Intellinetics(INLX) - 2018 Q4 - Annual Report

Revenue Performance - Total revenues for the fiscal year ended December 31, 2018, were $2,381,427, a decrease of $238,681 or 9% compared to $2,620,108 in 2017[134] - Revenues from cloud-based Software as a Service (SaaS) increased to $748,754, representing a growth of $126,530 or 20% year-over-year[138] - Software maintenance support revenue rose to $995,170, an increase of $29,159 or 3% compared to $966,011 in 2017[139] - Professional services revenues decreased to $289,962, down by $161,666 or 36% from $451,628 in 2017[140] Cost and Expenses - Cost of revenues for 2018 was $742,405, a decrease of $18,057 or 2% from $760,462 in 2017[142] - Overall gross margin for 2018 was 69%, down from 71% in 2017, primarily due to a shift in revenue mix[143] - General and administrative expenses decreased to $2,106,851, a reduction of $93,053 or 4% compared to $2,199,904 in 2017[154] - Sales and marketing expenses increased to $997,910, an increase of $175,396 or 21% from $822,514 in 2017[155] - Interest expense, net, rose to $865,501, an increase of $255,650 or 42% compared to $609,851 in 2017[157] Cash Flow and Financing - Net cash used in operating activities for the twelve months ended December 31, 2018 was $1,157,407, compared to $1,122,444 for the same period in 2017[168] - Net cash provided by financing activities for the twelve months ended December 31, 2018 amounted to $1,123,526, with new borrowings of $1,300,000[171] - The company raised a total of $12,683,494 through debt and equity securities from 2012 to 2018[160] - The company raised $1,300,000 in convertible debt in September 2018 and $2,150,000 in November 2017, both maturing on December 31, 2020[164] Future Outlook - The company anticipates that capital requirements will exceed cash flows generated from operations by approximately $86,000 per month over the next 12 months[159] - The company plans to increase sales and market share by developing targeted marketing approaches and expanding its reseller network[167] Revenue Recognition - The company recognizes revenue when performance obligations are satisfied, in accordance with ASC 606, adopted on January 1, 2018[185] - Deferred revenues relate to maintenance agreements and professional services paid for by customers prior to service performance[192] Concerns - The company has incurred substantial recurring losses since inception, raising concerns about its ability to continue as a going concern[180] - Revenues are generated from licensing, subscription, and maintenance of enterprise software products, with a focus on effective sales and marketing efforts[173]