GlobeNewswire Inc | Nov 16, 2020 08:30AM EST

November 16, 2020

Record Software as a Service and Overall Revenue;Record Positive Net Income; Earnings per Share of $0.06

COLUMBUS, OH, Nov. 16, 2020 (GLOBE NEWSWIRE) -- Intellinetics, Inc. (OTCQB: INLX), a cloud-based document solutions provider, announced financial results for the three and nine months ended September 30, 2020.

2020 Third Quarter Financial Highlights

-- Total Revenue increased 232% from the same period in 2019. -- Software as a Service Revenue increased 32% from the same period in 2019. -- Net Income of $155,673 compared to Net Loss of $398,753 from the same period in 2019. -- Adjusted EBITDA of $374,614, an improvement of $467,447 compared to an adjusted EBITDA loss of $92,833 from the same period in 2019. -- Earnings per share of $0.06.

2020 Nine Month Financial Highlights

-- Total Revenue increased 191% from the same period in 2019. -- Software as a Service Revenue increased 18% from the same period in 2019. -- Net Loss of $772,894 improved from a Net Loss of $1,542,268 from the same period in 2019. -- Adjusted EBITDA of $441,774, an improvement of $989,501 compared to an adjusted EBITDA loss of $547,727 from the same period in 2019.

Summary 2020 Third Quarter Results Revenues for the three months ended September 30, 2020 were $2,511,282 as compared with $755,568 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 income of $155,673 for the three months ended September 30, 2020 and a net loss of $398,753 for the three months ended September 30, 2019, representing an improvement of $554,426. The improved net income results were primarily the result of improved operating results as well as lower interest expense. Basic and diluted net income per share for the three months ended September 30, 2020 and 2019 was $0.06 and $1.08, respectively.

Summary 2020 Nine Month Results Revenues for the nine months ended September 30, 2020 were $5,557,586 as compared with $1,911,561 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, Inc., 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. Intellinetics reported a net loss of $772,894 and $1,542,268 for the nine months ended September 30, 2020 and 2019, respectively, representing a decrease in net loss of $769,374. The decreased net loss was primarily the result of improved operating income contribution, as well as 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. Basic and diluted net loss per share for the nine months ended September 30, 2020 and 2019 was $0.34 and $4.17, respectively.

2020 Operational Highlights

-- Positive net income for three months ended September 30, 2020. -- Positive adjusted EBITDA for three and nine months ended September 30, 2020. -- Integration of acquisitions of Graphic Sciences (March 2, 2020) and CEO Imaging Systems, Inc. (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, I could not be more proud of our team for the grit and resolve demonstrated during the quarter. Their work is reflected in the continued rapid integration of our acquisitions, the relationships maintained with customers and prospects, and, critically, in our improved operating results. Together, we have delivered a positive net income at Intellinetics for the first quarter since our business began operating as a public company in 2012. We also are reporting our highest ever quarterly software as a service revenues and overall revenues. While we celebrate this achievement, we have our eyes on the future. The COVID pandemic is still affecting our customers and the way we all do business. As a result, we need to be creative and nimble in pursuing revenue streams from new and existing customers.

Our teams have been focused on exactly that, and we have bundled new packages and developed new solutions that help our customers better navigate their own challenges in an environment demanding increased distancing and remote work. One example is a bundled scanning and document solution for customers to transform their records from paper to the cloud, without ever being unable to access a critical document when needed.

I am focused on sustaining the momentum we have achieved. We are maintaining our goal, set last quarter, to continue to deliver positive Adjusted EBITDA for the remainder of 2020. Similarly, despite the lingering pandemic, we expect to deliver revenues in the fourth quarter that are in line with our third quarter results.

Conference CallIntellinetics is holding a conference call to discuss these results on Monday, November 16, 2020, at 9:30 a.m. Eastern Time. The conference call can be accessed by dialing +1 929 205 6099 and providing passcode 81918576516#. 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 November 30, 2020. To listen to the replay, the call will be archived on the company's 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 StatementStatements in this press release which are not purely historical, including statements regarding future business and growth, future revenues, including fourth quarter revenues and future revenue streams from new and existing customers, fourth quarter Adjusted EBITDA, 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 atwww.intellinetics.com or at www.sec.gov.

