 2021 (GLOBE NEWSWIRE) -- Intellinetics, Inc. (OTCQB: INLX), a cloud-based document solutions provider, announced financial results for the three and twelve months ended December 31, 2020.

2020 Fourth Quarter Financial Highlights

? Total Revenue increased 332% from the same period in 2019. ? Software as a Service Revenue increased 38% from the same period in 2019. ? Net Loss of $1,427,307, compared to Net Loss of $591,013 from the same period in 2019. ? Includes $1,552,800 of change in fair value of earnout liabilities expense. ? Adjusted EBITDA of $361,188, an improvement of $670,737 compared to an adjusted EBITDA loss of $309,549 from the same period in 2019.

2020 Twelve Month Financial Highlights

? Total Revenue increased 225% from the same period in 2019. ? Software as a Service Revenue increased 23% from the same period in 2019. ? Net Loss of $2,200,201, compared to Net Loss of $2,133,281 from the same period in 2019. ? Includes $1,552,800 of change in fair value of earnout liabilities expense. ? Adjusted EBITDA of $802,962, an improvement of $1,660,238 compared to an adjusted EBITDA loss of $857,276 from the same period in 2019.

Summary 2020 Fourth Quarter Results

Revenues for the three months ended December 31, 2020 were $2,695,805 as compared with $624,394 for the same period in 2019. The increase in our professional services and storage and retrieval services revenues is primarily due to the addition of revenues from our subsidiary, Graphic Sciences, Inc., acquired March 2, 2020, and the increase in software maintenance services is primarily due to the addition of revenues from the acquisition of the assets of CEO Imaging Systems, Inc. on April 24, 2020. Intellinetics reported net loss of $1,427,307 and $591,013 for the three months ended December 31, 2020 and 2019, respectively, representing an increase of $836,294. Despite our improved gross profit and lower interest expense, our net loss increased primarily as a result of a charge taken due to a change in fair value of earnout liabilities of $1,554,800 relating to our 2020 acquisitions. The earnout liabilities are valued at $2,440,000 at December 31, 2020, which is 85% of the maximum possible payout, which increased from inception at acquisition to year end due to improved performance of both acquisitions against their threshold targets and a reduction in pandemic uncertainty. Basic and diluted net loss per share for the three months ended December 31, 2020 and 2019 was $0.51 and $1.60, respectively. Our adjusted EBITDA improved significantly year over year, by $670,737, which is more indicative of improved operations and demonstrates the value of the 2020 acquisitions.

Summary 2020 Twelve Month Results

Revenues for the twelve months ended December 31, 2020 were $8,253,391 as compared with $2,535,955 for the same period in 2019. The increase in our professional services and storage and retrieval services revenues is primarily due to the addition of revenues from our recently-acquired subsidiary, Graphic Sciences, and the increase in software maintenance services is primarily due to the addition of revenues from the acquisition of the assets of CEO Imaging Systems. We reported a net loss of $2,200,201 and $2,133,281 for the twelve months ended December 31, 2020 and 2019, respectively, representing an increase in net loss of $69,920. The increase in net loss was the net result of improved operating income contribution, a gain on extinguishment of debt of $287,426, and income tax benefit of $188,300, offset by acquisition-related transaction costs of $636,440 and a change in fair value of earnout liabilities of $1,554,800. Basic and diluted net loss per share for the twelve months ended December 31, 2020 and 2019 was $0.91 and $5.76, respectively.

2020 Operational Highlights

? Positive operating cash flow for three and twelve months ended December 31, 2020. ? Positive adjusted EBITDA for all four quarters of 2020. Integration of acquisitions of Graphic Sciences (March 2, 2020) and CEO ? Imaging Systems (April 24, 2020) progressing at or ahead of schedule despite pandemic challenges. Maintaining benefits for employees furloughed from March through June due ? to state stay-at-home orders, supported by temporary management salary reductions and other cost savings measures.

James F. DeSocio, President & CEO of Intellinetics, stated, We are very pleased with our results for the fourth quarter of 2020. We have achieved our goal of positive Adjusted EBITDA in fourth quarter, consistent with the third quarter. Our fourth quarter results from operations, excluding the acquisition-related change in fair value of earnout of $1,554,800, was positive as well, also consistent with the third quarter. Our software as a service and overall revenues exceeded the third quarter, which was previously our highest ever. All of this has been made possible by our employees executing on our plan in spite of the continued COVID pandemic.

