GlobeNewswire Inc | May 17, 2021 08:30AM EDT

May 17, 2021

Revenues Increase 117%; Earnings per share of $0.27

COLUMBUS, OH, May 17, 2021 (GLOBE NEWSWIRE) -- Intellinetics, Inc. (OTCQB: INLX), a cloud-based document solutions provider, announced financial results for the three months ended March 31, 2021.

2021 First Quarter Financial Highlights

? Total Revenue increased 117% from the same period in 2020. ? Software as a Service Revenue increased 43% from the same period in 2020. ? Net Income of $842,772, compared to Net Loss of $646,211 from the same period in 2020. ? Adjusted EBITDA of $356,165, compared to $7,785 from the same period in 2020.

Summary 2021 First quarter Results

Revenues for the three months ended March 31, 2021 were $2,635,219 as compared with $1,213,664 for the same period in 2020. The increase in our professional services and storage and retrieval revenues is primarily due to the inclusion of a full quarter of revenues from our subsidiary acquired in 2020, Graphic Sciences, Inc., compared to the same quarter in 2020 that only included one month of acquisition revenues. Intellinetics reported a net income of $842,772 for the three months ended March 31, 2021 compared to a net loss of $646,211 for the same period in 2020. The improved net income was the result of improved operating results, no significant transaction costs in 2021, and a gain on extinguishment of debt of $845,083 from the full forgiveness of our PPP loan. Net income per basic and diluted share was $0.30 and $0.27, respectively, for the three months ended March 31, 2021. Net loss per basic and diluted share was ($0.54) for the three months ended March 31, 2020.

2021 Other Highlights

? Invested in new warehouse to support growth of our storage and retrieval services, which increases box storage capacity more than 120%. ? Signed a new three-year, revenue favorable agreement with our second-largest customer. ? Expanded K-12 footprint closing 20 new districts in the quarter, taking us to over 230 school districts at the time of this release.

James F. DeSocio, President & CEO of Intellinetics, stated, Our employees continue to impress me with their focus. We have just celebrated the anniversaries our two 2020 acquisitions and I am pleased to say that the integrations have exceeded our expectations and our timeline. In all my career, these are two of the smoothest acquisitions in which I have been involved. The efforts are reflected in the results of our net income and cash flow, where our net cash provided by operating activities improved significantly from Q1 2020 to $326,869 for the quarter.

Similarly, we are making investments in our sales and marketing teams to enhance our ability to capture more of the market. We aligned the sales and marketing teams over the past two quarters, and we are cross selling our solutions and applications into our new and existing customer base. This is the synergy we strove for when we acquired the two companies. Weve launched tactically focused email and telephone campaigns in the first quarter, and I am excited to see what our organization can deliver. All eyes are all forward on growing the business.

We continue to expect, for this fiscal year, to build on the positive Adjusted EBITDA of 2020 and to drive revenue growth.

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 2020 acquisitions of Graphic Sciences and CEO Imaging and the success of our integration efforts, our other product and service offerings and marketing initiatives mentioned in this release, and in any other industry, market, initiative, service or innovation; cross-selling opportunities for 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.com or at www.sec.gov.

CONTACT:

Joe Spain, CFOIntellinetics, Inc.614.921.8170investors@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 March 31, 2021 2020 Net loss - GAAP $ 842,772 ($ 646,211 )Interest expense, net 113,044 290,430 Income tax benefit, net - (188,300 )Depreciation and amortization 94,884 28,091 Stock-based compensation 80,598 69,073 Stock and warrant issue expense - 377,761 Significant transaction costs - 364,367 Change in fair value of earnout 69,950 - liabilitiesGain on extinguishment of debt (845,083 ) (287,426 )Adjusted EBITDA $ 356,165 ($ 7,785 )

INTELLINETICS, INC. and SUBSIDIARYCondensed Consolidated Statements of Operations(Unaudited)

For the Three Months Ended March 31, 2021 2020 Revenues: Sale of software $ 9,594 $ 94,100 Software as a service 323,726 225,994 Software maintenance services 340,446 261,243 Professional services 1,652,463 560,029 Storage and retrieval services 308,990 72,298 Total revenues 2,635,219 1,213,664 Cost of revenues: Sale of software 4,237 38,302 Software as a service 76,340 72,515 Software maintenance services 24,388 46,516 Professional services 834,238 272,505 Storage and retrieval services 91,112 17,701 Total cost of revenues 1,030,315 447,539 Gross profit 1,604,904 766,125 Operating expenses: General and administrative 1,039,026 865,085 Change in fair value of earnout 69,950 - liabilitiesSignificant transaction costs - 460,767 Sales and marketing 290,311 243,689 Depreciation and amortization 94,884 28,091 Total operating expenses 1,494,171 1,597,632 Income/loss from operations 110,733 (831,507 ) Other income (expense) Gain on extinguishment of debt 845,083 287,426 Interest expense, net (113,044 ) (290,430 ) Total other income/expense 732,039 (3,004 ) Income/loss before income taxes 842,772 (834,511 ) Income tax benefit - 188,300 Net income/loss $ 842,772 $ (646,211 ) Basic net income (loss) per share: $ 0.30 $ (0.54 )Diluted net income (loss) per share: $ 0.27 $ (0.54 ) Weighted average number of common shares 2,822,665 1,185,846 outstanding - basicWeighted average number of common shares 3,106,885 1,185,846 outstanding - diluted