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

Non-GAAP Financial MeasureIntellinetics 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, stock-based compensation, note conversion and note or equity offer warrant or stock expense, gain or loss on debt extinguishment, and significant transaction costs.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

For the Three Months Ended September 30, 2020 2019 Net income (loss) - GAAP $ 155,673 $ (398,753 )Interest expense, net 115,497 245,156 Depreciation and amortization 89,475 1,901 Stock-based compensation 13,969 58,863 Adjusted EBITDA $ 374,614 $ (92,833 )

For the Nine Months Ended September 30, 2020 2019 Net loss - GAAP $ (772,894 ) $ (1,542,268 )Interest expense, net 522,724 717,650 Significant transaction costs 495,440 - Stock and warrant issue expense 377,761 - Depreciation and amortization 204,317 5,908 Stock-based compensation 90,152 270,983 Income tax benefit, net (188,300 ) - Gain on extinguishment of debt (287,426 ) - Adjusted EBITDA $ 441,774 $ (547,727 )

2020 Second Quarter Adjusted EBITDA CorrectionsThe following tables reflect corrections to our 2020 Second Quarter Adjusted EBITDA amounts, as reported in our earnings release dated August 14, 2020. Our Adjusted EBITDA for the three and six month periods ended June 30, 2020 were $59,374 and $67,160, respectively, and the Adjusted EBITDA reconciliation tables for such periods, as corrected, are fully set forth below. There are no errors or corrections in our historical GAAP financial information for the same periods as reported, as these errors in the computation of our Adjusted EBITDA calculation for those periods did not affect the computation or reporting of our Net Loss or any other historical financial information for those periods.

In addition, commencing with the second quarter results, we have included significant transaction costs as an adjustment to EBITDA.

For the Three Months Ended June 30, 2020:

Significant transaction costs was changed from $175,673 to $131,073, and Adjusted EBITDA was changed from $103,974 to $59,374.

For the Three Months Ended June 30, 2020 2019 Net loss - GAAP $ (282,356 ) $ (473,662 )Significant transaction costs 131,073 - Interest expense, net 116,796 239,347 Depreciation and amortization 86,751 2,099 Stock-based compensation 7,110 68,496 Adjusted EBITDA $ 59,374 $ (163,720 )

For the Six Months Ended June 30, 2020:Significant transaction costs was changed from $636,440 to $495,440, interest expense was changed from $583,331 to $407,227, and Adjusted EBITDA was changed from $384,264 to $67,160.

For the Six Months Ended June 30, 2020 2019 Net loss - GAAP $ (928,567 ) $ (1,143,515 )Significant transaction costs 495,440 - Interest expense, net 407,227 472,494 Income tax benefit, net (188,300 ) - Depreciation and amortization 114,842 4,007 Stock-based compensation 76,183 212,120 Stock and warrant issue expense 377,761 - Gain on extinguishment of debt (287,426 ) - Adjusted EBITDA $ 67,160 $ (454,894 )

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

For the Three Months Ended For the Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Revenues: Sale of $ 53,767 $ 170,738 $ 153,999 $ 179,590 softwareSoftware as a 281,810 214,237 756,497 643,402 serviceSoftwaremaintenance 340,129 248,343 915,483 753,692 servicesProfessional 1,615,445 122,250 3,221,154 334,877 servicesStorage andretrieval 220,131 - 510,453 - servicesTotal revenues 2,511,282 755,568 5,557,586 1,911,561 Cost of revenues:Sale of - 1,469 40,117 4,479 softwareSoftware as a 65,712 67,643 209,508 195,911 serviceSoftwaremaintenance 49,354 17,894 127,439 67,813 servicesProfessional 841,016 60,684 1,637,308 152,056 servicesStorage andretrieval 64,906 - 136,283 - servicesTotal cost of 1,020,988 147,690 2,150,655 420,259 revenues Gross profit 1,490,294 607,878 3,406,931 1,491,302 Operating expenses:General and 844,186 510,817 2,533,046 1,570,835 administrativeSignificanttransaction - - 636,440 - costsSales and 285,462 248,757 759,024 739,177 marketingDepreciationand 89,475 1,901 204,317 5,908 amortization Total operating 1,219,123 761,475 4,132,827 2,315,920 expenses Income (loss) 271,171 (153,597 ) (725,896 ) (824,618 )from operations Other income (expense)Gain onextinguishment - - 287,426 - of debtIncome tax - - 188,300 - benefitInterest (115,498 ) (245,156 ) (522,724 ) (717,650 )expense, net Total other (115,498 ) (245,156 ) (46,998 ) (717,650 )expense Net income $ 155,673 $ (398,753 ) $ (772,894 ) $ (1,542,268 )(loss) Basic anddiluted net $ 0.06 $ (1.08 ) $ (0.34 ) $ (4.17 )income (loss)per share: Weightedaverage numberof commonshares 2,810,865 370,497 2,271,169 370,205 outstanding ?basic anddiluted

