GlobeNewswire Inc | Aug 16, 2021 08:30AM EDT

August 16, 2021

Record Quarterly Software as a Service and Overall Revenues;Revenues Increase 58%; Earnings per share of $0.07

COLUMBUS, OH, Aug. 16, 2021 (GLOBE NEWSWIRE) -- Intellinetics, Inc. (OTCQB: INLX), a cloud-based document solutions provider, announced financial results for the three and six months ended June 30, 2021.

2021 Second Quarter Financial Highlights

Total Revenues increased 58% from the same period in 2020. Software as a Service Revenues increased 51% from the same period in 2020. Net Income of $192,447, compared to Net Loss of $282,356 from the same period in 2020. Adjusted EBITDA of $437,509, compared to $59,374 from the same period in 2020. Net income per basic share of $0.07, compared to $(0.10) from the same period in 2020.

2021 Six Month Financial Highlights

Total Revenues increased 82% from the same period in 2020. Software as a Service Revenues increased 47% from the same period in 2020. Net Income of $1,035,219, compared to Net Loss of $928,567 from the same period in 2020. Adjusted EBITDA of $793,674, compared to $67,159 from the same period in 2020.

Summary 2021 Second Quarter Results

Revenues for the three months ended June 30, 2021 were $2,909,646 as compared with $1,836,182 for the same period in 2020. This constituted a record in our quarterly overall revenues as well as a record in our quarterly Software as a Service revenues. The increase in our professional services and storage and retrieval revenues is primarily due to the impact of last years COVID-19 stay-at-home on our 2020 revenues. Intellinetics reported a net income of $192,447 for the three months ended June 30, 2021 compared to a net loss of $282,356 for the same period in 2020. The improved net income was the result of improved operating results, driven primarily by our record revenue quarter, as well as no significant transaction costs in 2021. Net income per basic and diluted share was $0.07 and $0.06, respectively, for the three months ended June 30, 2021, compared to net loss per basic and diluted share was ($0.10) for the three months ended June 30, 2020.

Summary 2021 Six Month Results

Revenues for the six months ended June 30, 2021 were $5,544,865 as compared with $3,049,846 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 six months of revenues from our Graphic Sciences, Inc. subsidiary acquired in 2020, compared to the same period in 2020 that only included approximately four months of revenues from that business. Intellinetics reported a net income of $1,035,219 for the six months ended June 30, 2021 compared to a net loss of $928,567 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 $0.37 and $0.33, respectively, for the six months ended June 30, 2021, compared to net loss per basic and diluted share was ($0.46) for the six months ended June 30, 2020.

2021 Other Highlights

Cash flow enhanced by $587,120 net cash provided by operating activities for the six months ended June 30, 2021. Invested in new warehouse to support growth of our storage and retrieval services, which increases box storage capacity more than 120%, and began consolidation of warehouses for more logistics efficiency. Expanded K-12 footprint closing 32 new districts in the six months ended June 30, 2021, taking us to about 250 school districts at the time of this release.

James F. DeSocio, President & CEO of Intellinetics, stated, I am excited to share that our Graphic Sciences subsidiary had a record revenue month in June 2021, which contributed to our consolidated company recording record revenues for the second quarter 2021. Additionally, our Software as a Service revenues continue to grow. In order to continue our momentum, weve hired a new marketing director to continue to expand our efforts with SEO and direct marketing lead generation, and were investing in increasing our sales team this year.

The results of our integration efforts of the 2020 acquisitions have exceeded my expectations. That said, we still have more opportunity for cross-selling, which we are pursuing. Each sales representative has a cross-selling target and is focused on customer penetration and expansion. Weve already expanding our production capabilities to meet the growing sales demand. I continue to be bullish for our future.