Our teams have come together and integrated our 2020 acquisitions at a pace that exceeded my expectations, while at the same time putting protocols in place to maximize the safety of our on-site employees. We are able to focus our energy and creativity on our customers and how our solutions add value. We have maintained old revenue streams and found new ones. This includes channel and direct sales, for example in our K-12 document solutions segment. Combining organic customer growth with those from acquisition, we now count 221 school districts as customers.

Im excited for our other target markets as well. We are positioned for 2021 better than ever in our history, and expect to build on the positive Adjusted EBITDA of 2020 while were executing on our plan to drive revenue growth in 2021.

Conference Call

Intellinetics is holding a conference call to discuss these results on Tuesday, March 30, 2021, at 9:30 a.m. Eastern Time. The conference call can be accessed by dialing +1 929 205 6099 and providing passcode 81937864246#. If you are unable to participate during the live call, a replay of the conference call will be available approximately two hours after the completion of the call through April 5, 2021. To listen to the replay, the call will be archived on the companys website at https://www.intellinetics.com/company-news/.

About Intellinetics, Inc.

Intellinetics, Inc., located in Columbus, Ohio, is a cloud-based document services software provider. Its IntelliCloud suite of solutions serve a mission-critical role for organizations in highly regulated, risk and compliance-intensive markets in Healthcare, K-12, Public Safety, Public Sector, Risk Management, Financial Services and beyond. IntelliCloud solutions make content secure, compliant, and process-ready to drive innovation, efficiencies and growth. Through its Image Technology Group and production scanning department, hundreds of millions of images have been converted from paper to digital, paper to microfilm, and microfiche to microfilm for business and federal, county, and municipal governments. Its operations in Madison Heights, Michigan, also provides its clients with long-term paper and microfilm storage and retrieval options. 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 growth, future revenues, including 2021 revenues and future revenue streams from new and existing customers, 2021 Adjusted EBITDA, future cash flow and other synergies associated with our recent acquisition of Graphic Sciences and CEO Imaging and the success of our integration efforts, our other product and service offerings and partnerships mentioned in this release, and in any other industry, market, initiative, service or innovation; cross-selling opportunities Intellinetics future revenues, revenue consistency, growth and long-term value, including trends in revenue growth and mix; growth of software as a service, professional services, and maintenance revenue; market penetration; execution of Intellinetics business plan, strategy, direction 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, the impact of COVID-19 and related governmental actions and orders on customers, suppliers, employees and the economy and our industry, Intellinetics ability to execute on its business plan and strategy, customary risks attendant to acquisitions, trends in the products markets, variations in Intellinetics cash flow or adequacy of capital resources, market acceptance risks, the success of Intellinetics solutions providers, including human services, health care, and education, technical development risks, and other risks, uncertainties and other factors discussed from time to time in its reports filed with or furnished to the Securities and Exchange Commission, including in Intellinetics most recent annual report on Form 10-K as well as subsequently filed reports on Form 8-K. 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.comor at www.sec.gov.

CONTACT:

Joe Spain, CFOIntellinetics, Inc.614.921.8170 investors@intellinetics.com

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 companys 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, stock-based compensation, note conversion and note or equity offer warrant or stock expense, gain or loss on debt extinguishment, change in fair value of contingent consideration, and significant transaction costs.

Reconciliation of Net Loss to Adjusted EBITDA

For the Three Months Ended December 31, 2020 2019 Net loss - GAAP $ (1,427,307 ) $ (591,013 )Change in fair value of earnout 1,554,800 - liabilitiesInterest expense, net 114,959 263,039 Depreciation and amortization 92,618 1,793 Stock-based compensation 26,118 16,632 Adjusted EBITDA $ 361,188 $ (309,549 )

For the Twelve months Ended December 31, 2020 2019 Net loss - GAAP $ (2,200,201 ) $ (2,133,281 )Change in fair value of earnout 1,554,800 - liabilitiesInterest expense, net 637,683 980,689 Significant transaction costs 495,440 - Stock and warrant issue expense 377,761 - Depreciation and amortization 296,935 7,701 Stock-based compensation 116,270 287,615 Income tax benefit, net (188,300 ) - Gain on extinguishment of debt (287,426 ) - Adjusted EBITDA $ 802,962 $ (857,276 )