INTELLINETICS, INC. and SUBSIDIARYCondensed Consolidated Balance Sheets

(unaudited) March 31, December 31, 2021 2020 ASSETS Current assets: Cash $ 2,003,052 $ 1,907,882 Accounts receivable, net 1,055,023 792,380 Accounts receivable, unbilled 346,151 523,522 Parts and supplies, net 75,877 79,784 Prepaid expenses and other current assets 231,475 162,166 Total current assets 3,711,578 3,465,734 Property and equipment, net 889,686 698,752 Right of use assets 2,511,445 2,641,005 Intangible assets, net 1,130,852 1,184,971 Goodwill 2,322,887 2,322,887 Other assets 27,284 31,284 Total assets $ 10,593,732 $ 10,344,633 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable $ 240,236 $ 141,823 Accrued compensation 391,310 271,889 Accrued expenses, other 141,748 131,685 Lease liabilities - current 489,105 518,531 Deferred revenues 945,812 996,131 Deferred compensation 100,828 100,828 Earnout liabilities - current 947,472 877,522 Accrued interest payable - current - 5,941 Notes payable - current - 580,638 Total current liabilities 3,256,511 3,624,988 Long-term liabilities: Notes payable - net of current portion 1,596,723 1,802,184 Lease liabilities - net of current portion 2,096,618 2,196,951 Earnout liabilities - net of current 1,566,478 1,566,478 portionTotal long-term liabilities 5,259,819 5,565,613 Total liabilities 8,516,330 9,190,601 Stockholders? equity: Common stock, $0.001 par value, 25,000,000shares authorized; 2,823,072 and 2,810,865 2,823 2,811 shares issued and outstanding at March 31,2021 and December 31, 2020, respectivelyAdditional paid-in capital 24,228,074 24,147,488 Accumulated deficit (22,153,495 ) (22,996,267 )Total stockholders? equity 2,077,402 1,154,032 Total liabilities and stockholders? equity $ 10,593,732 $ 10,344,633

INTELLINETICS, INC. and SUBSIDIARYCondensed Consolidated Statements of Cash Flows(Unaudited)

For the Three Months Ended March 31, 2021 2020 Cash flows from operating activities: Net income/loss $ 842,772 $ (646,211 )Adjustments to reconcile net income/lossto net cash used in operating activities:Depreciation and amortization 94,884 28,091 Bad debt expense (2,634 ) 23,287 Parts and supplies reserve change 4,500 1,500 Amortization of deferred financing costs 25,935 39,287 Amortization of beneficial conversion - 11,786 optionAmortization of debt discount 26,666 8,889 Amortization of right of use asset 129,560 45,197 Stock issued for services 57,500 57,500 Stock options compensation 23,098 11,573 Note conversion stock issue expense - 141,000 Warrant issue expense - 236,761 Interest on converted debt - 176,105 Amortization of original issue discount - 16,864 on notesGain on extinguishment of debt (845,083 ) (287,426 )Change in fair value of earnout 69,950 - liabilitiesChanges in operating assets and liabilities:Accounts receivable (260,009 ) 294,853 Accounts receivable, unbilled 177,371 8,423 Parts and supplies (593 ) (11,506 )Prepaid expenses and other current (65,309 ) (82,390 )assetsAccounts payable and accrued expenses 227,897 (90,718 )Lease liabilities, current and long-term (129,759 ) (43,908 )Deferred compensation - (13,046 )Accrued interest, current and long-term 442 20,000 Deferred revenues (50,319 ) (89,862 )Total adjustments (515,903 ) 502,260 Net cash provided by/(used in) operating 326,869 (143,951 )activities Cash flows from investing activities: Cash paid to acquire business, net of - (3,888,984 )cash acquiredPurchases of property and equipment (231,699 ) (7,742 )Net cash used in investing activities (231,699 ) (3,896,726 ) 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 - 2,000,000 Net cash provided by financing - 4,683,709 activities Net increase in cash 95,170 643,032 Cash - beginning of period 1,907,882 404,165 Cash - end of period $ 2,003,052 $ 1,047,197 Supplemental disclosure of cash flow information:Cash paid during the period for interest $ 60,000 $ 2,154 Cash paid during the period for income $ 913 $ - taxes Supplemental disclosure of non-cash financing activities:Accrued interest notes payable converted $ - $ 796,074 to equityAccrued interest notes payable related - 238,883 parties converted to equityDiscount on notes payable for beneficial - 320,000 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 - 1,071,770 Accounts receivable, unbilled - 266,403 Parts and supplies - 101,016 Prepaid expenses - 73,116 Other current assets - 5,954 Right of use assets - 2,885,618 Property and equipment - 732,372 Intangible assets - 1,230,000 Accounts payable - (129,622 )Accrued expenses - (155,949 )Lease liabilities - (2,947,684 )Federal and state taxes payable - (168,900 )Deferred revenues - (39,186 )Deferred tax liabilities, net - (149,900 )Net assets acquired in acquisition - 2,792,277 Total goodwill acquired in acquisition - 1,800,176 Total purchase price of acquisition - 4,592,453 Purchase price of business acquisition - (686,200 )financed with earnout liabilityCash used in business acquisition $ - $ 3,906,253