UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________to _________________________

Commission file number: 001-41495

INTELLINETICS, INC.

(Exact name of registrant as specified in its charter)

Nevada

87-0613716

(State or Other Jurisdiction

of Incorporation or Organization)

(I.R.S. Employer

Identification No.)

2190 Dividend Drive
Columbus, Ohio		43228
(Address of Principal Executive Offices)		(Zip Code)

(614) 921-8170

(Registrant’s telephone number, including area code)

(Former name and former address, if changed since the last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value		INLX		NYSE American

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b- 2 of the Exchange Act.

Large accelerated filer	☐	(Do not check if a smaller reporting company)	Accelerated filer	☐
Non-accelerated filer	☐		Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of May 11, 2023, there were 4,073,757 shares of the issuer’s common stock outstanding, each with a par value of $0.001 per share.

INTELLINETICS, INC.

Form 10-Q

March 31, 2023

TABLE OF CONTENTS

		Page No.
PART I

FINANCIAL INFORMATION		5

ITEM 1.	Financial Statements.	5

	Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	5

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (Unaudited)	6

	Condensed Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (Unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (Unaudited)	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	24

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk.	31

ITEM 4.	Controls and Procedures.	31

PART II

OTHER INFORMATION		32

ITEM 1.	Legal Proceedings.	32

ITEM 1A.	Risk Factors.	32

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	32

ITEM 3.	Defaults Upon Senior Securities.	32

ITEM 4.	Mine Safety Disclosures.	32

ITEM 5.	Other Information.	32

ITEM 6.	Exhibits.	32

SIGNATURES		33

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and the documents incorporated into this report by reference contain forward-looking statements. In addition, from time to time we may make additional forward-looking statements in presentations, at conferences, in press releases, in other reports and filings and otherwise. Forward-looking statements are all statements other than statements of historical facts, including statements that refer to plans, intentions, objectives, goals, targets, strategies, hopes, beliefs, projections, prospects, expectations or other characterizations of future events or performance, and assumptions underlying the foregoing. The words “may,” “could,” “should,” “would,” “will,” “project,” “intend,” “continue,” “believe,” “anticipate,” “estimate,” “forecast,” “expect,” “plan,” “potential,” “opportunity,” “scheduled,” “goal,” “target,” and “future,” variations of such words, and other comparable terminology and similar expressions and references to future periods are often, but not always, used to identify forward-looking statements. Examples of forward-looking statements include, among other things, statements about the following:

	●	the effects on our business, financial condition, and results of operations of current and future economic, business, market and regulatory conditions, including the current global inflation, economic downturn, and other economic and market conditions, and their effects on our customers and their capital spending and ability to finance purchases of our products, services, technologies and systems;

	●	our prospects, including our future business, revenues, recurring revenues, expenses, net income, earnings per share, margins, profitability, cash flow, cash position, liquidity, financial condition and results of operations, backlog of orders and revenue, our targeted growth rate, our goals for future revenues and earnings, and our expectations about realizing the revenues in our backlog and in our sales pipeline;

	●	our expectation that the shift from an offline to online world will continue to benefit our business;

	●	our ability to integrate our recent acquisitions and any future acquisitions, grow their businesses and obtain the expected financial and operational benefits from those businesses;

	●	the effects of fluctuations in sales on our business, revenues, expenses, net income, earnings per share, margins, profitability, cash flow, capital expenditures, liquidity, financial condition and results of operations;

	●	our products, services, technologies and systems, including their quality and performance in absolute terms and as compared to competitive alternatives, their benefits to our customers and their ability to meet our customers’ requirements, and our ability to successfully develop and market new products, services, technologies and systems;

	●	our markets, including our market position and our market share;

	●	our ability to successfully develop, operate, grow and diversify our operations and businesses;

	●	our business plans, strategies, goals and objectives, and our ability to successfully achieve them;

	●	the sufficiency of our capital resources, including our cash and cash equivalents, funds generated from operations, availability credit and financing arrangements and other capital resources, to meet our future working capital, capital expenditure, lease and debt service and business growth needs;

	●	the value of our assets and businesses, including the revenues, profits and cash flow they are capable of delivering in the future;

	●	the amount and timing of revenue recognition from customer contracts with commitments for performance obligations, including our estimate of the remaining amount of commitments and when we expect to recognize revenues;

	●	industry trends and customer preferences and the demand for our products, services, technologies and systems; and

	●	the nature and intensity of our competition, and our ability to successfully compete in our markets.

Any forward-looking statements we make are based on our current plans, intentions, objectives, strategies, projections and expectations, as well as assumptions made by and information currently available to management. Forward-looking statements are not guarantees of future performance or events, but are subject to and qualified by substantial risks, uncertainties and other factors, which are difficult to predict and are often beyond our control. Forward-looking statements will be affected by assumptions and expectations we might make that do not materialize or that prove to be incorrect and by known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed, anticipated or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, those described in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed on March 27, 2023, as well as other risks, uncertainties and factors discussed elsewhere in this Quarterly Report, in documents that we include as exhibits to or incorporate by reference in this report, and in other reports and documents we from time to time file with or furnish to the Securities and Exchange Commission (the “SEC”). In light of these risks and uncertainties, you are cautioned not to place undue reliance on any forward-looking statements that we make.