INTELLINETICS, INC. and SUBSIDIARYConsolidated Statements of Operations

For the Three Months Ended For the Twelve Months Ended December 31, December 31, 2020 2019 2020 2019 Revenues: Sale of $ 40,788 $ 9,575 $ 194,787 $ 189,165 softwareSoftware as a 298,519 216,235 1,055,016 859,637 serviceSoftwaremaintenance 341,963 257,586 1,257,446 1,011,278 servicesProfessional 1,786,463 140,998 5,007,617 475,875 servicesStorage andretrieval 228,072 - 738,525 - servicesTotal revenues 2,695,805 624,394 8,253,391 2,535,955 Cost of revenues:Sale of 16,547 4,154 56,664 8,633 softwareSoftware as a 63,860 59,088 273,368 254,999 serviceSoftwaremaintenance 31,683 19,467 159,122 87,280 servicesProfessional 915,745 64,875 2,553,053 216,931 servicesStorage andretrieval 84,163 - 220,446 - servicesTotal cost of 1,111,998 147,584 3,262,653 567,843 revenues Gross profit 1,583,807 476,810 4,990,738 1,968,112 Operating expenses:General and 966,394 560,550 3,499,440 2,131,385 administrativeChange in fairvalue of 1,554,800 - 1,554,800 - earnoutliabilitiesSignificanttransaction - - 636,440 - costsSales and 282,343 242,441 1,041,367 981,618 marketingDepreciationand 92,618 1,793 296,935 7,701 amortization Totaloperating 2,896,155 804,784 7,028,982 3,120,704 expenses Loss from (1,312,348 ) (327,974 ) (2,038,244 ) (1,152,592 )operations Other income (expense)Gain onextinguishment - - 287,426 - of debtInterest (114,959 ) (263,039 ) (637,683 ) (980,689 )expense, net Total other (114,959 ) (263,039 ) (350,257 ) (980,689 )expense Loss before (1,427,307 ) (591,013 ) (2,388,501 ) (2,133,281 )income taxes Income tax - - 188,300 - benefit Net loss $ (1,427,307 ) $ (591,013 ) $ (2,200,201 ) $ (2,133,281 ) Basic anddiluted net $ (0.51 ) $ (1.60 ) $ (0.91 ) $ (5.76 )loss per shareWeightedaverage numberof commonshares 2,810,865 370,497 2,406,830 370,279 outstanding -basic anddiluted

INTELLINETICS, INC. and SUBSIDIARYConsolidated Balance Sheets

December December 31, 31, 2020 2019 ASSETS Current assets: Cash $ 1,907,882 $ 404,165 Accounts receivable, net 792,380 329,571 Accounts receivable, unbilled 523,522 23,371 Parts and supplies, net 79,784 4,184 Prepaid expenses and other current assets 162,166 110,841 Total current assets 3,465,734 872,132 Property and equipment, net 698,752 6,919 Right of use assets 2,641,005 97,239 Intangible assets, net 1,184,971 - Goodwill 2,322,887 - Other assets 31,284 10,284 Total assets $ 10,344,633 $ 986,574 LIABILITIES AND STOCKHOLDERS? EQUITY (DEFICIT) Current liabilities: Accounts payable $ 141,823 $ 160,911 Accrued compensation 271,889 70,027 Accrued expenses, other 131,685 140,079 Lease liabilities - current 518,531 47,397 Deferred revenues 996,131 754,073 Deferred compensation 100,828 117,166 Earnout liabilities - current 877,522 - Accrued interest payable - current 5,941 1,212,498 Notes payable - current 580,638 3,339,963 Notes payable - related party - current - 1,467,400 Total current liabilities 3,624,988 7,309,514 Long-term liabilities: Notes payable 1,802,184 - Lease liabilities - net of current portion 2,196,951 53,318 Earnout liabilities - net of current 1,566,478 - portionTotal long-term liabilities 5,565,613 53,318 Total liabilities 9,190,601 7,362,832 Stockholders? equity (deficit): Common stock, $0.001 par value, 25,000,000shares authorized; 2,810,865 and 370,497 2,811 371 shares issued and outstanding at December31, 2020 and 2019, respectivelyAdditional paid-in capital 24,147,488 14,419,437 Accumulated deficit (22,996,267 ) (20,796,066 )Total stockholders? equity (deficit) 1,154,032 (6,376,258 )Total liabilities and stockholders? equity $ 10,344,633 $ 986,574 (deficit)