INTELLINETICS, INC. and SUBSIDIARYCondensed Consolidated Balance Sheets

(Unaudited) September 30, December 31, 2020 2019 ASSETS Current assets: Cash $ 1,511,990 $ 404,165 Accounts receivable, net 1,078,862 329,571 Accounts receivable, unbilled 503,642 23,371 Parts and supplies, net 79,975 4,184 Prepaid expenses and other current assets 207,201 110,841 Total current assets 3,381,670 872,132 Property and equipment, net 716,000 6,919 Right of use assets 2,703,978 97,239 Intangible assets, net 1,239,090 - Goodwill 2,322,887 - Other assets 18,784 10,284 Total assets $ 10,382,409 $ 986,574 LIABILITIES AND STOCKHOLDERS? EQUITY(DEFICIT) Current liabilities: Accounts payable $ 183,327 $ 160,911 Accrued compensation 261,638 70,027 Accrued expenses, other 156,567 140,079 Lease liabilities - current 516,206 47,397 Deferred revenues 1,022,252 754,073 Deferred compensation 100,828 117,166 Earnout liabilities - current 287,390 - Accrued interest payable - current 4,505 1,212,498 Notes payable - current 612,539 3,339,963 Notes payable - related party - current - 1,467,400 Total current liabilities 3,145,252 7,309,514 Long-term liabilities: Notes payable 1,817,681 - Lease liabilities - net of current portion 2,262,445 53,318 Earnout liabilities - net of current 601,810 - portionTotal long-term liabilities 4,681,936 53,318 Total liabilities 7,827,188 7,362,832 Stockholders? equity (deficit): Common stock, $0.001 par value, 25,000,000shares authorized; 2,810,865 and 370,497shares issued and outstanding at September 2,811 371 30, 2020 and December 31, 2019,respectivelyAdditional paid-in capital 24,121,370 14,419,437 Accumulated deficit (21,568,960 ) (20,796,066 )Total stockholders? equity (deficit) 2,555,221 (6,376,258 )Total liabilities and stockholders? equity $ 10,382,409 $ 986,574 (deficit)

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

For the Nine Months Ended September 30, 2020 2019 Cash flows from operating activities: Net loss $ (772,894 ) $ (1,542,268 )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization 204,317 5,908 Bad debt expense 40,325 14,340 Parts and supplies reserve change 10,500 - Amortization of deferred financing 91,156 137,888 costsAmortization of beneficial conversion 11,786 53,038 optionAmortization of debt discount 62,222 - Amortization of right of use asset 278,879 30,982 Stock issued for services 57,500 87,500 Stock options compensation 32,652 183,483 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 - on notesChanges in operating assets and liabilities:Accounts receivable 333,121 (227,594 )Accounts receivable, unbilled (204,248 ) 29,766 Parts and supplies 5,105 1,533 Prepaid expenses and other current (25,790 ) 4,155 assetsRight of use assets 0 (138,549 )Accounts payable and accrued expenses (589,461 ) 65,798 Lease liabilities, current and (269,748 ) 111,476 long-termDeferred compensation (16,338 ) (35,077 )Accrued interest, current and long-term 4,504 523,085 Deferred revenues 69,520 (50,903 )Total adjustments 380,739 796,829 Net cash used in operating activities (392,155 ) (745,439 ) Cash flows from investing activities: Cash paid to acquire business, net of (4,019,098 ) - cash acquired 0 - Purchases of property and equipment (55,603 ) (5,489 )Net cash used in investing activities (4,074,701 ) (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 - Repayment of notes payable (70,000 ) - Repayment of notes payable - related (47,728 ) (34,622 )partiesNet cash provided by/(used in) 5,574,681 (34,622 )financing activities Net increase (decrease) in cash 1,107,825 (785,550 )Cash - beginning of period 404,165 1,088,630 Cash - end of period $ 1,511,990 $ 303,080 Supplemental disclosure of cash flow information:Cash paid during the period for $ 6,241 interestCash paid during the period for taxes $ 142,018 $ - 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 $ -