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 and from Software as a Service sales, 2021 Adjusted EBITDA, cross-selling opportunities, the ability of our production capabilities to meet growing demand, 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.614.921.8170 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 Income/(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 Income/(Loss) to Adjusted EBITDA

For the Three Months Ended June 30, 2021 2020 Net income (loss) - GAAP $ 192,447 $ (282,356 )Interest expense, net 113,271 116,796 Depreciation and amortization 101,432 85,751 Stock-based compensation 23,098 7,110 Significant transaction costs - 131,073 Change in fair value of earnout 7,261 - liabilitiesAdjusted EBITDA $ 437,509 $ 59,374

For the Six Months Ended June 30, 2021 2020 Net income (loss) - GAAP $ 1,035,219 $ (928,567 )Interest expense, net 226,315 407,226 Depreciation and amortization 196,316 114,842 Stock-based compensation 103,696 76,183 Stock and warrant issue expense - 377,761 Significant transaction costs - 495,440 Change in fair value of earnout 77,211 - liabilitiesIncome tax benefit, net - (188,300 )Gain on extinguishment of debt (845,083 ) (287,426 )Adjusted EBITDA $ 793,674 $ 67,159

INTELLINETICS, INC. and SUBSIDIARY

Condensed Consolidated Statements of Operations(Unaudited)

For the Three Months Ended June For the Six Months Ended June 30, 30, 2021 2020 2021 2020 Revenues: Sale of $ 5,598 $ 9,674 $ 15,192 $ 103,774 softwareSoftware as a 376,154 248,693 699,880 474,687 serviceSoftwaremaintenance 335,073 314,111 675,519 575,354 servicesProfessional 1,897,780 1,045,679 3,550,243 1,605,709 servicesStorage andretrieval 295,041 218,025 604,031 290,322 servicesTotal revenues 2,909,646 1,836,182 5,544,865 3,049,846 Cost of revenues:Sale of 2,122 5,357 6,359 43,659 softwareSoftware as a 91,781 71,281 168,121 143,796 serviceSoftwaremaintenance 22,272 31,569 46,660 78,085 servicesProfessional 861,267 514,036 1,695,505 811,132 servicesStorage andretrieval 118,137 42,546 209,249 56,537 servicesTotal cost of 1,095,579 664,789 2,125,894 1,133,209 revenues Gross profit 1,814,067 1,171,393 3,418,971 1,916,637 Operating expenses:General and 1,058,061 844,657 2,097,087 1,688,860 administrativeChange in fairvalue of 7,261 - 77,211 - earnoutliabilitiesSignificanttransaction - 175,673 - 636,440 costsSales and 341,595 229,873 631,906 473,562 marketingDepreciationand 101,432 86,750 196,316 114,842 amortization Totaloperating 1,508,349 1,336,953 3,002,520 2,913,704 expenses Income (loss)from 305,718 (165,560 ) 416,451 (997,067 )operations Other income (expense)Gain onextinguishment - - 845,083 287,426 of debtInterest (113,271 ) (116,796 ) (226,315 ) (407,226 )expense, net Total otherincome (113,271 ) (116,796 ) 618,768 (119,800 )(expense) Income (loss)before income 192,447 (282,356 ) 1,035,219 (1,116,867 )taxes Income tax - - - 188,300 benefit Net income $ 192,447 $ (282,356 ) $ 1,035,219 $ (928,567 )(loss) Basic anddiluted net $ 0.07 $ (0.10 ) $ 0.37 $ (0.46 )income (loss)per share:Diluted netincome (loss) $ 0.06 $ (0.10 ) $ 0.33 $ (0.46 )per share: Weightedaverage numberof commonshares 2,823,072 2,810,865 2,822,870 1,998,356 outstanding -basic anddilutedWeightedaverage numberof common 3,104,334 2,810,865 3,105,602 1,998,356 sharesoutstanding -diluted