INTELLINETICS, INC. and SUBSIDIARYConsolidated Statements of Cash Flows

For the Twelve Months Ended December 31, 2020 2019 Cash flows from operating activities: Net loss $ (2,200,201 ) $ (2,133,281 )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization 296,935 7,701 Bad debt expense 54,834 28,307 Parts and supplies reserve change 15,000 - Amortization of deferred financing 117,091 183,851 costsAmortization of beneficial conversion 11,786 70,718 optionAmortization of debt discount 88,889 - Amortization of right of use asset 405,227 41,310 Stock issued for services 57,500 87,500 Stock options compensation 58,770 200,115 Note conversion stock issue expense 141,000 - Warrant issue expense 236,761 - Interest on converted debt 176,106 - Gain on extinguishment of debt (287,426 ) - Amortization of original issue discount 18,296 11,931 on notesChanges in operating assets and liabilities:Accounts receivable 605,094 (222,139 )Accounts receivable, unbilled (224,128 ) 41,747 Parts and supplies 796 1,531 Prepaid expenses and other current 6,745 (19,179 )assetsRight of use assets (63,375 ) (138,549 )Accounts payable and accrued expenses (645,596 ) 62,896 Lease liabilities, current and (332,917 ) 100,715 long-termDeferred compensation (16,338 ) (48,000 )Accrued interest, current and long-term 5,940 710,203 Earnout liabilities, current and 1,554,800 - long-termDeferred revenues 43,399 30,454 Total adjustments 2,325,189 1,151,112 Net cash provided by/(used in) 124,988 (982,169 )operating activities Cash flows from investing activities: Cash paid to acquire business, net of (4,019,098 ) - cash acquiredPurchases of property and equipment (76,854 ) (5,489 )Net cash used in investing activities (4,095,952 ) (5,489 ) Cash flows from financing activities: Proceeds from issuance of common stock 3,167,500 - Offering costs paid on issuance of (307,867 ) - common stockPayment of deferred financing costs (175,924 ) - Proceeds from notes payable 3,008,700 - Proceeds from notes payable - related 0 350,000 partiesRepayment of notes payable (170,000 ) - Repayment of notes payable - related (47,728 ) (46,807 )partiesNet cash provided by/(used in) 5,474,681 303,193 financing activities Net increase (decrease) in cash 1,503,717 (684,465 )Cash - beginning of period 404,165 1,088,630 Cash - end of period $ 1,907,882 $ 404,165 Supplemental disclosure of cash flow information:Cash paid during the period for $ 202,291 $ 7,706 interestCash paid during the period for income $ 117,072 $ - taxes Supplemental disclosure of non-cash financing activities:Accrued interest notes payable $ 796,074 $ - converted to equityAccrued interest notes payable related 238,883 - parties converted to equityDiscount on notes payable for 320,000 - beneficial conversion featureDiscount on notes payable for warrants 135,292 - Notes payable converted to equity 3,421,063 - Notes payable converted to equity - 1,465,515 - related parties Supplemental disclosure of non-cashinvesting activities relating to business acquisitions:Cash $ 17,269 $ - Accounts receivable 1,122,737 - Accounts receivable, unbilled 276,023 - Parts and supplies 91,396 - Prepaid expenses 73,116 - Other current assets 5,954 - Right of use assets 2,885,618 - Property and equipment 735,885 - Intangible assets 1,361,000 - Accounts payable (168,749 ) - Accrued expenses (162,426 ) - Lease liabilities (2,947,684 ) - Federal and state taxes payable (168,900 ) - Deferred revenues (198,659 ) - Deferred tax liabilities, net (149,900 ) - Net assets acquired in acquisition 2,772,680 - Total goodwill acquired in acquisition 2,322,887 - Total purchase price of acquisition 5,095,567 - Purchase price of business acquisition (889,200 ) - financed with earnout liabilityPurchase price of business acquisition (170,000 ) - financed with installment paymentsCash used in business acquisition $ 4,036,367 $ -