Any forward-looking statements contained in this report speak only as of the date of this report, and any other forward-looking statements we make from time to time in the future speak only as of the date they are made. We undertake no duty or obligation to update or revise any forward-looking statement or to publicly disclose any update or revision for any reason, whether as a result of changes in our expectations or the underlying assumptions, the receipt of new information, the occurrence of future or unanticipated events, circumstances or conditions or otherwise.

As used in this Quarterly Report, unless the context indicates otherwise:

	●	the terms “Intellinetics,” “Company,” “the company” “us,” “we,” “our,” and similar terms refer to Intellinetics, Inc., a Nevada corporation, and its subsidiaries;
	●	“Intellinetics Ohio” refers to Intellinetics, Inc., an Ohio corporation and a wholly-owned subsidiary of Intellinetics; and
	●	“Graphic Sciences” refers to Graphic Sciences, Inc., a Michigan corporation and a wholly-owned subsidiary of Intellinetics.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTELLINETICS, INC. and SUBSIDIARIES

Condensed Consolidated Balance Sheets

	(unaudited)
	March 31,			December 31,
	2023			2022

ASSETS
Current assets:
Cash	$	1,419,138		$	2,696,481
Accounts receivable, net		1,182,523			1,121,083
Accounts receivable, unbilled		887,742			596,410
Parts and supplies, net		81,455			73,221
Contract assets		80,577			80,378
Prepaid expenses and other current assets		327,198			325,466
Total current assets		3,978,633			4,893,039

Property and equipment, net		1,029,127			1,068,706
Right of use assets, operating		3,070,782			3,200,191
Right of use asset, finance		147,574			154,282
Intangible assets, net		4,292,069			4,419,646
Goodwill		5,789,821			5,789,821
Other assets		491,464			417,457
Total assets	$	18,799,470		$	19,943,142

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	368,797		$	370,300
Accrued compensation		604,260			411,683
Accrued expenses		153,677			114,902
Lease liabilities, operating - current		708,573			692,074
Lease liability, finance - current		22,918			22,493
Deferred revenues		2,182,276			2,754,064
Earnout liabilities - current		-			700,000
Notes payable - current		696,459			936,966
Total current liabilities		4,736,960			6,002,482

Long-term liabilities:
Notes payable - net of current portion		2,116,087			2,085,035
Notes payable - related party		536,964			529,084
Notes payable		536,964			529,084
Lease liabilities, operating - net of current portion		2,482,692			2,624,608
Lease liability, finance - net of current portion		127,240			133,131
Total long-term liabilities		5,262,983			5,371,858
Total liabilities		9,999,943			11,374,340

Stockholders’ equity:
Common stock, $0.001 par value, 25,000,000 shares authorized; 4,073,757 shares issued and outstanding at March 31, 2023 and December 31, 2022		4,074			4,074
Additional paid-in capital		30,297,179			30,179,017
Accumulated deficit		(21,501,726	)		(21,614,289	)
Total stockholders’ equity		8,799,527			8,568,802
Total liabilities and stockholders’ equity	$	18,799,470		$	19,943,142

See Notes to these condensed consolidated financial statements

INTELLINETICS, INC. and SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

	2023			2022
	For the Three Months Ended March 31,
	2023			2022

Revenues:
Sale of software	$	15,293		$	64,491
Software as a service		1,238,432			431,221
Software maintenance services		349,542			336,602
Professional services		2,299,289			1,587,948
Storage and retrieval services		284,277			283,250
Total revenues		4,186,833			2,703,512

Cost of revenues:
Sale of software		8,181			26,193
Software as a service		220,640			91,249
Software maintenance services		16,716			18,300
Professional services		1,187,116			848,167
Storage and retrieval services		108,341			87,766
Total cost of revenues		1,540,994			1,071,675

Gross profit		2,645,839			1,631,837

Operating expenses:
General and administrative		1,554,611			935,691
Change in fair value of earnout liabilities		-			64,204
Transaction costs		-			70,051
Sales and marketing		579,511			352,114
Depreciation and amortization		227,718			117,302
Total operating expenses		2,361,840			1,539,362

Income from operations		283,999			92,475

Interest expense		(171,436	)		(112,601	)

Net income (loss)	$	112,563		$	(20,126	)

Basic net income (loss) per share:	$	0.03		$	(0.01	)
Diluted net income per (loss) share:	$	0.03		$	(0.01	)

Weighted average number of common shares outstanding - basic		4,073,757			2,830,899
Weighted average number of common shares outstanding - diluted		4,695,106			2,830,899

See Notes to these condensed consolidated financial statements

INTELLINETICS, INC. and SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

For the Three Months Ended March 31, 2023 and 2022

(unaudited)

	Shares		Amount		Capital		Deficit			Total
	Common Stock				Additional Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total

Balance, December 31, 2021		2,823,072	$	2,823	$	24,297,229	$	(21,638,316	)	$	2,661,736

Stock Issued to Directors		8,097		8		57,492		-			57,500

Stock Option Compensation		-		-		22,960		-			22,960

Net Loss		-		-		-		(20,126	)		(20,126	)

Balance, March 31, 2022		2,831,169	$	2,831	$	24,377,681	$	(21,658,442	)	$	2,722,070

Balance, December 31, 2022		4,073,757	$	4,074	$	30,179,017	$	(21,614,289

SEC Form 10-Q filed by Intellinetics Inc.