INTELLINETICS, INC. and SUBSIDIARYCondensed Consolidated Balance Sheets

(unaudited) June 30, December 31, 2021 2020 ASSETS Current assets: Cash $ 1,140,631 $ 1,907,882 Accounts receivable, net 1,001,625 792,380 Accounts receivable, unbilled 512,075 523,522 Parts and supplies, net 60,922 79,784 Prepaid expenses and other current assets 252,661 162,166 Total current assets 2,967,914 3,465,734 Property and equipment, net 1,010,312 698,752 Right of use assets 3,832,916 2,641,005 Intangible assets, net 1,076,733 1,184,971 Goodwill 2,322,887 2,322,887 Other assets 27,284 31,284 Total assets $ 11,238,046 $ 10,344,633 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable $ 163,869 $ 141,823 Accrued compensation 458,567 271,889 Accrued expenses, other 152,370 131,685 Lease liabilities - current 606,350 518,531 Deferred revenues 942,947 996,131 Deferred compensation 100,828 100,828 Earnout liabilities - current 923,109 877,522 Accrued interest payable - current - 5,941 Notes payable - current - 580,638 Notes payable - related party - current - - Total current liabilities 3,348,040 3,624,988 Long-term liabilities: Notes payable - net of current portion 1,649,324 1,802,184 Lease liabilities - net of current portion 3,304,366 2,196,951 Earnout liabilities - net of current 643,369 1,566,478 portionTotal long-term liabilities 5,597,059 5,565,613 Total liabilities 8,945,099 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 June 30,2021 and December 31, 2020, respectivelyAdditional paid-in capital 24,251,172 24,147,488 Accumulated deficit (21,961,048 ) (22,996,267 )Total stockholders? equity 2,292,947 1,154,032 Total liabilities and stockholders? equity $ 11,238,046 $ 10,344,633

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

For the Six Months Ended June 30, 2021 2020 Cash flows from operating activities: Net income/loss $ 1,035,219 $ (928,567 )Adjustments to reconcile net income/loss to net cash used in operating activities:Depreciation and amortization 196,316 114,842 Bad debt expense (11,453 ) 44,705 Loss on disposal of fixed assets 0 - Parts and supplies reserve change 9,000 6,000 Amortization of deferred financing 51,869 65,222 costsAmortization of beneficial conversion - 11,786 optionAmortization of debt discount 53,333 35,555 Amortization of right of use asset 292,051 160,290 Stock issued for services 57,500 57,500 Stock options compensation 46,196 18,683 Note conversion stock issue expense - 141,000 Warrant issue expense - 236,761 Interest on converted debt - 176,105 Amortization of original issue discount - 18,296 on notesGain on extinguishment of debt (845,083 ) (287,426 )Change in fair value of earnout 77,211 - liabilitiesChanges in operating assets and liabilities:Accounts receivable (197,792 ) 804,874 Accounts receivable, unbilled 11,447 (150,846 )Parts and supplies 9,862 1,676 Prepaid expenses and other current (86,495 ) (53,400 )assetsRight of use assets (1,483,962 ) - Accounts payable and accrued expenses 229,409 (399,261 )Lease liabilities, current and 1,195,234 (154,257 )long-termDeferred compensation - (16,338 )Accrued interest, current and long-term 442 2,236 Deferred revenues (53,184 ) (37,723 )Total adjustments (448,099 ) 796,280 Net cash provided by/(used in) 587,120 (132,287 )operating activities Cash flows from investing activities: Cash paid to acquire business, net of - (4,017,816 )cash acquiredPurchases of property and equipment (399,638 ) (21,927 )Net cash used in investing activities (399,638 ) (4,039,743 ) Cash flows from financing activities: Payment of earnout liabilities (954,733 ) - 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 Repayment of notes payable - related - (47,728 )partiesNet cash provided by financing (954,733 ) 5,644,681 activities Net increase in cash (767,251 ) 1,472,651 Cash - beginning of period 1,907,882 404,165 Cash - end of period $ 1,140,631 $ 1,876,816 Supplemental disclosure of cash flow information:Cash paid during the period for $ 121,339 $ 85,949 interestCash paid during the period for income $ 2,088 $ - 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 partiesRight-of-use asset obtained in exchange 1,483,962 - for operating lease liability 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 - (169,289 )Accrued expenses - (163,168 )Lease liabilities - (2,947,684 )Federal and state taxes payable - (168,900 )Deferred revenues - (195,448 )Deferred tax liabilities, net - (149,900 )Net assets acquired in acquisition - 2,774,609 Total goodwill acquired in acquisition - 2,319,676 Total purchase price of acquisition - 5,094,285 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 $ - $ 4,035,085